WORLD INVESTMENT REPORT 2013

Executive Training Seminar Florence, 23 October 2013

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Contents

• FDI trends

• Recent policy developments

• Global value chains and FDI

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FDI recovery road proves bumpy, with 18% decline in 2012 Global FDI inflows (Billions of dollars) Average annual growth rate

2,003 1,816

+ 17%

1,473

1,409

1,652

1,351

1,216

pre-crisis average 20052007

2007

2008

2009

2010

- 18%

2011

2012

3 3

Developing economies surpass developed economies as FDI recipients for the first time FDI inflows by group of economies, 1995 – 2012 (Billions of dollars) 2 500 World total

2 000

Developed economies

1 500

Transition economies

1 000

Developing economies

42%

500 52%

0 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

4 4

9 of the 20 largest FDI recipients are developing economies Top 20 host economies, 2012 (Billions of dollars) (x) = 2011 ranking 1 United States (1)

168

2 China (2) 3 Hong Kong, China (4) 4 Brazil (5)

121 75 65 65

5 British Virgin Islands (7) 6 United Kingdom (10) 7 Australia (6)

62 57 57

8 Singapore (8) 9 Russian Federation (9) 10 Canada (12)

51 45

11 Chile (17)

30

12 Ireland (32) 13 Luxembourg (18)

29 28 28 26

14 Spain (16) 15 India (14) 16 France (13)

25 20

17 Indonesia (21) 18 Colombia (28) 19 Kazakhstan (27) 20 Sweden (38)

16 14 14

Developing economies Developed economies Transition economies

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Outward FDI from developing economies accounts for 1/3 of global total Shares in global FDI outflows, by group of economies, 2000–2012 (Per cent)

Developed economies Developing and transition economies

100% 90% 80% 70%

65%

60% 50%

88%

40% 30% 20% 10%

35% 12%

0% 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

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China moves up from the sixth to the third largest investor, after the United States and Japan Top 20 investor economies, 2012 (Billions of dollars) (x) = 2011 ranking 1 United States (1) 2 Japan (2) 3 China (6) 4 Hong Kong, China (4) 5 United Kingdom (3) 6 Germany (11) 7 Canada (12) 8 Russian Federation (7) 9 Switzerland (13) 10 British Virgin Islands (10) 11 France (8) 12 Sweden (17) 13 Republic of Korea (16) 14 Italy (9) 15 Mexico (28) 16 Singapore (18) 17 Chile (21) 18 Norway (19) 19 Ireland (167) 20 Luxembourg (30)

329 123 84 84 71

67 54 51 44 42 37 33 33 30 26 23 21 21 19 17

Developing economies

Developed economies Transition economies

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Global FDI drop is due to developed economies, flows into developing regions remain at their high level FDI inflows by region, 2010–2012 (Billions of dollars)

Region World Developed economies Developing economies Africa Asia East and South-East Asia South Asia West Asia Latin America and the Caribbean Oceania Transition economies Structurally weak, vulnerable and small economies LDCs LLDCs SIDS

•

FDI flows to developed countries plummet

•

FDI flows to developing economies see a small overall decline, with some bright spots:

FDI inflows 2010 1 409 696 637 44 401 313 28 59 190 3 75 45 19 27 5

2011 1 652 820 735 48 436 343 44 49 249 2 96 56 21 34 6

2012 1 351 561 703 50 407 326 34 47 244 2 87 60 26 35 6

•

Africa bucks the trend

• Developing Asia loses growth momentum, but remains at historically high levels • Latin America and the Caribbean register a small decline •

FDI is on the rise in structurally weak economies

•

Transition economies see a relatively small decline

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All the three sectors see a decline, but the services sector remains resilient FDI projects inflows by sector (Billions of dollars)

Value of greenfield projects, 2011–2012

Services

Manufacturing

Primary

385

Value of cross-border M&As, 2011–2012

- 33%

323

- 16%

264

- 42%

453

76

25

2011

2012

- 67%

214

- 45%

205

124

- 42%

137 47

- 33%

137 2011

2012

- 66%

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Reinvested earnings can be an important source of finance for long-term investment Structure and distribution of FDI income, 2005 - 2011

Reinvested earnings (on FDI component) Earnings (89%) FDI income (100%)

(33%) Capex

Cash reserves

Repatriated earnings (56%) Interest (11%)

• FDI income at $1.5 trillion in 2011, on the rise for the second consecutive years (average annual growth 2010 – 2011: +18%) • On a FDI stock of $21 trillion, the rate of return is just above 7%, higher in both developing (8 per cent) and transition economies (13 per cent) than developed economies (5 per cent) • Nearly one third of FDI income is retained in host economies. The share of retained earnings is highest in developing countries; at about 40% of FDI income, it represents an important source of financing

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Investments in offshore financial centres (OFCs) remain at historically high levels Value and share of OFCs in global FDI flows, 1990 – 2012 (Billions of dollars and per cent)

7

80 FDI inflows

Share in world

6

5

60

40

3

(%)

($ billion)

4

2

20 1

0

0

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Contents

• FDI trends

• Recent policy developments

• Global value chains and FDI

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Most countries remain keen to attract FDI while becoming more selective and reinforcing regulatory frameworks Changes in national investment policies, 2000 – 2012 (Per cent)

100

94% 75

Liberalization/promotion 75% 50

Restriction/regulation 25% 25

6% 0

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The number of newly signed IIAs continues to decline but the total number has reached 3,196 Trends in IIAs, 1983–2012

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Contents

• FDI trends

• Recent policy developments

• Global value chains and FDI

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Trade is increasingly driven by global value chains (GVCs), leading to a significant amount of double counting Value added in global trade, 2010 (Trillions of dollars)

ESTIMATES

~19

~5

28% ~14

Global gross exports

“Double counting” (foreign value added in exports)

Value added in trade

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The contribution of GVCs to economic growth can be significant Domestic value added in trade as a share of GDP, by region, 2010 (Per cent) Global

22%

Developed Economies

18%

EU United States Japan

26% 12% 13% 28%

Developing Economies Africa

30%

Asia

25%

East and South - East Asia

24%

South Asia

18%

West Asia Latin America and Caribbean

37% 16%

Central America

22% 27%

Caribbean South America

14%

Transition Economies Memorandum item: Least Developed Countries

30% 26% Developing country average

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GVCs are typically coordinated by TNCs Global gross trade (export of goods and services), by type of TNC involvement, 2010 (Trillions of dollars) ESTIMATES TNC-related trade: ~80%

~ 19

~4

~ 15

~ 6.3

~ 2.4 ~ 6.3

Global trade in goods and services

Non-TNC trade

All TNC-related trade

Intra-firm trade

NEM-generated trade, selected industries

TNC arm's length trade

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The presence of TNCs drives GVC participation Correlation between inward FDI stock and GVC participation, 187 countries, 1990 – 2010

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FDI shapes patterns of value added in trade Key value added trade indicators (median values), by quartile of FDI stock relative to GDP, 2010 Foreign value added in export 1st quartile (Countries with high FDI stock relative to GDP)

Value added contribution of trade to GDP

34%

2nd quartile

37%

24%

3rd quartile

17%

4th quartile (Countries with low FDI stock relative to GDP)

18%

30%

24%

21%

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Thank You! Visit UNCTAD websites: www.unctad.org/diae

and www.unctad.org/wir www.unctad.org/fdistatistics

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