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U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T

WORLD INVESTMENT REPORT

2011

NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND DEVELOPMENT

U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T

WORLD INVESTMENT REPORT

2011

NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND DEVELOPMENT

New York and Geneva, 2011

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World Investment Report 2011: Non-Equity Modes of International Production and Development

NOTE
The Division on Investment and Enterprise of UNCTAD is a global centre of excellence, dealing with issues related to investment and enterprise development in the United Nations System. It builds on three and a half decades of experience and international expertise in research and policy analysis, intergovernmental consensus-building, and provides technical assistance to developing countries. 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 judgment 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 member countries of the OECD (other than Chile, Mexico, the Republic of Korea and Turkey), plus the new European Union member countries which are not OECD members (Bulgaria, Cyprus, Latvia, Lithuania, Malta and Romania), plus Andorra, Bermuda, 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. For statistical purposes, the data for China do not include those for Hong Kong Special Administrative Region (Hong Kong SAR), Macao Special Administrative Region (Macao SAR) and Taiwan Province of China. Reference to companies and their activities should not be construed as an endorsement by UNCTAD of those companies or their 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 dash (–) 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.11.II.D.2 ISBN 978-92-1-112828-4 Copyright © United Nations, 2011 All rights reserved Printed in Switzerland

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PREFACE
Global foreign direct investment (FDI) has not yet bounced back to pre-crisis levels, though some regions show better recovery than others. The reason is not financing constraints, but perceived risks and regulatory uncertainty in a fragile world economy. The World Investment Report 2011 forecasts that, barring any economic shocks, FDI flows will recover to pre-crisis levels over the next two years. The challenge for the development community is to make this anticipated investment have greater impact on our efforts to achieve the Millennium Development Goals. In 2010 – for the first time – developing economies absorbed close to half of global FDI inflows. They also generated record levels of FDI outflows, much of it directed to other countries in the South. This further demonstrates the growing importance of developing economies to the world economy, and of South-South cooperation and investment for sustainable development. Increasingly, transnational corporations are engaging with developing and transition economies through a broadening array of production and investment models, such as contract manufacturing and farming, service outsourcing, franchising and licensing. These relatively new phenomena present opportunities for developing and transition economies to deepen their integration into the rapidly evolving global economy, to strengthen the potential of their home-grown productive capacity, and to improve their international competitiveness. Unlocking the full potential of these new developments will depend on wise policymaking and institution building by governments and international organizations. Entrepreneurs and businesses in developing and transition economies need frameworks in which they can benefit fully from integrated international production and trade. I commend this report, with its wealth of research and analysis, to policymakers and businesses pursuing development success in a fast-changing world.

BAN Ki-moon Secretary-General of the United Nations 

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World Investment Report 2011: Non-Equity Modes of International Production and Development

ACKNOWLEDGEMENTS
The World Investment Report 2011(WIR11) was prepared by a team led by James Zhan. The team members include Richard Bolwijn, Quentin Dupriez, Masataka Fujita, Thomas van Giffen, Michael Hanni, Kalman Kalotay, Joachim Karl, Ralf Krüger, Guoyong Liang, Anthony Miller, Hafiz Mirza, Nicole Moussa, Shin Ohinata, Astrit Sulstarova, Elisabeth Tuerk, Jörg Weber and Kee Hwee Wee. Wolfgang Alschner, Amare Bekele, Federico Di Biasio, Hamed El Kady, Ariel Ivanier, Lizzie Medrano, Cai Mengqi, Abraham Negash, Sergey Ripinski, Claudia Salgado, Christoph Spennemann, Katharina Wortmann and Youngjun Yoo also contributed to the Report. Peter Buckley served as principal consultant. WIR11 also benefited from the advice of Ilan Alon, Mark Casson, Lorraine Eden, Pierre Guislain, Justin Lin, Sarianna Lundan, Ted Moran, Rajneesh Narula, Pierre Sauvé and Timothy Sturgeon. Research and statistical assistance was provided by Bradley Boicourt, Lizanne Martinez and Tadelle Taye as well as interns Hasso Anwer, Hector Dip, Riham Ahmed Marii, Eleni Piteli, John Sasuya and Ninel Seniuk. Production and dissemination of WIR11 was supported by Tserenpuntsag Batbold, Elisabeth AnodeauMareschal, Séverine Excoffier, Rosalina Goyena, Natalia Meramo-Bachayani, Chantal Rakotondrainibe and Katia Vieu. The manuscript was edited by Christopher Long and typeset by Laurence Duchemin and Teresita Ventura. Sophie Combette designed the cover. At various stages of preparation, in particular during the four seminars organized to discuss earlier drafts of the Report, the team benefited from comments and inputs received from Rolf Adlung, Marie-Claude Allard, Yukiko Arai, Rashmi Banga, Diana Barrowclough, Francis Bartels, Sven Behrendt, Jem Bendell, Nathalie Bernasconi, Nils Bhinda, Francesco Ciabuschi, Simon Collier, Denise Dunlap-Hinkler, Kevin Gallagher, Patrick Genin, Simona Gentile-Lüdecke, David Hallam, Geoffrey Hamilton, Fabrice Hatem, Xiaoming He, Toh Mun Heng, Paul Hohnen, Anna Joubin-Bret, Christopher Kip, Pascal Liu, Celso Manangan, Arvind Mayaram, Ronaldo Mota, Jean-François Outreville, Peter Muchlinski, Ram Mudambi, Sam Muradzikwa, Peter Nunnenkamp, Offah Obale, Joost Pauwelyn, Carlo Pietrobelli, Jaya Prakash Pradhan, Hassan Qaqaya, Githa Roelans, Ulla Schwager, Emily Sims, Brian Smart, Jagjit Singh Srai, Brad Stillwell, Roger Strange, Dennis Tachiki, Ana Teresa Tavares-Lehmann, Silke Trumm, Frederico Araujo Turolla, Peter Utting, Kernaghan Webb, Jacques de Werra, Lulu Zhang and Zbigniew Zimny. Numerous officials of central banks, government agencies, international organizations and non-governmental organizations also contributed to WIR11. The financial support of the Governments of Finland and Sweden is gratefully acknowledged.

...........................................................................69 a.......................................40 b.......... REGIONAL INVESTMENT TRENDS ........................... Issues related to corporate governance .........................24 2.......................................................................................................................................... East and South-East Asia ..................................... Overall trends ... Prospects ............................ iv ABBREVIATIONS ............................................3 FDI by sector and industry ........................ e.................................................32 c...................58 b................................................................. ix KEY MESSAGES ............... b...52 a.............................................................................34 CHAPTER II.......................... Developing country TNCs’ inroads into Latin America ............................................................................................................................ Intraregional FDI for development ............................................................ Africa ........................................... Current trends ................................................................................... REGIONAL TRENDS ................................2 a.........................................10 FDI by components ...60 5......13 2..................................................................CONTENTS v TABLE OF CONTENTS Page PREFACE ...........................................8 FDI by modes of entry . Recent trends ...............................................................................52 b.........................................65 6......................................... GLOBAL INVESTMENT TRENDS ........................................... GLOBAL TRENDS AND PROSPECTS: RECOVERY OVER THE HORIZON... Recent trends ................................................................. Accelerating internationalization of firms .................................................................................................................................................................................................................... 39 A........................................................................................................ d..................................................... West Asia ......................................................16 B........... The universe of State-owned TNCs ................................2 1.....................................................................................................................28 b.........................................................................................69 b..........................................................................................................................................................................................................................................................................................11 FDI by special funds: private equity and sovereign wealth funds .................................42 2............................................................................ Rising FDI from developing Asia: emerging diversified industrial patterns ....63 b East–South interregional FDI: trends and prospects ................................................. Trends in State-owned TNCs’ FDI ....................................63 a....................................................................................................................................................................................24 1.......71 ........................................... Outward FDI strategies of West Asian TNCs ............ xii CHAPTER I.................................. iii ACKNOWLEDGEMENTS ................... South.......................................................................................... Bailing out of the banking industry and FDI ....................................................40 a.................................................53 4........................................... South-East Europe and the Commonwealth of Independent States .............................................x OVERVIEW ...................................................... FDI AS EXTERNAL SOURCES OF FINANCE TO DEVELOPING COUNTRIES...................................................................................................................................................... FURTHER EXPANSION OF INTERNATIONAL PRODUCTION ...................28 a........................... 1 A..............................................58 a........45 a........ Latin America and the Caribbean .......................................... Recent trends ............................................................................................... State-owned TNCs ............................ Recent trends ......................................................47 3.....................45 b........................ Recent trends .......................... c................................. Recent trends .......................... Developed countries .........40 1............................................21 C.............................................................

. Investment regulations and restrictions ................ d............ Multi-stakeholder initiative standards .....118 Moving from soft law to hard law .........................95 2.......................................................................................74 b............... VULNERABLE AND SMALL ECONOMIES............................................ c.......................... Interaction at the national level ........................................................................................................................... TRENDS IN STRUCTURALLY WEAK............................................ Recent trends ............................................................. e..............................................................................................................................109 a..................................117 ............ Taking stock of existing CSR standards ............................112 2....... Intergovernmental organization standards .............................................................. d.............................................................................................................................................................................................................85 b................................... THE INTERNATIONAL INVESTMENT REGIME....................................102 C.........................111 a......................... Enhancing productive capacities through FDI ....................................................................................................................................................................... Gaps......................104 3..........................................................................................................................................vi World Investment Report 2011: Non-Equity Modes of International Production and Development B...........79 b............................98 B.......................................................................................109 Nurturing the selected industries ..................................................... “Picking the winner” ............... NATIONAL POLICY DEVELOPMENTS........... Investment liberalization and promotion ......................................................................................................... c................................................. f................................................................................. Least developed countries .............................................100 1...................................... e...............................................................................85 a............................................ Industry association codes and individual company codes .............................117 Promoting CSR disclosure and responsible investment ...................................... 74 a........ Roles of TNCs in climate change adaptation .........................................................................................76 1......................103 2...............................111 1...................................................................................................................................... Landlocked developing countries ...............................................................104 D............. IIA coverage of investment ................................... Developments in 2010 ...... Policy options .................... Challenges with existing standards: key issues ..............111 b..........................100 2............................................................. 93 A.......................114 Compliance and market impact ..................................... RECENT POLICY DEVELOPMENTS .........................................114 Reporting and transparency .......................................................................................118 3...96 3...................110 E.......................................................113 a.................................................113 Inclusiveness in standard-setting ......... b..... INTERACTION BETWEEN FDI POLICY AND INDUSTRIAL POLICY ...................................110 Improving international coordination ............... overlaps and inconsistencies ......117 Applying CSR to public procurement policy ...105 1........114 Relationship between voluntary CSR standards and national legislation .....................................................79 a.................................................. Recent trends ........ Leveraging TNC participation in infrastructure development.87 CHAPTER III........................................ e......................................115 Supporting CSR standards development..114 Concerns about possible trade and investment barriers ......................................................................................... CORPORATE SOCIAL RESPONSIBILITY .............................................................................................................................................................................117 Building capacity ...................103 1......................................................................................... b...... OTHER INVESTMENT-RELATED POLICY DEVELOPMENTS ................. Interaction at the international level ..105 2...............................................................74 2............................................. a............................... Economic stimulus packages and State aid ...... d.....110 Avoiding investment protectionism ................................112 c..................... b......107 3........................................................82 3..................................... c........................................................................................................................................................................................ Political risk insurance ....................................... Small island developing States ........... Challenges for policymakers .......................................94 1.................................................................... G-20 Development Agenda ....109 Safeguarding policy space ............................................................. Recent trends ............................................................................................................................................................................. Investment in agriculture ..............

............................................... THE SCALE AND SCOPE OF CROSS-BORDER NEMs.................... Strengthening compliance promotion mechanisms among intergovernmental organization standards ......139 d...................................... Setting up an enabling legal framework ... Export generation ............................................................................................................ Technology and skills acquisition by NEMs ..................................................................................................... Access to finance ..119 Introducing CSR into the international investment regime ......................... Employment and working conditions ............................... Domestic productive capacity-building ..........................................................................................147 1........................... Contract manufacturing and services outsourcing ................................................................................ Enhancing technological capacities .....172 c......................................................................................................................................................... Franchising........................................ Local value added ......... Factors that make countries attractive NEM locations ........................... Embedding NEM policies in development strategies ..142 1...........161 E....................................................... d.................................153 3............................................................................................................................................................................169 The role of investment promotion agencies .............. 226 .................................................................................................................................................................................................................................................................. b........................................................170 4...127 B............165 1......................124 2..................................CONTENTS vii f........................... Education ...................................170 International policies ......................................................................... 177 ANNEX TABLES .............................................................................................................................171 a.................................. Driving forces behind the growing importance of NEMs ..........................................................167 b.................................................. c..........171 b...................144 D.......167 d...................... DRIVERS AND DETERMINANTS OF NEMs..........................................................................133 a..................................................................................... Labour issues and environmental protection ..............................................157 5................................................................................................................... Other modalities.....147 2. Strengthening the bargaining power of domestic firms ................................................................................................................................................................................................ Addressing competition concerns....................168 3......... Addressing potential negative effects of NEMs ........................166 a.................. 124 1....................... TNC value chains and governance choices .............................................142 2..................................169 Home-country policies ...................130 1............................................................ THE GROWING COMPLEXITY OF GLOBAL VALUE CHAINS AND TNC GOVERNANCE..... g............................................ POLICIES RELATED TO NON-EQUITY MODES OF INTERNATIONAL PRODUCTION.............................................................................................................. Entrepreneurship policy .....155 4..................119 CHAPTER IV..............................................167 c.......................................................................... 185 SELECTED UNCTAD PUBLICATIONS ON TNCS AND FDI .........................................................................160 6........................................................... Long-term industrial capacity-building.140 C.................................... h............................................133 b........... 123 A..................165 2..................................... DEVELOPMENT IMPLICATIONS OF NEMs............................................................................................. Licensing..........173 REFERENCES ....................................................118 Applying CSR to investment and trade promotion and enterprise development ........................................................... Trends and indicators by type of NEM............................................................. NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND DEVELOPMENT ............ Social and environmental impacts ............................. The overall size and growth of cross-border NEMs.............. Defining features of NEMs ................................................................... Facilitation and promotion of NEMs ....................132 2........................................138 c.......................169 a...............................................................

..............4 I....................................4..6............................3........................156 IV..........29 The Arab Spring and prospects for FDI in North Africa .........................................2.96 III........................................................... II.....................................8..112 III............89 III............................................99 III......... Pre-contractual requirements in franchising.169 IV............................................ I...............17 Effects of the natural disaster on Japanese TNCs and outward FDI........131 IV.. WTO TRIMS Agreement .................... The use of management contracts in the hotel industry ..2....66 Russian TNCs expand into Africa .....97 III.................................... EU FDI Policymaking .....................5.................4........ Examples of investment promotion measures in 2010–2011 .........................................6.....................viii World Investment Report 2011: Non-Equity Modes of International Production and Development Boxes I........... The 10 principles of the UN Global Compact .3....... I.88 II...43 China’s rising investment in Central Asia ......................................1............................................10...........................2............. TNCs and climate change adaptation in the tourism industry in SIDS .......................7................................ Managing the environmental impact of contract farming..................... Providing access to finance for SMEs engaging in franchising activities....................................26 What is a State-owned enterprise: the case of France ...........11................. Cyclical employment in contract manufacturing in Guadalajara ................7..... Examples of new regulatory measures affecting established foreign investors in 2010–2011 ..........................................23 Recent trends in internationalization of the largest financial TNCs in the world ..........................81 II.................................................................................12 Forecasting global and regional flows of FDI .1.................................152 IV................................................................................................................................... Value capture can be limited: iPhone production in China. Methodological note ... II...................................................................................................................................7.............. Examples of entry restrictions for foreign investors in 2010–2011 .......119 IV...................................3........... I.164 IV...................... II...................... I..........................................................1.9....................................162 IV............. I............. Labour conditions in Foxconn’s Chinese operations – concerns and corporate responses .........167 IV..................................................................12........................................................................3................. From contract manufacturing to building brands – the Chinese white goods sector.....5......2..........141 IV...................... II..127 IV................... The evolution of retail franchising in transition economies ....................................................................... Impact investing: achieving competitive financial returns while maximizing social and environmental impact ......6 FDI flows and the use of funds for investment..6..............98 III....... Natural resource-seeking FDI in Papua New Guinea: old and new investors................108 III................... NEMs as catalysts for capacity-building and development.........................................................8......163 IV...............................172 ......13.......6...................................1................. Why are data on global FDI inflows and outflows different?...................149 IV......151 IV............................19 FDI and capital controls ...........................................................................5.67 Overcoming the disadvantages of being landlocked: experience of Uzbekistan in attracting FDI in manufacturing .......................... Educational reforms in Viet Nam promote entrepreneurship.............................101 III....... Examples of investment liberalization measures in 2010–2011 .........4 Employment impact in developing countries of NEMs in garment and footwear production ......................................5.............................................

ABBREVIATIONS ix ABBREVIATIONS ASEAN BIT BOO BOT CIS COMESA CSR EAC EMS FDI GCC GFCF GHG IIA IP IPA IPO ISDS IT-BPO LDC LLDC LNG M&As MFN MSI NEM NIE ODA OECD PPM PPP QIA R&D ROCE RTAs SADC SEZ SIDS SME SOE SWF TBT TNC TRIMs TRIPs WIPS Association of South-East Asian Nations bilateral investment treaty build-own-operate build-operate-transfer Commonwealth of Independent States Common Market for Eastern and Southern Africa corporate social responsibility East African Community electronics manufacturing services foreign direct investment Gulf Cooperation Council gross fixed capital formation green house gas international investment agreement intellectual property investment promotion agency initial public offering investor–state dispute settlement information technology and business process outsourcing least developed country landlocked developing country liquefied natural gas mergers and acquisitions most favoured nation multi-stakeholder initiative non-equity mode newly industrializing economies official development assistance Organisation for Economic Co-operation and Development process and production method public-private partnership Qatar Investment Authority research and development return on capital employed regional trade agreements Southern African Development Community special economic zone small island developing States small and medium-sized enterprise State-owned enterprise sovereign wealth fund technical barriers to trade transnational corporation trade-related investment measures trade-related aspects of intellectual property rights World Investment Prospects Survey .

This is in contrast to global industrial output and trade.6 trillion. which were back to pre-crisis levels. . as did flows to South Asia. INVESTMENT POLICY TRENDS Investment liberalization and promotion remained the dominant element of recent investment policies. For the first time. The ownership and governance of State-owned TNCs have raised concerns in some host countries regarding. State-owned TNCs are an important emerging source of FDI. FDI inflows to developed countries continued to decline. Some of the poorest regions continued to see declines in FDI flows. increasing to $1. Governments can maximize development benefits deriving from these standards through appropriate policies. about a quarter of global GDP. and integrating CSR standards into international investment regimes. the level playing field and national security. The policy discourse about the future orientation of the IIA regime and its development impact is intensifying. with foreign sales.100 treaties. as is enhancing international coordination and cooperation. least developed countries.4–1.x World Investment Report 2011: Non-Equity Modes of International Production and Development KEY MESSAGES FDI TRENDS AND PROSPECTS Global foreign direct investment (FDI) flows rose moderately to $1. but were still 15 per cent below their pre-crisis average. With close to 6. The investment policy landscape is influenced more and more by a myriad of voluntary corporate social responsibility (CSR) standards. developing and transition economies together attracted more than half of global FDI flows. yet remains inadequate to cover all possible bilateral investment relationships (which would require a further 14. employment and assets of transnational corporations (TNCs) all increasing. landlocked developing countries and small island developing States all fell. This positive scenario holds. Foreign affiliates of TNCs accounted for more than 10 per cent of global GDP and one-third of world exports. The regime of international investment agreements (IIAs) is at the crossroads. The challenge is to manage this interaction so that the two policies work together for development. providing capacity-building programmes. Nevertheless. While they represent less than 1 per cent of TNCs. the risk of investment protectionism has increased as restrictive investment measures and administrative procedures have accumulated over the past years.500 foreign affiliates across the globe. FDI policies interact increasingly with industrial policies. At the same time. major emerging regions. such as East and South-East Asia and Latin America experienced strong growth in FDI inflows. International production is expanding. In contrast. Outward FDI from those economies also reached record highs. among others. with regulatory implications for the international expansion of these companies. such as harmonizing corporate reporting regulations. There are at least 650 State-owned TNCs. it has come close to a point where it is too big and complex to handle for governments and investors alike. UNCTAD estimates that global FDI will recover to its pre-crisis level in 2011. their outward investment accounted for 11 per cent of global FDI in 2010. with 8. TNCs’ production worldwide generated value-added of approximately $16 trillion in 2010.24 trillion in 2010. with most of their investment directed towards other countries in the South. Flows to Africa. Striking a balance between building stronger domestic productive capacity on the one hand and avoiding investment and trade protectionism on the other is key. nationally and internationally. many ongoing negotiations and multiple dispute-settlement mechanisms. and approach its 2007 peak in 2013.100 bilateral treaties). barring any unexpected global economic shocks that may arise from a number of risk factors still in play.

Concerns exist that TNCs may use NEMs to circumvent social and environmental standards. franchising $330–350 billion. Their value added represents up to 15 per cent of GDP in some economies. investment and technology policies and addressing dependency risks. First. And to ensure success in long-term industrial development. including through technology dissemination and domestic enterprise development. The value added contribution of NEMs can appear low if assessed in terms of the value captured out of the total global value chain. In most cases. policies need to address the negative consequences and risks posed by NEMs by strengthening the bargaining power of local NEM partners. Policy matters. NEM policies need to be embedded in overall national development strategies. governments need to support efforts to build domestic productive capacity to ensure the availability of attractive business partners that can qualify as actors in global value chains. Contract manufacturing and services outsourcing accounted for $1. Finally. Second. as well as the involvement of investment promotion agencies in attracting TNC partners. licensing $340–360 billion. developing countries need to mitigate the risk of remaining locked into low-value-added activities and becoming overly dependent on TNC-owned technologies and TNC-governed global value chains. NEMs can yield significant development benefits. and other types of contractual relationship through which TNCs coordinate the activities of host country firms. Third. services outsourcing. Cross-border NEM activity worldwide is significant and particularly important in developing countries. management contracts. promotion and facilitation of NEMs requires a strong enabling legal and institutional framework. policies aimed at improving the integration of developing economies into global value chains must look beyond FDI and trade. franchising. They employ an estimated 14–16 million workers in developing countries. without owning a stake in those firms. such as contract manufacturing. NEMs are growing more rapidly than the industries in which they operate. Their exports account for 70–80 per cent of global exports in several industries.KEY MESSAGES xi NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND DEVELOPMENT In today’s world.3 trillion. Employment in contract manufacturing can be highly cyclical and easily displaced. Overall. contract farming. Maximizing development benefits from NEMs requires action in four areas. NEMs can support longterm industrial development by building productive capacity. aligned with trade. and management contracts around $100 billion. . NEMs also pose risks for developing countries. protecting labour rights and the environment. It is estimated to have generated over $2 trillion of sales in 2009.1–1. and by helping developing countries gain access to global value chains. Policymakers need to consider non-equity modes (NEMs) of international production. licensing. safeguarding competition.

All the main service industries (business services. both as recipients of FDI and as outward investors. Half of the top-20 host economies for FDI in 2010 were developing or transition economies.xii World Investment Report 2011: Non-Equity Modes of International Production and Development OVERVIEW FDI TRENDS AND PROSPECTS FDI recovery to gain momentum in 2011 Global foreign direct investment (FDI) inflows rose modestly by 5 per cent. recovered in 2010. six developing and transition economies were among the top-20 investors. Their outward investment was still only about half of their 2007 peak. They now account for 29 per cent of global FDI outflows. or the pre-crisis level. The record cash holdings of TNCs. FDI in services. FDI flows in the financial industry experienced one of the sharpest declines. may yet derail the FDI recovery. For the first time. While global industrial output and world trade are already back to their pre-crisis levels. Emerging economies are the new FDI powerhouses Developing economies increased further in importance in 2010. while industries such as food. finance. and nearly 37 per cent below their 2007 peak. and automobiles. which accounted for the bulk of the decline in FDI flows due to the crisis. Services FDI subdued. However. FDI flows in 2010 remained some 15 per cent below their pre-crisis average. Risk factors such as the unpredictability of global economic governance. are creating new investment opportunities for companies across the globe. recently. the post-crisis business environment is still beset by uncertainties. textiles and garments. in 2011.7 trillion in 2012 and reach $1. international consumption shift to developing and transition economies. ongoing corporate and industrial restructuring.9 trillion in 2013. continued on its downward path in 2010. The moderate recovery of FDI inflows in 2010 masks major sectoral differences. as well as rising inflation and signs of overheating in major emerging market economies. beverages and tobacco. however. The share of manufacturing rose to almost half of all FDI projects.6 trillion. transport and communications and utilities) fell. but was still only around one third of the previous peak in 2007. The chemical industry (including pharmaceuticals) remained resilient through the crisis. investments fell in business-cycle-sensitive industries such as metal and electronics.4–1. by 21 per cent. As international production and. although at different speeds. the peak achieved in 2007. UNCTAD predicts FDI flows will continue their recovery to reach $1. they absorbed more than half of global FDI inflows in 2010.24 trillion in 2010.and market-seeking projects in those countries. TNCs are increasingly investing in both efficiency. In 2010. Within manufacturing. The value of cross-border M&As into developing economies . to reach $1. built up as supporting measures during the crisis. a possible widespread sovereign debt crisis and fiscal and financial sector imbalances in some developed countries. cross-border M&As rebound Sectoral patterns. rising stock market valuations and gradual exits by States from financial and non-financial firms’ shareholdings. The dynamism of emerging-market TNCs contrasts with the subdued pace of investment from developed-country TNCs. FDI outflows from developing and transition economies also increased strongly. They are expected to rise further to $1. The value of cross-border M&A deals increased by 36 per cent in 2010. Modes of entry. FDI in extractive industries (which did not suffer during the crisis) declined in 2010. especially those from Europe.

showed gains in 2010 as economic conditions improved. TNCs worldwide. as well as for the declines of inflows to Angola and Nigeria. down from 5. political uncertainty in North Africa is likely to make 2011 another challenging year for the continent as a whole. Some of the poorest regions continued to see declines in FDI flows.1 per cent in 2009. though developed countries continue to maintain a significant number of State-owned TNCs. Discussions are underway in some international forums with a view to addressing these issues. down from $26.OVERVIEW xiii doubled. FDI by sovereign wealth funds (SWFs) dropped to $10 billion in 2010. continued to dominate FDI flows to the continent. Private equity-sponsored FDI started to recover in 2010 and was directed increasingly towards developing and transition economies. bringing them in contact with a large number of host economies. as did those to South Asia. Improved economic performance in many parts of the world and increased profits of foreign affiliates lifted reinvested earnings to nearly double their 2009 level. including foreign sales. Special funds. in their operations both at home and abroad. Their more than 8. At the same time.4 per cent in 2010. there are concerns regarding the openness to investment from their State-owned TNCs. the level playing field for competing firms. The other two FDI components – equity investment flows and intra-company loans – fell in 2010. A more benign global economic environment may lead to increased FDI from these special funds in 2011. they are diversified and have a strong presence in the services sector. in particular by Asian TNCs. They also exported more than $6 trillion. At $55 billon. Today there are at least 650 State-owned TNCs. employment and assets of TNCs. FDI to the primary sector. FDI flows to Africa fell by 9 per cent in 2010. From the perspective of home countries. Components of FDI. While relatively small in number (less than 1 per cent of all TNCs). State-owned TNCs made up 19 of the world’s 100 largest TNCs. UNCTAD estimates that sales and value added of foreign affiliates in the world reached $33 trillion and $7 trillion. the share of Africa in total global FDI inflows was 4. especially in the oil industry. their FDI is substantial. least developed countries (LDCs). Flows to Africa. Uneven performance across regions The rise of FDI to developing countries masks significant regional differences. State-owned TNCs in the spotlight State-owned TNCs are causing concerns in a number of host countries regarding national security. it was still more than 70 per cent below the peak year of 2007. International production picks up Indicators of international production. about one-third of global exports. It accounted for the rise of Ghana as a major host country. experienced strong growth in FDI inflows. respectively. landlocked developing countries (LLDCs) and small island developing States (SIDS) continued to fall. . such as East and South-East Asia and Latin America. Developing and transition economies are home to more than half of these firms (56 per cent). generated value added of approximately $16 trillion in 2010 – about a quarter of total world GDP. Reflecting this. In contrast to the general view of State-owned TNCs as largely concentrated in the primary sector. is likely to sustain FDI flows to sub-Saharan Africa.5 billion in 2009. However. Although the continuing pursuit of natural resources. and governance and transparency. Greenfield investments declined in 2010. State-owned TNCs constitute a varied group. major emerging regions. reaching roughly 11 per cent of global FDI flows in 2010. but registered a significant rise in both value and number during the first five months of 2011.500 foreign affiliates are spread across the globe. constituting an important emerging source of FDI.

East and South-East Asia grew by 20 per cent to about $232 billion in 2010. climbed by 11 per cent. This has raised concerns in some countries in the region about the trade patterns. In manufacturing. falling by 12 per cent. and FDI inflows continue to shift towards high-tech industries and services. In India. such as China Investment Corporation and Temasek Holdings (Singapore). However. accounting for more than 60 per cent of total FDI to the region. jumped by 30 per cent to $913 million. concerns about political instability in the region are likely to dampen the recovery. . and sovereign wealth funds. where the growth rate was 56 per cent. electronics and aerospace. such as Indonesia and Viet Nam. FDI outflows in the services sector have declined. This approach differs from that of other countries. The decline of FDI to South Asia reflects a 31 per cent slide in inflows to India and a 14 per cent drop in Pakistan.xiv World Investment Report 2011: Non-Equity Modes of International Production and Development Although there is some evidence that intraregional FDI is beginning to emerge in non-natural resource related industries. Increasingly this policy has been pursued with a view to creating productive capabilities that are missing at home. some ASEAN member States. Outward investment from West Asia is mainly driven by government-controlled entities. FDI outflows from West Asia dropped by 51 per cent in 2010. to $106 billion. before engaging in outward direct investment. In extractive industries. Metal companies in the region have been particularly active in ensuring access to overseas mineral assets. Inflows to China. reaching $300 billion. which have generally sought to develop a certain level of capacity at home. but they are expected to bottom out in 2011. With continuously rising wages and production costs. those to East Asia saw a 17 per cent rise. but face increasing political obstacles. South-East Asia and South Asia as a whole rose by 24 per cent in 2010. alternative energies. the setback in attracting FDI was partly due to macroeconomic concerns. In contrast. offshoring of labour-intensive manufacturing to the country has slowed down. At the same time. such as motor vehicles. Latin America and the Caribbean also witnessed a surge of investments by developing Asian TNCs particularly in resource-seeking projects. Inflows to East Asia. FDI to South Asia declined by one-fourth. Harmonization of Africa’s regional trade agreements and inclusion of FDI regimes could help Africa achieve more of its intraregional FDI potential. with Brazil particularly buoyant. acquisitions by Asian TNCs jumped to $20 billion. FDI flows to West Asia in 2010 continued to be affected by the global economic crisis. Asian companies have been actively taking over large companies in the developed world. The strongest increase was registered in South America. FDI outflows from South. However. new investors have emerged. the three subregions experienced very different trends: inflows to ASEAN more than doubled. FDI flows to Latin America and the Caribbean increased by 13 per cent in 2010. FDI outflows from Latin America and the Caribbean increased by 67 per cent in 2010. including conglomerates such as CITIC (China) and Reliance Group (India). but M&As in such industries as telecommunications have been increasing. however. which have been redirecting some of their national oil surpluses to support their home economies. an increasingly important low-cost production location in South Asia. such as iron ore and copper. and also investing in developed countries to seek strategic assets for the development and diversification of the industrial capabilities back at home. especially for low-end manufacturing. In 2010. with South America exporting mostly commodities and importing manufactured goods. intraregional FDI flows in Africa are still limited in terms of volume and industry diversity. rising FDI outflows from developing Asia demonstrate new and diversified industrial patterns. the largest recipient of FDI in the developing world. inflows to Bangladesh. In recent years. have gained ground as lowcost production locations. The economic diversification policies of these countries has been pursued through a dual strategy: investing in other Arab countries to bolster their small domestic economies. mostly due to large cross-border M&A purchases by Brazilian and Mexican TNCs.

Europe suffered a sharp fall. FDI to developed countries remains well below pre-crisis levels In 2010. driven by regulatory authorities. however. However. this picture is distorted by the highly capital-intensive nature of resource projects. were among the factors hampering the recovery of FDI flows. due partly to sluggish investment from EU countries.OVERVIEW xv FDI flows to transition economies declined slightly in 2010. At the same time. Declining FDI flows were also registered in Japan. In developed countries. the restructuring of the banking industry. with an increase of more than 40 per cent. The global efforts towards the reform of the financial . as well as regulatory concerns. Foreign investors continue to be attracted to the fast-growing local consumer market. and regulatory and institutional reform. with five areas of action: public-private infrastructure development.6 per cent in 2010 – a matter of grave concern. On the occasion of the 2011 Fourth United Nations Conference on the Least Developed Countries. TNCs based in transition economies and in developing economies have increasingly ventured into each other’s markets. South–East interregional FDI is growing rapidly. These countries are traditionally marginal FDI destinations. aid for productive capacity. FDI flows to the poorest regions continue to fall In contrast to the FDI boom in developing countries as a whole. has resulted in a series of significant divestments of foreign assets. Inflows to the United States. Flows to the Commonwealth of Independent States (CIS) rose marginally by 0. FDI inflows in developed countries declined marginally. The emphasis is on an integrated policy approach to investment. Such South–East interregional FDI has benefited from outward FDI support from governments through. while developing-country outward FDI in transition economies increased more than five times over the past decade. Landlocked developing countries (LLDCs) saw their FDI inflows fall by 12 per cent to $23 billion in 2010. local business development and access to finance. Some 40 per cent of investments. FDI inflows to the 48 LDCs declined overall by a further 0. regional cooperation (e. SIDS are looking to attract investment from TNCs that can make a contribution to climate change adaptation. especially in the Russian Federation where flows rose by 13 per cent to $41 billion. In contrast. With intensified South–South economic cooperation and increasing capital flows from emerging markets. prospects for FDI flows to the group may improve. and they accounted for only 4 per cent of total FDI flows to the developing world. among others. The distribution of FDI flows among LDCs also remains highly uneven. A gloomier economic outlook. by mobilizing financial and technological resources. technical capacity-building and enterprise development. FDI flows to South-East Europe dropped sharply for the third consecutive year. with over 80 per cent of LDC FDI flows going to resource-rich economies in Africa. Kazakhstan and the Russian Federation are the most important targets of developing-country investors. to $4.2 billion. it has also generated new FDI as assets changed hands among major players.g. As these countries are particularly vulnerable to the effects of climate change. whereas China and Turkey are the most popular destinations for FDI from transition economies. by number. For example. and enhancing local adaptive capacities. austerity measures and possible sovereign debt crisis. the Shanghai Cooperation Organization) and bilateral partnerships.4 per cent. FDI inflows to small island developing States (SIDS) as a whole declined slightly by 1 per cent in 2010. implementing adaptation initiatives. showed a strong turnaround. were in the form of greenfield projects in the manufacturing sector and 16 per cent in services. building on LDC investment opportunities. UNCTAD proposed a plan of action for investment in LDCs. The pattern of FDI inflows was uneven among subregions. the share of developing host countries in greenfield investment projects by TNCs from transition economies rose to 60 per cent in 2010 (up from only 28 per cent in 2004).

has increased the risk of investment protectionism. The reversal was largely due to higher M&A values. including civil society. As of April 2011. The 2010 awards further tilted the overall balance in favour of the State. On the other hand. business and parliamentarians. where a relatively high number of measures eased entry and establishment conditions for foreign investment. this manifests itself in a growing dialogue among a broad set of investment stakeholders. governments are estimated to hold legacy assets and liabilities in financial and non-financial firms valued at over $2 trillion. with developing countries most often on the receiving end. or the expansion of existing. The process advances relatively slowly. the first five months of which saw 48 new IIAs. this took it to only half the level of its 2007 peak. continuing its upward trend since 2003.092 agreements at the end of the year. with more than 100 IIAs currently under negotiation. and ensuring coherence between IIAs and other public policies. The overwhelming majority of these cases were initiated by investors from developed countries.300 BITs with non-EU countries). As countries continue concluding IIAs. UNCTAD’s Investment Commission and the joint OECD-UNCTAD investment meetings serve as examples. facilitated by stronger balance sheets of TNCs and historic low rates of debt financing. with 78 cases won against 59 lost. However. intergovernmental debates in UNCTAD’s 2010 World Investment Forum. These measures included the streamlining of admission procedures and the opening of new. bringing the total of known cases to 390. The accumulation of restrictive measures over the past years and their continued upward trend. Although numerous countries continue to implement emergency measures or hold considerable assets following bail-out operations. The downward trend in outward FDI from developed countries reversed. almost one-third of all new measures in 2010 fell into the category of investmentrelated regulation and restrictions. the unwinding of support schemes and liabilities resulting from emergency measures has started. INVESTMENT POLICY TRENDS National policies: mixed messages More than two-thirds of reported investment policy measures in 2010 were in the area of FDI liberalization and promotion. This was the case for Asia in particular. special economic zones. By far the largest share relates to several hundred firms in the financial sector. The recent restrictive measures were mainly in a few industries. Internationally. . sometimes with novel provisions aimed at rebalancing the rights and obligations between States and firms. with a 10 per cent increase over 2009. Most promotion and facilitation measures were adopted by governments in Africa and Asia. as well as stricter review procedures for FDI entry. How the FDI-related competence shift from EU member States to the European level will affect the overall IIA regime is still unclear (EU member States currently have more than 1. This trend of treaty expansion is expected to continue in 2011. The international investment regime: too much and too little With a total of 178 new IIAs in 2010 – more than three new treaties per week – the IIA universe reached 6. At least 25 new treaty-based investor–State dispute settlement cases were initiated in 2010 and 47 decisions rendered. and those closed to 197. Nationally. All this indicates a potential wave of privatizations in the years to come. in particular natural resource-based industries and financial services.xvi World Investment Report 2011: Non-Equity Modes of International Production and Development system and the exit strategy of governments are likely to have a large bearing on FDI flows in the financial industry in coming years. the policy discourse about the future orientation of the IIA regime and how to make IIAs better contribute to sustainable development is intensifying.

compared to the primary and manufacturing sectors. most reservations exist in transportation. are increasingly significant for international investment as efforts to rebalance the rights and obligations of the State and the investor intensify. Better international coordination can contribute to avoiding “beggar thy neighbour” policies and creating synergies for global cooperation. Finally. and interconnected. TNCs in turn. There is a need to strike a balance between building stronger domestic productive capacity on the one hand and preventing investment and trade protectionism on the other. multifaceted. Voluntary CSR standards can complement government regulatory efforts. . Countries also use selective FDI restrictions for industrial policy purposes connected to the protection of infant industries. In addition there are dozens of international multi-stakeholder initiatives (MSIs). At the international level. subjects covered. so as to make the two policies work for development. hundreds of industry association initiatives and thousands of individual company codes providing standards for the social and environmental practices of firms at home and abroad. and about how to ensure that IIAs deliver on their development potential. CSR standards increasingly influence investment policies Over the past years. The standards of the United Nations. These CSR standards typically focus on the operations of TNCs and. industrial policies are supported by FDI promotion through IIAs. substitute or distract from these. The overall challenge is to manage the interaction between FDI policies and industrial policies. investment incentives related to certain industries. overlaps and inconsistencies between standards in terms of global reach. a number of flexibility mechanism have been developed in IIAs. industry focus and uptake among companies. Moreover. At the national level. nationally and internationally. CSR standards pose a number of systemic challenges. The current landscape of CSR standards is multilayered. countries are more inclined to preserve policy space for the services sector. through their foreign investments and global value chains. such as exclusions and reservations for certain industries. strategic enterprises or ailing domestic industries in times of crisis. can influence the social and environmental practices of business worldwide. the ILO and the OECD serve to define and provide guidance on fundamental CSR. IIA provisions can limit regulatory space for industrial policies. Within the services sector. but also about the impact of the IIA regime and its effectiveness for promoting and protecting investment. but they can also undermine.100 bilateral treaties would be required. Yet it offers protection to only two-thirds of global FDI stock and covers only one-fifth of possible bilateral investment relationships. today’s IIA regime has come close to a point where it is too big and complex to handle for governments and investors alike. finance and communication. According to UNCTAD case studies of reservations in IIAs. in particular when the respective IIA has sector-specific elements. Intensifying interaction between FDI policies and industrial policies FDI policies increasingly interact with industrial policies. corporate reporting on performance relative to CSR standards continues to lack standardization and comparability. activities or regions. At the same time. This raises questions not only about the efforts needed to complete the global IIA network.OVERVIEW xvii With thousands of treaties. To provide full coverage a further 14. A fundamental challenge affecting most CSR standards is ensuring that companies actually comply with their content. national champions. this interface manifests itself in specific national investment guidelines. the targeting of types of investment or specific categories of foreign investors for industrial development purposes. corporate social responsibility (CSR) standards have emerged as a unique dimension of “soft law”. as such. and investment facilitation in line with industrial development strategies. general exceptions or national security exceptions. To avoid undue policy constraints. many ongoing negotiations and multiple dispute-settlement mechanisms. there are gaps.

there are also new challenges. livelihoods of farmers and sustainable use of resources – than large-scale land acquisition. results in FDI. services outsourcing. On the other hand. This offers host economies considerable potential for long-term industrial capacity building through a number of key channels of development impact such as employment. applying CSR standards to government procurement. Internalization. the World Bank. NEMs include contract manufacturing. promoting the uptake of CSR reporting and responsible investment. TNCs can decide to conduct such activities in-house (internalization) or they can entrust them to other firms (externalization) – a choice analogous to a “make or buy” decision. as each NEM mode comes with its own set of development impacts and policy implications. Attracting FDI is also the better option for economies with limited existing productive capacity. While CSR standards generally aim to promote sustainable development goals. adopting CSR standards as part of regulatory initiatives. generating over $2 trillion in sales in 2010.xviii World Investment Report 2011: Non-Equity Modes of International Production and Development Governments can play an important role in creating a coherent policy and institutional framework to address the challenges and opportunities presented by the universe of CSR standards. The objective of promoting investment can be rhymed with CSR standards. for example. requesting these organizations to develop options for promoting responsible investment in agriculture. whereby the international flows of goods. For developing country policymakers. information and other assets are intra-firm and under full control of the TNC. value added. In agriculture. The TNC “make or buy” decision and NEMs as the “middle-ground” option Foremost among the core competencies of a TNC is its ability to coordinate activities within a global value chain. IFAD and FAO. Externalization results in either arm’s-length trade. . today. where it has a cross-border dimension. technology and skills. services. contract farming is more likely to address responsible investment issues – respect for local rights. building capacity in developing countries to adopt CSR standards. From a development perspective. NEMs may be more appropriate than FDI in sensitive situations. and factoring CSR standards into IIAs. Discussions on responsible investment are ongoing in the international community. in the context of international production care needs to be taken to avoid them becoming barriers to trade and investment. strengthening the compliance promotion mechanisms of existing international standards. as an intermediate “middle-ground” option. licensing.e. The various approaches already underway increasingly mix regulatory and voluntary instruments to promote responsible business practices. is no longer exclusively about FDI on the one hand and trade on the other. a TNC signals its long-term commitment to a host economy. Policy options for promoting CSR standards include supporting the development of new CSR standards. management contracts and other types of contractual relationships through which TNCs coordinate activities in their global value chains (GVCs) and influence the management of host-country firms without owning an equity stake in those firms. export generation and technology acquisition. the rise of NEMs not only creates new opportunities for productive capacity building and integration into GVCs. in 2010. franchising. NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND DEVELOPMENT International production. much of it in developing countries. with a built-in motive for TNCs to invest in the viability of their partners through dissemination of knowledge. both NEM partnerships and foreign affiliates (i. Non-equity modes (NEMs) of international production are of growing importance. FDI) can enable host countries to integrate into GVCs. contract farming. where the TNC exercises no control over other firms or. G-20 leaders encouraged countries and companies to uphold the Principles for Responsible Agricultural Investment (PRAI) that were developed by UNCTAD. by establishing a local affiliate through FDI. A key advantage of NEMs is that they are flexible arrangements with local firms. for example.

mostly in developing countries Cross-border NEM activity worldwide is estimated to have generated over $2 trillion of sales in 2010. contract manufacturing represents a significant share of trade and some three-quarters of employment. including only the most important industries in which each NEM type is prevalent. contract farming activities by TNCs are spread worldwide. covering over 110 developing and transition economies. contract manufacturing accounts for 30 per cent of global exports of automotive components and a quarter of employment. The ultimate ownership and control configuration of a GVC is the outcome of a set of strategic choices by the TNC. In labour-intensive industries such as garments. (3) flexibility in adapting to changes in the business cycle and in demand. which are significant in developing countries. in others the two may be complementary. a TNC oversees a sequence of activities from procurement of inputs. For example. compared with their share in global FDI stocks of 30 per cent and in world trade of less than 40 per cent. spanning a wide range of agricultural commodities and accounting for a high share of output. sales and aftersales services. In most cases. The total also excludes other non-equity modes such as contract farming and concessions. In a fully integrated company. (2) reduced risk exposure. In a typical value chain. services outsourcing and franchising . requiring the host-country firm to. the relative costs and benefits. developing countries account for almost all NEM-related employment and exports. These estimates are incomplete. The TNC’s ultimate choice between FDI and NEMs (or trade) in any segment of the value chain is based on its strategy. In many industries. licensing for $340–360 billion. In contrast. for example. the growth of NEMs outpaces that of the industries in which they operate. the associated risks.OVERVIEW xix in non-equity inter-firm arrangements in which contractual agreements and relative bargaining power condition the operations and behaviour of host-country firms. In addition. Such “conditioning” can have a material impact on the conduct of the business. NEMs are particularly important in developing countries. This growth is driven by a number of key advantages of NEMs for TNCs: (1) the relatively low upfront capital expenditures required and the limited working capital needed for operation. improve working conditions. contract manufacturing is even more important. In some parts of the value chain NEMs can be substitutes for FDI. For example. and (4) as a basis for externalizing non-core activities that can often be carried out at lower cost by other operators. NEMs generate significant formal employment in developing countries UNCTAD estimates that worldwide some 18–21 million workers are directly employed in firms operating under NEM arrangements. NEMs are worth more than $2 trillion. However. There are large variations in relative size. adopt new procedures. Of this amount. NEMs are also growing rapidly. and the feasibility of available options. firms undertake activities – such as IT functions or R&D – which support all parts of the value chain. franchising for $330–350 billion. most of whom are in contract manufacturing. or use specified suppliers. change processes. a TNC can outsource production to a contract manufacturer or permit a local firm to produce under licence. in all segments of the value chain TNCs can opt to externalize activities through various NEM types. resulting in FDI if the activity takes place overseas. cross-border activity related to selected NEMs of $2 trillion compares with exports of foreign affiliates of TNCs of some $6 trillion in 2010. contract manufacturing and services outsourcing accounted for $1. invest in equipment. in electronics. instead of establishing a manufacturing affiliate (FDI) in a host country. and management contracts for around $100 billion. activities in all these segments of the value chain are carried out in-house (internalized). However.1–1. Putting different modes of international production in perspective. through manufacturing operations to distribution.3 trillion. footwear and toys. In the automotive industry.

to promote international labour standards and good management practices. services outsourcing. but often with some training or skills transfer. Although value captured as a share of final-product sales price may be limited. it can nevertheless represent a significant contribution to the local economy. In toys. it is possible for value capture in the host economy to be relatively small compared to the overall value creation in a GVC. shaping global patterns of trade in many industries. social and economic structures of the countries in which NEM firms are operating. The greater the number of plants and the more numerous the linkages with TNCs. In efficiency seeking NEMs. such as contract manufacturing or services outsourcing. The social responsibility of TNCs has extended beyond their own legal boundaries and has pushed many to increase their influence over the activities of value chain partners. the greater will be the spillover effects and local value added. NEMs are an important avenue for technology and skills building NEMs are in essence a transfer of intellectual property to a host-country firm under the protection of a contract. on how much value is retained in the host economy. therefore. NEMs can thus be an important “route-to-market” for countries aiming at export-led growth. is predominantly based in developing countries. although global figures are not available. as is often the case in the electronics industry. NEMs often make an important contribution to GDP The impact of NEMs on local value added can be significant. International franchising . and vary considerably depending on the mode and the legal. especially in early stages of NEM development. for example. Employment in contract manufacturing and. to influence their NEM partners through codes of conduct. contract manufacturing represents more than 50 per cent of global trade. where local value added is limited. footwear. In addition. usually with contractual conditions attached. adding up to 10–15 per cent of GDP in some countries. and the ease with which they can shift NEM production to other locations can have a strong impact on working conditions in NEM firms and on stability of employment. for instance. in clusters or industrial parks). contract farming has led to some 400. It is increasingly common for TNCs. to a lesser extent. An additional concern relates to the relative “footlooseness” of NEMs. before gradually building independent exporting capabilities. clustering can reduce the risk of TNCs shifting production to other locations by increasing switching costs. in order to manage risks and protect their brand and image. processed and subsequently exported. Export gains can be partially offset by higher imports. reducing net export gains. The seasonality of industries. Around 80 per cent of NEM-generated employment is in developing and transition economies. in Mozambique. when the scope for local sourcing is limited and goods are imported. Licensing involves a TNC granting an NEM partner access to intellectual property.xx World Investment Report 2011: Non-Equity Modes of International Production and Development activities. The factors that influence working conditions in non-equity modes are the role of governments in defining. Working conditions in NEMs based on low-cost labour are often a concern. Local sourcing and the overall impact on host-country value added increases if the emergence of contract manufacturing leads to a concentration of production and export activities (e. garments. It depends on how NEM arrangements fit into TNC-governed GVCs and.000 smallholders participating in global value chains. The same applies in other NEMs. NEMs can generate export gains NEMs are inextricably linked with international trade. communicating and enforcing labour standards and the sourcing practices of TNCs. and an important initial point of access to TNC governed global value chains. fluctuating demand patterns of TNCs. and electronics.g. It also depends on the potential for linkages with other firms and on their underlying capabilities.

NEMs can help countries integrate in GVCs and build productive capacity The immediate contributions to employment. In some East and South-East Asian economies in particular. as NEMs are more “footloose” than equivalent FDI operations. this is not a foregone conclusion. factory inspections and audits. Although technology acquisition and assimilation through NEMs is a widespread phenomenon.g. and access to local or international financing. and extensive training and support are normally offered to local partners in order to properly set up the new franchise with wide-ranging implications for technology dissemination. Such domestic investment. on their perception of and exposure to legal liability risks (e. There are four key challenges for . but also in Eastern Europe. and the basic prerequisites to turn acquired skills into new business ventures. the availability of workers that can be trained to learn new skills. The right policies can help maximize NEM development benefits Policies are instrumental for countries to maximize development benefits and minimize the risks associated with the integration of domestic firms into NEM networks of TNCs. garments. Social and environmental pros and cons of NEMs Concerns exist that cross-border NEMs in some industries may be a mechanism for TNCs to circumvent high social and environmental standards in their production network. on the extent to which they can control NEMs. A major part of the contribution of NEMs to the build-up of local productive capacity and long-term prospects for industrial development is through the impact on enterprise development.OVERVIEW xxi transfers a business model. Latin America and South Asia. first. There is now a significant body of evidence to suggest that TNCs are likely to use more environmentally friendly practices than domestic companies in equivalent activities. pharmaceuticals. including the regulatory framework. especially at the level of second and third tier suppliers. developing economies would run a further risk of becoming vulnerable to TNCs shifting productive activity to other locations. or through the implicit guarantees stemming from the partnership with a major TNC itself. The extent to which TNCs guide NEM operations on social and environmental practices depends.g damage to their brand and lower sales). where linkages may be insufficient or of low quality. in the form of their existing skills base. IT-services and business process outsourcing (BPO) have led to their transformation into TNCs and technology leaders in their own right. to exports and to the local technology base that NEMs can bring help to provide the resources. concerns are often raised (especially with regard to contract manufacturing and licensing). as NEMs require local entrepreneurs and domestic investment. either through explicit measures by TNCs providing support to local NEM partners. that countries relying to a significant extent on NEMs for industrial development risk remaining locked-in to low-value-added segments of TNC-governed global value chains and remaining technology dependent. In such cases. to GDP. the business environment and access to finance. is often facilitated by NEMs. secondly. The related risks of “dependency” and “footlooseness” must be addressed by embedding NEMs in the overall development strategies of countries. skills and access to global value chains that are prerequisites for long-term industrial capacity building. reparations in the case of environmental damages) and business risks (e. Another important factor is the relative bargaining power of TNCs and local NEM partners. and. A key factor is the absorptive capacity of local NEM partners. Both factors can be influenced by appropriate policies. Pressure from the international community has pushed TNCs to take greater responsibility for such standards throughout their global value chains. technology and skills acquisition and assimilation by NEM companies in electronics. TNCs employ a number of mechanisms to influence NEM partners. including codes of conduct. While the potential contributions of NEMs to long-term development are clear. and third-party certification schemes.

combined with vocational training and the development of specialized NEM-related skills is also important. and are connected to a broad range of NEM partners. Access to finance for domestic NEM partners can be improved through policies reducing borrowing costs and the risks associated with lending to SMEs. Continuous learning and skills upgrading of domestic entrepreneurs and employees are also important to ensure domestic firms can move to higher value-added activities should foreign companies move “low end” production processes to cheaper locations. Promoting and facilitating NEM arrangements depends. ensuring that firms move to higher value-added stages in the value chain. Protection of indigenous capacities and traditional . second. engage in matchmaking services. develop their own brands. or by offering alternatives to traditional bank credits. and provide incentives to start-ups. how to promote and facilitate NEMs. how to address negative effects of NEMs. or become NEM originators in their own right. The development of industry-specific NEM model contracts or negotiation guidelines can contribute to achieving this objective. on clear and stable rules governing the contractual relationships between NEM partners. both within and across different value chains. In general. Improving the capacity of locals to engage in NEMs has several policy aspects. This is important. Diversification ensures that domestic companies are engaged in multiple NEM activities. franchising laws. helping local NEM partners reduce their technology dependency. While the current involvement of investment promotion agencies in NEM-specific promotion is still limited. A mix of national technology policies can improve local absorptive capacity and create technology clusters and partnerships. • An important element of industrial development strategies that incorporate NEMs are measures to prevent and mitigate impacts deriving from the “footlooseness” of some NEM types. and fourth. first. Conducive NEM-specific laws (e. NEM policies appropriately embedded in industrial development strategies will: • ensure that efforts to attract NEMs through building domestic productive capacity and through facilitation and promotion initiatives are directed at the right industries. To address any negative impacts of NEMs. measures should aim at maintaining and increasing the attractiveness of the host country for TNCs and improve the “stickiness” of NEMs by building up local mass. how to integrate NEM policies into the overall context of national development strategies. clusters of suppliers. value chains and specific activities or segments within value chains.g. franchising and often contract manufacturing) can also help. they could expand their remit beyond FDI to promote awareness of NEM opportunities. upgrading to segments with greater value capture. including transparency and coherence. third. Other public interest criteria may require attention as well. in the longer term. policies to promote NEMs need to go hand in hand with policies to safeguard competition. it is important to strengthen the bargaining power of local NEM partners vis-à-vis TNCs to ensure that contracts are based on a fair sharing of risks and benefits.xxii World Investment Report 2011: Non-Equity Modes of International Production and Development policymakers: first. balancing diversification and specialization. how to support the building of domestic productive capacity to ensure the availability of attractive business partners that can qualify as actors in global value chains. Facilitation efforts can also include initiatives to support respect for core labour standards and CSR. If TNCs engaged in NEMs acquire dominant positions. support industrial upgrading in line with a country’s development stage. they may be able to abuse their market power to the detriment of their competitors (domestic and foreign) and their own trading partners. and the local technology base. Pro-active entrepreneurship policies can strengthen the competitiveness of domestic NEM partners and range from fostering start-ups to promoting business networks. rules on contract farming) and appropriate intellectual property (IP) protection (particularly relevant for IP-intensive NEMs such as licensing. Embedding entrepreneurship knowledge into formal education systems. Specialization in particular value chains improves the competitive edge of local NEM partners within those chains and can facilitate. Therefore. as NEM arrangements are often governed by multiple laws and regulations.

The growth of NEMs poses new challenges but also creates new opportunities for the further integration of developing economies into the global economy. is essential. non-equity modes and trade. Geneva. The World Investment Report 2011 aims to help developing-country policymakers and the international development community navigate those challenges and capitalize on the opportunities for their development gains. provision of appropriate technologies and government-led extension services to improve capacities of contract farmers. and infrastructure development for improving business opportunities for contract farmers in remote areas. while there is no comprehensive legal and policy framework for fostering NEMs and their development contribution. Home-country policies that specifically promote overseas NEMs include the expansion of national export insurance schemes and political risk insurance to also cover some types of NEMs. direct investment in large-scale land acquisitions by TNCs would be less of an issue.OVERVIEW xxiii activities. Finally. supportive international policies range from relevant WTO agreements and. If contract farming was given more pride of place in government policies. Internationally. In the case of contract farming for instance. to soft law initiatives contributing to harmonizing the rules governing the relationship between private NEM parties or guiding them in the crafting of NEM contracts. with international production evolving and with blurring boundaries between FDI. National and international policy developments are sending mixed messages to the investment community. home-country initiatives and the international community can also play a positive role. training on sustainable farming methods. policies such as these would result in model contracts or guidelines supporting smallholders in negotiations with TNCs. that may be crowded out by a rapid increase in market shares of successful NEMs. However. *** Foreign direct investment is a key component of the world’s growth engine. with especially the poorest countries still in “FDI recession”. June 2011 Supachai Panitchpakdi Secretary-General of the UNCTAD . And investment policymaking is becoming more complex. IIAs. Many uncertainties still haunt investors in the global economy. to a limited extent. the post-crisis recovery in FDI has been slow to take off and is unevenly spread.

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International production is expanding.24 trillion in 2010. This positive scenario holds.6 trillion. with foreign sales. . which were back to pre-crisis levels. but were still 15 per cent below their pre-crisis average. employment and assets of transnational corporations (TNCs) all increasing. FDI inflows to developed countries continued to decline. interregional FDI between developing countries and transition economies has been growing rapidly. least developed countries. increasing to $1. experienced strong growth in FDI inflows. While they represent less than 1 per cent of TNCs worldwide. There are some 650 State-owned TNCs. Foreign affiliates of TNCs accounted for more than one-tenth of global GDP and one-third of world exports. UNCTAD estimates that global FDI will recover to its precrisis level in 2011. with regulatory implications for the international expansion of these companies. TNCs’ production worldwide generated value added of approximately $16 trillion in 2010 – about a quarter of global GDP.500 foreign affiliates across the globe. Flows to Africa. This is in contrast to global industrial output and trade. Furthermore. At the same time. Outward FDI from those economies also reached record highs. among others. major emerging regions. the level playing field and national security. For the first time. In contrast. barring any unexpected global economic shocks that may arise from a number of risk factors still in play. The ownership and governance of State-owned TNCs have raised concerns in some host countries regarding.GLOBAL INVESTMENT TRENDS CHAPTER I Global foreign direct investment (FDI) flows rose moderately to $1. Some of the poorest regions continued to see declines in FDI flows. as did flows to South Asia. such as East and South-East Asia and Latin America. their outward investment accounted for 11 per cent of global FDI in 2010. approaching its 2007 peak in 2013. developing and transition economies together attracted more than half of global FDI flows.4–1. with 8. landlocked developing countries and small island developing States all fell. with most of their investment directed towards other countries in the South. State-owned TNCs are an important emerging source of FDI.

a possible widespread sovereign debt crisis and fiscal and financial sector imbalances in some developed countries. They are expected to rise further to $1. on the back of improved performance of global capital markets. and healthy economic growth in developing countries. average 2005–2007 and 2007 to 2010 (Billions of dollars) 1 971 1 744 1 472 ~37% 1 185 ~15% 1 244 2005-2007 average 2007 2008 2009 2010 Source : UNCTAD. Global FDI inflows. Overall trends Global FDI flows rose modestly in 2010. In addition. boosted reinvested earnings – one of the three components of FDI flows – while uncertainties surrounding global currency markets and European sovereign debt resulted in negative intra-company loans and lower levels of equity investment – the other two components of FDI flows.4 –1. might derail FDI recovery. or the pre-crisis level. yet greenfield projects – which still account for the majority of FDI – fell in number and value. FDI flows in 2010 remained some 15 per cent below their pre-crisis average. GLOBAL TRENDS AND PROSPECTS: RECOVERY OVER THE HORIZON 1. At present. UNCTAD predicts FDI flows will continue their recovery to reach $1. and 37 per cent below their 2007 peak (figure I. among others. FDI inflows rose compared to the same period of 2010. following the large declines of 2008 and 2009. The moderate recovery of FDI flows in 2010 revealed an uneven pattern among components and modes of FDI. which together with transition economies – for the first time – absorbed more than half of FDI flows.2). means that TNCs have remained relatively cautious regarding their investment plans.1 and the FDI/TNC database (www. At $1. although this level was lower than the last quarter of 2010 (figure I. higher profitability. ongoing corporate and industrial restructuring. In the first quarter of 2011. The record cash holdings of TNCs.unctad. reaching $19 trillion.1).24 trillion in 2010. the peak achieved in 2007. they were 5 per cent higher than a year before (figure I. risk factors such as unpredictability of global economic governance. However. Increased profits of foreign affiliates. .2 World Investment Report 2011: Non-Equity Modes of International Production and Development A. transnational corporations (TNCs) have not yet taken up fully their customary lead role as private investors.org/fdistatistics). rising inflation and apparent signs of overheating in major emerging market economies. sustained economic recovery becomes more dependent on private investment.9 trillion in 2013. Figure I.1). are creating new investment opportunities for companies across the globe. that from sovereign wealth funds (SWFs) fell considerably in 2010. particularly in developed countries. Cross-border mergers and acquisitions (M&As) rebounded gradually. the volatility of the business environment. FDI inward stock rose by 7 per cent in 2010. This moderate growth was mainly the result of higher flows to developing countries. As stimulus packages and other public fiscal policies fade. While world industrial production and trade are back to their pre-crisis levels. in 2011.7 trillion in 2012 and reach $1. based on annex table I. rising stock market valuations and gradual exits by States from financial and non-financial firms’ shareholdings built up as supporting measures during the crisis. Global foreign direct investment (FDI) inflows rose modestly in 2010. While FDI by private equity firms regained momentum. especially in developing countries. but the share of developing and transition economies in both global inflows and outflows reached record highs.6 trillion.1.

The index has been calibrated such that the average of quarterly flows in 2005 is equivalent to 100. TNCs are increasingly investing in those countries to maintain cost-effectiveness and to remain competitive in the global production networks. Global FDI inflows in 2010 reached an estimated $1.unctad. there was an uneven pattern between regions and also between subregions. those to developing economies recovered strongly. the strength of domestic demand. which together account for roughly 90 per cent of global flows. based on annex table I. FDI flows to developing economies rose by 12 per cent (to $574 billion) in 2010. The value of cross-border M&As into developing economies doubled due to attractive valuations of company assets. and together with transition economies – for the first time – surpassed the 50 per cent mark of global FDI flows (figure I. strong earnings growth and robust economic fundamentals (such as market growth). a The Global FDI Quarterly Index is based on quarterly data of FDI inflows for 87 countries. FDI inflows to developed countries and transition economies contracted further in 2010.1) – a small increase from 2009’s level of $1. and burgeoning South– South flows. global and by group of economies. FDI inflows.1 and the FDI/TNC database (www.2. UNCTAD’s Global FDI Quarterly Index. This is now mirrored Figure I.CHAPTER I Global Investment Trends 3 Figure I. a.3). . As more international production moves to developing and transition economies.244 billion (figure I. thanks to their relatively fast economic recovery. 1980–2010 (Billions of dollars) 2 500 Transition economies World total 2 000 1 500 1 000 500 0 1980 Developing economies Developed economies 52% 1985 1990 1995 2000 2005 2010 Source: U NCTAD. However.3.185 billion. they absorbed more than half of global FDI flows. Current trends The shift of FDI inflows to developing and transition economies accelerated in 2010: for the first time.a 2007 Q1–2011 Q1 (Base 100: quarterly average of 2005) 350 300 250 200 150 100 50 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 Source: UNCTAD.org/ fdistatistics). In contrast.

This changing pattern of FDI inflows is confirmed also in the global ranking of the largest FDI recipients: in 2010.6). developing countries increased their performance index in the period 2005–2010. is excluded from the list. such as East and South-East Asia and Latin America experienced strong growth in FDI inflows (figure I. Indonesia entered the top 20 for the first time. top 20 host economies. In contrast. major emerging regions. Note: The number in bracket after the name of the country refers to the ranking in 2009. as did those to South Asia. East and South-East Asia picked Figure I. Some of the poorpoorest regions conest regions continued to see tinued to see declines declines. 2009 and 2010 a (Billions of dollars) United States (1) China (2) Hong Kong. Global FDI inflows.org/fdistatistics). in FDI flows. which measures the amount of FDI that countries receive relative to the size of their economy (GDP). a Ranked on the basis of the magnitude of 2010 FDI inflows.4). FDI flows to South. half of the top 20 host economies were from developing and transition economies.1 and the FDI/TNC database (www. some European countries moved down in the ranking. In addition to least developed countries (LDCs). While the United States and China maintained their top position. In addition. . The rise of FDI to devel. and they all have indices above unity (figure I. based on annex table I. The index for developed countries as a group is below unity (the point where the country’s share in global FDI flows and the country’s share in global GDP are equal).4. The shift towards developing and transition economies in total FDI inflows was also reflected in a change in the ranking of host countries by UNCTAD’s Inward FDI Performance Index.trends between and within ferences. compared to seven in 2009 (figure I.4 World Investment Report 2011: Non-Equity Modes of International Production and Development by a shift in international consumption. in the wake of which market-seeking FDI is also gaining ground.Slow growth of FDI flows oping countries hides globally masks diverging significant regional dif. which ranked 12th in 2010.unctad.5). three developing economies ranked among the five largest FDI recipients in the world. landlocked developing countries (LLDCs) and small island developing States (SIDS) (chapter II). and their ranking has fallen in the after-crisis period compared to the pre-crisis period of 2005– 2007. Some of the regions. flows to Africa continued to fall. British Virgin Islands. In contrast. China (4) Belgium (17) Brazil (15) Germany (6) United Kingdom (3) Russian Federation (7) Singapore (22) France (10) Australia (16) Saudi Arabia (11) Ireland (14) India (8) Spain (30) Canada (18) Luxembourg (12) Mexico (21) Chile (26) Indonesia (43) 5 9 15 24 26 38 48 46 46 41 36 39 34 34 32 71 52 62 69 95 106 228 153 26 28 32 26 26 25 36 25 23 21 20 19 15 15 13 13 30 2010 2009 40 60 80 100 120 140 0 20 Source: UNCTAD.

despite the steady economic recovery registered by the economies of the region.CHAPTER I Global Investment Trends 5 Figure I. Inflows to South Africa declined to little more than a quarter of those for 2009. drove FDI flows to Latin America and the Caribbean to $159 billion. with Brazil the largest destination. Similarly. Cross-border M&As in the region rose to $29 billion in 2010. at $58 billion decreased. Note : A full list of countries ranked by the index is available at www. which peaked in 2008 driven by the resource boom.6.org/fdistatistics).6 0. continued the downward trend which started in 2009. good macroeconomic fundamentals and higher commodity prices. after negative values in 2009. Figure I.5. East and SouthEast Asia West Asia Transition economies Source: UNCTAD. average of 2005–2007 and 2008 to 2010 (Billions of dollars) 300 average 2005-2007 2008 2009 2010 200 100 0 Africa Latin America and the Caribbean South. inflows to Africa. FDI/TNC database (www. outperforming other developing regions. However. Europe stood out as the subregion where flows fell most sharply. North Africa saw its FDI flows fall slightly (by 8 per cent) in 2010.org/wir. strong economic growth. FDI inflows to developing and transition economies.1). to $68 billion.4 1.6 1. of roughly 5 per cent. FDI flows to SouthEast Europe continued to decline sharply due to sluggish investment from EU countries – traditionally the dominant source of FDI in the subregion.8 0. . Nearly all the big recipient countries saw inward flows increase.org/fdistatistics). A value greater than 1 indicates that the country/ region receives more FDI than its relative economic size. average of 2005–2007 and 2008–2010 1.unctad. the uprisings which broke out in early 2011 impeded FDI flows in the first quarter of 2011 (see box II.a developed and developing economies.0 0. Inflows to the region rose by about 24 per cent in 2010. a The Inward FDI Performance Index is the ratio of a country/ region’s share in global FDI inflows to its share in global GDP. by region.unctad. FDI inflows to developed countries contracted moderately in 2010. based on data from FDI/TNC database (www/unctad.4 2005-2007 2008 2009 2010 Developed economies Developing economies In contrast. spurred by robust domestic and external demand. Inward FDI Performance Index. Sizeable increases in government spending by oil-rich countries helped bolster their economies.2 1. up markedly. reflecting uncertainties about the worsening sovereign debt crisis. reaching $300 billion. rising especially in South-East Asia and East Asia. Source : UNCTAD. FDI flows to West Asia. The transition economies of South-East Europe and the Commonwealth of Independent States (CIS) registered a marginal decrease in FDI inflows in 2010. but business conditions in the private sector remained fragile in certain countries. having fallen by 41 per cent in 2009. a value below 1 that it receives less. a faster economic recovery and improving stock markets. The CIS economies saw their flows increase by less than 1 per cent despite stronger commodity prices. falling by less than 1 per cent to $602 billion.

values to FDI. reflecting the strength of their economies. investment through exchange of shares between -80 investors and acquired firms.323 billion.7. 1999–2010 (Billions of dollars) This situation calls for a continuous improvement of both FDI-related definitions and data collection. is blurred. Their share in global outflows of 29 per cent was up from 16 per cent in 2007. As Box I.6 World Investment Report 2011: Non-Equity Modes of International Production and Development while Italy and the United Kingdom suffered. Investors from South. the year prior to the financial crisis.g. FDI flows to the United States surged by almost 50 per cent largely thanks to a significant recovery in the reinvested earnings of foreign affiliates.g. Note : Positive value means inflows are higher than outflows. At $1. it can be expected that the discrepancy between reports on inflows and outflows will narrow over time. The difference between global FDI inflows and outflows. Outward FDI from developing and transition economies reached $388 billion in 2010. The discrepancy is due to several reasons. Second. transactions with “portfolio-like behaviour” and portfolio investment. a 21 per cent increase over 2009 (figure I. accurate. where there were a number of large divestments.1. Why are data on global FDI inflows and outflows different? The discrepancy between reported global inward and outward FDI flows has been significant (box figure I. including hot money.1. there was an uneven pattern among regions. global FDI outflows in 2010. while increasing over the previous year. Declining FDI flows were also registered in Japan. as sound policy analysis and informed policymaking on this issue require reliable. making an exact correspondence between home. and 39 per cent below the 2007 peak (see box I. FDI in some of the region’s other major economies fell only slightly (e.g. First. Finally. especially in developing countries. in the case of inflows. Box figure I. Examples include different methods used by host and 171 home countries recording the same transactions. . Third. annex table I. the changing nature (e. which caused increasing volatility in exchange rates.1. FDI flows were still at about 75 per of their peak level of 2008.1. the dynamism of their TNCs and their growing aspiration to compete in new markets.1). East and South-East Asia and Latin America were the major drivers for the Outward FDI from developing and transition economies reached a record high. The downward trend in FDI from developed countries reversed. investment from indirect sources) and the increasing sophistication -166 -188 -204 of FDI-related transactions (that involve not only funds from parent firms. This is a major problem for policymakers worldwide. In contrast. there are inconsistencies in the data collection and reporting methods of different countries. France) or increased (e. are still some 11 per cent below the precrisis average.1). Behind this general increase there lie significant differences between countries. FDI flows from developing and transition economies picked up strongly. the accuracy of FDI reporting may itself be a victim of the global crisis. and 15 1 different exchange rates used for recording FDI -1 transactions.and host-country reporting more uncertain (as differences in the timing of records may coincide with major exchange-rate differences). However.1 for differences between FDI inflows and outflows). timely and comparable data (Fujita. but also government 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 loans and development assistance in the same package) often make it difficult to attribute exact Source: UNCTAD. the distinction between FDI and vice versa. 2008).g. Germany). with most of their investment directed towards other economies within these regions. 100 90 uneven coverage of FDI flows between countries 74 56 (e. with an 10 per cent increase over 2009. treatment of reinvested earnings). Source: UNCTAD. However. As considerable efforts by UNCTAD and other international organizations are underway to harmonize definitions and data collection. it remained at half the level of its 2007 peak.

compared to only 32 per cent in 2007 (figure I. especially large State-owned enterprises. due to large-scale divestments and redirection of outward FDI from governmentcontrolled entities to support their home economies weakened by the global financial crisis. forthcoming a). trends in FDI outflows differed markedly between countries and regions: outflows from Europe and the United States were up (9. from the BRIC countries – Brazil. Outflows from the largest FDI sources – Hong Kong (China) and China – increased by more than $10 billion each. the . FDI outflows from developing and transition economies. where recovery is strong and the economic outlook better.1 and by recovering commodity prices and higher stock market valuations. The quick recovery of natural resource-based companies in transition economies was boosted by strong support by the State.9).unctad. In contrast. Developed countries as a group saw only a limited recovery of their outward FDI. were carried out by Russian TNCs.8). Reflecting their diverging economic situations. Many TNCs in developing and transition economies are investing in other emerging markets. and overtaking Japanese companies in total outward FDI. FDI outflows from transition economies grew by 24 per cent.6 and 16 per cent.2 In 2010. 70 per cent of FDI projects (crossborder M&A and greenfield FDI projects) from these economies were invested within the same regions (figure I. Chinese companies continued their buying spree. All of the big outward investor countries from Latin America – Brazil. TNCs. six developing and transition economies were among the top 20 investors (figure I. Chile. easing the cash flow problems these firms had faced in 2009. average of 2005–2007 and 2008 to 2010 (Billions of dollars) 300 average 2005-2007 200 2008 2009 2010 100 0 Africa Latin America and South. as in previous years. respectively). FDI/TNC database (www. reaching a record $61 billion.7. The lingering effects of the crisis and subdued prospects in developed countries forced many of their TNCs to invest in emerging markets in an effort to keep their markets and profits: in 2010 almost half of total investment (cross-border M&A and greenfield FDI projects) from developed countries took place in developing and transition economies. increased their acquisitions abroad.8). UNCTAD’s World Investment Prospects Survey 2011–2013 (WIPS) confirms that developing and transition economies are becoming important investors. East and the Caribbean South-East Asia West Asia Transition economies Source: UNCTAD. by region. actively acquiring overseas assets in a wide range of industries and countries. strong growth in FDI outflows. reaching historical highs of $76 billion and $68 billion. and that this trend is likely to continue in the near future (UNCTAD. Indeed. Most of the outward FDI projects. particularly in developed countries where investment opportunities have arisen in the aftermath of the crisis.org/fdistatistics). respectively. while Japanese outward FDI flows dropped further in 2010 (down 25 per cent). Colombia and Mexico – bolstered by strong economic growth at home. followed by TNCs from Kazakhstan. in 2010. outflows from major investors in West Asia fell significantly.CHAPTER I Global Investment Trends 7 Figure I.

fDimarkets. electrical and electronics equipment and wood and wood products were hit by the crisis. accompanied by a substantial rise in productivity (Bureau of Labor Statistics. FDI in manufacturing bounced back while services sector FDI is still in decline.a by host region. Firms from developing Asia expanded their acquisitions in 2010 beyond their own regions. Distribution of FDI projects. 2011). ECLAC. In the United States.5). beverages and tobacco. compared to only two (or 3 per cent of the total) in 2009. 2007 and 2010 (Per cent) (a) by developed country TNCs (b) by developing and transition country TNCs 38 51 68 To developed economies 30 45 26 6 2007 4 2010 To developing economies 58 63 To transition economies 5 2007 7 2010 Source: UNCTAD. the picture . For example China’s outward FDI showed substantial increases in Latin America (chapter II. Within manufacturing. but the shock could eventually prove to be a boon to the sector. The value and share of the primary and services sector declined (figure I. reaching $554 billion. while other industries. Data on FDI projects (both crossborder M&As and greenfield investment) indicate that the value and share of manufacturing rose. FDI by sector and industry In the aftermath of the crisis. In addition. such as food. The unchanged level of overall FDI in 2010 also obscures some major sectoral differences.5). as many companies were forced to restructure into more productive and profitable activities – with attendant effects on FDI. in terms of sales and profits (annex table I. Some manufacturing industries such as chemicals (including pharmaceuticals) remained more resilient to the crisis. which suffered from serious overcapacity and wished to use cash to restore their balance sheet. While the primary sector has recovered. FDI in manufacturing rose by 62 per cent in 2010. As a result. investment fell in these industries. India and China – have gained ground as important investors in recent years as the result of rapid economic growth in their home countries. and b.8 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure I. The value of FDI projects in manufacturing rose by 23 per cent in 2010 compared to 2009. In 2010 there were seven mega-deals (over $3 billion) involving developing and transition economies (or 12 per cent of the total) (annex table I. based on UNCTAD cross-border M&A database and information from the Financial Times Ltd. for example. business-cycle sensitive industries such as metal and metal products. fDi Markets (www. and manufacturing is 10 per cent below their pre-crisis levels (annex table I.com). Transition-economy firms also increased their purchases in other transition economies in 2010.8. Compared with the pre-crisis level (2005–2007). especially in developed countries.10). services are still less than half. accounting for almost half of the total. textile and garments. abundant financial resources and strong motivations to acquire resources and strategic assets abroad (section C). their prospects for higher demand and market growth remained gloomy. The financial crisis hit a range of manufacturing industries hard.7). 2011). Russian Federation. is quite different. a Including both cross-border M&As and greenfield FDI projects.

for example. recovered in 2010. remained attractive to foreign investment. the recovery is prompted by a growth in consumer spending. British Virgin Islands. automobiles. is excluded from the list. In food.unctad. Note: The number in bracket after the name of the country refers to the ranking in 2009. which ranked 16th in 2010. Garment production is fairly cost-sensitive. profits soared in 2010.org/fdistatistics). . and a number of large acquisitions were made. based on annex table I. thanks to the dynamism of its final markets – especially in emerging economies. as the patent protection for a number of major drugs marketed by global pharmaceutical firms is about to expire. especially in developing countries.4 In the case of textiles and clothing. Sectoral distribution of FDI projects. a Ranked on the basis of the magnitude of 2010 FDI outflows. most notably in China and India. first.9. Republic of (19) Luxembourg (17) Ireland (13) India (21) 0 10 33 78 84 76 64 68 57 58 56 52 44 39 42 38 32 27 30 26 26 75 105 103 329 283 16 22 21 21 20 18 19 17 18 19 18 27 15 16 2010 2009 50 100 150 200 Source : UNCTAD. top 20 home economies. a Comprises cross-border M&As and greenfield investments. as witnessed by two large deals that took place in the industry. and secondly on the ageing demography of most developed countries. The pharmaceutical industry. 2009 and 2010a (Billions of dollars) United States (1) Germany (3) France (2) Hong Kong.CHAPTER I Global Investment Trends 9 Figure I.10. Global FDI outflows. For many large TNCs in this industry. China (5) China (6) Switzerland (10) Japan (4) Russian Federation (8) Canada (9) Belgium (156) Netherlands (12) Sweden (14) Australia (20) Spain (23) Italy (16) Singapore (18) Korea. The latter refers to the estimated amounts of capital investment. Figure I. which may prompt accelerated Primary Manufacturing Services Source: UNCTAD. on the necessity of setting up or acquiring production facilities. particularly in some emerging countries. beverages and tobacco the recovery was due to the sustained demand for basic items.3 Opportunities for business deals exist due to rapid growth in the number of scientists and pharmaceutical firms in emerging economies.1 and the FDI/TNC database (www. Restructuring continued in 2010.a 2009–2010 (Billions of dollars and per cent) 2010 449 361 254 30% 22% 37% 48% 33% 30% 392 338 554 600 2009 500 400 300 200 100 0 This rests.

