Transcript World Investment Report 2000

Preliminary version
EMBARGO 18 SEPTEMBER 2001
17:00 hrs GMT
World Investment Report 2001
Promoting Linkages
18 September 2001
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UNCTAD
Global inflows of FDI
1993-2000, USD billions, by group of countries
1400
W orld
1200
1000
D eveloped
coun tries
800
600
D evelopin g
coun tries
400
200
Cen tral an d Eastern Europe
0
1993
1994
1995
1996
1997
1998
1999
2000
Source: UNCTAD
World Investment Report 2001:
2
The 10 largest FDI destinations
2000, USD billions
U nited States
281
Germ any
176
U nited Kingdom
130
Belgium and Luxem bourg
87
H ong Kong, China
64
Canada
63
N etherlands
55
France
44
China
41
Spain
37
0
50
100
150
200
250
300
Source: UNCTAD
World Investment Report 2001:
3
The 10 largest sources of FDI
2000, USD billions
U nited Kingdom
250
France
173
U nited States
139
Belgium and Luxem bourg
83
N etherlands
73
H ong Kong, China
63
Spain
54
Germ any
49
Canada
44
Sw itzerland
40
0
50
100
150
200
250
300
Source: UNCTAD
World Investment Report 2001:
4
FDI inflows and outflows by region and economy
USD billions, 2000
820.3
W estern Europe
633.2
183.3
N orth America
344.4
85.3
143.8
Asia an d th e Pacific
13.4
86.2
Latin America an d th e Caribbean
4.1
27.5
Cen tral an d Eastern Europe
In flows
42.1
26.7
Oth er developed coun tries
O u t flows
1.3
9.1
Africa
0
150
300
450
600
(U SD billion s)
750
900
Note: Africa includes South Africa; Central and Eastern Europe includes Developing Europe
Source: UNCTAD
World Investment Report 2001:
5
Number of cross-border “mega deals”*
1995-2000
200
175
180
160
140
120
109
100
89
80
58
60
40
45
35
20
0
1995
1996
1997
1998
1999
2000
* Deals with transaction values of more than USD 1 billion
Source: UNCTAD
World Investment Report 2001:
6
-2 0
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FDI flows relative to the value of gross fixed capital
formation, per cent, 1997-99, developed countries
100
1 9 9 7 -1 9 9 9 FD I inflow s
80
1 9 9 7 -1 9 9 9 FD I outflow s
60
40
20
0
Source: UNCTAD
World Investment Report 2001:
7
FDI flows relative to the value of gross fixed capital
formation, per cent, 1997-99, Africa, top 20 countries
120
100
1 9 9 7 -1 9 9 9 FD I Inflow s
1 9 9 7 -1 9 9 9 FD I Outflow s
80
60
40
20
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0
-2 0
Source: UNCTAD
World Investment Report 2001:
8
FDI flows relative to the value of gross fixed capital
formation, %, 1997-99, Dev. Asia-Pacific, top 20 countries
70
60
1997-1999 FD I Inflows
1997-1999 FD I O utflows
50
40
30
20
10
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di
ve
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rd
an
0
Source: UNCTAD
World Investment Report 2001:
9
FDI flows relative to the value of gross fixed capital
formation, per cent, 1997-99, Latin Am./Carribbean, top 20
90
80
70
1 9 9 7 -1 9 9 9 FD I Inflow s
1 9 9 7 -1 9 9 9 FD I Outflow s
60
50
40
30
20
10
ua
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Source: UNCTAD
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10
FDI flows relative to the value of gross fixed capital
formation, per cent, 1997-99, Central and Eastern Europe
45
40
1 9 9 7 -1 9 9 9 FD I Inflow s
35
1 9 9 7 -1 9 9 9 FD I Outflow s
30
25
20
15
10
5
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Source: UNCTAD
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11
Share of developing countries in world FDI
1980-2000, per cent
Source: UNCTAD
World Investment Report 2001:
12
Outward FDI from some developing countries
1997-1999, FDI outflows as a percentage of gross fixed capital formation
Source: UNCTAD
World Investment Report 2001:
13
The Geography of
International Production
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14
TNC activities continue to expand
•
•
•
•
62,000 TNCs
820,000 foreign affiliates
Affiliate sales now almost twice the value of global exports
FDI most important external capital source in developing
countries
• FDI flows highly concentrated: 10 countries receive 75 %
of total inflows
Source: UNCTAD
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15
Changing geography of international production
• 1985: 17 countries received more than $1 billion of FDI
• 2000: 51 countries received more than $1 billion of FDI
• 1985: 13 countries had outflows of more than $1 billion
• 2000: 33 countries had outflows of more than $1 billion
•
In 2000: top 30 countries accounted for 99% of world outflows
•
In 2000: top 30 countries accounted for 95% of world inflows
Source: UNCTAD
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Some key characteristics
•
Services are growing in importance
•
Technologically more advanced activities tend to be more
concentrated
– Biotechnology among the most concentrated activities
– Food and beverages among the most dispersed
•
Specialization and internationalization go hand in hand.
