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Global Trends in Foreign Direct Investment

Scale, Developments and Consequences

Hafiz Mirza

Professor of International BusinessBradford School of Management

Chief, Development IssuesDivision on Investment

UNCTAD

BCIB Launch

“China is a sleeping dragon. Let it sleep, for when it wakes it will shake the world”. Napoleon

Inward FDI from 1980 to 2007

2

Transition economies

Developed economies

Developing economies

0

400

800

1 200

1 600World total

3

FDI from Emerging accounts for 15% of Global FDI (up from 5% in 1990) Emerging economies account for about 25% of all TNCs In 1990, there were 19 such companies among the Fortune 500; by 2005,

the number had risen to 47; and 58 by 2006 State ownership relatively common compared with developed-country

counterparts

Harbingers of the Future

Economy 1990 2006

Hong Kong, China 11'920 688'974

Russian Federation .. 156'824

British Virgin Islands 875 123'512

Singapore 7'808 117'580

Taiwan Province of China 30'356 113'910

Brazil 41'044 87'049

China 4'455 73'330

Korea, Republic of 2'301 46'760

South Africa 15'004 43'499

Cayman Islands 648 40'395

Mexico 2'672 35'144

Malaysia 753 27'830

Chile 1'149 26'787

Argentina 6'057 24'047

Panama 3'876 21'176

Indonesia 86 17'350

India 124 12'964

United Arab Emirates 14 11'830

Venezuela 1'221 11'559

Colombia 402 9'960

Source: UNCTAD, FDI/TNC database4

Top 20 Developing and Transition Economies

(Stock of FDI)

US$ Billions

Source: UNCTAD 2006, p. 119.

(Millions of dollars)

Figure 2. Intra-regional and inter-regional flows in developing countries excluding offshore financial centres, average 2002-2004

16

21

702

1 201

754

403

LAC2 701

Africa2 105

Asia47 881

5

Sovereign Wealth Funds:Top Investment Locations

6

$100-700 Bn

$30-100 Bn

$10-30 Bn

$0.1-10 Bn

7

International Expansion in Oil, Gas & Minining

35

35

46

46

49

53

66

98

114

129

188

366

512

550

584

1 291

1 045

749

1 427

0 200 400 600 800 1 000 1 200 1 400

ONGC

Norsk Hydro

Lukoil

CNOOC

Sinopec

Statoil

Petrobras

Petronas

BG

Inpex

CNPC/ Petro China

Repsol-YPF

ConocoPhillips

Chevron

ENI

Total

Royal Dutch Shell

BP

ExxonMobil

Oil and gas production of selected TNCs outside their home country, 2005, million barrels of oil equivalent

Source: UNCTAD, based on data from IHS

10%+ of Global FDI

8

Foreign Production Locations by Oil & Gas TNCs from Emerging Economies

1995

Source: UNCTAD, based on data from IHS

9

…and in

2005

Source: UNCTAD, based on data from IHS

TNC Involvement in Infrastructure

(Billions of US$)

10

0

10

20

30

40

50

60

70

80

90

100

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total Electricity, gas and water Telecommunications

10% of Global FDI

Top Infrastructure TNCs

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Rank Electricity Natural gas Telecommunications Transport Water and sewage

1 Electricité de France Gaz de France Vodafone Group Hutchison Whampoaa Veolia Environnement

2 E.On Spectra Energy Corp. Telefónica Grupo Ferrovial YTL Powerb

3 Suezc Centrica Deutsche Telekom Abertis Grupo Agbar

4 RWE Groupc Gas Natural France Télécom AP Moller-Maersk Waste Management Inc

5 Endesa Transcanada Corp. Vivendi Inc DP World Shanks Group6 Vattenfall Enbridge Inc Liberty Global Inc China Ocean Shipping Waste Services Inc7 National Grid Sempra Energy TeliaSonera Canadian National Railways Co. Stericycle Inc8 AES Corp. El Paso Corp. SingTel Skanska Hyflux Limited

9 Fortum Hunting Plc Telenor PSA International Clean Harbors Inc10 Duke Energy Corp. Williams Companies Nortel Networks Hochtief ..11 EDP Energias de Portugal Hong Kong & China Gas Co. KPN Vinci ..12 International Power Plc Distrigaz 'D' BT Group Macquarie Airports ..13 CLP Holdings Canadian Utilities Ltd. Verizon Communications Deutsche Bahn ..14 Iberdrola Iwatani International Corp. SES Bouyguesd ..

15 Unión Fenosa .. Telecom Italia Orient Overseas International ..16 PPL Corp. .. América Móvil Babcock & Brown Infrastructuree ..

17 Atel - Aare Tessin .. Mobile Telecommunications Co. Grupo ACS ..18 Public Service Enterprise Group .. TDC A/S Enka Insaat ve Sanayib ..

19 Keppel Corp. .. Portugal Telecom Obrascon Huarte Lain ..20 Cofide-CIR Group .. Tele2 Kansas City Southern ..

Source : Annex table A.III.(top infra) and A.III.(top50).a Also active in eectricity and telecommunications.b Also active in electricity.c Also active in water and sewage.d Also active in telecommunications.e Also active in telecommunications and electricity.

Significant Chinese and Indian

Infrastructure Investments in Africa

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TNC Profitability 1997-2007

13

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

$ b

illi

on

0

1

2

3

4

5

6

7

8

%

Profits Profitability

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Development Challenges

Host-country gov’t

• Governance, institutions

• Sectoral policies and institutions

• TNC-specific policies (entry and operations, contracts, taxation,IIAs)

Making FDI work for sustainable development

TNC Activities

TNCs

• Abide by local laws• Uphold high standards

when local governance is weak

Home-country gov’t

• Promote responsible TNC behaviour

• Assist host countries

Int. Community

• Guidelines• Pressure, sanctions• Assist host countries

Civil society

• Monitor TNCs and governments

• Provide expertise

Implications for Research:Sources of Competitive Advantage

Firm-Specific Advantages

Home Country Advantages

Development Process or Stage

Advantages

Ownership

and Access

Expertise and Technology

(1)

Access to Resources and Activities

(2)

Relative Advantages

(3)

Product Process

& Value Chain

Niches

Production and Process

Technologies (4)

Access to Created Access

(5)

Market Niches

(6)

Networks

and Relationships

Business

Models

(7)

Kinship

(8)

Intra-Developing Country Relations

(9)

Organisational Structures and Business Culture

Forms of Governance

(10)

Cultural Affinity

(11)

Institutional Affinity

(12)

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