Higher stock prices increased the purchasing power of investors to invest abroad. though from a low level. as to some extent companies tend to consider the two modes of market entry as alternative options. However. issues relating to the management of country risk and the assessment of conditions in host-country financial systems play a major role in supporting expansion abroad. Examples include the purchase of Repsol (Brazil) by China’s Sinopec Group for $7 billion. the total project value of greenfield investments has been much higher than that of cross-border M&As since the crisis. Transportation and telecommunication services suffered equally in 2010 as the industry’s restructuring is more or less completed after the round of large M&A deals before the crisis. and it has brought substantial benefits to host countries’ financial systems in terms of efficiency and stability. finance. FDI in the financial industry – the epicentre of the current crisis – experienced the sharpest decline.11). Differing trends between cross-border M&As and greenfield FDI are not surprising. seeking to cut internal costs by externalizing non-core business activities (chapter IV). mainly from developing and transition economies. All main service industries (business services.8). raising the share of the primary sector to 22 per cent. as higher values of corporate assets in 2010 raised the leverage of investors in undertaking M&As by using shares in partpayment. . FDI in the primary sector decreased in 2010 despite growing demand for raw materials and energy resources. compared with the corresponding period of 2010. FDI by modes of entry There are diverging Greenfield investment has trends between the two become much larger than main modes of FDI entry: cross-border M&As. and the purchase of the Carabobo block in the Bolivarian Republic of Venezuela by a group of investors from India for $4. the ongoing corporate and industrial restructuring is creating new acquisition opportunities. M&As and greenfield Recovery of FDI flows in (new) investment. in particular for cash-rich TNCs.7). Utilities were also strongly affected by the crisis. to and cross-border M&As.11. During the first five months of 2011.10 World Investment Report 2011: Non-Equity Modes of International Production and Development relocation to countries where there is cheap labour.3–6 and I. annex tables I. c. At the same time. as some investors were forced to reduce investment or even divest due to lower demand and accumulated losses. Developing and transition economies tend to host greenfield investment rather than crossborder M&As. $339 billion. investors from these economies are becoming increasingly important players in cross-border M&A markets. More than two-thirds of the total value of greenfield investment is directed to these economies. its expansion was instrumental in integrating emerging economies into the global financial system. Over the past decade. though it was still roughly one-third of the previous peak in 2007 (figure I. including those from emerging markets. both greenfield investments and cross-border M&As registered a significant rise in value (figure I.8 billion (annex table I. FDI projects (including cross-border M&A and greenfield investments) amounted to $254 billion in 2010. as TNCs are outsourcing a growing share of their business support functions to external providers. Business services declined by 8 per cent compared to the precrisis level. up from 14 per cent in the pre-crisis period. The 2011 relies on the rise of value of cross-border both greenfield investments M&A deals increased by 36 per cent in 2010. Natural resource-based companies with sound financial positions. it also produced a bubble of unsustainable lending. which had to burst. while only 25 per cent of cross-border M&As are undertaken there. made some large acquisitions in the primary sector. greenfield investment – the other mode of FDI – declined in 2010. The value of FDI projects in the services sector continued to decline sharply in 2010. with respect to both 2009 and the pre-crisis level of activity. However. Cross-border M&As rose by 58 per cent. On the other hand. particularly in developed countries. and high commodity prices. At the same time. although at different speeds. which previously were dominated by developed country players. transport and communications and utilities) fell. In the period of post-bubble correction. and is expected to remain sluggish in the medium term.

Also in developing countries. Stagnant global flows in 2010 were accompanied by diverging trends in the components of FDI inflows (figure I. lifted reinvested earnings to nearly double their 2009 level (figure I. operating profits of companies from China and the Republic of Korea rose significantly in 2010. based on data from FDI/TNC database (www/unctad. fDi Markets (www.CHAPTER I Global Investment Trends 11 Figure I. About 40 per cent of FDI income was retained as reinvested earnings in host countries in 2010 ( figure I. the profits to sales ratio of the United States’ S&P 500 firms in 2010 improved further. reinvested earnings grew fast.org/fdistatistics). while equity capital investment and intra-company loans declined. and increased profits of foreign affiliates. The continuing depressed level of equity investments was still the key factor keeping FDI Figure I. not all reinvested earnings are actually reinvested in productive capacity. or to finance other activities (box I. This reflects the general increase in profits globally. Improved economic performance in many parts of the world. FDI by components In 2010. a Based on 106 countries that account for 85 per cent of total FDI inflows during the period 2007-2010. based on UNCTAD cross-border M&A database and information from the Financial Times Ltd. a Based on 104 countries that account for 81 per cent of total  FDI inflows during the period 2005-2010. 2005–2010a (Billions of dollars and per cent) $ billion 1200 1000 800 600 400 200 0 2005 2006 2007 2008 2009 Per cent 45 40 35 30 25 20 15 10 5 0 2010 Reinvested earnings Repatriated earnings on Inward FDI Reinvested earnings as a % share of income Source: UNCTAD. Figure I. . Value and number of cross-border M&As and greenfield FDI projects.13).13. FDI inflows by component. Cash reserves of foreign affiliates grew substantially.11. They may be put aside to await better investment opportunities in the future. d. including those that are speculative (box I.12. 2007–May 2011 $ billion 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 M&A value 2007 2008 2009 M&As number Thousands 18 16 14 12 10 8 6 4 2 0 2010 Greenfield FDI number 400 350 300 250 200 150 100 50 0 2010 (Jan-May) 2011 (Jan-May) 7 6 5 4 3 2 1 0 Greenfield FDI value Source: UNCTAD.12). 2007–2010a (Billions of dollars) 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 2007 Other capital 2008 2009 Reinvested earnings 2010 Equity Source : UNCTAD. The increase in reinvested earnings compensated for the decline in equity capital flows. while profits of Japanese firms also rose in 2010.13).com). For example.5). FDI income.2). Note: Data for value of greenfield FDI projects refer to estimated amounts of capital investment. which were down slightly despite an up-tick in cross-border M&As. However.fDimarkets.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 This proxy indicator for overseas cash reserves of United States firms over the last 10 years shows a peak in 2004.2. it may be more relevant to see how FDI flows are used (use of funds). by fiscal considerations (e. the decision by a TNC to finance an investment in productive assets in a host country through an increase in equity capital. Estimated value of the “non-used” part of FDI by United States TNCs. a steep drop in 2005 and an ascent to new heights in 2008 – with estimates for 2009 and 2010 equally high (box figure I. firms do not necessarily reinvest this income in additional productive capacity. WIR10). it is a good proxy for the increase in cash reserves in foreign affiliates. For the last three years. . The implications are significant. and reinvested earnings of foreign affiliates. a loan. by the need to retain cash for planned future investments. “Reinvested earnings” consist of income earned by foreign affiliates that is not repatriated to the home country of the parent firm. firms hoarded cash in their overseas affiliates in 2004 and brought back several years’ worth of retained earnings in 2005 (some $360 billion). Source: UNCTAD. The difference between FDI flows and actual capital expenditures by foreign affiliates represents FDI not immediately employed for the creation of additional productive capacity and. Under-employed cash reserves of TNCs represent untapped funds that could be gainfully employed to stimulate the global economy.g. create jobs and finance development. most of which are beyond the reach of host-country policymakers to influence. expansion or improvement of productive assets. or (3) to add to the financial reserves of foreign affiliates. The latter may be motivated by decisions on the level of financial leverage of the firm. generating additional productive capacity. From a policymaker’s perspective.2. The 2004 peak and the 2005 trough can be explained by the Homeland Investment Act which provided a tax break on repatriated profits in 2005. to defer tax liabilities upon repatriation of profits). intra-company loans. additional to funds raised on local and international capital markets. The traditional method of analysing FDI by sources of funds tends to overlook the significance of such “parked funds” held in foreign affiliates of TNCs. However.1). as such. including opportunistic behaviour on the part of TNCs to profit from changes in exchange rates or local asset-price rises. (2) to finance changes in ownership of assets (M&As). These component parts can be considered as sources of funds for investment. 2001–2010 (Billions of dollars) 200 150 100 50 0 -50 -100 -150 -200 Source: UNCTAD based on FDI database and Bureau of Economic Analysis.12 World Investment Report 2011: Non-Equity Modes of International Production and Development Box I. TNCs can employ FDI (1) for the creation. FDI flows and the use of funds for investment FDI is traditionally broken down into three components: equity capital. or by other factors.1. levels have been similar to the anomalous 2004 peak. Box figure I. A 2009 tax change on the repatriation of foreign earnings is estimated to bring back an additional $40 billion in overseas funds annually (chapter II. The sensitivity of overseas cash reserves to the tax rate on fund repatriation can also be observed in Japan.2. Anticipating the tax break. or by using income earned in the host country is driven by a wide range of factors. leading to the conclusion that cash reserve levels in foreign affiliates may well exceed what is required for normal operations.

5 At the same time.050 deals completed. that could result Table I. in order to strengthen their balance sheets. as among the components of FDI. This was especially true of European TNCs which. The factors behind the increase in FDI by private equity funds are largely related to the stabilization of macroeconomic conditions. the value of private equity-sponsored crossborder M&As increased by 14 per cent to $122 billion. This classification is based on the Thomson Finance database on M&As. its peak year. It is a source of concern. firms in developing country firms and venture capital business. their value is still more than 70 per cent lower than the peak level in 2007. compared to $107 billion in 2009 after two years of consecutive decline (table I.CHAPTER I Global Investment Trends 13 flows relatively low. Intra-company loans declined also. Thus 31 per cent of FDI by private equity firms.1). also bolstering a more positive outlook for private equity-sponsored FDI.14). investors were looking for yields. although it fell short of its pre-crisis level.1).1. which provide better business opportunities than before. was directed to developing and transition economies in 2010 (figure I.2). This rise reflects the increasing interest of private equity Source : UNCTAD. reinvested earnings continue to play an important role in determining the level of investment flows. unless they are repatriated to their parent firms in home countries.unctad. secondary buyouts and smaller acquisitions. . Private equity investors were estimated to have held nearly a trillion dollars of uninvested capital at the beginning of 2010. In 2010. It is directed more towards developing and transition economies. amounting to $38 billion. Given the fact that foreign affiliates hold a significant amount of retained earnings on their balance sheets (box I. Note : Value is on a gross basis. 1996–May 2011 (Number of deals and value) Number of deals Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Number 932 925 1 089 1 285 1 340 1 248 1 248 1 488 1 622 1 736 1 698 1 917 1 785 1 993 2 050 591 Share in total (%) 16 14 14 14 13 15 19 22 22 20 18 18 18 25 22 17 $ billion 42 54 79 89 92 88 85 109 157 207 271 457 322 107 122 91 Value Share in total (%) 16 15 11 10 7 12 18 27 28 22 24 27 25 19 17 20 e. with 2. 2011). Positive trends were supported by stronger private equity activity in emerging markets (Emerging Markets Private Equity Association. FDI by special funds: private equity and sovereign wealth funds Private equity funds Private equity-sponsored FDI has regained momentum. including reserves for future use. in a declining interest rate environment. which is different from other M&A tables based on a net value. org/fdistatistics). The relative contribution of private equity funds to total FDI contracted by nearly 40 per cent from 2004. Also. up from 26 per cent in 2009. The table includes M&As by hedge funds. equity investment compared with reinvested earnings and intracompany loans is the one that is related most directly to TNCs’ long-term international investment strategies. Despite stronger private equity-sponsored crossborder M&As in 2010. Cross-border M&As by private equity firms. in particular those in developed host countries. significantly reduced loans to their affiliates in the United Kingdom and the United States. A more benign global economic environment should see fundraising and investment picking up in 2011. The relative contribution of private equity to global FDI continues to decline. to 2010. facing fears of a sovereign debt crisis spreading in many parts of the euro zone. cross-border M&A database (www. The volume share of private equity in total cross-border M&As fell from 19 per cent in 2009 to 17 per cent in 2010 (table I. as parent firms withdrew or were paid back loans from their affiliates. the corresponding number of cross-border M&As reached a record high. Private equity firms and hedge funds refer to acquirers as “investors not elsewhere classified”.

14

World Investment Report 2011: Non-Equity Modes of International Production and Development

Figure I.14. Cross-border M&As by private equity funds directed to developing and transition economies, 2005–2010
(Billions of dollars and per cent)
(10%) (13%) (20%) (26%) (14%) (31%)

Sovereign wealth funds
Sovereign wealth SWF-sponsored FDI declined funds (SWFs) are substantially because of s p e c i a l - p u r p o s e severely reduced investment investment funds or from the Gulf region. arrangements that However, its long-term are owned by govpotential as a source of ernment.9 At the end investment remains. of 2009, more than 80 SWFs, with an estimated total of $5.9 trillion in assets, could be identified.10 In 2010 alone, nearly 20 governments, mostly from emerging economies, considered or decided to establish an SWF. While funds that invest mainly in debt instruments (e.g. government bonds) were largely unaffected by the global financial crisis, SWFs with considerable equity exposure suffered a dramatic erosion of the value of their investments. By the end of 2009, however, with the recovery of stock markets worldwide, almost all SWFs had been able to recoup their losses from 2008. In 2010 the positive outlook for most SWFs held firm, supported by the overall recovery in equity markets. However, total SWF-sponsored FDI in 2010 amounted to only $10.0 billion, a significant drop from 2009’s $26.5 billion (figure I.15). The largest SWF-sponsored deals included investments in infrastructure, retail, transportation, natural resources and utilities in Australia, Canada, the United Kingdom and the United States (table I.2). The fall in SWF-sponsored FDI in 2010 is a considerable deviation from the trend of SWFs becoming more active foreign direct investors, that started in 2005. There are two reasons for this slump. First, unlike in earlier years, in 2010 FDI by SWFs based in the Gulf region (e.g. United Arab Emirates) was almost absent (table I.2). Asian and Canadian SWFs were the main investors in 2010. Second, while SWF-sponsored FDI is not necessarily pro-cyclical, the low appetite for direct investments in 2010 can be traced back to the exceptionally uncertain global financial environment of previous years. Because of that uncertainly, in 2010 SWFs directed about one-third of their FDI to acquire shares of, or inject capital into, private equity funds and other funds,11 rather than investing in acquiring shares issued by industry

50 40 30 20 10 0

2005–2007 2008–2010 2007 Average

2008

2009

2010

Source: UNCTAD, cross-border M&A database (www.unctad. org/fdistatistics). Note: Figures in parenthesis refer to the percentage share in total private equity. Data for 2005–2007 and 2008–2010 are annual averages.

in a surge in volume of cross-border M&As in 2011 (Bain & Co., 2011). On the supply side, there are now more opportunities. There are two factors. First, companies owned by private equity firms are becoming targets for other private equity firms. The relative performance of these secondary buyouts (i.e. buyouts of private equity invested firms) is only slightly lower than that of primary buyouts: this is because the former can be executed faster than the latter in issuing IPOs (initial public offerings), and because secondary buyouts entail a lower risk profile.6 Second, private equity firms are now seeking smaller firms, and are engaged in smaller-scale buyouts. This is an area to which private equity firms have not paid much attention in the past, yet one where many attractive firms are to be found. However, private equity funds continue to face regulations in response to the global financial crisis, partly due to the G-20’s commitment to subject all significant financial market actors to appropriate regulation and supervision. For example, the EU Alternative Investment Funds Managers Directive7 and the United States' Dodd-Frank Wall Street Reform and Consumer Protection Act8 will affect directly and indirectly the operations of private equity funds and their fund-raising ability, and in consequence their contribution to FDI.

CHAPTER I Global Investment Trends

15

Figure I.15. Cross-border M&As by SWFs, 2001–2010
(Million dollars and per cent)
$ billion 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Value Share in global outflows Per cent 3.0 2.5 2.0 1.5 1.0 0.5 0

Source: UNCTAD, cross-border M&A database (www.unctad.org/fdistatistics).

Table I.2. Selected large FDI deals by SWFs in 2010
Value ($ million) 3 090 2 227 1 581 881 800 576 400 259 194 100 91 43 Acquiring company Canada Pension Plan Investment Board Qatar Holding LLC China Investment Corp Canada Pension Plan Investment Board China Investment Corp Ontario Teachers Pension Plan Temasek Holdings(Pte)Ltd Caisse de Depot & Placement du Quebec GIC Real Estate Pte Ltd Temasek Holdings(Pte)Ltd Canada Pension Plan Investment Board Oman Investment Fund Acquiring nation Canada Qatar China Canada China Canada Singapore Canada Singapore Singapore Canada Oman Target company Intoll Group Harrods AES Corp 407 ETR Concession Co Penn West Energy Trust Camelot Group PLC Target nation Australia United Kingdom United States Canada Canada United Kingdom Industry of the acquired company Finance Retail Electricity, gas and water Transport, storage and communications Mining, quarrying and petroleum Community, social and personal service activities Mining, quarrying and petroleum Finance Business services Mining, quarrying and petroleum Business services Finance

Odebrecht Oleo & Gas SA Brazil HDF(UK)Holdings Ltd United Kingdom

Salta Properties-Industrial Australia Property Portfolio Platmin Ltd Vornado Realty Trust Petrovietnam Insurance Joint Stock Corp South Africa United States Viet Nam

Source: UNCTAD, cross-border M&A database (www.unctad.org/fdistatistics).

(e.g. the Canadian Pension Plan Investment Board’s investment in Intoll Group, an infrastructure fund, for $3 billion – table I.2). While expenditure on FDI has declined, the fundamental drivers for stronger SWF-sponsored FDI activity remain robust. Strong commodity prices in 2010 in particular have created a positive funding environment for SWFs, including those that have been actively involved in FDI in previous years. The foreign assets of the Qatar Investment Authority, an

active strategic investor, were estimated to grow from $65 billion in 2009 to $90 billion in 2010, and $120 billion in 2011.12 It has been suggested that the China Investment Corporation, established in 2007 with a mandate to diversify China’s foreign exchange holdings, and an active investor in energy, natural resources, and infrastructure-related assets, received $100–200 billion in new funds in 2010.13 Other SWFs have seen strong returns in 2010, supporting policy decisions to become more

16

World Investment Report 2011: Non-Equity Modes of International Production and Development

proactive sponsors of FDI. Since 2009, for example, the Norwegian Government Pension Fund Global, with more than $400 billion under management and owning roughly 1 per cent of the world’s equity, is now allowed to own up to 10 per cent of a listed company – the threshold to be considered FDI – making the fund a considerable potential source of FDI.14 Greater availability of funds, as well as policies that give SWFs more leeway to acquire larger stakes in attractive assets, together with improved in-house fund management capacity, will result in SWFs becoming more visible sources of FDI.

Figure I.16. Global FDI flows, 2002–2010, and projection for 2011–2013
(Billions of dollars)

2 500 2 000
Baseline

1 500
Pessimistic scenario

1 000 500

2. Prospects
Recovery is Judging from the data on FDI underway, but risks flows, cross-border M&As and and uncertainties greenfield investment for the first remain. few months of 2011, the recovery of FDI is relatively strong. This trend may well continue into the remaining period of 2011. New investment opportunities await for cash-rich companies in developed and developing countries. Emerging economies, particularly Brazil, China, India and the Russian Federation, have gained ground as sources of FDI in recent years. A recovery in FDI is on the horizon.
However, the business environment remains volatile, and TNCs are likely to remain relatively cautious regarding their investment plans. Consequently, medium-term prospects for FDI flows – which have not really picked up yet after the sharp slump in 2008 and 2009, and which had only a moderate recovery in 2010 – may vary substantially, depending on whether or not the potential risks in the global economy materialize or not. To illustrate these uncertainties, UNCTAD proposes baseline and pessimistic scenarios for future FDI growth (figure I.16). The former scenario is based on the results of various leading indicators, including UNCTAD’s World Investment Prospects Survey 2011—2013 (WIPS) (UNCTAD, forth­ coming a), an econometric model of forecasting FDI inflows (box I.3), and data for the first four to five months of 2011 for cross-border M&As and greenfield investment values. Taking these various indicators together, FDI flows could range from $1.4–1.6 trillion in 2011 (with a baseline scenario of $1.52 trillion) — the pre-crisis average of

2002

2003 2004 2005

2006 2007 2008

2009 2010 2011 2012 2013

Source: UNCTAD.

2005–2007. They are expected to rise further to $1.7 trillion in 2012 and reach $1.9 trillion in 2013, the peak achieved in 2007. However, there is also a possibility of stagnant FDI flows (pessimistic scenario) if the above–mentioned risks such as the unpredictability of global economic governance, worsening sovereign debt crisis, and fiscal and financial imbalances were to materialize. After the sharp recession at the end of 2008 and beginning of 2009, the economic environment has improved significantly over the past two years. The recovery in world output growth rests on a number of factors, including stabilization of the financial system, the resilient growth of emerging markets, the stimulus package programmes implemented in various major economies in the world, and the pickup in final demand in developed countries, following a return to confidence for both households and companies. Recent forecasts suggest that global GDP will grow by 3 per cent in 2011. Moreover, domestic investment, is expected to pick up strongly not only in developing countries but also in advanced economies (table I.3). Take for example the Republic of Korea, where investment expenditure in 2011 is expected to rise by nearly 10 per cent, to a record high.15 The improvement in the global macroeconomic outlook has had a direct positive effect on the capacity of TNCs to invest. After two years of slump, profits of TNCs picked up significantly in 2010 (figure I.17), and have continued to rise in 2011: in the first quarter the S&P 500 United States

CHAPTER I Global Investment Trends

17

Box I.3. Forecasting global and regional flows of FDI
Part of UNCTAD’s forecast for FDI flows is based on an econometric model, by which not only global but also regional estimations are made possible for 2011–2013. As FDI decisions are a strategic choice by firms choosing among alternative locations, the single country/region model cannot demonstrate how a TNC chooses a particular location over others. Existing studies typically portray FDI as reacting to individual host country/region factors, but fail to capture the impact of factors elsewhere on the other regions that may attract investment to, or divert investment from, the country in question. Consequently, in order to explain and forecast global and regional FDI, factors in all regions must be taken into consideration simultaneously. UNCTAD’s econometric model for FDI uses panel data for the period 1995–2010 from 93 countries, which account for more than 90 per cent of FDI in their own respective regions (Africa, West Asia, South, East and South-East Asia, Latin America and the Caribbean, EU and other developed countries).a The variables employed in the model include: market growth of G-20 countries as main home and host countries of global FDI (G-20 growth rate), market size (one year lagged GDP of each individual country), the one-year lagged price of oil to capture natural-resource FDI projects, trade openness (the share of exports plus imports over GDP), and the lagged dependent variable of FDI to capture the effects of FDI in the previous periods (autocorrelation). The regression results are summarized in box table I.3.1. Based on this model, FDI flows are projected to pick up in 2011 reaching the pre-crisis level mainly due to dynamism in the economic growth of G-20 countries. FDI inflows are expected to reach the peak level of 2007 in 2013 (box table I.3.2). However, the results of the model are based mainly on economic fundamentals and do not take into account the various risk factors mentioned in the Report. This is due to difficulties in quantifying them.
Source: UNCTAD. a The only exception is Latin America and the Caribbean, where the countries included represent around 70 per cent of FDI inflows. Lower coverage is due to the absence of macroeconomic data for the Caribbean.

Box table I.3.1. Regression results of FDI forecasting model, fixed effects panel regressiona Explanatory variable G20 growth GDP (-1) Openness Oil price (-1) FDI(-1) Constant R2 Observations Coefficients 0.37 (3.87)*** 0.01 (3.32)*** 0.01 (3.48)*** 0.02 (3.9)*** 0.50 (7.2)*** -0.63 (-0.58) 0.81 1395

Source: UNCTAD estimates, based on UNCTAD (for FDI inflows), IMF (G20 growth, GDP and openness), United Nations (oil price) from the Link project. a The following model FDI jt = α o + α 1 *G20 t + α 2 *GDP jt-1 +α3*Openessjt+α4*Oil_pricejt-1+α5*FDIjt-1+ejt is estimated with fixed effect panel regression using estimated generalized least squares with cross-sections weights. Coefficients computed by using white heteroscedasticity consistent standard errors. Statistical significance at the 1 per cent (***) and 5 per cent (**) levels.

Box table I.3.2. Summary of econometric medium-term baseline scenarios of FDI flows, by groupings (Billions of dollars) Averages 2005-2007 2008-2010 Global FDI flows Developed countries Developing countries Transition economies
Source: UNCTAD.

2009 1 185 030 602 835 510 578 71 618

2010 1 243 671 601 906 573 568 68 197

2011 1 523 598 790 183 655 800 77 615

Projections 2012 1 685 792 887 729 713 946 84 117

2013 1 874 620 1 026 109 749 531 98 980

1 471 799 967 947 444 945 58 907

1 390 934 723 284 580 716 86 934

firms increased their profits by 12 per cent over the corresponding period of 2010. For Japan, despite a negative economic growth rate due to the natural

disaster, listed firms still achieved profits,16 and even in the aftermath of the disaster, Japanese firms are vigorously investing abroad (box I.4). Firms now

18

World Investment Report 2011: Non-Equity Modes of International Production and Development

Table I.3. Real growth rates of GDP and gross fixed capital formation (GFCF), 2010–2012
(Per cent)
Variable World GDP growth rate Developed economies Developing economies Transition economies World GFCF growth rate Advanced economiesa Emerging and developing economiesa Region 2010 2011 2012 3.6 1.6 7.1 3.8 5.9 2.5 9.6 3.1 1.3 6.0 4.0 6.5 4.2 8.9 3.5 1.7 6.1 4.2 7.2 6.2 8.2

Figure I.18. Level of optimism of TNCs regarding the investment environment, 2011–2013
(Percentage of responses by TNCs surveyed)
53%

49% 34%

Source: UNCTAD, based on United Nations, 2011 for GDP and IMF, 2011a for GFCF. a IMF’s classifications of advanced, emerging and developing economies are not the same as the United Nations’ classifications of developed and developing economies.

2011

2012

2013

Source: UNCTAD, forthcoming a.

Figure I.17. Profitability a and profit levels of TNCs, 1997–2010
(Billions of dollars and per cent)
$ billion 1 400 1 200 1 000 800 600 400 200 0 - 200 Profits Profitability Per cent 8 7 6 5 4 3 2 1 0 -1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

(53 per cent) in 2013. Perhaps more strikingly, the share of TNCs responding that they were “pessimistic” or “very pessimistic” for 2013 fell to 1 per cent. Responses to the WIPS also suggest strongly the continuing importance of developing and transition economies as destinations for FDI (figure I.19). While the composition of the top five destinations has not changed much in recent years – for example, in 2005 the top five were China, India, United States, Russian Federation, and Brazil – the mix of the second tier of host economies has shifted over time. Reflecting the spread of FDI in developing Asia beyond the top destinations, the rankings of economies such as Indonesia, Viet Nam, and Taiwan Province of China have risen markedly compared to previous surveys. Peru and Chile have likewise improved their position as Latin American destinations, thanks largely to their stable investment climates and strong macroeconomic factors. African countries are conspicuous by their absence from the list of top potential host economies for TNCs. While improving macro- and microeconomic fundamentals, coupled with rising investor optimism and the strong pull of booming emerging markets, should signal a strong rebound in global FDI flows, risks and uncertainties continue to hamper the realization of new investment opportunities. Such factors include the unpredictability of global governance (financial system, investment regimes,

Source : UNCTAD, based on data from Thomson One Banker. a Profitability is calculated as the ratio of net income to total sales. Note: The number of TNCs covered in this calculation is 2,498.

have record levels of cash holdings. TNCs’ sales have also increased significantly as compared to 2009, both globally and for their foreign affiliates (section C). These improvements at both the macroeconomic and microeconomic levels are reflected in TNCs’ opinions about the global investment climate. According to 2011’s World Investment Prospects Survey (WIPS),17 TNCs exhibit a growing optimism going towards 2013 (figure I.18). Some 34 per cent of respondents expressed “optimistic” or “very optimistic” views for the global investment environment in 2011, compared to more than half

However. Renasas Electronics.CHAPTER I Global Investment Trends 19 Box I.g. Japan will again be a leading investor for outward FDI. regional instability. while a further fifth intended to diversify their procurement sources within Japan. etc.a one-quarter of the respondents said that they would increase procurement from abroad.4 Effects of the natural disaster on Japanese TNCs and outward FDI On 11 March 2011. the strategy of diversifying procurement sources could strengthen outward FDI. Source: UNCTAD.19. and China United States India Brazil Russian Federation Poland Indonesia Australia Germany Mexico Viet Nam Thailand United Kingdom Singapore Taiwan Province of China Peru Czech Republic Chile Colombia France Malaysia 90 80 70 60 50 40 30 20 10 0 fears of investment protectionism. In the medium term. Figure I. volatility of exchange rates. The survey indicated that about two-thirds of the firms intended to maintain or increase their level of total investment in the aftermath of this natural disaster. forthcoming a. the chain of events has prompted Japanese manufacturers to reconsider their procurement strategies. energy price hikes and risks of inflation. In a recent survey of Japanese firms by the Nikkei. Over the long run. The region that was most badly affected is home to a number of niche hi-tech companies. the overall impact of the earthquake on outward FDI from Japan is likely to be limited. the supply disruption will have reduced the revenues of those foreign affiliates of Japanese TNCs that were affected by supply disruption. a Based on a survey of 100 CEOs by the Nikkei (29 May 2011). . On the other hand. which controls a 30 per cent share of the global market for microcontrollers). especially against the backdrop of buoyant outward FDI through M&A by Japanese firms. Top host economies for FDI in 2011–2013 (Number of times the country is mentioned as a top FDI priority by respondent TNCs) Source: UNCTAD. and thus their reinvested earning. Despite the severity of the damage. all major producers of specialized components (e. the prominence of all of these risks at the same time could seriously obstruct FDI globally. While Japanese firms have shown remarkable resilience. the northern part of Japan experienced a devastating earthquake and tsunami. not only in Japan but internationally. the worsening sovereign debt crisis in some developed countries and the resultant fiscal austerity. The earthquake itself and the subsequent interruption of power supplies resulted in a severe disruption of supply chains. Although each can serve as a disincentive to investment in its own right. In the short term. production at Toyota had recovered to 90 per cent of its pre-earthquake level. by June most of the supply chains had been restored: for example. the temporary loss of revenues might have induced the parent companies of these affiliates to extend intra-company loans.).

At the high end of that range. the worldwide demand for private productive investment is increasing as public investment. Policymakers from those countries would be well advised to take a lead role among their international peers in continuing to ensure a favourable and stable global investment climate. by contrast. declines in one country after another. which rescued the global economy from a prolonged depression. or because of a lack of investment opportunities. . where the need for private investment to take over from dwindling public investment is greatest. is acting as a brake on renewed capital expenditures. building upon the modest recovery experienced in 2010. and clear priority opportunity areas. governments must now rein in their deficits and let private investment take over the lead role in generating and supporting a sustained recovery. While the FDI recovery resumes. yet would still be below the 2007 peak of $2 trillion.20 World Investment Report 2011: Non-Equity Modes of International Production and Development *** UNCTAD’s WIPS and econometric model projections for FDI flows in the coming years paint a picture of cautious but increasing optimism. with global FDI flows set to increase to between $1. Responses by TNCs to UNCTAD's WIPS (UNCTAD. forthcoming a) indicate increasing willingness to invest. is already back at pre-crisis levels (table I. are ranked far lower on the investment priority list of TNCs than either the size of their economies or their past FDI performance would seem to warrant. including financial instability and the possibility of a rise in investment protectionism. However.5). and with nervous capital markets. With unsustainably high levels of public debt at both national and sub-national levels in many countries.6 trillion in 2011. A number of developed countries. The FDI recovery in 2010 was slow not because of a lack of funds to invest.4 and $1. the perception among TNC managers of a number of risks in the global investment climate. FDI flows would be slightly more than the average pre-crisis level. World trade.

enterprises.4.9 539 173 76. Capital flows to developing countries. there remain concerns about volatility. led by FDI. However. High expected GDP growth in developing 56. but these remain below their peak of 2007 (table I. These have different motivations. 2011b). Non-FDI flows may work either in association with FDI. private capital flows to emerging and developing economies have been rebounding. official loans and trade credits. thanks to quantitative easing and low interest rates. while policy frameworks are perceived to be more resilient to future shocks. First. FDI AS EXTERNAL SOURCES OF FINANCE TO DEVELOPING COUNTRIES Domestic investment still accounts for the majority of the total investment in developing and transition economies. as FDI may be volatile. IMF. private investors (individuals. or separately from it. And the low interest rate environment in developed economies cannot be sustained indefinitely. 927 297 647 1 063 204 245 Source : UNCTAD.19 However. be they private or public. behave differently.. 2011. which are now highly exposed to volatile portfolio and especially other capital elements such as bank loans. Less positively. led by FDI. funds etc. Since the first half of 2009. a Other investments include loans from commercial banks. caution is needed as to its sustainability. the capital surge is exposing developing and transition economies to greater instability. especially in Asia (structural pull).) and public investors (e. 2011a (on portfolio. is the recovery in development finance to developing and transition economies sustainable? The recovery is due to a combination of structural (long-term) and cyclical (short-term) pull and push factors. productive investment.CHAPTER I Global Investment Trends 21 B. . putting direct upward pressure on their exchange rates. There is a sign of continued recovery in capital flows.9 106. FDI has been the main source of inflows during 2009–2010. but caution is needed. each form of foreign investment plays a distinct and important role in promoting growth and sustainable development. and the benefits of combining FDI with other sources of external finance. and reducing social and income disparities. the global recovery may be more fragile. and consequently have different impacts on development.4). generating employment.18 Foreign investment can only complement this. This section will discuss the development implications of various forms of investment. This makes it necessary to review each instrument and the synergies between them. Differing motivations. countries is heralding profitable investment opportunities (cyclical pull). characteristics and responses also drive different groups of investors in an enterprise – for instance.4 774 288 95 673 281 . Foreign investors may finance their activities using a range of instruments in addition to FDI. other investment and reserve assets). Table I. are motivated to invest in developing countries with relatively higher rates and returns (cyclical push) (Akyuz.1 86. Developed countries with excess liquidity. from UNCTAD (on FDI inflows and workers’ remittances) and from the World Bank (on official grants excluding technical cooperation). implying greater stability and a return to confidence for longer-term. 2005–2010 (Billions of dollars) Type of flows Total FDI Portfolio investment Other investmenta Memorandum Official grants. boosting countries’ competitiveness. based on data from IMF. because FDI is relatively less significant this time in developed economies. As no single type of flow alone can meet investment needs.20 As a positive sign for emerging and developing economies. it is vital to leverage their combinations to maximize their development impact. excluding technical cooperation Change in reserves Workers' remittances 2005 2006 2007 2008 2009 2010 579 930 1 650 447 656 1 095 332 435 571 652 507 561 154 268 394 -244 93 186 94 228 686 39 56 348 The recovery of external capital flows to developing countries is under way.g. However. However. via ODA and other official finance).

by type.4 billion in 2009 and $1.4 billion in 2008. . The volatility of private capital flows.5). the fact that net private flows to developing countries remain positive is largely due to FDI: the recovery has not extended yet to all private flows in all regions. Figure I. $26 billion in 2009 and $48 billion in 2010). It is argued that this might reflect its changing composition. failure by developed countries to meet stipulated objectives has led to deep scepticism about its effectiveness in addressing core development needs of beneficiary countries. assumptions about FDI’s stability relative to other types of capital should be treated with caution especially for emerging economies (IMF. Note: The volatility of each type of capital flow is calculated as relative standard deviation for the immediately preceding 10 years. the Republic of Korea ($8. although it remains much less volatile than portfolio and other investments (such as commercial loans and trade credits) (figure I. bank loans and FDI – contribute to development. or “hot money”. however.6 billion in 2010).20). reinvested earnings and intra-company loans) has reasons for fluctuation. bearing in mind the dramatic rise and fall in FDI inflows to such countries as Brazil ($45 billion in 2008. All private foreign capital flows – portfolio investment. restructurings. ODA is less prone to fluctuations.21). As a consequence. FDI would therefore appear to be much less volatile than these other private flows (namely private portfolio and private other capital).20. depending on profitability and the level of repatriation from abroad in the form of dividend payments. Each of the three components of FDI flows (equity investment. which would also make it more sensitive to the changes in United States monetary policy that have triggered previous crises. for example a shift from equity to debt components. 2003–2010 Developed countries Developing and transition economies 3 3 Other investment 2 Other investment 2 Portfolio investment 1 FDI 1 FDI 0 Portfolio investment 2003 2004 2005 2006 2007 2008 2009 2010 0 2003a 2004a 2005 2006 2007 2008 2009 2010 Source: UNCTAD. a In 2003 and 2004. $7. Thus. the recent crisis.5 billion in 2009 and $6. are both matters of concern to developing countries.21 Reinvested earnings fluctuate quite significantly. $5. global production chains have changed considerably and it has become much easier for equity to relocate. or upswings.9 billion in 2010) and South Africa ($9 billion in 2008. the value of standard deviation exceeded 3. FDI is also likely to contain some short-term and volatile flows. and non-FDI flows were negative in many years and regions even during the FDI boom (figure I. Despite the instability of FDI flows in recent years. The relative standard deviation of 2010 is based on flows between 2001 and 2010. being related more to the decisions of the parent company in order to help its foreign affiliates to expand or cover the running costs during start-up. Stabilization of capital flows now represents an important challenge to many developing countries (box I.22 World Investment Report 2011: Non-Equity Modes of International Production and Development Second. Although equity investment continues to be the most stable component of FDI. FDI in recent years is gradually becoming more volatile in developing and transition economies. 2011a). and the nature and inherent fragility of the current upswing. This makes the role of official development assistance (ODA) very important. Intra-company debt generally comes with more flexible terms and conditions than commercial loans.

Indeed FDI in real estate is rising in many countries. Take for example the capital controls introduced in 2009–2010 in the real estate markets of various Asian economies: direct controls to limit the size of flows affected both short. short-term speculative flows may be misreported under FDI outflows when they leave the home country. . In 2009 (the most recent year for which data are available). Such misreporting happens because the distinction between long-term capital flows (FDI) and short-term capital flows is increasingly blurred. the latter may hold part of the funds received from their parent firms in assets other than immediate investment.CHAPTER I Global Investment Trends 23 Box I.50 . the value of errors and omissions was equivalent to almost half that of all FDI inflows globally.21. or is invested in real estate and property which may easily be liquidated. Moreover. In principle.200 . and South-East Asia 400 300 200 100 . In 2010. but are not recorded as FDI inflows in host countries as the money transferred is spent instantaneously for speculative purposes. Source: UNCTAD Figure I. 2011a.20 . A part of this money might have entered developing host countries for the purpose of short-term capital gains. 2004–2010 (Billions of dollars) Africa 100 80 60 40 20 . in particular in China (chapter II) and in Latin America – as it at one time was in pre-crisis West Asia. In countries where FDI inflows exceed considerably the capital expenditures of foreign affiliates. based on data from IMF. volatile flows. The IMF also has now softened its customary stance against capital controls (Ostry et al. FDI flows rose significantly to some developing countries.100 .40 2004 2005 2006 2007 2008 2009 2010 South. As a result of the growth of this short-term capital. as flows recorded statistically under FDI could encompass some short-term flows. capital controls are back on their policy agenda. the establishment of measures targeting exclusively short-term capital flows is increasingly difficult.5. While some speculative short-term private capital flows may have become part of FDI statistics. while maintaining the more preferential treatment of long-term capital.. making it easier for some Asian and Latin American countries to introduce measures to restrict short-term. FDI and capital controls Some developing countries are concerned that a surge in capital inflows could exacerbate imbalances and complicate their macroeconomic policies. as the latter should contain only long-term flows.100 . East.20). for example speculative funds. and does not stay long enough in the accounts of foreign affiliates. recently FDI flows have become more volatile than before (figure I. Reality is more complex. 2011). as they usually escape being captured in the established items of the balance of payments. these measures should not affect FDI.300 2004 2005 2006 2007 2008 2009 2010 Latin America and the Caribbean 250 200 150 100 50 . As the markets for different types of capital flows are interrelated. This kind of money is either reserved for special-purpose entities and financial holding companies. Composition of private capital flows to developing and transition economies.and long-term capital flows (IMF. up from only about 10 per cent in previous years. the increase of FDI was not necessarily accompanied by investment in fixed assets or cross-border acquisitions. most continue to be recorded under errors and omissions. In certain cases. Against this backdrop.150 2004 FDI 2005 2006 2007 2008 2009 2010 Portfolio Other Capital Source: UNCTAD. 2011a).

4 -5.9 1 083 6.6 8.3 18. as efficiencyseeking investments expanded during the crisis. on the basis of the shares of those countries in worldwide outward FDI stock. Sweden. Note :  Not included in this table are the value of worldwide sales by foreign affiliates associated with their parent firms through non-equity relationships and of the sales of the parent firms themselves. International production networks thus continue to expand. Slovenia. France.3 4. Germany. a Calculated with FDI income for the countries that have the data for both this and FDI stock. generated value added of approximately $16 trillion in 2010 (figure I. Table I. accounting for more than a quarter of global GDP. Italy.0 707 33 300 6 216 64 423 6 599 64 484 61 147 13 999 191 19 794 2010 1 244 1 323 19 141 20 408 1 137 7. International production by TNCs (i.3 -6.3 6. . total assets.3 -9.6 14. with sales. with the stock (equity) over assets ratio declining from nearly 40 per cent to 25 per cent.6 14. Austria.3 35.1 per cent.4 20. Accelerating internationalization of firms International production is expanding. Employment continued to expand.6 2.1 36. up from around 35 per cent in 2005.9 19. Czech Republic. Sweden.5).3 -1.6 122 7.3 13.1 8. Canada.7 4. Portugal.3 -0. as proxied by outward FDI stock over foreign assets. d Based on data from IMF. Worldwide sales. Israel.0 7. France.3 0.5 1.0 5.1 64.8 -20. Leverage peaked during the FDI boom years from 2005 to 2007.8 -0.6 30 213b 6 129b 53 601b 5 262c 66 688b 57 920d 12 735 187 15 783d Source: UNCTAD. Greece. Japan.5. c Data for 1995 –1997 are based on a linear regression of exports of foreign affiliates against inward FDI stock for the period 1982 –1994. Finland.3 10. Luxembourg.7 32. Japan and the United States for assets.6 3.1 7.22).3 20.1 8. Switzerland.9 10. Belgium.1 9.0 3. but it has since decreased.2 339 32 960b 6 636b 56 998b 6 239c 68 218b 62 909d 13 940 191 18 713d 1 185 1 171 17 950 19 197 945 7.0 1 037 6. 2011a.1 13.6 11.1 14.1 -11.9 35. Slovenia. those from Austria. Sweden.6 13.1 10.9 250 Annual growth rate or change on return (Per cent) 1991– 1996– 2001– 2009 2010 1995 2000 2005 22. and the United States for employment. and the United States for exports. UNCTAD estimates that TNCs worldwide. Lithuania.1 8. reflecting strong revenues in developing and transition economies. and those from Australia.3 8.9 10.3 20. FURTHER EXPANSION OF INTERNATIONAL PRODUCTION 1.1 6. although the rate of growth was slower during the crisis.9 15.5).6 6. This continuing expansion reflects the consistently high rates of return obtained by TNCs on FDI – back up to 7.e.3%) was applied to obtain values.9 -20.3 99 5 105 1 019 4 602 1 498 21 470 22 206 5 109 29 4 382 Value at current prices (Billions of dollars) 2005–2007 2008 2009 average 1 472 1 487 14 407 15 705 990 5. and the United States for sales. Slovenia.6 9.3 1 113 7.9 6. 1990–2010 Item FDI inflows FDI outflows FDI inward stock FDI outward stock Income on inward FDI Rate of return on inward FDI a Income on outward FDI a Rate of return on outward FDI a Cross-border M&As Sales of foreign affiliates Value-added (product) of foreign affiliates Total assets of foreign affiliates Exports of foreign affiliates Employment by foreign affiliates (thousands) GDP Gross fixed capital formation Royalties and licence fee receipts Exports of goods and non-factor services 1990 207 241 2 081 2 094 75 6.24 World Investment Report 2011: Non-Equity Modes of International Production and Development C. Other indicators of international production also showed positive gains in 2010. despite a steady decrease in leverage. Belgium. Sales of foreign affiliates rose 9. value added by foreign affiliates) accounts for around 40 per cent of TNCs’ total value added (figure I. Finland.6 2.2 703 21 293 3 570 43 324 5 003 55 001 50 338 11 208 155 15 008 1 744 1 911 15 295 15 988 1 066 7.7 13. employment and assets of foreign affiliates all increasing (table I.5 14. In 2010.3 3.7 18. with the equity/asset ratio climbing up to 36 per cent in 2009 and 2010. Selected indicators of FDI and international production. Canada. Israel.3 0.1 -38.9 13.9 -0. the share of exports of foreign affiliates in world export in 1998 (33.7 -9. Portugal. Japan. Lithuania. Germany. France. Luxembourg.2 3.3 1 251 7. Latvia. Slovenia.9 9. Czech Republic. those from the Czech Republic. Latvia. gross product. due to the drop in FDI flows.1 31. exports and employment of foreign affiliates are estimated by extrapolating the worldwide data of foreign affiliates of TNCs from Australia.7 5.3 9.0 0. Germany.3 18.2 -64. Macao (China).8 1.4 49. Portugal.7 -32.4 14. those from Czech Republic. Portugal. Japan.4 1.4 -16.1 -0. in their operations both at home and abroad.22).7 17. Sweden.  For 1998–2010.7 9.6 0.5 19.0 -1. b Data for 2009 and 2010 are estimated based on a fixed effects panel regression of each variable against outward stock and a lagged  dependent variable for the period 1980-2008.4 11. Austria. and the United States for value-added (product). Italy. foreign affiliates accounted for more than one-tenth of global GDP and one-third of world exports. after a one-year dip during the crisis (table I.5 16.3 per cent in 2010. Returns are thus back to pre-crisis levels.1 40.8 18.

compared to the relatively weak response in developed economies. predominantly from developed economies. a Current prices. These firms. However not all of the largest TNCs increased their internationalization. registering a continued increase in their foreign assets in 2010. Social security. For TNCs in developed economies. The largest TNCs from developing and transition economies experienced subtly differing pressures. has given further momentum to the expansion of foreign assets. Sanitation. home economy operations. In 2010. foreign activity of the largest non-financial TNCs’ rebounded. X.6).22 Employment and sales also rose both at home and abroad. second. current exchange rates. Health.5 in this report. for example. many companies embarked on significant layoffs and organizational restructuring in order to remain profitable. These trends are plainly manifest in the findings of UNCTAD’s annual survey of the largest TNCs in the world (table I. TNCs account for one-quarter of world GDP. of the initial internationalization of previously non-TNC firms. d Table I.22. especially targeting strategic firms.6). Financial TNCs. Community services. this often meant making cuts in their Figure I. During the economic and financial crisis. the crisis caused firms to rationalize their corporate structure and increase efficiencies wherever possible (including the options to close down or to sell to others).9) 50% 76% (47. indeed. b ISIC L. . 92.8) 14% 25% (15. M. Given the tremendous growth registered in many of their home economies. the rapid recovery in emerging market economies. which make up nearly 80 per cent of the TNCs in the world. c As estimated by the weighted average size of home economies. while moving or opening new facilities abroad to take advantage of specific comparative advantages in those locations. and account for some 70 per cent of global FDI outflows.0) 10% (6. N. 2010 (Per cent and trillions of dollarsa) 24% 100% (62. Defence. foreign activity of the largest non-financial TNCs rebounded. experienced significant difficulties in 2010 (box I. Rising cross-border M&A activity by the largest TNCs. in some cases stoked by significant public stimulus packages. these TNCs struggled to balance responding to growth at home In 2010. and the rise of emerging market TNCs including State-owned TNCs. Private household employment). and its share in total activity remained high.6) (9. in an effort to protect profits and generate growth.CHAPTER I Global Investment Trends 25 Underlying this improvement in international production has been an acceleration of the internationalization of TNCs – and. P (Public administration. Three of the major factors driving this “new” burst of internationalization are: first. expanded their footprint outside their home countries.6) World GDP Public sectorb Private sector Domestic businesses TNCs Home countryc Foreign affiliatesd Source: UNCTAD. forced many TNCs to embrace these markets. Q. often by relocating business functions to cost-advantageous locations. and its share in total activity remained high.

the number of projects targeting these economies increased by 23 per cent. firms were forced to consolidate by regulators. Source: UNCTAD. but financial TNCs in developed markets may find that their entry into fast-growing developing markets encounters various capital control measures (box I.23). In some cases. Economist. Japanese financial TNCs. and volatile. policymakers in many of the largest developing countries. 25 September 2008. . with sharp drops registered by a number of European financial institutions. Without easy access to the largest and fastest-growing markets. which were slashed by the crisis. This trend spans industries. Investment activity by the 100 largest TNCs in the world has now shifted decidedly towards developing and transition economies. the crisis has played havoc with the internationalization programmes of many of the largest financial TNCs. markets with those of quick-growing. with TNCs as varied as Coca-Cola (United States). increased their internationalization. financial TNCs will find it difficult to uphold the long-term rationale for internationalization: balancing the earnings of developed. These firms continued to expand their balance sheets abroad at a rapid pace. has sold a number of its foreign assets. or by their new State owners. have rebounded sharply for many of the largest TNCs in the world (section A). as key destinations for both efficiency. viewed State-owned financial institutions as important agents of healthy financial markets.5 in 2009. they are also seen increasingly as important markets in their own right. Washington Post. The swift economic recovery of the largest developing economies played an important role in restoring these firms to income growth.4 points to 44. RBS (United Kingdom). Recent trends in internationalization of the largest financial TNCs in the world Financial TNCs. they have been stabilizing their situations – as witnessed by the strong rebound in their profits. which accounted for more than 20 per cent of FDI outflows during 2006–2008. c Geographical spread is calculated as the square root of the share of foreign affiliates in total affiliates (the Internationalization Index). and the number of investments targeting them. with foreign assets rising 11 per cent in 2009 (the latest year for which data are available) to almost $1 trillion (table I. and access to natural resources. Individual firm performance was mixed.e.6). sales and employment) continued to rise (table I. Holcim (Switzerland). Comparing international greenfield projects between 2007–2008 and 2009–2010. multiplied by the number of host economies. for example Citigroup’s (United States) sale of non-retail banking assets in Japan (chapter II). 2009).d A new wave of financial industry M&As may materialize in the coming years. the share of foreign operations in total activity (i. making strategic international acquisitions during the crisis.5). during which a number were forced into government receivership. in contrast. compared to 43. Corporate profits.6. b “Citigroup to sell shares in Japanese brokerage monex”. In some cases. For example. In other cases the crisis hastened previously laid plans. which was saved only by significant government intervention. in particular Brazil and China. and Toyota Motors (Japan) deriving more than one-third of their operating income from developing economies (figure I. A number of financial TNCs in the United States also posted declines. a “Banking industry posts best quarter of profits since early 2007”. India. UNCTAD’s measure of the average geographical spreadc of the 50 largest financial TNCs rose only 1. in both the share of operating profits generated in these economies. Since the crisis. especially the emerging markets of Brazil. income from developing and transition economies has grown to account for a significant share of TNCs’ operating income. Not only are these economies attractive for their lower labour costs. compared The rising importance of developing and transition economies Strong profits of TNCs in emerging markets incentivizes further investments The crisis drew attention to the importance of developing and transition economies. have seen their fortunes fluctuate dramatically over recent years.9 for the year. 21 September 2010. developing markets (Schildbach. Therefore. Icelandic and Irish banks suffered the same fate.26 World Investment Report 2011: Non-Equity Modes of International Production and Development with long-term internationalization goals and the desire to acquire international brands. d “The big boys are back”. This trend is apparent Box I. 25 May 2011.and market-seeking investors. technologies. a slowdown in their internationalization in 2010 was almost inevitable. relatively stable. China and the Russian Federation (BRICs).6).a Nevertheless. During the crisis. shifting their focus to domestic markets at the expense of foreign businesses.b Given the pressures facing the largest financial TNCs. Bloomberg.

China (7). to only a 4 per cent rise in developed economies.0 7. .1 4.0 -7.9 -2. Note: Regional reporting by TNCs differs.3 8. While investments in developing Asia have dominated. Note: From 2009 onwards. thousands of employees and per cent) 100 largest TNCs worldwide Variable Assets Foreign Total Foreign as % of total Sales Foreign Total Foreign as % of total Employment Foreign Total Foreign as % of total 2008 6 161 10 790 57 5 168 8 406 61 9 008 15 729 57 2009 7 147 11 543 62 4 602 6 979 66 8 568 15 144 57 2008–2009 % change 16. Metro AG (Germany) is pursuing growth in both developing and transition economies.2 100 largest TNCs from developing and transition economies 2008 899 2 673 34 989 2 234 44 2 651 6 778 39 2009 997 3 152 32 911 1 914 48 3 399 8 259 41 % change 10.7 2010b 7 512 12 075 62 5 005 7 847 64 8 726 15 489 56 2009–2010 % change 5. opening new stores in the Russian Federation (17).9 17.3 3. 2010 data are unavailable for the 100 largest TNCs from developing and transition economies due to lengthier reporting deadlines in these economies. selected top 100 TNCs. in this case segments that were either completely or mainly located in developing or transition economies were included.0 4.4 -2. Kazakhstan (4). Internationalization statistics of the 100 largest non-financial TNCs worldwide and from developing and transition economies (Billions of dollars.9 2. growing poles of investment are now discernible in Latin America and in Africa (figure I.9 -14.9 -17. b Preliminary results.5 -4.24).8 12.23. a In percentage points.2 1.8 2.6 0.CHAPTER I Global Investment Trends 27 Table I.2 21. data refer to fiscal year results reported between 1 April of the base year to 31 March of the following year.0 a a a a a a a a Source: UNCTAD. 2010 (Billions of dollars and share of total operating profits) % of operating income Anglo American Anheuser-Busch InBev GlaxoSmithKline Coca-Cola Toyota Motor Unilever SABMiller Nestlé Barrick Gold Holcim British American Tobacco Nissan Motor BASF Honda Motor Bayer 0 1 2 3 4 5 6 7 8 9 91 44 25 45 68 36 76 19 52 83 27 32 19 26 41 10 Source: UNCTAD. Operating profits derived from operations in developing and transition economies.8 -10.3 28.9 -3.3 -0. while Figure I. and Viet Nam (4) during 2010.0 4.6.7 -0.

around the globe. State-owned TNCs from developed countries are also extant internationally. the world’s largest TNC in terms of foreign assets. East and SouthEast Asia and Oceania West Asia Transition economies 0 500 2009–2010 Source: UNCTAD. is also emblematic of this shift. 650 State-owned TNCs. and. majority. because they are not enterprises and are not necessarily governed by the usual corporate mechanisms. Roughly 44 per cent of State-owned TNCs are majority-owned by their respective governments (figure I. this definition excludes international investments by SWFs. they nevertheless constituted a significant number (19 companies) of the world’s 100 largest TNCs of 2010 (also in 2009).24. Some illustrative examples of factors determining what constitutes a State-owned TNC – for example. which has the effect of reducing some widespread conglomerates to a single entry. Additionally. 2007–2008 and 2009–2010 (Number of projects and percent change between periods) Developed economies Developing economies Africa Latin America and the Caribbean South. a number of the State-owned TNCs are identified such only due to a recent crisisinduced intervention. 4 23 23 61 9 41 5 1 000 1 500 or not listed on a stock exchange. Importantly.1 for more details). Government control of State-owned TNCs spans a spectrum from full control to substantive influence.24 Figure I. These include companies that are fully 2007–2008 2.7. provinces and cities. thus their membership on this list should be considered temporary (General Motors. which have become more visible investors in recent years25 (see section A.1. or significant minority). The largest 15 of these Stateowned TNCs. State-owned TNCs are defined as enterprises comprising parent enterprises and their foreign affiliates in which the government has a controlling interest (full. motives and strategies – has become an issue of intense interest and debate. It is important to note that this enumeration of State-owned TNCs refers only to parent firms. State-owned TNCs The emergence of State-owned TNCs. whether . Stateowned refers to both national and sub-national governments. State-owned TNCs nevwith more than 8. The ownership difference from traditionally private or shareholder-owned TNCs – putatively impacting on their objectives.25). are a relatively well-known group with recognizable names (table I. France Telecom. in which the State has a roughly 26 per cent-stake – are included in box I.7). The universe of State-owned TNCs In 2010 there were at least Relatively small as a group. such as regions. has implications for both home and host economies.26 While this makes them a minority in the universe of all TNCs (see section C. or where the government is the largest single shareholder. as important outward investors. if not yet of extensive research.e for a review of recent trends in SWF-sponsored FDI). Greenfield investments by the largest 100 TNCs in the world. The internationalization of large State-owned enterprises (SOEs) from developing and transition economies constitutes an important component of FDI.23 General Electric (United States). from both developed and developing economies. a. control is defined as a stake of 10 per cent or more of the voting power. having announced recently that it intends to intensify its focus on emerging markets – which account for 40 per cent of the firm’s industrial revenues – in order to reduce costs and increase revenue growth. especially those from developing economies. of the top 100 TNCs from developing and transition economies of 2009 (28 companies).28 World Investment Report 2011: Non-Equity Modes of International Production and Development closing stores in developed markets in Europe.500 ertheless rank among the foreign affiliates. Definitions of what constitutes a controlling stake differ. by host region. but in this Report. albeit not widely recognized. operating largest TNCs in the world. for example). more especially.

” This very broad definition encompasses a large variety of situations and types of company.  Listed companies in which the French State has a stake of more than 50 per cent.7. 2. directly or indirectly. Aéroport de Paris. Examples include La Poste. Source: UNCTAD. Malaysia (45). These numbers .a These firms. however. China (50). For these firms the government is often the largest of the minority stakeholders. What is a State-owned enterprise: the case of France In France there is no specific law defining “State-owned” or “State-controlled” enterprises. 56 per cent of State-owned TNCs worldwide are from developing and transition economies (table I.8). Ownership structure of State-owned TNCs. South Africa owes its relatively large number of SOEs to investment of public pension funds (through the Public Investment (Per cent of State-owned TNCs by size of government stake) 44% Figure I. is as follows: “[a] State-owned enterprise is a company in which the State holds. falling within the legal framework of the “free market”. 10 per cent had a stake of less than 10 per cent. Examples include EDF (a former “public establishment”). though normally a small (less than 15 per cent) stake. a This situation is possible when the SOE has to be privatized or become publicly-owned. For 42 per cent of identified State-owned TNCs.25. SNCF. 2011 32% 14% 10% < 10%a 10-50% 51-100%b 100% Source: UNCTAD. These firms fill a specific function and may not diversify. especially in Denmark (36). 3. Banque de France. Geographically. or holds so-called “golden shares” and therefore exerts a significant or preponderant influence on the composition of the board of directors and the management of the enterprise. the so-called public establishments (Etablissements publics). Basically. usually as an extension of a particular ministry. In developed economies. due to the owning of the property or of a financial participation. as given by the French National Institute of Statistics and Economic Studies (INSEE). The State owns 100 per cent of shares before they are sold publicly. based on 653 TNCs. as well as those firms which are publically listed. Among these economies.  Non-listed companies totally owned by the State. The French State’s stake may be reduced or eliminated at any time. The economic definition. b Includes those State-owned TNCs where the government stake is unknown. Of these. These overall figures. resulting in the State taking a stake in a number of firms. Examples include RATP. France (32). 4. a former “public establishment”. Corporation) in various businesses throughout the domestic economy. and should be analysed in terms of “control” rather than mere “ownership”. Réseau Ferré de France. a dominant influence. and various other large airports and ports in the country. South Africa (54). belie very different government ownership strategies: for example.CHAPTER I Global Investment Trends 29 Box I. etc. may diversify their activities. integrated into the State. a The State is the largest shareholder or owns golden shares.  Listed companies totally owned by the State. it is possible to identify four main categories of “State-owned” enterprises falling under the INSEE definition: 1. a private firm). through majority or full-ownership stakes. United Arab Emirates (21) and India (20) are the top five source countries. but in which the State owns more than 50 per cent of the voting shares. on the other hand. Examples include France Telecom (a former “public establishment”. but is assumed to be majority-owned. tend to be more firmly controlled directly by the State. allowing it full control of the company’s management. 26 per cent stake) and GDF-Suez (formed through the merger of GDF. the majority of State-owned TNCs are located in Europe. unless this is prohibited by law in a particular case. by owning either the majority of the capital or the majority of votes attached to the emitted shares. and Suez. the government had a stake of less than 50 per cent.  Listed companies in which the French State has a direct or indirect stake of less than 50 per cent. State-owned TNCs from China. Finland (21) and Sweden (18).

0 30./ref. Transport and storage Mining & quarrying Petroleum expl. the Transnationality Index. foreign sales to total sales and foreign employment to total employment.7 World Investment Report 2011: Non-Equity Modes of International Production and Development Petronas .3 50. b Based on most recent data available from Thomson Worldscope (retrieved 31 May 2011).7 20. gas and water) Utilities (Electricity.3 32.9 84.1 59.9 66./ref.30 Table I. gas and water Motor vehicles Utilities (Electricity.2 14.7 34./distr.3 50.0 26.3 Assets Industry c Foreign Total 157 156 146 134 113 102 76 73 72 72 52 44 43 39 39 34 32 30 30 29 28 24 23 19 18 16 15 14 12 12 102 126 37 92 42 44 36 79 27 20 23 24 200 25 150 325 20 28 10 29 29 20 18 38 8 7 5 16 29 3 33 5 24 63 14 47 66 25 28 68 12 8 7 22 116 5 75 178 13 8 20 66 25 32 4 22 10 12 1 47 8 3 5 30 60 41 29 121 50 73 72 143 23 13 2 81 77 4 92 1 585 231 255 247 348 184 169 136 133 116 83 72 315 97 50 44 105 68 40 53 78 55 31 54 22 29 11 17 44 86 146 111 92 90 117 105 64 60 27 48 31 74 67 Sales Foreign Total Total TNI e (per cent) Corporation Electricity.7.7 31.3 18. Telecommunications Motor vehicles Food.7 100 67.9 39.2 55./distr.7 49.9 23.4 54. Utilities (Electricity. a All data are based on the companies’ annual reports unless otherwise stated.2 61.2 100 13.7 73.0 2./ref.9 56.0 54.Petroliam Nasional Bhd TeliaSonera AB Renault SA Japan Tobacco Inc Finmeccanica Spa China Ocean Shipping (Group) Company Lukoil OAO Singapore Telecommunications Ltd Zain Qatar Telecom Tata Steel Ltd Petroleo Brasileiro SA Abu Dhabi National Energy Co PJSC Petróleos de Venezuela SA China National Petroleum Corporation Malaysia Sweden France Japan Italy China Russian Federation Singapore Kuwait Qatar India Brazil United Arab Emirates Venezuela.7 22.4 100 10.2 67. of China 34. ./ref. Home economy Government stake b Enel SpA Volkswagen Group GDF Suez EDF SA Deutsche Telekom AG Eni SpA General Motors Co France Telecom SA EADS NV Vattenfall AB Veolia Environnement SA CITIC Group Statoil ASA Deutsche Post AG Italy Germany France France Germany Italy United States France France Sweden France China Norway Germany Vale SA Brazil 48.2 55.3 92. ranked by foreign assets. Petroleum expl. 2009 a (Millions of dollars and number of employees) Employment Foreignd 43 196 96 58 108 40 114 64 75 34 212 25 11 258 81 369 197 169 258 78 217 167 120 40 313 125 29 425 57.7 47.7 30.0 64. Motor vehicles Telecommunications Aircraft Electricity./ref.4 68.2 53.5 5. e TNI. The top 30 non-financial State-owned TNCs./distr.4 62. is calculated as the average of the following three ratios: foreign assets to total assets.2 34.0 36.5 39.2 30./distr. gas and water Utilities (Electricity./ref. gas and water) Petroleum expl.1 78.5 (12 golden shares) 100 37.0 65.0 12.4 49.0 30./distr. Bolivarian Rep.2 19. d In a number of cases foreign employment data were calculated by applying the share of foreign employment in total employment of the previous year to total employment of 2009.4 84. c Industry classification for companies follows the United States Standard Industrial Classification as used by the United States Securities and Exchange Commission (SEC). gas and water) Diversified Petroleum expl./distr. gas and water) Telecommunications Petroleum expl. beverages and tobacco Machinery and equipment Transport and storage Petroleum and natural gas Telecommunications Telecommunications Telecommunications Metal and metal products Petroleum expl.8 100 100 100 Source: UNCTAD.0 71.

East. in most cases.4 in the services sector.0 10. major SOE investors are covered.7 2.6 34.1 3. State sole-funded enterprises and enterprises with the State as the largest shareholder numbered roughly 154. Distribution of State-owned TNCs by sector/industry.9 1.2 21. transport. East and South-East Asia China India Iran. and South.6 7. gas.1 1.5 6.6 2. with less than half of .6 8. State-owned TNCs from West Asia show the highest levels of internationalization by the latter measure (the former measure is not available for many developing country State-owned TNCs).2 5.3 4.1 2.4 2.7 3.3 4. require monopolistic positions to gain the necessary economies of scale.8 12.8.1 1.6 2. there are some 900 SOEs in France. while in China.4 16.3 4. mainly automotive and transport equipment (4 per cent of all Stateowned TNCs). by the total number of SOEs in each respective economy.000 in 2008. led by financial services.1 5.2 4.7 3. For example.5 3.3 7.9 36. and the share of their affiliates located abroad (figure I. and water (10 per cent).9.8 2.9 1.7 0.8 3. also are dwarfed. Distribution of State-owned TNCs by home region/economy. quarrying and petroleum Others Manufacturing Food. This suggests that the number and proportion of SOEs that have become transnational is relatively small.6 2.9 3. major SOE investors are covered. Roughly 70 per cent of State-owned TNCs operate Source: UNCTAD. petroleum and nuclear fuel Chemicals and chemical products Metals and metal products Motor vehicles and other transport equipment Others Services Electricity. State-owned TNCs tend to be most active in financial services and industries that are capitalintensive. Islamic Republic of Malaysia Singapore Others South-East Europe and the CIS Russian Federation Others Number 653 285 223 36 21 32 18 17 18 81 41 27 11 3 3 18 4 14 345 82 54 28 28 9 19 235 70 19 21 30 165 50 20 10 45 9 31 23 14 9 Share 100 43. Some 22 per cent of State-owned TNCs are in manufacturing industries.4 4.8 1. Latin America and the Caribbean.1 6.7 3. The remaining 9 per cent are located in the primary sector and are mainly active in extractive industries. Note: While the number is not exhaustive. storage and communications Finance Holding Insurance Rental activities Business services Others Number 653 56 48 8 142 19 12 11 20 20 27 33 455 63 20 42 105 126 27 17 14 18 23 Share 100 8.1 69.CHAPTER I Global Investment Trends 31 Table I.1 52.9 2. or are deemed to be of strong strategic interest to the country.7 2.7).5 2.1 2.3 4.26).4 6.4 1.8 0. which accounts for 19 per cent of all State-owned TNCs.8 12.5 0.1 19. gas and water Construction Trade Transport. Those based in the other major developing regions – Africa.1 1.1 4. chemicals and chemical products (3 per cent) and metals and metal products (3 per cent) (table I.6 25.5 Source: UNCTAD. Note: While the number is not exhaustive. and South-East Asia – are less internationalized.2 4. The transnationality index (table I. are each indicative of the internationalization of Stateowned TNCs.9). Table I. storage and communications (16 per cent) and electricity. 2010 Region/economy World Developed countries European Union Denmark Finland France Germany Poland Sweden Others Other European countries Norway Switzerland Others United States Other developed countries Japan Others Developing economies Africa South Africa Others Latin America and the Caribbean Brazil Others Asia West Asia Kuwait United Arab Emirates Others South.6 3.5 2.7 9. with on average 47 per cent of their affiliates being located abroad. beverages and tobacco Wood and wood products Coke.3 1. 2010 Sector/industry Total Primary Mining.

