INWARD/OUTWARD INVESTMENT IN SCOTLAND
OUTWARD INVESTMENT AND EXPORTS
82. Deregulation, privatisation, technological innovation
and market opening policies pursued nationally and internationally
around the world offer great opportunities as well as posing considerable
challenges for Scotland. One important conclusion is that encouragement
for the internationalisation of Scottish business is arguably
likely to be as important as the attraction of inward investment
in the future. Many Scottish businesses will serve international
markets largely by exports from their Scottish base. For others,
however, marketing internationally may be supported most successfully
by outward investment (that is establishing production and service
operations in foreign countries) or by other means such as licensing
or franchising.
83. 'Globalisation' of Scottish companies is not
without risk to the Scottish economy. There is always the risk
that the Scottish brand may get lost or that a Scottish company
diversifying abroad may find it in its own best interest to remove
its headquarters from the country. The STUC warned that the export
of capital might lead to the export of jobs, but in reality without
outward investment, the future of the whole company might be in
jeopardy.
84. We accept that the policy of trying to increase
the currently rather small number of Scottish companies that can
be regarded as global is a sound one. Scottish Enterprise told
us that 'there is actually some evidence and this is one of the
things we are looking at in this globalisation study, from the
Department of Trade which says that in terms of outward investment
you do not actually put jobs in jeopardy. That by getting companies
to invest overseas you actually allow the more significant headquarters,
R&D functions etcetera ... to grow at home. So it would be
quite encouraging if the companies have the capacity to get them
to do that. Indeed, as you might guess, it would be very hard
for us to go round the world saying to Koreans, Japanese and Americans
"you need a global strategy and therefore you have to have
a plant in Europe" and then go to our Scottish companies
and say "you have a global strategy but for God's sake do
not put a plant in China". .... There will be some of it,
as we are seeing in textiles just now, that is mainly cost driven,
but a lot of it will be for the same reason that our inward investors
come here. It is not to do with costs but to do with getting closer
to your customers and your market place'.[125]
85. Scottish Enterprise is trying to become more
flexible in its approach to helping Scottish companies who want
to internationalise, and are working with STI to 'help them provide
a wider range of services than purely exporting advice and assistance'.[126]
86. Outward investment is direct investment by indigenous
companies overseas, and is not the same as trade, although they
are increasingly related. The close links between inward and outward
investment and trade are confirmed by the citing of 'increased
exports' as a major benefit of inward investment (see paragraph
60). The Scottish Office explained that 'inward investors ...
make a substantial contribution to Scotland's export performance
... a number ... have won the Queen's Award for Export achievement
and some ... are among the UK's largest exporters'.[127]
87. A study of the wider effects of foreign direct
investment in the UK found that on average, exports account for
over 50 per cent of inward investors' sales and that less than
a fifth of those sales would have been taken by UK companies if
the inward investors had not located in the UK.[128]
Inward investors' most significant contribution to Scotland's
export performance is in the electronics sector. In 1996, office
machinery and computer equipment together accounted for 53 per
cent of all manufactured exports from Scotland.[129]
88. Not all witnesses were quite so enthusiastic
about the net export contribution of inward investors; the Scottish
TUC issued a caveat to the effect that only 30 per cent of the
value of the exports of the Scottish electronics industry has
been added in Scotland. The rise of global sourcing emphasises
this point.[130]
Nonetheless it is clear that there is a considerable contribution.
125 Q 447. Back
126 Q
1355. Back
127 Evidence,
p 4. Back
128 Evidence,
p 39. Back
129 Evidence,
p 4. Back
130 Q
185. Back
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