•
Even critical functions such as design, R&D and financial
management are becoming more internationalized
•
Innovative clusters attract FDI, e.g.:
– Silicon Valley, California
– Silicon Fen, Cambridge
– Wireless Valley, Stockholm
Source: UNCTAD
World Investment Report 2001:
17
Generations of investment promotion policies
• 1st generation:
– liberalization of FDI flows
– opening up of sectors to foreign investors
• 2nd generation:
– marketing of countries as locations for FDI
– setting up of national investment promotion agencies
• 3rd generation:
– targeting of foreign investors at the level of industries and clusters
– marketing of regions and clusters
– aim: to match the locational advantages of countries with the needs of the
foreign investor.
Source: UNCTAD
World Investment Report 2001:
18
An increasingly enabling framework for FDI
number of national regulatory changes in, 1991-2000
160
Less favourable t o FD I
140
M ore favourable t o FD I
120
100
80
60
40
20
0
1991
1992
1993
Source: UNCTAD
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1994
1995
1996
1997
1998
1999
2000
19
The World’s Top 100 TNCs
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20
The world’s top 100 TNCs 1999 - some facts
• 91 are based in the “Triad”
• 3 firms from developing countries made the list
• Half of the largest 100 firms are in three industries
 electrical and electronic equipment
 motor vehicle
 petroleum exploration and distribution industries
 The top 100 accounted for
 12 per cent of the foreign assets;
 16 per cent of the sales; and
 15 per cent of the employment...
...in all TNCs.
Source: UNCTAD
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21
The top 10 largest TNCs in the world,
by foreign assets, USD billions, 1999
Rank
Corporation
Industry
1
General Electric
Electronics
United States
2
ExxonMobil Corp
Petroleum
United States
99
3
Petroleum
Motor vehicles
Netherlands/
United Kingdom
United States
69
4
Royal Dutch Shell
Group
General Motors
5
Ford Motor Company
Motor vehicles
United States
Na
6
Toyota Motor Corp.
Motor vehicles
Japan
56
7
DaimlerChrysler
Motor vehicles
Germany
56
8
TotalFina
Pertroleum
France
Na
9
IBM
Computers
United States
45
10
BP
Petroleum
United Kingdom
39
Source: UNCTAD
World Investment Report 2001:
Country
Foreign
assets
141
68
22
The top 10 largest TNCs in developing countries, by
foreign assets, USD millions, 1999
Rank Corporation
1
Industry
Country
Hong Kong,
China
Venezuela
3
Hutchison Whampoa Diversified
Ltd.
Petróleos de
Petroleum
Venezuela
Cemex SA
Construction
4
Petronas
Malaysia
5
Samsung Corp.
Petroleum expl., ref.
and dist.
Diversified/Trade
6
Daewoo Corp.
Trade
7
LG Electronics Inc.
8
Sunkyong Group
9
Electronics and
electrical equipment
Enery/trading/chemi
cals
Construction
New World
Development Co.
Samsung Electronics Electronics and
Co. Ltd.
electrical equipment
2
10
Source: UNCTAD
World Investment Report 2001:
Mexico
Republic of
Korea
Republic of
Korea
Republic of
Korea
Republic of
Korea
Hong Kong,
China
Republic of
Korea
Foreign
assets
na
8,009
6,973
na
5,127
na
4,215
4,214
4,097
3,907
23
The top 10 largest TNCs in Central and Eastern
Europe, by foreign assets, USD millions, 1999
Rank Corporation
Industry
Country
Foreign
assets
3,236
Petroleum & natural
gas
Transportation
Russian
Federation
Latvia
Energy
Croatia
296
Croatia
286
Russian
Federation
Slovenia
256
236
1
Lukoil Oil Co.
2
Latvian Shipping Co.
3
4
Hrvatska
Elektroprivreda d.d.
Podravka Group
5
Primorsk Shipping Co.
Food & beverages/
pharmaceuticals
Transportation
6
Gorenje Group
Domestic appliances
7
Transportation
8
Far Eastern Shipping
Co.
Pliva Group
Pharmaceuticals
Russian
Federation
Croatia
9
TVK Ltd.
Chemicals
Hungary
139
Motokov a.s.
Trade
Czech
Republic
138
10
Source: UNCTAD
World Investment Report 2001:
459
236
182
24
Promoting Linkages
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25
Why promote backward linkages?
• Potential benefits to foreign affiliates, local firms and host countries.