7 4. in contrast. During that period there appear to have been two key phases of activity: first. a higher share than represented by their number in the universe of TNCs (less than one per cent of all TNCs).27). b. Trends in State-owned TNCs’ FDI Surging FDI by State-owned TNCs.11). Figure I.26. when State-owned TNCs from developed countries were more important in FDI flows.32 World Investment Report 2011: Non-Equity Modes of International Production and Development their affiliates located in foreign countries.28 State-owned TNCs as major international investors are a relatively new phenomenon. from the beginning of 2000 onwards. outward FDI of all State-owned TNCs was tilted towards developing and transition economies (56 per cent of the total) (table I.2 foreign economies. State-owned TNCs from Europe have a wider footprint (operating in 8.7 3. An analysis of FDI projects (including both cross-border M&A purchases and greenfield investments) indicates that State-owned TNCs are active investors around the world.1 6.8 44% 40% 8.28). and secondly. a Calculated as the number of foreign affiliates divided by the number of all affiliates. These numbers are.26). has raised their profile on the global investment scene. During 2003–2010.3 foreign economies. State-owned TNCs from developing and transition economies are significant players in South–South investment flows.1 Source: UNCTAD. Four of the six FDI projects with a value of more than $10 billion (one M&A deal and three greenfield investment projects) were undertaken by developing country State-owned TNCs. West Asian State-owned TNCs are more internationalized than others. especially those from developing economies. and South-East Asia Africa Commonwealth of Independent States Latin America and the Caribbean Other developed economies 35% 35% 34% 32% 28% 47% 3. very small compared with the internationalization of the world’s top 100 TNCs.10). when surging outward FDI by State-owned TNCs from developing economies made up the majority of State-owned TNC FDI flows (figure I.6 3. which on average have roughly 70 per cent of their affiliates abroad. Differences by mode of investment and by source also appear in sectoral/industry activity. investing $458 billion in FDI projects in other developing and transition economies over the period. The direction of FDI also differs by mode of investment: in the case of cross-border M&As. judging by their cross-border M&A purchases from the early 1980s to 2010. totalled some $146 billion. During 2003–2010.7 and 6.2 5. or compared with the largest 100 TNCs from developing countries. Emblematic of this surge is the number of developing country State-owned TNCs responsible for the largest mega-deals in the past five years (table I. or roughly . The geographical spread of State-owned TNCs’ operations appears to be relatively limited: in terms of the number of host economies in which they operate.27 In 2010. however. East. While West Asia Europe World South. the period from the early 1980s to the end of the 1990s. developing and transition economies received 68 per cent of total greenfield investment. or slightly more than two-thirds of all FDI projects from those economies ($663 billion). their FDI. a period for which data on both M&As and greenfield investments are available. While official statistics of the FDI stock controlled by State-owned TNCs do not exist. FDI projects by State-owned TNCs made up an average of 32 per cent of total outflows from developing countries. which on average have 51 per cent of their affiliates abroad (WIR08). as measured by the value of these projects. two-thirds of such deals conducted by State-owned TNCs worldwide were directed to developed countries.3 2. on average) (figure I. a rough estimate suggests that in 2010 their share of global outward stock was no less than 6 per cent. 2011 (Average internationalization indexa and average number of host economies) 11 per cent of global FDI flows (figure I. on average) compared to their counterparts from developing and transition economies (between 2.

gas and water. State-owned TNCs’ cross-border M&As between 1981 and 2010 largely targeted extractive industries. 1981–2010 (Millions of dollars) 80 70 60 50 40 30 20 10 0 1981 1985 1990 1995 Developed economies 2000 2005 2010 Transition economies Developing economies Source: UNCTAD. However. The latter refers to the estimated amounts of capital investment. in contrast. utilities. b Cross-border M&A data refers only to TNCs in which the State has a stake of 50 per cent or more. The value of FDI projectsa by State-owned TNCs. and telecommunications (figure I. FDI from State-owned TNCs based in developed economies largely focused on utilities (33 per cent of the total).b and its share in total FDI outflows. The difference between the patterns of investment by State-owned TNCs from developed as opposed to developing countries reflects.a by home region. such as electricity.28.29). targeted extractive industries (37 per cent) and telecommunications (20 per cent). Note : The values may be overestimated. which engage in FDI in order to capitalize on their firm-specific advantages and to generate Figure I. the principal actors involved and their differing strategic aims. in terms of value. Cross-border M&A purchases by State-owned TNCs.27. . a Comprises cross-border M&As and greenfield investments. 2003–2010 250 200 $ billion 18 16 14 12 8 6 4 2 0 % 150 100 50 0 10 2003 2004 2005 2006 2007 2008 2009 2010 Cross-border M&As Greenfield investments Share in global FDI outflows Source: UNCTAD. the shares of manufacturing and services sectors differ somewhat between cross-border M&As and greenfield investments. and telecommunications (19 per cent). about 40 per cent of State-owned TNCs’ FDI projects. whereas State-owned TNCs from developing and transition economies. The most active State-owned TNCs from developed economies are large national utilities. as the value of greenfield FDI refers to estimated amount of capital investment of the entire project. a Refers only to TNCs in which the State has a stake of 50 per cent or more. to some extent.CHAPTER I Global Investment Trends 33 Figure I. are in the primary sector.

as State-owners differ in their interest and political systems. it can be argued.34 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure I. the State might be willing to support FDI by SOEs as this may help to build economies of scale and/or further develop the competitive position of the firm and that of the home country (e.a by economic grouping of ultimate acquirer and industry of target. . Cumulative cross-border M&A purchases by State-owned TNCs. Thus. fi­ nancial. gas and water Finance Chemicals and chemical products Transport. There is a significant diversity in the behaviour of SOEs around the world. quarrying and petroleum Food. as this could reduce their contribution and role (e. the more the State will tend to intervene in SOE management as SOEs become an important tool for the country’s development.29. Third. In contrast. or income redistribution. influencing the possibilities and modalities of SOEs’ internationalization are specific government industrial. the development of SOEs as TNCs is influenced by the political and economic underpinnings of the country of origin.g.g. Even SOEs owned by the same State differ. Second. 1981–2010 (Per cent) a) Developed countries b) Developing and transition economies All other Business services Finance Mining. beverages and tobacco Transport. This is largely in keeping with many emerging economies’ national goals to secure access to necessary natural resources. 2004. petroleum and nuclear fuel Electricity. technologies. The less developed a country. State-owned TNCs’ internationalization process may be influenced by the level of development of the country.g. however. social. growth in markets outside their own. State-owned TNCs active in extractive industries are more commonly from developing economies.29 At a general level. political. Child and Rodrigues. where there has been repeated concern about the potential effects of SOEs’ internationalization on local unemployment rates). a Refers to the TNCs in which the State has a 50 per cent or more stake only. in other cases. industry and market context. First. Deng. technological. for instance in their mission. In some cases the government might hinder FDI by SOEs. industrial) in the domestic economy. the way they are governed and how their relationship with the State plays out. gas and water 33% Mining. 2005). it is important to distinguish between cases where the link to the State might either hinder or support SOEs’ FDI and performance: • Government as hindrance to internationalization (e. These aspects complicate the understanding (in comparison with private companies) of how SOEs operate. or cultural. storage and communications 20% 4% 5% 8% 11% 19% All other Coke. SOEs may have multiple objectives – for instance. quarrying and petroleum 37% Source: UNCTAD. it is important to distinguish between countries where free market policies or interventionism are preponderant. storage and communications 21% 4% 5% 6% 7% 20% Electricity. c. social and foreign policies. social. in Italy. Many of them were created originally to pursue public policy objectives. Issues related to corporate governance Corporate governance structures play an important role in determining FDI decisions of State-owned TNCs – raising concerns in host economies.

oil and natural gas Coal. China Acquired company British Energy Group PLC Gallaher Group PLC GE Plastics Addax Petroleum Corp Repsol YPF Brasil SA Peninsular & Oriental Steam Navigation Co British Energy Group PLC FASTWEB SpA Constellation Energy Nuclear Group LLC Hutchison Port Holdings Ltd Industry of acquired company Electric services Cigarettes Plastics materials and synthetic resins Crude petroleum and natural gas Crude petroleum and natural gas Deep sea foreign transportation of freight Electric services Information retrieval services Electric services Marine cargo handling Ultimate acquiring company EDF Japan Tobacco Inc SABIC Sinopec Group Sinopec Group Dubai World Shares Ultimate home acquired economy (%) France 73 Japan 100 Saudi Arabia 100 China China 100 40 100 26 82 50 20 United Arab Emirates EDF France Swisscom AG (Swiss Switzerland Confederation) EDF France PSA Corp Ltd Singapore (Ministry of Finance) (b) Greenfield investments Value Year Host economy ($ million) 2006 2010 2007 2006 2006 2010 2010 2008 18 725 16 000 14 000 9 000 6 000 5 800 5 740 5 000 Pakistan Australia Tunisia China Turkey Cuba Nigeria Morocco Investing company Industry of investing company Home economy United Arab Emirates Malaysia United Arab Emirates Kuwait India China China United Arab Emirates France France Emaar Properties PJSC Real estate Petroliam Nasional Berhad Coal. but with general support and with greater regard to developmental impact (e. 2006–2010 (Millions of dollars and per cent) (a) Cross-border M&As Year 2009 2007 2007 2009 2010 2006 2008 2007 2009 2006 Value ($ million) 16 938 14 684 11 600 7 157 7 111 6 899 6 086 5 483 4 500 4 388 Host economy United Kingdom United Kingdom United States Switzerland Brazil United Kingdom United Kingdom Italy United States Hong Kong. if the degree of autonomy is very high. Vattenfall (Sweden) in Africa). • Government as supporter of internationalization (e. the SOE could behave just like a private firm. GCC countries’ economic diversification policy (see chapter II. and South Africa’s outward FDI policies – WIR06).10. • Government as indifferent to SOE internationalization. In general terms it is argued that the extent to which SOEs are free of.CHAPTER I Global Investment Trends 35 Table I. This situation suggests that although a certain level . or subject to. and this may impact on its original mission and public policy role.A. oil and natural gas Coal.g. oil and natural gas Alternative/renewable energy Source: UNCTAD. oil and natural gas Dubai Holding LLC Real estate Kuwait Petroleum Corporation Indian Oil Corporation Ltd China National Petroleum Corporation China State Construction Engineering Corporation International Petroleum Investment Company PJSC GDF Suez SA AREVA Group Coal. oil and natural gas 2010 2008 5 000 4 700 Cameroon United States Coal. oil and natural gas Coal.3). China’s “Go Global” policy. the Republic of Korea’s Overseas Investment Policy Package.g. oil and natural gas Coal. The 10 largest cross-border M&A purchases and 10 largest greenfield investments by State-owned TNCs. However. Active government participation in SOEs is often regarded as a limit to good economic performance. government involvement in operational and management matters (including FDI) is critical.

Partly in response. potentially inexperienced boards of directors. FDI by SOEs is perceived as further strengthening these ties. Athreye and Kapur. Note: The value may be overestimated as the value of greenfield FDI refers to estimated amount of capital investment of the entire project. because of fears of compromising port security. 2008. 2003–2010 (Millions of dollars and per cent) Source economy Host economy (a) By value (millions of dollars) Developed Developing Transition Total economies economies economies Developed economies 292 109 180 641 45 748 518 498 Developing economies 176 314 394 935 18 826 590 076 Transition economies 28 556 16 916 26 987 72 460 Total 496 979 592 493 91 562 1 181 034 (b) By destination of source economy (per cent) Developed Developing Transition economies economies economies Developed economies 56 35 9 Developing economies 30 67 3 Transition economies 39 23 37 Total 42 50 8 Total 100 100 100 100 ties. Mascarenhas. perceive FDI by their SOEs as a step – among others – towards establishing a closer relationship between them. Cumulative value of FDI projectsa by State-owned TNCsb. host countries – particularly in the developed world – have over the past few years focused attention on developing legal frameworks and processes to provide the necessary instruments for identifying and preventing deemed adverse consequences arising from State-owned TNC investments (e. including international diversification. There are also cases in which. Their international business operations became part of ODA packages. by source and target economy. The level and mode of FDI by SOEs is also influenced by host country policies that regulate inward FDI. It was argued that sometimes their investments would endanger the national security position of any host country. and reduce opportunism. a Comprises cross-border M&As and greenfield investments. may create opportunities for corruption.36 World Investment Report 2011: Non-Equity Modes of International Production and Development Table I.g. an acquisition of port management businesses in six major United States seaports in the United States by DP World (UAE) in 2006 came under close scrutiny. of State intervention can be good for SOEs’ performance. and focuses on alleviating these concerns: • National security concerns were particularly prominent when State-owned TNC activity increased in the mid-2000s. and relevant information may only be available to the State. there are also countries with more favourable attitudes concerning FDI by foreign SOEs. Typical potential corporate governance concerns regarding State-owned TNCs are related to their objectives arising from State ownership (which may diverge from the commercial norms). depending on conditions and the attitude of the host country. b Cross-border M&A data refers only to TNCs in which the State has a stake of 50 per cent or more. this hinders monitoring. 2009). 1989. a perceived lower level of transparency. In light of this situation.11. as well as concerns about State-owned TNCs as instruments of foreign policy (e. limits accountability and. However. • Competition concerns may be voiced where foreign investment is deemed a threat to national core industries and “national champi- Source: UNCTAD. because they do not yet have established political . State-owned TNCs might be perceived either favourably or unfavourably. Mazzolini.30 As many SOEs may have no public reporting requirements. improve performance monitoring. the future policy agenda that host governments may wish to deal with revolves around the core differences between State-owned and private TNCs.g. under some conditions. and poor relationships with other shareholders and stakeholders. Examples include the case of Malaysian State-owned TNCs such as Petronas and some African countries. For instance there are cases in which two States. clarify management goals. too much State intervention might be detrimental. there are persistent claims of “unfair” competition by State-owned TNCs. For example. Anusha and Nandini. The latter refers to the estimated amounts of capital investment. because of the already existing strong ties between States. Australia. 1980. Political resistance ultimately forced DP World to divest these assets. Canada). For instance. in which investments were often fostered by the Government of Malaysia (WIR06). Explicitly defining and reaching an agreement (between the State and SOE governance) on SOE objectives can help reduce concerns in both host and home countries.

Given the current absence of any broader consensus on the future rules of engagement of State-owned TNCs as sources of FDI. less than one-fifth. 9 International Working Group of Sovereign Wealth Funds: Generally Accepted Principles and Practices.78 trillion to the largest Russian companies through the State corporation Bank for Development and Foreign Economic Affairs (Filippov. Also. purchasing more stake in Rio Tinto (Australia/United Kingdom).7). such as the Carlyle Group. The membership base of the International Working Group for Sovereign Wealth Funds comprises 26 SWFs from 23 countries. Brussels: European Commission. for example. The Monitor Group. SOEs are also expected to comply with high standards of accounting and auditing. Blackstone Group and Apax Partners.31 The OECD has prepared guidelines regarding provision of an effective legal and regulatory framework (OECD. it is critical that home and host economies determine and define more clearly the rules and regulations under which State-owned TNCs pursue their investment activities. and only 3 per cent (or 17 firms) use the Global Reporting Initiative (GRI) standards. 2011e). 6 Bain & Company. from the perspective of home countries. Directive of the European Parliament and of the Council on Alternative Investment Fund Managers. social and foreign policies influence the possibilities and modalities of SOEs’ internationalization. 2010. 10 Truman (2011: 11). the Republic of Korea’s National Pension Service. 8 October 2008. technology transfer. which otherwise would have led to the Aluminum Corporation of China (Chinalco). while the acquisition of Cadbury (United Kingdom) by Kraft Foods (United States) for $19 billion was the largest deal recorded in 2010 (annex table I. The analysis in this report is based on a consolidated universe drawn from these two samples. Boston. managing assets of around $2. the Abu Dhabi Investment Authority. the Santiago Principles. there are concerns regarding the openness to investment from their State-owned TNCs. financial. Notes In October–December 2008 the Russian Government provided financial help amounting to $9.6 billion and the takeover of Millipore (United States) by the drug and chemical group Merck (Germany) for $6 billion (annex table I. market access and environmental issues. includes 33 funds in its Monitor-FEEM SWF Transaction Database. Global Private Equity Report 2011. 2011). SOEs’ internationalization drivers should be identified and examined. the Australian Future Fund and the private equity firm 1 . Note that the size of the SWF universe depends on the qualifying criteria used in the underlying SWF definition. compared to 60 per cent in both initiatives for the world’s top 100 TNCs (UNCTAD. in the mining industry. for example. A good example for a private equity-SWF investment syndication is the co-ownership of Gatwick Airport by the California Public Employees Retirement System. rather than establishing new companies (greenfield investment). China’s Stateowned metals group. Dodd-Frank Wall Street Reform and Consumer Protection Act. Research should look at how specific government industrial and technological.CHAPTER I Global Investment Trends 37 ons”. a leading global mining company. 2005). To improve transparency. 2 Due to unavailability of data on FDI flows (on a balance-of-payments basis) by sector or by country. although such concerns are already being voiced with regard to extractive industries and agriculture. of 653 State-owned TNCs in UNCTAD’s database subscribe to the United Nations’ Global Compact. or 119 firms. 4 Nestlé. 5 Private equity firms are engaged in buying out or acquiring a majority of the existing firms. COM(2009) 207 final. 11 Some SWFs have acquired large stakes in leading private equity firms.7). as should be SOEs’ FDI impact on key aspects such as employment conditions. In reality. but they may also be raised in the context of knowledge and technology transfer issues.3 trillion. registered a net profit of $34 billion in 2010. This policy agenda determines part of future work in this area. 8 Public Law 111-202-July 21. data on FDI projects (cross-border M&As and greenfield investments) are used in this Report. A recent controversial case that failed for these reasons concerned a proposed second deal in 2009. 7 Commission of the European Communities. • Concerns over governance and social and environmental standards might become more prominent in the future for host countries as investments from State-owned TNCs increase. 3 The acquisition of Solvay Pharmaceuticals (Belgium) by Abbott Laboratories (United States) for $7. 2009. In particular.

25 TNCs where the State’s stake is held by an SWF (e. 14 Government Pension Fund Global. Financial Times. 15 Based on 600 major companies. compiled by the Nikkei (14 May 2011). Metro AG. and variable grace and maturity periods (Bhinda and Martin. 17 This year’s survey provides an outlook on future trends in FDI as seen by 205 largest TNCs and 91 IPAs. p. banks are reluctant to lend. see UNCTAD. 12 Institute of International Finance. all of which are signatories to the Global Compact and two use the GRI reporting standard.g. 19 This is because in home economies. including low or zero interest rates. the State-owned TNC in question was retained in the count. an SWF) are included in the universe of State-owned TNCs. amount of reporting and new investments. 31 This 100 TNC list. Nikkei. 20 December 2010).7). 10 April 2011) and for Japanese firms. 24 Annual Report 2009. 29 October 2010. Oslo: Norges Bank Investment Management. which are reviewed in section A. Annual Report 2009. including the debt crisis of the 1980s. 29 A more extensive study on the issue of State-owned TNCs’ governance and FDI is ongoing and will be published soon by UNCTAD. 26 In those cases where it was not possible to fully apply the restriction related to government stakes of less than 10 per cent. This data also excludes FDI projects of SWFs. 28 Comparing the cumulative sum of their gross cross-border M&A purchases and greenfield capital expenditures from 2003–2010. 25 April 2011. 22 . 2010a and 2011a. data from Thomson Reuter (Nikkei. and various emerging markets crises of the 1990s.e. 23 Annual Report 2010. 18 For detailed discussion on FDI and domestic investment. the analysis presented in this section refers to the State-owned TNCs where the State has a 50 per cent or greater stake. GCC Regional Overview. 16 For United States firms. 27 Due to data limitations. Singapore Telecom − which is majority owned by Temasek. 20 For example. 12 April 2011. Financial Times. as there are concerns about the recovery.1. compensation and incentives for management.22. 30 At SOE firm-level discussions on governance typically revolve around specific governance decisions. which is used for the study on CSR (UNCTAD 2011e). includes 14 State-owned TNCs. 13 “CIC set for up to $200bn in fresh funds”. 2009).8 billion acquisition of Cadbury (United Kingdom) by Kraft Foods (United States) – the largest M&A deal of the year (annex table I. General Electric. Examples include a $18.38 World Investment Report 2011: Non-Equity Modes of International Production and Development Global Infrastructure Partners (“Future fund gets Gatwick go-ahead”. such as who should be appointed as board members and CEO. 21 Intra-company loans often have flexible terms and conditions. and enterprises facing weak market prospects are discouraged from investing. sudden increases in United States interest rates especially have in the past triggered crises in developing countries. heavily indebted consumers have little appetite to borrow or spend.

ASEAN and East Asia attracted record amounts of FDI. South Asia. technical capacity-building and enterprise development. In transition economies. those to Africa. Some major developments feature in regional FDI: • Intraregional FDI in Africa is increasing but has yet to realize its potential. fuelled by the commodity boom and government support within both group of economies. flows to Europe and Japan declined. Inward FDI flows to Africa varied between subregions. • State-owned enterprises lead outward FDI from West Asia with a strategy of improving the competitiveness of the home economies. • A new plan of action for LDCs is proposed within an integrated policy framework on investment. • Latin America and the Caribbean are witnessing a surge in resource-seeking FDI from developing Asia. • The restructuring of the banking industry in developed countries resulted in both significant divestments of foreign assets and the generation of new FDI. transition and developed countries continued to decline. • TNCs are contributing to the economic challenges of climate change adaptation in SIDS. East and South-East Asia have been rising rapidly. West Asia. demonstrating new and diverse industrial patterns. • The investment link between developing and transition economies is gaining momentum. . In developing Asia. Latin America and the Caribbean witnessed a surge in cross-border M&As. vulnerable and small economies – LDCs. LLDCs and SIDS – saw their FDI inflows fall. Among developed countries. mainly from developing Asia. the marginal rise of flows to the CIS did not compensate for the sharp drop in South-East Europe. overshadowing the increased flows to the United States. • FDI outflows from South. • TNC participation has led to significant infrastructure build-up in LLDCs. All three groups in the structurally weak. while in West Asia the impact of the global economic crisis continued to hold back FDI.REGIONAL INVESTMENT TRENDS CHAPTER II The slow recovery of FDI flows in 2010 masked starkly divergent trends among regions: while East and South-East Asia and Latin America experienced strong growth in FDI inflows.

.0 16.8 1.3 Income on outward FDI 2009 2010 2.4 190.5 0. Swaziland.1 2.23 6 Purchases 2009 2010 2 702 621 621 138 39 -4 102 1 942 . Mozambique. Burundi. Cameroon.0 5. Morocco and Zambia Niger.4 billion South Africa.4 5. Malawi.6 182. Côte d'Ivoire.0 106. Guinea-Bissau and São Tomé and Principe.7 11.5 .1 1. Senegal and Mauritius Gabon. 2000–2010 11 10 9 8 7 6 5 4 3 2 1 0 . Ghana. Namibia. social and personal service activities Other services % Table E.6 12.1 2010 55.300 200 200 3 184 1 336 1 224 45 1 460 268 54 214 . Cape Verde.1 0.1 20.5 1. South Africa.1 to $0.3 .2 0. Mauritania.0 to $1. quarrying and petroleum Manufacturing Food.2 1.1 95. 2009–2010 (Billions of dollars) Region Africa North Africa East Africa West Africa Southern Africa Central Africa FDI inflows 2009 60.0.2 90. Ethiopia.117 3 058 .3 17.7 0. Mali.70 .5 - Nigeria and Morocco $0.295 21 5 0 7 608 2 149 2 149 303 263 -1 5 32 2 -9 10 5 157 84 136 1 912 38 3 003 . Togo and Botswana Table C. Niger. Benin. Recent trends Table A.2 23.3 1.2 0.7 206.8 153. Outflows . Sierra Leone.60 - . and Algeria Sudan.4 FDI outflows 2009 5. storage and communications Finance Business services Health and social services Community.4 0.1 0.1 8. by range. Djibouti.0 0. .9 billion Inflows Angola. Seychelles. REGIONAL TRENDS 1. East and South-East Asia Oceania South-East Europe and the CIS Russian Federation Sales 2009 2010 5 2 2 140 579 579 110 11 .1 1.5 3. Cameroon.9 3. Africa a.9 38. GuineaBissau.6 3.4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Central Africa Southern Africa West Africa East Africa North Africa Table D.84 768 -10 653 11 421 51 16 7 6 1 1 3 Purchases 2009 2010 2 702 1 378 782 1 124 927 927 500 11 62 395 383 12 102 102 .0 122. United Republic of Tanzania. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Japan Developing economies Africa North Africa Sub-Saharan Africa South Africa Uganda Zambia Zimbabwe Latin America and the Caribbean South America Caribbean Asia West Asia South.81 381 2 1 .6 2. Nigeria and Libyan Arab Jamahiriya Democratic Republic of the Congo. Egypt and Angola Table B.9 1.. Benin and Zimbabwe Swaziland.75 1 267 965 302 388 388 140 328 159 125 797 927 324 603 597 . Sierra Leone.7 1. Somalia. Kenya. Distribution of FDI flows among economies.8 554. Central African Republic.1 12.81 . Senegal.7 12. Liberia.5 0. Democratic Republic of the Congo.2 1. Cape Verde.40 World Investment Report 2011: Non-Equity Modes of International Production and Development A. Seychelles. Lesotho. Tunisia.38 416 2 885 .0 a Economies are listed according to the magnitude of their FDI flows. Figure A. Congo. Madagascar. Ghana.8 78.0 32. Mozambique.7 15.9 billion $1. Gambia.1 Cross-border M&A sales 2009 2010 5. 2009-2010 (Billions of dollars) Region Africa North Africa East Africa West Africa Southern Africa Central Africa FDI inward stock 2009 2010 FDI outward stock 2009 2010 Income on inward FDI 2009 2010 39.0 2010 6. Burkina Faso.0 billion $2. Tunisia.1 . Cross-border M&As by region/country. São Tomé and Principe. Cross-border M&As by industry. and income on inward and outward FDI.2 1.2 Cross-border M&A purchases 2009 2010 2. Namibia. and cross-border M&A sales and purchases. Gabon. Guinea.2 1. Liberia.1 billion 488.1 84. Togo.6 1. Comoros.2 3.0 3.9 0.103 -1 3 1 643 32 369 3 184 . FDI inflows and outflows.9 0.6 0.2 0. Eritrea. Rwanda. beverages and tobacco Wood and wood products Chemicals and chemical products Non-metallic mineral products Metals and metal products Machinery and equipment Electrical and electronic equipment Precision instruments Services Construction Trade Hotels and restaurants Transport.1 1.4 0.26 2 572 340 -1 - 2009 5 4 3 1 Sales 2010 608 355 459 927 199 952 268 268 100 257 . 2000–2010 70 60 50 $ billion 40 30 10 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 5 0 West Africa Central Africa Southern Africa East Africa North Africa FDI in ows as a percentage of gross xed capital formation 30 25 20 15 $ billion Figure B. Kenya. FDI inflows.2 Below $0.7 6.7 0.7 0.2 18.0 to $2.9 billion $0. FDI inward and outward stock. Zimbabwe. Malawi.2 14.a 2010 Range Above $3.3 0. Zambia. Mali. Mauritania.5 3. Egypt.4 5.2 4.620 250 248 2 672 .2 .5 0.7 0.1 0. Burkina Faso. Sudan.0 1.4 1.5 30.5 to $0. Equatorial Guinea and Botswana Mauritius.5 50.9 7. Algeria.84 . FDI outflows. 2009–2010 (Millions of dollars) Sector/industry Total Primary Mining.75 .3 15. Uganda. Côte d'Ivoire. Libyan Arab Jamahiriya.88 257 51 .2 8.7 20. Chad.6 27.

discouraged foreign investors and. One of the largest M&A deals worldwide in 2010 was the acquisition of the telecoms operations of Zain (Kuwait) in 15 African countries (not including those in North Africa) by the Indian mobile operator Bharti Airtel. the new owner announced that it would invest $1 billion to expand its operations in 2011. Equatorial Guinea and Gabon) were mostly due to oilrelated investments. Uganda and the United Republic of Tanzania. fell by 15 per cent. some of which are seeking an alternative subregional source of oil to Nigeria.1 which is perceived as unfavourable for TNCs. In Central Africa and East Africa. were perhaps not sustainable. In Southern Africa. the major factor was the oil industry. inflows of FDI increased in 2010 to reach $8. fell substantially (19 per cent). Similarly. 9 per cent down from 2009 (figure A). Although the deal itself did not bring in any net external finance to Africa. but not enough to compensate for the large fall in Nigeria to reverse the downward trend of this subregion. East Africa’s increase was modest (2. China. Among developing countries.6 billion) and 2009 ($11.1). TNCs investing in Africa in 2010 were mostly from developed countries. leading Africa’s share of FDI inflows among developing countries to fall from 12 per cent in 2009 to 10 per cent in 2010. Indeed. FDI in 2010 stood at $55 billon. though this rebound seems certain to be short-lived. which peaked in 2008 amidst the resource boom. as inflows to the subregion’s largest recipient. BP announced plans to divest from five Southern African countries. . manufacturing for 29 per cent (of which almost half was in the metal industry) and services (mainly communications and real estate) for 28 per cent. One of the two major recipients in the subregion. oil and gas) accounted for 43 per cent.7 billion. Madagascar. a level amounting to one-sixth of the peak recorded in 2008.7 billion. although there were significant subregional variations. the primary sector (mainly coal. In West Africa. Shell announced its plan to withdraw from the downstream markets – considered “lowmargin” – in 21 African countries. As for Ghana.0 billion and $3. India and the United Arab Emirates were the main source countries in 2010.6 billion. inflows fell by 24 per cent.2 As for the future. although the rate of decline was much reduced and the picture uneven. FDI to the subregion’s two other large recipients. respectively. saw its inflows fall by over 70 per cent to $1. In both countries. the start of major oil production has attracted the interest of TNCs. when there had been major investments in oil and agriculture. Inflows to North Africa account for roughly onethird of the total in Africa. the two largest recipients had contrasting fortunes: inflows increased significantly in Ghana. The inflows to the larger recipients in Central Africa (Chad.7 billion). have tended to be stable in recent years and held broadly steady in 2010. For the region as a whole. One of the problems of Angola’s oil industry is that its production has exceeded Angola’s OPEC quota. the region’s largest recipient. uncertainty over the Petroleum Industry Bill. In April 2010. Congo. given the current political situation in the country. These fell for the second year running. the Democratic Republic of the Congo. inflows to North Africa seem likely to fall significantly. Elsewhere in West and Southern Africa. In Nigeria. Other developing regions performed considerably better. The only significant instance of FDI in non-primary sectors was investment in telecommunications in the Democratic Republic of the Congo. Inflows to Angola. the inflow levels achieved in 2008 ($16. due to the military conflict in the Libyan Arab Jamahiriya and the general political uncertainty hanging over the subregion (box II.CHAPTER II Regional Investment Trends 41 Inflows to Africa. The source countries and industry distribution of FDI to Africa can be gauged from the expansion of TNCs’ affiliate networks in Africa through crossborder M&As (tables D and E) and greenfield projects. inflows to the Libyan Arab Jamahiriya rose over 40 per cent in 2010. As in previous years.5 per cent). for instance. Although the decline was large. allegedly led Shell to sell a number of its onshore licences. considering that inflows to Angola had been just over $5 billion in 2003 when the civil war in the country ended. In terms of industry distribution. South Africa. continued their downward trend in 2010. oil and gas TNCs are divesting their downstream businesses. for $10. and the unresolved political problem in the Niger Delta.

the United Republic of Tanzania and Uganda). Mozambique has offered generous incentives to foreign farmers to invest. there is some anecdotal evidence of regional FDI bringing positive development impacts to host countries in Africa. The nascent oil industry in Ghana perhaps represents the single most important positive prospect.42 World Investment Report 2011: Non-Equity Modes of International Production and Development It would require a major upturn in sub-Saharan Africa to reverse the downward trend of FDI inflows to the continent. Indeed. 2011 is likely to be another challenging year for FDI inflows to Africa. could provide a boost.2 0 Number 570 65 461 43 1 Projects % share 12 1 10 1 0 Memorandum Total FDI projects in Africa Source: UNCTAD. however. especially the poor (UNCTAD.2 % share 5 1 4 0. but this rise was mainly driven by a large investment in Ghana. Coleus Crowns (Uganda) provides a successful example of a joint venture at the intraregional level. Data on FDI projects (greenfield investments and cross-border M&A deals) for the first few months of 2011 show a 9 per cent rise over the same period of 2010 in Africa as a whole. In manufacturing. 2011b). The pattern indicates that aside from South Africa. Since then. it has succeeded in establishing itself as a supplier to major TNCs b. developing country TNCs are likely to be in possession of more appropriate technologies – with a greater potential for technology transfer – and better able to address the needs of local consumers. and other countries have considered similar packages (e. Geographical proximity and cultural affinity are thought to give regional TNCs an advantage in terms of familiarity with the operational environment and business needs in the host country. which also have a significant presence in other sectors. From a development perspective.g. a Including cross-border M&A and greenfield FDI projects. From the host country’s point of view.  Intraregional FDI for development Intra-African FDI offers a huge potential. cumulative 2003−2010 Total and intraregional FDI All intraregional FDI projects North Africa to North Africa Sub-Saharan Africa to sub-Saharan Africa North Africa to sub-Saharan Africa Sub-Saharan Africa to North Africa Value $ billion 46 8 35 2 0. Overall. 848 100 4 702 100 . Intraregional FDI projectsa in Africa: the value and number of projects and their shares in Africa’s totals.3 and I. the lack of intra­ regional FDI is suggestive of a missed opportunity. which began production of bottle crowns in 2007.4 The scope for joint ventures between domestic and foreign partners in the African context is often constrained by the absence of domestic partners with the required technical and financial capacity. The large share accounted for by FDI projects within sub-Saharan Africa suggests that South African investors are playing a large role. Nigeria.1).8). Judging from data on FDI projects.1. For example. and the increasing interest in Africa of Indian TNCs. The extent of intraregional FDI in Africa is limited. intra-regional FDI accounts for only 5 per cent of the total in terms of value and 12 per cent in terms of number (table II. investments from foreign farmers have played a role in revitalizing agriculture in Zambia. It is a joint venture between the Madhvani Group (Uganda) and Coleus Packaging (South Africa). subregional organizations can do more to boost these flows. The continuing pursuit of natural resources by Chinese TNCs. Kenya. which has an exceptional propensity to invest regionally. intraregional FDI is particularly underdeveloped in Africa.3 FDI projects in North Africa fell by half in this period (annex tables I. Table II.

Namibia and the United Republic of Tanzania) are those in which investors from South Africa are active. such as Nile Breweries (an affiliate of SABMiller). outward FDI from Nigeria is concentrated in finance. finance and service activities. However. Nigerian banks have a reputation of bringing in innovative services to neighbouring countries in West Africa. the importance of Africa in its outward investment has increased over time. and the return of investor confidence is likely to depend on the overall political settlement and the geopolitical situation surrounding the country.2). It was also reported that some Gulf States had agreed to contribute to a fund worth about $170 million set up by the Government of Egypt to encourage investment. which reportedly accounted for about $9 billion out of $11. Leading players in the region's telecommunications industry include MTN (South Africa). but it has dampened investor confidence in the short term. a number of banks based in Nigeria and South Africa have established a regional/subregional presence. including FDI. In addition to international support. although . Malawi. while FDI from South Africa has mainly been in mining.3 and I. There is a paucity of disaggregate data on the source countries of FDI in Africa.e. In Egypt. In contrast. However. the Government has approved measures to simplify the procedure for approving new industrial projects and to ease the restrictions on setting up franchises. available country-level evidence indicates that the actual picture in this regard is very mixed.8) to the subregion declined substantially. there ought to be potential for diverse intraregional FDI in terms of industry and source country. real estate.8). where greenfield investments fell by 80 per cent in the first four months of 2011 compared to the corresponding period of 2010 (annex table I. Rwanda and the Sudan. Senegalese FDI in the Gambia is relatively diverse. wholesale and retail. It also serves the regional markets in Burundi. For example.1 billion of foreign investment (both FDI and portfolio) in the country. The share of Africa in its outward FDI stock rose from 8 per cent in 2005 to 22 per cent in 2009 (table II. and many of the leading banks have an extensive presence throughout the region.1. Morocco. In spite of these successful instances. Source: UNCTAD. as shown by greenfield investments and cross-border M&As (annex tables I. the most important investor country is the United States. For South Africa. Countries with high shares of intraregional FDI flows/stock (i. the impact of investment incentives might be limited in the current climate of political transition. the extent of intraregional FDI is limited. the United States offered loan guarantees of up to $1 billion through the Overseas Private Investment Corporation to finance infrastructure development and boost job creation in Egypt. Given the geographical proximity and cultural affinity. there was no record of cross-border M&As in North Africa for the first five months (annex table I. Mozambique. In the United Republic of Tanzania. It could take months before confidence among investors in those countries is restored. In the financial industry. In the long term. FDI from Kenya is diversified into various manufacturing. primarily in natural resource-related industry. The dominant role of South Africa is also confirmed by data on the expansion of TNCs’ affiliate networks through greenfield projects and M&As. democratization should result in better governance and thus lead to a more sustainable growth of economic activities. Most of the intraregional flows are attributable to investment from South Africa in neighbouring countries in East and Southern Africa. covering finance.CHAPTER II Regional Investment Trends 43 Box II. The Arab Spring and prospects for FDI in North Africa The Arab Spring led to a blossoming of democratic expression in the subregion. Pepsi Uganda and Coke Uganda. some African TNCs in telecommunications and banking have actively engaged in regional expansion.3). In May 2011. Botswana. The available data for the first few months of 2011 indicate that FDI inflows.5 In services. manufacturing. For instance. but such data as are available reveal intraregional FDI in Africa to have a skewed and underdeveloped nature. Orascom (Egypt) and Seacom (Mauritius).

4 70. which would also have implications for FDI. the greater value of investment projects in mining obscures the significant number of investment projects in other sectors (Bhinda and Martin.6 60. The Free Trade Area of the Southern African Development Community (SADC)6 was established with the objective of promoting.1 1.6 151. agriculture. Various subregional initiatives have been introduced to this end.1 36. The harmonization of Africa’s RTAs. Its Common Investment Area is aimed at promoting intra-COMESA and international FDI into infra­ structure.7 310.7 24.. FDI and domestic investment. by creating a larger single market (Rwelamira and Kaino.7 8.6 To the World 36 826. various years Country FDI inflows Egypt Ethiopia Mauritius Morocco Mozambique Namibia Tunisia Inward FDI stock Botswana Malawi Morocco South Africa United Rep.5 236.0 229.1 206. and SADC started a process to enhance integration among their members in 2008 (Brenton et al. of Tanzania Outward FDI stock South Africa 2005 2009 1997 2007 2000 2004 2004 2008 2000 2009 1998 2005 To Africa 3 017.9 357.1 3.8 45.9 1 280.6 20. UNCTAD. 2009. The East African Community (EAC)7 has discussed the need to promote FDI into the subregion.2 21.1 802. would help Africa to achieve its full intraregional FDI potential.2 3.4 261.1 78.4 924.2 636. among other activities.8 37. FDI/TNC database (www.3 98.8 7.0 769. though not yet in force.7 27.unctad. Recognizing this.1 3 352. There are around 30 regional trade agreements (RTAs) in Africa.7 2 020. which sets out the legal basis for regional cooperation and harmonization in the area of finance.2. 2009). investment and macro-economic policy.3 2007-2009 1997-1999 2002-2004 1990-1992 2007-2009 1996-1998 2006-2008 2007-2009 1991-1993 2006-2008 1990-1992 2007-2009 162. There are also initiatives to promote FDI between the regional groupings.0 80. Intraregional FDI in Africa.2 0.0 117 434.0 29.7 0. EAC.org/fdistatistics). energy. manufacturing and finance.0 72 583.6 0.3 41.6 43.0 80.3 13.7 562.4 522.0 103.5 Period average / year Source region ($ million) From Africa From the World Share of Africa in world (%) Source: UNCTAD.1 301. but there seems to be no well-developed structure in place to promote intra-subregional FDI. information technology.4 8. SADC also has a "services protocol".1 664.3 43 451.9 348. 2008a).8 One major problem with regional groupings in Africa is their great proliferation. SADC has concluded a Protocol on Finance and Investment.3 19 883.0 3.7 1.0 26.3 1.2 968. 2008).3 2 224.0 653.4 421.1 303. telecoms. and accelerated and closely coordinated planning with respect to FDI.0 8.8 0. each country typically belonging to several such groupings.1 32.9 1.1 39 388. .0 15 676. The current situation calls for more efforts to encourage FDI at the regional and subregional levels. resulting in overlaps and inconsistencies.2 0. most notably by the Common Market for Eastern and Southern Africa (COMESA) (Fujita. COMESA.5 5 141.6 13 882. 2011).7 3 735.44 World Investment Report 2011: Non-Equity Modes of International Production and Development Table II.

5 1 586.0 79.2 Singapore. 2000–2010 South Asia East Asia South-East Asia FDI in ows as a percentage of gross xed capital formation 16 280 14 240 200 $ billion 160 120 80 40 0 12 $ billion Figure B.4 6.6 1.0 431.3 42.127 .0 83.4 33.1 16. South.2 190. gas and water Trade Hotels and restaurants Transport.5 145.1 2 115.5 53. India.3 4. Thailand and Indonesia Taiwan Province of China. Cross-border M&As by industry. 2000–2010 240 200 South-East Asia South Asia East Asia 160 10 % 8 6 4 2 0 120 80 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D. 2009–2010 (Billions of dollars) Region FDI inward stock 2009 2010 FDI outward stock 2009 2010 Income on inward FDI 2009 2010 Income on outward FDI 2009 2010 99. petroleum products and nuclear fuel Chemicals and chemical products Rubber and plastic products Metals and metal products Machinery and equipment Electrical and electronic equipment Motor vehicles and other transport equipment Services Electricity. 2009–2010 (Billions of dollars) Region South. East and South-East 2 565.7 15. India and Indonesia $1. China Korea. storage and communications Finance Business services Health and social services Table E. quarrying and petroleum Manufacturing Food.557 . beverages and tobacco Textiles.4 1 365.4 Asia East Asia 1 599.3 938. Philippines and Islamic Republic of Iran Mongolia. Philippines and Mongolia Bangladesh.2 17. Brunei Darussalam.1 billion a South. Islamic Republic of Iran.6 232. Cross-border M&As by region/country. clothing and leather Coke. and cross-border M&A sales and purchases. FDI inward and outward stock.5 299.2 231.3 142.3 93.4 Economies are listed according to the magnitude of their FDI flows. Republic of Korea.608 17 806 2 896 367 265 5 950 460 1 557 300 918 4 201 14 711 408 239 138 2 165 1 650 4 837 3 330 Purchases 2009 2010 40 467 12 962 . Bangladesh.6 10. Figure A. Republic of Korea.7 $0. Sri Lanka.7 6.8 42.54 13 016 2 798 .a 2010 Range Above $50 billion $10 to $49 billion Inflows China and Hong Kong (China) Outflows Hong Kong (China) and China Singapore. Cambodia.7 193. Democratic People's Republic of Korea and Bhutan Viet Nam.CHAPTER II Regional Investment Trends 45 2. Lao People's Democratic Republic and Macao (China) Table C.7 97. Recent trends Table A. East and South-East Asia China Hong Kong. Pakistan.4 14.0 16.1 to $0.5 32. TimorLeste and Maldives Afghanistan.4 1 888.1 188.9 32.8 1 766.4 317. East and South-East Asia a.499 2 000 60 761 1 048 1 765 1 144 13 768 39 271 138 3 101 Sales 2009 34 11 1 3 5 23 748 320 031 985 206 473 195 102 374 246 497 005 491 519 746 276 637 482 13 13 2010 32 14 1 5 4 16 16 -2 18 7 1 3 1 3 089 936 446 780 910 840 223 302 618 39 9 539 143 682 024 790 536 061 192 - Purchases 2009 2010 40 19 2 1 3 18 1 17 17 9 2 4 1 1 467 966 875 014 529 350 796 105 018 981 649 158 491 333 403 243 323 940 706 359 347 93 42 18 8 9 50 11 19 19 19 18 2 8 2 4 521 661 594 329 383 625 816 421 935 353 25 284 602 682 536 924 318 119 448 44 24 16 22 5 17 4 7 2 2 . Cambodia. Nepal.1 116. Thailand. Viet Nam. Distribution of FDI flows among economies.6 3 087.4 15.1 5.2 16.5 28.142 235 154 35 958 531 787 206 24 707 7 973 2 273 262 -3 639 17 876 947 41 93 521 23 948 72 23 875 8 812 4 152 981 1 299 1 361 35 . Myanmar. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Australia Japan Developing economies Africa Latin America and the Caribbean South America Central America Asia West Asia South. Macao (China).1 38.9 South Asia 220.8 90. Lao People's Democratic Republic.5 1.1 26.5 35.9 0.0 to $9. Pakistan. FDI inflows and outflows. and income on inward and outward FDI. by range. East and South-East Asia East Asia South Asia South-East Asia FDI inflows 2009 2010 FDI outflows 2009 2010 Cross-border M&A sales 2009 2010 34.351 1 119 9 441 88 16 067 2 241 2 609 -3 5 758 2 839 2 532 .4 Cross-border M&A purchases 2009 2010 40.0 241. 2009–2010 (Millions of dollars) Sector/industry Total Primary Agriculture.7 7.9 billion Below $0.6 177. hunting.9 billion Malaysia. forestry and fishing Mining.9 107. Sri Lanka.6 161.9 174.1 12.0 261. FDI inflows.236 2010 32 089 . FDI outflows.8 37. Brunei Darussalam.428 180 . Republic of Malaysia Singapore South-East Europe and the CIS Kazakhstan Russian Federation Sales 2009 34 748 1 597 4 1 593 17 084 3 298 86 2 212 1 038 14 .0 South-East Asia 746. Malaysia and Taiwan Province of China Table B.

but dropped in industries such as food and beverages ($2. In India. However. namely the Republic of Korea and Taiwan Province of China. respectively. For instance. surpassing 2007’s previous record of $76 billion. including the planned $1. Meanwhile. while those to India.1). the setback in attracting FDI was partly due to macroeconomic concerns.2 billion) and metal products ($1. Proactive policy efforts at the country level contributed to the good performance of the region. thanks to growing inflows to Hong Kong (China) (32 per cent) and China (11 per cent) (table A). the Lao People’s Democratic Republic has been successful in attracting foreign investment in infrastructure in recent years. FDI in real estate alone accounted for more than 20 per cent of total inflows to China in 2010. However. Indonesia and the Philippines liberalized more industries. inflows to Bangladesh increased by nearly 30 per cent to $913 million. and the Philippines strengthened the supportive services for publicprivate partnerships (PPPs) (chapter III). Cross-border M&As in the region declined by about 8 per cent to $32 billion in 2010. the island State has benefited considerably from increasing investment in developing Asia. inflows amounted to a historic level of $39 billion in 2010. In contrast. FDI inflows to South. the country is becoming a major low-cost production location in South Asia. against a background of rising capital flows to the emerging economies in general in the post-crisis era. M&As in manufacturing rose slightly while they declined by 8 per cent in services. which accounted for half of ASEAN’s FDI. structural transformation is shifting FDI inflows towards hightechnology sectors and services.B. the Republic of Korea and Taiwan Province of China declined (table B).6 billion). FDI to ASEAN surged to $79 billion in 2010. and the share was almost 50 per cent in early 2011.2). Indonesia (173 per cent) and Singapore (153 per cent) (table A.46 World Investment Report 2011: Non-Equity Modes of International Production and Development In 2010. As a global financial centre and a regional hub of TNC headquarters. Mirroring similar arrangements in some developed countries. have gained ground as low-cost production locations.5 trillion investment in infrastructure between 2007 and 2017. FDI to South Asia declined to $32 billion.10 these factors are hindering the Indian Government’s efforts to boost investment. particularly from neighbouring countries like China and Thailand. as a result of Chinese investment in an international high-speed rail network. Indonesia improved its FDI-related administrative procedures. the two largest recipients of FDI in the subcontinent. FDI to the country is likely to boom in the coming years (section II. especially for lowend manufacturing. those to China and Hong Kong (China) enjoyed double-digit growth. China established a joint ministerial committee in 2011 to review the national security implications of certain foreign acquisitions. Within manufacturing. some ASEAN countries.9 ASEAN LDCs also received increasing inflows. In Singapore. Cambodia. Hong Kong (China) quickly recovered from the shock of the global financial crisis. Due to rising production costs in China. motor vehicles ($4. For instance. to $300 billion (figure A). FDI inflows to East Asia should continue to grow in the near future.0 billion). such as a high current account deficit and inflation. China continues to experience rising wages and production costs. and seem likely to continue to do so: in 2010. such as Indonesia and Viet Nam. reflecting a 31 per cent slide in inflows to India and a 14 per cent drop in Pakistan. the performance of major economies within the region varied significantly: inflows to the 10 ASEAN countries more than doubled. the value of deals surged in industries such as chemical products ($6. annex table I. The increase was driven by sharp rises in inflows to Malaysia (537 per cent). FDI to East Asia rose to $188 billion. Benefiting greatly from its close economic relationship with mainland China. after a significant slowdown due to widespread divestments and project cancellations in 2009 (annex table I. as well as to delays in the approval of large FDI projects. and those to South Asia are likely to . declined by 8 per cent and 11 per cent. inflows to the other two newly industrializing economies. so the widespread offshoring of low-cost manufacturing to that country has been slowing down and divestments are occuring from the coastal areas.9 billion) and electronics ($920 million) (table D). Greenfield investment remained stable in 2010. and FDI inflows recorded a historic high of $69 billion in 2010.8). East and SouthEast Asia rose 24 per cent.

about 560 cross-border M&As and 500 greenfield projects were recorded in extractive industries. as well as other extractive activities) accounts for a significant part of total FDI from South. Malaysia. The growth in FDI outflows in extractive industries has been driven by the rising demand for oil and gas and minerals in economies such as China and India. as well as by the need of both governments and companies to guarantee a long-term. metal mining. The number and value of recorded greenfield projects show a certain degree of fluctuation. a national energy security strategy has further reinforced the motivation of State-owned companies to acquire mineral assets abroad. but their share in FDI outflows from the region has been rising. the Republic of Korea and Malaysia being the major investor countries. thanks to intensified SouthSouth economic cooperation.7).CHAPTER II Regional Investment Trends 47 regain momentum. China exceeded Japan for the first time in outward FDI. although the number of deals is small. conglomerates.1). Singapore and Taiwan Province of China. and strategies. but the total investment was $65 billion and $258 billion (19 per cent and 25 per cent of the total). the amount of total investment is very large. a record level. In terms of FDI stock. Indeed. FDI outflows in extractive industries. Beyond that. while the number and value of cross-border M&As have kept rising (figure II. discussed later. The competitiveness of SouthEast Asian countries in low-cost production will be strengthened. and between China and ASEAN. The major oil and gas companies and mining companies from the region are traditional naturalresource acquirers (table II. stable supply of natural resources against a background of rising commodity prices. Indeed. but new investors have been emerging. respectively. Due to the capital-intensive nature of projects in extractive industries. FDI outflows from the region have been rising rapidly since 2005. In 2010. Prospects for inflows to the LDCs in the region are promising. Asian companies actively acquired overseas assets through large deals covering a wide range of industries and countries (annex table I. India. were not included in the official statistics. FDI outflows from South. such as CITIC (China) and b. as well as in GDP. such as the Bharti Airtel–Zain acquisition. and further FDI increases can be expected. respectively. the share of these industries in China’s total FDI stock was nevertheless at a modest level of 16 per cent at the end of 2009. driven by increased outflows from China. with only a modest setback in 2008 due to the global financial crisis (figure B). Hong Kong (China). East and South-East Asia. for example).12 For example. M&A purchases by India boomed. and is a manifestation of new and diversified industrial patterns in recent years. during the period 2003-2010. industrialization and urbanization. As a result. although Chinese companies have been actively acquiring mineral assets abroad and extractive industries has accounted for well above 20 per cent of FDI outflows from China in recent years. The region’s share in global FDI outflows jumped from below 10 per cent before 2008 to around 17 per cent in the past two years. Outflows from the region’s two largest FDI sources – Hong Kong (China) and China – increased by more than $10 billion each and reached historic highs of $76 billion and $68 billion.3). the Republic of Korea. East and SouthEast Asia rose by 20 per cent to about $230 billion in 2010 (figure B). while FDI outflows were down by 8 per cent. including metal companies. the share of extractive industries might seem unimpressive. with China. manufacturing and services. countries in the region have made significant progress in their regional economic integration efforts (within Greater China. to support their rapid economic growth.11 perhaps reflecting the fact that a few large deals. fortified by surging intraregional FDI. cross-border M&A purchases surged to nearly $94 billion in 2010. FDI in extractive industries (including oil and gas. R  ising FDI from developing Asia: emerging diversified industrial patterns Rising FDI outflows from developing Asia display new and diverse patterns in the primary sector. which will translate into a more favourable investment climate for intraregional FDI flows. The rise in FDI outflows has been driven by various corporate motives . with China alone accounting for over 30 per cent of the total.

Sub-Saharan Africa continues to be a major target. they have been actively acquiring mines around the world in order to secure stable supplies. this industry accounts for more than onequarter of both greenfield projects and cross-border M&As in the region.48 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure II. Number and value of extractive industry projects undertaken by firms based in South. 15 but Latin America and the Caribbean and Oceania (section B.fDimarkets. China has become the leading foreign investor in Australia. In particular. East and South-East Asia have been mainly via greenfield investment. and oil-abundant developing and transition economies. Reliance Group (India). metal and metal products.1. For instance. accounting for around one-fifth of all global deal activities. The significance of electronics in outward FDI from the region is in line with the international competitiveness of Asian Number $billion . and sovereign wealth funds. As the global centre of electronics production. China’s position as a leading investor in extractive industries has been strengthened.14 Mining companies from the country spent much less – $4. facing rising iron ore prices.5 billion – but are catching up.3) have also appeared on the radar screens of Asian resource acquirers. In 2010. a number of steel companies in the region have invested in overseas iron ore production bases (table II. Indeed.13 and Chinese oil companies have continued their buying spree.com). manufacturing accounts for about half of accumulated outward FDI through greenfield investment. motor vehicles.3). such as iron ore and copper. such as China Investment Corporation and Temasek Holdings (Singapore). The country overtook the United States to become the world’s largest energy user in 2010. such as Iraq. FDI in extractive industries from developing Asia has targeted resource-rich countries all around the world (table II. equivalent to about 9 per cent of all M&A purchases. Major investment locations include mineral-rich Australia and Canada in the developed world.16 FDI outflows in manufacturing.5 billion bid for Equinox Minerals (Australia and Canada) by Minmetals Corporation. the total value of deals in manufacturing was $9 billion. 2003–2010 80 70 60 50 160 140 120 100 80 60 40 20 2003 2004 2005 2006 2007 2008 2009 2010 40 30 20 10 0 0 Value of M&As Number of M&As Value of green eld projects Number of green eld projects Source:  UNCTAD. and chemicals and chemical products (figure II. Outflows in manu­ facturing from South. but less than 15 per cent of the total amount of cross-border M&A purchases. Sudan and Uzbekistan.2). as highlighted by the $6. based on UNCTAD cross-border M&A database and information from the Financial Times Ltd. Major industrial targets of FDI outflows from East and South-East Asia are electronics. As a result of such investments.3). fDi Markets (www. spending $25 billion on overseas assets. For the region as a whole. East and South-East Asia. in value terms. the region is also the major source of FDI in the electronics industry. metal companies have been increasingly involved in a vertical relationship along the value chain in order to gain access to upstream mineral assets.

which have become a dominant force at the production stage of the global electronics value chain (chapter IV). East and South-East Asia.17 So far its production activities are concentrated in East Asia. of Iraq Kazakhstan Libyan Arab Jamahiriya Mauritania Myanmar Niger Nigeria Oman Peru Philippines Russian Federation Sudan Syrian Arab Republic United States Thailand Uzbekistan Venezuela. However. it is also considering a multi-billion investment in Brazil. greenfield investment in manufacturing from South. However. based on company annual reports and UNCTAD’s database on cross-border M&As. Islamic Rep. companies in the industry. As illustrated by the case of electronics. manufacturers from a wide range of industries have been investing mainly in neighbouring countries. For instance.000. with about $60 billion sales and 1. New production locations outside of the region have emerged. and some . with rising production costs in some economies in the region and shifting corporate strategies. A new round of industrial restructuring and upgrading is taking place in China. Bolivarian Rep.3. Driven by market.and efficiencyseeking motivations. 2010 Major foreign production location Algeria Australia Azerbaijan Cameroon Canada Chad Guinea Indonesia Iran. such as in South-East Asia (Malaysia and Viet Nam) and the Czech Republic. Major foreign production locations of selected oil and gas. of Viet Nam CNPC (China) X X X X X X X X X X X X X X X X X X X X X X Oil and gas companies KNOC ONGC PETRONAS (Republic (India) (Malaysia) of Korea) X X X X X X X X X X X X X X X X X X X X X X X X X X X X Mining companies Minmetal (China) X MSC Group (Malaysia) X Steel companies Sinosteel (China) X X X X Tata Steel (India) X X X X X X X X X X X X X X X X Source: UNCTAD.CHAPTER II Regional Investment Trends 49 Table II. Sichuan and Shanxi. as the industrial landscape in the world evolves. Within China. Henan. Although the scale of Asian FDI in manufacturing in Africa and Latin America and the Caribbean remains small so far. particularly the contract manufacturers.000 employees in 2010. Hon Hai is aggressively investing in large-scale production bases in inner land areas such as Chongqing. the potential seems to be large. mining and steel companies based in South. the pattern of outward FDI from the region has started to change. East and South-East Asia is concentrated within the region. Hon Hai (Taiwan Province of China) has become the world’s largest contract manufacturer. the company is establishing new production locations both within and outside the region. most notably China.

beverages and tobacco Metal and metal products 60 120 180 0 Cross-border M&As (27%) (26%) (13%) Motor vehicles & others Chemicals and chemical products Food. although FDI outflows from the region in the services sector have declined. FDI outflows in services. The main target services for FDI outflows from South. the Republic of Korea and Singapore. also help boost outward FDI in manufacturing. accumulate ownership advantages and enhance international competitiveness.18 How to clear such hurdles for Chinese investors became an important issue discussed at the third China-United States Strategic and Economic Dialogue in 2011. East and SouthEast Asia are real estate. In the meantime. as highlighted by a number of mega-deals (table II. In contrast. fDi Markets (www. telecommunications.. low-end. During the past few years.4). 2007). health services and telecommunications. triggered by industrial restructuring during and after the global financial crisis. For Asian companies eager to tackle global markets.3). market-seeking M&As in specific service industries. East and South-East Asia in manufacturing. the value of deals in finance more than doubled to $39 billion. India. beverages and tobacco 0 (4%) (11%) (15%) (12%) (12%) (10%) 9 18 27 Source:  UNCTAD. such as advanced. Note: Figures in parenthesis show the share of the industry in the region’s total amount of investment. brand names and distribution channels (Buckley et al. strategic assets-seeking investment through cross-border M&A is a particularly attractive choice. Asian companies have been facing political obstacles in undertaking strategic assets-seeking FDI as they become important players in M&A markets in developed countries. top 5 industries. cumulative 2003−2010 (Billions of dollars and per cent) Green eld projects Metal and metal products Electronics (28%) Electronics Machinery and equipment Chemicals and chemical products Food.2. proprietary technologies.com). In recent years. For example. transportation. In 2010. hotels and tourism. have actively been taking over companies in developed countries. including China. Outward FDI from South. companies from major economies in the region. services account for about 70 per cent of accumulated outward FDI through cross-border M&A purchases. and financial services (figure II. targeting economies both in and outside the region. such as hotels. export-oriented manufacturing activities have been shifting from coastal China to low income countries in South-East Asia and also Africa. As the major target of international investment by Asian firms. based on UNCTAD cross-border M&A database and information from the Financial Times Ltd. Chinese companies are often attracted by various intangible assets. the share is below 30 per cent for greenfield investment. have been increasing. This is illustrated by the failed attempts by Huawei Technologies (China) to take over 3Com and 3Leaf in the United States in 2008 and 2010. . FDI outflows in financial services have also rebounded since the global financial crisis. M&A opportunities in developed countries.fDimarkets. and high profitability and abundant bank lending at home.50 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure II.

HNA (China) paid $620 million for a 20 per cent stake in NH Hotels (Spain) in May 2011.4. the total value of deals surged to about $14 billion in 2010. Outward FDI from South.19 In the hotel industry. East and South-East Asia in the services sector. cross-border M&A database (www. growing from the baseline of 42 million subscribers and $3. aiming at market expansion in Europe. Bharti Airtel (India) alone spent $10.fDimarkets.20 . (United States) Ingersoll-Rand Co. (India) China National Agrochemical Wanhua Polyurethanes (China) Essar Steel Holdings (India) United Spirits (India) Geely Holding Group (China) Target company Corus Group (United Kingdom) Novelis Inc. (United States) Jaguar Cars Ltd. storage and communications Utilities Business activities Wholesale and retail trade 60 120 180 0 (7%) Cross-border M&As (52%) (15%) (28%) (14%) (10%) (4%) (5%) (3%) 100 200 300 Source:  UNCTAD. Figure II. fDi Markets (www. Bharti Airtel gained access to mobile markets in 15 African countries and became the world’s fifth largest mobile telecom operator.7). top 5 industries. In telecommunications. it faces challenges to streamline its operations across the 15 different countries. Selected M&A mega-deals in manufacturing undertaken by firms from South. Through this aggressive market-seeking deal. and turn around loss-making assets. However. based on UNCTAD cross-border M&A database and information from the Financial Times Ltd. (United Kingdom) Elkem AS (Norway) BorsodChem Zrt (Hungary) Algoma Steel Inc.com). by number of subscribers. The Indian company aims to have 100 million subscribers and $5 billion annual revenue in Africa by 2013. 2007−2011 Acquiring company Tata Steel (India) Hindalco Industries (India) Doosan (Republic of Korea) Flextronics (Singapore) Tata Motors Ltd. Note: Figures in parenthesis show the share of the industry in the region’s total amount of investment. (Canada) Whyte & Mackay (United Kingdom) Volvo (Sweden) Industry Steel Aluminium Construction equipment Electronics Motor vehicles Aluminium Chemical products Steel Food and beverages Motor vehicles Value ($ million) 11 791 5 789 4 900 3 675 2 300 2 179 1 701 1 603 1 176 1 500 Year 2007 2007 2007 2007 2008 2011 2011 2007 2007 2010 Source: UNCTAD.CHAPTER II Regional Investment Trends 51 Table II. cumulative 2003−2010 (Billions of dollars and per cent) Green eld projects Real estate Hotels and tourism Transportation Communications Finance 0 (43%) Finance Transport. East and South-East Asia in developed countries.6 billion revenue in 2010.3.org/fdistatistics).7 billion to buy Zain’s (Kuwait) mobile operations in Africa (annex table I.unctad. (United States) Solectron Corp.

0 14. clothing and leather Coke.6 3. FDI inward and outward stock.6 2.0 143.2 127.0 274.6 0.3 2010 13.4 10. Iraq and Syrian Arab Republic Saudi Arabia. petroleum products and nuclear fuel Chemicals and chemical products Non-metallic mineral products Metals and metal products Electrical and electronic equipment Services Electricity. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Australia Japan Developing economies Africa North Africa Sub-Saharan Africa Latin America and the Caribbean Asia West Asia Jordan Saudi Arabia Turkey South.9 billion West Asia Gulf Cooperation Council (GCC) Turkey Other West Asia Turkey and Qatar .. Recent trends Table A.0 10.3 23.9 6.15 1 645 -10 736 24 510 -1 897 297 556 .9 5.44 110 97 3 336 2 361 78 85 41 550 120 100 - 2010 4 617 170 170 2 126 32 32 1 525 19 410 107 2 321 . FDI outflows. by range.56 .2 1.15. quarrying and petroleum Manufacturing Food.1 0.2 2.9 69. 2009–2010 (Billions of dollars) Region FDI inflows 2009 66.6 1.8 0.7 0.8 0.3 Income on outward FDI 2009 2010 6.3 9.5 1. Cross-border M&As by industry. 2000–2010 Other West Asia 40 80 60 $ billion 40 10 $ billion Other West Asia Turkey Gulf Cooperation Council (GCC) FDI in ows as a percentage of gross xed capital formation 20 Turkey Gulf Cooperation Council (GCC) 15 % 30 20 20 5 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D. Kuwait and Yemen Lebanon. United Arab Emirates.0 Above $10 billion Saudi Arabia .15 27 602 122 2 21 21 Purchases 2009 2010 26 21 16 3 1 5 843 451 387 012 143 146 362 164 164 320 206 201 101 12 118 005 49 923 30 30 -15 -2 -1 -2 560 909 037 333 322 -12 691 -10 653 47 -10 700 -2 038 105 66 49 -2 143 -2 234 . United Arab Emirates.9 2.8 14.9 billion Lebanon. and income on inward and outward FDI. 2000–2010 100 25 50 Figure B. Cross-border M&As by region/country. West Asia Gulf Cooperation Council (GCC) Turkey Other West Asia 487.0 to $9.9 119. Palestinian Territory.0 Below $1.2 151.1 8. gas and water Construction Trade Hotels and restaurants Transport.0 to $4.. $1.6 . 2009–2010 (Billions of dollars) Region FDI inward stock 2009 2010 FDI outward stock 2009 2010 Income on inward FDI 2009 2010 19.52 World Investment Report 2011: Non-Equity Modes of International Production and Development 3. Iraq.1 9. beverages and tobacco Textiles. $5. Distribution of FDI flows among economies. Qatar and Turkey Table C. East and South-East Asia Korea.7 21. Oman.0 3.4 2010 58.5 23.5 .a 2010 Range Inflows Outflows Table B. Oman. 2009–2010 (Millions of dollars) Sector/industry Total Primary Mining.8 26.5 FDI outflows 2009 26.4 1.9 9. FDI inflows.92 40 40 5 5 3 .6 Cross-border M&A purchases 2009 2010 26.2 Figure A.8 10.7 Cross-border M&A sales 2009 2010 3.2 39. Syrian Arab Republic and Palestinian Territory a Economies are listed according to the magnitude of their FDI flows.0. and cross-border M&A sales and purchases.0 billion Bahrain.15.4 22. Jordan.7 5.3 .1 4.59 14 74 331 100 1 637 146 112 . Kuwait.2 0.0 2.7 0. storage and communications Finance Business services Public administration and defence Health and social services Community. Republic of Singapore South-East Europe and the CIS Armenia Russian Federation Sales 2009 3 543 8 8 199 91 . Bahrain.6 181.612 -5 372 - Sales 2009 3 543 3 174 2 457 349 358 358 201 114 158 - 2010 4 617 2 357 1 472 112 3 343 1 673 965 965 708 105 .9 314.5 0.6 2.1 78. social and personal service activities Table E. Yemen. West Asia a. Jordan.0 47.6 575.19 20 33 26 648 -17 052 724 400 85 12 . FDI inflows and outflows.1 161.38 Purchases 2009 2010 26 843 -15 560 52 1 484 52 1 484 142 8 113 -4 .

CHAPTER II Regional Investment Trends 53 FDI flows to West Asia in 2010 continued to be affected by the global economic crisis. Qatar Electricity Company is evaluating the situation in the Syrian Arab Republic before proceeding with plans to build a plant there. The estimated value of greenfield FDI projects fell in both 2009 (by 42 per cent) and 2010 (by 44 per cent). In the United Arab Emirates FDI stayed at the same low level as in 2009. as cross-border M&As have risen fivefold during the first five months of 2011 from the low value registered during the corresponding period of 2010. They decreased by 12 per cent to $58 billion (table B and figure A). In addition.7 billion sale by Zain Group (Kuwait) of its African operations to Bharti Airtel (India). For example in March 2011. when it had plummeted to $4 billion due to the economic crisis.2 billion sale by International Petroleum Investment Company of a 70 per cent stake in Hyundai Oilbank in the Republic of Korea to Hyundai Heavy Industries Co. The largest ones included the $10. despite the steady economic recovery registered in 2010 in most of the economies of the region. They fell by returns. This uncertainty is likely to affect both inflows and outflows. For example. The fall in FDI inflows in 2010 varied by country. and became domestic operations fully funded by Saudi Aramco (as for example the Jazan refinery). The 8 per cent rise in Turkey mainly resulted from a 40 per cent increase in real estate investment. given the importance of both intraregional investments and West Asia’s investment in North Africa. they dropped by 12 per cent in Saudi Arabia. Outward investment from West Asia is driven mainly by government-controlled entities that have been redirecting part of their investment to support their home economies. FDI inflows are now expected to bottom out. . but also by economic 51 per cent in 2010 and political objectives. or failed to attract enough foreign investment. citing unrest as one of the reasons. due to the ending of the privatization process in this country.21 and greenfield investments increased by 9 per cent in the first four months of 2011 over the corresponding period of 2010. Cross-border M&A sales – traditionally concentrated mainly in Turkey – whilst increasing by 30 per cent in 2010. In Qatar. weakened by the global financial crisis. and the $2. AES (United States) withdrew from bidding for a power plant project in Saudi Arabia. FDI inflows fell by 32 per cent as the last of four LNG Qatargas plants. outward investment by the private sector has been affected by the tightening of lending by local banks to the private sector amid the financial crisis. was completed in 2010. that had bolstered FDI in 2009. b. the telephone company Etisalat (United Arab Emirates) recently cancelled its $12 billion bid for Zain. the estimated value of West Asian greenfield projects abroad dropped by 52 per cent. underpinned by sizeable increases in government spending in oil-rich countries.22 Unrest is also affecting outward investment by putting pressure on governments and government-controlled entities to direct more investment into their own economies and to finance higher social spending to pre-empt or respond to popular discontent. where a number of flagship megaprojects in the petrochemical industry involving joint ventures between the State-owned Saudi Aramco and foreign TNCs saw the withdrawal of foreign partners (ConocoPhillips from the Yanbu project). Private investors however remained cautious. a Kuwaiti rival. holding back its recovery. However. due to divestments by West Asian firms. At the same time. as foreign companies will be reluctant to sink large sums of money into projects until the political outlook becomes clearer. or were temporarily frozen (such as the Ras Tanura integrated project with Dow Chemical).6 billion). In addition. as oil prices prospects suggest that funds available for investment abroad will continue to rise. Their strategy year (table B and is driven not only by financial figure B). Longterm prospects for outward investments are nevertheless positive on the whole. due to a large acquisition in Turkey. remained at a very low level ($4.  Outward FDI strategies of West Asian TNCs FDI outflows from State-owned entities from West Asia declined oil-rich countries have led West significantly for the Asia’s outward FDI boom since second consecutive the early 2000s. concerns about the political stability of the region are likely to remain.

2 28.5 13.7 3.1 0. and the adoption of a policy of economic diversification that includes investing abroad in industries perceived as strategic for the development and diversification of their national economies.2 127.8 100 3 1 1 18 23 2 51 100 Greenfield FDI projectsa State ownedb 41. In terms of geographical distribution.5. per cent Source: UNCTAD.1 0. Saudi Arabia.0 9.3 100 Per cent 13 1 10 2 1 5 7 4 57 100 - Home economy Bahrain Iraq Jordan Kuwait Lebanon Oman Palestinian territory Qatar Saudi Arabia Syria Turkey United Arab Emirates Yemen Total Total. Other significant industries in West Asian outward greenfield projects are oil and gas (10 per cent) and hotels and tourism Table II. In sectoral terms. fDi Markets (www.7 1. which diverted part of these surpluses from purely financial investment.0 0.54 World Investment Report 2011: Non-Equity Modes of International Production and Development The decline of outward FDI from West Asia since 2009 came after a period of notable increase that began in 2004.4 21.3 6. Bahrain and Kuwait have been other significant outward investors (table II.0 0. Companies from the United Arab Emirates have been by far the most active investors abroad.9 2. the main destinations being West Asia (31 per cent) and North Africa (29 per cent) (table II.3 0.7).2 0. These companies accounted for 73 per cent of the amount of cross-border acquisitions by West Asian firms and for 47 per cent of the region’s greenfield outward FDI projects during the period 2004–2010.3 5.3 -6. thanks to the surge in oil prices.6 56. they attracted 93 per cent of the total. The outward FDI boom was largely driven by Stateowned enterprises. a The value refers to the estimated amounts of capital investment.8 1.3 29. Targeted regions and sectors. particularly in North Africa and West Asia.8 56.7 34.4 21.0 9.9 0.1 2.5). based on UNCTAD cross-border M&A database and information from the Financial Times Ltd.2).8 20. A number of factors explain this surge of outward FDI from rich Arab countries.1 4. led by the United Arab Emirates and Saudi Arabia which together accounted for 45 per cent of the region’s total outward FDI stock (annex table I.4 24.7 65. In contrast.6 1.6 268. attracting 68 per cent of net purchases during 2004-2010 (table II.2 29. developing and transition economies are by far the main destination of West Asian greenfield FDI abroad: between 2003 and 2010. Gulf Cooperation Council (GCC) countries accounted for 79 per cent of the total.5 9.com). located mainly in developing and transition economies (98 per cent). Qatar.3 21. West Asia: cross-border M&A purchases and greenfield outward FDI projects by ownership type and by home economy. low interest rates and high volatility of equity markets.0 2.1 73 4.0 0.1 571.4 38.4 0.4 53 Total Value 76.1 23.1 302.1 0.3 0.5 0. .7 27 4. b Refers to TNCs in which the State has a controlling stake.1 4.2 169.9 0. cumulative 2004−2010 (Billions of dollars and per cent) Net cross-border M&A purchases Total Private State ownedb Value Per cent owned 0.1 1.fDimarkets.6). raising outward FDI stock from $25 billion in 2003 to $161 billion in 2010.5 93.9 47 Private owned 35. developed countries have been the preferred destination of cross-border M&A purchases by West Asian firms.5 0. 59 per cent of the estimated value of greenfield projects during 2003 and 2010 concerned real estate.1 1.2 18.8 157. These include the accumulation of considerable surpluses.8 327.7 8.7 41.

transport and hotel industries.6 1. cumulative 2004−2010 (Millions of dollars and per cent) Developed economies Sector / industry Primary.com).0 3. per cent Total 3 016 2 478 15 921 103 1 342 1 545 448 6 712 20 327 6 297 6 757 1 013 3 964 580 39 264 7 North America 38 22 158 10 5 2 18 88 408 272 105 370 324 604 1 Europe 2 177 1 657 12 314 93 971 1 543 430 6 621 16 397 4 025 6 687 908 3 493 256 30 888 5 Developing and transition economies South. Table II. oil and natural gas Secondary. the preferred purchase targets have been telecommunications. West Asia: cross-border M&A purchases by region/industry of destination.6 3.0 1.6.4 3.8 5. of which Post and communications Transport Business activities Hotels and restaurants Total Total. and electrical and electronic equipment in South. beverages and tobacco Plastics Tertiary. .8 2. Table II.7 2.991 228 -1 922 11 136 315 9 632 3 887 .13 1 249 1 677 7 349 39 180 31 13 154 21 3 8 5 1 44 17 090 Source: UNCTAD. based on information from the Financial Times Ltd. extractive. of which Chemicals and chemical products Motor vehicles and other transport equipment Electrical and electronic equipment Tertiary. West Asia: greenfield outward FDI projects by region/industry of destination. In the case of cross-border M&As. of which Metals Chemicals Non-metallic minerals Food. in that order (table II. purchases in developed countries have targeted companies that operate mainly in the chemicals. In developing countries.3 75.6). fDi Markets (www. cumulative 2004−2010 (Millions of dollars and per cent) North America 7 7 20 13 932 932 517 826 Developed economies Sector / industry Primary. East and South-East Asia. of which Coal.7 10.org/fdistatistics).1 100 - 3 3 2 6 Source: UNCTAD.3 58.1 14.fDimarkets. East North Total West Asia and SouthAfrica East Asia 59 698 11 018 11 948 23 073 56 773 10 769 11 345 21 497 66 308 19 819 10 922 26 349 22 112 6 603 6 563 7 551 14 317 828 292 11 711 10 162 4 213 505 3 434 9 206 5 026 2 054 981 633 185 37 288 421 253 149 237 148 309 60 130 338 395 118 449 132 424 40 581 26 219 16 071 3 487 3 582 18 934 3 170 3 346 3 938 13 942 509 2 311 7 238 11 480 5 444 5 746 223 547 258 180 074 171 179 109 552 93 31 29 19 World Value 62 713 59 251 82 229 22 216 15 658 11 707 9 655 7 345 441 580 344 692 32 976 19 947 17 906 12 060 586 522 100 Per cent 10.CHAPTER II Regional Investment Trends 55 (6 per cent). of which Real estate Hotels and tourism Communications Transportation Leisure and entertainment Total Total.44 3 128 2 136 070 229 735 092 377 580 41 374 32 4 31 16 1 2 82 97 19 420 13 380 161 947 0 19 963 16 2 054 3 972 13 795 9 736 .unctad.991 228 -1 922 . East West Total and South-East Asia Asia . per cent Total 15 14 38 18 3 32 3 9 7 8 86 253 910 343 005 220 929 947 479 209 928 525 68 Europe 5 5 17 4 616 616 040 178 3 914 900 299 459 550 571 35 Developing and transition economies South. motor vehicle. cross-border M&A database (www.40 1 515 352 21 505 17 World Value 14 13 49 21 7 64 20 10 9 9 127 261 918 479 892 289 158 683 571 586 508 899 100 Per cent 11 11 39 17 13 6 50 16 8 7 7 100 - 14 954 1 800 3 216 10 731 . of which Mining. quarrying and petroleum Secondary.7. Note: The value refers to the estimated amounts of capital investments.1 2.

