the world bank world bank group multilateral investment guarantee agency a changing fdi context...

THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

A CHANGING FDI CONTEXT

FACILITATING NEW INVESTMENT IN DIFFICULT MARKET CIRCUMSTANCES

Amaya ManriqueKingston, Jamaica

October 2010


2

Understanding the changing nature of FDI and the importance of investor facilitation

Day 1

Day 2

Day 2

Day 3

Close

Module 2 Online Investment Promotion

• Implications of recession for FDI• Responding to investors’ needs• What constitutes good facilitation• Facilitation in the Caribbean

Module 1 -- Understanding the Context

Module 3 Building relationships with

investors• Understanding how investors use

online information sources

• Enhancing your content to meet investor needs

• Learning how to present online information with promotional impact and keep it up to date

• Promoting your services and Web site effectively

• Understanding how and when investors get in contact with IPIs

• Learning how to handle and build on first contacts from investors

• Partnering with public and private institutions for inquiry-handling

• Building and implementing professional facilitation services

• Developing systematic approaches to handling investor inquiries

• Summing up• Event debriefing and participant

evaluation• Certificate awards


3

FDI in the Current Economic Recession

Business Response Significant decrease in access to credit

Re-capitalization of banks is taking place in many countries

Lower corporate profits

Leading site selection firms report slowdown and postponement of investment projects

Companies restructuring to deal with the crisis; cautious about recovery

Investment plans frozen or discarded

De-locations and outright plant closures

Business Response Significant decrease in access to credit

Re-capitalization of banks is taking place in many countries

Lower corporate profits

Leading site selection firms report slowdown and postponement of investment projects

Companies restructuring to deal with the crisis; cautious about recovery

Investment plans frozen or discarded

De-locations and outright plant closures

RecoveryTentative recovery in the first half of 2010

Cross-border M&As, representing ¼ of total FDI, increased 36%

Total FDI in 2010 is forecast to increase by 10% over 2009

RecoveryTentative recovery in the first half of 2010

Cross-border M&As, representing ¼ of total FDI, increased 36%

Total FDI in 2010 is forecast to increase by 10% over 2009

Recession Most severe recession since 1929

Global FDI flows fell 47% between 2007 and 2009

Recession Most severe recession since 1929

Global FDI flows fell 47% between 2007 and 2009

Sources: World Investment Report 2010, United Nations Conference on Trade and Development

Global Location Trends—Annual Report 2009, IBM—Plant Location International


What we don’t know yet:

How long this crisis will last or how deep it will be

The final extent of FDI decline

The relative impact between greenfield and M&A investment

The geographical impact by region and country

The extent to which the crisis will affect different sectors

4

FDI in the Current Economic Recession


5

Investment flows – Global

Global FDI at $1.11 trillion [Greenfield and M&A]2nd consecutive year of decline after 4 years of growth

Still 5th highest year in history

Share of developing countries rose to 43%, the highest since 1982

Source: UNCTAD WIR2010


Investment flows – Developing economies

Developing economies$630 billion in 2008 was the highest level ever, while developed economies saw a decline of 16%

$478 billion in 2009 was a 24% decrease, but was much more modest than the 44% decrease in developed countries

South and Central America$72 billion in 2009 was the third highest ever, but a decline of 41% from the 2008 peak

Caribbean (excluding British Virgin Islands and Cayman Islands)

$6 billion in 2009 was the second highest ever, but a decline of 39% from the 2008 peak

6



Investment flows – the Caribbean

The region enjoyed a dramatic, 9-fold increase from 1996 to 2008

Major declines only in 2000 and 2009 due to global economic downturns

7

FDI Inflows to the Caribbean, 1990-2009 (excluding financial centers)

Mill

ions

of U

SD

Source: UNCTAD FDI Database



24 FDI projects per year on average (Jan. 2003-Sept. 2010)

145 companies invested in 183 projects

370 jobs created per project on average

Leading sector: Hotels & tourism, with 15% of projects

Leading activity: Manufacturing, with 21% of projects

8

Source: fDi Markets database



Top 10 companies accounted for 16% of projects, including:

Sol Melia Hotels and Restaurants (Spain)

The Bank of Nova Scotia (Canada)

British Petroleum (U.K.)

Top 3 destinations in the Caribbean

Dominican Republic: 43% of projects (FDI per capita $214)

Trinidad and Tobago: 15% of projects (FDI per capita $391)

Jamaica: 14% of projects (FDI per capita $530)

9


Traditional Sectors

Recession’s Impact on Specific Sectors in the Caribbean

Resilient Sectors

10

Declining SectorsSoftware & IT Services

Transportation

Metals

Coal, Oil & Natural Gas

Alternative/ renewable energy

Financial Services

Business Services

Communications


Investment flows – Other trends and characteristics

Other recent trends

South-South FDI flows: TNCs from developing and transition economies, mainly from Asia

Reinvested profits: 30% of FDI

High FDI concentration

50% is concentrated in top 10 countries

FDI is cyclical with a strong upward trend

2001-2003: ↓

2004-2007: ↑

2008-2009: ↓

2010-201?: ↑?

Increased 18 of the last 24 years

11

Sources: UNCTAD WIR2010 and FDI database


Prospects for FDI Recovery: 2009-2012

For illustration only – wide variation in possible outcomes

Dependent on: Financial sector liquidity and willingness to fund new projects Government response policies – e.g. extent of protectionism


Global FDI flows, 2002-2009, and projections for 2010-2012


What will drive FDI in the recession and subsequent recovery?

Drive to lower cost and more flexible solutions:

Outsourcing to lower cost locations

Rationalisation and consolidation of existing operations

Search for government support and funding

Shift to flexible work patterns

Drive to greater market relevance and growth

Regionalisation and globalisation rather than localisation

Search for growing markets


Lower costs …… but balanced by need for lower risks

Low taxes

Access to incentives

Flexible labour markets

More conducive investment climate – e.g. ease of establishing and running a business

Logistics, infrastructure & accessibility

Language skills

14

Which locations will do better?


Thank you.

Questions

the world bank world bank group multilateral investment guarantee agency a changing fdi context...

Documents