UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT World Investment Report 2006 FDI from Developing and Transition Economies: Implications for Development United Nations New York and Geneva,2006
UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT World Investment Report United Nations New York and Geneva, 2006 2006 FDI from Developing and Transition Economies: Implications for Development
NOTE ated n attracting and from FDI and in building their tive c apaeitend building and enterprise development hatso e of develo r statistic Transition economies:South-East Europe and the Commonwealth of Independent States Developing economies:in general all economies not specified above The ref endorsement by UNCTAD na The following symbols have been used in the tables A dash(-)indicates that the item is equal to zero or its value is negligible A blank in a table indicates that the item is not applicable,unless otherwise indicated. A slash()between dates representing years,e.g1994/95,indicates a financial year. yr-195 the full. Reference to"dollars"()means United States dollars.unless otherwise indicated. Annual rates of growth or change.unless otherwise stated.refer to annual compound rates Details and percentages in tables do not necessarily add to totals because of rounding. The material contained in this study may be freely quoted with appropriate acknowledgement UNITED NATIONS PUBLICATION Sales No.E.06.ILD.11 1SBN92-1-112703-4 Printed in Switzerland
ii NOTE As the focal point in the United Nations system for investment and technology, and building on 30 years of experience in these areas, UNCTAD, through DITE, promotes understanding of key issues, particularly matters related to foreign direct investment and transfer of technology. DITE also assists developing countries in attracting and benefiting from FDI and in building their productive capacities and international competitiveness. The emphasis is on an integrated policy approach to investment, technological capacity building and enterprise development. The terms country/economy as used in this Report also refer, as appropriate, to territories or areas; the designations employed and the presentation of the material do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. In addition, the designations of country groups are intended solely for statistical or analytical convenience and do not necessarily express a judgement about the stage of development reached by a particular country or area in the development process. The major country groupings used in this Report follow the classification of the United Nations Statistical Office. These are: Developed countries: the countries members of the OECD (other than Mexico, the Republic of Korea and Turkey), plus the new European Union member countries which are not OECD members (Cyprus, Estonia, Latvia, Lithuania, Malta and Slovenia), plus Andorra, Israel, Liechtenstein, Monaco and San Marino. Transition economies: South-East Europe and the Commonwealth of Independent States. Developing economies: in general all economies not specified above. The reference to a company and its activities should not be construed as an endorsement by UNCTAD of the company or its activities. The boundaries and names shown and designations used on the maps presented in this publication do not imply official endorsement or acceptance by the United Nations. The following symbols have been used in the tables: Two dots (..) indicate that data are not available or are not separately reported. Rows in tables have been omitted in those cases where no data are available for any of the elements in the row; A dash (-) indicates that the item is equal to zero or its value is negligible; A blank in a table indicates that the item is not applicable, unless otherwise indicated; A slash (/) between dates representing years, e.g., 1994/95, indicates a financial year; Use of a hyphen (-) between dates representing years, e.g., 1994-1995, signifies the full period involved, including the beginning and end years; Reference to "dollars" ($) means United States dollars, unless otherwise indicated; Annual rates of growth or change, unless otherwise stated, refer to annual compound rates; Details and percentages in tables do not necessarily add to totals because of rounding. The material contained in this study may be freely quoted with appropriate acknowledgement. UNITED NATIONS PUBLICATION Sales No. E.06.II.D.11 ISBN 92-1-112703-4 Copyright © United Nations, 2006 All rights reserved Printed in Switzerland
PREFACE 's World aorseisageaginocesooeadhctnotnnsosteatwg The re ses that such outward investment offers an additional avenue for developi can help firms ac aaenpoctesheaeoYmateuheasksaxoosedseeah outward investment. From a host-country perspective the rise of transnational corporations from developing and transition investment into many least developed mutual development ga w this form of S in Developed countries and their firms will face new competition for various resources and assets eywll asndewortnclbrtion They will have tobm has omie pliecao aeeaweshoaogge Finally.the of corporations from developing and amCaA9meamRiaa,Saoro9gn9m2cimgtmgosTlneper8rRabencg s a step towar Kofi A An New York,July 2006 Secretary-General of the United Nations