24 and the acquisition of an 8 per cent share in the French public works company Vinci in 2009 (becoming the top shareholder after its employees). West Asia’s outward investment flows are concentrated in a small number of companies – 10 companies accounted for 83 per cent of crossborder M&A purchases between 2004 and 2010. All but two of these companies are owned by or strongly related to the State. healthcare. the car manufacturer Ferrari (Italy). which reinforced its partnership with this company. with access to increasing funding derived from high commodity prices.23 These include the acquisition of 17 per cent of the voting rights in Volkswagen. real estate. but also at building international partnerships and strategic alliances that generally support economic and political objectives. in recent years. the acquisition of the German construction firm Hochtief in 2010. It has also developed joint ventures and funds with notable investors and industry leaders such as Credit Suisse and General Electric.illustrates this new trend. they have become increasingly active in direct acquisitions and greenfield FDI projects that entail a long-term relationship and involvement in management. infrastructure and services sectors. Mubadala Aerospace aims at turning Abu Dhabi into a global aerospace hub. Qatar Investment Authority (QIA) has been making a number of high-profile international direct investments in the financial services.8). West Asian firms have expanded to neighbouring countries where . Furthermore. and widened the scope of Vinci’s activities in Qatar. the oil and gas company Pearl Energy (Singapore). and the global investment firm Carlyle Group (United States). For example. Most of them were created in the 2000s (table II. However. which was accompanied by a memorandum of understanding seeking to establish R&D collaboration.56 World Investment Report 2011: Non-Equity Modes of International Production and Development The most important investors and their strategy. and with higher levels of managerial skill. finance. Of these. construction). 26 Given the high levels of their foreign exchange reserves and the relatively small sizes of their respective economies. the provider of technical solutions to airlines SR Technics (United States). It is also common that the State-owned entities use foreign alliances and partnerships built through outward FDI as a tool to attract FDI and enhance its impact on the host economy. They aim not only at achieving revenue maximization and diversification. however. The example of two Stateowned entities or SWFs established during the 2000s . that they assess the performance and effectiveness of their strategy of using outward FDI as an instrument for economic development.the Qatar Investment Authority (QIA) and Mubadala . In sectors such as construction and real estate. Mubadala has acquired stakes in the aircraft manufacturing company Piaggio Aero (Italy). the others are holding groups or investment companies. aimed at facilitating the transfer of advanced technology and know-how to Qatar. telecommunications. Other projects include the energy. and transport.25 Mubadala aims to develop world-leading clusters of expertise in strategically important sectors. and accordingly has created nine business units. It is important. the United Arab Emirates is home to half of them. telecom. The economic diversification policies of GCC countries has been pursued by a dual strategy. Gulf countries have developed a certain level of expertise at home that has allowed them to engage in outward direct investment in these fields. Lacking strong proprietary assets. and in real estate. Mubadala Industry is pursuing investment and development opportunities in capital. GCC countries can afford to spend large amounts of foreign currency on overseas investments. Amongst them. energy and intellectual property-intensive sectors. automotive. The FDI strategies of these State-owned investors are generally linked to the economic and political objectives of their respective governments. the semiconductor company Advanced Micro Devices (United States) . and Mubadala Information & Communications Technology is creating a portfolio of global ICT assets to develop industryleading facilities at home and in the region. testing and training facilities in Doha. aerospace and construction industries. only three undertake specific activities (such as petrochemicals. Investors from West Asia have traditionally played a passive role. focusing on liquidity and safety rather than return on investments. This outward FDI has aimed mainly at building a presence in other Arab countries in West Asia and North Africa to compensate for the small size of their domestic economies.

plastics and metals. the region has a different strategy to aim at enhancing capabilities in industries existing at home . power generation. printing. Qatar Investment Authority (QIA) SABIC International Petroleum Investment Company (IPIC) Dubai Holding 14 293 12 411 12 255 2005 1976 1984 State-owned State-owned State-owned 10 754 2004 State-owned Arcapita Bahrain 10 163 Islamic Investment Bank Energy investment company 2005 Private TAQA United Arab Emirates 9 848 2005 State-owned Mubadala STC Saudi Oger United Arab Emirates Saudi Arabia Saudi Arabia 7 808 5 900 4 215 Investment Company Telecom company Construction and infrastructure 2002 1998 1978 State-owned State-owned Private Source: UNCTAD. invest in and/or operate companies engaged in the oil and gas. consisting mainly in using M&As. such as motor vehicles. it is 70% State-owned.org/fdistatistics).such as finance. water. Owned by the Government of Abu Dhabi with a mandate to invest in the energy sector across the globe. energy and infrastructure sectors. In investing in developed countries and Asian emerging economies. It acquires controlling interests in foreign companies with the aim of providing investments with strategic and financial support when necessary. Its mandate is to facilitate the diversification of Abu Dhabi’s economy. The top 10 West Asian companies. In the absence of a parent company that performs related activities at home. which contributed to increasing their expertise and improving their competitiveness.unctad. alternative energies and electronics. a question is raised about the nature of the channels through which cross-border purchases of enterprises can contribute to the development and diversification of the region's economies. before engaging in outward direct investment. It is Saudi Arabia’s largest telecom service provider and the only integrated service provider. This approach differs from that of other countries. Includes only deals involving the acquisition of at least 10 per cent of the shares. movement of employees and intra-firm trade .67% owned by the ruler of Dubai. utilities and IT services. Table II. a Estimated value.that outward FDI can become a source of improved competitiveness at home.but also and increasingly to develop capabilities in industries not actually present at home. it covers several activities including telecommunication.CHAPTER II Regional Investment Trends 57 they took advantage of their financial capacities and cultural proximity. 51% owned by ADWEA. Founded as a construction company.such as transfer of technological knowledge. 70% State-owned. wholly owned by the Abu Dhabi Government. hotels and petrochemicals . which have generally first developed a certain level of capacity at home. Its mandate is to own. real estate development. aerospace. It produces chemicals. . ranked by the total value of cross-border M&A purchases. Owned by the Government of Abu Dhabi. It is generally through the medium of exchanges between parent companies and foreign affiliates . 99. cumulative 2004–2010 (Millions of dollars) Creation date 2006 Home country United Arab Emirates Qatar Saudi Arabia United Arab Emirates United Arab Emirates Crossborder M&A purchasesa 18 282 Company name Dubai World Activity Holding company SWF Petrochemical company Energy investment fund Holding company Ownership State-owned Information about the company Owned by the Government of Dubai. Created in 1976. Its mandate is to diversify the Qatari national economy. cross-border M&A database (www. Its mandate is to consolidate the various large scale infrastructure and investment projects in Dubai that were created over the past five years as well as to identify and execute future major projects. and to exit at the right time and price.8. Its mandate is to manage and supervise a portfolio of businesses and projects for the Dubai Government across a wide range of industries. in addition to making other investments as considered appropriate to meet its objectives. fertilizers.

2009–2010 (Millions of dollars) Sector/industry Total Primary Agriculture. FDI inflows and outflows. 2000–2010 Central America South America Caribbean FDI in ows as a percentage of gross xed capital formation 200 180 160 $ billion 90 80 70 Figure B.1 297.115 57 -1 221 695 82 1 742 72 9 697 409 18 1 410 2 962 1 565 2 437 503 217 Purchases 2009 2010 3 740 4 689 -1 4 690 859 3 224 .2 0.3 16.1 9. Cayman Islands and Colombia Bolivarian Republic of Venezuela and Panama Table B. Aruba.7 3.90 . Latin America and the Caribbean a.5 98.6 367.9 billion $1.5 24.6 Cross-border M&A purchases 2009 2010 3. Saint Vincent and the Grenadines. Uruguay.1 3. Honduras. Dominica.0 to $9.8 77.12 1 575 3 421 -2 353 735 18 1 2010 29 481 11 692 423 11 269 8 092 6 771 .1 0.3 Less than $0. Nicaragua.4 .735 . Dominican Republic and Plurinational State of Bolivia FDI outward stock 2009 2010 Income on inward FDI 2009 2010 91.130 373 990 672 150 8 637 1 227 49 762 164 4 105 1 070 1 200 Sales 2009 -4 -6 -3 358 815 023 797 .5 326. and income on inward and outward FDI.3 30. Nicaragua.8 29.4 .62 .134 737 -2 642 . Distribution of FDI flows among economies.8 7. FDI outflows.5 18.147 .156 .5 8.2 0.5 Central America 20.2 the Caribbean South America 55.4 307. East and South-East Asia China Korea. Plurinational State of Bolivia. 2000–2010 Caribbean Central America South America 30 25 60 140 $ billion 120 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 100 20 15 10 5 0 50 40 30 20 10 0 % 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D.159 15 11 2 5 710 544 534 225 125 4 313 .947 63 -1 337 5 . Chile and Cayman Islands Peru.5 63. Netherlands Antilles and Antigua and Barbuda Saint Lucia.7 2. Haiti.7 899. gas and water Construction Trade Transport. petroleum products and nuclear fuel Chemicals and chemical products Non-metallic mineral products Metals and metal products Electrical and electronic equipment Motor vehicles and other transport equipment Services Electricity.7 1 722. Aruba.9 billion Inflows Brazil. Uruguay. social and personal service activities Table E.7 Latin America and 141.0 8.2 48. Figure A. storage and communications Finance Business services Education Community.3 86. Belize. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Japan Developing economies Africa Latin America and the Caribbean South America Brazil Colombia Central America Mexico Caribbean Asia West Asia South.9 2. Saint Kitts and Nevis.5 4.618 .5 272.89 1 850 395 116 2 288 1 659 211 16 16 -2 188 1 338 320 1 018 133 893 - 2010 29 481 3 581 946 .a 2010 Range Above $10 billion $5. Netherlands Antilles.7 94. Jamaica.7 10.9 2.8 352.0 407. Paraguay.0 159. Guyana.14 120 -2 113 379 15 710 2 112 96 2 016 4 962 2 834 . FDI inward and outward stock. 2009–2010 (Billions of dollars) Region FDI inward stock 2009 2010 787. Trinidad and Tobago. Mexico and Brazil Chile.1 to $0.2 Cross-border M&A sales 2009 2010 .1 billion Jamaica. Cross-border M&As by region/country. by range.1 2010 76.70 116 . Ecuador.4 732. Guatemala. Montserrat and Bolivarian Republic of Venezuela Outflows British Virgin Islands.8 15. Anguilla. Mexico. Barbados. Cuba.156 . beverages and tobacco Wood and wood products Coke.8 Income on outward FDI 2009 2010 7. Belize.1 415.3 0. Guatemala.12 .6 a Economies are listed according to the magnitude of their FDI flows.5 Latin America and the Caribbean South America Central America Caribbean 1 507. FDI inflows. forestry and fishing Mining. British Virgin Islands.8 29. El Salvador.58 World Investment Report 2011: Non-Equity Modes of International Production and Development 4.0 to $4.188 -1 808 . hunting. Colombia and Argentina Panama.5.4 77.103 . Turks and Caicos Islands.6 12.9 billion Argentina and Peru Table C. Barbados. Turks and Caicos Islands.512 4 508 24 970 .6 Caribbean 65. and cross-border M&A sales and purchases. Grenada.2. Recent trends Table A. quarrying and petroleum Manufacturing Food.618 281 .1 $0.4 32.84 5 015 2 062 257 182 2 839 193 115 . Republic of India South-East Europe and the CIS Russian Federation Sales 2009 -4 358 -2 327 43 -2 370 -2 768 404 61 61 125 -3 219 .4 0.3 664. Dominican Republic and Costa Rica Bahamas. Ecuador.75 5 015 4 086 386 3 116 747 761 182 19 935 19 935 12 915 720 5 460 -3 -3 Purchases 2009 2010 3 3 -1 5 740 475 233 603 561 420 .7 3. 2009–2010 (Billions of dollars) Region FDI inflows 2009 2010 FDI outflows 2009 45. Honduras. Suriname. Costa Rica.7 11.7 7.90 796 177 10 2 374 374 374 161 64 .4.3 0. Paraguay.9 0. Cross-border M&As by industry.

steel. In the latter. The FDI rebound in 2010 was due mainly to the strong rise in cross-border M&As. developing Asian countries (mostly China and India) became the main acquirers of Latin American and Caribbean firms in 2010 (see section 4. Greenfield FDI projects into the region also registered a significant increase in the four first months of 2011: their estimated value was 94 per cent above the corresponding period of the previous year. The sectoral breakdown in 2010 differs by entry mode. In Mexico (22 per cent) and Chile (17 per cent). Gerdau. following a 32 per cent decline in 2009. This shows a renewed interest by foreign firms in the acquisition of Latin American enterprises. the increases were due to the growth of cross-border M&A sales. The decrease of FDI to Colombia (down 5 per cent) was due mainly to a 32 per cent decrease in FDI into metal mining . Petrobras and Braskem have made acquisitions in the iron ore.after a 13 per cent decrease in 2009 . and petroleum-refining industries in developed . Those to the Caribbean decreased by 26 per cent. and that of Latin America and the Caribbean 17 per cent. a threefold increase over the corresponding period of 2010. of which offshore financial centres accounted for 95 per cent. which absorbed 30 per cent of the region’s total FDI inflows in 2010. and they increased by 104 per cent in Mexico. Their acquisitions totalled $20 billion or 68 per cent of the total. developed countries were responsible for 79 per cent of the total amount of projects in 2010. where FDI rose by 56 per cent to $86 billion.b). FDI into Brazil amounted to $23 billion. Greenfield projects abroad also increased (23 per cent) in 2010.CHAPTER II Regional Investment Trends 59 FDI inflows to Latin America and the Caribbean rose 13 per cent to $159 billion in 2010 (table B). FDI outflows from Latin America and the Caribbean increased by 67 per cent to $76 billion in 2010 (table B). The highest growth (87 per cent) occurred in Brazil and resulted from the doubling of equity capital. they remained below their 2008 level (figure A). bolstered by strong economic growth at home. however. The region’s TNCs. However. Preliminary data show that in the first four months of 2011. These rose from negative values (because of divestment) in 2009 to $29 billion in 2010 (tables D and E). after a decade of sluggish crossborder M&A activities in the region. except for Colombia. food. but also in manufacturing (16 per cent). while Latin America and the Caribbean accounted for 10 per cent and developing Asia for 9 per cent. the main recipient country. the highest level since 2000. All the main recipient countries. Votorantim. which increased more than fourfold to $15. The strongest increase was in South America. Cross-border M&A predominantly concerned the primary sector (40 per cent of total amount). On the other hand. In the case of greenfield investment. after declining by 19 per cent in 2009. to $48 billion. while the 58 per cent growth in Argentina stemmed from intra-company loans. This rise in outward FDI − the strongest among the world’s economic regions − is mainly due to the surge in cross-border M&A purchases. registered significant increases in FDI inflows in 2010. cement. Camargo Correa. mainly in the primary sector. the estimated value of greenfield projects in 2010 increased by 8 per cent . in particular in developed countries (table E). of which Mexico attracted $19 billion. especially the metal industry. Inflows to Central America increased by 20 per cent to $25 billion. with Brazil alone accounting for 56 per cent of this amount. outflows jumped from a large negative value in 2009 (−$10 billion) to $11. After plummeting in 2009. chemical.7 billion (tables D and E). Strong increases were registered in the region’s two main outward investor countries: Mexico and Brazil. while greenfield projects were mostly in the manufacturing sector (58 per cent of total estimated amounts). The share of developed countries was only 12 per cent. In an unprecedented surge of investment. Brazilian companies such as Vale. This resulted from a strong increase in both equity capital (an increase of 147 per cent to $18 billion) and intra-company loans (15-fold increase to $5 billion). due to a jump of FDI inflows to Brazil.sustaining the recovery of FDI inflows from the impact of the global financial crisis.5 billion in 2010. have increased their investments abroad. where investment opportunities have arisen in the aftermath of the crisis. FDI inflows are expected to increase in 2011.

There have been also some important intraregional acquisitions (table E). as preliminary data for the first four months of 2011 show high negative values for FDI outflows from Brazil (minus $9 billion).6 billion in 2001–2010. which brought their share in the total from 8 to 43 per cent. This increase was favoured by a relative retrenchment of developed country-based TNCs (see figure II. Direct investment by TNCs from developing countries has been on the rise in Latin America and the Caribbean during the 2000s. where their share represented 10 per cent of the region’s total during 2003–2010. This is the result of a more than sevenfold increase (to $14 billion) in repayment of loans (intra-company loans) from foreign affiliates to their parent company in Brazil.27 At the intraregional level. both cross-border M&As . including on intraregional acquisitions that fell to zero in value in 2008 and 2009.3 billion in 1991–2000 to $5. This follows decades during which TNCs based in developed countries were the most dynamic foreign source of direct investment into the region. among which were the region’s economic stagnation between 1998 and 2003. 78 per cent targeted Latin America and the Caribbean.9). bolstered by the region’s strong economic recovery.5 billion in 2003). this share rose to 36 per cent during the period 2003–2010 (table II. East and South-East Asia. and their share in the total grew from 5 per cent in 2003 to 10 per cent in 2010. Metalsa and Inmobiliaria Carso purchased firms in the United States in industries such as media. Firms based in developing Asia had been only marginal investors in the region’s cross-border M&A market until 2010. and took b. The recent global financial crisis had a strong impact on the region’s cross-border M&A market. Greenfield FDI projects reached an estimated $11. and the dot com crisis in the 2000s that affected developed country TNCs’ financial capacities. In the case of cross-border M&As.60 World Investment Report 2011: Non-Equity Modes of International Production and Development countries. Latin American companies were the origin of only 5 per cent of the total amount of cross-border M&A sales in the region. an estimated 75 per cent of outward greenfield projects were located in developing countries. While 73 per cent of the region’s cross-border M&A purchases were concentrated in developed countries in 2010 (table E). following their near-inactivity of previous years. Sigma Alimentos. motor vehicles and services. This trend is obvious in the region’s cross-border M&A market. food.9 billion purchase by Grupo Aval (Colombia) of BAC Credomatic. the most significant being the $1. and greenfield FDI projects followed a rising trend during the 2000s. though they resumed growth in 2010 (figure II.6 billion in 2010 (up from $4. reflecting the growing strength of Latin American firms. and investments in resourceseeking activities from developing Asia surged in 2010. and 5 per cent Africa. Acquisitions by these companies jumped to $20 billion in 2010. the rise of regulatory problems with the privatized companies involving investment from developed country TNCs. however. where the average amount of annual purchases by developing economy-based TNCs increased from $1. that resulted from a number of factors.4). Mexican firms such as Grupo Televisa. Outflows from Mexico also decreased in 2011. Of these.  Developing country TNCs' inroads into Latin America Intraregional FDI gained strength during the 2000s. the share of intraregional deals in the total increased considerably from the early 2000s: during the period 1995–2002. FDI from the region is expected to decrease in 2011.28 In 2010. a Panamanian affiliate of General Electric. Most of these acquisitions were undertaken by Chinese enterprises (44 per cent). TNCs based in Latin America and Asia are the main investors from developing regions. The surge of developing Asian TNCs in the Latin American and the Caribbean cross-border M&A market in 2010.4). and more than three times their total accumulated acquisitions in the region over the previous two decades. 13 per cent South. the region’s cross-border M&A market witnessed a notable and unprecedented surge of investment by developing Asian TNCs. their FDI activity being undertaken mainly through greenfield FDI projects. accounting for 68 per cent of the total. accounting in the first quarter of 2011 for only one-fifth of their value in the same period of 2010.

3 14.6 72.unctad.8 0.0 -43.4 10.0 4.6 12.0 20. Note: Africa and South-East Europe and the CIS are not shown in this table because of the small amounts.3 24.6 1.0 48.6 12. China’s State Grid Corporation acquired seven Brazilian power transmission companies for $1.1 10.4 0.1 89.3 32.org/fdistatistics).3 3. cross-border M&As database (www.6 billion (annex table I.5 64. Table II. East and South-East Asi a Source: UNCTAD. place in South America in oil and gas and energy activities.6 80.1 9.6 26. Latin America and the Caribbean: cross-border M&A sales by main acquiring regions.1 22.4 0.7 24.7 15.9 44 Developing economies 100 44.8 3.8 0.1 0.1 0.4 7.9 1.7 37.8 15. cross-border M&A database (www.5 10.0 0.3 10.6 100 Developed economies 100 -11.3 86.9 74.3 16.6 2.CHAPTER II Regional Investment Trends 61 Figure II.4 16. beverages and tobacco Metal and metal products Services Finance Post and communications Business activities Total sectors.9 2.1 10.7 7. especially in the oil and . Two Chinese oil and gas companies – China Petrochemical Corp. In addition.4 4.8 37.1 10 Brazil 100 33.4 29.1 30. India was also the source of significant resource-seeking acquisitions in the region.0 13.2 1. 1993–2010 (Billions of dollars) 40 35 30 25 20 15 10 5 0 -5 -10 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Developed countries Latin America and the Caribbean South.8 0.7 26.4 79.6 27 Developing Asia China & Hong Kong (China) 100 81.5 26.6 8 Total 100 81.1 9.8 7 Sector/industry Investing country Total sectors Primary Mining of metal ores Petroleum Manufacturing Food.3 18.3 3.8 7.5 99.7 3.1 4.0 6.3 5.8 27 Mexico 100 13.0 43.4. Note:  Africa and South-East Europe and the CIS are not represented in this figure because of the small amounts involved. (Sinopec) and CNOOC – made big upstream acquisitions in Argentina and Brazil in 2010 and 2011 that totalled $12.7 billion. in $billion Share in total world World 100 18.7).3 5.unctad. Latin America and the Caribbean: cross-border M&As by main acquiring regions and countries and main targeted industries.8 37.4 1.7 15.1 1.8 3.6 6.org/fdistatistics). 2003−2010 (Per cent) Latin America and the Caribbean Total 100 11.0 54 Source: UNCTAD.0 -0.5 5.6 18.3 6.5 9.1 6.2 54.9 16 India 100 95.9.0 57.

62 World Investment Report 2011: Non-Equity Modes of International Production and Development gas industry in Venezuela and in the sugar cane industry in Brazil. with metals and oil and gas the underlying reason for most of the projects (table II. based on information from the Financial Times Ltd.com). of 100 6 6 91 37 18 17 2 3 1 2 12 2 Sector/industry Investing country Total sectors Primary Coal. 2003–2010 (Per cent) Latin America and the Caribbean Total 100 24 19 54 14 1 1 6 4 22 10 4 1 55 8 Brazil 100 29 18 68 25 1 1 4 2 25 4 Chile 100 12 10 63 23 17 25 1 17 8 1 Mexico 100 4 4 29 10 6 3 67 56 3 6 1 Total 100 26 25 60 36 12 11 1 2 14 1 2 7 74 10 Developing Asia China & Hong Kong (China) 100 23 23 65 50 11 11 2 12 1 8 35 5 India 100 41 35 53 33 14 14 5 7 5 13 2 Korea.29 TNCs from developing Asia accounted for onetenth of the total estimated value of greenfield FDI projects in the region during 2003–2010. with South America exporting mostly commodities and importing manufactured goods. As with their M&A activities. Rep. The strong increase in resource-seeking FDI from developing Asia into South America in 2010–2011 raises concerns by some countries in the region about the trade patterns. beverages and tobacco Chemicals and chemical products Services Communications Business activities Transportation Total sectors. Note: The values refer to estimated amounts of capital investments.10). Greenfield FDI projects by main investing regions and countries and main targeted industries.10. fDi Markets (www. oil and natural gas Manufacturing Metals Motor vehicles and other transport equipment Automotive OEM Food. with China and Hong Kong (China) alone the source of 47 per cent of the projects from developing Asian countries. in $ billion Share in total world World Developed economies 100 24 17 58 27 10 7 6 4 18 6 4 3 566 80 Developing economies 100 28 24 56 27 8 7 3 3 16 4 3 4 142 20 100 25 19 58 27 9 7 5 4 18 5 4 3 708 100 Source: UNCTAD. resources were the main attraction.fDimarkets. .30 Table II.

8 63.5 Income on outward FDI 2009 2010 10.9 billion Turkmenistan.7 2. Belarus.8 1.78 .8 464.a 2010 Range Above $5. $0.8 FDI outflows 2009 48.156 . Georgia. 2009–2010 (Millions of dollars) Sector/industry Total Primary Mining. 2009–2010 (Billions of dollars) Region South-East Europe and the CIS South-East Europe CIS Below $0. 2000–2010 Commonwealth of Independent States South-East Europe FDI in ows as a percentage of gross xed capital formation 120 100 80 60 10 40 20 0 5 20 10 20 40 $ billion $ billion Figure B. 2000–2010 60 25 50 Commonwealth of Independent States South-East Europe 15 % 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D.167 .6 9. Republic of India Indonesia South-East Europe and the CIS South-East Europe CIS Russian Federation Ukraine Sales 2009 7 125 5 037 5 033 522 175 12 52 7 7 1 565 259 3 716 111 356 120 - 2010 4 321 . Recent trends Table A.30 - 2010 4 321 -3 076 2 202 119 325 388 . Cross-border M&As by region/country.9 8. FDI inward and outward stock.2 7. by range.4 .4 687.1 Cross-border M&A purchases 2009 2010 7. Figure A.85 .8 76.3 4.4 FDI outward stock 2009 2010 337. Kyrgyzstan.1 Income on inward FDI 2009 2010 58. FDI inflows.147 .5 Cross-border M&A sales 2009 2010 7.0 to $4.3 9. Bosnia and Herzegovina.6 7.7 0.8 0.157 .3 549.6 0. Kazakhstan and Ukraine Outflows Table B.30 . and cross-border M&A sales and purchases.6 4. FDI inflows and outflows. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Japan Developing economies Africa Latin America and the Caribbean South America Caribbean Asia West Asia South.4 Russian Federation and Kazakhstan South-East Europe and the CIS South-East Europe CIS $1.1 60.9 billion Uzbekistan. Bosnia and Herzegovina and Tajikistan Azerbaijan. and income on inward and outward FDI.2 326.5 472.82 1 736 30 1 706 3 843 426 -2 604 . 2009–2010 (Billions of dollars) Region FDI inflows 2009 71. Armenia. Republic of Moldova.6 77.8 69. Azerbaijan and Georgia Ukraine Table C.3 2.4 611.5 6. Armenia. Croatia.0. Cross-border M&As by industry. Albania and Croatia FDI inward stock 2009 2010 626.156 84 40 44 20 24 6 166 6 166 6 152 15 Purchases 2009 2010 7 7 6 1 432 616 536 072 13 13 13 5 8 . gas and water Construction Trade Hotels and restaurants Transport. FDI outflows. Serbia. quarrying and petroleum Manufacturing Food.3 17.CHAPTER II Regional Investment Trends 63 5.4 47. Distribution of FDI flows among economies. beverages and tobacco Wood and wood products Publishing and printing Chemicals and chemical products Non-metallic mineral products Metals and metal products Machinery and equipment Electrical and electronic equipment Precision instruments Services Electricity.4 0.5 to $0.4 2010 68. East and South-East Asia China Korea..7 11.40 158 9 698 3 464 1 888 205 69 51 -3 -3 21 21 6 166 4 6 163 5 519 . Montenegro.1 72.197 .1 10.2 4. Serbia and Albania .197 . storage and communications Finance Business services Public administration and defence Table E.1 2010 60.5 billion The FYR of Macedonia.1 0.85 1 857 1 366 51 20 -7 50 12 350 14 2 549 625 6 330 15 1 020 543 185 - Purchases 2009 2010 432 897 897 032 1 015 17 -1 497 4 8 590 2 -2 101 7 7 7 1 9 698 1 965 1 965 270 325 126 -7 .6 56.7 17. Montenegro.3 0.1 64. the FYR of Macedonia.2 a Economies are listed according to the magnitude of their FDI flows.0 billion Inflows Russian Federation. Belarus. South-East Europe and the Commonwealth of Independent States a.174 7 463 519 13 5 077 1 248 7 599 Sales 2009 7 125 5 336 4 320 265 174 1 779 200 . Republic of Moldova.

Cross-border M&A sales in the region declined by 39 per cent in 2010 (tables D and E). Foreign investors continue to be attracted to the fast-growing local consumer market.64 World Investment Report 2011: Non-Equity Modes of International Production and Development In 2010. due to stronger commodity prices and economic recovery in countries with large natural resources. Prospects for inward FDI are positive.7). and a new round of privatizations in the major host countries of the region (the Russian Federation and Ukraine). thanks to favourable commodity prices. the cross-border M&A purchases of the region increased by more than seven times compared with the same period in 2010. followed by those from Kazakhstan. Outward FDI flows rose by 24 per cent in 2010 to a record $61 billion (table B). higher commodity prices. In the Russian Federation. whereas the value of greenfield projects declined by 4 per cent. A large increase in intraregional M&A purchases – mainly from the Russian Federation – could not compensate for the slump in M&A activity by developed country firms. despite a continued rise in the share of developing countries. FDI inflows are expected to increase in 2011 on the back of a more investor-friendly environment. partly as a result of the sluggishness of investment from EU countries (traditionally the dominant source of FDI in this subregion). making it the secondlargest FDI recipient country in the subregion after Serbia (table A). whose net value (new M&As less divested projects) became negative for the first time ever. even though it remained the second largest recipient in the subregion. divested or downsized their operations. FDI flows to the CIS rose marginally by less than 1 per cent.a record share . The acquisition of the Russian soft drinks brand Wimm-Bill-Dann by PepsiCo for $3. FDI flows to Croatia and Serbia declined sharply in 2010. due to better macroeconomic conditions and the revival of cross-border acquisitions by Russian companies. the anticipated WTO accession of the Russian Federation. annex table I. FDI inflows to South-East Europe and the Commonwealth of Independent States (CIS)31 declined by 5 per cent (to $68 billion). economic recovery and strong support by the State. for the third consecutive year (by 47 per cent in 2010). were carried out by Russian TNCs. Both cross-border M&A purchases and greenfield projects rose in 2010. . such as Morgan Stanley and Spain’s Santander. FDI flows rose by 13 per cent (to $41 billion) (table A). Greece. the share of manufacturing continued to rise in 2010 at the expense of the primary and services sectors.33 Most of the outward FDI projects. motors vehicles and chemicals). Developed countries remained the largest source of greenfield projects in the transition economies (more than two-thirds).34 Outward FDI is expected to pick up in 2011–2013. which used to be a gateway or conduit for foreign investors into South-East Europe. In both greenfield and M&A projects. In particular. food and beverages. More than 60 per cent .32 FDI flows to Ukraine increased by 35 per cent.g. ceased to be an entry point as its domestic economic crisis worsened. Transition-economy firms increased their purchases within the region and in developing countries in 2010 (section 5. Another reason for the sluggishness of FDI is structural: investors rarely set up export-oriented projects in the subregion. as in past years.b). some foreign banks.of greenfield investment projects by transition-economy firms took place in developing countries. FDI inflows declined in Kazakhstan in 2010. which has been excluded from international production networks – the engine of recovery in 2010. FDI flows to South-East Europe fell. which are open to foreign investors (e.5 billion. due to the divestment by Telenor (Norway) of ZAO Kyivstar GSM (Ukraine) to the Russian firm VimpelCom ($5. In contrast to the CIS. In the first five months of 2011. after falling more than 40 per cent in 2009 (figure A and table B). especially in “non-strategic” industries. thanks to better cash flows of TNCs located in the region.8 billion was seen as a sign of investor confidence in the country. economic recovery and improving stock markets. However. while Albania saw its FDI rise to more than $1 billion for the first time ever.

2004–2010 (Billions of dollars and as a per cent of total) 18 16 14 50 70 60 $ billion 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 2009 2010 10 0 40 30 20 % M&A value Share in total total cross-border M&As by transition economy TNCs Greenfield value Share in total greenfield investment projects by transition economy TNCs Source: UNCTAD. This reached a record level of $388 billion in 2010. Asia and Latin America and the Caribbean. The landscape of international investment has gained an important new dimension in recent years with the expansion of FDI from developing and transition economies. India’s State-owned ONGC Videsh participated in the development of the Sakhalin I oil and gas exploration project. has prompted TNCs from these countries to actively pursue joint ventures and other forms of collaboration in resource-rich transition economies. In another large project. Ten years ago.CHAPTER II Regional Investment Trends 65 b. TNCs based in developing and transitions economies have increasingly ventured into each other’s markets. .5).2). Although the bulk of South–South FDI (including the flows to and from transition economies) is intraregional. Trends Bilateral FDI flows between developing and transition economies are relatively small. Central Asian countries have been increasingly targeted by neighbouring Chinese TNCs (box II. For example. up from only 30 per cent in 2004 (figure II. Increasingly. reflecting the priorities and strategies of their governments. in 2010. but rather to expand their control over Figure II. especially China and India. CNPC (China) formed a joint-venture with Rosneft (Russian Federation) to develop oil extraction projects in the Russian Federation and downstream operations in China. the share of developing countries in greenfield investment projects from transition economies rose to 60 per cent. Cross-border M&As and greenfield FDI projects undertaken in developing countries by transition economy TNCs. Similarly. South to East FDI has been on the rise: developing countries' share in transition economies' greenfield investment projects rose from 9 per cent in 2004 to 21 per cent in 2010. Rapid economic growth. high commodity prices and liberalization have been feeding a boom in outward investment from these economies. For example.5. In contrast to TNCs from developing countries. Note: Data for value of greenfield FDI projects refer to estimated amounts of capital investment. representing almost 30 per cent of world outflows (chapter I). the main aim of transition-economy TNCs is not simply to ensure the supply of raw materials to their home countries. The growing demand for energy in developing countries. However. transition-economy TNCs are finding their way to Africa.  East−South interregional FDI: trends and prospects Bilateral FDI between transition and developing economies is gaining momentum. they have grown rapidly during the past decade and this process is expected to continue to gain momentum. that share was only 11 per cent.

Chinese investment in the subregion has increased dramatically. Chinese firms built two oil and gas pipelines from Kazakhstan and Turkmenistan to China (inaugurated in 2006 and 2009. silver. and CNPC bought a 49 per cent share of Mangistaumunaigaz for $2. In the electricity industry. China. As for the host country pattern. a Including both cross-border M&As and greenfield FDI projects. Since then. East–South investment links are concentrated in a handful of countries. to build sustainable competitive advantages vis-à-vis other firms. the China Investment Corporation bought a 14. XD Group. more than onethird of Turkey’s outward FDI stock was located in Figure II.66 World Investment Report 2011: Non-Equity Modes of International Production and Development Box II. China’s rising investment in Central Asia China initiated its investment in Central Asia through the signing in April 1996 of general economic and security agreements with the Central Asian economies of Kazakhstan. In 2009. While the Russian Federation is the dominant transition-economy investor in developing countries.6 billion.6). Africa also has attracted important investment flows from the Russian Federation (box II. CNPC formed a joint venture with Kazakhstan’s State-owned Kazatomprom to invest in uranium production in Kazakhstan. Source: UNCTAD. Radio Free Europe. laying the ground for largescale exploration and development of oil and gas fields.5 per cent stake in KazMunaiGas. Tashkent. the value chain of their natural resources. Kyrgyzstan and Tajikistan.a cumulative 2003–2010 (Billions of dollars) a) From developing to transition economies Russian Russian Federation Federation 68 68 b) From transition to developing economies China China 19 19 Kazakhstan Kazakhstan 17 17 Turkey Turkey 14 14 6 Turkmenistan Turkmenistan 6 Syrian Arab Syrian Republic Arab Republic 9 9 Azerbaijan Azerbaijan4 4 Bolivarian Bolivarian Republic Republic of Venezuela of Venezuela Viet Nam Viet Nam 6 7 7 Georgia Georgia 4 4 6 Source: UNCTAD cross-border M&A database and information from the Financial Times Ltd. respectively). both in 2009. and to strengthen their market positions in key developing countries. this company has acquired the right to extract gold. the China National Petroleum Corporation (CNPC) is the only foreign company possessing an onshore contract for oil and gas exploration.2.fDimarkets.a In nuclear energy. Top 5 destinations of FDI projects. 4 April 2010.3). India and the Republic of Korea are major investors in transition economies. In Kazakhstan. In an offsetting deal. . China’s Tebian Electric Apparatus is building power transmission lines and substations in Kyrgyzstan and Tajikistan. copper and tungsten in the Pamir Mountains of Tajikistan.com). Another company. Turkey. is modernizing the electricity system in the Uzbek capital. While Kazakhstan and the Russian Federation are the most important targets of developing-country investors. there is a limited number of home countries in South to East bilateral investments. fDi Markets (www. and an affiliate of the China Guangdong Nuclear Power Corporation is in a joint venture to develop black-shale uranium in the Navoi Province of Uzbekistan. a “Chinese-Central Asian Relationship Requires Delicate Balancing Act”. In Turkmenistan. China and Turkey are the most popular destinations for FDI from transition economies (figure II.6.

most of the acquisitions took place in the services sector (figure II. For this reason. The primary sector accounts for almost one-third of FDI projects. such as in the case of Severstal’s $2. Source: UNCTAD.8). such as the Shanghai Cooperation Organisation (SCO). In Southern Africa. Chinese investment in Central Asia). The arrival of these TNCs has been motivated by a desire to enhance raw-material supplies and to expand to new segments of strategic commodities.g. encouraging dialogue. and the expansion of the Turkish retail group Migros (part of Koc Group) in this country and Kazakhstan. transition economies. FDI between developing countries and transition economies often involves large State-owned TNCs. the world’s largest aluminium producer. following national strategic objectives. has operations in Angola. Russian TNCs have acquired certain assets directly. and the largest acquisitions took place in this sector. TNCs often invest in countries with common cultural and ethnic ties and heritage (e.3. As developing-country investors are interested in the fast-growing consumer markets of large transition economies such as Kazakhstan and the Russian Federation.g. In North Africa. is building electric power plants in Namibia and a hydroelectric dam in Angola. in collaboration with African Aura Mining (United Kingdom). in other cases they acquired the parent firms of African assets in developed countries. The initiative is an important step in establishing networks. in the case of the Russian– Vietnamese cooperation in coal mining. from the Governments of China and India) and from geographical proximity. Turkish investment in SouthEast Europe and Central Asia. Russian banks are also moving into Africa.35 A greater proportion of acquisitions by transitioneconomy TNCs were made in the primary sector. that share was only 2–3 per cent (figure II. electricity and natural gas). Russian mining companies are currently involved in developing manganese deposits in the Kalahari Desert (Renova Group. integration schemes and regional cooperation encompassing these groups. In the latter case. with branches in 11 other African countries. a leading Russian asset management company. Policy response.36 play an important role. In Egypt. The largest Russian diamond producer. Investments by Korean firms (e. Vneshtorgbank for instance opened the first foreign majority-owned bank in Angola. Gazprom has signed three exploration and production-sharing agreements with the National Oil Corporation (NOC) of the Libyan Arab Jamahiriya. Nigeria and South Africa. has invested up to $1 billion). mainly in telecommunications. Other forms of investment include joint ventures. the Government of Russia has signed an agreement on civilian nuclear development. Ssangyong Motor’s $480 million production agreement and Hyundai’s $400 million new car assembly plant. Tajikistan and Uzbekistan. For example RusAl. Alrosa. followed by manufacturing and services.7). Russian TNCs expand into Africa The expansion of Russian TNCs in Africa is fairly recent. allowing Russian companies to bid for nuclear power plant construction contracts. Other important measures are bilateral partnerships which can underpin cooperation conducive to East–South investment links. the project is coupled with a licence to explore for oil and gas.37 The Silk Road Initiative seeks to enhance regional cooperation between China. one of the largest Nigerian banks. cultural affinity and historical relationships. while Renaissance Capital owns 25 per cent of the shares in Ecobank. and then moved into Namibia and Côte d’Ivoire. in the cases of China and the Republic of Korea. Kazakhstan. bridging cultural divides . Kyrgyzstan.g.CHAPTER II Regional Investment Trends 67 Box II. as well as a desire to access local markets. such as South Africa’s Highveld Steel and Vanadium (by Evraz group) or Burkina Faso’s High River Gold (by Severstal).g. both in the Russian Federation) are also of this type.5 billion iron mining project in Liberia. South to East FDI benefited from outward FDI support (e. Guinea. or with which their countries have historical links (e. Examples of market-seeking projects include investments of Chinese companies and companies from West Asia in real estate construction projects in the Russian Federation.

8. Note:  Figures in parenthesis show the share of transition economies in the country’s total outward FDI stock in 2009. the number of East-South DTTs had grown to 175. Despite the recent financial crisis. A growing number of bilateral agreements such as bilateral investment treaties (BITs) and double taxation treaties (DTTs) have been concluded between developing countries and transition economies. and promoting awareness of the potential for cooperation in the investment area between countries of the region. Major developing country investors in transition economies. Data for India refer to 2005 and are on an approval basis. Some large resource-based firms are seeking to become regional and global players. a Including both cross-border M&As and greenfield FDI projects. Transition economies have signed the largest number of BITs with Asia.38 For the latter.com). including from developing countries.org/fdistatistics). is expected in particular to grow fast in the near future. Outward FDI from transition economies. Governments could also consider nurturing longlasting relationships by focusing on businesses based on comparative advantages and by providing specific mesures to promote investment. State-owned TNCs such as Gazprom can play a major role in that expansion. It will include Africa. FDI based on technology and other firm-specific advantages is crucial for firms from developing countries and transition economies to increase their investment links.7. followed by Africa and then Latin America.a cumulative. Rep. while some banks are expanding into other countries in the region.unctad. Source: UNCTAD. the launch of a $10 billion FDI fund to attract foreign investors in the country can be expected to further increase FDI. fDi Markets (www. in the Russian Federation. FDI/TNC database (www. the fast growing consumer market of transition economies and the rise of commodity prices will induce further investment by developing country TNCs in the East. By the end of 2010. 2004–2010 (Per cent of total value) a) From South to East b) From East to South Tertiary 28% Tertiary 49% 30% 28% 42% Primary Secondary Secondary Primary 23% Source: UNCTAD cross-border M&A database and information from the Financial Times Ltd. and stricter regulations and conditions governing natural resources projects in the Russian Federation and other transition economies. Figure II. For the former. Prospects.fDimarkets. among developing countries China has signed BITs with all transition economies (17). In addition. 233 BITs had been concluded. mainly the Russian Federation. developing country TNCs have continued to access the natural resources of these economies. The Russian . outward FDI stock in 2009 (Millions of dollars) Turkey China Korea. for example.68 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure II. Sectoral distribution of FDI projects. of India 0 (34%) (2%) (3%) (20%) 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 5 500 6 000 Federation is the transition country with the largest number of BITs concluded with developing countries (31). As of the end of 2010.

FDI outflows.7 $10 to $49 billion $1 to $9 billion Poland.6 a Economies are listed according to the magnitude of their FDI flows. Israel. Spain. Iceland and Portugal Developed 12 263.7 41. 2009–2010 (Billions of dollars) Region Developed economies European Union Other developed countries Other developed Europe North America FDI inflows 2009 602.1 439.4 5 459.0 442.5 1 012.1 1 320.6 55. Spain.9 8 933.4 251.3 63. Ireland. Australia. Greece.0 350.3 FDI outflows 2009 851.8 346. Denmark. Czech Republic.4 47.2 18. Switzerland and Netherlands Bermuda.4 2010 601.6 9.a 2010 Range Above $100 billion $50 to $99 billion Inflows United States Belgium Germany.1 8.3 countries Other developed 655. Estonia.5 558. Ireland.2 16. Belgium. Italy. Poland. Romania. Recent trends Table A.3 174.2 1 153.291 4 488 773 331 700 001 . Slovakia.4 524. Malta.5 115.4 9 080.0 92. Hungary and Greece Table C.2 59. Switzerland and Japan Canada. 2000–2010 1 500 1 200 900 600 300 0 Figure B.5 Cross-border Cross-border M&A sales M&A purchases 2009 2010 2009 2010 203. FDI inward and outward stock. France. Latvia.5 33. beverages and tobacco Chemicals and chemical products Non-metallic mineral products Metals and metal products Machinery and equipment Electrical and electronic equipment Precision instruments Motor vehicles and other transport equipment Services Electricity.0 40.5 73. Gibraltar.5 40.5 4 924.5 118. Portugal and Malta Finland.6 57.686 247 015 641 017 400 14 062 60 286 15 995 -1 . Cyprus.7 2010 935.1 724. Lithuania.6 51. Israel. FDI inflows and outflows.6 874. social and personal service activities Table E. Cyprus. by range.9 304.43 7 112 63 832 24 914 698 5 195 3 175 4 080 .3 91.7 160.6 16 171.7 113. Canada.5 353. East and South-East Asia China India Oceania South-East Europe and the CIS Russian Federation Ukraine Sales 2009 203 41 40 61 5 32 530 198 216 153 669 084 139 252 1 305 8 315 3 841 179 408 254 327 535 523 434 638 254 2010 251 50 46 98 27 27 2 7 10 9 101 -3 6 12 4 7 26 35 5 705 945 107 998 797 496 436 155 619 129 303 762 265 301 331 712 603 496 025 613 Purchases 2009 2010 160 2 1 32 -4 28 2 1 4 125 39 -1 1 785 875 344 663 038 648 728 680 086 281 798 215 23 23 105 27 41 3 2 5 6 7 86 -21 -2 7 654 548 041 333 603 409 050 832 870 902 331 Sales 2009 203 530 143 163 81 751 38 372 20 372 -6 307 18 834 11 882 46 272 1 378 3 475 959 3 169 41 417 21 451 19 966 12 994 40 2 7 616 7 616 - 2010 251 705 182 657 9 804 2 451 6 293 -7 516 79 091 18 126 52 629 1 336 11 544 7 561 2 559 39 752 -2 909 42 661 9 047 7 949 -4 3 464 2 896 .4 Europe North America 3 550. storage and communications Finance Business services Health and social services Community. New Zealand.0 370. Luxembourg.5 1 098. Distribution of FDI flows among economies. quarrying and petroleum Manufacturing Food.9 68.12 Purchases 2009 2010 160 785 143 163 88 575 . Japan. Bulgaria.2 910.2 economies European Union 7 296.4 16 803. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union France Germany United Kingdom United States Japan Developing economies Africa Latin America and the Caribbean South America Central America Asia West Asia South. Slovakia.9 1 090.7 37. United Kingdom. Latvia.0 4 012. Luxembourg and Norway Outflows United States and Germany France. New Zealand.8 89. and cross-border M&A sales and purchases.14 215 654 182 657 84 910 3 496 9 665 42 782 66 819 3 051 36 073 6 355 3 581 -4 129 5 787 17 294 2 357 14 936 2 976 7 465 8 843 -3 076 1 719 -5 206 8 546 101 59 10 -1 1 3 8 13 1 3 210 . Denmark.2 407.7 12 501.2 41.9 Other developed 762.7 17. Estonia.5 64.8 94.2 324. United Kingdom and Austria Table B.7 17.8 387.9 61. Netherlands. Finland.5 367.1 6 890. 2009-2010 (Billions of dollars) Region FDI inward stock 2009 2010 FDI outward stock 2009 2010 Income on inward FDI 2009 2010 Income on outward FDI 2009 2010 Below $1 billion Slovenia.2 17. Hungary.CHAPTER II Regional Investment Trends 69 6.5 215. FDI inflows. 2009–2010 (Millions of dollars) Sector/industry Total Primary Mining. and income on inward and outward FDI. Austria.5 669.6 13. Iceland. Bermuda.3 182. Sweden. Bulgaria.5 116. Cross-border M&As by industry. Slovenia. Developed countries a. gas and water Construction Trade Hotels and restaurants Transport. Australia. Italy. Figure A. Lithuania.9 44. Czech Republic. 2000–2010 2 000 25 1 600 20 15 10 5 0 % $ billion North America Other developed Europe Other developed countries European Union FDI in ows as a percentage of gross xed capital formation North America Other developed Europe Other developed countries European Union 1 200 $ billion 800 400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D.5 251. Norway. Romania.342 1 561 21 678 26 640 -6 945 12 286 4 328 -6 815 -6 681 16 14 494 3 174 11 320 1 418 5 573 280 5 336 4 487 . Cross-border M&As by region/country. Sweden.

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In 2010, FDI inflows to developed countries declined marginally. At $602 billion, FDI inflows to the region were only 46 per cent of the peak level in 2007 (figure A). From a global perspective, the developed countries’ share of FDI inflows in the world total fell below 50 per cent for the first time in 2010. A gloomier economic outlook prompted by government austerity measures, looming sovereign debt crises and regulatory concerns were among the factors hampering the recovery of FDI flows in developed countries. The overall figures, however, mask wide subregional variations among developed countries. In North America, inflows of FDI showed a strong turnaround with a 44 per cent increase over the previous year to $252 billion (table A). In contrast, inflows to Europe were down by 19 per cent. In addition to a 36 per cent fall in the United Kingdom, which has been one of the largest recipients in Europe, large divestments from two of the subregion’s small open economies, namely the Netherlands and Switzerland, dragged down the total. Significant divestments also occurred in Japan where growth prospects were perceived to be poor, especially in comparison with emerging economies. The divergent pace of economic recovery is reflected, to an extent, in the components of inward FDI. In the two large economies leading the recovery of FDI in the grouping, namely Germany and the United States, there was a more robust economic recovery, resulting in strong growth of reinvested earnings, which increased more than threefold compared with the 2009 level in both economies. In contrast to the declining inflows, FDI outflows from developed countries reversed their downward trend, with a 10 per cent increase over the previous year. FDI from developed countries amounted to $935 billion, still accounting for 71 per cent of the world total (figure B). TNCs in developed countries accumulated an unprecedented amount of cash on their balance sheets and the rates of debt financing were at a historic low, facilitating their overseas expansion. Furthermore, M&A remained an attractive strategy for firms seeking growth as well as for those seeking cost-cutting through synergy. Although

these factors appear to have generated a sizeable recovery of outward FDI from developed countries, the total for the region as a whole was half of its peak in 2007. By subregion, the recovery of FDI outflows in developed countries was, like inflows, driven by North America. Cross-border M&A deals by United States firms more than tripled, resulting in a 16 per cent increase in total outflows from the United States. Furthermore, the value of reinvested earnings increased by 35 per cent. In addition to the increase in profits, a greater share of profits was reinvested rather than repatriated.39 In Europe, despite a 67 per cent fall in cross-border M&A deals by European TNCs, outflows of FDI overall increased by 10 per cent, due largely to the upswing of intra-company loans. For Germany, for example, intra-company loans from its TNCs turned from a negative $25 billion in 2009 to nearly $18 billion in 2010. Similarly, intra-company loans from Swiss TNCs increased from a negative $7 billion in 2009 to $11 billion in 2010. Cross-border M&A deals by Japanese firms almost doubled, but this was still not enough to compensate for the fall in intra-company loans and reinvested earnings at Japanese affiliates abroad. Japanese TNCs continued to repatriate much of the profits from their affiliates to take advantage of the tax break on dividends introduced in 2009 (WIR10). At the industry level, M&A activities in the natural resource-related industries drew much attention, not least because of the political sensitivity associated with them. For instance, the takeover of Dana Petroleum (United Kingdom) by Korea National Oil Corporation in 2010 was thought to have been the first hostile bid for a developed country-based firm by a State-owned company from an emerging economy.40 Some proposed mega-deals in the sector, namely the separate bids by BHP Billiton and Sinochem for PotashCorp (Canada), as well as the plan to merge the Australian iron ore operations of BHP Billiton and Rio Tinto, did not materialize, as they failed to address regulatory concerns. Another active industry in terms of M&As was the pharmaceutical industry. The populations in many developed countries are ageing, and consequently,

CHAPTER II Regional Investment Trends

71

the long-term prospects for the healthcare-related industries are regarded as favourable. Furthermore, the patents of a number of top-selling drugs will shortly expire, prompting takeovers of smaller pharmaceutical and biotechnology firms with products and technologies by large international pharmaceutical companies. One of the largest M&A deals in 2010 was the takeover of Millipore (United States) by the drug and chemical group Merck (Germany) (annex table I.7). Other reported deals included the acquisition of Talecris Biotherapeutics (United States) by Grifols (Spain) and of OSI Pharmaceuticals (United States) by Astellas Pharma (Japan). This trend has continued into 2011. As for the prospect, the comparison of the first several months of 2011 and those of 2010 suggests a more solid recovery of FDI flows in 2011. The value of greenfield projects indicates that outflows will continue their recovery – at a faster rate. The values of greenfield projects from all the subregions in the first four months of 2011 are showing a 20– 25 per cent increase over the same period of 2010. Despite suffering from a serious natural disaster, Japan’s outward FDI flows are buoyant, in particular through cross-border M&As in 2011. For inflows, the picture is more mixed. Data on greenfield projects show a small overall decline for the region. In contrast, M&A data show a similar pattern to 2010: a robust increase in North America but declines in Europe and Japan. As growth prospects for major economies in the region, including the United States, are uncertain, the return of confidence and a recovery of inward FDI may take longer than was the case after previous FDI downturns.

governments were followed by a restructuring process of those banks, which in some cases resulted in divestments of foreign assets but in others generated new FDI (table II.11). Over the period from September 2008 to December 2010, divestment of foreign assets by the rescued banks resulted in a net decrease of FDI (i.e. assets abroad sold to a domestic bank in the host country) by about $45 billion. In the same period, the sell-offs of nationalized banks and their assets generated FDI worth about $35 billion.42 The restructuring of the banks that were beneficiaries of government rescue – a process which is still ongoing in 2011 – has been driven by concerns over competition in the banking industry and efforts towards the reform of the financial system. The future policy discourse over these issues is likely to have implications for the FDI flows of the financial industry for years to come. Restructuring and divestment. The bail-outs of the banks left governments holding substantial amounts of equity in the rescued banks. As financial markets around the world recovered some stability in the course of 2009 and 2010, governments began to seek exit from holding major stakes in the banks. In some cases, governments simply sold off their equity holdings through public offerings.43 In others, banks were required to restructure and to sell off assets while under government control. This process has generated FDI, resulting in further transnationalization of the banking industry, especially in Europe, where the competition policy of the European Commission was the major driving force behind the restructuring. The concerns of the European Commission were twofold. First, injection of public funds should not give the recipient banks an unfair competitive advantage. Second, consolidation of the industry resulting from acquiring weaker banks should not reduce competition in the industry. In the United Kingdom, for instance, in 2008 the Government injected £37 billion into its two largest banks, Lloyds Banking Group and the Royal Bank of Scotland, followed by additional support measures in the following year.44 As the price for the State bail-out, the European Commission required Lloyds to sell at least 600 branches and reduce its

b.  Bailing out of the banking industry and FDI The restructuring of the banking industry following government bail-outs in Europe and the United States has resulted in both divestment of foreign assets and generation of new FDI.
The financial crisis and the banking industry. Amid the turmoil in the financial markets which followed the failure of Lehman Brothers in September 2008, some of the largest banks in the world sought injections of capital from SWFs, rival banks or governments to shore up their balance sheets. In some cases, the bail-outs by foreign banks and SWFs were large enough to qualify as FDI.41 The bail-outs by national

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World Investment Report 2011: Non-Equity Modes of International Production and Development

Table II.11. Selected cases of government bail-out of international banks, 2008−2010
Bank Hypo Group Alpe Adria Dexia Government Austria Belgium France Luxembourg Fortis Belgium/Luxembourg Netherlands KBC Group Belgium Bail-out, 2008–2010 €450 million €3 billion €3 billion €376 million €9.4 billion/€2.5 billion €16.8 billion €7 billion Implications for FDI flows 67% stake worth €3 billion held by Bayerische Landesbank (Germany) written off when nationalized in 2009. 20% stake in Credit du Nord (France) sold for €645 million in 2009. 70% stake in Dexia Crediop (Italy) and 85.5% stake in Dexia Banka Slovensko (Slovakia) to be divested by October 2012; 60% stake in Dexia Sabadell (Spain) by December 2013. Sold to BNP Paribas (France) in 2009 Amlin (United Kingdom) acquiring Fortis Corporate Insurance from the Government of the Netherlands for €350 million in 2009. Investment banking unit, KBC Peel Hunt (United Kingdom), global convertible bonds and Asian equity derivatives businesses, and its reverse mortgage activities in the United States all divested. Its Swiss affiliates Dresdner Bank (Switzerland) and Commerzbank (Switzerland) divested in 2009. The following assets divested in 2010: Privatinvest Bank (Austria), Dresdner VPV (Netherlands), Dresdner Van Moer Courtens (Netherlands), and the Belgian affiliate of Commerzbank International (Luxembourg), Commerzbank International Trust Singapore, its United Kingdom affiliates, Channel Islands Holdings and Kleinwort Benson Private Bank, Allianz Dresdner Bauspar AG (ADB) (Austria), Dresdner Bank Monaco. Its affiliate in Germany Montrada GmbH, a card payments processing company, sold to a Dutch firm in 2010. Bailed out through State-owned development bank, KFW. Its 90.8% stake sold to the United States private equity fund Lone Star for $150 million in 2008. 22.4% stake in M&T Bank (United States) sold though public offering (agreed in October 2010). Bank Zachodni WBK (Poland) sold to Banco Santander (Spain) for €4 billion (purchase completed in March 2011). 50% stake in Paul Capital Investments (United States), a private equity fund, and its United States-based foreign currency business sold in 2011. Swiss private banking unit sold to Julius Baer (Switzerland) for $505 million; 51% equity stakes in ING Australia and ING New Zealand sold to the ANZ Bank (Australia) for €1.1 billion; and Asian Private Banking business sold for $1 billion in 2010. Most of its real estate investment management business around the world sold for $1.1 billion in 2011. 632 branches in the United Kingdom put up for sale in 2011 as agreed with the European Commission. Bank of Western Australia sold for $1.4 billion in 2008. 318 branches sold to Santander (Spain) in 2010. RBS WorldPay sold for £2 billion. Its stake in a Chinese affiliate reduced in 2009 and stake in Mexican affiliate disposed in 2010. Nikko Cordial Securities (Japan) sold for $5.8 billion and Nikko Asset Management (Japan) for $1.2 billion in 2009. Citi Cards Canada sold for $1 billion in 2009.

Commerzbank

Germany

€18.2 billion

IKB Deutsche Industriebank Allied Irish Bank

Germany

$3.1 billion

Ireland

€9.2 billion

Bank of Ireland

Ireland

€5.5 billion

ING

Netherlands

€10 billion

Lloyds TSB/HBOS

United Kingdom

£17 billion

RBS Bank of America Citigroup

United Kingdom United States United States

£20 billion $45 billion $25 billion

Source: UNCTAD, based on media reports, corporate press releases and annual reports.

market share by an agreed percentage by selling some of its operations.45 Similarly, the Royal Bank of Scotland was told to sell 318 branches, which were subsequently purchased by Santander (Spain) for £1.65 billion. The Spanish bank announced that it would inject £4.46 billion of equity capital to its affiliates in the United Kingdom, although

the deal is not expected to be completed until 2012.46 Furthermore, the Royal Bank of Scotland announced in 2010 an agreement to sell an 80 per cent share in its payment processing business to a consortium of United States private equity funds, Advent International and Bain Capital, for £2 billion.47

CHAPTER II Regional Investment Trends

73

In the case of the banks in the United Kingdom, some of the required sell-offs took the form of the sale of domestic assets to foreign investors, thus generating inward FDI. For other European banks, it often resulted in divestment of foreign assets, i.e. negative outward FDI. For instance, in return for receiving State support amounting to €18.2 billion over the period 2008–2010, Commerzbank was required by the European Commission to reduce its assets by 45 per cent, including its private bank operations in Belgium, Germany, the Netherlands and the United Kingdom. The sell-off of foreign assets has not been limited to European Banks. To address regulatory concerns, Bank of America sold part of its equity holdings in China Construction Bank for $7.3 billion in 2009 and its entire 24.9 per cent stake in Grupo Financiero Santander (Mexico) for $2.5 billion in 2010. A much more complex process of restructuring took place in the aftermath of the bail-out of Fortis (Belgium). In September 2008, the Governments of Belgium, the Netherlands and Luxembourg took the decision to buy 49 per cent stakes in Fortis’s respective national arms, jointly injecting €11.2 billion. Subsequently, the Government of the Netherlands renegotiated the bail-out package, to buy all of Fortis’s Dutch operation as well as the Dutch operation of ABN Amro, also previously owned by Fortis, for €16.8 billion. The Belgian part of Fortis, Fortis Bank, was fully nationalized in October 2008. In the following year, an agreement was reached between the Government of Belgium and BNP Paribas (France), whereby France’s largest bank took over a 75 per cent stake of Fortis Bank in an all-share exchange transaction. This deal left the Government of Belgium as the largest shareholder of BNP Paribas, with a stake of around 11.7 per cent in the French bank, which became the biggest bank in Europe in terms of deposits. For the Dutch part of the assets, it was reported in June 2009 that Lloyds of London insurer Amlin had agreed to buy Fortis Corporate Insurance for €350 million. Nationalization of Icelandic banks. One of the most spectacular banking failures during the financial crisis was the collapse of the Icelandic banks. The three largest banks in Iceland, Kaupthing, Landsbanki and Glitnir had to be nationalized in

October 2008, and the fourth largest, Straumur, followed suit in March 2009. In the process of subsequent restructuring, unsecured creditors (mostly foreign) agreed to a deal involving a debtequity swap, as a result of which the foreign creditors took control of the remnants of three of those banks. The Government of Iceland reached an agreement in November 2008 to hand over 95 per cent of Glitnir, renamed Islandsbanki, to creditors, which included RBS and Mitsui-Sumitomo Bank. Similarly, in December 2009, creditors of Kaupthing agreed to take an 87 per cent stake in Arion Bank, the successor to Kaupthing, that took over its healthy assets, as compensation and to inject further capital worth more than $500 million. Finally, an agreement was reached in September 2010 whereby holders of unsecured debt issued by Straumur, including hedge funds Davison Kempner and Varde Partners, assumed 100 per cent ownership of the bank’s remaining businesses. The exact equity shares taken over by foreign creditors in those deals are not known, but some of them are likely to have been over 10 per cent, in effect, turning their portfolio investment into FDI. At the same time, the restructuring of Icelandic banks has resulted in divestment of their foreign assets (e.g. retailers based in the United Kingdom), resulting in negative outward FDI from Iceland, but which, in turn, have generated FDI by private equity groups from a third country (mostly the United States). Prospects. The process of restructuring is still ongoing. In developed countries, the nationalization of banks is only a temporary measure and the equity held by governments will be sold off. Thus, FDI flows in the banking industry in the coming years are likely to be influenced by the policies of the competition authorities as well as the exit strategies of governments. In the longer term, the global efforts towards reforming the financial system could have important implications. For instance, Basel III, the revised international bank capital and liquidity framework, imposes tougher bank capital requirement rules. Although the implementation of these rules is to be gradually phased in, starting in 2013 up to January 2019, there is some evidence that banks have been reconfiguring their assets, including divestment of their foreign assets, in an effort to strengthen their capital base.

74

World Investment Report 2011: Non-Equity Modes of International Production and Development

B. Trends in structurally weak, vulnerable and small economies
1. Least developed countries
a. Recent trends
Table A. Distribution of FDI flows among economies, by range,a 2010
Range
Above $10.0 billion $2.0 to $9.9 billion $1.0 to $1.9 billion $0.5 to $0.9 billion

Inflows
.. Angola and Democratic Republic of the Congo Sudan and Zambia Niger, Bangladesh, Madagascar, Uganda, Mozambique, Cambodia, Chad, Myanmar, United Republic of Tanzania and Equatorial Guinea Angola

Outflows
.. ..

Table B. FDI inflows and outflows, and cross-border M&A sales and purchases, 2009–2010 (Billions of dollars)
Region
Least developed countries (LDCs) LDCs: Africa LDCs: Latin America and the Caribbean LDCs: Asia LDCs: Oceania

FDI inflows 2009
26.5 23.8 2.6 0.2

FDI outflows 2009
0.4 0.3 0.1 0.0

2010
26.4 23.1 0.2 2.9 0.3

2010
1.8 1.7 0.1 0.0

Cross-border M&A sales 2009 2010
- 0.8 - 0.5 - 0.3 0.0 2.2 2.0 0.1 0.1 -

Cross-border M&A purchases 2009 2010
0.4 0.3 0.1

..

$0.1 to $0.4 billion

Lao People's Democratic Republic, Guinea, Timor-Leste, Liberia, Solomon Islands, Senegal, Ethiopia, Zambia and Senegal Haiti, Mali, Malawi, Somalia and Benin Afghanistan, Central African Republic, Eritrea, Lesotho, Rwanda, Togo, Nepal, Vanuatu, Gambia, Burkina Faso, Sierra Leone, Djibouti, Burundi, Mauritania, Bhutan, Comoros, Guinea-Bissau, Kiribati, São Tomé and Principe, Samoa, Tuvalu and Yemen Yemen, Sudan, Liberia, Cambodia, Bangladesh, Niger, Democratic Republic of the Congo, Benin, Lao People's Democratic Republic, Sierra Leone, São Tomé and Principe, Mali, Mauritania, Solomon Islands, Malawi, Vanuatu, Mozambique, Burkina Faso, Kiribati, Guinea-Bissau, Samoa and Togo

Table C. FDI inward and outward stock, and income on inward and outward FDI, 2009-2010 (Billions of dollars)
Region FDI inward stock 2009 2010 FDI outward stock 2009 2010
7.4 6.5 0.9 10.9 9.9 1.0 0.1

Income on inward FDI 2009 2010
16.3 10.7 5.4 0.2 19.6 13.0 6.4 0.2

Income on outward FDI 2009 2010
0.3 0.3 0.4 0.4 -

Below $0.1 billion

a

Economies are listed according to the magnitude of their FDI flows.

Least developed 127.8 151.7 countries (LDCs) LDCs: Africa 100.2 121.0 LDCs: Latin America 0.5 0.6 and the Caribbean LDCs: Asia 26.2 28.9 LDCs: Oceania 0.9 1.2

Figure A. FDI inflows, 2000–2010
35 30 25 $ billion 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Asia Oceania Africa Latin America and the Caribbean FDI in ows as a percentage of gross xed capital formation 35 30 25 20
$ billion

Figure B. FDI outflows, 2000–2010
3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Oceania Asia Africa Latin America and the Caribbean

15 10 5 0

Table D. Cross-border M&As by industry, 2009–2010 (Millions of dollars)
Sector/industry
Total Primary Mining, quarrying and petroleum Manufacturing Food, beverages and tobacco Textiles, clothing and leather Wood and wood products Chemicals and chemical products Metals and metal products Machinery and equipment Electrical and electronic equipment Precision instruments Services Electricity, gas and water Trade Transport, storage and communications Finance Business services

%

Table E. Cross-border M&As by region/country, 2009–2010 (Millions of dollars)
Region/country
World Developed economies European Union United States Australia Developing economies Africa North Africa Sub-Saharan Africa Uganda Zambia Latin America and the Caribbean Panama Asia West Asia South, East and South-East Asia South-East Europe and the CIS Ukraine

Sales 2009
- 774 8 8 11 11 - 793 - 346 - 354 - 94

2010
2 201 1 094 1 094 94 65 10 20 1 013 110 903 -

Purchases 2009 2010
16 16 16 354 2 2 96 95 1 257 257 -

Sales 2009
- 774 -1 156 -1 160 - 15 372 354 324 30 -5 23 23 -

2010
2 201 1 655 786 1 300 - 427 511 252 252 257 259 - 280 539 35 35

Purchases 2009 2010
16 16 16 354 2 1 352 257 257 257 95 95 -

The accumulated stock of inward FDI in LDCs now stands at $152 billion. where FDI flows were equivalent to as high as 25 per cent of gross fixed capital formation over most of the past decade. account for two-thirds of the total inward stock. followed by manufacturing (36 per cent). Most investments in 2010 were in the form of greenfield projects. This unprecedented two-year retreat in FDI inflows to LDCs has taken place against a backdrop of rising commodity prices. 2011b). 2011b). Bangladesh and Uganda.CHAPTER II Regional Investment Trends 75 FDI inflows to the 48 LDCs declined by a further 0. following the 20 per cent fall a year earlier that had interrupted the upwards trend of the previous decade (table B and figure A). Equatorial Guinea and Sudan – saw their FDI inflows reduced. There was a particularly impressive expansion of global TNCs investing in Mozambique. accounting for 48 per cent of the total. such as in telecommunications. extraction activities account for the majority of inflows. rather than developed economies. Uganda and Mozambique. Cross-border M&A sales turned positive in 2010.400 jobs (UNCTAD. the shares of developing and transition economies in LDCs’ FDI stock vary from 30 per cent in Malawi to more than 70 per cent in Cambodia. The FDI pattern in LDCs is also evident from the expanding presence of the largest TNCs. in that order) with FDI stocks of more than $5 billion as of 2010. were through mergers and acquisitions.9). This concentration of FDI in a limited number of resource-rich countries continues to increase. FDI is a key source of technology and management know-how. and most countries have seen a considerable increase in their . This is especially so in African LDCs. amounting to $2. There were 288 such projects of a significant size (annex table I. judging by FDI project data (crossborder M&A and greenfield investment projects). Currently. European companies accounted for the largest share of FDI flows from developed countries to LDCs. service industries such as financial services. as FDI is a major contributor to their capital formation (figure A). Malawi. which have become major players with respect to international investment. Rwanda. Many large FDI projects were in base metals and oil prospecting and exploitation.2 billion in 2010 (tables D and E). Equatorial Guinea. Sudan and Zambia – received over half of total FDI into LDCs. Djibouti. which generated a total of 67. Fifty- six per cent of the deals originated from developing and transition economies. some 75 TNCs have pulled out from LDCs during the past decade (UNCTAD. As of 2010. in contrast to 2008 and 2009. The delay in recovery of FDI flows to LDCs is a matter of grave concern. The distribution of FDI flows among LDCs remains highly uneven. Myanmar. FDI via M&As is still limited in LDCs. Bangladesh. which totalled $37. respectively. transportation and communications represented the majority of investments. while in Asian LDCs services industries such as telecommunications and electricity have attracted more foreign investment. Zambia.8). Almost two-fifths of the LDCs – in particular Yemen. FDI in telecommunications is on the rise in African LDCs. with over 36 per cent of the world total (UNCTAD. In terms of the number of deals. The projects were concentrated in the primary and manufacturing sectors. Substantial shifts are taking place in world FDI patterns. In addition. some of the large investments. Four mostly natural resources exporting countries – Angola.6 per cent in 2010 to $26 billion. the United Republic of Tanzania. Burkina Faso. Sudan. Mauritania. However. and a 10 per cent increase in inflows to developing and transition economies. while FDI to Asian LDCs is primarily in manufacturing or services such as electricity. due to the emergence of FDI from developing economies. 2011b). accounting for 44 and 39 per cent of the total. In Africa. whose presence in LDCs doubled over the past decade. exports and technology flows into LDCs. However the 10 countries (Angola.1 billion in their combined (foreign and domestic) capital expenditures (annex table I. which are of particular importance for LDCs. compared with 17 per cent in services. when they were negative. In particular. but their number has nearly doubled over the last decade. Cambodia. Equatorial Guinea. The primary sector accounted for just 11 per cent of the deals. a modest recovery in global FDI flows.

rather than cross-border M&A. and holds the potential to boost productivity and significantly affect development patterns in LDCs. and has been more resilient during the recent global economic crisis. FDI from Brazil. FDI flows to LDCs had grown at an annual rate of 15 per cent during the last decade. On average. Germany is the country that has signed most BITs with LDCs (33). in particular. Turkey. Data for the first four months of 2011 on greenfield investment. FDI prospects for LDCs remain challenging. Also.48 . However. to agriculture. oil and gas and agriculture. It has been less volatile than that from developed countries. contributing to further divergence in economic performance among LDCs. which is the main mode of investment in LDCs. accounting for only 1 per cent of world trade flows (exports plus imports) in industrial goods. and transfers of skills and knowhow have been limited. finance. LDCs had concluded a total of 455 BITs and 188 DTTs. By the end of 2010. In addition. In addition. followed by Switzerland (26) and China (19). and on what can be done to improve the situation in the light of UNCTAD´s long-standing work on FDI in LDCs. and inflows have stagnated or declined in some countries. there are serious challenges that require renewed policy efforts at the national and international levels if FDI is to effectively contribute to sustainable development in LDCs (see the following section). investments from the Gulf Cooperation Council (GCC) countries in African LDCs have recently increased in industries such as telecoms. the predominance of FDI in natural-resource extraction has reinforced the commodity dependence of LDCs. LDCs concluded nine BITs and four DTTs per country. infrastructure. LDCs as a whole still remain at the margin of global value chains. FDI linkages with the domestic economy have been hard to establish. show further decline of 25 per cent (annex table I. India and South Africa. they have become more diversified in recent years in a number of host countries.76 World Investment Report 2011: Non-Equity Modes of International Production and Development proportion in recent years. and recent regulatory reforms have made several LDC economies more attractive to FDI. The study found that despite the recent setback. The report focuses on the challenges LDCs face in attracting and benefiting from FDI. in May 2011. regional and multilateral levels in order to enhance international cooperation and/or integration in matters relating to FDI. exacerbating their unbalanced economic structures and vulnerability to external shocks. South-South FDI is likely to play an increasing role for LDCs in the future. Some LDCs have succeeded in diversifying the type of FDI they attract. 2011b). and regional disparities inside countries remain acute. raising their share in global FDI flows from less than 1 per cent to over 2 per cent by 2010. The geographic concentration of FDI flows has increased over the past decade. but over 80 per cent of total FDI flows went to resource-rich economies in Africa. While such investments focused principally on extractive industries at first. compared with 14 BITS and 12 DTTs for all developing countries. tourism. UNCTAD carried out a broad review of FDI trends in LDCs over the past decade since the Brussels Declaration and the Programme of Action for the Least Developed Countries (BPoA). which includes subsistence agriculture. Increased attention has been paid by many LDCs to policy initiatives at the bilateral. On the partners' side. Most LDCs are still characterized by a dual economy in which a relatively small formal private sector coexists with a large informal segment. examining the impact of FDI on their economies with a view to proposing a plan of action to enhance its effectiveness (UNCTAD. with a weak impact on employment generation. has become sizeable in many African LDCs.8). held in Istanbul. to commerce and finance. b. E  nhancing productive capacities through FDI In preparation for An ambitious new plan of action the Fourth United for FDI in LDCs to enhance Nations Conference productive capacities is urgently on the Least Develneeded. ranging from manufacturing. The regulatory conditions established in many LDCs are on a par with those in other developing countries. Although starting from a low base. China. partly because it is less dependent on debt financing. oped Countries. mining.

