World Investment Report 2003 FDI Policies for Development: National and International Perspectives UNCTAD EMBARGO 4 SEPTEMBER 2003 17:00 hrs GMT Zbigniew.

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  • World Investment Report 2003 FDI Policies for Development: National and International Perspectives UNCTAD EMBARGO 4 SEPTEMBER 2003 17:00 hrs GMT Zbigniew Zimny, Head Investment Issues Analysis Branch UNCTAD, Division on Investment, Technology and Enterprise Development Phone: 4122 907 4643; Fax: 4122 907 0197 E-mail: zbig.zimny@unctad.org Presentation in Warsaw, 4 September 2003
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 2 Largest FDI Downturn in 30 Years Developed countries most affected Global inflows of FDI, 1993-2002, by groups of countries $ billions Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 3 Uneven Downturn in Developing Countries Largest declines in Latin America and Africa 0 50 100 150 200 250 19951996199719981999200020012002 Developing countries Asia and the Pacific Latin America/Caribbean China Africa LDCs Inflows of FDI to developing countries, 1995-2002, by region $ billions Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 4 Declines in FDI inflows, 2002 $ billions The 10 Destinations Most Affected Inflows to the US down by more than $100 billion Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 5 Top 10 Economies Defying the Downturn Increases in FDI inflows, 2002 $ billions Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 6 Top 10 Destinations for FDI in 2002 China in first place leaving aside special case of Luxembourg $ billions
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 7 Top 10 Developing Economy Recipients in 2002 $ billions
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 8 10 Largest Sources of FDI 2002 $ billions
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 9 Why the Downturn Macroeconomic factors. Slow growth, decline in stock market valuations (which led to the dramatic decline in cross-border M&As) Microeconomic factors. Low corporate profits, divestment, repayment of intra-company loans Institutional factors. Winding down of privatization
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 10 Plummeting Cross-Border M&As Key Factor Between 2000 and 2002: Value of cross-border M&As fell from $1.1 trillion to $370 billions Number of deals dropped from 7,900 to 4,500 The average value of deals shrunk from $145 millions to $82 millions Number of mega-deals (value >$1 billion) more than halved from 175 to 81 Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 11 FDI Largest Source of External Finance to Developing Countries Total resource flows to developing countries, by type of flow, 1990-2002, $ billions
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 12 Indicators of FDI and international production 1982-2002, $ billions, current prices International Production Growing, at Slower Pace
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 13 Inward FDI stock, by group of economies, 1980, 1990, 1995, 2000, 2001 and 2002 (Billions of dollars)
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 14 Outward FDI stock, by group of economies, 1980, 1990, 1995, 2000, 2001 and 2002 (Billions of dollars)
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 15 Inward FDI stock, 2002 Note: The size of the region/country's box reflects the size of the FDI stock.
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 16 Top 15 Ranks in the FDI Performance Index 1999-2001, index value
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 17 Top 15 Ranks in the FDI Potential Index 1999-2001, index value
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 18 Countries Increasingly Welcome FDI
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 19 Future Prospects for FDI Vary by Region a 2003/04 and 2004/05 a The survey question was: How do you perceive the prospects for FDI inflows to your country in the short- and medium-term, as compared to the last two years (2001-2002)?
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 20 Enhancing The Development Dimension of International Investment Agreements Part Two
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 21 Objectives of National FDI Policies Maximizing benefits of FDI Minimizing negative effects of FDI Attracting FDI Development concerns
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 22 Proliferation of IIAs at All Levels Bilateral level oBITs: from 385 (1989) to some 2,200 (2002) oFTAs now often contain investment provisions Regional level oFTAs covering investment (NAFTA, MERCOSUR) oInvestment agreements (ASEAN Investment Area, Andean Communitys Decision 291) Multilateral level: instruments affecting FDI oGATS, TRIMs Agreement, MIGA, etc. And many IIAs are in the making
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 23 Number of BITs and DTTs Continues to Rise BITs and DTTs concluded, 1990-2002
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 24 Density Mapping of BITs Worldwide Number of BITs per country, January 2003
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 25 BITs Increasing Coverage 176 countries have signed BITs 45% of BITs do not involve developed countries Share of outward FDI stock covered by BITs o7% of global FDI o22% of FDI in developing countries o57% of FDI in CEE Main aim: investor protection but some now include provisions for the right of establishment, performance requirements and employment of key foreign personnel.
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 26 Implications? Shows: national FDI policies increasingly take place in the context of IIAs Various approaches to international rule-making all have their benefits and costs What is desirable for a country depends on what it seeks from an agreementinvestor protection, liberalization, international cooperation The desirability, from a development perspective, of any future IIAs at whatever level depends on the objectives, structure, substantive provisions and implementation of IIAs
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 27 Key IIA Issues Examined in WIR03 The definition of investment: determines the scope and reach of the substantive provisions of an agreement National treatment (especially with regard to the right of establishment): determines how much and in what ways preferences can be given to domestic enterprises Circumstances under which government policies should be regarded as regulatory takings: testing the line between the right of governments to regulate and the rights of private property owners
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 28 Key IIA Issues Examined in WIR03 (cont.) Dispute settlement: question of the involvement of non-State actors and the extent to which the settlement of investment disputes is self-contained The interaction of IIAs with national policies in the area of oPerformance requirements oIncentives oTransfer-of-technology policies and oCompetition policy
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 29 Balancing Host and Home Country Interests to enhance the development dimension of IIAs Traditional IIAs: focus on host countries Developed countries already use various home country measures (HCMs) to encourage FDI to developing countries Some bilateral and regional agreements contain HCM commitments Future IIAs: greater emphasis on HCMs Developing countries would benefit from making HCMs more transparent, stable and predictable in future IIAs
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 30 The Role of TNCs also Deserves Attention TNCs can do more to advance the development dimension of their investments, as part of good corporate citizenship So far voluntary actions and corporate codes prevailed Focus so far is on social and environmental issues, less on economic ones Key areas from development perspective: ocontributing fully to public revenues of host countries ocreating and upgrading linkages with local enterprises ocreating employment opportunities oraising local skill levels otransferring technology Further attention in IIAs is desirable
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  • Source: UNCTAD, World Investment Report 2003. FDI Policies for Development: National and International Perspectives 31 Conclusions FDI flows are primarily determined by economic fundamentals IIAs can only complement what is done at the national level in terms of creating a more conducive environment. Challenge: to make the development dimension an integral part of IIAs at all levels in support of national policies to attract FDI and benefit more from it.
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  • World Investment Report 2003 FDI Policies for Development: National and International Perspectives Thank You! Visit the website of the World Investment Report at: www.unctad.org/wir.

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