Southern multinationals : a growing phenomenon

South-South foreign direct investment (FDI) now accounts for one third of all FDI going to developing countries, and is growing. This is good news because this FDI typically reaches very poor and remote developing countries. This is because Southern multinational corporations (MNC) are more familiar with challenging investment climates and are also better equipped to deliver products tailored to low income consumers. South-South FDI flows are primarily regional, and concentrated in the infrastructure and extractive sectors, with an increasing sector diversification. Southern MNCs' are attracted to new profitable markets, resources and strategic assets. The motivation is less about seeking low factor costs, which means that developing countries should be less worried about these FDI outflows. While governments in many developing countries are encouraging outward FDI, Southern MNCs continue to face regulatory and operational challenges in their home economy. Many Southern MNCs new on the international market are having growing pains, similar to those of Northern MNCs a few decades ago, and are moving up the ladder of corporate social responsibility. To benefit from South-South FDI, developing countries, whether host or home to FDI, need to pursue investment climate reforms.