• Regulatory and institutional reform. taking into account the changed circumstances and the lessons of the past decade. • Aid for productive capacity. Shortfalls in terms of skills and human capital are at least as big a constraint on development in LDCs as poor physical infrastructure. An aid-for-productivecapacity programme focusing on education. UNCTAD’s plan of action for LDCs builds on the reforms and efforts that have been undertaken in recent times.CHAPTER II Regional Investment Trends 77 Technological advances and organizational changes in the global economy and within TNCs are fundamentally altering the way goods and services are produced. Successfully addressing the problem calls for strengthened PPP initiatives for infrastructure development and a strong role for private investment. • Building on investment opportunities. These are summarized in table II. TNCs are increasingly outsourcing parts of their value chains. New initiatives to support SME development and linkages with TNCs are essential. there are specific measures to be taken by each stakeholder. capacity-building and enterprise development. In these five areas of action. which LDCs need to attract on a much larger scale and sustainable basis if they are to integrate into global value chains. and places production and employment at the heart of policies. as well as potential for high returns on investment. Efforts need to be redoubled to enable firms of all sizes to capture opportunities in LDCs. There are five key areas: • Public–private initiatives in infrastructure. in order to increase their efficiency and competitiveness and avail of the lowest worldwide cost options. where markets are typically small and operating conditions are more challenging. Large TNCs frequently bypass investment opportunities in LDCs. While significant reforms have been carried out in LDCs in this area in the past 10 years. • Local business development and access to finance. much remains to be done. Poor physical infrastructure constrains not just FDI. LDCs offer significant untapped business opportunities for nimble and innovative investors of a more modest size. development partners and home countries of TNCs – and envisages a clear role for the private sector itself. The presence of efficient and dynamic local businesses is particularly important for efficiencyseeking foreign investors. LDCs need to launch the next wave of regulatory and institutional reforms to further strengthen the relevant State institutions and their implementation capacities within a partnership-based approach.12. but strives to present new ways of addressing old problems. The plan calls for steps to be taken by all key stakeholders involved – governments in LDCs. training and transfer of skills is called for. This in turn requires new approaches and development policies for LDCs. The emphasis is on an integrated policy approach to investment. with a better balance between markets and the State. . However. Global value chains with a high degree of specialization have become the norm. but more generally the development of productive capacities and LDCs’ ability to reap the benefits of economic globalization. The relevant new paradigm implies a more proactive approach to developing productive capacities.

environment.12. “impact investment” regulatory framework. pipeline of projects and regional coordination. strengthen State institutions. . • Technical assistance for regulation and Legal and regulatory framework for PPPs. into business opportunities in LDCs: IPA–EPA e. telecom services. service SME FDI. Proactively promoting of the primary sector with •   Home-country measures to help firms tap opportunities for fast technological catching-up. Proactive targeting of SME FDI and “impact  • Risk coverage institutions at the national level to investors”. Regulatory reform to enable SME access to bank •   Support for increased lending and credit lending and strengthen financial infrastructure.78 World Investment Report 2011: Non-Equity Modes of International Production and Development Table II. and strengthened infrastructure and regulatory and institutional development banks. investors on draft laws. with  implementation of infrastructure PPPs. Increased public investment in technical and  • Aid-for-productive capacity funds.  Strengthened efforts to combat corruption under  top to bottom zero-tolerance policy. coordination mechanisms. Building on mutually reinforcing interests: avoid  • Adoption of home-country measures to support command and control regulatory bias. • Systematic institution twinning. Plan of action for investment in LDCs Actions • Strengthen public-private infrastructure development efforts Selected measures on the part of… LDC governments Development partners Pursuing a liberalization of infrastructure sectors •   LDC infrastructure development fund focused and stable regulatory frameworks to ensure on infrastructure PPPs: risk coverage. oversight of systematic consultation mechanisms with business practices by TNCs. • Strengthened technical assistance on key New reform to put increasing emphasis on  regulatory issues. support for technical and vocational training and entrepreneurship. • • Boost aid for productive capacity • • Enable firms of all sizes to capture LDC opportunities • • Foster local business and ease access to finance • • • Start the next wave of regulatory and institutional reform • • • Source: UNCTAD. including vocational training. interest.g. Build client-oriented investment institutions. Credit guarantee schemes for micro. Simplification of procedures for formal business  development. Reform of immigration and work permitting  procedures. establish LDCs: tax engineering avoidance. small  • Technical support for the development of financial and medium-sized firms. including taxation and aspects of regulations that shape FDI impact and competition. renewable energy. direct competitive outcomes and protect the national participation and lending on soft terms. including taxation and competition. guarantee schemes for SMEs. 2011b.

Uganda. and income on inward and outward FDI. Uzbekistan.3 0.2 2010 25.3 0. Cross-border M&As by region/country.6 1.0.1 34. Mali. quarrying and petroleum Manufacturing Food.1 8.0 1.3 .8 $10 to $99 million Mongolia. Cross-border M&As by industry.6 2010 . Azerbaijan and Botswana Paraguay.1 2010 0. Rwanda. Armenia.0. 2009–2010 (Billions of dollars) FDI inflows Region 2009 26.5 0.3 0.1 0. Plurinational State of Bolivia.0 6.0 Figure A. Republic of Moldova.1 0. Tajikistan. Burkina Faso. Chad.8 2010 8. Ethiopia. Botswana and Plurinational State of Bolivia a Economies are listed according to the magnitude of their FDI flows. Landlocked developing countries a. by range.5 2010 27.24 .6 2. Armenia. Landlocked countries (LLCs) Africa Latin America and the Caribbean Asia and Oceania Transition economies 149.3 1.24 518 261 260 257 257 - .0 5. storage and communications Finance Public administration and defence Other services Table E.5 Cross-border M&A sales 2009 1. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Japan Developing economies Africa Latin America and the Caribbean British Virgin Islands Asia West Asia South.1 12.0.24 5 2010 639 45 45 44 0 42 1 551 110 0 371 69 - Purchases 2009 2010 -8 1 216 1 216 -1 224 -1 224 518 123 123 395 396 -1 - Sales 2009 1 708 75 .3 . Central African Republic. beverages and tobacco Wood and wood products Chemicals and chemical products Non-metallic mineral products Metals and metal products Machinery and equipment Electrical and electronic equipment Services Electricity. Swaziland.6 9.2 4. FDI inflows.5 0. FDI outflows. Nepal.1 4.4 0.247 335 0 . Mali.5 0.0.2 .4 Below $10 million .8 0.1 169.0.. Turkmenistan.6 0. and cross-border M&A sales and purchases. Republic of Moldova. Lao People's Democratic Republic.4 1.2 .2 0.3 0. Recent trends Table A.198 2010 639 88 89 .7 19.0 10. Paraguay.2 3.3 0. $100 to $499 million Zambia and Azerbaijan Table C.2 22. East and South-East Asia China India Indonesia Thailand South-East Europe and the CIS Russian Federation Sales 2009 1 708 1 614 1 614 25 11 10 4 70 . 2009–2010 (Millions of dollars) Sector/industry Total Primary Mining. FDI inflows and outflows.7 0. Mongolia and Zambia Niger.6 29. Malawi and Zimbabwe Swaziland.53 52 1 831 74 1 757 30 1 727 3 558 -2 604 . Kyrgyzstan.1 FDI outflows 2009 3.418 .2 14.0 117.24 .2 15. 2009-2010 (Billions of dollars) Region FDI inward stock 2009 2010 FDI outward stock 2009 15.6 104.6 2.1 Income on outward FDI 2009 .2 0. Distribution of FDI flows among economies. 2000–2010 30 25 20 $ billion 15 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 10 2 5 0 0 Asia and Oceania Transition economies Latin America and the Caribbean Africa FDI in ows as a percentage of gross xed capital formation 35 30 25 20 $ billion Figure B.4 Cross-border M&A purchases 2009 - Kazakhstan Landlocked countries (LLCs) Africa Latin America and the Caribbean Asia and Oceania Transition economies 2010 23.4 0.0 2. Lao People's Democratic Republic. gas and water Trade Transport.1 . FDI inward and outward stock.2 20.17 -3 550 303 246 0 246 46 80 110 - Purchases 2009 2010 -8 -8 16 16 . Zimbabwe and Niger Income on inward FDI 2009 19. Burundi and Bhutan Outflows Table B.. 2000–2010 10 Transition economies Asia and Oceania Latin America and the Caribbean Africa 8 6 % 4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D.1 0.1 3.a 2010 Range Above $1 billion $500 to $999 million Inflows Kazakhstan. Kyrgyzstan. Lesotho.198 . Burkina Faso.CHAPTER II Regional Investment Trends 79 2. the FYR of Macedonia.4 8. Afghanistan.0. Malawi.2 0. the FYR of Macedonia.2 2010 0.9 1.2 0.

cross border M&A database (www. $1 billion and $950 million. Inherent geographical disadvantages and structural macroeconomic weaknesses have hampered the overall economic performance of these countries. thereby enhancing their productive capabilities and generating employment. In contrast. For instance. have received more diversified FDI inflows. Paraguay (Latin America) and Uzbekistan (Central Asia). $2. FDI inflows to the 31 landlocked developing countries (LLDCs)49 declined by 12 per cent to $23 billion (table B and figure A). For instance. In the LLDCs. greenfield investments are more significant than cross-border M&As.50 Similarly. Mongolia has demonstrated high performance in attracting FDI (up by 171 per cent to $1. They also face severe constraints in attracting FDI inflows. but inflows to the country have concentrated in mining industries. electronics.5 per cent in 2009. food and beverages. Turkmenistan (both in the CIS). Some large greenfield projects highlight the success of a number of LLDCs in attracting FDI. respectively (table A).unctad. privatization in telecommunications led to significant foreign investment through M&As. TFYR National Bank of Greece SA Kyrgyzstan Uganda Zambia Kazakhstan Mongolia Investor Group McLeod Russel India Ltd Nava Bharat Ventures Ltd Punjab National Bank Windy Knob Resources Ltd Source: UNCTAD. weak infrastructure and high transportation costs. Large cross-border M&As also took place in financial services. LLDCs accounted for 3. while in Zambia. including the small size of their economies. Though not yet reflected in FDI statistics.6 per cent of FDI flows to all developing and transition economies. down from 4.100 jobs. creating about 1. The 10 largest cross-border M&As in LLDCs. Uzbekistan attracted greenfield FDI projects in a number of manufacturing industries in 2010. an Indian-funded project in the food industry. nec Mining Banks Coal mining Value Share ($ million) (%) 257 110 77 51 46 40 30 26 24 8 75 15 51 40 22 78 100 65 64 100 Zimbabwe Alloys Chrome(Pvt)Ltd Zimbabwe Stopanska Banka AD OAO Kyrgyztelekom Rwenzori Tea Investments Ltd Maamba Collieries Ltd AO Danabank Ovoot Coking Coal Project Macedonia. some projects announced in 2010 will be implemented in the years to come and drive up FDI inflows to countries such as Uganda. is expected to create about 340 jobs. . While the largest projects were concen­ trated in extractive industries (table II. some of them have made significant progress in attracting FDI inflows over the past decade. Mongolia (East Asia). a number of countries in different regions. such as Ethiopia (Africa). Xinxiang Kuroda (China) invested $67 million in a project in the textiles industry in Ethiopia.org/fdistatistics). chemicals. The performance of LLDCs in attracting FDI inflows varies widely (table A). and textiles. including the automotive industry. Large cross-border M&A deals in LLDCs have been increasingly targeting services (table II. Table II.14).4). $1. The five largest recipients of FDI in this special grouping of structurally weak economies were Kazakhstan. also in Ethiopia. as the result of economic reforms. including from other developing countries.13. with inflows of $10 billion. including in automotives.1 billion. Zambia (Southern Africa) and Niger (West Africa). chemicals and consumer electronics (box II.7 billion. Kazakhstan and Kyrgyzstan. a significant amount of investment also took place in manufacturing. covering a wider range of industries and business functions. building materials.80 World Investment Report 2011: Non-Equity Modes of International Production and Development In 2010. However. investment liberalization and favourable external economic conditions (WIR10). 2010 Target company Zambia Telecommunications Co Ltd Nam Theun 2 Power Co Ltd TOO Mobile Telecom Service Country Zambia Lao PDR Kazakhstan Acquiring company Libya Africa Investment Portfolio Investor Group Tele2 AB Metmar Ltd Home country Libyan Arab Jamahiriya Thailand Sweden South Africa Greece Cyprus India India India Australia Industry Telecommunications Energy Telecommunications Electrometallurgical products Banks Telecommunications Food preparations.13).7 billion in 2010). For instance.

The 10 largest greenfield projects in LLDCs.fDimarkets. In the automotive components industry. a local company.4. the country has attracted some large greenfield projects in manufacturing. Box II. the new plant will produce a compact sedan in late 2011.fDimarkets. The facility will supply 150. for instance.14.1.34 billion project is being funded from the United Arab Emirates.1). With a total investment of $136 million. a For instance.com). These large projects illustrate the success of government policies in attracting FDI in manufacturing to Uzbekistan. established an international joint venture with a total investment of $13 million. Box table II. oil and natural gas Chemicals Coal. Erae Cs Ltd (Republic of Korea) and Uztosanoat. have contributed to this success. oil and natural gas Coal. Islamic Republic of Germany Korea. oil and natural gas Transportation Communications Communications Metals Industry Host country Paraguay Uganda Uganda Uzbekistan Uganda Kazakhstan Afghanistan Botswana Uganda Zambia Home country United Kingdom United Kingdom Kenya United Arab Emirates Mauritius Russian Federation United Arab Emirates United States South Africa Brazil Investment ($ million) 6 000 5 000 1 701 1 340 749 500 497 470 468 400 Source: UNCTAD. and a company from Singapore has signed a deal for a joint venture project for polyethylene production. GM Uzbekistan produces seven models of automotive vehicles in the country. Selected FDI projects in manufacturing in Uzbekistan.4. based on information from the Financial Times Ltd. b Currently. Source: UNCTAD.400 in 2010. starting production in the second half of 2011.CHAPTER II Regional Investment Trends 81 Table II.com). Overcoming the disadvantages of being landlocked: experience of Uzbekistan in attracting FDI in manufacturing Uzbekistan is an LLDC with a GDP of $39 billion and GDP per capita of $1. . It seems that institutional advantages can help LLDCs overcome their geographical disadvantages.000 km of car cables per year to General Motors’ new plant in Uzbekistan. 2010 Investor or project International Petroleum Investment Company Omnivest Knauf EMG CLAAS Erae Cs Ltd LG Industry Chemicals Pharmaceuticals Building materials Ceramics and glass Industrial machinery Automotive components Consumer electronics Home country United Arab Emirates Hungary Germany Iran. which includes guarantees for foreign investors and certain preferences for them. oil and natural gas Coal.b In the petrochemicals industry.a In recent years. FDI to the country has increased since the mid-2000s as a result of a privatization programme. A favourable investment climate and a sound framework of FDI legislation. 2010 Investor or project Rio Tinto Group Tullow Oil Kenol-Kobil Group (KenolKobil) International Petroleum Investment Company Albatros Energy Lukoil Move One Globalstar Dimension Data Holdings (DiData) Vale (Companhia Vale do Rio Doce) Metals Coal. Republic of Investment ($ million) 1 340 100 50 24 20 13 9 Source: UNCTAD. Republic of Korea. based on information from the Financial Times Ltd. a $1. and Uzbekistan provides an example in this regard. and foreign investors purchased 28 companies for $115 million in 2007 alone. fDi Markets (www. the Government privatized more than 600 enterprises each year in 2006 and 2007.4. fDi Markets (www. with a number of them announced or implemented in 2010 (box table II.

Table II.51 A few LLDCs have been particularly successful in leveraging TNC participation to improve their infrastructure. and concession (table II. but has devoted a significant amount of investment to upgrade the century-old transport system and increase the traffic volume. the Lao People’s Democratic Republic and Uganda have successfully implemented a number of large electricity generation and transmission projects with the involvement of TNCs from both developed and developing countries. won a 25-year concession to operate the combined Kenya and Uganda railway system. build-own-operate (BOO). The company underwent several rounds of restructuring.3 billion. including various forms of PPPs.15). in 2005. PPP arrangements have . Infrastructure development is crucial for LLDCs to reduce high transaction (communication and transportation) costs. multilateral support was involved. 12 large infrastructure development projects of at least $100 million each with TNC participation were undertaken in seven LLDCs.  Leveraging TNC participation in infrastructure development Under appropriate regulatory frameworks and proactive policies. such as in the TE–TO Skopje electricity generation project in the former Yugoslav Republic of Macedonia and the Aktau airport terminal project in Kazakhstan. TNCs have been involved in these infrastructure projects through different modalities. as in the two largest electricity projects in the Lao People’s Democratic Republic and Uganda. For instance. in particular in electricity. TNCs are often attracted by the growth potential in host developing countries and regions. such as build-operatetransfer (BOT). TNC participation has helped mobilize significant amounts of capital for the development of infrastructure in LLDCs.15 were associated with a total investment of $5. making use of the private sector and leveraging the potential contribution of TNCs (WIR08).15). In other cases.82 World Investment Report 2011: Non-Equity Modes of International Production and Development With intensified South–South economic cooperation and increasing capital flows from emerging markets. TNCs form joint ventures with local partners. governments need to introduce specific infrastructure development strategies. overcome geographic disadvantages and move onto a path of sustainable development and poverty reduction. as well as Azerbaijan. respectively. sometimes. the former Yugoslav Republic of Macedonia (two projects) and Afghanistan (two projects). TNCs from different home countries have set up joint ventures for a project. Rift Valley Railways. In a number of LLDCs. the total amount of investment of recorded greenfield projects jumped by over 40 per cent in the first four months of 2011. In some cases. namely Uganda (three projects). During 2005-2010. including through various forms of public-private partnerships. The projects listed in table II. greenfield investment and other forms of TNC participation have contributed to infrastructure development. as well as by business opportunities triggered by new liberalization and deregulation initiatives. which is badly needed to bring them on a track of fast and sustainable development. compared with the same period of 2010. A systematic turnaround strategy was implemented to improve the services and a considerable reduction in railrelated accidents bolstered customers’ confidence. a consortium led by Sheltam (South Africa). prospects for FDI inflows to the grouping of LLDCs are promising. helped infrastructure TNCs mitigate risks and overcome difficulties in their operations abroad. which is in line with the general situation of TNC participation in infrastructure in the developing world (WIR08). For example. and. Indeed. b. Furthermore. for 2011 and beyond. but a number of large projects for extending transport networks and building transport utilities in LLDCs have brought in substantial financial resources.15 shows that TNCs’ contributions have been high in electricity generation and mobile telecommunications. Few projects were recorded in water and sanitation. transport and telecommunications. To realize the objective of rapid infrastructure build-up. Bhutan and Rwanda (one project each) (table II. TNCs can help develop badly needed infrastructure in LLDCs. The impact on financing and investment varies by industry. Lao People’s Democratic Republic (two projects).

provides useful lessons. Ratchaburi Electricity Generating Holding Plc (Thailand) Abu Dhabi Group (United Arab Emirates). (Russian Federation). in which TNCs are involved in the development of a transport network for facilitating trade and regional integration. Trans Century Ltd. Toplifikacija (Macedonia. For instance. proactive national policies and regional integration efforts have brought benefits of infrastructure improvement and associated socioeconomic development to LLDCs.52 and the Governments of Kenya and Uganda plan to build a new railway from the port of Mombasa. (Kenya) Emirates Telecommunications Corporation (Etisalat) (United Arab Emirates) Extel (United Kingdom). Thailand and Malaysia will start in 2011. The project will bring a significant amount of foreign investment and advanced technology to related countries. At present the railway system handles less than 6 per cent of cargo passing through the Northern Corridor. 2005−2010 Project Nam Theun II Hydropower Project Bujagali Hydro Project Nam Ngum 2 Hydro Power Plant Warid Telecom Uganda Limited Kenya-Uganda Railways Etisalat Afghanistan Country Lao PDR Industry Energy Segment Electricity generation Electricity generation Electricity generation Various services Railroads Investment ($ million) 1250 TNCs involved Italian-Thai Development Public Company (Thailand). Electricite de France (France) Sithe Global Power (United States).56 Construction of a high-speed railway system linking China and Singapore and passing through the Lao People’s Democratic Republic. FYR Energy Airports Electricity generation 295 233 Concession BOO 2008 2007 Dagachhu Hydro Power Project Areeba Afghanistan Millicom Rwanda Bhutan Afghanistan Rwanda Energy Telecommunications Telecommunications Electricity generation Mobile access Mobile access 201 133 117 BOO Greenfield Greenfield 2009 2005 2009 Source: UNCTAD.53 The example of the Maputo Corridor. Celex Communications (United Kingdom) TAV Airports Holding Co.15.55 The ASEAN Highway Network Project has helped improve road transport in the Lao People’s Democratic Republic. Aga Khan Fund (Switzerland) Modality BOT Year 2005 Uganda Energy 799 BOT 2007 Lao PDR Energy 760 Ch Karnchang Company Limited BOT (Thailand). with investment above $100 million. Sintez Group (Russian Federation) Tata Enterprises (India) MTN Group (South Africa) Millicom International (Luxembourg) Greenfield 2006 Afghanistan Telecommunications Telecommunications Mobile access 340 2006 Azerfon Azerbaijan Mobile access 300 Greenfield 2006 Skopje and Ohrid Airports Concession TE-TO Skopje Macedonia. (Turkey) Itera Holding Ltd. FYR Transport Macedonia. based on World Bank PPI database.54 In Asia.CHAPTER II Regional Investment Trends 83 Table II. Infrastructure development projects with TNC participation in LLDCs. FYR). Siemens AG (Germany). the Lao People’s Democratic Republic has introduced a “land-linked” strategy in parallel with regional and subregional infrastructure development schemes. and will play a particularly significant role in infrastructure . Essar Group (India) Greenfield 2006 Uganda Telecommunications Transport 481 2007 Uganda 404 Sheltam Rail Company (Pty) Ltd Concession (South Africa). within the frameworks of ASEAN and the Greater Mekong Subregion.

the development of region-wide transport infrastructure is a vital way for those countries to access regional markets and sea ports. in an enabling institutional environment (including a high-quality regulatory framework. . and regional collaboration among developing countries should be encouraged. The cases discussed above show that. private or through some forms of PPPs – as well as to identify the potential role of TNCs and to design the framework of specific projects. and their involvement can help mobilize financial resources and increase investment levels in infrastructure industries in LLDCs. Governments in LLDCs need to develop the capacity to assess the feasibility and suitability of different forms of infrastructure provision – whether public. and TNCs. Capacity-building needs to be strengthened in this regard. an effective riskmitigation system and proper investment promotion activities). can play an important role in this regard. TNCs can be engaged in various types of infrastructure development projects. particularly those from the South.84 World Investment Report 2011: Non-Equity Modes of International Production and Development development in the Lao People’s Democratic Republic. In particular.

Grenada and Barbados Vanuatu.4 0. Seychelles.175 8 987 698 94 603 603 328 . Papua New Guinea. São Tomé and Principe.7 0. 2009-2010 (Billions of dollars) Region Small island developing states (SIDS) Africa Latin America and the Caribbean Asia Oceania $1 to $49 million Seychelles.. Maldives..7 0. Palau.8 2.2 0. Cape Verde and Samoa Economies are listed according to the magnitude of their FDI flows.4 0. Fiji. Bahamas and Trinidad and Tobago Mauritius.5 0.5 9.6 0.188 220 .11 95 95 77 -3 . Outflows .8 60. Timor-Leste. Fiji. Federated States of Micronesia.8 46. Saint Kitts and Nevis. FDI inflows and outflows. 2009–2010 (Millions of dollars) Region/country World Developed economies European Union United States Australia Japan Developing economies Africa Latin America and the Caribbean Asia West Asia South. Cape Verde and Antigua and Barbuda Saint Lucia.2 0. Comoros. Solomon Islands. Cross-border M&As by region/country.5 FDI outward stock 2009 2010 3.2 0. by range.8 2. Recent trends Table A.8 4.2 0.a 2010 Range Above $1 billion $500 to $999 million Inflows . Kiribati.2 0.3 Income on inward FDI 2009 2010 2. Figure A. Cross-border M&As by industry.320 237 . Marshall Islands.6 0. Tonga. Small island developing States a..7 48.1 0.10 28 361 6 355 355 172 181 161 113 18 100 -4 1 48 . Papua New Guinea. 2009–2010 (Billions of dollars) Region Small island developing states (SIDS) Africa Latin America and the Caribbean Asia Oceania FDI inflows 2009 4.11 . Barbados and Vanuatu FDI inward stock 2009 2010 56. and cross-border M&A sales and purchases.5 - Below $1 million a Kiribati.63 163 176 - Purchases 2009 2010 393 31 .CHAPTER II Regional Investment Trends 85 3.1 0.2 0.3 0. Dominica.23 3 100 Sales 2009 31 . Samoa and Tuvalu .6 5. 2009–2010 (Millions of dollars) Sector/industry Total Primary Mining.9 0.8 0.0 0.7 2.3 0. Solomon Islands. São Tomé and Principe. . 2000–2010 Oceania Africa Asia Latin America and the Caribbean FDI in ows as a percentage of gross xed capital formation 1.3 3.6 4.4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Table D.4 0.2 0.0 0.2 0.5 0.207 22 .5 2010 0.88 90 47 47 10 38 -1 - . Saint Vincent and the Grenadines.9 0.1 $100 to $499 million Mauritius $50 to $99 million Jamaica Table C. 2000–2010 Oceania Asia Africa Latin America and the Caribbean 8 7 6 $ billion 5 4 3 2 1 0 0.7 FDI outflows 2009 - 2010 4. China India Malaysia South-East Europe and the CIS Sales 2009 2010 31 31 25 5 9 735 9 037 9 037 699 82 136 480 1 - Purchases 2009 2010 393 393 6 385 2 161 .4 0. Table B. quarrying and petroleum Manufacturing Food.5 0. storage and communications Finance Business services Health and social services Other services Table E.1 - Cross-border Cross-border M&A sales M&A purchases 2009 2010 2009 2010 9.4 0. East and South-East Asia China Hong Kong.3 1.300 537 320 217 5 192 - 2010 9 735 9 038 28 .2 % $ billion Figure B. and income on inward and outward FDI. gas and water Trade Hotels and restaurants Transport.4 0. beverages and tobacco Chemicals and chemical products Metals and metal products Machinery and equipment Services Electricity. FDI inward and outward stock..0 45 40 35 30 25 20 15 10 5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0 0.9 Income on outward FDI 2009 2010 0.9 2.2 5. FDI outflows.2 0. FDI inflows. Jamaica.6 2. Distribution of FDI flows among economies.0 0.

86 World Investment Report 2011: Non-Equity Modes of International Production and Development FDI inflows to small island developing States (SIDS) dropped marginally by less than 1 per cent. Noteworthy were two investments in manufacturing in Mauritius: one Table II. total inflows to these economies remain at a very low level. low availability of resources. Trinidad and Tobago (both in the Caribbean).unctad. 2010 Target company Lihir Gold Ltd Garden Plaza Capital SRL CTP(PNG)Ltd Darius Holdings Ltd Digicel Pacific Ltd Light & Power Holdings Ltd Country Papua New Guinea Barbados Papua New Guinea Mauritius Fiji Barbados Acquiring company Newcrest Mining Ltd Fosun Intl Hldgs Ltd Kulim(Malaysia)Bhd Asian Hotels (North) Ltd Digicel Group Ltd Emera Inc Home country Australia China Malaysia India Jamaica Canada Industry Gold ore Holding companies Vegetable oil mills Hotels Telecommunications Investors Value Shares ($ million) (%) 9 018 100 328 100 175 80 136 53 132 100 85 38 Source: UNCTAD.com). 2010 Investor or project Eni SpA (Eni) InterOil Daewoo Shipbuilding & Marine Engineering Pruksa Real Estate Allied Gold Mubadala Development Fairmont Raffles Hotels International Shangri-La Hotels and Resorts Dubai Holding Fairmont Raffles Hotels International Industry Coal. As a result. FDI flows to SIDS stagnated in 2010. China United Arab Emirates Canada Investment ($ million) 1 000 550 406 373 217 170 170 165 160 128 Source: UNCTAD.16. Despite a number of large cross-border M&A deals in industries such as mining and hotels (table II. . as this transaction was between foreign investors. following a 47 per cent decline in 2009. while Papua New Guinea hosted a major share of large mining projects. as well as in other services. accounting for less than 1 per cent of total FDI inflows to the developing world in recent years. with inflows ranging between $977 million and $280 million (table A). financial services and real estate. oil and natural gas Real estate Metals Hotels and tourism Hotels and tourism Hotels and tourism Hotels and tourism Hotels and tourism Host country Timor-Leste Papua New Guinea Papua New Guinea Maldives Solomon Islands Maldives Maldives Maldives Maldives Seychelles Home country Italy Australia Korea. involving a change in foreign ownership only. and a lack of economies of scale. remoteness. to $4. and high transportation and communication costs. Republic of Thailand Australia United Arab Emirates Canada Hong Kong. susceptibility to natural disasters. Selected large cross-border M&As in SIDS. The $9 billion acquisition of Lihir Gold by Newcrest Mining (Australia) was not reflected in FDI inflows to Papua New Guinea in 2010. there were a number of greenfield investments in these industries (table II. oil and natural gas Coal. based on information from the Financial Times Ltd. However. such as the small size of their economies.2 billion in 2010 (table B and figure A). Seychelles (both in East Africa) and Timor-Leste (South-East Asia). The Maldives accounted for most of the large projects in hotels and tourism. Mauritius.16). the 29 SIDS57 nevertheless share similar development challenges: small but rapidly growing populations. including hotels and tourism.org/fdistatistics). Table II.17). other deals by firms from developing counties may drive inflows to the country to new highs in 2011. The largest five recipients of FDI in this special grouping of structurally weak economies were Bahamas. They also face a number of difficulties in attracting FDI. oil and natural gas Coal. fDi Markets (www.17.fDimarkets. The 10 largest greenfield projects in SIDS. a lack of human resources. In 2010. cross border M&A database (www. FDI inflows in SIDS have traditionally been concentrated in extractive industries and services. Geographically and culturally diverse.

compared with the same period of 2010. the value of cross-border M&A purchases rose to over $200 million. will be strongly affected . Evidence shows that TNCs can make a significant contribution through mobilizing resources and undertaking necessary investments. Various multilateral and bilateral sources of funding are available. a number of SIDS performed well in attracting FDI inflows.58 however the latter share might drop as TNCs move less funds to these economies in the future. while the actors involved range from individuals. tourism. In particular. 62 per cent of the grouping’s total FDI inflows targeted the top five recipients noted above (table A). aggressive mitigation action by the major green house gas (GHG) emitters is crucial.the shift of tourism to higher altitudes and latitudes is expected to result in a significant drop in the tourist industry in such SIDS as the Maldives (Morin. TNC involvement can enhance the adaptive capacities of host countries by improving infrastructure. FDI inflows to SIDS seem likely to increase in the years to come.59 For instance. resulting from booming investment in its extractive industries (box II. and are calling for action among the international community.60 For this grouping of structurally . Key industries identified in this process are agriculture. To respond successfully to the risks of economic disruption. TNCs can play an important role. Rising greenfield investments and cross-border M&As will drive up FDI inflows to SIDS in 2011. and the other by Mango (Spain) in textiles. 2008). information and infrastructure). FDI inflows were still biased towards relatively large economies and tax havens. The private sector is a crucial actor in the fight against the negative impacts of global warming in SIDS. public health and water infrastructure. 2006). In important industries such as tourism. and resource-rich Papua New Guinea stands out as one of the winners. In 2010. SIDS are looking to attract TNCs and FDI projects that can contribute to adaptation efforts. A warming of the ocean surface and a rise in sea level around these island economies have been detected. First. To avoid the grave danger posed by climate change.61 The governments of SIDS are taking various initiatives to incorporate adaptation practices into their economic planning and investment activities. Total investment of recorded greenfield projects had jumped by 90 per cent in the first four months of 2011. and 38 per cent went into the tax havens.62 but they are not of the magnitude needed (AOSIS and UNF. the participation of and optimal use of TNCs’ resources is useful in filling the financial and technological gaps for climate change adaptation in SIDS. In relative terms. the cost of inaction would be tremendous. 2008). the tourist industry. but lack of data prevents a systematic assessment of the extent of the financial and technological contributions of TNCs. The associated adverse impacts pose a serious danger to many aspects of economic development in SIDS. SIDS are perhaps the countries that are most vulnerable to the effects of climate change. governments. SIDS need infrastructure b. Secondly. and this is expected to continue (UNFCCC.6). The SIDS have dedicated their own resources to this critical area. which the economies of SIDS particularly depend on. foreign affiliates have strengthened host countries’ adaptation efforts by undertaking their own adaptation activities as private sector participants. Thirdly. local communities and international organizations to the private sector and civil society (AOSIS and UNF. as well as indirectly through demonstration effects. vulnerable economies.5). while SIDS themselves have an urgent need for adaptation activities.  Roles of TNCs in climate change adaptation Highly vulnerable to the effects of climate change. Considerable funds are needed to implement climate change adaptation activities (including improving land and water management and introducing new agricultural production technologies) and to enhance the countries’ adaptive capacities (including improving education.63 TNCs’ contribution in dealing with the economic challenges of climate change is considerable (box II. Considering the high potential of capital flows from emerging economies. In the meantime. 2007). which accounts for a large share of the economy of many SIDS.CHAPTER II Regional Investment Trends 87 undertaken by Pick n Pay (South Africa) in the food industry.

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World Investment Report 2011: Non-Equity Modes of International Production and Development

Box II.5. Natural resource-seeking FDI in Papua New Guinea: old and new investors
Papua New Guinea is a SIDS with substantial mineral reserves, including gold, copper and nickel, as well as oil and gas. Those natural resources have traditionally attracted significant investment from big companies based in Australia, the United Kingdom and the United States; but in recent years, these companies have been joined by investors from emerging economies. Companies from developed countries are still the major investors in extractive industries in Papua New Guinea and have been trying to strengthen their positions. In the oil and gas industry, for instance, ExxonMobil and its joint venture partners have invested $14 billion in a liquefied natural gas project, starting from early 2010.a In metal mining, the “majors” from the developed world, such as BHP Billiton, Rio Tinto and Xstrata, are the main players in the country. Xstrata, the world’s largest copper producer, has invested over $2 billion in Frieda River, a copper mine in Sandaun and East Sepik Provinces in Papua New Guinea in recent years. Now, mining companies from developing countries, mainly large emerging economies, such as China and India, are investing in a big way. For example, following an agreement signed with the Government of Papua New Guinea in 2005, Metallurgical Construction Group (China) has made significant investments in the country’s mining industries, including through the Ramu nickel-cobalt project, in which the Chinese corporation holds 85 per cent of equity. The total investment in the project in 2009 was $1.4 billion.b
Source: UNCTAD. a Elizabeth Fry, “Exxon LNG project arranges $14bn in financing”, Financial Times, 16 December 2009. b E&MJ’s Annual Survey of Global Mining Investment, project survey 2010.

systems that are modern and resilient to climate change. There are many interdependencies between the infrastructure industries, all of which are important for adaptive capacities (Royal Academy of Engineering, 2011),64 but for most SIDS a resilient water industry (including water storage facilities, potable and waste water treatment plants, transmission lines, local distribution systems etc.) is a priority. A number of projects with TNC participation have contributed to infrastructure development in SIDS, helping to reduce the vulnerability of SIDS to natural disasters and the anticipated rise in sea level. For instance, Berlinwasser (Germany) invested in a water and sewerage project in Mauritius in 2008, raising standards and improving the efficiency and resilience of the water industry in the country.65 In the Maldives, Hitachi Plant Technologies Group (Japan) acquired a 20 per cent stake in a major water and sewage treatment company in 2010, and helped streamline and update operations by leveraging the company’s strengths and know-how.66 Some TNCs involved in infrastructure industries are also

from developing countries, and sometimes they have cooperated with international organizations which provide multilateral support on climate change adaptation as well as related infrastructure development to SIDS.67 Effective climate change adaptation in SIDS is beyond the scope and capability of any single organization; it should involve partnerships among all relevant entities and stakeholders to achieve scale-up (AOSIS and UNF, 2008). With a proper institutional framework in place, TNCs can participate and play an important role. However, a number of barriers still exist to the private financing of adaptation practices in SIDS, including the lack of local capacities and resources, weak domestic markets and institutions, as well as the lack of interest by international investors. PPPs are needed to overcome these barriers and for a creative leveraging of foreign private resources; capacity-building of host country governments is the crucial first step. In this context, the importance of data collection cannot be overstated, which is fundamental to any further research in the area.

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Box II.6. TNCs and climate change adaptation in the tourism industry in SIDS
The tourism industry is a key economic sector for SIDS in terms of income, employment and exports (box figure II.6.1), and is the major target of FDI inflows to these countries. The far-reaching consequences of climate change will affect the industry through increased infrastructure damage,a additional emergency preparedness requirements, higher operating expenses (e.g., insurance, back-up water and power systems, and evacuations), and business interruptions. Awareness of the need for climate-change mitigation measures is also changing the way that consumers think about tourism, all of which has significant implications for patterns of consumption and for the kinds of services that are desired or valued most. How to deal with these consequences has become a critical concern for SIDS such as Barbados and Dominica in the Caribbean, and Fiji and Vanuatu in Oceania.
Box figure II.6.1. Share of the hotel and tourism industry in total exports, GDP and employment, selected SIDS, 2007 or latest available year
(Per cent)
90 80

Exports
70 60 50 40 30 20 10 0

GDP

Employment

Antigua & Barbuda

Bahamas

Barbados

Dominicaa

Fijia

Jamaica

Maldives

Mauritius

Seychellesa

Vanuatua

Source: UNTCAD. a Share in total employment is estimated.

Foreign and domestic service providers (including hotel chains, tour operators, etc.) are active participants in sectorspecific adaption plans for tourism in some SIDS. For example, a project of adaptation to “extreme temperatures and risk of tropical storms” was undertaken by the Caribbean Tourism Organization, the governments of several Caribbean islands, as well as companies in the accommodation industry. Another project of “water impact and adaptation” was conducted by individual accommodation providers and tour operators in Fiji (Becken, 2005). The country receives the highest number of tourists in Oceania, and its major hotels are managed by global TNCs such as Accor, Intercontinental, Radisson, Sheraton, Warwick etc.b In this and other cases, a range of technological, managerial and behavioural adaptation measures have been utilized by foreign affiliates to deal with climate change impacts. Foreign affiliates can also play an indirect role in this regard. UNCTAD research in a number of developing countries found that foreign hotels were typically relatively early adopters of “green” technologies and approaches compared to local hotels and appeared to be able to recover from natural disasters more rapidly (UNCTAD, 2007). For instance, all four of Accor’s hotels in Fiji have reached benchmark status for achieving the Green Global certification. c A wide range of methodologies and decision tools exist to guide adaptation practices,d but none have been specifically applied to the tourism industry (UNWTO, UNEP and WMO, 2008). Therefore, in addition to raising the awareness of adaptation among domestic tourism operators, the adaptation activities conducted by foreign affiliates become important sources of possible “best practice” examples for local firms to learn from and imitate.
Source: UNCTAD. a For instance, in Barbados: 70 per cent of the island’s hotels are located within 250 metres of the high water mark and are at a high risk  of major structural damage. b Lengefeld, Klaus, “Sustainable tourism and climate change in the Pacific island region”, GTZ Sector Project, 2011. c Green Globe is an international environmental accreditation organization for travel and tourism operators. d These include the UNFCCC’s Compendium of Decision Tools to Evaluate Strategies for Adaptation to Climate Change, as well as those  developed by organizations such as UNDP Adaptation Policy Framework, United States Country Studies Program and United Kingdom Climate Impacts Programme.

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Notes 
igeria’s Petroleum Industry Bill (PIB) is aimed at N reforming the legal and fiscal arrangements governing the oil industry. It has yet to be passed. Operating companies are concerned about maintaining their tax exemptions. The proposed bill would also require existing joint ventures to become incorporated with the restructured State-owned oil company, impose separate licences for oil and gas, preferential tax treatment for gas, relinquishment of licences for inactive fields and further reallocation of marginal fields to indigenous operators, enhanced environmental reporting, and higher local content mandates especially for professional and managerial staff. “Nigeria: Petroleum Industry Bill – of Senate warning and public agitation”, AllAfrica.com, 14 March 2011; Revenue Watch Institute (no date), “The Nigerian Petroleum Industry Bill: key upstream questions for the National Assembly”, www.revenuewatch.org. 2 “Bharti sets USD1bn African budget in 2011”,  TeleGeography, 25 May 2011. www.telegeography. com. 3 Hasan International (Hong Kong, China) invested an  estimated $4 billion in metals in Ghana in 2011. 4 "Is Zambia Africa's next breadbasket?", Mail and  Guardian Online, 1 October 2010 (www.mg.co.za); "The great trek north", BNet, July 2004 (www.findarticles. com). 5 “Coleus Crowns: past, present and future”, Madhvani  Group Magazine, 18(1): 25, June 2010. 6 Members include Botswana, the Democratic Republic  of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, the United Republic of Tanzania, Zambia and Zimbabwe. 7 EAC member countries are Burundi, Kenya, Rwanda,  Uganda and the United Republic of Tanzania. 8 The Daily News Egypt, "Member States push for  infrastructure investment at COMESA", 13 April 2010 (www.trademarksa.org). 9 In 2010, for example, Viet Nam surpassed China to  become the largest production face for Nike (United States). In 2011, Coach (United States) is planning to shift half of its production activities out of China to neighbouring Asian countries, due to rising labour costs. 10 Harsh Joshi, “Foreign capital shuns India”, Wall Street  Journal, 7 February 2011. 11 The decline in FDI outflows from India was due to  the depressed level of equity investment by Indian companies. By component, of FDI outflows from India: reinvested earnings remained at the same level of 2009 ($1.1 billion); other capital flows (mainly intra-company loans) increased by 99 per cent in 2010, while equity investments dropped by 40 per cent. 12 It is difficult to estimate the share of extractive industries  in the region’s total FDI stock due to lack of data at the
1

country level, but it might be around 15 per cent, which is well above the global average of less than 10 per cent (Web table 24 – www.unctad.org/wir). 13 Source: International Energy Agency. 14 Sylvia Pfeifer, “Chinese demand for energy pumps up  M&A share”, Financial Times, 7 November 2010. 15 See e.g. “The Chinese are coming … to Africa”, The  Economist, 22 April 2011. 16 Attractive mineral resources are, for instance, copper  (in Chile and Peru), iron ore (in Brazil) and oil and gas (in Ecuador and Venezuela). 17 Source: company website (www.foxconn.com.cn). 18 Adam Goldberg and Joshua Galper, “Where Huawei  went wrong in America”, Wall Street Journal, 3 March 2011. 19 Source: International Business Times (www.ibtimes. com). 20 As the target company runs 400 hotels in 25 countries,  mainly in Europe, the deal has helped HNA realize its plan of European market expansion. 21 There was a $3.8 billion acquisition of Turkiye Garanti  Bankasi by the Spanish Bank BBVA in March 2011. 22 “Arab unrest takes toll on foreign investment”, Financial  Times, 30 March 2011. 23 QIA’s cross-border purchases have included  investments in the London Stock Exchange, Credit Suisse, Barclays Bank, Volkswagen, the French electrical engineering group Cegelec, the French media and aerospace group Lagardère, Singapore’s Raffles Medical Group, the grocery stores Sainsbury (United Kingdom), the Industrial & Commercial Bank of China, the German construction firm Hochtief, and the Brazilian affiliate of Banco Santander. 24 “Qatar Holding acquires 9.1 per cent stake in German  industrial giant Hochtief”, Gulfnews.com, 7 December 2010, http://gulfnews.com. 25 The acquisition was through the swap of a 100 per  cent share of the French electrical engineering group Cegelec (wholly owned by QIA) for an 8 per cent share of Vinci (Vinci Press release, 31 August 2009, www.vinci.com). 26 Mubadala, Annual Report 2009, Abu Dhabi, Mubadala  website http://mubadala.ae. 27 They were the source of 99 per cent of the value of  the region's cross-border M&A sales to developing countries in 2001–2010, and 99 per cent of greenfield FDI projects by TNCs from developing countries in 2003–2010. Source: UNCTAD, based on UNCTAD cross-border M&A database and information from the Financial Times Ltd, fDI markets (www.fDImarkets. com). 28 Source: UNCTAD, based on information from the  Financial Times Ltd, fDI Markets (www.fDImarkets. com).

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hree Renuka Sugars (India) bought out stakes in two S Brazilian sugar and ethanol production companies for a total amount of $492 million: 50.34 per cent of Equipav AA, and 100 per cent of Vale Do Ivai. 30 For example, in 2010, three commodities – iron ore,  soya and crude oil – made up 84 per cent of Brazilian exports to China in 2010, while its imports from China were dominated almost entirely by manufactured goods (98 per cent). Source: Latin American Economy and Business, April 2011. See also the Economist Intelligence Unit, “Brazil/China economy: rebalancing the relationship”, Viewswire, 13 April 2011, and “Chinese investment in Brazil soars”, Financial Times, 31 January 2011. 31 Georgia is listed under CIS, although it formally ceased  to be a member in 2009. 32 “Foreign banks are fleeing Russia”, Bloomberg  Business Week, 3 March 2011. 33 See endnote 1 in Chapter I for this State support.  34 A government fund is to be set up in the Russian  Federation to attract foreign investment and help modernize the economy, sharing risks with foreign investors in projects designed to help modernize the country. “Russia plans $10 billion investment in fund”, Wall Street Journal, 22 March 2011. 35 Examples include the acqusitions of OAO Udmurneft  (Russia Federation) and OAO MangistauMunaiGaz (Kazakhstan) by two Chinese TNCs for $3.6 trillion and $2.6 trillion, respectively. 36 Its members include China, Kazakhstan, Kyrgyzstan,  the Russian Federation, Tajikistan, and Uzbekistan. India, the Islamic Republic of Iran, Mongolia and Pakistan are observer States, and Belarus and Sri Lanka dialogue partners. 37 Examples include the “Sino-Russian Beijing  declaration”, guiding the two countries’ strategic partnership, and “Russian Federation-India declaration on strategic partnership”, signed in 2000. 38 For example, Tencent, the Chinese company that runs  the country’s largest social networking and instant messaging service, is seeking to extend its business model overseas, initially through a 10 per cent stake in one of Russia’s leading internet companies, Digital Sky Technologies. Yin et al., 2011. 39 Repatriated earnings by United States TNCs rose from  $99 billion in 2009 to $104 billion in 2010, whereas reinvested earnings rose from $219 billion to $296 billion. 40 This hostile bid received wide media coverage, e.g.  “Smooth sailing in rough seas for merger arbitrageurs”, FT.com, 6 December 2010. 41 Examples of bail-outs by rival banks include the $9  billion investment in Morgan Stanley by Mitsubishi UFJ Financial, for 21 per cent of the equity. Though not in the period under study, the most well-known bail-out was that of Merrill Lynch in December 2007, which with
29

additional investments in 2008 amounted to about $6 billion in total. 42 The calculations are based on the Thomson Reuters  M&A data base and media reports. 43 Examples include the sale of equity in UBS by the  Government of Switzerland in 2009 and the sale of equity in Citigroup by the Government of the United States over the course of 2010. 44 The State bail-out left the Government owning 84 per  cent of the Royal Bank of Scotland Group and 43 per cent of the Lloyds Banking Group. 45 “Too late for an ‘unbundling’ of Lloyds-HBSO”, Financial Times, 7 April 2011. 46 “Santander buys RBS branches, UK spin-off seen”,  Reuters, 4 August 2010. 47 “RBS agrees to sell 80.01 per cent interest in Global  Merchant Services to a consortium of Advent International and Bain Capital”, Press Release of the Royal Bank of Scotland Group, 6 August 2010. 48 Some efforts, such as UNCTAD’s Business Linkages  programme, have proved useful, as exemplified by the projects undertaken in four LDCs: Mozambique, Uganda, the United Republic of Tanzania, and Zambia, in 2008–2010. 49 The countries of this grouping include: Afghanistan,  Armenia, Azerbaijan, Bhutan, the Plurinational State of Bolivia, Botswana, Burkina Faso, Burundi, the Central African Republic, Chad, Ethiopia, Kazakhstan, Kyrgyzstan, the Lao People’s Democratic Republic, Lesotho, the former Yugoslav Republic of Macedonia, Malawi, Mali, the Republic of Moldova, Mongolia, Nepal, Niger, Paraguay, Rwanda, Swaziland, Tajikistan, Turkmenistan, Uganda, Uzbekistan, Zambia and Zimbabwe. Sixteen of the 31 LLDCs are classified as LDCs, and 9 are economies in transition. 50 China’s Xinxiang Kuroda Mingliang Leather Co.  opened a $67 million leather factory in Ethiopia on 24 November 2010. The company financed 55 per cent of the project, with the remainder coming from the ChinaAfrica Development Fund (Source: Bloomberg). 51 In the Nam Theun II Hydropower Project in the Lao  People’s Democratic Republic, multilateral supports were from IDA (Guarantee/$42 million/2005), IDA (Loan/$20 million/2005), MIGA (Guarantee/$91 million/2005), ADB (Guarantee/$50 million/2005), EIB (Loan/$55 million/2005), ADB (Loan/$70 million/2005), and others (Loan/$131 million/2005). In the Bujagali Hydro Project in Uganda, multilateral supports were from IFC (Loan/$130 million/2007), IDA (Guarantee/$115 million/2007), ADB (Loan/$110 million/2007), EIB (Loan/$130 million/2007), and MIGA (Guarantee/$115 million/2007) (Source: World Bank). 52 The Northern Corridor links Burundi, the Democratic  Republic of the Congo, Ethiopia, Kenya, Rwanda, Sudan Uganda, and United Republic of Tanzania. 53 Source: Reuters.

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World Investment Report 2011: Non-Equity Modes of International Production and Development 

outh Africa, Mozambique and other countries in S Southern Africa have promoted the establishment of the Maputo Corridor with substantial public and private (including foreign) investment. The corridor is intended to stimulate sustainable growth and development in the area. 55 The Greater Mekong Subregion comprises Cambodia,  the Lao People’s Democratic Republic, Myanmar, Thailand, Viet Nam, and Yunnan Province in China. 56 Launched in 1999, the ASEAN Highway Network  Project aims to upgrade all designated national routes to Class I standards by 2020. The network consists of 23 designated routes totalling 38,400 km. 57 The countries of this group include: Antigua and  Barbuda, Bahamas, Barbados, Cape Verde, Comoros, Dominica, Fiji, Grenada, Jamaica, Kiribati, Maldives, Marshall Islands, Mauritius, the Federated States of Micronesia, Nauru, Palau, Papua New Guinea, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Sao Tome and Principe, Seychelles, Solomon Islands, Timor-Leste, Tonga, Trinidad and Tobago, Tuvalu and Vanuatu. 58 According to the OECD, the following SIDS are tax  havens: Antigua and Barbuda, Bahamas, Dominica, Grenada, Marshall Islands, Nauru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, and Vanuatu. 59 The advserse impacts of global warming on SIDS  include: increases in extreme weather events, rises in sea level, reductions in water resources, diminished marine resources, displacement of local species, and increased hazards to human health (Alliance of Small Island States (AOSIS) and United Nations Foundation (UNF), 2008; Kelman and West, 2009). 60 In the context of climate change, mitigation refers to  human intervention to reduce the sources or enhance the sinks of greenhouse gases. Examples include using fossil fuels more efficiently for industrial processes and electricity generation, switching to solar energy or wind power, improving the insulation of buildings, and expanding forests and other “sinks” to remove greater amounts of carbon dioxide from the atmosphere. Adaptation refers to the adjustment in natural or
54

human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities (Source: UNFCCC). 61 In the absence of adaptation efforts, the annual costs  of climate change impacts in exposed developing countries in general and SIDS in particular are expected to range from several per cent to tens of per cent of GDP (World Bank, 2006). 62 These sources of funding for adaptation available for  SIDS include, for instance, the GEF Trust Fund, the Special Climate Change Trust Fund and the Least Developed Countries Trust Fund (administrated by the UN Global Environment Facility), the Adaptation Fund (administrated by the AF Board under the authority and guidance of CMP), and the Convention on Biological Diversity. 63 In the Caribbean, the industry accounts for 15 per cent  of GDP, 13 per cent of employment, and 15 per cent of total exports; in Oceania the shares are 12 per cent, 12 per cent and 17 per cent, respectively (Nurse, 2009). 64 The interdependencies in many cases are quite  straightforward: energy directly affects all other industries which require power to function; workers in all industries rely on transport to get to work, and can only work if water supplies are maintained; all other industries are reliant on a supply of electricity for energy and on the ICT for communication (Royal Academy of Engineering, 2011). 65 Source: World Bank PPI database. 66 The company operates water supply and sewerage  systems on seven islands, including the island of Malé, where the capital is. Its services are used by 40 per cent of the population of the Maldives (source: hitachipt.com). 67 For example, Digicel (incorporated in Bermuda) has  been actively investing in telecommunications in countries such as the Maldives (together with IFC) and Papua New Guinea (together with the Asian Development Bank). An energy and water project with the involvement of the Asian Development Bank has contributed to infrastructure in the Maldives, improving the country’s adaptive capability.

Nevertheless. Governments can maximize development benefits deriving from these standards through appropriate policies. providing capacity-building programmes. FDI policies interact increasingly with industrial policies.100 treaties.RECENT POLICY DEVELOPMENTS CHAPTER III Investment liberalization and promotion remained the dominant element of recent investment policies. The regime of international investment agreements (IIAs) is at a crossroads. nationally and internationally. the risk of investment protectionism has increased as restrictive investment measures and administrative procedures have accumulated over recent years. With close to 6. and integrating CSR standards into international investment regimes. it has come close to a point where it is too big and complex to handle for governments and investors alike. The investment policy landscape is influenced more and more by a myriad of voluntary corporate social responsibility (CSR) standards. . yet remains inadequate to cover all possible bilateral investment relationships (which would require a further 14. Striking a balance between building stronger domestic productive capacity on the one hand and avoiding investment and trade protectionism on the other is key. as is enhancing international coordination and cooperation. many ongoing negotiations and multiple dispute-settlement mechanisms.000 bilateral treaties). The challenge is to manage this interaction so that the two policies work together for development. The policy discourse about the future orientation of the IIA regime and its development impact is intensifying. such as harmonizing corporate reporting regulations.

Investment Policy Monitor database. Overall. Measures from West Asia. at least 74 countries around the globe adopted upwards of 149 policy measures affecting foreign investment (table III. including both agribusiness and extractive industries. while in transition economies these measures mainly related to the introduction of new privatization schemes. governments focused particularly on new promotion and facilitation measures to foster a more favourable investment climate. Asia stands out. At the same time. . followed by Africa (29) and Latin America (25). the percentage of more restrictive policy measures increased only slightly. whereas for South. were mainly in the area of liberalization of entry conditions. followed by measures measures). Due principally to developments in a small number of Latin American countries. For developed countries the number of more favourable and less favourable entry measures was equal. NATIONAL POLICY DEVELOPMENTS Investment liberalization and promotion have continued to figure prominently on the policy agendas of many countries. promotion and facilitation also played an important role. Of these measures.1).1). Investment Policy Monitor database. Figure III. Asian countries (including West Asia) were the most active (56 Table III. affecting the entry and establishment phase. 101 related to investment liberalization. A closer look at the type of policy measures adopted reveals that most related to operational conditions for TNCs. National regulatory changes. measures aimed at improving investment conditions continued to outnumber measures introducing new restrictions or regulations. promotion and facilitation. developing countries were especially active in revising investment policy. In Africa. These measures involved the strengthening of State control (up to and including nationalization) over natural resourcesbased industries. In 2010. while 48 introduced new restrictions or regulations relevant to FDI. The numerical difference was particularly large with regard to the entry and establishment category. and promotion and facilitation measures (table III. from approximately 30 per cent to 32 per cent. rather than liberalizing (figure III. 2000–2010 (Per cent) 100 98% 80 60 40 20 0 2% Liberalization/promotion 68% Regulations/restrictions 32% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: UNCTAD. the trend of recent years towards increased investment regulation has persisted. Compared to 2009.94 World Investment Report 2011: Non-Equity Modes of International Production and Development A.2). As regards the geographical distribution (table III. East and South-East Asia. Overall.2). This maintains the long-term trend of investment policy becoming increasingly restrictive.1. but the margin is diminishing.1. this region stands out for the number of policy measures that were less favourable to FDI. for instance. the percentage of investment liberalization and promotion measures was slightly higher in developing countries and transition economies than in developed countries. 2000–2010 (Number of measures) 2002 72 246 234 12 2003 82 242 218 24 Item Number of countries that introduced changes Number of regulatory changes Liberalization/promotion Regulations/restrictions 2000 70 150 147  3 2001 71 207 193 14 2004 103 270 234 36 2005 92 203 162 41 2006 91 177 142 35 2007 58 98 74 24 2008 54 106 83 23 2009 50 102 71 31 2010 74 149 101 48 Source: UNCTAD. with a total of 46 out of 56 measures being more favourable to FDI. National Regulatory Changes.

These include the streamlining of admission procedures and the opening of new – or the expansion of existing – special economic zones (box III. procedural measures related to approval and admission. overall totals differ from table III.2).2 and box III. measures in the area of liberalization or promotion of FDI dominated those of a restrictive nature (table III. a Since some of the measures can be classified under more than one type. nationalization or expropriation.2). These industries were responsible for a large share of the restrictive measures in 2010. and 15 were of a more general nature improving the overall policy framework for FDI. 25 were specifically taken to liberalize foreign investment. including measures such as the introduction of performance requirements and new tax regimes. Investment Policy Monitor database. For most industries. National regulatory changes in 2010. most relate to the lowering of corporate tax rates. The main exceptions to this were the extractive industries and to a lesser extent agribusiness. and the renegotiation of contracts. performance requirements. Approximately half of the investment policy measures taken in 2010 related to one or more specific industries. extractive industries and financial services). gas and water Financial services Other services Source: UNCTAD. 1. Table III. dispute settlement. some more than others (in particular.2. Investment Policy Monitor database. by industry (Per cent) Liberalization/ promotion 67 84 38 7 50 75 59 61 Regulations/ restrictions 33 16 62 93 50 25 41 39 Total No specific industry Agribusiness Extractive industries Manufacturing Electricity. by type of measure and region a (Number of measures) Entry and establishmentb More favourable Less favourable to FDI to FDI Total Developed countries Developing economies Africa South. These measures were most pronounced in Asia and related to a broad range of industries (table III. facilitation measures can often be more important for investors than a formal easing of investment restrictions. Of the 34 measures improving operational conditions for TNCs. Many different industries were involved.3.1). East and South-East Asia West Asia Latin America and the Caribbean South-East Europe and the CIS 40 6 30 4 12 10 4 4 16 6 10 2 5 0 3 0 Operationc More favourable Less favourable to FDI to FDI 34 10 19 8 5 4 2 5 33 6 24 4 5 0 15 3 Promotion and facilitationd 35 4 27 11 12 3 1 4 Source: UNCTAD. c Operation: measures related to non-discrimination. or investment facilitation and other institutional support.CHAPTER III Recent Policy Developments 95 Table III. corporate tax rates and other measures affecting the operating conditions for TNCs. Of the 40 new investment liberalization measures implemented in 2010. A few categories of facilitation and promotion measures stand out as having been frequently used. d Promotion and facilitation: measures related to fiscal and financial incentives. capital transfer. Most of the measures to promote or facilitate foreign investment were taken by countries in Africa and Asia (table III. National regulatory changes in 2010.1.3). Informal . From a practical point of view. The number of these measures increased from 71 in 2009 to 101 in 2010. b Entry measures and establishment: measures related to ownership and control or approval and admission conditions for (both inward and outward) FDI and other measures affecting the entry or establishment of TNCs. Investment liberalization and promotion At least 56 countries adopted new investment liberalization or promotion measures in various industries.

9 April 2010. 21 May 2010. including semiconductor manufacturing. film and health services. Several countries have taken steps to encourage FDI in specific economic activities. barriers are regularly cited as major investment hurdles in developing countries. b Canada Telecommunications Act amended 12 July 2010.b • Guatemala passed a new insurance law that allows foreign insurance companies to establish branches. such as hitech industries or car manufacturing. Several countries increased the role of the State in natural resources based industries.g It also announced the opening of a large part of its core hi-tech business. numerous countries have adopted measures to strengthen the regulatory framework for investment. 16 (5). both domestic and foreign. 14 November 2010. such as agribusiness and extractive industries. 36. services.h • Turkey adopted a law permitting foreign investors to hold up to 50 per cent of the shares in up to two broadcasting companies.1. “The second phase of opening up the mainland investment in Taiwan Industry Project”.a • Canada removed foreign ownership restrictions regarding international submarine cables.1. specialized health services. 2 March 2011. i Law No. Moreover. Investment regulations and restrictions The rebalancing of investor rights and obligations continued. 13 August 2010. according to which all activities not included in a “negative list” shall be open to FDI. and satellites. 2010. d Consolidated FDI Policy Circular No. allows the conversion of non-cash items into equity (with approval from the government) and permits FDI in certain agricultural activities. a Ministry of Economic Affairs. e Presidential Regulation No. and infrastructure facilities within the services sector. as well as parts of electricity generation. Examples of investment liberalization measures in 2010/2011 • Bhutan released its “FDI policy 2010”. 2.d • Indonesia has partially liberalized construction services. e • Syrian Arab Republic issued a law that permits the private sector (both foreign and domestic) to invest in the generation and distribution of electricity. which facilitates the expansion of established foreign owned enterprises. The number of measures restricting or regulating FDI increased from 31 in 2009 to 48 in 2010. 25-2010. Notwithstanding the continuing predominance of investment liberalization and promotion. 32. g Council for Economic Planning and Development. It allowed 100 per cent foreign ownership in certain activities such as education. and infrastructure. manufacturing. Promotion measures included fiscal and financial incentives. to investors from mainland China. the greater the importance of “soft” investment conditions. Removing such bottlenecks is also politically less sensitive than investment liberalization. like a welcoming.c • India issued a new consolidated FDI policy. h Investment Commission. i Source: UNCTAD. published in the Official Gazette No. the smaller the differences between countries in their formal openness to FDI. c Decree No. 6112. Art. luxury hotels and resorts. Investment promotion measures have also been taken in the context of industrial policy (section D). with a particular focus on the financial sector.96 World Investment Report 2011: Non-Equity Modes of International Production and Development Box III. earth stations that provide telecommunications services by means of satellites. 1 April 2011. 3. “Restrictions loosened on investment in China”. competent and efficient administration.f • Taiwan Province of China partially liberalized outward investment to China with regard to a number of activities related to agriculture. f Law No. 3 March 2011. This has been the case . and the establishment of special economic zones.

particularly in the financial sector.CHAPTER III Recent Policy Developments 97 Box III. Official Gazette of the Government of Myanmar. characterized by an extension of protective measures to national champions and strategic industries and by the intrusion of national security concepts into industrial policy . Official Gazette No. Ministry of Knowledge Economy. 4 March 2011.e • The Russian Federation created a new special economic zone in the Samar Region with a view to attracting investors particularly in the car-making and related industries.2 More State intervention also became apparent in the natural resources based industry. including financial services.b • In the Republic of Korea. in particular in Latin America. Concerns have been expressed about the potential negative impact of the new regulations on existing investments.1 Different opinions exist as to the impact of the new regulations on FDI in the financial sector. “Cabinet approves one stop shop”. g Federal Law No.a • Fiji adopted a one-stop shop policy to enhance processes relating to foreign and local investment applications in the country. Once again. No clear pattern emerged according to which certain industries would be specifically liable to new entry restrictions. 19 May 2010. and other members of the Basel Accord. c Ministry of Knowledge Economy. 12 August 2010. where several countries tightened existing rules in order to prevent future financial crises.d • The Philippines launched its Public–Private Partnership Centre to facilitate the coordination and monitoring of the PPP programmes and projects. simplifying the registration process for foreign investment. “Free Economic Zone Promotion Plan”. In large part.g Source: UNCTAD. the extractive industry was particularly affected (box III. but regulators argue that the beneficial impact on the macro economy should more than offset the transitional adjustment costs. pursued nationalization policies. “PPP center launches 5 PPP projects”. The Government also extended FDI zones for the services sector.3). 621. 27 January 2011. In general. which provides incentives for foreign investors in banking and insurance. 18 January 2011. 1 September 2010. Examples of investment promotion measures in 2010/2011 • Bosnia and Herzegovina amended its Law on Foreign Direct Investment Policy.f The country also introduced simplified rules for employing highly qualified foreign specialists. a Law on the Policy on Foreign Direct Investment. b Fiji Government Online Portal. Likewise. 86-FZ.4). with foreign investors being one target. such as local content requirements. reducing the existing risks in connection with financial institutions that are “too big to fail”.c • Myanmar passed a “Special Economic Zone Law”.2). 8/2011. d Special Economic Zone Law No. e Official Gazette. f Government Resolution No. Compared to the quantity of nationalizations and new operating conditions for investment. 48/10. new FDI entry and establishment restrictions have been less common (table III. The reported nationalizations and sector-specific entry restrictions are part of broader developments in industrial policy. these new financial regulations focus on an increase in bank capital and liquidity requirements. A number of countries. 5 October 2010. Some nationalizations occurred also in other industries. a move towards stricter regulations manifested itself in new operational conditions for foreign investors. these measures have related to screening and approval regulations (box III. Most of these measures have been taken by G-20 countries. and reinforcing oversight. the Government is offering an improved package of incentives to attract foreign investors into special economic zones. “Modification of the Enforcement Decree on the FDI Act”.2. The latter vary between countries due to individual political sensitivities. A few foreign investments have been rejected on national interest grounds.

Together with their continued upward trend. f Ministry of Industry and Commerce.d • The Kyrgyz Republic nationalized one of the country’s largest banks. while at the same time avoiding such policies degenerating into investment protectionism (section D). Decree No. overall the number of restrictive investment regulations and administrative practices has accumulated to a significant degree over the past few years. . 26 October 2010.98 World Investment Report 2011: Non-Equity Modes of International Production and Development considerations.3. b Ley Reformatoria a la Ley de Hidrocarburos y a la Ley de Regimen Tributario Interno. nationalizations affected various industries. 23 November 2010. Together. 10 October 2010.751. 27 April 2010. 24 December 2010. which regulates the nationalization of private property in cases of threats to national security.56. the country’s pension system. No. they will have to significantly increase the overall volume of production in Russia and achieve a higher level of locally produced parts. this raises important questions on how to safeguard adequate policy space for countries to adopt FDI restrictions that they consider necessary. among others. 4 October 2010. Although still a minority. in the financial resulting from emergency sector. and continued in 2010.h Source: UNCTAD. 10 December 2010.e • The Russian Federation tightened the rules for foreign automobile producers with assembly plants in Russia.713. which included sunset clauses set by the European Commission.678/1289/184H. this poses the risk of potential investment protectionism.c • Kazakhstan adopted a Law on State-Owned Property. Decree No. the Government nationalized. 2011). the main outstanding issue relates to the unwinding of assets and liabilities that remain on government books as a legacy of the emergency Box III. as well as stricter review procedures for FDI entry. The phasing out of some of these schemes had already started in late 2009. 7 June 2010. assistance schemes. of 1 March 2011. g Decree No. h General Notice 114. d Law on State Property.g • Zimbabwe set out the requirements for the implementation of the Indigenization and Economic Empowerment Act and its supporting regulations as they pertain to the mining sector. 7.65. 7. e Decree No. 413-IV. c Government press release. Part of this process is due to the expiry of support schemes in the European Union. It requires private oil companies to renegotiate their contracts from a production-sharing to a service arrangement. a Law No. So far have ceased to accept this process has not overtly applications from discriminated against foreign financial firms to public investors. 7. some countries continue to hold considerable assets following bail-out operations.394. Examples of new regulatory measures affecting established foreign investors in 2010/2011 • In the Plurinational State of Bolivia. have substantial outstanding loans to individual firms. which has been further weakened by the gradual tightening of the conditions of State support by governments (EC. With the closure of support schemes to new entrants. Decree No. 25 March 2011. Joint Order No. 24 June 2010. many countries measures has started. or continue emergency support schemes for the financial and The unwinding of support non-financial sectors. In order for such producers to continue to enjoy duty-free importation of components. This 2007 Act made provision for the indigenization of up to 51 per cent of all foreign-owned businesses operating in Zimbabwe. Ministry of Economic Development and Ministry of Finance. Economic stimulus packages and State aid More than two and a half years after the outbreak of the financial crisis.a • Ecuador passed a new hydrocarbons law. 7. The closure of aid schemes also reflects an uneven but often low demand by businesses for this aid. including in the area of agriculture and power generation.f • In the Bolivarian Republic of Venezuela.b The Government started to take over the oil fields of the Brazilian national oil company Petrobras after renegotiation of its licence failed. the foreign-controlled AsiaUniversalBank.3 schemes and liabilities However.700. 3.

the United States has sold its holdings in financial institutions and an automotive company through auctions executed by private banks and parts of the assets were sold to foreign competitors. the WTO and OECD have monitored trade. (a Canadian fertilizer and mining company). in April 2011. measures. Examples of entry restrictions for foreign investors in 2010/2011 • Australia rejected Singapore Exchange’s US$8.a • Brazil reinstated restrictions on rural land-ownership for foreigners by modifying the way a law dating back to 1971 is to be interpreted. Foreign Investment Decision. Parecer CGU/AGU No. 5. The reinterpreted law establishes that. a study by the European Commission shows that several EU member States. and the United Kingdom. which it concluded was not in Australia’s national interest. France.5 . governments were estimated to hold legacy assets and liabilities in financial and non-financial firms valued at over $2 trillion. this process has advanced relatively slowly.4. “Catas dolor sint facia niatur rerendi dit intur sinventendae vel eostis”. In all.and investment-related policy responses to the financial crisis. 2009 and 2010). 2010a. b and 2011. So far. considered that emergency schemes for the non-financial sectors implemented in other countries did not harm their companies. In the non-financial sectors.709/71. The five reports published so far by the three international organizations conclude that for the most part. and less than a fifth of the financial firms that received crisis-related support have repaid loans fully. Since 2009. and some of the government equity holdings in the companies have been acquired by private investors. following a request by G-20 leaders. One of the main objectives is to scrutinize whether and to what extent countries resorted to trade or investment protectionism. repurchased equity or relinquished public guarantees. 01/2008. France and the United States have partly repaid loans.b • The Minister of Industry of Canada announced the blocking of the Australian mining company BHP Billiton’s US$39 billion takeover of Potash Corp. For instance. The unwinding of emergency aid to the non-financial sector has also started. including Germany. 3 November 2010.4 Furthermore. as they grappled with the crisis.c Source: UNCTAD. Brazilian companies which are majority owned by foreigners are subject to the legal regime applicable to foreign companies. c Ministry of Industry Press Release . a Australian Treasury. but the number of companies that benefited from crisis-related government support is much greater. UNCTAD. By far the largest share relates to several hundred firms in the financial sector. For instance. on rural land-ownership.3 billion offer to take over Australian Securities Exchange. 8 April 2011. 23 August 2010. This indicates a potential wave of privatizations in years to come. in the automotive industry – one of the main industries at which aid was targeted – companies in Canada. legacy assets and liabilities are much lower. b New Interpretation of Law No. WTO-OECD-UNCTAD. OECD-UNCTAD. emergency measures as well as unwinding of assets and liabilities did not overtly discriminate against foreign investors (WIR10.CHAPTER III Recent Policy Developments 99 Box III.

the policy discourse about international investment policymaking intensifies at both domestic and international levels.11 Countries continue to conclude IIAs. Developments in 2010 As the IIA universe continues to expand. The Russian Federation (141) and Croatia (118) rank first among the transition economies.092 agreements.6 113 double taxation treaties (DTTs)7 and 11 IIAs other than BITs and DTTs (“other IIAs”). including 2. Amongst the developing countries. 2000–2010 200 180 160 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 DTTs BITs Other IIAs All IIAs cumulative 1 000 0 3 000 2 000 7 000 5 000 4 000 Source: UNCTAD. at the end of 2010 the IIA universe contained 6.5). as were four of the 11 other IIAs. the United Kingdom is party to 320 IIAs. In 2010. In terms of total numbers of IIAs. followed by Germany (304) and France (297). Trends of BITs.2). as of May 2011. a trend possibly related to developing countries’ growing role as outward investors. China tops the list. 2. it remains to be seen how the shift of responsibility for FDI from EU member States to the European level will affect the IIA regime (with EU member States being parties to more than 1. at both the national and international levels. At the same time.8 As a result.100 World Investment Report 2011: Non-Equity Modes of International Production and Development B. different investment stakeholders have started to voice their concerns about the costs and Figure III. THE INTERNATIONAL INVESTMENT REGIME 1. At the same time.2.9 agreements with limited investment-related provisions (five treaties). amounting to a period of reflection on the future orientation of the IIA regime to make it work better for sustainable development.976 DTTs and 309 “other IIAs” (figure III. a total of 178 new IIAs were concluded (54 bilateral investment treaties (BITs). Twenty of the 54 BITs signed in 2010 were between developing countries and/or transition economies. the first five months of which saw the conclusion of 48 new IIAs (23 BITs. Nationally. treaties concluded in 2010 continue to fall into the three categories: IIAs including obligations commonly found in BITs (three treaties in 2010). the policy discourse about how to enhance IIAs’ contribution to sustainable development is intensifying.807 BITs. followed by the Republic of Korea (190) and Turkey (183).10 and IIAs focusing on investment cooperation (three treaties). 20 DTTs and five “other IIAs”) and more than 100 free trade agreements (FTAs) and other economic agreements with investment provisions currently under negotiation. sometimes with novel provisions aimed at rebalancing the rights and obligations between States and investors and ensuring coherence between IIAs and other public policies. Cumulative number of IIAs 6 000 Annual number of IIAs . With respect to “other IIAs”. with 249 IIAs. The trend seen in 2010 of rapid treaty expansion – with more than three treaties concluded every week – is expected to continue in 2011. DTTs and “other IIAs”. based on IIA database.300 BITs with third countries) (box III.

