FIRST REPORT
The Scottish Affairs Committee has agreed
to the following Report:—
INWARD/OUTWARD INVESTMENT IN SCOTLAND
INTRODUCTION
1. In session 1979-80 our predecessor Committee made
a Report on Inward Investment,[1]
a Report which was followed by the setting up of Locate in Scotland,
the main agency charged with attracting inward investment into
Scotland.
2. In the spring of 1998 we decided the time had
come to have another look at the subject. In part we were prompted
by concern about the repercussions of the turmoil in the tiger
economies of the Far East. This cast into doubt some sources of
inward investment; the collapse of the Hyundai project, at the
time it occurred, looked like a straw in a rather alarming wind.
In the event the effects of the Asian economic crises have not
so far proved as damaging as they might have done,[2]
partly perhaps because 40 to 50 per cent of the inflow of foreign
direct investment into Scotland comes from the USA.[3]
Nonetheless, it soon became apparent that the inquiry remained
timely. For one thing, company behaviour, in terms of, for instance,
how global supply chains are managed, has changed greatly, altering
the whole approach to foreign direct investment. Further, there
are the implications of devolution (both to Scotland and in wider
UK terms) to consider; a number of the problems we identified
seem to call for more coherent policies which the new Scottish
Executive may find easier to provide.
3. One difference between the earlier inquiry and
the current one is that this time the Committee agreed to include
outward investment by Scottish companies in its terms of reference;
as the inquiry progressed we became ever more convinced that,
whatever may have been the position in 1980, the subjects are
now inextricably linked. We also included other forms of outward
international activities such as exporting.
4. The nature of inward investment is changing. New
countries, such as Taiwan and South Korea, have emerged as significant
sources of new, greenfield, projects. But an increasing proportion
of all inward investment now consists of reinvestment by established
foreign-owned players in the Scottish economy. A third form of
inward investment involves foreign investors acquiring established
commercial assets in Scotland, sometimes, as in the case of Viasystems,
created by indigenous British companies. The distinction between
inward investors and indigenous companies is becoming blurred
as some inward investors have been in Scotland for a very long
time.
5. Outward investment from Scotland is constrained
by the relatively small number of independent Scottish corporates
with global ambitions. But, for the UK as a whole outward investment,
particularly into the United States, has been growing strongly
in recent years. This inquiry considers both inward and outward
investment but, partly because of a change of approach by the
agencies themselves, we found ourselves reflecting more generally
on the Scottish economy.
6. During the course of our inquiry the Committee
took evidence from eighteen groups of witnesses and received a
substantial number of written submissions, many of which will
be published along with this report. A list of the people and
organisations whom we met on informal visits in Scotland, Northern
Ireland, the Republic of Ireland and the United States is annexed
to this Report. Our thanks are due to all our witnesses and those
who met us or facilitated our visits and to our advisers Professors
Neil Hood and Stephen Young of Strathclyde University and Mr Alf
Young of The Herald.
7. At the same time we have been conducting this
inquiry we have also been inquiring into tourism in Scotland,
and we have been struck by how many similar considerations apply
to both topics. Our Report on tourism will be published as soon
as possible.
8. Readers should note that because the evidence
on which this Report is based was taken over two Parliamentary
sessions there are two separate House of Commons paper series
involved and whereas Questions 1 to 560 are contained in the 698
series of Session 1997-98, Questions 561 onward appear in 84 of
Session 1998-99.
1 HC (1979-80) 769. Back
2 Q
468. Back
3 Evidence,
p 301. Back
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