iii PREFACE This year’s World Investment Report highlights the changing role of developing countries and transition economies in global foreign direct investment and the international production system. It examines their emergence as significant sources of foreign direct investment as well as the underlying factors and broader implications. The Report stresses that such outward investment offers an additional avenue for developing countries to link up to global markets and production systems. If managed successfully, these investments can help firms access markets, natural resources, foreign capital, technology or various intangible assets that are essential to their competitiveness but that may not be readily available in their home countries. Appropriate policies are needed to mitigate the risks and costs and seize the opportunities arising from outward investment. From a host-country perspective the rise of transnational corporations from developing and transition economies expands the range of potential sources of finance, technology and management know-how. This is of particular relevance to low-income countries. As shown in the Report, inflows of foreign investment into many least developed countries come primarily from other developing countries. It is important to consider how this form of South-South cooperation can be further strengthened to promote mutual development gains. Developed countries and their firms will face new competition for various resources and assets, but they will also find new opportunities for economic collaboration. They will have to become accustomed to many more transactions involving investors from developing and transition economies as they expand internationally. In fact, the emergence of these new sources of investment has broader implications for international economic relations as it reflects their growing clout in the world economy. Finally, the emergence of transnational corporations from developing and transition economies imparts greater momentum to South-South cooperation. New investment corridors are opening up between Latin America, Africa and Asia as part of this dynamic activity, with positive prospects for advancing development. To capitalize on this opportunity, policy-makers from home and host developing countries need to gear themselves into action and, for this, they will require insightful knowledge and analysis. This year’s World Investment Report is a step towards this goal. Kofi A. Annan New York, July 2006 Secretary-General of the United Nations
ACKNOWLEDGEMENTS M oachim Karl.Dong Jae Lee,Guoyong Liang.Michael Lim,Padma Mallampally,Hafiz Mirza,Nicole Principal research assistance was provided by Mohamed Chiraz Baly.Bradley Boicourt.Jovan ur vame rs at va published Teresita Ventura.It was edited by Praveen Bhalla. John H.Dunning was the senior economic adviser. WIR06 benefited 2006 Seminar in Geneva in May City,Mexico (n o with Reginald Rumney and the Edge Institute). Inputs were also received from Emin Akcaoglu,Bekele Amare,Frank Bartels,Yannis Berthouzoz Kady.Gachino.Celso Stephen Gelb.Andrea Gold Jost,Georg Kell,Kee Beom Kim,Ari Kokko,Julia Lewis,Mina Mashayekhi.John Mathews.Anthony ved during ation fr s Arruda.Dilek Avku ohn Da niels,Maria de los Angele Pozas Ivanics,Josephat Kweka,Seong-Bong Lee,Robert Lipse ey,Kari Liuhto,Aimable Uwizeye Mapendanc re,Peter i Naidu Estelle Rey.Reginald Rumney.Tagi Sa gafi-Nejad,Mona Salim Bseiso,Yai Sriratana,Marjan Svetlicic Mazen M.Tineh,Len Trevino,Judit Vadasz,Joerg Weber,Henry Yeung and Zbigniew Zimny. nal o xecutives of a number of companies,also contributed toespecially through the provision of ata and othe heegmation e collection o The financial support of the Governments of Norway and Sweden is gratefully acknowledged
iv ACKNOWLEDGEMENTS The World Investment Report 2006 (WIR06) was prepared by a team led by Anne Miroux and comprising Kumi Endo, Torbjörn Fredriksson, Masataka Fujita, Masayo Ishikawa, Kálmán Kalotay, Joachim Karl, Dong Jae Lee, Guoyong Liang, Michael Lim, Padma Mallampally, Hafiz Mirza, Nicole Moussa, Abraham Negash, Hilary Nwokeabia, Shin Ohinata, Jean-François Outreville, Thomas Pollan and James Zhan. Principal research assistance was provided by Mohamed Chiraz Baly, Bradley Boicourt, Jovan Licina, Lizanne Martinez and Tadelle Taye. Anne-Christine Charon, Michael Karschnia, Elodie Laurent and Arthur van de Kamp assisted as interns at various stages. The production of the WIR06 was carried out by Severine Excoffier, Chantal Rakotondrainibe and Katia Vieu. WIR06 was desktop published by Teresita Ventura. It was edited by Praveen Bhalla. John H. Dunning was the senior economic adviser. WIR06 benefited from inputs provided by participants in a Global Seminar in Geneva in May 2006, and three regional seminars on FDI from developing countries held in April 2006: one in Mexico City, Mexico (in cooperation with the Economic Commission for Latin America and the Caribbean and the Government of Mexico), the second in Chiang Mai, Thailand (in cooperation with the ASEAN Secretariat and the Government of Thailand), and the third in Johannesburg, South Africa (in cooperation with Reginald Rumney and the Edge Institute). Inputs were also received from Emin Akçaoglu, Bekele Amare, Frank Bartels, Yannis Berthouzoz, Peter Buckley, Hamed El-Kady, Geoffrey Gachino, Celso Garrido, Stephen Gelb, Andrea Goldstein, Kathryn Gordon, Vishwas Govitrikar, Carrie Hall, Susan Hayter, Daisuke Hiratsuka, Veena Jha, Thomas Jost, Georg Kell, Kee Beom Kim, Ari Kokko, Julia Lewis, Mina Mashayekhi, John Mathews, Anthony Miller, Rekha Misra, Toh Mun Heng, Ramón Padilla, Pavida Pananond, Neil Patterson, Jenny Rydeman, Frans Paul van der Putten, Kee Hwee Wee, Sun Wenjie, Bing Xiang and Tham Siew Yean. Comments were received during various stages of preparation from Carlos Arruda, Dilek Aykut, Rashmi Banga, Diana Barrowclough, Joseph Battat, David Benavides, Peter Brimble, Douglas Brooks, Gregorio Canales Ramirez, John Cassidy, Refik Culpan, John Daniels, Maria de los Angeles Pozas, Ping Deng, Diana Farrell, Axèle Giroud, Ulrich Grosch, Wuping Guo, Guner Gursoy, Sireen Hikmat, Gábor Hunya, Yao-Su Hu, Moses Ikiara, Bharat Joshi, Anna Joubin Bret, Metin Kilci, Annamaria Kokeny Ivanics, Josephat Kweka, Seong-Bong Lee, Robert Lipsey, Kari Liuhto, Aimable Uwizeye Mapendano, Juan Carlos Moreno-Brid, Michael Mortimore, Peter Muchlinski, Sanusha Naidu, Kishore Nair, Rajneesh Narula, Abdoulaye Niang, Peter Nunnenkamp, Gerald Pachoud, Sheila Page, Fernando Porta, MarieEstelle Rey, Reginald Rumney, Tagi Sagafi-Nejad, Mona Salim Bseiso, Yai Sriratana, Marjan Svetlicic, Mazen M. Tineh, Len Treviño, Judit Vadasz, Joerg Weber, Henry Yeung and Zbigniew Zimny. Numerous officials of central banks, statistical offices, investment promotion and other government agencies, and officials of international organizations and non-governmental organizations, as well as executives of a number of companies, also contributed to WIR06, especially through the provision of data and other information. The Report also benefited from collaboration with Erasmus University, Rotterdam on the collection of data on, and analysis of, the largest TNCs. The financial support of the Governments of Norway and Sweden is gratefully acknowledged