However. differences of opinion have emerged regarding the details (e. which involved a broad range of investment stakeholders in the Ministerial Round Table and the IIA Conference 2010. Internationally. This process is particularly prominent at the European level (box III. lack of predictability and stability will all serve to complicate the situation for EU negotiating partners and the IIA regime generally. notably human rights and sustainable development). The outcome of this debate is likely to have a major impact on the global IIA regime.3). the OECD Investment Committee. provisions on scope and definition. with the majority of cases accruing under ICSID (245 cases in total). including civil society.g.5. While IIAs have traditionally been negotiated by the relevant government ministry. with ongoing negotiations and with existing EU BITs (both intra. benefits and the future orientation of IIAs.CHAPTER III Recent Policy Developments 101 Box III. and suggest that it is time for a radically new approach to foreign in­ vestment. with Uruguay and Grenada each contesting the first claims directed against them. there is now an emerging trend of inter-ministerial or inter-agency coordination. including how to deal with the selection of future negotiating partners. or that IIAs need to undergo domestic ratification processes. Europe as a whole accounted for approximately 30 per cent of global FDI flows. business and parliamentarians. EU member States are among the countries with the largest numbers of BITs (annex table III. attendant uncertainties. In that context.e. but is also evident in EU member States and other countries around the globe. a Thirty of the 54 BITs concluded in 2010 involved an EU member State. 17 developed countries and 15 economies in transition have been on the responding side of ISDS cases. The disagreement is compounded by questions about future development of the EU IIA regime. Fifty-one developing countries. at least 25 new treaty-based cases were initiated in 2010 – the lowest number filed annually since 2001. This brought the total of known cases filed to 390 by the end of the year (figure III.1).While European member States continue concluding BITsa the shift of responsibility has given rise to a number of substantive and procedural questions about future EU investment policymaking at the international level. the content and formulation of key substantive and procedural protection provisions. In contrast. the total number of countries involved in investment treaty arbitrations grew to 83. While there seems to be agreement among EU institutions on the general orientation of future EU IIAs (i. A number of civil society groups consider IIAs a threat to the public interest. Moreover. With respect to ISDS. which continued to be the most frequently used international arbitration forum (with 18 new cases). Seventeen of the 30 European BITs were renegotiated ones. The overwhelming . joint meetings of OECD and UNCTAD. The EU debate offers great potential in so far as it allows the putting into practice of lessons learned regarding the design and substance of IIAs and their impact on sustainable development. the call for increasing transparency and inclusiveness of IIA-related decision-making is gaining additional traction.5).and extra-EU BITs). Source: UNCTAD. and the extent to which IIAs should refer to corporate social responsibility (CSR)). that they should contribute to sustainable and inclusive growth and be guided by the principles and objectives of the Union’s external action. some European industry groups highlight the positive role BITs play in increasing the competitiveness of European industry. the relevant European institutions and non-governmental investment stakeholders have expressed their views. Opinions differ even more when considering non-governmental investment stakeholders. the discourse was carried forward in forums such as the UNCTAD Investment Commission. To the extent that countries are reviewing their model BITs (WIR10). and particularly in the UNCTAD World Investment Forum 2010. open questions. EU FDI Policymaking The entry into force in December 2009 of the Lisbon Treaty shifted responsibility in the field of FDI from the member States to the EU (WIR10). over the last three years. In 2010.12 These cases were mainly submitted to the International Centre for Settlement of Investment Disputes (ICSID) (including its Additional Facility). This follows the long-term trend. regional conversations co-organized by UNCTAD to improve the investor–State dispute settlement (ISDS) system.

g. but covers only onefifth of possible bilateral investment relationships. China and the United States. and one award embodied the parties’ settlement agreement. this represents only one-fifth of possible bilateral relationships. On the other hand. These 14. five in favour of the investor. A further 630 BITs overlap with “other IIAs” that contain investment liberalization provisions only 2. they would also include a few bilateral relationships where substantial FDI stocks exist that are not covered by any existing investment protection agreement (e.100 treaties would include. 2011c). the existence of considerable FDI stocks in the absence of postestablishment treaty coverage suggests that for some investment relationships. For example. Furthermore.100 bilateral investment treaties would be required (figure III. 1987–2010 (Cumulative and newly instituted cases) 45 40 450 400 350 300 250 200 150 100 50 0 Annual number of cases 35 30 25 20 15 10 5 0 ICSID Non-ICSID All cases cumulative Source: UNCTAD. about two-thirds of global FDI stock benefits from postestablishment protection with comprehensive sectoral coverage granted by BITs or “other IIAs”. ISDS database.5). Brazil and China). The intended purpose of IIAs is to protect and to promote foreign investment. Cumulative number of cases .g. This raises questions about the efficiency of the IIA regime – an issue that is already discussed with regard to the future of EU member States’ IIAs (box III. between OECD member countries). In fact. bringing the total number of cases concluded to 197 (UNCTAD. To provide full coverage another 14.102 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure III.14 However.e. Known investment treaty arbitrations.4). on the one hand. 14 of which were decided in favour of the State. IIA coverage of investment Today’s IIA regime offers protection to more than two-thirds of global FDI stock. majority of the claims were initiated by investors from developed countries. Forty-seven decisions were rendered in 2010. 570 BITs at least partially duplicate the post-establishment protection offered by other agreements. many bilateral relationships with little propensity to invest (i. This has tilted the overall balance of awards further in favour of the State (with 78 won cases against 59 lost). Today. 2009b). some of the FDI stock is subject to protection offered by two or more IIAs.13 Twenty of these decisions were awards. where FDI flows are negligible) or with little propensity to protect (e. These findings beg a number of questions with regard to the effectiveness of IIAs in terms of generating investment flows and promoting development gains (UNCTAD. The extent of overlap and risk of contradictory provisions depends on the precise formulation used in BITs and/or “other IIAs” in terms of protection granted and flexibilities offered (WIR10). IIAs fall short of being a determining factor for investment.3.

various international initiatives are being developed to promote positive development impacts through private investment.CHAPTER III Recent Policy Developments 103 Figure III. the answer to which is highly context. OIC. Note: FDI stocks are estimated on the basis of treaty-partner shares of world FDI inflows and outflows. SADC. CAFTA. Whether such comprehensive coverage is desirable is an important question. UCIAC.g. Private investment can contribute to long-term solutions to food security and development. The agricultural . could contribute to enhancing the positive and reducing the potential negative effects of foreign investment in agricultural production. Eurasian Economic Community.NAFTA. and needs to be assessed against the overall objective of ensuring that IIAs promote investment for sustainable development.TEP. COMESA. CEFTA.org/fdistatistics) and UNCTAD database on IIAs. The coverage of food security and responsible investment in agriculture by the G-20 Multi-Year Action Plan on Development reflects growing concerns among policymakers regarding access to 1. LAS. APTA. work has continued on the Principles for Responsible Agricultural Investment (PRAI) that were developed jointly by UNCTAD.unctad. the Food and Agriculture Organization of the United Nations (FAO). association and cooperation agreements). as well as FTAs CARICOM. EFTA. OTHER INVESTMENT-RELATED POLICY DEVELOPMENTS Supported by the G-20 Development Agenda. once implemented. resulting in a situation where post-establishment protection (offered by BITs) complements pre-establishment protection/ liberalization (offered by “other IIAs”). C. a Includes EU. IIA coverage of bilateral relationships and FDI stocks (Per cent and number) 100 32 34 34 FDI stocks covered by regional economic groupings and FTAsa FDI stocks covered by BITs only 2 200 12 FDI stocks not covered by BITs or equivalent IIA 14 100 78 Total global FDI stocks Number Bilateral relationships Per cent 1 800 10 18 100 100 Source: UNCTAD FDI/TNC database (www. the International Fund for Agricultural Development (IFAD) and the World Bank (WIR10). 192 UN member countries only. provided that such investment is socially responsible and environmentally sustainable (WIR09). sector in low-income countries has been suffering from serious underinvestment for decades. UMA. MERCOSUR. investment relationships have to be seen from a dynamic perspective.and situation-specific. as the propensities to invest. (e. The seven principles. ASEAN. EU partnership. EFTA and GCC with third countries. may change over time (as witnessed by the growing interest of some emerging outward investing countries in IIAs). Furthermore. and hence to protect through IIAs. the FTA between GCC-EFTA.4. ASEAN. Investment in agriculture Since the publication of the World Investment Report 2010.

UNCTAD. trade. low-income countries (LICs) in particular. transport. OECD and the World Bank reviewed and developed key quantifiable economic and financial indicators for measuring and maximizing economic value-added and job creation arising from private sector investment in value chains. which in turn contributes to sustainable development and poverty reduction in developing countries. G-20 leaders are expected to take further actions based on this work at their future summits in 2011 and 2012. ILO. both . to help build the capacity to achieve and maintain their economic growth potential in line with the mandate from the G-20’s Toronto Summit. complementarity. At the Seoul Summit on 11–12 November 2010. 3. or “key pillars”. the potential negative impacts of speculation and profiteering in commodities and land. sustainable and resilient growth in developing countries. in particular with respect to energy. IFAD. 2. the World Bank. wealth creation and innovation. financial inclusion. private sector participation. The G-20 leaders also endorsed the Multi-Year Action Plan on Development. domestic resource mobilization. The six core principles focus on economic growth. global development partnership. Under the “Private Investment and Job Creation” pillar. political risk considerations are expected to return to the fore of investors’ concerns. growth with resilience. the G-20 leaders emphasized the need for increased investment and financial support for agricultural development. Political risk insurance In the past few years. in developing countries. Under the “Infrastructure” pillar the G-20 leaders looked at gaps in infrastructure. They committed to overcoming obstacles to infrastructure investment.15 The G-20 leaders committed to work in partnership with other developing countries. They requested regional development banks and the World Bank Group to work jointly to prepare action plans to increase public. These areas are: infrastructure. and outcome orientation. This Plan includes 16 specific and detailed actions on the nine key pillars identified in the Seoul Consensus. semi-public and private finance and improve implementation of national and regional infrastructure projects. the investment community has been mainly concerned with the financial crisis and its impacts on FDI and the global economy. including in energy. the G-20 leaders considered the disproportionate effect of the financial crisis on the most vulnerable in the poorest countries. UNDP. communications. and knowledge-sharing. At the G-20’s request. the G-20 and other countries to support country-led plans and ensure predictable financing. and encouraged additional contributions by the private sector. The leaders committed to support and assist investors.104 World Investment Report 2011: Non-Equity Modes of International Production and Development food and food prices. transport. where action is necessary to resolve the most significant bottlenecks to inclusive. Under the “Food Security” pillar. In addition. the G-20 leaders encouraged countries and companies to uphold the PRAI and requested UNCTAD. Three pillars in the Multi-Year Action Plan on Development are closely related to investment. and developed policy approaches for promoting standards for responsible investment in value chains. food security. the G-20 leaders emphasized the importance of domestic and foreign private investment as a key source of employment. in particular LICs. with deadlines running from 2012 to late 2014. and the slow progress toward achieving the Millennium Development Goals (MDGs).16 The Seoul Consensus consists of a set of principles and guidelines to achieve the MDGs. that are significant bottlenecks to increasing and maintaining growth in many developing countries. developing countries and key development partners in their work to maximize the economic value-added of private investment. the G-20 leaders identified nine areas. water and regional infrastructure. FAO and other appropriate international organizations to develop options for promoting responsible investment in agriculture. and the social and environmental impacts of international investments in agriculture. developing project pipelines. improving capacity and facilitating increased finance for infrastructure investment in developing countries. G-20 Development Agenda At the Seoul Summit. private investment and job creation. However. human resource development. global or regional systemic issues. communications and water.

and what FDI-related policy instruments to apply (e. D. The slight pick-up in 2010 results from the modest recovery in FDI during the year. For example. Political risk insurance evolved in 2010. The reasons for this are manifold and include. these concerns have not yet resulted in greater reliance on political risk insurance. some entities condition the granting of political risk insurance on the existence of an IIA with the host country in question. Conversely. disappointment with the results of laissezfaire policy. Interaction at the national level The interface between FDI policies and industrial policies is most pronounced in specific national investment guidelines that define the role of FDI in domestic industrial development strategies and identify the policy tools to apply in this context. the wish to “guide” development. China. both at the national and international levels. political risk was perceived to be the single most important constraint on investment into developing countries over the medium term.CHAPTER III Recent Policy Developments 105 in the developed and in the developing world. Investment promotion policy can be an important means to build productive capacity in developing countries. for instance. the volume of liability totalled over $142 billion as of June 2010. According to the 2010 MIGA-EIU Political Risk Survey. structural change and economic diversification. including a trend towards greater regulation of FDI (section A) and recent political unrest in some parts of the world. the Non-Concessional Borrowing Policy (NCBP) was updated to avoid the re-accumulation of external debt in low-income countries that have benefited from the “multilateral” debt relief initiative of 2006. depending on the industry in question and on the role they want to assign to FDI in domestic development. to avoid investment protectionism and to enhance international coordination. restricted. allowed or encouraged. The success of industrial policy in countries such as Brazil. Reflecting the recovery in new business. Finally. FDI policy interacts closely with industrial development strategies. 2011). an increase of 7.7 per cent in 12 months (MIGA. Many governments have opted for more proactive industrial policy in recent years.1 billion from 2008 to 2009.g. In general. political risk insurance has linkages with other areas of investment policymaking. The challenge is to make the two work together for development. The interaction between FDI policy and industrial policy has both national and international dimensions. countries may choose to restrict FDI because they see a need to protect certain domestic industries − in particular infant or strategic industries – from foreign takeovers or competition. however. and State intervention in response to various crises. a desire to strengthen and protect national champions. India or the Republic of Korea has given further impetus to this development. As a consequence of the global economic crisis. For example. 2011). the volume of liability underwritten by Berne Union (BU) investment insurers fell by 6 per cent to $137. This reflects numerous developments. A number of countries have created such documents that specify to various degrees the extent to which FDI is prohibited. technology and know-how into the host country that can be crucial for the development of individual industries. Since April 2010. 1. the NCBP has been successful in attracting an increased number of creditors to adhere to NCBP for promotion of financing of low-income countries (MIGA. as TNCs bring capital. China’s “Foreign Investment Industrial Guidance Catalogue” and “Catalogue of Foreign Investment Advantageous Industries in Central . pressure from international competition. INTERACTION BETWEEN FDI POLICY AND INDUSTRIAL POLICY FDI policy increasingly interacts with industrial policy. countries promote or restrict foreign investment within this context. So far.

thus further enlarging the scope of State intervention vis-à-vis foreign investors. environmentally friendly projects or labour intensive technologies. with more than half of the countries limiting foreign investment in these industries.23 Figure III. These “targeting” policies may be reinforced through linkage programmes.g. often allowing only minority ownership. Moreover.17 Some guidelines specifically address the use of investment promotion instruments (e.22 Industrial policy may also be pursued through selective FDI restrictions. or regions. 2010 (Per cent) Transport Media Electricity Telecom Finance Mining. Industrial policy can further be supported by specific investment promotion and facilitation measures for FDI in particular industries. The economic importance of such policies is huge. 2010. Investment promotion agencies (IPAs) have an important supporting role in this context. For instance.g. the Malaysian Industrial Development Authority’s “Invest in Malaysia” policy. Investment incentives are subject to requirements related to development in certain industries. such as hi-tech investments. India’s “Consolidated FDI Policy”). technology transfer and upgrading. oil & gas Light manufacturing Health care & waste management Agriculture & forestry Construction. policies to protect national champions and strategic enterprises usually cover core industries such as natural resources. namely through their matchmaking and aftercare services. governments may see a need to protect ailing domestic industries and companies at times of financial crisis or to discourage or restrict outward foreign investment in order to keep employment “at home”. by industry. such as “hi-tech zones” (e. Figure III. such as export promotion. financial services and the transport sector (OECD.5 provides an indication of which industries are most often affected by certain foreign ownership limitations.21 which aim at improving the “hard” and “soft” infrastructure of the host country. Many countries have policies to target individual companies or specific categories of foreign investors considered capable of making a particularly significant contribution to industrial development.5. the “Taipei Technology Corridor”)20 or “renewables zones” (e. Share of countries with industry-specific restrictions on foreign ownership. . industrial policy considerations to justify FDI restrictions have become blurred with other policies to protect national security. or for sociocultural reasons (e. 2009).19 “IT corridors” (e. restrictive FDI policy has been applied particularly with a view to promoting infant industries. job creation. India).106 World Investment Report 2011: Non-Equity Modes of International Production and Development and Western China”. the promotion of industrial clusters. in line with their development strategies. and the Thailand Board of Investment’s “Investment Promotion Policy for Sustainable Development”). this relatively narrow policy scope has given way to a broader approach.18 These guidelines may also relate to the interpretation of national laws and policies at the sub-national level. energy. and where the beneficiaries of government protection also include national champions. telecommunications. under which numerous countries have strengthened their FDIrelated policy instruments. the “Electronic City” in Bangalore. and incubation programmes to maximize spillover effects and other benefits. or with regard to specific development goals. tourism & retail 0 20 40 60 80 Source: UNCTAD.g. based on World Bank. are cases in point.g. Nowadays. strategic enterprises and critical infrastructure. “Masdar City” in Abu Dhabi). In the past. Increasingly. renewables).g. Industrial policy strategies often emerge with more general fiscal or financial incentive programmes. the Republic of Korea’s “FDI Promotion Policy in 2011”. land ownership restrictions).g. The establishment of special economic zones and incubators. Restrictions mainly apply to transport and media. Investment incentives are also used to help developing industries where as yet there is no sufficiently large market (e. in particular with regard to approval and screening procedures.

and will depend on the industry.g. In addition. (ii) improving the overall investment policy framework. potentially constraining policies aimed at generating certain local linkages or ensuring positive spill-overs from foreign investment). and (iv) the high level of State ownership (chapter I. (ii) greater political sensitivities (e. or agricultural policies. as a result of the greater scope for market failure in network services). 2009c). On the other hand. a number of flexibility mechanisms have been developed in some IIAs (WIR10). taking. To avoid creating undue policy constraints. by easing entry or by offering national treatment). and (iii) issues regarding the need to guarantee the supply of public services in the telecommunications sector). . Provisions that deserve most attention in this context include.g. IIAs are expected to encourage foreign investment through their functions of (i) protecting and liberalizing investment (e. (iii) national security concerns (e. the form of exceptions/exclusions to the treaty or of country-specific lists of reservations. financial services or cultural industries. in sectors where monopolistic or oligopolistic market structures prevail) (UNCTAD. such as aviation. subsidies. Within the services sector. business/professional services and communication (e. (ii) national treatment (e. notably: (i) the generally higher level of regulation (e.29 Beyond specific industrial policy considerations a number of other aspects might also come within this context. courier.6). potentially precluding countries from granting subsidies exclusively to domestically owned enterprises).g.30 While the rationale for doing so may be different in each of the industries (e.24 However. section C. a trend that has remained broadly unchanged over recent decades. IIA rules regarding (i) the entry of foreign investors (e. as revealed by UNCTAD case studies on investment reservations (figure III. amongst others. some IIAs include specific promotion-oriented provisions (UNCTAD. the quest for State ownership may also be relevant. policy and IIA clause at issue.g.g. with respect to strategic services). 2005. banking and insurance).28 and/or • Including general or national security exceptions. fisheries. government procurement.27 The actual extent of constraints posed by IIA obligations is hard to anticipate in the abstract.6).g.7). countries are generally reluctant to accept far-reaching international commitments in the services sector. 2009b). IIAs also have the potential to constrain investment-related industrial policy.g. potentially precluding countries from restricting foreign investment at the entry level). potentially both supporting and constraining industrial policy. including water distribution).CHAPTER III Recent Policy Developments 107 2. A potentially constraining impact may also arise from investmentrelated provisions in international trade agreements. and/or (iii) enlarging markets to serve (UNCTAD. health and environmental services.2) or governmental scrutiny (e.25 and/or (iii) performance requirements (e. potential foreign investment enhancing effects would occur for all industries. 2008b). finance (e. 2006).g.g. as most IIAs apply on a cross-cutting basis. Those particularly relevant for industrial policy include: • Excluding certain industries. regarding the role of private – and foreign – providers in essential services sectors such as education. such as the WTO’s Agreement on Trade-Related Investment Measures26 and the Agreement on Subsidies and Countervailing Measures (box III.g. telecom and audiovisual services) (figure III. Interaction at the international level The interaction between international investment policy and industrial policy is characterized by the dual nature of IIAs. Certain sectors and industries stand out as ones to which policymakers give particular attention when seeking to preserve space for industrial policy. (i) issues related to cabotage in the case of transport. such as taxation. which increasingly become relevant in the context of industrial policy (UNCTAD. For example. among others. • Excluding certain policies. With respect to their potential to support industrial policy. policymakers are inclined to preserve policy space particularly with regard to transportation. (ii) issues regarding the integrity and stability of the sector in the case of financial services. postal.g. maritime matters.

agriculture and forestry) sectors.7 (international policies). Issues related to subsidies. G/ TRIMS/W/71 and G/TRIMS/W/74. d Article 6. such as requirements to use predetermined amounts of locally produced inputs. Source: UNCTAD. including agriculture-related goods. may suggest that the Agreement’s actual reach may be considerable. Moreover. See G/TRIMS/M/27 and 29. local services requirements). The salient features characterizing the interaction between FDI policies and industrial policy at the international level correspond to what can be observed at the national level. policy space is preserved for specific aspects of investment policy that are closely related to industrial policy. the fact that the TRIMs Agreement applies to both foreign and domestic producers of goods.5 (national policies) and III. and that its list of prohibited measures is indicative rather than exhaustive. the TRIMs Committee. including those applied by regional and local governments and authorities within their territories. the mineral/coal and mining sectors. The TRIMS Agreement establishes transparency requirementsd and an institutional setting. TRIMS applies to goods-related policies only and hence does not apply to WTO Members’ services-related policies (e.g. requirements to “prioritize” the utilization of local manpower and domestic goods and services in the mineral and coal mining sectors and to carry out processing and refining of the mining product inside the country. to its provisions. between these IIAs and TRIMs lies in the scope of application: IIAs are typically narrower than TRIMs. which stipulates that foreign investors cannot set up more than two Sino-foreign joint ventures for the production of passenger cars. they may be deeper than TRIMs in so far as they sometimes add additional requirements (“TRIMs +”) (e.108 World Investment Report 2011: Non-Equity Modes of International Production and Development Box III.g. the so-called “2+2” regulation. Figure III.f Prohibitions on performance requirements can also be found in IIAs. the services sector is much more affected by foreign ownership limitations. compared to manufacturing or primary (e. and two for commercial vehicles. c Article 4 of the TRIMS Agreement. for discussion and consultation.c Furthermore.g.g. performance requirements for services or intellectual property rights) or do not have TRIMs-type exceptions. f E. At both levels. However. e E.b The Agreement also provides for a temporary exception for developing countries to maintain flexibility in their tariff structure enabling them to grant the tariff protection required for the establishment of a particular industry. as indicated by figures III. b Article 3 of the TRIMs Agreement. based on IIA database and UNCTAD (2005. See G/TRIMS/W/70. “General Exceptions” are contained in Article XX of GATT 1994. and G/ TRIMS/W/55. including China’s policies in the automobile and steel sectorse or Indonesia’s policies in the telecommunications. Investment-related reservations in IIAs. . Based on a survey of 16 IIAs. and Article XVIII of GATT 1994.g.6. Several debates in the TRIMs Committee have touched on industrial policies. WTO TRIMS Agreement The WTO Agreement on Trade-related Investment Measures (TRIMs Agreement) precludes WTO members from adopting certain goods-related performance requirements.2 of the TRIMS Agreement requires each Member to notify the publications in which TRIMs may be found. the services industries where countries are comparatively more Source: UNCTAD. as appropriate. Moreover. across sectors (Number of reservations) Services Manufacturing Primary Horizontal 0 1 000 2 000 3 000 4 000 Sometimes. in so far as they do not restrain governments from regulating domestic investors. it has to be noted that the TRIMs Agreement acknowledges that all exceptions under GATT 1994 shall apply. 2006).a The TRIMS Agreement therefore directly touches upon measures that traditionally fall within the realm of industrial policy. A crucial difference. the nationality of ships. a TRIMS prohibits trade-related investment measures that are inconsistent with the GATT’s provisions on national treatment (Article III of GATT 1994) and quantitative restrictions (Article XI of GATT 1994).6. public utilities. State-owned enterprises or land ownership serve as examples.

2004. Export-generating choices do not always have the greatest impact on employment and value added. but also to picking “winning firms”. Horizontal policies are the basis. with a view to ensuring coherence at both the national and international levels. because innovation is a risky process (Lin. and which will thereby benefit from new opportunities arising in a multi-polar growth . This underlines the need for close coordination between industrial policy. 2006). A case in point is recent changes in the international production networks of TNCs. Investment-related reservations in IIAs. nonequity modes). FDI policy and technology-related policy. together with institutional mechanisms reducing the risk of governments making the “wrong” choice. special investment incentives may be needed to help overcoming barriers to entry. 2010. a. 2011). the risk of distorting market mechanisms to the long-term detriment of the economy.CHAPTER III Recent Policy Developments 109 inclined to preserve regulatory space are similar at the national and international levels. the risk of wasting valuable and scarce resources if support is provided to “losers”.g renewable energy) or where there is a “first mover” problem.7. 3.31 In countries with poor infrastructure and business environments that are perceived as unfriendly. Sometimes even the most obvious choices for industrial priorities. Based on a survey of 16 IIAs. based on IIA database and UNCTAD (2005. culture) Tourism Environmental Construction Distribution Education 0 10 20 30 40 world (Lin. Lin. Lin and Monga. The dynamic nature of industrial development calls for regular review and adaptation of existing policy instruments. Policy tools are needed (a checklist of indicators against which to assess domestic potential). across services industries (Share of reservations) Transport Financial Business and professional Communication Other Health related & social Recreational (incl. “Picking the winner” One of the strongest criticisms of industrial policy relates to the difficulty in identifying the “right” industries for promotion (“picking the winner”). so that they are coherent and mutually reinforcing. aiming at improving the hard and soft infrastructure of the host country. resulting in a stronger emphasis on non-equity modes of international production (chapter IV). Industrial policy can be successful if governments are able to identify those industries or activities which possess existing or latent comparative advantages. industrial policy can contribute to strengthening international competiveness. and the form of TNC involvement (FDI vs. By focusing on increasing industrial productivity. This difficulty relates not only to picking “winning industries”. b. seemingly sure winners. Such incentives may also be required with regard to emerging industries for which a market does not yet exist (e. On balance. this suggests that countries aim to consciously manage the interaction between investment and industrial policy. What is actually needed depends on the type of business activity to be developed. often account for more than half of value added. and the risk of succumbing to the pressure of lobbying . even in developing economies. Figure III. 2011). Successful strategies to pick winners also include a readiness to let losers go. Source : UNCTAD. will not work out in today’s uncertain economic environment. Challenges for policymakers These different kinds of interaction between FDI policy and industrial policy raise a number of important challenges for policymakers to make the two policies work together for development. including services. the technology and skills required for it. domestic industries. Some first suggestions have already been made in this regard (Rodrik. Nurturing the selected industries The interaction between FDI policies and industrial policy also implies designing the “right” investment promotion instruments. 2011).

infant industry protection or reciprocity policies. competition and conflict are bound to intensify and to become more complex. Since September 2009. competition policy. Other regions. better international coordination is called for (Zhan. while preserving space for the dynamics of industrial policy. In each case. UNCTAD and the OECD have regularly published joint reports on G-20 Investment Measures. 2006).35 Efforts to establish criteria for assessing whether investment restrictions are justified have been undertaken in the context of policy measures relating to national security reasons (OECD. avoiding “beggar thy neighbour” policies. prudential policies in financial industries. to the detriment of foreign competitors. sovereignty or national security concerns. as countries may be tempted to protect their domestic industries. or so-called “ratchet clauses” according to which regulatory changes towards further liberalization are automatically reflected in a country’s commitments under the IIA (UNCTAD. This challenge extends to identifying industries and existing/potential future domestic policies. in particular the EU. or a race to the top in incentives. some selected IIAs establish a procedure for IIA signatories to modify or withdraw commitments in their schedules. such “coordination” is presently essentially limited to the control of certain forms of subsidies in the framework of the WTO Agreement on Subsidies and Countervailing Measures.38 also have developed d.36 ECOWAS37 and the Members of the Gulf Cooperation Council. Avoiding investment protectionism The inclusion of elements of investment restrictions within industrial policy has given rise to concerns about investment protectionism. At the global level. and the need to avoid investment protectionism. costs and risks of an industrial project are too big for one country alone to implement it. following a request from the G-20 London and Pittsburgh Summits. Safeguarding policy space Managing the interaction between international investment policy and industrial policy implies striking a balance between liberalizing and protecting FDI. Better international coordination of industrial policy can also create important synergies through economies of scale.110 World Investment Report 2011: Non-Equity Modes of International Production and Development c. Cross-border industrial cooperation can also present solutions in cases where the size. 2011). carefully crafting IIA obligations in conjunction with exceptions and reservations can go a long way to concluding IIAs that are conducive to countries’ industrial policy objectives. e. where the example of the creation of the Airbus industry in the 1970s comes to mind. 2009). and to avoid the return of protectionist tendencies. These concerns have grown in the light of the recent financial crisis. such as ASEAN. and strengthening the position of participating countries.33 In sum. socio-cultural reasons. Clarifying the term would require distinguishing between justified and unjustified . Efforts in this regard have materialized at the regional level. In response.32 The problem is further exacerbated if pre-establishment treaties contain “rollback” commitments with regard to remaining FDI restrictions. implying that once a commitment is made to open an industry to foreign investment. strategic considerations. identifying IIA provisions that are particularly likely to impact on industrial policy. countries may have very different perceptions of whether and under what conditions such reasons are legitimate. for instance. host countries are bound by it as long as the IIA remains in force. One initiative to monitor investment protectionism has been taken by the G-20 (section A. reasons to restrict FDI.34 Achieving a balance between the sovereign right to regulate an industry.3). To avoid a global race to the bottom in regulatory standards. The motivations for FDI restrictions are manifold and include. for which flexibilities are most needed. and recognising that industrial policy is likely to change over time. remains a major policy challenge. It is complicated by the fact that there is no internationally recognized definition of “investment protectionism”. Improving international coordination As more and more countries adopt forms of industrial policy. The latter is important in light of the so-called “lock-in” effect.

E. The three main sources of these international instruments are the United Nations.40 While it would be difficult to provide an exhaustive account of every such standard and initiative. Development stages and related strategies differ between countries. can influence the social and environmental practices of businesses worldwide. CORPORATE SOCIAL RESPONSIBILITY The investment policy landscape increasingly includes a combination of voluntary and regulatory initiatives to promote corporate social responsibility standards.CHAPTER III Recent Policy Developments 111 joint industrial development strategies. The policy challenges are numerous. or in voluntary non-binding “soft law” instruments. through their foreign investments and global value chains. nationally and internationally. such as national laws and regulations. derived from universal principles as recognized in international declarations and agreements (three major sets of standards exist). A further important investment policy development in recent years has been the emergence of corporate social responsibility (CSR) standards. standards can be categorized according to the organization that created them: i) intergovernmental organization standards. and iv) individual company codes (thousands). *** In conclusion. Regional industrial policy is further reinforced when there is a common FDI regime among the participants. while others call for international attention. international CSR standards are almost uniformly voluntary in nature and so exist as a unique dimension of “soft law”. a. and there can be no “one size fits all” solution in dealing with this interaction.39 Such standards can be contained in binding “hard law” instruments. Three of the leading standards in this category are: • United Nations declarations and instruments: one of the most prominent examples is the UN Global Compact: launched in 2000. Intergovernmental organization standards Universal principles as recognized by international declarations and agreements are the source of the most prominent and authoritative CSR standards. interaction between FDI policies and industrial policies is increasing. iii) industry association codes (hundreds). CSR standards have expanded in both number and form. Governments can consider a number of practical measures to apply these standards to their investment and enterprise governance mechanisms. This has resulted in a complex. multilayered. with some of them being relevant only at the domestic level. At present. with a view to maximizing the development impact of corporate activities. ii) multi-stakeholder initiative (MSI) standards (dozens). CSR standards. • ILO conventions and declarations:41 there are 188 ILO conventions. the universe of CSR . this is an initiative of the UN Secretary General’s office to translate the most relevant UN declarations into 10 guiding principles for enterprises (box III.7). latest revision in 2006) 1. though applicable to all types of enterprises. multifaceted and interconnected universe of standards. are increasingly significant for international investment. as they typically focus on the operations of TNCs which. Taking stock of existing CSR standards Over recent years. as efforts to rebalance the rights and obligations of the State and the investor have intensified (WIR10). the most relevant for TNC operations being the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (“MNE Declaration”) (first adopted in 1977. the ILO and the OECD. This emergence of CSR has been further reinforced in the post-crisis era.

1). In each of the categories of standards reviewed below. which serves as a significant reference point for defining the terms of “social responsibility”. cover the fundamental issues of CSR. and Principle 9: encourage the development and diffusion of environmentally friendly technologies. to address social and/or environmental aspects of supply chains and Box III. The 10 principles of the UN Global Compact Human Rights Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights. along with the Guidelines of the OECD. such as the environmental or social aspects of certain production methods. business. a non-governmental organization whose members are national standard-setting bodies.42 b. Principle 4: the elimination of all forms of forced and compulsory labour. labour. they often make reference to the normative frameworks of international soft law instruments (annex table III. These partnerships contain a mix of civil society. and Principle 6: the elimination of discrimination in respect of employment and occupation. latest revision 2011). to design and steward standards for c. there is a large number of relevant intergovernmental organization standards and conventions emanating from the UN (and its specialized agencies.e. including the ILO.7. • The OECD Guidelines on Multinational Enterprises (“OECD Guidelines”) (first edition 1976. Principle 5: the effective abolition of child labour. MSI standards most often address non-product-related process and production methods (PPM). including the ILO) and the OECD. including extortion and bribery. A unique MSI is the International Organization for Standardization (ISO). and Principle 2: make sure that they are not complicit in human rights abuses.g. Source: www. the WTO) and national governments. The standards of the UN and its specialized agencies.unglobalcompact. i. In 2010. the regulation of market and non-market actors” (Litovsky et al. Industry association codes and individual company codes An industry-specific code typically involves the adoption of a code jointly developed by the leading companies within an industry. Labour Standards Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. Although MSI standards are mostly developed by civil society and business actors.112 World Investment Report 2011: Non-Equity Modes of International Production and Development and the Declaration on Fundamental Principles and Rights at Work (1998) (also known as “Fundamental Labour Standards”).2). The 42 adhering governments are fewer in number than the signatories of UN and ILO conventions. ISO launched the ISO 26000 standard “Guidance on Social Responsibility”. 2007). consumers and other stakeholders. Principle 8: undertake initiatives to promote greater environmental responsibility. . it is common to find references to these major intergovernmental organization standards.. ISO standards are widely recognized by international institutions (e. Multi-stakeholder initiative standards Multi-stakeholder initiatives (MSIs) are “crosssectoral partnerships created with a rule-setting purpose.  Anti-Corruption Principle 10: Businesses should work against corruption in all its forms. section A. In addition to the three most commonly noted standards above.  Environment Principle 7: Businesses should support a precautionary approach to environmental challenges. but they include large developed economies whose corporations accounted for 70 per cent of FDI in 2010 (chapter I.org. issues related to how a product is produced.

g. media. to observe the MNE Declaration (OECDILO. companies are left to innovate these details themselves. Gaps also exist in uptake among companies: as uptake is driven by the concerns of consumers. more than one MSI or industry association standard exists. There are thousands of individual company codes in existence. environment. Subject matter gaps exist among MSIs. as many standards focus either on the environment or on social issues. Among individual company standards.g. 2002). workers and TNCs. there can be both a high degree of overlap in the issues covered (e.g. The proliferation of these standards has resulted in a number of systemic challenges related to standardsetting and standard implementation. as leading firms adopt and implement CSR standards. forthcoming b). MSIs are increasingly working together towards alignment between standards that address the same subject or the same industry. This can cause confusion among companies. labour rights). and each yielding influence and impacting on development in different ways.CHAPTER III Recent Policy Developments 113 international operations (annex table III. An emerging trend among MSIs is the inclusion of social issues within environmental standards.45 *** The universe of voluntary CSR standards consists of a multitude of standards. minimum wage compliance) versus standards that focus on “process rights” (e. adding complexity and higher compliance costs. The ILO MNE Declaration focuses more specifically on employment practices and human rights. While the adoption of standards by large TNCs can create a cascade effect that pushes sustainability across the value chain. but applies to a larger group of member States that are directly addressed. and investors. However. bribery). they are negotiated by a more limited number of member States. functions. compared to UN and ILO instruments. 2011e). 2008). Gaps. human rights.43 Subject matter gaps can also include standards that focus on specific outcomes (e. they set a benchmark for best practice against which other firms are measured. While the absence of a standard may reflect a gap that has yet to be filled. In some industries. About half of TNC codes that apply to value chains make reference to one or more intergovernmental organization standards (UNCTAD. from human rights to taxation. each differing in terms of source. with not all industries (or parts of the value chain) being the subject of a standard. this does not necessarily have a uniform impact on all members. As most companies refer to major intergovernmental organization standards for key issues. The rise of industry-specific standards can help to alleviate this situation.3). and a high degree of inconsistency in detailed operational guidelines. Utting and Mukherjee-Reed. labour practices. The OECD Guidelines cover a broad range of responsible business practice. The resulting inconsistencies mean that suppliers can be faced with differing requirements. but not often to the same extent on both. or where a standard is not considered the most appropriate way to address existing problems. addressees. Gaps also exist . and they are especially common among large TNCs: more than three-quarters of large TNCs from both developed and developing countries have policies on social and environmental issues (UNCTAD. 2011). 2008c. often leading them to opt for multiple certifications to ensure that all relevant issues have been addressed. but since many intergovernmental organization standards lack detailed micro-level operational guidance. Challenges with existing standards: key issues a. CSR standards are primarily adopted by those companies that are most exposed to such concerns (Utting.44 it can also represent either an area that does not necessarily require a standard. this reduces inconsistencies in the general subjects covered. 2. Nevertheless. and interrelationships. overlaps and inconsistencies Gaps between standards exist in terms of subjects covered and industry focus. alongside employers. in industry focus. Indeed there may be a tendency for some standards to favour concentration at different levels and to crowd out small enterprises and producers (Reed.

they note that the oil company BP only discovered severe problems with its feeder pipelines after it was required by the United States Government to undertake inspections. The reporting of MSIs and industry associations also raises transparency issues that make it difficult for stakeholders to evaluate and compare the performance of different initiatives. corrective action programmes. where they are promoted as a substitute for labour.48 The compliance promotion mechanisms embodied in existing CSR standards range from none. Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR)46 and several MSIs (e. and the International Integrated Reporting Committee). The intergovernmental organizations are perceived as authoritative standard-setters because they reflect international consensus. To enhance credibility. MSI standards and industry association standards often have certification or accreditation programmes which typically include inspections/ audits. such reporting continues to lack uniformity. including the UN Global Compact (the “integrity measures” and the “communication on progress”). Addressing the challenge of inclusiveness also means addressing the often limited participation of developing country stakeholders in CSR standard-setting processes. etc. Failure to demonstrate compliance can lower the standard’s credibility and market impact. the contrast in the United States between legally required safety inspections of the TransAlaska Pipeline. then these voluntary standards can potentially undermine. 2007).114 World Investment Report 2011: Non-Equity Modes of International Production and Development b. factory inspections. e. Critics of voluntary standards have pointed out. standardization and comparability.g. Company codes and industry association codes are often challenged as being less credible because of the limited involvement of outside stakeholders. the Global Reporting Initiative (GRI). many MSIs have separated their standards-setting process from the certification process. Fair Wear Association) have created a reporting framework for companies adopting their standards. social and environmental protection legislation. A number of initiatives promote a standardized CSR reporting framework. have started to implement reporting programmes: the Fair Labour Association publishes an annual report and discloses information about the progress made by the companies that have adopted its standard.g. it nevertheless remains relatively low47 and even among companies adopting a voluntary CSR reporting framework. however. however. Some initiatives. or where CSR standards are not based on national or international rules. to reporting requirements and redress mechanisms. for example. The major intergovernmental organization standards contain compliance mechanisms. to proactive mechanisms such as audits. including UNCTAD’s . and the OECD Guidelines (“the specific instance procedures” and the system of “National Contact Points”). substitute or distract from governmental regulatory efforts. which arises out of resource constraints. (table III. the Carbon Disclosure Standards Board. Relationship between voluntary CSR standards and national legislation Voluntary CSR standards can complement government regulatory efforts. Compliance and market impact A critical challenge is to ensure that companies voluntarily adopting a standard actually comply with the standard. Some MSIs (e. The popularity of MSI standards is due largely to their inclusive cross-sectoral process. While uptake of such frameworks among companies is growing rapidly. Reporting and transparency Despite tremendous growth in CSR reporting in recent years among TNCs of developed and developing countries. and voluntary commitments from companies to ensure the safety of feeder pipelines. implementation of the framework can be selective and incomplete. following a spill of over a quarter of a million barrels of oil (Reich. reporting and consumer labelling schemes. c. relying increasingly on professionalized third parties for the d.4). the ILO MNE Declaration (the “interpretation procedure”). Inclusiveness in standardsetting The credibility of a standard is linked to the inclusion of a sufficiently broad range of stakeholders in the standard-setting process.

50 Similarly.g. a lack of compliance mechanisms can lead to high rates of voluntary adoption of the standard. the challenge now is how to achieve widespread uptake of these standards. In Guatemala. with some influencing more than half of the global market for the industry in question (table III. For example.5). the “proof of concept” phase has been passed. sanitary and phytosanitary measures. Outside of the TBT agreement. adding complaints procedures.CHAPTER III Recent Policy Developments 115 monitoring and auditing processes. and in Denmark. inspections) Reporting requirements/ redress mechanisms • UN Global Compact • OECD Guidelines • ILO Tripartite Declaration No formal compliance mechanisms - With global market shares ranging between 5 and 10 per cent for some standards (such as the Marine Stewardship Council (MSC) and the Forest Stewardship Council (FSC)). unclear and/or immeasurable rates of implementation.4. but low. and reduced market impact. where environmental regulations in the United States led to an import ban for shrimp-exporting countries that did not use turtle-safe harvesting practices (which had already been introduced by the United States fishing industry on the basis of consumer demands). This is particularly so in highly fragmented industries. forestry companies without FSC certification are prohibited from operating within the Mayan Biosphere reserve (FSC. tightening up inspection procedures. it is possible for CSR standards to create barriers to (inward and outward) investment for companies that are unable to meet the requirements of the standards. f. In less fragmented industries. Conversely. the challenge is to distinguish where the use of a standard constitutes a legitimate application. In both cases. A challenge associated with certification schemes and audits is that they may impose a higher burden on companies. Practices • Leather Working Group • BSCI • International Council of Toy Industries - • ISO 26000 • GRI - • EICC • Pharmaceutical Industry Principles for Responsible Supply Chain Management Source: UNCTAD. Agreement on Government Procurement). for example. Concerns about possible trade and investment barriers There are unresolved questions about whether social and environmental standards. where adoption by many companies would be required to cover a large market share. a number of MSI and industry association codes employ proactive compliance mechanisms and are nonetheless having a significant impact. However. adding new standards. .5). While compliance promotion mechanisms can be an integral part of a standard. As noted above. only companies meeting the Government’s CSR standard qualify for outward investment assistance. It is not clear under WTO rules whether non-product PPM standards are covered by the WTO’s Technical Barriers to Trade (TBT) agreement or other WTO agreements (e. there was the “shrimp-turtle” case from the late 1990s.E. In this way. and thus lead to lower rates of adoption of the standard. and where it constitutes an abuse of protectionist intent. differentiating between companies by national origin. It is important therefore to monitor the application of CSR standards and to Multistakeholder/ NGO Company/ Industry association • ISO14000 • MSC • FSC • FLA RSPO • SA8000 • 4C Assoc.49 The dynamic nature of the field of CSR standards also includes significant practices of “ratcheting-up” compliance mechanisms over time. Compliance mechanisms of selected international CSR standards Source of standard Intergovernmental Organization Proactive mechanisms (audits. e.g. they can also be associated to a standard by third parties. 2009). Table III. even individual company codes can have a significant impact (table III. the use of CSR standards can become a form of protectionism if they are applied in a discriminatory way. many intergovernmental organization standards are key references for some of the certifiable standards of the MSI.F.A. could potentially become barriers to trade and investment. especially nonproduct-related PPM standards. • C. company compliance with “soft law” intergovernmental organization standards can be driven by other CSR standards with proactive compliance mechanisms.

116 World Investment Report 2011: Non-Equity Modes of International Production and Development identify discriminatory practices where they arise. but does not require that firms use this standard as a condition of market entry.200 suppliers audited according to the BSCI code of conduct and 4. For example. since there is no requirement that firms must follow them. industry associations. across 66 industrial sectors Covers 6% of global landed fish Covers 75% of the athletic footwear industry FWF affiliates in 2009 sourced from a total of 1. in terms of achieving public policy objectives (Webb and Morrison. and less prone to questions of investment protectionism.153 factories. voluntary standards alone can create a risk of neglect and indifference on the part of firms.4 million workers are employed in over 2. Audit Results Annual Report Audit Results Annual Report Annual Report with performance data of member companies Audit Results Market impact Forest Stewardship Council (1993) ISO14001 (1996) SA8000 (1997) Marine Stewardship Council (1997) Fair Labor Association (1998) Fair Wear Foundation (1999) UTZ CERTIFIED (1999) 4C Association (2004) Roundtable on Sustainable Palm Oil (2004) Business Social Compliance Initiative (BSCI) Code of Conduct (2002) International Council of Toy Industries (ICTI) Code of Conduct (2004) Leather Working Group Principles (2005) Covers 11% of global forests used for productive activities As of December 2009. through its supplier code of conduct Adidas influences the conditions of more than 775.400 SA8000 certified facilities in 65 countries.000 employees in 1.  with an estimated total of 300. based on data from MSI. companies and FAO.000 employees in 700 factories in 45 countries 22% of the global market for athletic footwear. Audit Results Annual Report Annual Report Annual Report. a voluntary standard pertaining to organic foods gives firms the option of using the approach adopted in the standard. 223. 2004). through its supplier code of conduct Nike influences the conditions of more than 800. That said.000 suppliers trained in 9 different countries Yes Biennial Report 75% of the global toy business is committed to only source from suppliers certified by ICTI in the future Yes No Individual company codes The working group covers 10% of the global leather production Nike Supplier code of conduct Adidas Supplier code of conduct Yes Yes Yes Yes 31% of the global market for athletic footwear. The balance between mandatory Table III. In this way. . voluntary CSR standards may be less problematic than mandatory requirements.149 organizations in 159 countries are certified to ISO 14000 Over 1.200 factories in 65 countries Source: UNCTAD.5.000 workers (growth rate of 60% in the last 3 years) Covers 5% of global coffee production Covers 30% of global coffee production Covers 8% of global palm oil production Industry association codes Yes Annual Report 11. Impact of selected MSI and industry association CSR standards and individual company codes Standard Compliance mechanisms Certification/ Public reporting Audits Multi-stakeholder initiative standards Yes Yes Yes Yes Yes Yes Yes Yes Yes Annual Report. Voluntary CSR standards may be less susceptible to challenge through WTO trade agreements. Audit Results Annual Report.

Applying CSR to public procurement policy Governments can consider applying CSR standards to their purchasing policies. the Government of Switzerland is in the process of developing such a scheme. This is part of creating “shared responsibility” within a value chain (which involves TNCs providing assistance to suppliers). including standards in Brazil and Mexico in 2004. and mobilizing the participation of relevant stakeholders (Vermeulen et al.. some governments are beginning to apply CSR standards to the architecture of corporate governance and international trade and investment. including through the provision of material support. 2010). while being careful to avoid discriminatory practices that would be a form of protectionism. there may be increased interest in an international CSR MSS. Building capacity One factor that can lead to low uptake of standards is a lack of knowledge. but legitimate restrictions based on objective criteria of necessity and proportionality are permitted under trade and investment agreements. of companies – especially those from poorer countries – that have limited capacity to adhere to such standards. and hence operations. Supporting CSR standards development Governments can encourage and support the development of CSR standards. maintains a “green list” of environmentally friendly products which should be given preferential treatment in public procurement. This approach provides enterprises with a certifiable standard to distinguish themselves in the area of CSR. For example. While applying CSR standards to procurement policies can help promote the uptake of such standards by companies. Thus. the 4C Association has become an influential industry standard. and the Netherlands and Denmark in 2010. Spain in 2009. skills and capabilities at various stages of a value chain. it can also negatively affect the competitive position. implementation of standards often requires a capacity-building component. schools) exclusively from MSC-certified suppliers. The Netherlands also has a sustainable procurement policy. In some cases these national c.CHAPTER III Recent Policy Developments 117 and voluntary standards is delicate.g. The Government of China. the 4C Association is a sustainability standard for the coffee industry. Portugal in 2008. As national CSR MSSs proliferate. to promote good business practices on more environmentally friendly products. Governments can support the development of national certifiable management system standards (MSSs). With support from the Government of Switzerland and other public and private sector representatives. . technical expertise. A number of policy options follow. as opposed to what critics call “offloading responsibility” (wherein the compliance burden falls solely on developing country suppliers that may have little capacity for meeting CSR standards). 3. Policy options Governments can play an important role in creating a coherent policy and institutional framework to address the challenges and opportunities presented by the universe of CSR standards. the State’s right to regulate may create legitimate restrictions on investors and their investments in the interests of public policy and economic development.51 Equally. for instance. initiated by the Government of Germany and implemented by the German development agency. and the Government of the United Kingdom has laid out a strategy (“Government Sustainable Procurement Action Plan”) and has already committed to source fish for its public institutions (e.52 Thus the challenge is to maintain an appropriate balance between mandatory and voluntary standards. a. MSSs are based on or aligned with ISO standards. This approach aims to promote best practice in corporate compliance with national laws and international agreements in order to maximize the sustainable development impact of TNCs. Recent years have seen the creation of a number of national CSR MSSs. In this regard.53 b.54 The Government of Germany has made a commitment to purchase only wood and wood products that are verified as coming from legal and sustainable sources. and accepts the FSC certification as verification of this.

the Malaysian stock exchange. including in the area of “impact investing” (box III.58 This model allows governments to use the dynamic space of voluntary standards as a laboratory for future government regulations. but today are usually regulated under national legislation. State-owned enterprises are required to prepare reports using the GRI standard. This has included capacity-building for companies that are willing to be certified. organic food standards originated in most countries as voluntary standards from civil society or industry associations.55 An alternative to developing a national CSR reporting framework is to adopt an existing framework developed by an international initiative. A project between the Government of Bolivia and USAID.8). has made CSR reporting mandatory for all listed companies. a number of stock exchanges – especially in emerging markets − have employed stock exchange listing rules to promote the uptake of CSR reporting to facilitate responsible investment practices (Responsible Research. requires companies to use the GRI guidelines in preparing sustainability reports. Promoting CSR disclosure and responsible investment To enhance transparency and comparability of CSR practices. As a result of this programme. 2010).118 World Investment Report 2011: Non-Equity Modes of International Production and Development Developing country governments wishing to promote standards in their countries can partner with donor States to deliver capacity-building initiatives and technical assistance to local industry and regulatory bodies. for example. Strengthening compliance promotion mechanisms among intergovernmental organization standards Governments could consider further strengthening the compliance promotion mechanisms of existing intergovernmental organization standards. and assistance linking certified companies with export markets. for example. Policymakers interested in promoting an internationally harmonized approach to CSR reporting and encouraging responsible investment. while adding uniformity of implementation through regulation. for example. Governments can further strengthen CSR capacity-building by engaging in the exchange of best practice at international forums. Using a common framework like this can promote international comparability between reports. the Ministry of Fisheries works in partnership with USAID to obtain MSC certification for the country’s fisheries (USAID. In Gambia. These organizations periodically review the efficacy of such instruments. 2009). Moving from soft law to hard law Governments can consider adopting some of the existing CSR standards as part of regulatory initiatives. promotes FSC certification in the Bolivian forestry industry. and the Shanghai Stock Exchange in China has published the Shanghai Environmental Disclosure Guidelines. In the case of the UN Global Compact. Another option is a mixed “public–private regulatory regime”. This approach can be useful for preserving the dynamism and aspirational nature of many multi-stakeholder standard-setting processes. including their redress mechanisms. 2010). the UN Joint Inspections Unit recently recommended that the UN “reinforce the implementation of the Integrity Measures and accountability in implementing the ten principles” (UN JIU. for example. . the Government has made FSC certification mandatory for forestry firms operating in the Mayan Biosphere reserve. d. such as UNCTAD. many intergovernmental organization standards already have some compliance promotion mechanisms in place. The Johannesburg Stock Exchange in South Africa. In Sweden. In Guatemala. Bolivia now has the largest area of FSC-certified tropical forest in the world (FSC. wherein regulatory initiatives ensure compliance with standards developed by civil society and/or the private sector. In close cooperation with national policymakers. for example. can work together through forums such f.57 e. As noted above. as UNCTAD’s ISAR working group56 and/or the Sustainable Stock Exchanges initiative. with which listed companies are urged to comply. 2010). For example. turning hitherto voluntary standards (soft law) into mandatory requirements (hard law).

the European Union has complemented its General System of Preferences (GSP) with the “GSP Plus” scheme. the Government of Denmark requires companies receiving financial support from the Danish Industrialization Fund for Developing Countries (IFU) to comply with IFU’s CSR policy. environmental and developmental objectives into the fabric of business and financial models. the Brazilian National Economic Development Bank has introduced a code of ethics. in collaboration with Harvard University’s Initiative for Responsible Investment. at $23 trillion. responsible investment has become a multitrillion dollar industry. It can also be focused on shareholder advocacy and positive environmental. While CSRspecific clauses do not currently feature prominently in IIAs. Applying CSR to investment and trade promotion and enterprise development Governments could play an active role in promoting socially and environmentally sustainable inward and outward investment.8. a small but growing number of agreements. social and governance (ESG) screens.000 constitute a $5 trillion global consumer market. The potential range of impact investment opportunities remains largely unknown. the 1. which offers additional tariff reductions for developing countries that have ratified and implemented 27 key international conventions related to CSR practices (e.3 trillion in investment will be required to halve greenhouse gas emissions from the energy sector by 2050. and other institutions to address these gaps and galvanize sources of private capital to tackle high priority social and environmental challenges.000 represent an even larger $12. Another $41 trillion is needed by 2030 to modernize infrastructure systems worldwide. It is the explicit incorporation of social. Moreover. to which all of its clients must adhere. Responsible investing has various themes. the OECD.59 Care has to be taken. based on intergovernmental organization standards. and limited knowledge of financial models that sufficiently incorporate environmental. Analysts estimate that impact investments could reach between $500 billion and several trillions over the next decade. a few examples are given below. h. To illustrate the magnitude of opportunities in impact investing. social and developmental factors into valuations and alpha forecasts. McGraw Hill Construction estimates that the green building market will more than double worldwide to between $96 and $140 billion by 2013. Impact investing: achieving competitive financial returns while maximizing social and environmental impact Over time. renewable energy) or for compliance with CSR standards. and hence may benefit from such initiatives.000 and $20. Through its “20ii − Investing with Impact” initiative. “Impact investing” takes this a step further.g. there are critical gaps in understanding the market conditions necessary for success. according to the World Resources Institute. the 4 billion people with annual incomes below $3. however. Further. Water infrastructure. together with inadequate policy and regulatory frameworks. Source: Contributed by the United States Department of State.g. Similarly.5 trillion market globally. It is based on the fundamental belief that it is possible for investors to achieve competitive financial returns and social change simultaneously. the United States Department of State will work with UNCTAD. the International Energy Agency estimates that $1. For example. For instance. to target investment in particular companies. to ensure that those countries that do not a priori fulfil the criteria receive the required technical assistance in order to do so.CHAPTER III Recent Policy Developments 119 g. is the largest portion of this investment. It can be focused on negative screens that prohibit investment in firms that manufacture or promote certain products and services. Despite the enormous potential of impact investing. Box III. in line with their overall development priorities and strategies. the ILO Core Conventions). Introducing CSR into the international investment regime Governments can also consider introducing CSR into the international investment regime. . To address climate change.4 billion people with per capita incomes between $3. Some governments are also providing incentives through preferential trade agreements. Governments can consider offering incentives for investments in sustainable industries (e. while avoiding discriminatory practices that would be a form of protectionism.

from 18 March 2010 to 26 April 2010. These principles address issues such as labour. a few countries have included innovative CSR provisions in their model agreements. economic partnership agreements (EPAs) or framework agreements.64 However. human rights. local capacity-building. such clauses nevertheless serve to flag the importance of CSR in investor–State relations. referring to specific corporate contributions. training and transfer of technology. then majority-controlled by the United States Government. such as human capital formation. Article 816 of the CanadaColombia FTA.63 Finally. A gradual schedule for the implementation of these rules will start in 2013 and should be fully phased in by January 2019. free trade agreements (FTAs). the environment. Available at: www. 4 E. 6 Twenty of the 2010 BITs were renegotiated. while devising mechanisms for addressing unintended consequences and preventing possible protectionist abuses.g.g. e. include such provisions.org. British bank Bradford & Bingley was sold to a Spanish bank. such as statements of principle that have been endorsed or are supported by the Parties. and create linkages between IIAs and international CSR standards. community relations and anti-corruption. including seven by the Czech Republic. 3 For further information see the UNCTAD-OECD Fifth Report on G-20 Investment Measures (2011). *** Governments have a range of policy options for promoting CSR. 2 Bank for International Settlements (2010) “Basel III rules text and results of the quantitative impact study issued by the Basel Committee”. and strengthened capacity-building programmes (to assist developing country enterprises to meet international best practice in this area). the implementation of CSR provisions in “real” IIAs remains to be seen. 8 This includes. At the Seoul Summit in November 2010. While it is difficult to assess their impact on conditions “on the ground”. 5 The European Commission conducted this consultation using a “Questionnaire on the application of the Temporary Framework”. three Canadian FTAs with investment provisions61 refer to CSR in the preamble and contain substantive provisions. the European Parliament has called for the inclusion of a CSR clause in every future FTA investment chapter concluded by the EU. Two critical components of this mix will be improved CSR reporting by companies (to better inform future policy development).62 While BITs by EU member States do not include CSR clauses. the earliest of these references. Today.120 World Investment Report 2011: Non-Equity Modes of International Production and Development especially recent FTAs with investment chapters. which may also influence the interpretation of IIA clauses by tribunals in investor–State dispute settlement cases.. 1 . and United States Government co-owned Chrysler was partly sold to Italian automaker Fiat. For example. While this process has its origins in the mid-1990s. care has to be taken to ensure that increasing consideration of CSR does not open the door to justifying policy interventions with undue protectionist purposes. sold its Swedish subsidiary Saab to a Dutch/Austrian company. states that: “each Party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognized standards of corporate social responsibility in their internal policies. employment creation. G-20 leaders endorsed these and other recommendations to strengthen financial stability. the preambles of the European Free Trade Association’s 2009 FTA with Albania and 2010 FTA with Peru refer to CSR-related issues. While there are a number of policy implications. Pioneering examples in both developing and developed countries suggest that it is time to mainstream CSR into national policies and international trade and investment regimes. The Parties remind those enterprises of the importance of incorporating such corporate social responsibility standards in their internal policies. 7 This includes DTTs on “income” and “income and capital”. Again. United States automaker GM.bis.60 specific references to CSR started appearing more recently. Notes The Basel III rules were issued by the Basel Committee on 16 December 2010. the various approaches already underway are increasingly taking the form of a combination of regulatory and voluntary instruments that work together to promote responsible business practices.” In addition. in an effort to bring its IIAs into conformity with EU law.

If individual treaty exclusions and reservations are taken into consideration a more nuanced picture would emerge.mida. such as training or employing workers. protection in case of expropriation. Mercosur (1994). Finance is a combination of banking and insurance from the original WB report and the share represents those countries that allow only less than full ownership for at least one of these sectors. telecommunication systems. are excluded. constructing/expanding particular facilities. become 21 .g. including the OECD National Treatment Instrument (1991). 10 The second category focuses more on granting market access to foreign investors than on protecting investments once they are made (WIR10). such as national treatment. some of the EU treaties). the G-20 leaders had agreed that “Narrowing the development gap and reducing poverty are integral to our broader objective of achieving strong. 11 The third category of IIAs are agreements dealing with investment cooperation (WIR10). including 14 developed countries. the education system. 30 Of interest is also the social services sector. but no other typical protection provisions such as those on expropriation or ISDS (e. and Shenzhen Economic Zone. see www. locating production. values and other intangible structures in an economy. Rwanda-United States BIT (2007). http://business. 9 Examples are the “Aurora Pacific Economic Zone” in the Philippines to utilize wind power and solar cells for energy and fresh water springs for potable water.my.gov. “Soft” infrastructure includes the financial system and regulation. transfer of funds and investor–State dispute settlement (ISDS) (WIR10). 26 For example. financial or fiscal incentives. Japan-Uzbekistan BIT (2009) and JapanIndia FTA (2011).com. 18 For the Republic of Korea. transport 80 and for all other industries 85 countries. notably whether it contains the qualification of only applying to investments/investors “in like circumstances”. “FDI Promotion Policy in 2011”. by requiring the use of local services or mandating technology transfer. For Malaysia see www. most favoured nation (MFN) treatment. telecoms 84. 19 Other examples are the University of the Philippines Science Technology Park – joint venture between the university and private sector to establish an incubation centre for hi-tech projects. the total number of actual treaty-based cases could be higher. 28 Some of the provisions refer explicitly to the industrial-policy related objectives of the subsidy in question. 23 The World Bank IAB 2010 report surveyed sectors with restricted entry for foreign investors for 87 countries. for India see http:// mapsofindia. institutional mechanisms. CAFTA (2004).com. Panama-Singapore FTA (2005).boi. health facilities and test bed facilities for R&D. but never concluded). 2006. 15 See “The G-20 Seoul Summit Declaration” and “Annexes”. The number of countries with data for specific sectors is: health care 86. 57 developing countries and 16 transition economies. United StatesUruguay BIT (2005). 20 Other examples include the “Ontario Technology Corridor” and the “Illinois Research & Development Corridor”. and the “Saemangeum Gunsan Free Economic Zone” in the Republic of Korea. or to use domestic goods instead of imported goods). the SCM Agreement disciplines the use of certain subsidies (e.th.mapsofindia.go. 16 At the Toronto summit on 26−27 June 2010. endorsed and published on 31 January 2011. fair and equitable treatment (FET).com and www. 2011c and UNCTAD’s database on investor–State dispute settlement cases (available at www. Canada-Chile FTA (1996). the legal framework.unctad. Japan-Peru BIT (2009).indianground. 13 This includes 20 awards. draft OECD Multilateral Agreement on Investment (1998. where reservations have. transport. UNCTAD. For further details on the eight earlier IIAs see UNCTAD. by prohibiting subsidies that require recipients to meet certain export targets. Treaties that offer post-establishment national treatment only. 11−12 November 2010. the “Technology Park Malaysia” − centre for research and development for knowledge-based industries.” 17 For China. 24 E. as well as DTTs. Canada-Peru BIT (2006). social networks. for Thailand. NAFTA (1992). or carrying out research and development in a particular territory. Andean Community (2001) and the Chile-United States FTA (2003). see http://works. 25 The actual impact of the national treatment clause depends on its specific formulation. see Foreign Investment Committee.com. 22 Examples of “hard” infrastructure are power. five decisions on liability. 27 For example. electricity 83. 29 Case studies were conducted for 16 IIAs. org/iia). and sectorspecific agreements such as the Energy Charter Treaty are excluded. including those that are only signed but not yet ratified. sustainable and balanced growth and ensuring a more robust and resilient global economy for all.g. 12 Since most arbitration forums do not maintain a public registry of claims. G3 (1994).com and www. and 11 other decisions.CHAPTER III Recent Policy Developments 121 The first category of “other IIAs” is those that contain substantive investment provisions.g.bepress. Multilateral investment-protection related agreements such as the TRIMs. or providing a service. 14 This includes all post-establishment IIAs.chinalawinsight. over time. 11 decisions on jurisdiction.

45 The 4C Association and the Rainforest Alliance for example have created a translation mechanism between each other’s standards. See also Art.unctad. 33 For example. safety or environmental measures (e. see www. 52 See further WIR03. 36 ASEAN Secretariat (2003). see www. adoption and compliance. OECD-UNCTAD 2010a. 63 On 6 April 2011. See www.eu/ agriculture. the governments of the G-8 and the G-20 have taken a strong interest in CSR standards in recent years.122 World Investment Report 2011: Non-Equity Modes of International Production and Development more frequent.XIV.org/isar for more information. 56 For more information. Botswana’s model BIT (2008). 12. and experiences with ISDS touching upon essential services or social considerations.world-exchanges. See G-8 Leaders Declaration: Responsible Leadership for a Sustainable Future. 55 See www. and the transfer of technology”.ccgp. e. 2006. corporate governance standards of the United Nations Global Compact and relevant ILO Conventions in the latter. 54 See Ministry of Finance and State Environmental Protection Agency: Implementation Guidance on Public Procurement Based on Environmentally Labeled Products.  the Committee on Sustainability Assessment). which in 2010 was used by approximately 1. local capacity building through close cooperation with the local community. 61 These are Canada’s FTAs with Colombia (2008).cn (Chinese language). 43 For example the Forest Stewardship Council (FSC). An increasing consciousness of the pros and cons of submitting social services to international obligations. 60 See references to environmental and labour considerations (e. among others. and the draft Norwegian model BIT (2007). involving representatives of governments. It is unique among UN agencies in that it has a “tripartite” governance structure. 49 For example ISO. and Panama (2010).htm. GATS 1994 Art.europa-eu-un.g.g. 53 Note that ISO 2600 is not an MSS. ILO. June 2011. might have contributed to this development. and not intended for certification.10.unpri.unctad.g. 34 See the WTO-OECD-UNCTAD Reports on G-20 Investment Measures (WTO-OECD-UNCTAD. 50 WTO cases No. employers and employees. sustainable meat production and conflict minerals.org. www. 11. 58 and 61. 41 The ILO is a specialized agency of the UN. 40 Among others. 59 See www. and references to good corporate governance. While various efforts are underway (e. 44 There are a number of standards still emerging in new areas. 31 See also chapter IV. 48 Impact assessment of CSR standards is critically important. 32 The risks of the lock-in effect are particularly pronounced with regard to liberalization commitments based on a “top-down/negative list” approach. 42 See www.org/6402. use third party certification. available at www. The most popular and comprehensive CSR reporting framework is that of the GRI.iso.org/isar. 2009 and 2010. 51 See GATT 1994.g. e.org. rather it is a guidance standard. Peru (2009). and the Governments of Germany and Saudi Arabia. INI/2010/2203. MSC. 46 47 . 39 The text in this section is based partially on UNCTAD’s contribution to a recent G-20 document on “Promoting standards for responsible investment in value chains”.gov. 35 Ibid. 2009 (para. 58 EU policy on organic farming: http://ec. there is no consensus approach. create employment opportunities and facilitate training opportunities for employees.800 corporations. the WTO’s General Agreement on Trade in Services (GATS). 64 For example. See report to the G-20 High-Level Development Working Group. the European Parliament adopted its Resolution on the future European international investment policy. NAFTA investment chapter). such that Rainforest Alliance certificate-holders can now apply for the 4C Licence without having to go through the entire 4C Verification Process. See UNCTAD. Canada model BIT Art. 2010b and 2011).org. encourage human capital formation. which also benefited from comments by UNDP.g. 37 ECOWAS (2010) “West African Common Industrial Policy (WACIP)”. Ghana’s model BIT (2008) states that foreign investors “shall to the extent possible. 53) and G-20 MultiYear Action Plan on Development.europa. UNCTAD currently uses an industry-level analysis examining factors such as the market share of the companies using the standard or the number of enterprises or workers influenced by the standard. in Art. 2010 (page 5). 62 There are references to responsible corporate conduct and ILO Conventions in the former.asean. 57 For more information. OECD and the World Bank. 38 Gulf Cooperation Council (2000) “Unified Industrial Developments Strategy for the Arab States of the Gulf Cooperation Council”. FSC and UTZ. focusing on promoting dissemination. “What is AlCo?”. NAFTA preamble) and a recognition that it is inappropriate to encourage investment by relaxing domestic health.org/iso/social_responsibility.

