Until a few years ago, almost all the investment dollars flowed from the developed world into the developing world. This is how globalisation was perceived to work, the objective being industrialisation of the Third World states with the West’s capital to the extent that the former’s businesses were able to provide cheap goods to the latter’s markets. That they could one day exceed that limit and grow into giant entities capable enough of acquiring US and European assets was never an objective.

As such, globalisation was designed to function as one-way street. What has happened over recent years is that global capital has started moving both ways. The West, having resisted it initially, seems to have somehow come to terms with the new reality, though not completely. The result is that, as BusinessWeek puts it, “a new era is taking shape”, in which the flow of global capital is moving from the developing world back to western financial centres.

A case in point that illustrates the new trend is the purchase of an American oil company Pride International’s Latin American land-drilling operations unit by the continent’s largest equity firm, GP Investments of Brazil, in a one billion dollar deal, something unheard of in recent times. The deal is among the largest in the region’s history.

Apart from this, the new deals showing global capital’s new direction, according to the US weekly, have been in everything from mining to finance and media. In May, the Saudi investment fund SABIC acquired General Electric’s plastics business for $11.6 billion. The same month Russia’s Norilsk Nickel Group acquired Canada’s LionOre Mining International for $6.3 billion. Then late last month, the Abu Dhabi Investment Authority bought a $7.5 billion stake in troubled banking giant Citigroup, following an investment of the same amount earlier this year in well-known equity firm Carlyle Group.

Earlier this year, China invested three billion dollars in a leading equity US firm, Blackstone Group. And last week, the government of Dubai took a five per cent stake in media giant Sony. A business analyst thinks the current decade will be “about companies, funds, and individuals in developing markets buying into western markets.” The volume of such deals is growing at a pace of 35 per cent to 40 per cent a year and may hit $96 billion in 2007, up from $7 billion in 2003.

Acquisition of famous and familiar brands by developing world firms brings with it considerable social, political and business implications for western society which confronts such happenings with a degree of gloom. The public there will gradually have an idea of what its position actually is in a multipolar world and companies there will have to learn how to manage cross-border deals of increasing complexity. It is a trend that can only accelerate in the coming years. It can hardly slow down or be turned back for it is an inevitable outgrowth of globalisation.

There are several reasons for this phenomenon, foremost being the fall in dollar’s value. It has made US assets cheaper for companies in Brazil, Russia, India, and China –– the so-called BRIC nations –– which are home to a growing number of global 500 companies such as China’s Huawei, Russia’s Lukoil and Brazil’s CVRD. In China, there’s a strong demand for tech deals, such as Lenovo’s acquisition of the IBM business. In India, it is for steel and auto deals, as evident from reports that the leading bidders to acquire Land Rover and Jaguar from Ford Motor are Indian stalwarts Tata Motors and Mahindra & Mahindra.

What is so impressive about Tata empire is that it represents a significant outward reach by an Indian company. When it acquired Corus, a British-Dutch steel company in 2006, it was an outward reach to Britain, the country that once ruled South Asia. Similarly, Lakhshmi Mittal, one of the largest steel producers of the world, and his company, Mittal steel, having acquired European companies such as Arcelor, can be described as true by-products of globalisation.

The biggest obstacle developing countries may face and did face in the recent past is political, the other being history. It is too difficult for ex-colonial empires to witness their former subjects ‘encroaching’ into their financial realm and dictate their terms in some sectors of their economy. So, they started creating barriers in the way of businesses of the ex-colonies which have grown in size and want to equally benefit from the process of globalisation by investing in their industries. Allowing them to do so hurts West’s sense of superiority. And, on occasions, it aggravates its sense of insecurity as it happened when China tried to buy American oil company Unocal. It finally gave up its bid because of unexpected political resistance.

And in 2006, DP World, a company of the United Arab Emirates, had to abandon a plan to acquire management of six US ports in the wake of regulatory resistance from the US government and effective opposition from Congress. It was a strange mix of politics and economics. The Arab firm was denied takeover on the grounds that its employees might help Islamist terrorists and that two of the 9/11 hijackers were from the UAE. It was an open insult to investors of an Arab state which happened to be a close ally of the US. The Wall Street Journal noted on the eve that Congressmen were too arrogant in their attitude and didn’t care about the fact that Middle East oil producing countries hold 121 billion dollars in US securities (2004) which gave them a considerable leverage to react in a similar fashion.

Noted writer James Surowiecki recalls in a Guardian piece that in the late 1980s nine American Congressmen held a press conference on Capital Hill during which one of them picked up a sledge-hammer and smashed a Toshiba radio into pieces. The purpose of doing so was to show anger over ‘encroachment’ of the US economy by Japanese firms. At the time time, Japanese companies were not only outperforming US firms around the world but also buying American assets at a rapid pace. Since then, Suroweicky noted, US hostility towards foreign investors became part of American business culture and had returned with a vengeance in 2005.

The problem is that until a few years ago, the concept of emerging markets was all about adventurous investors from the US and Europe travelling around and “discovering” opportunities in prospective parts of the world. Now, it is more about the investors from the relatively advanced Third World countries. Indian commerce minister Kamal Nath was not wrong when he accused the Europeans last year of being ‘racist’ when they had tried to block Mittal’s takeover bid for Arcelor.