TABLE OF CONTENTS V TABLE OF CONTENTS Page PREfACE ACKNOWLEDGEMENTS. OVERVIEW.... PART ONE ANOTHER YEAR OF FDI GROWTH CHAPTER I.GLOBAL TRENDS:RISING FDI INFLOWS 3 A.OVERALL TRENDS AND DEVELOPMENTS IN FDI 3 1.endand characteristics vival of FDI in natural resources Trends in international production. 10 Some issues concerning FDI statistics:what is behind the numbers? 10 A new wave of cross-border M&As... b.Cross-border M&As versus greenfield FDI An emerging trend:the rise in FDI by collective investment funds. 4.FDI performance and potential. .21 B.POLICY DEVELOPMENTS ... .23 icy changes 26 b.Systemic issues in international investment rule-making.. .27 C.THE LARGEST TNCS. .30 1 The world's 100 largest TNCs. .30 The top 100 INCs rom developing economies tionality of to 15 4 5 The world's 50 largest financial TNCs 34 D.PROSPECTS.. 36 NOTES .37 CHAPTER II.REGIONAL TRENDS:FDI GROWS IN MOST REGIONS....... 39 INTRODUCTION. .39 A.DEVELOPING COUNTRIES. 40 1.Africa .40 a.Geograp ical trend OwaFD"n2h20godiypmnces 41 44 b.Sectoral trends:FDI up in the primary sector
TABLE OF CONTENTS v Page PREFACE ................................................................................................................ iii ACKNOWLEDGEMENTS........................................................................................ iv OVERVIEW ........................................................................................................... xvii CHAPTER I. GLOBAL TRENDS: RISING FDI INFLOWS ...................................... 3 A. OVERALL TRENDS AND DEVELOPMENTS IN FDI .................................................................. 3 1. Trends, patterns and characteristics ................................................................................................. 3 a. Global FDI ................................................................................................................................. 3 b. Sectoral analysis: revival of FDI in natural resources ........................................................... 7 c. Trends in international production ......................................................................................... 10 2. Some issues concerning FDI statistics: what is behind the numbers? ....................................... 10 3. A new wave of cross-border M&As............................................................................................... 13 a. Recent trends ........................................................................................................................... 13 b. Cross-border M&As versus greenfield FDI .......................................................................... 15 c. An emerging trend: the rise in FDI by collective investment funds .................................. 16 4. FDI performance and potential....................................................................................................... 21 B. POLICY DEVELOPMENTS .............................................................................................................. 23 1. National policy changes .................................................................................................................. 23 2. Recent developments in international investment arrangements ................................................ 26 a. The IIA network continues to expand.................................................................................... 26 b. Systemic issues in international investment rule-making .................................................... 27 C. THE LARGEST TNCS ........................................................................................................................ 30 1. The world’s 100 largest TNCs........................................................................................................ 30 2. The top 100 TNCs from developing economies ........................................................................... 31 3. Transnationality of top TNCs ......................................................................................................... 32 4. TNCs’ most-favoured locations...................................................................................................... 34 5. The world’s 50 largest financial TNCs .......................................................................................... 34 D. PROSPECTS.......................................................................................................................................... 36 NOTES .................................................................................................................................................................. 37 CHAPTER II. REGIONAL TRENDS: FDI GROWS IN MOST REGIONS............. 39 INTRODUCTION ........................................................................................................................................ 39 A. DEVELOPING COUNTRIES............................................................................................................. 40 1. Africa ................................................................................................................................................ 40 a. Geographical trends ................................................................................................................ 41 (i) Growth driven by high commodity prices .................................................................... 41 (ii) Outward FDI: down in 2005 ......................................................................................... 44 b. Sectoral trends: FDI up in the primary sector....................................................................... 45