It is estimated to have generated over $2 trillion of sales in 2010. Developing countries need to mitigate the risk of remaining locked into low-value-added activities. licensing and management contracts. They employ an estimated 14–16 million workers in developing countries. NEM policies need to be embedded in overall national development strategies. NEMs can yield significant development benefits. franchising. such as contract manufacturing. Second. Policy matters. licensing $340–360 billion. Overall. Their exports account for 70–80 per cent of global exports in several industries. and protecting labour rights and the environment. Policymakers need to consider non-equity modes (NEMs) of international production. Their value added represents up to 15 per cent of GDP in some economies.1–1. ensuring fair competition. Employment in contract manufacturing can be highly cyclical and easily displaced. governments need to support efforts to build domestic productive capacity. and management contracts around $100 billion. Concerns exist that TNCs may use NEMs to circumvent social and environmental standards. services outsourcing. Maximizing development benefits from NEMs requires action in four areas. franchising $330–350 billion. promotion and facilitation of NEMs requires a strong enabling legal and institutional framework. In most cases. NEMs can enhance productive capacities in developing economies through their integration into global value chains. as well as the involvement of investment promotion agencies in attracting TNC partners. policies aimed at improving the integration of developing economies into global value chains must look beyond FDI and trade. Third. policies need to address the negative consequences and risks posed by NEMs by strengthening the bargaining power of local NEM partners. Finally. NEMs also pose risks for developing countries.NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND DEVELOPMENT CHAPTER IV In today’s world. Contract manufacturing and services outsourcing accounted for $1. First.3 trillion. Cross-border NEM activity worldwide is significant and particularly important in developing economies. . NEMs are growing more rapidly than the industries in which they operate. The value added contribution of NEMs can appear low in terms of the value captured out of the total global value chain. contract farming.

or in non-equity inter-firm arrangements in which contractual agreements condition the operations and behaviour of hostcountry partner firms. and the feasibility of each option (Buckley and Casson. or not prohibitively expensive or time-consuming to acquire. TNCs increasingly control and coordinate the operations of independent or. rather. They have built interdependent networks of operations involving both their affiliates and partner firms in home and host countries. Policymakers need to consider a myriad of alternative networked forms of TNC operations. multicurrency operations. can decide to with the choice based on conduct such activities relative costs. where the TNC exercises no control over other firms. multi-plant. 2001). for example. Internalization of cross-border activities brings with it the costs of running complex. contract manufacturing. where there is a cross-border dimension. 1. THE GROWING COMPLEXITY OF GLOBAL VALUE CHAINS AND TNC GOVERNANCE In the past. skills and know-how required to perform the activity are either present in the firm. to pursue the integration of developing economies into global value chains it is no longer enough to focus on attracting FDI and TNC affiliates on the one hand. These mechanisms or levers of control range from partial ownership or joint ventures. creating an internalized system of affiliates in host countries owned and managed by the parent firm. The choice between internalization and externalization is typically based on the relative costs and benefits. Over time. contract farming. Balanced against the costs of internalization are the obvious advantages of retaining full control of value-chain activities. In this chapter. information and other assets are intra-firm and under the full control of the TNC. through various mechanisms. we refer to these TNC networks as global value chains (GVCs). results in FDI. loosely dependent partner firms. it assumes that the technical capability. Depending on their overall objectives and strategy. to other firms (externalization) – a choice analogous to a “make or buy” decision. NEMs include. market access and standards. From a policy perspective. services outsourcing. the associated risks. TNC value chains and governance choices Foremost among the TNCs manage global value core competencies of chains through internalizaa TNC is its ability to tion (ownership) and extercontrol and coordinate nalization (including NEMs). activities within a global NEMs and FDI can be subvalue chain. including capital exposure and business uncertainty. and the specific circumstances of individual markets. as well as other types of contractual relationship through which TNCs coordinate and control the activities of partner firms in host countries. franchising and licensing. which tend to increase the greater the social. cultural and political differences between locations. the industry in which they operate. through various contractual forms. 1976.124 World Investment Report 2011: Non-Equity Modes of International Production and Development A. It also implies internalizing the full extent of risk associated with the activity. TNCs. whereby the international flows of goods. Such mechanisms are not mutually exclusive and they can be as much complements as substitutes to FDI. like stitutes or complements. TNCs primarily built their international production networks through FDI (equity holdings). Internalization. or to promote arm’s-length trade on the other. TNCs will want to maximize “value capture” – externalization clearly . WIR11 focuses on “non-equity modes” of TNC international production (NEMs) as alternative forms of governance of TNC-controlled global value chains. benefits and in-house (internalization) or they can entrust them associated risks. To start with. Externalization results either in trade. services. each of which comes with its own set of development impacts and policy implications. to control based on bargaining power arising from TNCs’ strategic assets such as technology. Finally. all firms. TNCs have also externalized activities throughout their global value chains.

e. These include shifting of certain costs and risks to third parties.CHAPTER IV Non-Equity Modes of International Production and Development 125 implies giving up part of the profits generated along the chain. including flows of knowledge. Secondly. access to low-cost resources. 2009). Non-equity modalities: A middle ground between FDI and trade Foreign direct investment Non-equity modes of international production Trade Source: UNCTAD. Figure IV. technological capability and knowhow.1) in their GVC governance by externalizing activities while still maintaining a level of control. control is defined purely by ownership.2 shows that NEMs are not specific to any particular part of the value chain or type of activity – TNCs are generally prepared to externalize any activity that is not fundamental to competitive advantage in their market or industry and that can be carried out at lower cost or more effectively by third parties (including overseas). such as networks and relationships in host countries. i. These can be “hard” assets. or often equally important “soft” assets. context and relative bargaining power of TNCs and NEM partners (see below in section A. and monitoring and control of compliance with contractual obligations.e. in the case of NEMs. Thus. The degree of control given up by the TNC. they allow TNCs to enter a “middle ground” (figure IV. Finally.1. In building their international production networks.2 the choice of mode in host countries is between ownership (FDI) and arm’slength trade or licensing. Externalization has a number of intrinsic advantages. Non-contractual levers of control can also play a role in minimizing costs and risks to the TNC – the superior bargaining power of the TNC will alleviate concerns related to giving up a measure of control over part of its value chain. Equity joint ventures are a special case in which TNCs’ control flows from a mix of equity and non-equity governance. internalization avoids the transaction costs associated with finding suitable third parties and then stipulating contractual arrangements that tend to become more complex the greater the perceived risks associated with loss of control over parts of the value chain and over assets and valuable intellectual property (IP). the terms of contracts underpinning non-equity relationships are aimed at minimizing the cost of externalization and at protecting the assets. 1980). TNCs therefore have to decide not only on a location. goods and services. in the case of wholly owned host country affiliates. technology and IP exchanged. The ultimate ownership and control configuration of a GVC is thus the outcome of a set of strategic choices by the TNC. the ownership-location-internalization (OLI) model (Dunning. i. vary by mode. In the classic economic model describing this decision-making process. Figure IV. The type of non-equity modes that are available or appropriate along GVCs varies by value chain segment. control is exercised through contracts and bargaining power (table IV. Non-equity modes of international production represent an evolution of this model. not tacit and to some extent standardized or codified.2). it allows a focus on “core business”. Externalization allows the TNC to establish a more effective internal division of labour. the costs and associated risks of externalization. and the type of contractual and non-contractual levers which come into play. internalization also eliminates the costs of managing relationships with NEM partners on a continuous basis. but between a range of modes in which control is exercised in various configurations and to various degrees. Activities that are knowledge-intensive or high value added are not precluded. improving the trade-off between the advantages and the costs of externalization (Hennart. The choice is thus no longer between control through ownership (FDI) or no control (trade).1). While certain patterns of . when the risks associated with externalization are limited or can be contained. as well as gaining rapid access to the assets and resources third parties may bring to the partnership. communication and information flows. such as plants and equipment. Externalization is clearly more feasible if the knowledge and intellectual property required to conduct the activity are transferable. but also on the mode of control and coordination of international operations. From the TNC’s perspective. freeing scarce resources to be used in other segments of its value chain – in other words.

In some industries. based on Porter’s classic value chain representation (Porter.g. a commercial. The partners in NEM relationships evolve over time. and its ownership and control configuration. where for example directly owned retail outlets coexist with franchise outlets. Contract design. For example in the electronics industry. complementarity may exist at the same stage in the value chain. are dynamic. marketing Aftersales and services • Contract farming • Procurement hubs • Contract manufacturing (intermediates) • Contract manufacturing (assembly/final product) • Out-licensing • Contract logistics • Franchising • Management contracts • Concessions • Brand-licensing • After sales services outsourcing • Call centres Source: UNCTAD. or alternatively licensing the required technology and IP to a local manufacturer. Complementarity is a characteristic of TNC coordinated international production systems. In some parts of the value chain NEMs and FDI may be substitutes. or where foreign affiliates are established to manage and facilitate NEM relationships (e. while in others the two may be complementary. procurement or logistics entity to support multiple contract manufacturing relationships in the same overseas market). 1985). NEM activity have emerged in different industries. The composition of a TNC-governed GVC. which encompass a web of owned affiliates and third-party NEM relationships. Substitution occurs where a TNC has a choice between different modes and makes a cost-benefit trade-off. not unusually expanding their NEM operations to new production bases or Figure IV. Moreover. In-licensing Procurement/ in-bound logistics Operations/ manufacturing Out-bound logistics/ distribution Sales. for example where a firm has the option of either building a plant to produce and supply products to an overseas market. both modes of operation are an integral part of the chain of global value creation. Selected NEM-types along the value chain Corporate services and support processes • Business process outsourcing Technology/Intelectual property development • Contract R&D. service provision.2. It may also occur where the industry structure predetermines the outcome of the trade-off.1.or brand-owner no longer makes economic sense in the presence of large and sophisticated global contract manufacturing firms.126 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV. direct participation in host-country firms Contractual agreement conditions the behaviour of a hostcountry firm Control based on bargaining Host-country firm dependence on access to TNC strategic power assets and the TNC network conditions its behaviour No control Arm’s-length market transactions. trade Contractual levers of control Source: UNCTAD. Different modes of TNC governance in global value chains Types of governance Control through ownership Translation to modes of international operation Ownership advantages √ √ √ √ OLI-model Locational advantages √ √ √ Internalization advantages √ - FDI. it is useful to view the propensity of any given segment of a value chain to be externalized as entirely specific to the industry or the individual TNC. in most cases construction of a fully owned new components or assembly plant by a design. NEM partner firms have grown into TNCs in their own right. . adapted from Dunning (1980).

Thus the defining feature of cross-border NEMs.446. A cross-border nonequity mode of TNC operation3 arises when a TNC externalizes part of its operations to a host-country-based partner firm in which it has no ownership stake. can also be compared to FDI in terms of their motivation. Specifications may relate to. the design and quality of the product or service to be delivered. to distinguish it from other forms of investment.1. make capital expenditure. improve working conditions. as the distribution networks created for the centrally planned system had become unsustainable. International retailers entered the market almost exclusively through equity investments (FDI). technology and know-how in logistics. Retail services in particular needed modernization. both by bringing in expatriate staff and by training local personnel. adopt new procedures. is a significant level of control (a minimum equity stake of 10 per cent in host-country business entities) and a long-term interest in the host-country operation. compared to only 33 in 1996. some types of NEM 2. the underdeveloped business environment and a lack of appropriate partners often precluded non-equity forms of operation (franchising). Some. The various forms of NEM. is control over a host-country business entity by means other than equity holdings.1). use specified suppliers. based on data provided by the East European Franchise Association. The share of retail in the inward FDI stock of transition economies was between 5 and 7 per cent in the late 1990s. foreign operators are increasingly opting to develop their retail networks through franchising. change processes. is a case in point (box IV. although each type of NEM has its own particularities. The evolution of TNC strategies in transition economies. Thus with the evolution of the local market. In addition. and some are market-seeking (brand licensing. The evolution of retail franchising in transition economies One of the main economic challenges of transition economies in the early transition period was the reconstruction of the services sector. . The number of franchisee outlets linked to foreign franchisors had risen to 3. This issue of a long-term interest also arises in the case of NEMs. compared with less than 1 per cent in the rest of the world. logistics networks and warehouses. as partner firms become an integral part of the TNC’s GVC and their performance is an integral part of the TNC’s overall competitiveness. without equity involvement. for example. as a form of governance of a TNC’s global value chain. in 2011.2. Moreover. franchising). and so forth. through their local operations they have built local capabilities and skills. requiring the host-country partner firm to. are resource-seeking. For TNCs. summarized in table IV. the process and standards of production. retail TNCs are shifting their operations from FDI to franchising.CHAPTER IV Non-Equity Modes of International Production and Development 127 markets through FDI. was the fastest way to enter the region. some are efficiencyseeking (contract manufacturing. Box IV. Defining features of NEMs NEMs are contractual relationships between TNCs and partner firms. often serve as a basis for building franchising operations. outsourcing). In distinction to purely arm’s-length transactions. while maintaining a level of control over the operation by contractually specifying the way it is to be conducted. for example. Source: UNCTAD. Examples include Foxconn (Taiwan Province of China) (contract manufacturing) and Arcos Dorados (Argentina) (franchising). Their foreign affiliates. including purchasing and marketing organizations. as the transition economies advance. in the Russian Federation there were 305 foreign franchise systems out of 595. The defining feature of FDI. network development and marketing. up from only 440 in 1996. For example. though many maintain an FDI presence. or the business model that the partner firm must adhere to. they have a material impact on the conduct of the business. and the sources of this power vary by mode. The mix of FDI and NEMs within GVCs can also shift as technologies and standards change. Gradually.4 A parallel can be drawn with FDI. FDI. Transition economies relied heavily on foreign investors for capital. Bargaining power represents an additional lever with which TNCs influence their partners. such as contract farming. Furthermore. including the acquisition of privatized firms. broadly from FDI to franchising after the region opened up to international investors.

Licensing can take various forms. which manages the asset in return for a fee.128 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV. Contracts set forth terms. as in the case of licensing.2. Contractual relationship under which operational control of an asset in a host country is vested to an international firm. Contract farming Licensing Franchising Management contracts Concessions Strategic alliances Contractual joint ventures Source: UNCTAD. and unit franchising. were dealt with in WIR07 and WIR08. business and knowledge functions. product licensing and process licensing. service or processing elements of its GVC (extending even to aspects of product development). See also WIR05. trade secrets) in exchange for payment (a royalty). knowledge. which might include elements of investment by the TNC or ownership of the asset for a period. Franchising includes international master franchising. Contractual relationship in which an international firm (licensor) grants to a host country firm (licensee) the right to use an intellectual property (e.) The defining features of NEMs – coordination and control of independent firms through contractual and non-contractual means. with individual entrepreneurs owning one or more outlets. Concessions are normally complex agreements.g. resources. In some industries such as electronics. and liabilities of the parties but do not entail the creation of a new legal entity. NEMs and trade. or some sub-types of franchising such as distributorships or agencies. manufacturing capability. distribution channels. including brand licensing. Strategic alliances involve intellectual property transfer. which establishes conditions for the farming and marketing of agricultural products. the concessionaire. (Concessions in extractive industries and infrastructure. contract manufacturers are very large operators . Other NEM types are more “narrow asset transfers”. respectively. franchising and concessions. a The generic terms “subcontracting” and “OEM” will be avoided in this report as they are used in a number of different ways in the literature and business. Contractual relationship under which operational control of an asset in a host country is vested to an international firm. See also WIR09. as in the case of contract manufacturing. including as public–private partnerships (PPPs). with a single equity owner of all outlets in a market. The firm manages the asset in return for an entitlement to (part of) the proceeds generated by the asset. concessions and contractual joint ventures are complex NEM forms.2. obligations. Legally they can be structured in many ways. out-licensing entails sale of intellectual property to other firms. such as build-own-transfer (BOT) arrangements. This report focuses on NEMs where the relationship between TNCs and partner firms is relatively simple – essentially the first five types of NEM in table IV. Definitions of selected types of cross-border NEMs NEM type Contract manufacturing Services outsourcinga Definition Contractual relationships whereby an international firm contracts out to a host-country firm production. patents. management contracts. Contractual relationship in which an international firm (franchisor) permits a host country firm (franchisee) to run a business modelled on the system developed by the franchisor in exchange for a fee or a mark-up on goods or services supplied by the franchisor. Contractual relationship between an international buyer and (associations of) host-country farmers (including through intermediaries). industrial design rights. technology and know-how to be put in the care of host-country firms. outsourcing. expertise. capital equipment. the contractor. trade marks. All go under the general rubric of "outsourcing". are similar to FDI in that they entail a “package” of assets. Services outsourcing commonly entails the externalization of support processes including IT. from contract manufacturing to management contracts – to enable a relatively unambiguous analysis based around GVCs. See also WIR07 and WIR08. specialization. or intellectual property. In-licensing refers to a company acquiring a licence from another firm. shared expenses and risk. facilitating assessment of impact and policy issues. Strategic alliances. with a material impact on the conduct of their business – in some instances blur the rigid distinction between FDI. with less clear-cut scope and implications meriting separate treatment. copyrights. Contractual relationship between two or more firms to pursue a joint business objective. Partners may provide the alliance with products.

in 2008 Olam (Singapore) sourced 17 agricultural commodities from approximately 200. it is the TNC which orchestrates the value chain. In each NEM-type contractual levers of control are complemented with elements of soft bargaining power that strengthen TNCs’ governance of GVCs (table IV. including in negotiations defining the terms of a contract. with power relationships depending on a range of factors which vary by NEM-type and industry. NEMs are therefore inextricably linked with international trade and FDI. which then establish conditions for the production of farm products. and Lenovo (China). This countervailing power can also be exercised in a number of ways. cooperatives or other intermediaries. garments. and it does this from production affiliates in countries such as Malaysia. advanced productive capabilities (e. consumer electronics. Similarly. FujitsuSiemens (Japan). Czech Republic and Mexico. often with the support of their government. outweighing any countervailing forces that a host-country NEM may put forward. In industry segments such as automotive components. the ability to scale operations quickly). in 2008 food manufacturer Nestlé (Switzerland) had more than 600. Partnerships are seldom equal. Contractual relationships between a TNC and host-country farmers can be channelled through associations of farmers. The means of control and the sources of bargaining power in NEM relationships vary by type.g.CHAPTER IV Non-Equity Modes of International Production and Development 129 and TNCs in their own right. It also makes them important interlocutors for policymakers aiming to stimulate the development of specific economic activities in specific locations. In contract farming.000 contract farmers in over 80 developing and transition economies as direct suppliers of various agricultural commodities (WIR09). shaping global patterns of trade in many sectors. At the same time.3). partner companies in host countries possess or can develop “countervailing power”. Ultimately. and a major point of access to TNC global value chains. builds and internationally distributes electronics products for lead TNCs such as Apple (United States). For example. access to key assets or resources (including human resources) or knowhow related to the local market of the NEM partner.000 suppliers in 60 countries (most of them developing countries). In the garments industry. Inventec (Taiwan Province of China) designs. in franchising. . contract manufacturing and services outsourcing represent a very large share of total trade. China) arrange production in dozens of countries for branded clothing companies such as Gap (United States) via its long-standing relationship with independent contractors. This has implications for both partner firms and developing countries. Similarly. Thus. Sources of such countervailing power on the part of NEM partners include specialized knowledge (including patents and other intellectual property). TNC governance. NEMs are thus a major “route-to-market” for countries aiming at export-led growth. large intermediaries such as Li & Fung (Hong Kong. hotels and IT and business process services. the most important source of TNC bargaining power. Thus the segmentation or “fine-slicing” of value chains into ever more numerous and discrete activities that can be carried out by partner firms in any location plays into the hands of TNCs. the numbers of individual suppliers are so great that arrangements with TNCs are made by intermediaries. extended networks of business outlets are often governed through a master franchisee that contracts rights for an entire market (a country or region) in which it manages relationships with individual unit franchisees. is its role as the coordinator of the GVC itself. and include the capabilities and other assets possessed by TNCs and partner firms. independent of whether such development is driven by FDI or domestic partners’ investment. The TNC’s governance of its integrated international production network and of the web of loosely dependent entities that make it up allows it to regulate access to the network and to set the conditions. For example. control and coordination of hostcountry operations through NEMs can be indirect.

NEM activity is becoming ever more widespread geographically. In electronics contract manufacturing. choice of suppliers. and are growing rapidly. However. their NEM identity is vital information for policymakers – all the more so because such operations generate significant amounts of trade. partially owned. Including the activities of such contract manufacturers in the measurement of non-equity modes of internationalization risks some “double-counting” between FDI and NEMs. the relationship between FDI. even if their productive capacity is employed to serve other TNCs. a Contractual arrangements also include obligations on the part of TNCs. process. the aim here is to establish a baseline to evaluate NEMs in a number of dimensions (box IV. From the perspective of developing host countries.g. because the web of directly owned. have become TNCs in their own right. CSR) •O  bligations regarding the state and maintenance of the asset and future investments (capital expenditure obligations/assurances) Sources of TNC bargaining power • Access to the TNC internal market. and quality • Commercial terms and capital expenditure obligations/assurances • Supply guarantees and restrictions on side-selling • Obligations to purchase specific inputs (e. fertilizer) • Obligations regarding the TNC’s CSR practices •O  bligations placed on the licensee restricting or conditioning the use of the intellectual property •O  bligations placed on the franchisee conditioning the use of the intellectual property and the running of the business (e. contract-based and arm’s-length forms of international operation of TNCs is tangled. However. product or service. for example. intellectual property • Access to the TNC internal market where part of a subcontracting arrangement •   Existence of many competing licensees • Access to the TNC supply and business support network • Market strength of established brand names • Existence of alternative choices of franchisees • Access to TNC managerial competencies and know-how. Recognizing the complexity of NEMs and their interconnections with other aspects of TNC operations. analysing non-equity modes is complex. and intellectual property Franchising Management contracts Source: UNCTAD. TNCs’ contractual levers and sources of bargaining power Modes Contract manufacturing Services outsourcing Contract farming Contractual levers of TNC control over host-country firmsa •S  pecifications for design.3. and some of the distinctions between the different modes are blurred. supply network. most of the top players. supplies of inputs. seeds. To assess the extent to which TNCs govern global value chains it is no longer sufficient to consider equity ownership (FDI) alone as a control mechanism. their inclusion in this section is essential in order to understand the nature and extent of value chain governance by individual TNCs.130 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV. Nevertheless. NEMs and trade is also intertwined in many GVCs. primarily from developing economies. Measuring the scale and scope of cross-border NEMs is crucial to our understanding of the overall development of world trade and investment. use of the supply network. Moreover.g. service levels.2 describes the methodology used for the analysis and calculations). THE SCALE AND SCOPE OF CROSS-BORDER NEMs NEMs are an important part of TNC-governed GVCs. logistics network • Existence of many potential contract suppliers Licensing • Access to know-how. guaranteed sales • Access to TNC know-how. though there are significant variations by mode and industry. B. capital expenditure. the activities of such firms are equivalent to FDI. The overall methodology .

and specifically cross-border activities. an internationalization ratio (share of franchising activity carried out by foreigners) was applied to estimate cross-border NEM employment. The data on major players used to derive estimates are included in annex tables IV. Source: UNCTAD. Linkages between foreign affiliates and local firms that take the form of NEM contracts5 are. In order to provide some sense of the scale and scope of NEM activity worldwide. footwear. and management contracts in hotels). excluded from the data presented here. licensing. Third. automotive parts. personnel costs. measured by sales or exports. employment estimates. Estimates of employment in developing and transition economies were derived by applying the ratio of worldwide employment located in these economies to the total employment estimate. This report focuses only on those NEM activities that cross borders. UNCTAD employed a three-step methodology to establish estimates for WIR11. value added related to cross-border NEM sales was estimated in most cases by applying the ratio of value added (calculated as the sum of pre-tax income. franchising and management contracts – are commonly also employed between firms within the same country. The usage of NEMs in firm internationalization is common across many industries and in every segment of GVCs. footwear etc.2. These estimates were then refined by analysing the major players in each market and adjusting total NEM sales by an appropriate internationalization ratio to derive cross-border sales. services outsourcing. • In cases where NEM estimates do not exist in any form (contract manufacturing in garments. the prevalence of various forms of NEMs was mapped across industries. Methodological note Measurement of NEM activity is difficult. the data were obtained through national franchise associations. Estimates of employment in developing and transition economies were derived by applying the share of assets or employment in these economies for the largest players to the total employment estimate. Where possible. industry reports provided the necessary cross-border related employment. For franchising. subtracting re-exports.CHAPTER IV Non-Equity Modes of International Production and Development 131 Box IV. The report limits its analysis to a number of industries in which NEMs . both total and in developing and transition economies. or latest available year) and applying industry-specific ratios related to the share of production destined for export and an estimate of the share of exports related to the given mode/industry combination. contract farming. automotive components. and management contracts in hotels) estimates of global activity were obtained from recognized industry analysts. contract manufacturing is most prevalent in industries such as electronics. for the most part. given the lack of national and international statistics that cover NEM-specific transactions. automotive components. First. services outsourcing. garments. Estimates of employment in developing and transition economies were constructed using information from the same sources. For franchising. and toys) total employment was estimated by using industrial data from UNIDO to determine worldwide employment in a given industry (2007 data. • Data for franchising and IT services and business process outsourcing were obtained from national associations and from industry reports. • In cases where the concentration of players is low (contract manufacturing: garments. and applying an estimate of the share of exports related to the given mode/industry combination based on industry interviews and industry reports. This ubiquity creates difficulties for analysis of the phenomenon. overall NEM activity. and pharmaceuticals. The various contractual forms included in our discussion – contract manufacturing. For IT services and business process outsourcing. and toys) cross-border sales were estimated by taking world exports of those goods. the estimate of cross-border employment was constructed by taking the sum of their employment and inflating it by their share in the global NEM market for their industry/mode and applying an internationalization ratio. estimates a minimal size for NEMs. footwear. Second.1–7. industry associations or consultancy firms. were also derived for each mode/industry combination: • In cases where the players in a given industry/mode combination are highly concentrated (contract manufacturing: electronics. and pharmaceuticals. and amortization/depreciation) to sales generated from a sample of representative companies in each industry. For example. was gathered for all industry/mode combinations: • In some cases (contract manufacturing in electronics. but the actual level is likely to be somewhat higher. franchising. given the general lack of relevant statistics.

between different legal entities of the same parent company. such intra-firm arrangements are excluded from the scope of cross-border NEMs in this report.3 1. Cross-border NEM activity worldwide is estimated to have generated about $2 trillion of sales in 2010 in selected modes. much of it in developing countries. for similar reasons. franchising. in which their affiliates compete with each other or with outside suppliers for contracts.132 World Investment Report 2011: Non-Equity Modes of International Production and Development are especially important. Looking at major indicators by NEM type also hides significant differences by industry. exports.7 Contract manufacturing and services outsourcing as a whole clearly top the list on all major indicators. Of this amount. Note: See box IV. including total sales generated. Because of this. as explained in section IV.2 for the methodology used. and in some cases. contract manufacturing and management contracts are also commonly used within a TNC. . Estimated worldwide sales by type of NEM. trillion. including only the most important industries in which each NEM type is prevalent. value added. worldwide employment and employment in developing countries as indicated by selected industries (table IV. 2010 (Trillions of dollars) ~0. Nevertheless. contractual types such as licensing.6 Finally.e. contract manufacturing and services outsourcing accounted for about $1 Figure IV. franchising for $330–350 billion.3. and electronics components) and management contracts (infrastructure services). These figures include additional estimates not covered in table IV. and also because including them would again result in double-counting with FDI. NEMs are growing more rapidly than the industries in which they operate. automotive components and pharmaceuticals. The dotted area depicts the range estimates for each item. i. In most cases. white goods. value added and employment in more technology-intensive industries such as electronics.1 1.4 for contract manufacturing (sporting goods.g.8–2.A. However. where contract manufacturing is concentrated in a number of major international 1. These estimates are incomplete.4). firms sometimes simulate internal markets. The overall size and growth of crossborder NEMs Cross-border NEMs are worth at least $2 trillion in sales globally. and management contracts for some $100 billion (figure IV. licensing for $340–360 billion.3). Other non-equity forms such as strategic alliances and concessions are not in the scope of this report. The total also excludes other NEMs – principally contract farming – for which reliable data are not available. textiles.1–1. as by definition they cannot be considered “non-equity”. to particular stages of a GVC. Sales. other NEM types are often significant on individual quantitative indicators (e. for employment generation in developing countries) or in terms of qualitative impacts (section D).3 ~0.1 Contract manufacturing and services outsourcing Franchising Licensing Management contracts Total value of selected cross-border NEM types Source: UNCTAD estimates.3 ~0.

4 0.1–0.5 1. They knit together the widely dispersed activities of many of the largest TNCs in the world.15 Estimated NEM-related worldwide Fees Associated Associated sales value added 17–18 340–360 90–110 Licensing Cross-industry Source: UNCTAD estimates.0 0.3–0.1 6. 2. which are characterized by large numbers of smaller producers. contract manufacturing represents a much larger share of trade and employment. In labour-intensive industries such as garments. hotel.8–4.0–2. NEMs are particularly important in developing countries.4 0. Note: See box IV. Trends and indicators by type of NEM a. contract manufacturing is even more important. grouping businesses as diverse as retail. Putting different modes of international production in perspective. footwear and toys.2 for the methodology used. quick-service restaurants and business services under the single banner of franchising undoubtedly hides wide variations in value added and employment. In the automotive industry.4–0.4.4–0. NEMs are also growing rapidly.4).0–6. and catering. footwear and toys.8 0. inter-firm NEM only.CHAPTER IV Non-Equity Modes of International Production and Development 133 Table IV. All figures are cross-border.5 2. business and other services 330–350 Management contracts .5 5–10 0.1–0.2 6.6–1. a  Data for 2010 or latest available year. which in many industries account for almost all NEM-related employment and exports. However.5 2. Equally.0 1. b  For data reliability reasons this estimate only reflects pure cross-border sales and is therefore an underestimate of NEM activity in this industry.5 3. In contrast. Contract manufacturing and services outsourcing Contract manufacturing and services outsourcing relationships across borders are extensive. The bulk of integrated international manufacturing occurs within . 2010 a (Billions of dollars and millions of employees) Estimated NEM-related worldwide Employment Sales Value added Employment in developing economies Contract manufacturing .5 0. in electronics.selected labour intensive industries Garments 200–205 Footwear 50–55 Toys 10–15 Services outsourcing IT services and business process outsourcing b 90–100 Franchising Retail.3–1. operators. cross-border activity related to selected NEMs of $2 trillion compares with exports of foreign affiliates of TNCs of some $6 trillion in 2010. compared with the developing country share in global FDI stocks of 30 per cent and in world trade of less than 40 per cent. are different from those in traditional labour-intensive industries such as garments.3–2. the growth of NEMs outpaces that of the industries in which they operate (figure IV. contract manufacturing accounts for 30 per cent of global exports of automotive components and a quarter of employment. Key figures of cross-border NEMs.selected technology/capital intensive industries Electronics 230–240 Automotive components 200–220 Pharmaceuticals 20–30 Contract manufacturing .05–0.0–3.3–0. In most cases.7 1.4 0. selected industries. restaurant.selected industry 15–20 Hotels 20–25 60–70 5–10 40–45 10–15 2–3 50–60 130–150 1. There are large variations in relative size.7–2.5 3.1–1.2 1. at best aggregated under international operators specializing in GVC coordination.5–7.4–1.

pharmaceuticals and ITBPO. Globally. ~ 20% ~ 40% ~ 90% ~ 80% ~ 60–70% Industry growth NEM growth 0 5 10 15 20 Source: UNCTAD estimates. however. in industries such as pharmaceuticals. has grown rapidly in the past decade as TNCs move towards network forms of operation. managing the manufacturing part of the GVC. Note: Global industry growth estimates based on industry market research from Ibisworld (garments and footwear) and Datamonitor (all others). companies from developed countries are the largest contract manufacturers. Figure IV.5. For example. Offshoring up to the mid1980s took the form of manufacturing FDI. with large-scale operations in a relatively small number of locations worldwide. Contract manufacturing. but with developing country companies the more significant (tables IV. franchising and licensing are among the largest NEMs in terms of sales and employment.5 and IV. as TNCs took advantage of cheaper. selected industries. Many of these intermediaries. a number of developing country TNCs act as intermediaries or agents between lead TNCs and NEMs. whereas contract Contract manufacturing in the electronics industry evolved early.6). outsourcing more than 50 per cent of production by cost of goods sold. however. the geographical dispersion of NEM operations and their scale and industrial concentration differ by industry. The examination of contract manufacturing in electronics. garments and IT-BPO that follows is illustrative of the various patterns of evolution. footwear and toys. is relatively new and is still small measured as a percentage of cost of goods sold.3). In the latter part of the . except for franchising in retail. For instance.1–1. Contract manufacturing with third parties.134 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure IV. In automotive components. Comparative growth rates of NEMs’ sales. Use of contract manufacturing by selected industries. Other NEMs – such as contract farming and management contracts – are significant in various ways. Estimates for NEM growth are based on data for the 10 largest contract manufacturers in each industry. activity and geographic dispersal. which depend on the nature of industries and other conditions. while in electronics and semiconductors the situation is more mixed. 2005-2010 (Per cent) Electronics (contract manufacturing Pharmaceuticals (contract manufacturing) Footwear (contract manufacturing) Retail (franchising) Toys (contract manufacturing) Garments (contract manufacturing) manufacturers in electronics and IT-BPO services (information technology and business process outsourcing) are major TNCs in their own right. In the case of labourintensive industries such as garments. the toys and sporting goods. such as Li & Fung Ltd (Hong Kong. the confines of TNCs’ global operations. manifesting itself through significant levels of intra-firm trade.5). The use of contract manufacturing varies considerably across industries (figure IV. In technology and capital-intensive industries a small number of NEMs – often TNCs – dominate.6). UNCTAD estimates that the market for contract manufacturing and services outsourcing combined was in the range of $1. which is based on data available for 24 countries.5 and IV.4.3 trillion in 2010 (figure IV. Contract manufacturing/ services outsourcing. estimated share of cost of goods sold Toys/sporting goods Consumer electronics Automotive Pharmaceuticals (generic) Pharmaceuticals (branded) Source: Polastro (2009). China). have evolved from NEM roots. on the other hand. The nature and origin of NEM players. electronics and automotive industry are major users of contract manufacturing. those in industries such as garments and footwear are relatively small firms in low-cost locations with a very wide geographical dispersion (tables IV. relatively skilled labour8 in host countries to process and assemble intermediate goods for shipping back to their home economies.

2 2.8 0.9 13.1).CHAPTER IV Non-Equity Modes of International Production and Development 135 1980s. a number of electronics companies started shedding manufacturing operations to concentrate on R&D.1 0. China) IT-BPO Tata Consultancy Services (India) Wipro (India) China Communications Services (China) Sonda (Chile) HCL Technologies (India) 1. Sony and Philips in consumer electronics (annex table IV.9 0.4 0. 2010).1).8 0. others were spinoffs.8 0. Sturgeon and Kawakami. Ltd (China) Luen Thai (Hong Kong. India. China) Makalot Industrial (Taiwan Province of China) Tristate (Hong Kong. Major developing economy players in contract manufacturing and services outsourcing. often by purchasing manufacturing facilities from lead TNCs.7 0. . China) Herald (Hong Kong.9 1. both established and emerging. there are many smaller contract manufacturers in the industry. especially those based in Taiwan Province of China (e.5. Doner and Haggard. A small number of contract manufacturers now dominate the industry.2 0.2 0. including Celestica. Today.5 1. China) Footwear Pou Chen (Taiwan Province of China) Stella International (Taiwan Province of China) Feng Tay (Taiwan Province of China) Symphony (Hong Kong. China) Toys Kader (Hong Kong. in Table IV.7 0.g.3 30.9 25. China) Matrix (Hong Kong.4 0.5 1.1 1.4). This has made them into large TNCs in their own right. particularly China.1 5.8 47 20 21 15 12 333 50 68 14 12 20 8 5 9 9 160 108 127 9 54 Company name Electronics Foxconn/Hon Hai (Taiwan Province of China) Flextronics (Singapore) Quanta (Taiwan Province of China) Compal (Taiwan Province of China) Wistron (Taiwan Province of China) Automotive components LG Chem (Republic of Korea) Hyundai Mobis (Republic of Korea) Mando (Republic of Korea) Nemak (Mexico) Randon (Brazil) Pharmaceuticals Piramal Healthcare (India) Jubilant Life Sciences (India) Divi's Laboratories (India) Dishman Pharmaceuticals (India) Hikal (India) Semiconductors TSMC (Taiwan Province of China) UMC (Taiwan Province of China) Chartered Semiconductor (Singapore) SMIC (China) Dongbu HiTek (Republic of Korea) Company name Sales Employment Source: UNCTAD Note: Data refer. All but three of the top 10 players in electronics contract manufacturing are headquartered in developing East Asia – the bulk of manufacturing production in the industry is centred on East and South-East Asia. They produce for all major brands in the industry. In addition to these large global NEM firms.2 0. China) High Fashion International (Hong Kong.2 0.1 9.9 such as Celestica from IBM (McKendrick. with the largest 10 by sales accounting for some two-thirds of the EMS activity. to sales and employment associated with cross-border NEM activities.2 2. they own and run hundreds of facilities in developing economies that lie beyond their region of origin. China) Dream International (Hong Kong. contract manufacturing firms in the industry have accelerated their spread to other regions. 2009 (Billions of dollars and thousands of employees) Sales 59.3 6.4 20. China) Kingmaker Footwear (Hong Kong. Mexico and Turkey (annex table IV.2 4.4 13.9 1. product design and brand management. Foxconn).1 11.0 0. where possible.4 0. 2000. including Brazil.4 Employment Garments 611 160 65 58 39 8 6 4 15 10 7 6 1 1 1 26 13 4 10 3 Youngor Group Co. China) Lerado Group (Hong Kong. Some of these emerged from existing suppliers.2 2. with overall sales in electronics contract manufacturing amounting to $230–240 billion in 2010 (table IV. Flextronics and Foxconn. from Dell and Hewlett-Packard in computing to Apple.1 0.2 0.2 0. The manufacturing was taken up by electronics manufacturing services (EMS) companies.7 0.2 0. During the last decade. however.

5 6.9 32.4).6 9.6 0. and Nike (United States) (annex table IV.7 17. based on annex tables IV.6 1.2 34. (Japan) 6 Patheon (Canada) 4 Fareva (France) 7 Haupt Pharma (Germany) Semiconductors 26 Dongbu HiTek (Republic of Korea) 13 VIC (Taiwan Province of China) 4 TowerJazz (Israel) 10 Samsung Electronics (Republic of Korea) 10 IBM Microelectronics (United States) IT-BPO 190 140 18 46 204 NTT Data Corp. such as Gama Tek (Turkey) or Alok Industries (India). These firms lack the global footprint of the top players and their close interaction with major lead TNCs in the electronics industry. 2.3 1. retailers include mass merchandisers such as Walmart (United States) and Marks and Spencer’s (United Kingdom).2 13.1 9.0 0.2 Company name Foxconn/Hon Hai (Taiwan Province of China) Flextronics (Singapore) Quanta (Taiwan Province of China) Compal (Taiwan Province of China) Wistron (Taiwan Province of China) Denso (Japan) Robert Bosch (Germany) Aisin Seiki (Japan) Continental (Germany) Magna International (Canada) Catalent Pharma Solutions (United States) Lonza Group (Switzerland) Boehringer Ingelheim (Germany) Royal DSM (Netherlands) Piramal Healthcare (India) TSMC (Taiwan Province of China) UMC (Taiwan Province of China) Chartered Semiconductor (Singapore) Globalfoundries (United States) SMIC (China) International Business Machines (United States) Hewlett-Packard (United States) Fujitsu (Japan) Xerox (United States) Accenture (Ireland) Employment Company name Electronics 611 Inventec (Taiwan Province of China) 160 Jabil (United States) 65 TPV Technology (Hong Kong.4 0. Although there are large-scale developing country firms involved in contract manufacturing. generally speaking contract manufacturing is a highly competitive industry typified by vast numbers of small suppliers servicing a limited number of international brands and retailers. 5 and 7.4 0. Contracts are often managed through agents or intermediate players (mostly from East Asia).5 0.6 22.3 8. 2009 (Billions of dollars and thousands of employees) Sales 59.0 6.0 25.1 1. where possible. instead many act as second.3 0.1 5.8 11.5 Employment 30 61 24 35 32 13 58 130 147 60 6 10 4 5 2 3 3 2 .136 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV.9 1.6.9 25.5 5.7 0.1.. especially by companies located in developing countries.1 18.4 13. . . locations around the world which are important players in local value chains. 3.3 0.7 9.4 8. to sales and employment associated with cross-border NEM activities. Note: Data refer.6 5.4 20.8 11. Christian Dior (France).4 0.1 13.9 27. The garment and footwear industries have a long history of contract manufacturing.4 0.5 13. China) 58 Celestica (Canada) 39 Sanmina-SCI (United States) Automotive components 120 LG Chem (Republic of Korea) 271 Faurecia (France) 74 Johnson Controls (United States) 148 Delphi (United States) 96 ZF Friedrichshafen (Germany) Pharmaceuticals 9 Jubilant Life Sciences (India) 4 NIPRO Corp. Top 10 players in contract manufacturing and services outsourcing. and speciality retailers including Gap (United States) and H&M (Sweden).7 0..and third-tier suppliers to the large NEM players in the industry.0 12.2 2. selected industries. (Japan) Computer Sciences Corporation (United States) Cap Gemini (France) Dell (United States) Logica (United Kingdom) Sales 13.1 38. Examples of the larger brands include Adidas (Germany). 35 45 109 43 39 Source: UNCTAD.9 6.1 1.3 30.4 1.5 1.

Because of its development out of ICT and knowledge activities. 2010). India. Unlike contract manufacturing. the industry is dominated by major developed country players such as Accenture (Ireland). Asia and Latin America. with other valuations ranging up to $380 billion or more. partly because of locational advantages.6). based on company report. Some of the suppliers within such arrangements are themselves TNCs. The size of the market in contract manufacturing of garments.g. 2008). business intelligence and R&D (Gereffi and Fernadez-Starck. is some $200–205 billion (table IV. Cap Gemini (France).g.7).5). UNCTAD estimates that the global scale of services outsourcing exports. annex table IV. A number of new city locations for services outsourcing are coming to the fore (table IV. The largest developing country firms providing services under contract to overseas clients are from India.000 suppliers under contract manufacturing arrangements in 40 developing economies. the industry is expanding to countries such as Argentina. This happened in the case of Li & Fung Ltd. accounted for around 65 per cent12 of global export revenues related to IT-BPO services in 2009.5). and NTT Data (Japan) (table IV. has fuelled a surge in the outsourcing of services.4). McNamara. 2009 Developed countries 5% Latin America and the Caribbean 7% Africa and West Asia 4% Services outsourcing began as an “onshore” activity in information technology in the 1990s.CHAPTER IV Non-Equity Modes of International Production and Development 137 formerly contract manufacturers. However. but rapidly shifted to offshore markets. The location of factories used by Gap Inc (United States) is a good reflection of this spread (figure IV. which have evolved into providers of “value chain management services”. The facility to separate location of production and related services arising from the information and communication technology (ICT) revolution hastened the extension of services outsourcing and offshoring to a range of business processes and other knowledge processes such as market research. increasing fine-slicing of business functions. . back-office functions or customer services).6. 2011. Morocco and South Africa (AT Kearney. with others dispersed from China to Chile (table IV. Figure IV. Infosys Technologies and Wipro. which has 80 offices globally (many in developed countries. was around $90–100 billion in 2009 (table IV. Three countries. Hewlett-Packard (United States). the Philippines and China. the Czech Republic. especially in developing and transition economies. Brazil. and ICT infrastructure. East Asia 33% South-East Asia 25% South Asia 26% Source: UNCTAD.11 although the higher figures often include elements such as services outsourcing by TNC affiliates. This may be a considerable underestimate. and sometimes shedding their original manufacturing operations. Location of factories used by Gap Inc. Chile. by sales. including Tata Consultancy Services. with production occurring in widely dispersed locations in Africa. Lao People’s Democratic Republic or Lesotho (Gereffi and Frederick. to work with and secure orders from major brand owners) and 12. such as specific language and IT skills. the low cost of labour. because of the need for knowledge workers and ready connectivity. 2010. The top developing country locations for outsourcing services (managed both by major developed country players and by local firms) are still in Asia. services outsourcing is tied to cities as locations. taking on board more and more elements of the value chain (e.4). including corporate and support activities (e. Egypt. mostly IT-BPO. Beyond the manufacturing elements of TNCs’ value chains. IBM (United States).6). for instance Hong Kong and Indonesian manufacturers with affiliates in (neighbouring) countries with lower labour costs such as Cambodia. design and outsourcing).

restaurants (often quickservice restaurants). followed by quick-service restaurants with 16 per cent. a A franchise system consists of all the franchised units and units managed by the franchisor itself that operate under the same banner and business format. However. for example.138 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV. the rate is still between 30 and 40 per cent. In Brazil.7. For example.com. Most large global franchising operators (franchisors) originate in developed countries. The most important franchising sectors are retail (including high-street retailing as well as grocery). international franchisors account for 80 per cent or more of the total. with a share of almost 25 per cent of franchised systems. b Refers to the share of cross-border outlets in the total number of outlets. for example.globalservicesmedia. Destination Compendium 2010. the business environment. In developed countries the share of higher value added services tends to be higher. connectivity and infrastructure support. whether they are Source : Global Services. foreign franchise chains represent only around 10 per cent of the total. micro-franchising (mostly one-person businesses) and lower value added services are more common. Note: The ranking of the cities is based on a range of quantitative and qualitative factors such as the number and quality of IT engineers and other skilled labour. based on a joint UNCTAD/World Franchise Council survey of national franchise associations. Similarly.4). Franchising Worldwide sales of franchised enterprises reached nearly $2.8). and takes different forms. 2010 Top 10 established cities Bangalore (India) Mumbai (India) Delhi (India) Manila (Philippines) Chennai (India) Hyderabad (India) Dublin (Ireland) Pune (India) Cebu City (Philippines) Shanghai (China) Top 10 emerging cities Krakow (Poland) Beijing (China) Buenos Aires (Argentina) Cairo (Egypt) Sao Paolo (Brazil) Ho Chi Minh City (Viet Nam) Dalian (China) Shenzhen (China) Curitiba (Brazil) Colombo (Sri Lanka) franchises. Locations for global services outsourcing: top 10 established and emerging cities. in the United States. the Russian Federation and Turkey. business and personal services account for 37 per cent of the total franchising sector. Franchise systemsa in the world. business services. except for South Africa. By contrast. all of the top 10 chains being domestic Table IV. followed by retail (also a limited value added sector) with 22 per cent. risk profiles and quality of life. Available at www. In most African markets. for example the McDonald’s franchise system. from education to personal care services. of which the value of cross-border franchising was around $330– 350 billion (table IV. with a share of 32 per cent. and in emerging markets such as Mexico. in developing countries.8. b. In most developed markets domestic franchising accounts for 80–90 per cent of the total. The franchising formula is found in different sectors. . The share of international franchising varies significantly by country.5 trillion in 2010 (table IV. hotels. but franchising has reached maturity in some major emerging markets as well. as well as a diverse range of other services sectors. in India the leading sector is retail. in South Africa the most important franchising sector is quick-service restaurants. initial growth of franchising in developing markets is often driven by international franchise operators. 2010 Region/economy World Developed economies Europe Japan United States Developing/transition economies Africa Latin America and the Caribbean Asia South-East Europe and the CIS Franchise systems 30 12 7 1 2 17 1 3 11 000 200 700 200 500 400 600 800 200 800 Number of outlets (Thousands) 2 640 1 310 370 230 630 1 330 40 190 1 070 30 Sales ($ billion) 2 480 2 210 340 250 1 480 270 30 70 170 5 Employees (Thousands) 19 12 2 2 6 7 940 400 830 500 250 540 550 1 810 4 810 370 Cross-border (Per cent) b 15 10 20 5 5 30 70 20 25 50 Source: UNCTAD estimates.

NEM-related licensing has grown steadily since 1990. c.5 11.7 2. or restaurants transplanting their successful formulas to new markets as consumers develop an “international taste”.6 0. The top 15 global franchisors by number of outlets are all United States firms.3 2009 197.5 50. Balance of payments statistics suggest that licensing activity directed at developing markets increased markedly in the past decade.7 2.4 149. 2005.1 3.9 4.3 3.5 0.5 2.3 23.1 2. This number was scaled-up to the world total by using the share of the United States in world licensing receipts.8 1.3 33.2 4.7 0.4 113.1 0.4 0.5 1.1 0.9 5.6 0.4 34. For example.6 0. Table IV.3 0. Data from the United States were used to calculate the amount of cross-border inter-firm licensing associated with industrial processes and trade marks.2 48. with many franchisees in developing countries.3 1. The geographical dispersal of licensees (based on royalty payments) is wide.6 11.7 0. Estimated sales related to cross-border inter-firm licensing.CHAPTER IV Non-Equity Modes of International Production and Development 139 international retailers expanding through franchise networks. based on IMF’s balance-of-payment statistics.6 0.0 22. East. The choice of location is driven by market size.5 10.6 0.9). including 7-Eleven (Japan) and InterContinental (United Kingdom).5 0. Canada and the United Kingdom (annex table IV.3 1. although South.7 0.1 30.8 1.3 5.0 2.2 6. 2009 (Billions of dollars) Region/economy World Developed economies Developing and transition economies Africa South Africa Egypt Nigeria Latin America and the Caribbean Brazil Argentina Mexico Chile Asia and Oceania West Asia Turkey Iraq South.3 1.4 0.0 0.2 0. registering a steady 10 per cent average annual growth rate as measured by estimated sales up to 2008.1 0. the equivalent numbers for Holiday Inn are over 100 and 80. Royalties and licence payments by selected developing and transition economies.8 0. on this basis. although there was a decline in 2009 because of the financial and economic crisis.7). Note: The dotted area depicts the range estimates for each year.3 0.6 1. various years (Billions of dollars) 500 450 400 350 300 250 200 150 100 50 0 1990 2000 2005 2008 2009 Source: UNCTAD estimates.2 2008 204. touching on nearly every step of many industries’ global value chains. Figure IV. Global franchise chains are frequently widely dispersed.5 0. Licensing International licensing spans a wide range of industries and activities.2 Source:  UNCTAD.6).3 1.2 6.7 0.1 0. 2008. UNCTAD estimates that cross-border NEM-related licensing resulted in sales of $340–360 billion in 2010 (figure IV.7. Most of these 15 firms are fast-food chains such as McDonald’s (United States) and Pizza Hut (United States).2 2. The remaining companies out of this group are essentially convenience stores or hotels.2 153. apart from one company each from Japan. East and South-East Asia Singapore China Taiwan Province of China Thailand India South-East Europe and the CIS Russian Federation Ukraine Croatia 2005 143. which is reflected in the top franchising country locations.5 1. Global royalty payments are indicative of licences received (and hence the location of NEM partners to TNCs) and.6 1.4 1.4 0. in shopping malls and at airports. .5 0. developing and transition economies now pay out roughly a quarter of global royalty fees (table IV.7 12.3 1. KFC (United States) has franchisees in about 110 countries globally. though developed economies continue to dominate. luxury brands expanding internationally on the high street.5 5.7 9.6 0.5 34.1 3.5 1.4 2.1 0.5 35. of which some 75 are developing economies.9.7 1.

Africa. and this involves a large range of agricultural commodities. but which are nevertheless large and important from a development perspective. 50 per cent of tea and 40 per cent of rice are sourced through this mode. • In Mozambique a majority of the 400. discussed above. and Turkey in West Asia. This is slightly less the case for East. about 60 per cent of tea and sugar – and nearly all of cut flower exports – are produced through contract farming arrangements. South and South-East Asia. d. Other modalities In addition to contract manufacturing.140 World Investment Report 2011: Non-Equity Modes of International Production and Development and South-East Asia comprised nearly 70 per cent of the total from developing and transition economies in 2009. and West Asia. franchising and licensing. China and Taiwan Province of China most involved as licensing partners. it is widespread. Contract farming plays an important role in underpinning agricultural production and related activities (WIR09): • In Brazil about 75 per cent of poultry and 35 per cent of soya bean production are sourced through contract farming. • In Viet Nam some 90 per cent of cotton and fresh milk. TNCs utilize contract farming in over 110 developing and transition economies. a key NEM in terms of development impact (section D). e. In the case of crossborder management contracts. • In Kenya. Although there is no available figure for the overall scale of cross-border contract farming. The management contract element in infrastructure is often a sub-element of a more complex agreement. UNCTAD estimates sales of $100 billion (figure IV. South-East Europe and the CIS.000 contract farmers are smallholders. followed by Latin America and the Caribbean. . This NEM is a significant feature of many TNC GVCs. Within each region there is a high concentration of licensing activity in a few countries.3) to infrastructure services. with Singapore. such as electricity and water distribution.g. biofuels and retail (supermarkets).3) in an eclectic range of industries from hotels (box IV. services outsourcing. • In Zambia 100 per cent of cotton and paprika are produced through contract farming. Brazil and Argentina in Latin America. including food and beverages. there are many other NEMs – such as management contracts and contract farming – for which overall scale is difficult to estimate (reliable data are often unavailable). South Africa and Egypt in Africa.

The average share of management contracts in the global branded market (by number of rooms) is around 28 per cent (24 per cent for the top 10 groups). while they have a stronger preference for management contracts (and ownership. Note: Sales are the gross sales of the global hotel system. . Hotel groups largely stick to franchising in more mature markets. Among the top 10 groups Hyatt makes the most use of this mode (53 per cent share in rooms).1.e. and Marriot accounts for the highest amount of sales associated with management contracts ($8. Historically. FDI) in developing markets. Inc. These chains combined have 41 per cent of their operations abroad.000 for the entire branded market.1. Globally. 2011). Top 10 hotel groups.3. i. The use of management contracts in the hotel industry The international hotel industry is a good example of how TNCs vary their use of internationalization modes depending on circumstances.000 people in the top 10 chains and 353. Box table IV. Total top 10 hotel groups Home economy United Kingdom United States United States United States France United States United States United States United States United States - Number of rooms 647 161 618 104 612 735 587 813 507 306 495 145 308 736 308 477 159 756 127 507 4 372 740 Estimated Estimated hotel hotel system system sales employment 18 700 19 691 7 169 18 757 10 083 6 538 12 260 6 931 4 844 5 124 110 101 335 000 300 000 315 970 303 118 261 603 145 000 159 206 145 000 160 000 130 000 2 254 898 Internationalization (Per cent) 90 20 25 17 75 15 43 39 55 30 41 Franchising (Per cent) 74 53 96 69 24 100 39 100 65 16 68 Management contracts (MC) (Per cent) 25 45 1 26 22 52 21 53 22 Total sales MC 4 701 8 860 47 4 885 2 208 6 323 1 017 2 716 30 760 International employment MC 75 786 27 00 519 13 082 42 728 35 353 18 541 20 376 233 488 Source: UNCTAD estimates.3. Source: UNCTAD. UNCTAD estimates that cross-border management contracts employ 233. as employment intensity in those markets is much higher due to low labour costs and more services provided in-house (box table IV. compared to mature markets. They also exhibit a preference for management contract when it comes to luxury and upscale hotels – categories with a larger share in hotel group portfolios in developing markets. MKG Hospitality.CHAPTER IV Non-Equity Modes of International Production and Development 141 Box IV. hotel chains have favoured franchising as a mode of expansion. based on company and consultancy reports. Starwood Hotel & Resorts Worlwide Best Western International Carlson Hotels Worldwide Hyatt Hotels Corp. The resulting share of management contracts in sales abroad by the top 10 groups provides an estimate of $16 billion.9 billion). including sales generated by franchised and managed hotels. These figures most likely understate the employment impact in developing countries. and by branded hotels of $19 billion. eight of the 10 largest hotel groups use management contracts. Accor Choice Hotel International.3. The share of management contracts is the proportion of rooms in hotels under management contracts to the total number of rooms. 2010 Group IHG InterContinental Hotels Group Marriot International Wyndham Hotel Group Hilton Hotel Corp. both domestically and internationally.

The everpresent attention of shareholders on return on capital employed (ROCE). These core advantages of NEMs for firms indicate that the growth of NEMs as a means of internationalization is likely to persist. NEMs: key advantages and drivers of growth Advantages of NEMs for TNCs Low upfront investment outlays and working capital Limited risk exposure Flexibility Leveraging of core competencies Drivers of the continuing growth of NEMs • Increasing focus on return on capital employed (ROCE) and need to de-leverage • Ever greater levels of capital expenditure required for expansion of production and entering new markets • Increasing market and political risk-aversion • Limitation of legal liability • Increasing awareness of the need to anticipate cyclical shocks • Increasing value-chain segmentation. natural and structural market imperfections and resulting Table IV. more important. The rapid growth of NEMs as a means of internationalization can be explained by both firms’ strategic choices and a number of enabling factors.B). without nuancing them by type of NEM.g. Overall. will if anything accelerate.10. including their relatively lower upfront capital requirements. Driving forces behind the growing importance of NEMs NEMs are driven by a number of factors. are: (1) the relatively lower upfront capital expenditure and working capital needed for operation. The choice on the part of firms to expand overseas through the use of NEMs is based on a number of key advantages they possess (table IV. or the shifting of market risks to partners through licensing or franchising. There are also disadvantages and risks associated with NEMs. . The use of non-equity modes in international production by TNCs has increased rapidly over the last decade. externalizing parts of the value chain not considered central to other operations. To start with. (2) related to this. In industries such as hotels. In addition. DRIVERS AND DETERMINANTS OF NEMs 1. these advantages.142 World Investment Report 2011: Non-Equity Modes of International Production and Development C. given the drive to ensure maximum efficiency along the value chain to serve emerging markets demanding low-cost versions of mature-market products and services. and greater risk-aversion all increase the relative attractiveness of NEMs. design facilities) and non-core activities efficiently and effectively Source: UNCTAD. allowing TNCs to leverage their core competencies. the traditional means of overseas expansion for TNCs. and (4) the externalization of non-core activities that can be carried out at lower cost or more effectively by other operators. Finally. across industries the trend to focus on core competencies. They have also expanded faster than the average in those sectors in which NEMs are most prevalent (section IV. as these modes require less capital. the reduced risk exposure. The growth of NEMs has outpaced the growth of FDI.13 the need for firms to de-leverage in the post-crisis world. (3) greater flexibility in adapting to changes in the business cycle and in demand. combined with improving knowledge codification. reduced risk exposure and greater flexibility in adapting to change.10). The greater awareness of the need to anticipate shocks in the business cycle makes the flexibility that contract manufacturers provide in changing production levels. prevalence of industry standards and improving IP regimes as enabling factors • Growing availability of sophisticated NEM partners in emerging markets capable of providing core (e. franchising and management contracts allow for much faster expansion of the brand than would be feasible when owning all properties. the externalization of any part of the value chain through the use of an NEM will cause a firm to capture less of the total value created in the chain.

In the case of franchising. Cattaneo. a pharmaceutical firm can either build its own plant to serve an overseas market. frequently the use of NEMs is either opportunistic or is determined by a firm’s business model. The competitive advantages possessed by local businesses may make entry into a market through FDI unfeasible or a losing proposition.14 In contract manufacturing. as in the case of GlaxoSmithKline’s licensing of the drug Seretide to Hanmi in the Republic of Korea (Avafia.g. In pharmaceuticals. or by industry. However. Where the use of NEMs is optional for TNCs. Industry and host economy factors can also necessitate the use of NEMs. The purpose of the contract establishing the NEM partnership is to address precisely these disadvantages and risks. Risks associated with NEMs stem from a lower degree of control over processes. 2010). the trend to outsource production stages along the pharmaceutical value chain in their home markets is leading TNCs to adopt the same lean model globally. Denso (Japan). This is balanced by the relative profitability of other segments of the value chain and by potential cost advantages that can be obtained through the externalization of activities (e. and uses franchising for some of its convenience stores in both developed countries (e. For example. in automotive parts.4. TNCs make a deliberate choice between the two options only in some cases. or other forms of intellectual property transferred to a partner. have huge operations in many locations. and over technology. Italy) and emerging markets (e. For example. the company manages approximately 150 contract manufacturers around the world. with potential implications for quality and service levels (e. Carrefour operates most of its hypermarkets and larger supermarkets as directly owned stores. NEMs and FDI operations can also be developed in parallel. in some industries such as automotives or electronics where the model is mature and contract manufacturers have themselves grown into large TNCs with strong competencies and cost advantages. A number of developing country companies. prohibitive restrictions on FDI as an entry mode into a host economy may foster greater use of NEMs by TNCs.g. and including clauses to mitigate the risks for both parties. TNCs appear to be increasingly choosing NEMs rather than FDI as a means of internationalization. skills.CHAPTER IV Non-Equity Modes of International Production and Development 143 transaction costs can make NEMs less attractive. the cap on foreign ownership and restriction on retailing business in the Indian food retail sector has kept out or limited the nature of market entry by large international . growing sophistication in codification of knowledge and prevalence of industry standards.g. For example. on-time delivery). while the choice of using FDI remains. Berger and Hartzenberg. For example.A). improving intellectual property protection regimes worldwide. Gereffi and Staritz. Due to the inherent advantages of NEMs and the factors enabling their development. from the TNC’s perpective. the choice between ownership and partnership is analogous to a “make or buy” decision (as discussed in section IV. as part of Pfizer’s outsourcing strategy. In addition to the trends pushing TNCs towards a greater use of NEMs. such as Laboratorios Phoenix (Argentina) have benefited from this process. and growing capabilities and increasing availability of credible and technologically sophisticated partner firms in new markets are all contributing to NEM growth. to low-cost providers and locations). an electronics contract manufacturer. Berger et al. In a more extreme case. to use exclusively franchising for distribution in both domestic and foreign markets (Reid. a number of enabling factors are facilitating their growth. Many retailers operate both directly owned and franchised stores in the same markets. setting out the parameters for the sharing of value and profits. France. 2006. a business model that is built around the exploitation of intellectual property or product development core competencies leads some brand owners. it would be almost unthinkable for brand owners to invest in their own intermediate manufacturing facilities. The increasing fragmentation of production processes between locations. For example. 2008). as well as considerable investment in research (section D. Brazil) In many cases a TNC’s business model or plan may predispose it to use a particular mode. 2010). and Foxconn (Taiwan Province of China). or grant a licence to a local manufacturer to do so.and countryspecific factors. such as Benetton..g.

. which cannot be achieved in external structures. and adherence to international agreements on FDI. And at the country level. developing NEMs may not be feasible. Jayakumar and Samad. Table IV. A number of FDI-specific locational determinants. an international retail franchisor. industryor host country-specific factors may preclude the use of NEMs and dictate the choice of FDI in entering foreign markets. economic conditions operations are in many and business facilitation.144 World Investment Report 2011: Non-Equity Modes of International Production and Development retailers such as Walmart15 that exclusively operate fully owned stores. 2010). leading to: - growth of demand exceeding the capacity of TNCs to expand through directly owned business networks -  increasing “pull” of potential franchisors by willing entrepreneurs in rapidly growing emerging markets • Market saturation and high levels of competition in home countries • Increasing number of passive property investors • Market saturation and high levels of competition in home countries • Increasingly volatile commodity prices pushing TNCs to seek stable sources of supplies and predictability of costs •R  ising concerns in many countries regarding foreign ownership of agricultural land Franchising Management contracts Contract farming Source: UNCTAD. business facilitation. such as rules regarding entry and operations. are relevant only to the extent that TNCs aiming to enter a foreign market through the use of a non-equity mode may Table IV. are usually analysed for FDI in a standard framework (WIR98. At the industry level.12). WIR10) that encompasses a country’s policies. Restrictions on land ownership by foreign firms in India have also. enabling factors. in highly knowledge-intensive sectors. Selected mode-specific drivers of international NEM growth Mode Contract manufacturing Services outsourcing Licensing • • • • Drivers of growth Increasing fragmentation of production processes between locations Easier codification and sharing of knowledge and increasing prevalence of industry standards  Improving intellectual property protection regimes  Growing presence of large and sophisticated potential partners  • Strengthening intellectual property regimes • Increasing availability of sophisticated partners in emerging markets •L  arge emerging consumer markets moving from traditional to modern retail and services. A stable policy environment conducive to business. is equally relevant for NEM operations as for direct invested operations. led to the use of contract farming by TNCs in order to secure supplies for the local or global value chains (Barrett et al. Factors that make countries attractive NEM locations The factors that make NEM locational determinants countries attractive consist of the policy framelocations for NEM work. including well-developed competition policy. but the same policy has created an opportunity for Spar International (Germany). 2008). and its general economic environment (table IV. standards of treatment of foreign affiliates. in part. trade and fiscal rules. . A TNC may have a business model and cost structure based on maximizing internal value added. and in those industries where knowledge still tends to be tacit and difficult to transfer to third parties.and mode-specific.11 summarizes the main drivers of growth for each mode. FDI may be the only feasible entry option.11. where countries lack credible and capable local partners. 2. and factors that predetermine the use of a particular mode of internationalization will play out in different ways to drive the growth of different non-equity modes across industries. respects the same Such determinants are conas for FDI operations. text. Firms’ preferences. or locational determinants. These factors. or be dependent on full control over marketing or retail mix (product and price). to expand its network in the huge and expanding Indian consumer market (Ravichandran. Clearly the opposite is also possible: firm-. or where local partners do not have access to capital.

the second set of determinants.2).g. Egypt. Business facilitation. Locational determinants and relevance for FDI and NEMs Relevant for FDI and NEMs • Economic. JPM. contract farming). the specific laws that may govern NEMs in the country. transport.strategic infrastructure have to establish a “foothold” operation to support the NEM business. given the relatively low capacities of the local partners (UNCTAD. • Access to strategic assets: - created assets (e. energy) Source: UNCTAD. productivity standards of local firms - enterprise development. and the IP regime (see also section E. awareness-building on NEM opportunities with local groups -  supporting minimum standards of working conditions and CSR in local firms •P  resence of credible local entrepreneurs and business partners • Access to local capital Economic determinants • Infrastructure • Market size and per capita income • Market growth • Access to regional and global markets • Country-specific consumer preferences • Access to raw materials • Access to low-cost labour • Access to skilled labour • Relative cost and productivitity of resources/assets • Other input costs (e. as NEMs are essentially a contract-based form of TNC engagement in a host economy. intellectual property) . forthcoming). fiscal incentives for start-ups - information provision. Such a foothold can range from a minimal commercial presence. quality. is equally important for the attraction of NEMs as for FDI. as in the case of the Jordanian pharmaceuticals company. developing for example franchised outlets next to directly owned outlets. JPM’s role in these ventures is primarily one of technical oversight. In addition to the policy-related locational determinants considered standard for FDI. quality of life) •F  acilitation efforts aimed at: -  upgrading of technological. there are a number of factors specifically favouring the development of NEMs in host countries. cost of doing business) • • • • Investment promotion Investment incentives  Provision of after-care  Provision of social amenities  (e.g. Mozambique and Tunisia in which it also holds equity stakes. These include a stable commercial and contract law. political and social stability • Competition policy • Trade policy • Tax policy More relevant for FDI More relevant for NEMs Policy framework •R  ules regarding entry and operations • S  table general commercial and contract law • Standards of treatment of foreign •S  pecific laws governing NEM contractual forms affiliates (e. to significant logistical support operations as in the case of franchisors of retail or quick-service restaurant businesses which need to provide supplies to franchised outlets. which licenses technology to five ventures in Algeria. franchising contracts) • International investment agreements • Intellectual property protection • Privatization policy Business facilitation •R  eduction of hassle costs (e. WHO and ICTSD.g. for example a purchasing and quality control organization to support outsourced manufacturing. communications.12.g. or a marketing and customer service presence to support a licensed consumer business. as in the case of McDonald’s in China. increasing local entrepreneurial drive. technology. FDI-specific policies are also relevant where TNCs operate a mixed model.CHAPTER IV Non-Equity Modes of International Production and Development 145 Table IV. recognizing licensing. franchising. Eritrea. business facilitation .g. such as laws recognizing and setting parameters for NEM contractual forms (e.subsidies. or where the NEM is combined with a limited equity stake held by the TNC.g. Some FDI-specific business facilitation .

a number of measures are relevant for the development of NEMs. The types of economic determinants that are especially relevant to NEMs include the presence of credible and capable local entrepreneurs and business partners and access to capital for local businesses (section E.16 In the case of services outsourcing. again are very similar. Main locational determinants by type of NEM Mode Contract manufacturing Services outsourcing Most relevant locational determinants • Open trade policy. according to this year’s IPA survey (section E. However. in the case of contract farming. although an adverse local infrastructure environment may be less of a deterrent for local entrepreneurs setting up a business to engage in an NEM relationship than for a foreign investor.e. generally require strong and sometimes sophisticated local partners that can shoulder risks transferred to them. the size and growth of the market and the access to regional markets are equally important for NEM forms such as franchising or out-licensing as for their directly invested equivalents. For example.2).3). can all increase the pool of potential local NEM partners capable of engaging with TNCs (section E. . or to support minimum standards of working conditions and CSR. and undertook other measures which facilitated entry into the local economy by TNCs. Initiatives to upgrade technological.18 The economic determinants of the attractiveness of a country for NEM and FDI operations. access (or preferential access) to international markets • Access to cheap labour (both unskilled and skilled). farmer associations and Table IV. for example where investment promotion agencies engage in matchmaking between foreign franchisors and local aspiring franchisees (about a quarter of IPAs do so. The only economic locational determinant that is likely to be less relevant for NEMs is access to local strategic assets. Through various agencies it offers financial support to those setting up franchising businesses. For example. unless promotion activities and incentives are applicable more widely. land. access (or preferential access) to international markets • Transport and storage infrastructure • Market size and growth (for local value chains) Licensing Franchising Management contracts Contract farming Source: UNCTAD.2). which TNCs will aim to own outright. water) • Stable political and economic environment • Open trade policy. the Government of Malaysia introduced franchising-specific legislation. quality.13. the Government of the Philippines contributed to strengthening the development of the call centre industry. or productivity standards of local firms.17 The Government of Brazil has also provided incentives and institutional support to develop this industry. the third area of determinants. in addition to the business facilitation efforts considered standard for FDI. energy and communications are important for all businesses. For example.146 World Investment Report 2011: Non-Equity Modes of International Production and Development efforts are clearly less relevant. favourable relative costs and productivity of local resources • Strong intellectual property regime • Facilitation initiatives aimed at upgrading local technological capabilities • Strong intellectual property regime • Availability of skilled local labour • Stable commercial law and contract enforcement regime • Facilitation initiatives aimed at upgrading local technological capabilities • Market size and growth • Stable commercial law and contract enforcement regime • Availability of capable local entrepreneurs and access to local finance • Market size and growth • Business facilitation aimed at local entrepreneurial development and start-up incentives •S  table commercial law and contract enforcement regime • Underperforming locally owned assets • Access to agricultural and related resources (i. The provision of basic infrastructure and the costs of transport. Most NEMs. unlike FDI.

especially in contract manufacturing and. Contract manufacturing comprises two types of industry: “hi-tech” or technology-intensive industries such as electronics. The relative importance of locational determinants varies by non-equity mode and industry. Not all of the benefits that NEMs can bring are automatic. is clearly one for firms to make. The most relevant locational determinants for each mode are summarized in table IV. Employment and working conditions UNCTAD estimates that NEMs can make a worldwide.13. as in the case of adhering to international investment agreements or providing tax incentives. combined. and “low-tech” or labour-intensive ones like garments. some 18 to 21 significant contribution million workers are directly to employment. as well as considerable indirect employment. Access to capital for local firms is crucial. Around 80 per cent of NEM-generated employment is in developing and transition economies.14). value added. the cost of improving locational determinants for NEMs can be lower. the extent to which they materialize will depend on the capabilities of local firms and on the balance of power between them and partner TNCs. 2010). While all determinants contribute to the overall attractiveness of a country for any form of NEM. such as contract farming. insofar as NEMs imply the development of a locally financed business. In addition.CHAPTER IV Non-Equity Modes of International Production and Development 147 cooperatives offer a degree of sophistication and certainty to TNCs which do not prevail in contracts with individual farmers (WIR09. and prolonged reliance on low value added activities or technological dependence on foreign firms. among others (table IV. 1. insofar as it is a choice. The analytical framework for the assessment of their development impact is similar to that for FDI – it looks at employment. DEVELOPMENT IMPLICATIONS OF NEMs The development implications of NEMs vary according to the NEM type. there are a number of concerns and risks associated with NEMs which need to be addressed. semiconductors. depending on industry factors. even if the very contractual engagement of the local partner in the NEM relationship generally works as a facilitator of access to finance with local banks or other financiers. including substandard working conditions in some NEM facilities.8). can make a positive contribution to its long-term industrial development by supporting the build-up of productive capacity and improving access to international markets (Narula and Dunning. services outsourcing. differences between the locational determinants of the two types of internationalization show that developing countries can influence that choice. NEMs bring to a host country a package of tangible and intangible assets.. The choice between FDI and NEMs. Where host countries’ efforts to become more attractive for foreign investors can be politically difficult or economically costly. the sector or industry and the value chain segments in which they take place. certain determinants are fundamental for the development of specific modes. In each of these areas NEMs can bring a number of benefits to a developing host country which. as do country-specific conditions and policy influences. to a lesser extent. pharmaceuticals. auto components. as well as on the general policy framework in host countries. footwear and . Barrett et al. services outsourcing and franchising activities (figure IV. 2010). industries and value chain segments (section B). The jobs created are both skilled and unskilled. but employed in firms operating concerns remain about under NEM partnership working conditions and arrangements in selected stability of employment. Beyond this. Most of the jobs created are in contract manufacturing. there is significant direct employment in other NEMs or industries. D. technology dissemination and social and environmental impacts. However. exports. a lack of employment stability. Individual contractual arrangements can also play a role.

have a centre of gravity in East and South-East Asia. with a global web of factories in emerging economies in Latin America. toys. Eastern Europe and elsewhere (table IV.148 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV. Long-term industrial capacity building Source: UNCTAD. mostly from developing economies. In the electronics and semiconductor industries.g. management contracts in tourism) this leads to significant export generation and to more stable export sales • In the case of contract manufacturing this is partly counterbalanced by increased imports of goods for processing • In the case of market-seeking NEMs (e. involve transfer of technology. Foxconn. is an important generator of employment . contract manufacturing. by their nature. and “footlooseness”. Main development impacts of NEMs Impact category Highlights of findings •N  EMs have significant job-creation potential: especially contract manufacturing. For some of these countries. licensing. roughly 90 per cent of NEM-related employment is located in developing and transition economies. NEMs encourage domestic enterprise development and domestic investment in productive assets and integration of such domestic economic activity into global value chains • Concerns need to be addressed especially in issues such as long-term dependency on foreign sources of technology.14. making an important contribution to GDP in developing countries where individual modes achieve scale • Concerns exist that contract manufacturing value added is often limited where contracted processes are only a small part of the overall value chain or end-product • NEMs can also generate additional value added through local sourcing. in the case of those modes relying on foreign markets (e. particularly in the electronics industry • NEM partners can evolve into important technology developers in their own right (e. local partners engaging in NEM relationships have been shown to gain in productivity. business model and/or skills and are often accompanied by training of local staff and management • In contract manufacturing.g. footwear and toys.g. In garments. making it one of the single largest employers in the country. management contracts. as contract-based work is more susceptible to economic cycles •N  EMs can generate significant direct value added. services outsourcing and franchising account for large shares of total employment in countries where they are prevalent • Working conditions have been a source of concern in the case of contract manufacturing based on low-cost labour in a number of countries with relatively weak regulatory environments • Stability of employment is a concern. franchising. a subsidiary of Hon Hai (Taiwan Province of China) and one of the largest electronics manufacturing services firms in the world. brand-licensing. the largest of these firms. in particular. activity is largely dominated by a relatively small group of major players with a worldwide employment footprint. management contracts) NEMs can lead to increased imports • NEM relationships are in essence a form of intellectual property transfer to a local NEM partner. sometimes through “second-tier” nonequity relationships •N  EMs imply access to TNCs’ international networks for local NEM partners.19 Contract manufacturing in the second group of industries is characterized by wide geographical dispersion. in contract manufacturing and services outsourcing) • They can also remain locked into low-technology activities • NEMs. NEMrelated activities generate significant employment. outsourcing. foster local entrepreneurship. NEMs can support or accelerate the development of modern local productive capacities in developing countries • In particular. positive effects on entrepreneurship skills development are especially marked in franchising Employment generation and working conditions Local value added and linkages Export generation Technology and skills transfer Social and environmental •  NEMs can serve as a mechanism to transfer international best social and environmental practices impacts • They equally raise concerns that they may serve as mechanisms for TNCs to circumvent such practices • Through the sum of the above impacts.6). including LDCs. Among the first group of industries. over-reliance on TNC-governed GVCs for limited-value-added activities. protected by the contract • NEM forms such as franchising. has nearly a million employees in China alone. principally in the case of contract manufacturing and outsourcing. Contract manufacturing for major brands such as Nike (United States) and Hugo Boss (Germany).