• Foreign affiliates: using suppliers in a host country way to reduce costs,
increase flexibility and expand sales. Outsourcing and sub-contracting
raise the need for inter-firm linkages.
• Local firms: become part of global production networks of TNCs, can
increase sales and benefit from productivity-enhancing information and
knowledge transmitted from foreign affiliates.
• Host countries: can benefit when linkages contribute to the upgrading of
domestic enterprises and as foreign affiliates become more firmly
embedded in the host economy.
Source: UNCTAD
World Investment Report 2001:
26
Strategic options for obtaining inputs
Source: UNCTAD
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27
Many factors affect the linkage creation process
• Industry-specific determinants
• TNC-specific determinants
–
–
–
–
–
–
investment motives and strategies;
technology and market position of the TNC;
role assigned to a foreign affiliates;
age of foreign affiliate;
mode of establishment
size of affiliate
• Host-country-specific determinants
–
–
–
–
level of economic development
availability of competitive suppliers
availability of support institutions
legal and economic policy framework
Source: UNCTAD
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28
Supplier development efforts by TNCs
• Supply chain management more important.
• Some TNCs have established special linkage development
programmes.
• Objective: expand the number of efficient suppliers, and/or to help
existing suppliers improve their capabilities.
• Efforts have been made to e.g.:
– find new suppliers;
– provide technology and technical assistance;
– give training;
– share information; and/or
– extend financial support.
Source: UNCTAD
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29
Policy framework for promoting backward linkages
Source: UNCTAD
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30
The linkages policy environment
Source: UNCTAD
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31
The role of trade and investment measures
• Various performance requirements
– local content (not permissible under the WTO TRIMs Agreement)
– joint venture
– export performance
FDI and trade liberalization, and more intense competition for FDI, have
reduced the reliance by countries on many performance requirements.
• Incentives
– incentives linked to local content are not permissible under the TRIMs
Agreement;
– the use of incentives must also be compatible with the Agreement on
Subsidies and Countervailing Measures;
– Well targeted incentives to promote the strengthening of linkages can be
important. Maybe such development-related subsidies should be rendered
non-actionable.
Source: UNCTAD
World Investment Report 2001:
32
Best practice in linkage promotion
The need for public-private partnerships
• Role of foreign affiliates
–
–
–
–
indicate scope for local sourcing
help identify suppliers with greatest potential
specify requirements
participate in training, provide information and knowledge
• Role of government
– formulate and adopt adequate laws and incentives
– set up an appropriate institutional framework
– make sure that support required is provided (by public or private service
providers) to the firms targeted
– policy coherence
Source: UNCTAD
World Investment Report 2001:
33
Best practice in linkage promotion
some key lessons
• Matchmaking needs to be complemented by measure to upgrade local
supply capacity
• Supplier development efforts should be selective and target SMEs that
show the greatest potential for growth
• Cooperation and coordination among the various government agencies
involved is important.
• Efforts need to tally with SME development and FDI policies
• Identify the best service providers of business support -- whether they
be private or public.
• Efforts must be adapted to the specific circumstances of each country
or sub-national location.
Source: UNCTAD
World Investment Report 2001:
34
The National Linkage Programme in Ireland
basic facts
• Run by Enterprise Ireland
• Dates back to the mid-1980s
• Two main tasks:
– to support Irish enterprises to build capacity, innovate and create new
partnerships
– to assist international investors to source and identify key suppliers in
Ireland
• Key industries: electronics, engineering and pharamceuticals
• Has focused on 70-80 Irish firms and involved some 250 foreign
affiliates.
• Rapid growth of local purchases of raw materials and services
• Several SMEs have become successful international subcontractors.
Source: UNCTAD
World Investment Report 2001:
35
The Local Industry Upgrading Programme (LIUP) in
Singapore
• Run by the Economic Development Board (EDB)
• Started in 1986
• Aim: to upgrade, strengthen and expand the pool of local suppliers to
foreign affiliates by enhancing their efficiency, reliability and
international competitiveness.
• Close collaboration with foreign affiliates.
• In 1999, some 30 foreign affiliates and 11 large domestic companies
were partnering some 670 vendors under the LIUP.
• Several local firms under the programme have managed to become
preferred global first-tier suppliers to their customers and TNCs in
their own right.
Source: UNCTAD
World Investment Report 2001:
36
A Linkage Promotion Programme key elements
1. Setting the policy objectives
2. Identifying the targets of the programme
- selection of industries, foreign affiliates and domestic firms
3. Identifying specific measures to be adopted:
- information and matchmaking
- technology and technical assistance
- training
- provision of finance
4. Setting up institutional and administrative framework to
implement and monitor the programme
Source: UNCTAD
World Investment Report 2001:
37