2008). many working under similar contractual arrangements. the Coca-Cola/SABMiller value chain involved 3.20 in Chile.000 farmers around the globe supplying it with commodities for its food and beverage businesses. Brazil. the PTP Group. El Salvador. Estimated global employment in contract manufacturing. For example.4. Hong Kong (China). India. including Argentina. By 2009. China and Viet Nam owes much to the participation of foreign contract manufacturing firms producing locally for international clients. Mexico. Source: UNCTAD. Turkey and Viet Nam – which involves over 800.000 people. a joint venture between Asia Timber Products (Singapore) and the local government in Leshan. For instance. at least initially (UNIDO. IT-BPO is one of the largest contributors to a number of economies Box IV. another stronghold of the industry. the garments industry employs some 400. Indonesia. its employment and poverty reduction implications are generally viewed positively.24 On a smaller scale. Gap.000 workers in the Cambodian garments sector. selected industries. the Philippines and a few other developing economies. in India the sector had created some 2. Malaysia. For instance. especially in poor countries. total employment was some 525. Similarly. In Sri Lanka. some 400.000 workers.21 and in the Philippines. Puma has contract manufacturing arrangements with some 350 factories.2 million direct jobs and indirectly impacted the lives of about 8 million people. 2010 (Millions of employees) Garments Automotive components Electronics Footwear Toys 0 2 4 6 8 10 12 14 16 Global industry employment NEM-related employment in terms of GDP. contract manufacturing in garments and footwear is far more dispersed. Most major brand companies such as Nike. there are about 376. where the vast bulk of production is carried out under contract manufacturing arrangements.000 people in 2009.2 for the methodology used. exports and employment.000 people in 2010.23 In Mozambique. Singapore and Taiwan Province of China.000 people. H&M. The overall number of contract farmers is uncertain but individual projects can have several hundred thousand participant farmers at a time. McNamara. involves the participation of 400. Cambodia. the outsourcing services industry in 2008 employed 20. Puma.244 in El Salvador in 2008. China. Nestlé (Switzerland) is working with more than 550. China. 95 per cent of exports in the industry are by foreign firms. Note: See box IV. For instance.4).22 Contract farming is linked to very large numbers of jobs for smallholder farmers. Collective Brands and Hugo Boss use extensive networks of contract manufacturers based in different developing economies to produce their brand products. The dotted area depicts the range estimate for each item. The rapid growth of the garment industry in countries such as Bangladesh. Cambodia. Thus. the Republic of Korea.741 workers in Zambia and 4. which is relatively concentrated in East Asia. mostly in contract farming Source: UNCTAD estimates. all of Nike’s footwear is produced by contract suppliers outside of the United States – some 600 factories in 33 countries.CHAPTER IV Non-Equity Modes of International Production and Development 149 Figure IV.000 workers. In services outsourcing the employment impact is also large in India. In the case of Cambodia.000 contract farmers are participating in GVCs. Thailand. In some developing economies foreign contract manufacturers constitute the bulk of the contract manufacturing activity. involving 300. 2009. across the developing world (box IV. These companies employed around 300.8.000 forestry workers in fibreboard production (WIR09: 144). Adidas. unlike electronics contract manufacturing. a majority of which are in developing economies. Indonesia. mostly developing economy TNCs from China. Sri Lanka. Similarly. accounting for nearly 50 per cent of Cambodia’s manufacturing employment. Employment impact in developing countries of NEMs in garment and footwear production The employment impact of contract manufacturing in low technology-intensive industries such as garments and footwear is significant in developing economies. but nevertheless significant for the countries and GVC segment involved. .

Similarly. Management contracts in some industries can also have a sizeable employment impact in host countries.5 per cent of the total labour force. of which roughly 400. International franchising is also a significant contributor to employment in host countries. This expansion plan will be mostly carried out using management contracts. communicating and enforcing labour standards. interior design companies. almost 2. licensing and management contracts are frequently perceived as enhancing employment conditions in host countries. NEMs such as franchising.000 people were employed in franchised businesses in 2010 (just under 1 per cent of the total workforce) (Rocha. licensing of host country firms in the pharmaceutical industry creates employment opportunities in other parts of the local value chain. providing services or parts and components to NEM partner firms.7 per cent of the workforce. such as laundry. through linkages with local firms. while 30 per cent declare that franchisees and their employees have better working conditions in foreign chains compared to local competitors. 2007). advertising firms. The global branded hotel market has an estimated employment of 3. creating an additional 90.10). Coca-Cola and Oxfam. In terms of backward linkages.000 jobs – on top of the current 40. The employment impact of NEMs is even more significant when indirect employment is taken into account. .000 people. the sourcing practices of lead firms. sources of indirect employment include workers employed by subsequent tiers of contractors (for instance in contract manufacturing).and small enterprises. Borini and Spers.25 and in Malaysia. as in the case of IT-BPO in India above. franchising businesses employ more than 200. local suppliers of raw materials and local packaging companies. UNCTAD–WFC survey).000 people in 2010.3).000 jobs are attributable to operations run under management contracts abroad (box IV. or contract farming in Kenya (box IV. 2010. International hotels often offer a higher service level (requiring more staff per room) than local hotels (Fontanier and van Wijk. UNCTAD. In China. while in South Africa. The potential of the hotel industry to create jobs is one of the reasons that many developing-country governments are aiming to grow the industry. For example. Research in six developing countries has shown that foreign-owned accommodation has a staff-toguest ratio of 8:1. 2007: 81. and the role of governments in defining. In addition. for instance.150 World Investment Report 2011: Non-Equity Modes of International Production and Development arrangements (SABMiller. 2005. although franchising businesses are not immune to bad working conditions. 64 per cent of franchising associations around the world state that employees in foreign chains enjoy at least the same working conditions as prevailing in local host-country chains. the InterContinental Hotel Group has an expansion plan to double its current complement of 150 hotels over the next five years. employment is created by providers of ancillary services. The number of franchising businesses. such as logistics companies. The factors that influence working conditions in non-equity modes are the type of mode and the industry. such as in pharmaceutical R&D or product distribution. particularly in Asia. mostly micro.000 employees in China. International hotel groups are currently expanding their reach. in franchising in the retail sector. where the formula is widely used. 2010). further employment is created by local service providers to the NEM operations. or some 1. 2010). in developing countries is growing rapidly and franchising in some countries is considered an important tool for unemployment reduction due to its potential to create both formal entrepreneurial employment and dependent employment in small business outlets. 2011).26 International hotel chains operating through management contracts or franchising in host countries are a powerful pull factor in complementary activities employing lowskilled workers. cleaning and security (in addition to higher-skilled areas such as surveillance and IT services) in developing countries (Lamminmaki. franchised businesses employed 460. in Brazil around 780. often due to relatively strong management control or oversight from international partners.5 million people.27 In an UNCTAD-World Franchise Council survey of franchising associations. For instance. which represent the interests of franchisors and franchisees. compared to the 1:1 or 1:2 ratio reported for domestically owned accommodation (UNCTAD. MKG Hospitality.

which gave privileged access to the United States market. Foxconn has been involved in several controversies concerning working conditions. SACOM website at http:// sacom. employee breaks. however. NGOs and media have begun a process assigning social and environmental responsibilities in supply chains back to lead firms. treatment of student workers. In some extreme cases. also illustrates the highly volatile nature of certain types of employment created through NEMs. 2008). working hours. Box IV. heavy criticism in the media and by activists and consumer organizations has forced international firms to intervene and to work with their local NEM partners in order to improve working conditions (box IV. that it is possible for NEMs to manage demanding customers.6 illustrates. Reports on Foxconn’s Chinese operations have in the past identified facility-specific issues on wages and benefits. a recent report by a Hong Kong (China)-based NGO (SACOM) argues that labour rights abuses persist at some of Foxconn’s facilities in China. Despite these positive actions. In 2009 for example. one of Nike’s NEM partners in Honduras closed two of its factories. Campaigns by civil society. 2008). excessive overtime. have responded to these concerns by carrying out an independent investigation and subsequently by working with Foxconn senior management on corrective actions towards higher international labour standards. In order to keep costs down and remain competitive and attractive as partners for lead TNCs. however. and can be shed quickly at times of economic downturn.hk. the relationship between core firms and their NEM partners has started to change. occupational health and safety. such as contract manufacturing or services outsourcing.800 workers unemployed and without the legally mandated severance payments they were due. Jobs in labour-intensive NEMs are highly sensitive to the business cycle in GVCs. including the violation of national and international labour rights. a “Foxconn and Apple fail to fulfill promises: predicaments of workers after the suicides”. Dell and HP. NEM partners and industries in host economies. management quality. One example is the electronics cluster in Guadalajara which.a Source: UNCTAD. Labour conditions in Foxconn’s Chinese operations – concerns and corporate responses Foxconn. Many factories were closed and thousands of jobs lost (McNamara.000 workers and accounted for 77 per cent of the country’s exports. For instance. are more often criticised for weak employment conditions. as quotas on garment imports to the United States from large. chiefly produced by contract manufacturers from Taiwan Province of China under the Africa Growth and Opportunity Act (AGOA). With the help Box IV.5). leaving 1. Over the last two decades. the very nature of cost-sensitive production can be problematic because TNCs can shift to other locations with even lower operating costs. contract farming and similar modes can employ large numbers of workers. including the introduction of new salary standards that reduce pressure for overtime as a personal necessity for employees. including Apple. and dining and living conditions. After 2003. The action plan consists of several steps to improve working conditions in factories. although an example of successful value chain upgrading. This “footloose” nature of some NEMs can have severe consequences for workers. NEM firms can take measures that impinge on workers’ rights and freedoms – low wages and benefits. A number of Foxconn’s customers. the relocation of some manufacturing operations closer to migrant workers’ hometowns (thereby maintaining social structures and support systems). a subsidiary of Hon Hai Precision Industry Co Ltd (Taiwan Province of China). . In common with many other contract manufactures. however. in 2000 the garment industry in Lesotho employed over 45. is the world’s largest contract manufacturer in the electronics industry. job instability28 and poor health and safety practices (Milberg and Amengual. work intensity. low-cost locations such as China and India were removed . and helping employees to integrate better into the community to promote a positive work-life balance and create a more extensive support network.5. for example through diversifying the customer base.the industry in Lesotho was devastated. seasonality and other sources of volatility. grievance mechanisms.CHAPTER IV Non-Equity Modes of International Production and Development 151 NEMs that are focused on reducing production costs. While contract manufacturing.

Very few of the products made in Guadalajara in 2000 are still made there today.000. the capital of Jalisco State in south-west Mexico.6. contract manufacturers found new partners in retail outlets in the United States. 2010. with falling exports in two consecutive years (box figure IV. Examples of such electronics products include low. the average annual export growth rate was reduced to near zero. 2008.000 in 2000. Total hi-tech employment peaked in Jalisco State at more than 76. the decline in output and employment after 2001 was precipitous. 2006. when large contract manufacturers such as Flextronics. price-sensitive items such as mobile phone handsets and notebook computers. Jabil Circuit and Solectron. when the technology bubble burst. to control their NEM partners through codes of conduct.152 World Investment Report 2011: Non-Equity Modes of International Production and Development of “The Workers’ Rights Consortium” NGO. Until 2001. The close economic ties between the two countries. testing. often on a direct-ship. Employment (left scale) Exports (right scale) With the downturn in the business cycle. are a general feature of the Mexican maquiladora industries.1. 2009 0 0 Exports ($ billion) 14 . and materials management. Some contract manufacturers with facilities both in Guadalajara and in other locations shifted high-volume work to lower-cost plants in China. rapid replenishment basis. Although most codes are developed individually by companies. Employment volatility in such Mexican plants was found to be twice that of United States facilities in the same industry. electronic fish finders for use in recreational boating and alarm systems for homes and businesses. civil society groups initiated intense public campaigns until Nike agreed to take over the supplier’s full obligations (severance payment. In contrast. Cadelec. Blecker and Esquivel. and after 2001 dropped by 40 per cent to less than 46.6. resulting in a “synchronization” of business cycles. employment fell by up to 60 per cent. Contract manufacturers and workers have had to adapt to more complex production and supply processes.and mid-range computer servers. Box IV. Guadalajara’s factories competed directly with those in China in the production of high-volume. as in the case of electronics in Guadalajara. 2010). High variations in employment. to promote international labour standards and good management practices. Feenstra and Hanson. the industrial upgrading that took place has led to a gradual recovery to previous levels of employment and exports.1). in some plants. 2010. had some observers speaking of the United States exporting a portion of its employment fluctuations over the business cycle to Mexico (Bergin. to increase the utilization of facilities in Guadalajara. Volatility in contract manufacturing employment in Guadalajara. nine months of medical care and job training for laid-off workers). in order to manage risks and protect their brand and image. and quality assurance processes have been upgraded to accommodate the increased product variety. Source: Sturgeon and Dussel-Peters. This “public relations liability” has extended the social responsibility of TNCs beyond their actual legal boundaries and compelled them to increase their influence over the activities of their value chain partners. It is increasingly common for TNCs. and started to produce lower-volume goods. However. During 1994–2000. Over time. 1996–2009 90 20 18 16 Thousands of employees 80 70 60 50 40 30 20 10 12 10 8 6 4 2 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Cadelec. the value of electronics exports from Jalisco State increased at an average rate of 35 per cent per year. Box figure IV. New logistics functions have been added to ship small lots directly to retailers for distribution.6. during 2000–2005. is home to an electronics cluster deeply embedded in GVCs. all established facilities in Guadalajara. Cyclical employment in contract manufacturing in Guadalajara Guadalajara.

and toys are manifestly smaller. and help developing country enterprises to differentiate themselves when seeking international business partners (Riisgard and Hammer.CHAPTER IV Non-Equity Modes of International Production and Development 153 they are commonly based on international principles such as ILO labour standards. contract manufacturing and services outsourcing are the largest single contributor. H&M has an inspectorate in South Asia which investigates the working conditions in the approximately 40 clothing factories in India and Sri Lanka with which the company works. The real significance of NEM-related value added stems from its importance within a particular country’s economic context. codes are being used as a basis for capacity-building programmes aimed at transferring specific management knowhow to developing country enterprises. Thus. which often includes management audits and on-site factory inspections. 2. for many NEM partners the adherence to internationally recognized labour standards is part of their contractual obligations. core firms engage in compliance monitoring. core firms themselves are emerging as a regulator of sorts. they integrate the outcomes of the inspections into their purchasing decisions. many TNCs also adopt third party standards. in some developing countries it . For instance. NEM partners typically have to implement corrective action plans to rectify critical issues identified during the audits. NEM. Accordingly. Local value added The direct impact NEMs can generate signifiof NEMs on local cant value added in the host value added can be economy – including through significant. or the OECD Guidelines on Multinational Enterprises (chapter III). In this way. lead firms offer special supplier development programmes for social and environmental issues. Electronics contract manufacturing. Cross-border franchising. automotive OEM components and garments generate the largest share of value added. Instead.000 ISO 14001 certificates have been issued in more than 150 countries. the structure of the TNC’s GVC and the underlying capabilities of other local firms.4).31 Although questions remain about TNCs’ motives vis-à-vis CSR in global value chains (Starmanns. To support their NEM partners in their efforts to meet compliance with the code. rewarding those NEM partners that comply with the standards. the UN Universal Declaration of Human Rights. NEM firms in most industries need to commit to the terms set forth in a code before entering into business relationships with lead firms. about half of which were unannounced.30 These certifiable third-party standards assure TNCs that their suppliers meet certain basic standards. In this way. Currently there are over 2. or at least show strong commitment to meeting them. which includes a spectrum of discrete activities. footwear. In 2010 they carried out 251 visits. 2010).9). it can be observed that lead firms that have worked with codes over a longer period of time have introduced a systematic approach to supplier monitoring and rating. To ensure that the code of conduct is implemented and followed by their partners. due in part to industry size – footwear and toys are smaller markets – and the nature of the manufacturing being contracted – much of the activity covered in electronics is related to final assembly of goods. that many companies are reluctant to drop a supplier for failure to meet the conditions of the code.600 facilities certified to SA8000 across 65 industries. accounting for more than $200 billion (figure IV. Among those industries with significant contract manufacturing activity. accounts for roughly $150 billion of value added worldwide. such SA8000 (for labour practices) or ISO14001 (for environmental management). issuing process guidelines covering a range of social and environmental practices. In combination with individual company codes.29 and more than 200. Of this amount. it has also become evident over the past decade. While global NEM value added accounts for less than 1 per cent of global GDP. second-tier linkages – even the scale of additional when their share of value indirect value creation created in the global value depends greatly on the nature of the particular chain is limited. however. However. 2010). UNCTAD estimates that the direct value added impact of cross-border NEMs is roughly $400–500 billion dollars a year (table IV.

as part of the firm’s globally integrated value chain. lead firms’ logic in using contract manufacturing often squeezes local capture of value added. IT-BPO activities accounted for 4. the scope for local sourcing. 2010 (Billions of dollars) Contract manufacturing and services outsourcing Automotive components IT services and business process outsourcing Garments Electronics Footwear Toys Franchising 0 Source: UNCTAD estimates. is relatively limited as goods are imported. For instance. In some cases. however.. services outsourcing and contract farming. On the other hand.32 India’s auto components industry. If the NEM partner’s role is confined to processing inputs from one step in a TNCs’ value chain to be passed onto the next. Local NEM partners are not. working mostly under contracting arrangements.154 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure IV. retaining value in the host economy. Electronics contract manufacturing provides a clear example of the interplay of these forces. is often only a small part of the value generated within the GVC of any particular product. selected industries. 2011).10).3 per cent to the country’s GDP and is expected to generate $30 billion in revenues in fiscal year 2010–11. whether the phone is produced in Finland or China. Note: See box IV. Estimated global value added in contract manufacturing. For example. who face ever-smaller margins (figure IV.8 per cent of GDP and generated $9 billion export revenues in 2010. Combined with their significant bargaining power over their NEM partners. necessarily locked into a low local value added trap. in a similar case – the Nokia N95 Smartphone – the value added in manufacturing was determined to be 2. as NEM partners can make greater use of local suppliers. in the case of the iPhone that Foxconn (Taiwan Province of China) assembles on behalf of Apple (United States).2 for the methodology used. and thus for additional indirect value generation. Korean and other international suppliers pre-selected by Apple. The explosive growth of this mode in the industry has stemmed largely from lead firms wanting to outsource the lowest value added activities of their internal processes. This has led to a steady fall in the generation of value added by their NEM partners.9. former contract manufacturers have created their own brands and are now competing with lead TNCs in the global consumer electronics market (Sturgeon and Kawakami. Importantly. Much of the remaining global value added is accounted for by Japanese. though production methods and factor inputs might differ (Ali-Yrkkö et al. such as contract manufacturing.1 per cent of the total. and subsequently exported. in the Philippines. the low value captured by the NEM partner in this example reflects the industry (and the balance of power within it).7). The dotted area depicts the range estimate for each item. 2010). only a small share of the unit value added is captured by the company’s Chinese factories. One argument in favour of developing countries undertaking low value added NEM activities is that the apparently unfavourable balance in value capture for local NEM firms is the initial price they pay for access to TNCs’ knowledge assets and long-term capability development (Moran. however. . value capture in the host economy can be small. greater autonomy has the potential to generate substantial indirect local value added.33 This value added activity. For efficiency-seeking NEMs. depending crucially on the nature of a NEM’s integration into lead TNCs’ GVC and the balance of power between the two. For example. as well as by Apple and its vendors (box IV. 2011). processed. 100 200 300 represents a significant share of economic activity. rather than the country location of production. services outsourcing and franchising. Many electronics contract manufacturers are quickly evolving to provide additional services to their clients in higher value-generating activities in other segments of the value chain. contributes about 2.

Malaysia in the 1990s and 2000s. . industrial parks). Note: See box IV.CHAPTER IV Non-Equity Modes of International Production and Development 155 Figure IV. Nevertheless. as seen in the Republic of Korea in the 1980s and 1990s. In addition. Compal Electronics. contract mode-specific.g. industry and host country. adherence to specified quality standards is a common feature in licensing. Modes such as contract manufacturing. gains – the extent of In toys. McDonald’s (United States). value added in predominantly market-seeking NEMs such as franchising. and TPV Technology). In the hotel industry.2 for methodology used. The dotted area depicts the range estimate for each item.11).10. often builds up a domestic food value chain to supply its stores. franchise operations can create significant local linkages.11. The extent and nature of backward linkages by NEMs and their concomitant additional local value capture vary by mode. increase if the emergence of contract manufacturing leads to a concentration of production and export activities in clusters (e. footwear. and amortization/ depreciation. The greater the number of plants and the more numerous the linkages with TNC buyers. 2010 (Billions of dollars) Beyond contract manufacturing. which can limit sourcing in host economies if local suppliers do not meet the required quality levels. Value added as per cent of sales based on data from six of the top 10 major companies in this segment (Hon Hai. Note : Value added is calculated as the sum of pre-tax income. the greater are the spillover effects and local value added. 2007). selected industries. operations linked to a TNC were found to source no less locally than host country competitors (UNCTAD. World and NEM-related exports. Total sales and value added as per cent of sales for top electronics contract manufacturers. for instance. this can lead to high shares of individual industries in a country’s or region’s exports: for Figure IV. businessprocess outsourcing and contract farming. Once a supplier and McDonald’s have agreed on standards and quality guarantees along the food chain. and the overall impact on host country value added. personnel costs (wages). cluster policies can reduce the risk of TNCs shifting production to other locations because of the benefits they gain from cooperation with firms in such agglomerations. depending on the capabilities of local firms. The use of local inputs. contract manufacturing and franchising agreements. 3. Export generation NEMs shape global patterns NEMs generate export of trade in many industries. contracts and local value creation tend to be long-term. Quanta Computer.34 Source: UNCTAD. by their nature create substantial exports and foreign exchange earnings. For example. 2003–2010 (Billions of dollars and per cent) $ billion 300 250 200 150 100 50 0 Value added/sales Per cent 12 10 8 6 4 2 2003 2004 2005 2006 2007 2008 2009 2010 0 The extent of local sourcing is also governed by contractual agreements between NEM partners. for example. As industries associated with these modes often show significant clustering effects. Electronics Garments Automotive components Footwear Toys 0 50 100 150 200 250 300 350 400 450 World exports NEM exports Source: UNCTAD estimates. garments which is context and and electronics. Inventec. Wistron Corp. management contracts and licensing essentially remains in the host economy – apart from the fees and royalties involved. manufacturing and services outsourcing represent more than 50 per cent of global trade (figure IV.

During 2005–2009 average IT-BPO exports from India. the high proportion of international guests is an important feature. especially in terms of geographical delimitation of the sales activities of the NEM partner. Breakdown of the production costs of the iPhone. limited to packaging and local services. licensing and management contracts – export gains are clearly more limited. In the upper segments of the hotel market in particular.40 In licensing.46 48. more than half. in fiscal year 2009. Box figure IV. the gross value of such exported goods reached $655 billion in 2009. textiles and apparel exports were $22 billion. the goods for processing trade.7. were equivalent to 14 per cent of India’s total exports. has exploded during the past decade. toys made up $12.e. 2010 (Dollars per unit) 124.1. such as the United States. but not absent.50 of the $179 production cost (retail price. distribution and retailing etc.9 billion.7.50 Components Other materials Assembly Source: UNCTAD. This is illustrated by the well-known case of the Apple iPhone. the company’s NEM partner in China (box figure IV. the shipping of intermediate goods for assembly or further processing (and thus a good proxy in international statistics for trends in contract manufacturing).7.156 World Investment Report 2011: Non-Equity Modes of International Production and Development Box IV. can appear very limited. and were expected to grow fast. in part. the South African pharmaceutical company Aspen Pharmacare is limited in its exports of patented anti-retroviral (ARV) drugs under the terms of its licensing agreements . In the global hotel industry. constraints on exporting activity can be built into contractual agreement between the TNC and host country licensees. 9 and 14 per cent of the respective countries’ total merchandise exports in 2009. of Guangdong province’s (China) exports in 2010. 12.39 In NEMs that are primarily oriented towards the host country market – such as franchising. The share captured by domestic Chinese companies is even less. BoP database).5 per cent of total exports. in particular international tourists and business travellers. for which it is estimated that only $6.00 6.1). Japan. instance. Germany and the Republic of Korea. compared to the total value created in the overall global value chain and expressed in currency units of the final destination market (or as a percentage of the final product sales price). global chains give hotel-owners access to new customer groups. Note : The remaining $321 of the $500 retail price is accounted for by Apple and other companies’ returns to R&D. amounting to two-thirds of the country’s total IT-BPO industry revenues. up from roughly $138 billion in 2000 (IMF. because iPhones are assembled from components made mostly in other countries. design. based on Xing and Detert. Kenya and Zimbabwe accounted for more than 8. $500 in the US market) is captured by Foxconn (Taiwan Province of China).37 Looking beyond individual industries. In China. For example. i. Value capture can be limited: iPhone production in China The relative value added captured by contract manufacturers in developing countries.38 IT-BPO and contract farming also underline the significant export generation of efficiency-seeking NEMs. Similarly. exports of cut flowers (produced under contract) from Ethiopia. 2010. This is. i. with almost all international operations run either as a franchise or under a management contract.36 In India.35 In Bangladesh and Cambodia the garment industry accounted for some 70–80 per cent of total national exports in 2008–2009.e.

e. In addition to professional skills – which are industryspecific – the training and support given usually include general managerial competencies. Pyndt and Pedersen. the Republic of Korea and China account for 92 per cent of production). extensive training and support are normally offered to local partners in order to properly set up the new franchise. and even – potentially – corporate culture and values. international franchising can be an avenue for brands from developing countries to grow internationally (including as master franchisees for lead TNCs) with little need for high up-front investments. UNCTAD. the TNC provides training to facilitate the start-up of the new business and provides ongoing in-store and computer-based assistance to help the franchisee in developing their business. franchised businesses based in South Africa have opened outlets in neighbouring countries across Southern Africa (figure IV. but imports can rise in the case of branded goods retailing. forthcoming). business models. Such narrow technology transfers. Since the 1960s. Franchising in retail goods. prior to the establishment of a 7-Eleven store. 2006. . 2010). the influx of international tourists constitutes a rise in services exports and normally the associated imports are low. have been active in pursuing such strategies (acquiring and absorbing narrow. in the case of international franchising. e. 2003. Technology and skills acquisition by NEMs NEMs can diffuse technology and skills to local partners. companies in Asia and Latin America.e. A good example is MAN B&W Diesel (MBD). with wideranging implications for technology dissemination. Schrunder and Mongar. specific technologies). such as services outsourcing. Similarly. pharmaceuticals and shipbuilding41 (Kim. Technology encompasses a range of hard and soft elements. managerial. Borini and Spers. the 7-Eleven franchise system provides not only structural support (store equipment). modes such as contract manufacturing and contract farming lead to net export gains. with limited interaction between the TNC and partners. in sectors such as automobiles. as in the case of the iPhone (box IV. Brazil and the Republic of Korea. As an alternative route to international market access.7). electronics. often in combination. which has been licensing marine engine technology primarily – with some training – to shipbuilders in Asia (Japan. WHO and ICTSD. a Danish subsidiary of MAN AG (Germany). the NEM company normally must already possess significant capabilities and absorptive capacities. Amuasi. elements in creating absorptive capacity). machinery and other capital equipment. 2009: 14). In contrast. marketing and management knowledge to let entrepreneurs manage the new business efficiently (i. for instance. production and organisational knowledge and skills (including quality standards and norms).). 2004.12) Licensing involves a TNC granting an NEM partner access to intellectual property – usually with some contractual conditions – and with or without training or skills transfer. for example. Also. contribute to initiatives 4. although these can be limited where the import of intermediate goods or services accounts for a significant part of the value. Net export generation may differ appreciably by mode and industry. 68 home-grown brands – about 5 per cent of the total national franchised networks – have internationalized and expanded to some 50 countries around the world through franchising as a mode of entry (Rocha. imply that in licensing. For example. Similarly. blueprints. but also field consultants who regularly meet with franchisees in order to help them maximize store performance and profitability. primarily because of their existing industrial base. In the case of management contracts in hotels. engineering and other skills (including tacit ones). in order to assimilate and utilize the knowledge received. especially in Argentina. The extent of technology uptake depends on local absorptive capacities. manuals etc. In the case of Brazil. which transfers a business model. 2006. The extent and combination of technology and skills received by NEM partners differ. intellectual property (including patents.g. Mudambi. The impact on export generation is higher in the case of other contracting modes. financial.42 Some TNC hotel groups. apart from providing internal training programmes.g. normally creates few exports.CHAPTER IV Non-Equity Modes of International Production and Development 157 with GlaxoSmithKline and Boehringer Ingelheim (Berger.

2010b). international manufacturers) (Ivarsson and Alvstam. Latin America and South Asia. either through the TSO. Regional spread of selected South African franchise chains. Morrison. technology and skills acquisition and assimilation by NEM companies in electronics. 2010a. whether in processes. 2010 40 35 30 Woolworth's Debonair's Shoprite Protea Hotels Nando's Wimpy Number of units 25 20 15 10 5 0 Namibia Zambia Botswana Swaziland Zimbabwe Malawi Mozambique Madagascar Angola Source: UNCTAD. 2008).44 A good example of a company which has become a significant TNC and technology leader by being . garments. This is because NEMs are a part of TNCs’ global value chains. Nevertheless. pharmaceuticals and IT-BPO services – among others – has led to their evolution into TNCs and technology leaders in their own right (WIR06. Most relevant research on this issue has been conducted on contract manufacturing and services outsourcing. Pietrobelli and Rabellotti.e. In some East and South-East Asian economies in particular. products or along the value chain. TNCs exist primarily because they possess intellectual property. 2010c.43 A good example of how a TNC may do this is provided by IKEA’s relationship with its developing country suppliers in the home furnishing industry. The company has launched the IHG Academy. staff despatched from the parent office or external expertise (consultants. NEM partners can continue to supply other customers). to build capacity in the sector. IKEA has a policy of working long-term with its suppliers. The relationship with suppliers is managed by dedicated regional trade sales offices (TSOs) which ensure that necessary technology and skills are provided. for host countries. but also in Eastern Europe.158 World Investment Report 2011: Non-Equity Modes of International Production and Development Figure IV. it is therefore normally in their interest to create or seek barriers to make acquisition of this knowledge by other firms more difficult. One example is the current expansion of the InterContinental Group in China. 2010). are therefore not infrequent and are consistent with the role that these firms play in value chains (UNCTAD. The Academy has 23 partners located in 10 cities. Deelder and Miller (2010). to address the needs of the international hospitality and tourism industry (Intercontinental Hotel Group. 2010c). it is in TNCs’ interest to disseminate technology – including building local absorptive capacities – to their partners. at least to a degree (UNCTAD. Other examples include Best Western’s establishment of a Centre for Hotel Management and Training in India and the creation of the Hospitality Training Campus in UAE. training 5.000 students per year.12. Technology acquisition and assimilation by NEM firms. but without “lock-in” (i. a public partnership that provides hospitality job training in local communities. adapted from Beck. NEMs can be an important interface for acquisition and diffusion of knowledge from lead TNCs – in a similar fashion to JVs and affiliatesupplier linkages. or other forms of knowledge. section B).

(2) local absorptive capacities. limited skills sets and fragile markets led TNCs such as Warner Brothers to move their contracts to other countries such as India and China. such as animation (Tschang and Goldstein.46 With 1. Finally. most opportunities for technological/ skill upgrading are inherent in product design (controlled by brands) and production methods (capital goods and inputs. Even in the case of IKEA. in “lowtech” industries such as garments. or the absorptive capacity of suppliers low. whereby they become technologically advanced in particular components on a mass scale and realize profits through cost reductions. for instance has not yet resulted in significant upgrading by small local suppliers (Yang. Hon Hai is following in the footsteps of other Taiwanese companies such as Acer and AsusTek. apart from the cost of the equipment. For example Acer and AsusTek (both Taiwan Province of China) achieved their success in notebooks through leveraging knowledge gained from supply chains of many TNC customers.438 patents (up from about 500 in 2000). although the Philippines is successful in various services outsourcing GVCs. footwear and furniture. All these companies made this transition on the basis of deep expertise established over time in product definition and design. mentioned earlier.47 and the number is not far off the 1. Strategies of NEM partners also matter. the local NEMs’ combination of high wages. a number of factors affect technology and knowledge acquisition and assimilation by NEMs. For example. only a small proportion of its suppliers improve their innovative capabilities (albeit all suppliers achieve better operational capacity and about half are able to absorb adaptive technologies) (Ivarsson and Alvstam.CHAPTER IV Non-Equity Modes of International Production and Development 159 (and continuing as) an NEM is Hon Hai (Taiwan Province of China) – holding company to Foxconn – which was the 13th largest recipient of patents45 granted in the United States in 2010. and (3) NEM strategies. Its customers include most major automobile companies and it has affiliates in China.48 Although technology acquisition and assimilation through NEMs is a widespread phenomenon. As most technology is embodied in capital goods. 2010). and explains the dominance of developed country TNCs in such industries. For instance. especially at the level of second. the recent financial and economic crisis that created a competitive impulse for upgrading such industries also showed that local NEMs may lack the necessary capabilities to do so. For instance this led to AsusTek – . NEM companies benefit from knowledge gained from a number of TNCs). 2005). To benefit fully from technology and skills available through particular NEM arrangements. The Taiwan Province of China notebook computer production network in China. Among the most important of these are (1) the industry. it is therefore important for local firms to develop their absorptive capacities. They were able to innovate on the basis of the wider technological base thus gained. In the Philippine animation industry. Germany. in industries such as automotives and components. With respect to the industry. processes or systems.e.490 received by LG Electronics (Republic of Korea). GVC and learning opportunities. 2010a). 2010). including services requiring “creative” work. A very common strategy which pays dividends is customer diversification leading to crosschain learning (i. through an entrepreneurial pioneering of new niches.49 On the other hand. Sweden and the United Kingdom. this means that there are few barriers to technology upgrading. it is not a foregone conclusion. in moving from a pure contract manufacturer to becoming a brand.and third-tier suppliers. Hon Hai is one of only four developing country companies in the top 50 assignees of United States patents in 2010. This makes technology and assimilation more difficult for new players on the scene. generally purchasable from manufacturers independent of the brands). technology assimilation requires mastery of complex products. where linkages may be insufficient or of low quality. Pietrobelli and Rabellotti. How NEMs fare despite these constraints depends greatly on absorptive capacity (Giuliani. Bharat Forge (India) is now the world’s second largest producer of forgings for car engines and chassis components. For example. Overall. NEM partners can adopt strategies in their dealings with TNCs to improve their bargaining power and technology acquisition and upgrading. key determinants are the industry’s structure. For example. it is possible for companies to engage in “deep niche” specialization.

in Ghana. 2008. with telecom services a widespread example. TNCs and NEMs can also take social-cultural initiatives. despite the risks. IKEA actually encourages such cross-chain learning. franchising can influence local sociocultural norms by contributing to the growth of consumerism. including in the agriculture and forestry sectors (Arai. is an effective system of localizing the operations of a foreign company. to the extent that the TNC is not directly involved. Witte and Pryor.g. some governments have become adept at using NEMs to address and overcome important social issues in their countries. but they may also allow TNCs to circumvent such practices. although there are many economic benefits arising from modern retail franchise networks. 2003. because it improves their supplier capabilities (Ivarsson and Alvstam. for instance when issuing a mobile phone licence to Vodacom in the 1990s with specific requirements that involved providing services to the poor. India.51 The entry of “fast food” restaurants offering accessible non-traditional fare has met with some resistance in countries such as China. Franchising. marketing and branding to interact more effectively as they gradually gain the capacities to sell direct to final customers. 2010. and the development and strengthening of commercial values and standards (Freund and Martin. Social and environmental impacts NEMs can serve as a means to transfer international best social and environmental practices.52 The use of micro-franchising as a distribution channel to the poor or low-income segments of a market is common in developing countries. Research shows that companies which have serviced multiple value chains in NEM relationships in this industry (rather than operating as affiliates under a single TNC network). including a range of externalities such as changing consumption patterns and cultural values. In this context.53 In a similar vein. increasing the use of imported inputs. including creating brands for domestic and regional customers. for Unilever in India through its Project Shakti.. often consisting of renovated shipping containers with some installed phones linked to the mobile network.160 World Investment Report 2011: Non-Equity Modes of International Production and Development followed by Acer and others – subverting Intel’s product roadmap by expanding its target market for netbooks to include customers in the developed world (Intel’s vision had only encompassed sales of the devices to developing countries. For instance.50 there is often a tension between the elements of “modernization” – some brought about through NEM activities – and the essence . In Malaysia. India and Mexico (Alon. 2010). Many socio-cultural and political issues arise from TNC involvement in developing countries. e. while at the same time addressing their needs. while in some countries like Bangladesh and Peru a similar franchising model is used to broaden internet access (Falch and Anyimadu. of traditional identity. Shih et al. some of these issues are weaker in scope. the Government of South Africa has officially promoted franchising. e. but they remain in essence. Operating in multiple value chains appears to improve NEMs’ options for upgrading (Navas-Aleman. At the same time. are able to use the learning in design. Indonesia. 2010c). ITU. 2010: 22–23). In the case of NEM operations. Senegal or Thailand. 2004). by integrating its business model into a population of entrepreneurs who will then have ownership interests in the business and who can cater to national development goals. has allocated $4 million to a loan scheme to back the Women Franchise Programme and the Graduate Franchise Programme. the Government of Liberia uses TNCs and their supply chains to support job creation for young people. such as hotel chains entering markets through franchising and contract 5. who either had limited or no access to phone lines. Other examples include the sale of household products to the poor. 2010). Cissé and Sock. an agency under the Ministry of Entrepreneur and Cooperative Development. Bank Rakyat together with Perbadanan Nasional Bhd (PNS). 2011). It is possible for NEMs. With this in mind. Another example. hence their lower cost) (Sturgeon and Kawakami.g. Vodacom subsequently set up a system of franchised “Telecom Kiosks”. from a low-tech industry. 2008). is that of the Brazilian furniture and footwear industries. for example. Grünhagen.

Four Seasons Hotels & Resorts (Canada). In the cases of franchising and management contracts. Contract farming can have serious impacts. to linkages and to the local into global value chains.g. Marriott International (United States). which can be controversial. damage to their brand and lower sales). NEMs also help related to long-term to provide the resources. on their perception of and exposure to legal liability risks (e. For example. as well as their carbon footprint. An example of such an approach in Thailand involves major international chains (InterContinental Hotels Group (United Kingdom). production technologies. the scale of operations. Hyatt Hotel Corporation (United States). first. global value chains that are prerequisites for long-term industrial capacity building.CHAPTER IV Non-Equity Modes of International Production and Development 161 management. in their annual and CSR reports. Some. The specific environmental impacts of contract farming activities depend on contingent factors. factory inspections/audits. e. including how fragmented or concentrated the industry is at the level of the NEM partner. Long-term industrial capacity-building NEM activity in developing NEMs can enhance host countries can make productive capacities immediate contributions in developing countries to employment. with the potential to obtain skills . The long-term industrial development impact of NEMs filters through each of the impact types discussed in previous sections: oo The employment generated by NEM activities contributes to the build-up of a formalized workforce. focusing on poverty alleviation and youth employability. in terms of inputs and production methods to support the farming of genetically modified crops (box IV. private–public cooperation. limited value skills and access to added and “footlooseness”. NH Hotels (Spain)) in establishing and sustaining “the international tourism partnership youth career service”. There is a significant body of evidence to suggest that TNCs are likely to use more environmentally friendly practices than domestic companies in equivalent activities. TNCs employ a number of mechanisms to influence NEM partners. including the specific crop or activity undertaken.g. like all industry. which determines how much choice the TNC has in selecting the partner. it depends on the extent to which they can control NEMs. to through their integration GDP. training of personnel and recycling facilities are two of the most commonly adopted measures to tackle environmental challenges and encourage an ecological conscience. including codes of conduct. thereby contributing to the diffusion of more environmentally friendly practices. Second. reparations in the case of environmental damages) and business risks (e. Ultimately the level of influence a TNC has over its NEM partners is determined by a range of factors. among others through soil erosion and biodiversity loss (WIR09: 155–157). dependency. Hilton Worldwide (United States). and host-country and international rules and regulations on the environment. inevitably have environmental impacts – mostly similar in type to FDI. NEMs. Starwood Hotels and Resorts Worldwide (United States). 6. such as InterContinental Hotels Group PLC and Marriot International are pioneering the construction of sustainable hotels and buildings using renewable resources. environmental reporting is of high importance. to exports. including reductions in waste. technology base. Applying a uniform environmental standard across all global operations is normally less costly than taking advantage of laxer environmental regulations in some locations. Fairmont Hotels and Resorts (Canada). to diversify their local capability programmes to support wider goals than their immediate skill needs (though the two can be interrelated).g. water use and electricity consumption. In but there are also concerns doing so. and third party certification schemes.8). The extent to which TNCs guide NEM operations to the same effect depends. An important factor is the technical support or encouragement provided to the NEM by the TNC. In this respect. NEMs for which the TNC’s brand is a key driver. seven of the 10 largest hotel groups worldwide (all extensively involved in franchising and/or management contracts) provide extensive information on their global policies to promote environmental responsibility.54 This has developed into a strong.

is conditioned increasingly by extended corporate social responsibility demands placed on all actors in the chain by lead TNCs. managerial and professional skills. and a major point of access to TNC global value chains. A major part of the contribution of NEMs to the build-up of local productive capacity and long-term prospects for industrial development is through impact on enterprise development as. Source: UNCTAD.162 World Investment Report 2011: Non-Equity Modes of International Production and Development Box IV. and due to the fact that many producers are far from their customers. often by gradually moving to serve more than one TNC network. based on WIR09: 155–157. environmentally friendly methods also contribute to reducing cost. thus creating significant impact from transport activities. oo Long-term industrial capacity building implies the gradual upgrading of local technological capabilities and the pursuit of a degree of technological independence. is not forced for subsistence reasons to stay in occupations where working conditions limit possibilities to seek improvement) is an important aspect of the potential of NEMs to contribute to longer-term development. Managing the environmental impact of contract farming In the cut flower industry. for example. The path to such independence is. farms working with TNCs have introduced environmentally sustainable practices. since the late 1990s. Compliance is implemented through codes of practice and certification by industry associations. 2009). to design and own brand development (including for domestic or regional markets) (box IV.8. as workers change jobs. sustainable environmental standards and good working conditions for their employees. to contract manufacturing activities for multiple TNC value chains at a later stage. to extend its presence to adjacent segments of the value chain. insofar as industrial upgrading. moving up to higher value added segments of global value chains. where NEM activities may be confined to low value added and low-tech segments of global value chains. Organic planting technologies introduced through foreign firms’ networks have boosted value creation and led to higher incomes for farmers (Liu. local firms can grow into independent exporters and gain independent access to global value chains. TNCs have been consistently criticized for their environmental impact through contract farming. oo Even the impact of NEMs on social and environmental standards can have a bearing on long-term sustainable industrial development. In the longer term there are opportunities through NEMs to grow a country’s presence in such limited value chain segments to a “dominant” international position to maximize development potential. operations by TNCs and their contract farming schemes have often been criticized for negative environmental impacts due to their high water consumption leading to water depletion. often from third-party factories in the early stages of development. or to enter other value chains that may depend on similar skills. oo NEMs are a major “route-to-market” for countries aiming at export-led growth. as well as values and experience of business culture. that can be transferred to the wider economy. oo The local value added generated by NEMs may be limited in the early stages of development of an economy. resources and endowments. such as geothermal steam and integrated pest management systems (Wee and Arnold. to protect their corporate image and to manage risks. through lower inputs and recycling. Despite these recent efforts for sustainable farming. in contrast to . Skills include technical. While initially NEMs in countries in the early stages of development may be the only point of access. For similar reasons. the banana industry in Latin America (where contract farming is also common) has progressively seen the adoption of environment-friendly farming techniques in plantations. In response. (In some cases. 2009). The extent to which the labour force is flexible and can afford to look for new opportunities (i.e.) Regular environmental and social inspections are performed to guarantee that contract farmers conform to good agricultural practices (GAPs). One positive result of these criticisms seems to be the fact that TNCs are increasingly embracing environmental certification for produce in their GVCs.9).

9. including Hisense. Contract farming also tends to increase local investment in agriculture by giving farmers a guaranteed fixed income against which they can borrow money from local financial institutions (WIR09). In such cases. This will also help them in the domestic market. and in some cases explicit guarantees offered by TNC franchisors. in the case of franchising. where manufacturers have routinely accepted single-digit profit margins. Midea and Haier. active in international supply in mass product categories such as refrigerators.and small entrepreneurs. have progressively moved into design and secondary innovation.55 For example. There can also be indirect impacts on capital formation. either through explicit measures by TNCs providing support to local NEM partners such as supplier capacity-building initiatives or financing guarantees. and are both based in Shunde. for both manufacturers and large retail chains. concerns are often raised (especially with regard to contract manufacturing and licensing) that countries relying to a significant extent on NEMs for industrial development risk remaining locked into low value added segments of TNC-governed global value chains and cannot reduce their technology dependency. The related risks of “dependency” and “footlooseness” must be addressed through policies touching on each of the impact areas discussed above. facilitating rapid response and low cost. as NEMs are more “footloose” than equivalent FDI operations. . For a particular product category. who between them represent some two-thirds of global production volumes. Manufacturers. microwaves. such as contract manufacturing. Internationally. However. is often facilitated for NEMs. are now producing designs that are increasingly producer-branded. ease negotiations with banks. washing machines. FDI. A number of producing firms are now aiming to establish independent footholds in overseas markets to improve these margins.10). developing economies would run a further risk of becoming vulnerable to TNCs shifting productive activity to other locations. Price competition is fierce both in the domestic market and in consignment-based international contract production. but above all they must be addressed by embedding NEMs in the overall development strategies of countries. or through the implicit assurance stemming from the partnership with a major TNC itself or from the contract setting out terms and conditions obtained by the local partner. Their supplier base is located within a two-hour road transport network. Source: UNCTAD. access to a proven business model facilitates access to commercial credit for start-up capital requirements for local micro. based on case studies by the Institute for Manufacturing. based on large consignment orders. local entrepreneurs and domestic investment are intrinsic to NEMs. In the case of other NEM types. Kenya and Taiwan Province of China (box IV. University of Cambridge. For example. From contract manufacturing to building brands – the Chinese white goods sector Chinese manufacturers are key players in the white-goods household appliance sector globally. several contract manufacturers. as domestic consumers are becoming increasingly brand aware. the high levels of exports still largely compete on the basis of cost advantages in contract manufacturing arrangements. over 50 per cent of Chinese production is destined for overseas markets. Hisense develops multiple product variants each year that exhibit innovative design. microwaveoven production for example is dominated by the manufacturers Galanz and Midea. these operations are often heavily clustered in a particular town or city. Such domestic investment. Many of these manufacturers entered the market barely a decade ago. air-conditioners or domestic cooling fans. and access to local or international financing.CHAPTER IV Non-Equity Modes of International Production and Development 163 Box IV. Nevertheless. The reduced risk associated with a “tried and tested” business model. *** The potential contributions of NEMs as catalysts for long-term development are clear and typified by economies such as India. Few Chinese players are operating internationally with their own brands. but have migrated from pure outsourced thirdparty factories to independent contract manufacturers. UNCTAD has included such practices into its roster of good practices in business linkages (WIR04).

as well as the strong policy and institutional support from the Government and the industry’s organization. IT-savvy employees and entrepreneurs who are now playing a significant role in other industries (e. Quanta. the introduction of a business culture with a stress on quality and reliability develops capacities among workers and entrepreneurs beyond agriculture. This is exemplified by the country’s floriculture industry. most with existing links with TNCs in the United Kingdom and North America. The Government built on this by providing a strong policy influence and institutional support aimed at fostering local capabilities. bunch and export the flowers to auction centres in the Netherlands. The IT-BPO industry has evolved over the past two decades and is a significant support or infrastructure industry for the Indian economy. including establishing links with foreign TNCs. Local and foreign-owned farms also produce cut flowers under contract for customers. owe much to the Government for their existence. Both Taiwan Semiconductor Manufacturing Company (TSMC) and United Mircoelectronics Corporation (UMC). through a move to semiconductors. the State-owned Electronics Research and Services Organization.g. about 26 per cent of export revenues. a developed infrastructure and a large number of entrepreneurial SMEs in manufacturing and other industries. assimilate and develop technology and skills from their relationship with TNC partners.164 World Investment Report 2011: Non-Equity Modes of International Production and Development Box IV. Indian firms’ existing scale and links with local industrial groups meant that they had the absorptive capabilities to acquire. It provides skilled. Through out-grower arrangements. Over a period. A combination of active government support. NEMs as catalysts for capacity-building and development Contract manufacturing in Taiwan Province of China Taiwan Province of China has successfully transformed into an industrial power through contract manufacturing. Source: UNCTAD. BenQ. grade. many of which are now TNCs. The success of the industry in India owes much to the existence of significant IT companies. two leading global semiconductor producers. and is a force for diversification of the economy.10. including major supermarkets. The industry accounted for about 6.g. The rapid growth of the services outsourcing industry has improved India’s competitiveness and the overall investment environment. which control. . and employs a significant number of people with some 2 million or about 7 per cent of the population relying on the industry for their livelihood. favourable agro-climatic condition.4 per cent of the country’s GDP. Foxconn. especially in electronics. to – increasingly – innovation. National Chiao Tung University and National Development Fund have played a significant role in the development of the industry. such as Tata Consultancy Services. Local firms and the economy have upgraded their capacities over time. the industry contributes to poverty alleviation and rural employment and development. Services outsourcing in India India is today a world-leading destination for IT-BPO and offshoring activities. e. This strategy was pursued after the Second World War because the economy possessed an educated labour force. which produces cut flowers for foreign auction centres and retailers. and over two million jobs in 2011. Contract farming in Kenya Contract farming has helped Kenya emerge as a major agriculture exporter and helped to modernize the processes utilized by its local farmers. on which the economy continues to build. moving from the production of goods using simple technologies. this strategy has produced many local world-class electronics companies such as Acer. The process has also led to a formidable industrial cluster. in other developed countries. In the case of electronics.6 per cent CAGR between 2000 and 2009. availability of low-cost farm workers and the role of foreign-owned farms have contributed to Kenya’s floriculture development. quality control and improved infrastructure play a role in modernizing Kenya’s farming sector and furthering the competitiveness of the agriculture industry. telecommunications) – all of which has fostered economic diversification. Technology acquisition. Kenya’s cut flowers industry has grown rapidly at 18. through more capital and technology intensive processes. Many of them have become TNCs themselves. In addition. Asus. when IT-BPO services offshoring began to accelerate in the 1990s. Indian NEMs were able to take advantage of a large low-cost labour force with English language and technology skills. small cut flower farms in Kenya produce and sell their flowers to larger local Kenyan or foreign companies.

how to address negative consequences related to NEMs (table IV. POLICIES RELATED TO NON-EQUITY MODES OF INTERNATIONAL PRODUCTION Maximizing the development benefits of NEMs requires embedding them into overall development strategies. These policies interact increasingly with the national and international policy frameworks for FDI (see chapter III) and trade.15. building domestic NEMrelated productive capacity. NEMs in global value chains and in developing country economies. Maximizing development benefits from NEMs Policy areas Embedding NEM policies in overall development strategies Key actions • Integrating NEM policies into industrial development strategies • Ensuring coherence with trade. its industrial structure and the capabilities of local enterprises.CHAPTER IV Non-Equity Modes of International Production and Development 165 E. there is a case for industrial development policies to embrace NEMs as an additional means to achieving development objectives.. 2010). second. successful government strategies towards using NEMs to galvanize capacity-building reflect the economy’s natural and created endowments. 1. and policies to mitigate negative effects. how to integrate NEM policies into the overall context of national development strategy. These strategies should build on concrete opportunities to integrate local players into specific activities or segments of global value chains. investment. in particular since the recent global economic crisis. such as existing linkages with international production networks and existing export markets. First. third. and technology policies • Mitigating dependency risks and supporting upgrading efforts • • • • • • • • Developing entrepreneurship Improving education Providing access to finance Enhancing technological capacities Setting up an enabling legal framework Promoting NEMs through IPAs Securing home-country support measures Making international policies conducive to NEMs Building domestic productive capacity Facilitating and promoting NEMs Addressing negative effects Source: UNCTAD. NEM policies within industrial development strategies that aim at industrial upgrading support firms in moving up to higher stages in the value Embedding NEM policies in overall development strategies requires their integration into industrial development strategies. • Strengthening the bargaining power of domestic firms • Safeguarding competition • Protecting labour rights and the environment . NEM-specific promotion. Given the importance of Analogous to the common policy challenge in industrial policy of “picking winners”. Because of the evolutionary nature of GVCs. initial success in one “GVC niche” can breed additional outsourcing and induce rapid growth (Whittaker et al. Table IV. how to promote and facilitate NEMs. Embedding NEM policies in development strategies Many countries are increasingly opting for more proactive industrial development policies. ensuring coherence with trade. how to support the building of domestic productive capacity to ensure the availability of attractive business partners that can qualify as actors in global value chains. Appropriate policies are necessary if countries are to maximize the development benefits from the integration of domestic firms into NEM networks of TNCs. There are four key challenges for policymakers.15). and fourth. and mitigating dependency risks. investment and technology policies.

• Technology policy to support local technological uptake and upgrading so as to enable local firms to capture more value added in NEM relationships. both within and across different value chains. including vocational training. allowing them ultimately to move towards segments with greater value capture. or even to become “NEM originators” themselves. is critical. and sufficient access to finance. Most importantly. Several policies related to productive capacity-building are important in this context: Effective policies to attract and benefit from NEMs require the promotion of local business partners with good entrepreneurial and technological capabilities. and related structural changes. Bridging support. People-embodied technology ultimately is the most effective anchor for TNCs. result in a reduction of their low labour cost competitiveness. the implications of “footlooseness” can be mitigated by improving the “stickiness” of NEMs. countries can reduce dependency risks by balancing specialization and diversification. Diversification. so as to be able to engage in NEMs. Competitiveness based only on cheap labour can easily vanish as the economy develops. to improve the entrepreneurial. reducing their technology dependency. while local industry builds capacity in other activities to fill gaps or finds alternative international NEM partners. improving soft and hard infrastructure). • Policies geared towards easing access to finance. These strategies can be complemented by labour and social policies aimed at cushioning adjustment costs and smoothing adjustment processes.166 World Investment Report 2011: Non-Equity Modes of International Production and Development chain. technological and managerial skills of the local labour force. embedding NEMs into comprehensive industrial development strategies can help address the risks arising from dependency on a limited range of technologies. • Entrepreneurship policy. or becoming NEM originators in their own right. by nurturing existing NEM relationships or by improving the overall NEM climate (e. can help mitigate dependency risks by ensuring that domestic companies are engaged in many different activities. As part of the longer-term strategy.g. can help address social and other challenges arising. On a more permanent basis. In the short term. Policymakers can maintain – and possibly even increase – domestic NEM partners’ attractiveness by building sufficient local mass and clusters of secondary suppliers. Continuous learning and skills upgrading of domestic entrepreneurs and employees are necessary preconditions for domestic firms to qualify as attractive business partners for higher value added activities. Policies can support businesses to extend their operations into adjacent activities and segments of the value chain to maximize value added and job creation (see below). • Education policy. This is of particular importance in situations where countries’ development paths. when foreign companies move relatively “low-end” economic activities and production processes to cheaper locations. and connected to a broad range of NEM partners. Policies that foster specialization can improve NEM partners’ competitive edge within a value chain. to develop local entrepreneurs capable of partnering international NEMs and taking advantage of them. 2. . periodic review by host countries of their international competitiveness as NEM destinations. Domestic productive capacity-building NEM-related development strategies can only be successful if enterprises in developing countries qualify as potential NEM partners of TNCs. involving close monitoring of key indicators concerning labour and other cost factors. market segments or TNC partners. with a view to retaining existing TNC engagements with domestic NEM partners. in turn. developing their own brands.

This can be supported by reaching out to the business community and integrating it into the learning process. b. including in the NEM context. . To promote the development of specialized skills. including schools. based on Pham Truong Hoang. Recently. technological and managerial skills and behaviours relevant for NEMs. Educational reforms in Viet Nam promote entrepreneurship In Viet Nam. Key in this respect is to embed entrepreneurship knowledge (including financial literacy and business strategy for start-ups) into the formal educational system at all levels. c. In a broader sense. This requires a combination of policies geared towards developing technology clusters. the service sector and respective labour markets. and can also interact with apprenticeship systems.CHAPTER IV Non-Equity Modes of International Production and Development 167 a. Vocational training and the development of specialized skills can be a key policy to enhance the capacity of local companies to engage in NEMs (box IV. including through simplification of administrative steps and the provision of specific information through government websites and portals. Business “incubators” are a useful government tool to assist producers that engage. supportive administrative regulations can help entrepreneurs to turn new ideas into business products and firms. It prepares trainees for jobs involving manual or practical activities. Most incubators are linked to or sponsored by government institutions. An example is education programmes for local farmers to increase their productivity and to enhance sustainable methods of agricultural production (WIR09).g. Source: UNCTAD. available at: www. by offering practical training and internships in companies. Governments can also support the creation of business networks and linkages to assist new entrepreneurs in their interaction with established companies and facilitate access to resources and clients. MOET has supported various initiatives to improve the knowledge base of the population. which are non-academic and related to a specific trade or occupation. for instance.11. in contract manufacturing. and protecting intellectual property rights. Awareness is also necessary to promote an entrepreneurial culture among a country’s population. Finally. Building on this. Education Education plays a fundamental role in developing entrepreneurial attitudes. Entrepreneurship policy Proactive entrepreneurship policies consist of measures to raise awareness of entrepreneurship as a career option and to support individuals who are willing to assume the risks of engaging in business activities. universities or industry associations. the Government has supported higher education vocational training schools through its Ministry of Education and Training (MOET). The system will make it possible to connect the curricula with the ever-changing educational and training needs of the industrial sector. e. vocational training can be set up at the secondary or post-secondary level. encouraging acquisition and dissemination of technology and skills through improved local absorptive capacity. such as quality standards. Enhancing technological capacities National technology policies play a vital role in the development of local capacities for technologyrelated NEMs. automation processes and prevailing ITC systems.11). A new education law was passed in 2005 and a plan was formulated by MOET to implement a National Policy Framework for development of a profession-oriented education system. “Industrial Human Resource Development in Vietnam in the New Stage of Industrialization” Vietnam Development Forum. Box IV. support for start-ups and commercialization is fundamental at the early level of business development. These centres can also focus on the coordination of afterschool programmes or activities in community centres.vn.org. to convert most existing universities into professional higher education institutions. universities and private sector bodies. Depending on the educational systems of countries. it also encompasses policies to disseminate information on international business standards expected from local NEM partners of TNCs.vdf. entrepreneurship centres can be established that serve as hubs to coordinate activities across business and educational institutions.

58 or of alternatives to traditional bank credit. processes or management practices. SMEs are more likely to invest resources in R&D and technological upgrading if their innovations are protected against piracy. can be useful. products. 2010b). It can also be a means of encouraging R&D by local NEM partner firms. subsidies and government loan guarantees. In the long run these kind of initiatives may also allow the domestic NEM contractor to become an NEM originator in its own right. or encourage their formation within existing private institutions (box IV. governments can promote finance for licensing and franchising through official institutions that provide special windows for this type of activity. The establishment of agricultural development banks can particularly focus on serving the financial needs of local farmers and small holders (WIR09). but at the same time easily imitateable technologies.12). and it can be a particular constraint when engaging in NEMs.59 Also. Recent years have witnessed some successful initiatives by governments to stimulate not only the involvement of national producers in global value chains. For example. Appropriate protection and enforcement of IP rights is a precondition for IP holders to disclose their technology to licensees in developing countries.168 World Investment Report 2011: Non-Equity Modes of International Production and Development Generating and disseminating technologies are both vital activities for the development of local capacities in technology-related NEMs. can support local farmers in contract farming (WIR09).g. software and audiovisual industries emphasizes the relevance and mutual dependence of technological upgrading and the protection of intellectual property rights (UNCTAD. governments can create a legal framework for “factoring”. For example. facilitating technological upgrading and promoting partnerships. for instance in the form of new seeds and pesticides. where a firm can sell its accounts receivable (i. IP protection plays an important role in the NEM context. such as pharmaceuticals (UNCTAD. both Egypt56 and the Philippines57 have promoted technological upgrading among local contractors with a focus on improving the competitiveness of call centres and business processing operations.e. through a combination of targeted incentives and the establishment of centres of excellence. suppliers and research institutes. Access to finance Access to finance is a key concern for SME entrepreneurs in general. technology clusters that promote R&D in a particular industry can help generate technology by bringing together technology firms. A new UNCTAD study of developing country cases in the automotive components. Disseminating technology can foster technological upgrading and hence facilitate the involvement of domestic producers in global value chains. e. upgrading helps host countries to capture higher economic rents within the value chain. . Policies aimed at generating technology can strengthen the technological base and attractiveness of domestic NEM partners. 2010b). Policies can be instituted to address the circumstances of SMEs involved in NEMs with foreign companies. Technology-related policies are also crucial to avoid local firms being limited to low value-added activities within NEM relationships. Hence. establishing logistic technology centres as demonstration and testing facilities. but also to foster their upgrading through technological innovation. Government policies aimed at promoting credit for SMEs can take the form of tax breaks. For instance. The provision of technologies. invoices) to a third party in exchange for money with which to finance current expenditure. Both countries built their strategies on existing capacities and comparative advantages and policies supported the creation of linkages with the wider business community. the formation of venture capital funds to assist start-ups. The promotion of partnerships between SMEs and organizations overseas. especially in areas involving R&D-intensive. d. Specific policies include supporting training and capacity-building via skill development and business development service programmes. for the dissemination of key technology. in order to reduce the commercial risks faced by contract manufacturers.

Many law areas may come into play. based on information from the Philippine Franchise Association and Small Business Guarantee and Finance Corporation. such as regulations on intellectual property (e. weak contract laws and cumbersome administrative rules on business start-ups are perceived as the main regulatory obstacles by TNCs. Under these circumstances.g. A review of existing NEM-specific promotion activities. 3. SBGFC provides credit through the banking system to finance the requirements of small and medium enterprises.16). with most of their attention to date devoted to contract manufacturing (table IV. An additional task to improve the legal framework for NEMs is to promote the simplification of administrative steps needed to set up new businesses. Setting up an enabling legal framework NEMs are based on contractual relationships. a. competition. The role of investment promotion agencies UNCTAD’s latest survey of IPAs indicates that at present they are only modestly involved in attracting NEMs.60 According to investment promotion agencies (IPAs) from developing countries and economies in transition. including franchises. Small Business Guarantee and Finance Corporation (SBGFC). implemented either by IPAs or by other government institutions.CHAPTER IV Non-Equity Modes of International Production and Development 169 Box IV. contract farming or franchising. Additionally. Communication campaigns that provide information on existing regulations through media and websites can also contribute to business facilitation. Facilitation and promotion of NEMs Facilitating and promoting NEMs requires an enabling legal framework. and also reduce costs. Providing access to finance for SMEs engaging in franchising activities In the Philippines. NEMs would be facilitated by a clear and stable regulatory framework. the Development Bank of the Philippines (DBP) and the Export Industry Bank (EIB) launched franchise financing facility windows specifically for franchisors and franchisees. but apply general contract laws. ensuring transparency and coherence of the legal framework becomes particularly important. the consequences of a breach of contract. Identifying the applicable laws and regulations is complicated by the fact that most countries do not have specific rules for individual NEM types. “one-stop shop” initiatives that concentrate registration procedures in a single agency can reduce the time needed to set up a company. securing home-country support and harnessing international policies. and can constitute either an incentive or an obstacle for this kind of business cooperation. NEM parties need to know what domestic rules govern their contract. for licensing or franchising). strengthened promotion policies. Source: UNCTAD. together with other legislation that may be relevant in the specific context. only agencies in Asia seem to give more attention to franchising. such as contract manufacturing. and how a judicial decision or arbitration award can be enforced. consumer protection. The laws and regulations governing these contracts are therefore an important NEM determinant. the Philippine Franchise Association (PFA). in particular whether they can opt for international arbitration instead of domestic court proceedings.12. what procedures apply in the event of a dispute. b. agribusiness and service. This is the case for almost all regions. the extent to which these regulations constrain their contractual discretion. whether and to what extent they have the right to chose the law of a third (neutral) country to apply to the contract. employment and environmental protection. For example. in various productive sectors such as manufacturing. reveals variations between different NEM modes: (i) fiscal and financial subsidies . This is particularly the case for contract manufacturing and management contracts.

Contractual joint ventures Contract manufacturing Franchising Management contracts Contract farming Licensing Current promotion 54 40 26 24 20 19 Expected importance in the future 60 49 43 36 32 31 Across the board Textiles and apparel. Use of IPA policy tools for NEMs. For instance. forestry and fishing Pharmaceuticals Main industries Source: UNCTAD. are mainly used for contract manufacturing.16. 2009). IPAs involve themselves mainly with information provision and project facilitation in this respect. Share of IPAs actively involved in the promotion of NEMs. (iii) technological upgrading is mostly mentioned in connection with contract manufacturing.13. while (iv) matchmaking plays an important role across the board.170 World Investment Report 2011: Non-Equity Modes of International Production and Development Table IV. including coordinating missions around international events. In Malaysia.63 Official development aid can be used to fund supplier development programmes in host countries (WIR01) and can include technical assistance aimed at domestic capacity-building for NEMs.62 National export insurance schemes as well as political risk insurance for FDI can be extended to NEMs. For example. Information provision Project facilitation Fairs and seminars Company targeting Aftercare Missions Advertisement and publicity Financial and fiscal incentives Policy advocacy Project negotiation d. . Involvement in project negotiations mainly occurs in the case of management contracts. forthcoming c. export promotion activities for the franchise industry by the Malaysia External Trade Development Corporation (MATRADE) include participation in international fairs and organizing special marketing missions in conjunction with franchise exhibitions. linked to franchising. electrical and electronic equipment and business services Hotels and restaurants and retail and wholesale trade Hotels and restaurants Agriculture.61 The United States Exim Bank offers long-term financing in emerging markets to United States franchisors involved in international franchising (Richter.13 indicates that. Beyond assisting domestic NEM partners. 2011 (Percentage of respondents) c. hunting. While there is no comprehensive international legal and policy framework for fostering NEMs and their development implications. IPAs can play an important role in promoting the use of NEMs to TNCs. International policies 10 20 30 40 50 0 Source: UNCTAD. Home-country policies There are examples of TNC home countries promoting specific forms of NEM. in particular franchising. forthcoming c. 2011 (Percentage of respondents) Mode Strategic alliances. investment fairs play an import role in the promotion of franchising opportunities. For example. the Australian Trade Commission (AUSTRADE) provides a number of services to Australian franchisors abroad. in general. a number of different international treaties and policies merit attention. (ii) promoting local entrepreneurship is. the United States Exim Bank can provide insurance for franchising related to export activities. Figure IV. in particular. Investor targeting. investment missions and the provision of incentives are more common in the case of contract manufacturing. Figure IV. undertaking market research. business partner searches and individual market visit programmes.

As regards potential anti-competitive effects.64 Moreover. particularly when TNCs have both FDI and NEMs in the same host country. all play a part in ensuring that NEMs deliver tangible development benefits without detrimental side-effects. However. which do not involve an (equity) investment and hence miss the element that typically triggers IIA application. For example. restaurant. . The local firm’s negotiation position might further be weakened by the fact that TNCs often use standard contract forms with local foreign partners.g. services. and soft law initiatives. the type of protection offered by IIAs (i. certain NEM components can be considered part of an investment package. or by guiding private NEM parties in the crafting of the NEM contract. for example. by reducing barriers to trade in services. 4. the 2002 Model Franchise Disclosure Law developed by the International Institute for the Unification of Private Law (UNIDROIT) addresses pre-contractual disclosure on the part of the franchisor. or distribution services). NEMs relying on intellectual property may benefit from IP rules at national. the WTO General Agreement on Trade in Services (GATS) (e. international competition policies 66 remain patchy. Regional integration agreements can foster NEMs by encouraging harmonization and institutionbuilding and helping establish regionally integrated production networks and value chains. IIAs could have some application. may provide political risk insurance also for activities other than FDI. In such cases. under the broad or asset-based definition of “investment” in IIAs (e. including CSR. Also relevant are other non-binding guidelines and recommendations in specific areas such as licensing. IIAs are not designed to cover NEM arrangements. safeguarding competition. Of relevance also is the World Bank’s Multilateral Investment Guarantee Agency (MIGA). from November 2010. including for example. and to preventing the contract from confining the local company to low value-added activities. have little or no experience or knowledge of NEMs. (i) the Model International Franchising Contract. Some of these international initiatives also aim at addressing potential negative effects of NEMs.CHAPTER IV Non-Equity Modes of International Production and Development 171 The role of IIAs in protecting – and hence promoting – NEMs and NEM-related investments is not straightforward. and the ICC Model Contract explicitly aims at striking a balance between the interests of the franchisor and franchisee. franchising and licensing agreements. and hence to a certain extent facilitating business process outsourcing or cross-border franchising in. and sometimes do not fully understand the implications of concluding a deal. International environmental law. Strengthening the negotiating power of domestic firms can be an important means to achieving a fair sharing of risk between the contracting parties. and (ii) the 1998 UNIDROIT Guide to International Master Franchising Arrangements (in its 2007 revision) comprehensively examines and explains master franchise arrangements. However. which. where local entrepreneurs will often be in a weaker position.65 Some international “soft law” instruments can promote NEMs by harmonizing the rules governing the contractual relationship between private NEM parties. regional and multilateral levels. including management contracts. there are other international treaties that may impact – directly or indirectly – on NEMs. a.g. Strengthening the bargaining power of domestic firms Negotiating a NEM contract with a foreign TNC can be a challenge for firms in developing countries. Addressing potential negative effects of NEMs Addressing negative effects of NEMs requires strengthening the bargaining power of local firms. hotel. protection against government interference or conduct) might not correspond to what is mostly required by NEM partners. technology transfer and innovation. a trade mark or patents). leaving little room for individual bargaining. issued by the International Chamber of Commerce (ICC) provides franchisors and franchisees with drafting suggestions. international labour standards. in terms of strengthening the bargaining power of domestic NEM partners. and protecting labour rights and the environment.e. For example.

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Box IV.13. Pre-contractual requirements in franchising
The most common obligation on the franchisor is to provide pre-contractual disclosure of all relevant information, allowing the prospective franchisee to enter the contract with full knowledge of the facts. How much information needs to be disclosed, and how long in advance, depends on the country. Some countries have set a detailed list with required information (e.g. China, France, Japan, Mexico, United States) while for others this is based on general principles (e.g. United Kingdom) or is derived from case law (e.g. Germany). The most common requirements include information on the franchisor’s business experience, past or pending litigation, financial statements, franchise fees and the existing network of franchisees. Other information may include operational details, including the franchisor’s involvement in supervision or training of the franchisee. How long in advance these documents need to be disclosed varies, e.g. from seven days in Singapore to 14 in Australia, Canada or the United States, or 30 days in China or Mexico. Franchising regulation may also include other obligations for the franchisor. For instance, the United States requires the franchise offering to be registered with the state. In China, the franchisor must fulfil the “2+1” requirement, that is the franchisor must have owned at least two stores that carry out the franchised business for more than one year, although these do not necessarily need to be in China. In France, the franchisor needs to have run a similar business in a manner and for a time necessary to be considered a success. In other countries similar requirements are not part of the legal framework itself, but are set out in a franchise code of ethics (e.g. in Germany and the United Kingdom).
Source: UNCTAD, based on Getting the Deal Through – Franchise 2011, available at www.franchise.org.

One means of backing domestic firms in their negotiations is through the imposition by the host country of mandatory requirements on NEM counterparts. The respective issue is then no longer a bargaining chip between the negotiators. Such mandatory rules exist particularly for franchising and contract farming. For instance, numerous countries have franchising regulations, establishing certain pre-contractual requirements for the franchisor visà-vis the franchisee (box IV.13). Specific laws on contract farming have been adopted in a few countries, including India, Thailand, and Viet Nam. The provisions address, inter alia, the establishment of a special register or a notification procedure for contract farming agreements, special regulations on leasing of land by enterprises and land property rights of farmers, compensation in case of contract breach, and rules relating to force majeure. Another key aspect relates to special dispute settlement mechanisms, e.g. facilitating access to justice for farmers and ensuring that decisions are final, binding and enforceable (WIR09). With such provisions in place, NEMs may be more appropriate than FDI in sensitive situations, since contract farming is more likely to address responsible investment issues – respect for local rights, livelihoods of farmers and

sustainable use of resources – than large-scale land acquisition. Local entrepreneurs can also benefit greatly from advice on how to negotiate a NEM contract. This includes economic aspects (distribution of business risks), financial considerations (e.g. taxation) and legal elements (implications of the contract). In most cases it is not the lack of an adequate legal framework, but the lack of carefully drafted contracts, that lies at the root of subsequent problems and failures. Governments can play a role, for instance, by developing and publishing negotiating guidelines, checklists of issues to be considered in negotiations, codes of conduct, model contracts (including for contract farming) or benchmark prices for the respective product or service. Promoting a “contract culture”, i.e. a better understanding of the merits of entering into formal contracts, is also vital. Finally, supporting collective bargaining, including the formation of domestic producer associations, can help to create a better counterweight to TNCs’ negotiating power.

b. Addressing competition concerns
NEMs, like FDI, can have serious implications for competition in the host countries. Specific

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contractual provisions in NEMs, such as exclusive dealing obligations, territorial constraints, and resale price maintenance, frequently raise competition concerns. They are considered as per se anticompetitive in many competition law regimes. If TNCs engaged in NEMs acquire dominant positions, they may be able to abuse their market power to the detriment of their competitors (domestic and foreign) and their own trading partners. Therefore, policies to promote NEMs need to go hand in hand with policies to safeguard competition (WIR97). Competition-related considerations may go beyond the enforcement of the “rules of the game” to ensure that enterprises do not undertake restrictive business practices. Other public interest criteria may require attention as well. Protection of indigenous capacities and traditional activities that may be crowded out by a rapid increase in market shares of successful NEMs, may be relevant, particularly in market-seeking forms of NEMs, such as franchising.

as owner and operator of the plant, there is the issue of whether liability could be extended to the TNC, in the event that the latter controls or strongly influences many of the processes within the NEM. These labour and environmental issues are also addressed in TNCs’ voluntary CSR standards. Governments can play an important role in creating a coherent policy and institutional framework to address the challenges and opportunities presented by the universe of CSR standards. As explained in chapter III, various approaches are already underway that increasingly mix regulatory and voluntary instruments to promote responsible business practices. There is also a role for policies to build the capacity of local NEM firms to meet the labour and environmental standards expected by TNCs. As TNC CSR codes and other CSR standards proliferate to include international value chains, domestic NEM partners are increasingly expected to meet international standards of labour practice and environmental protection. The potential for legal liability and brand damage discourages TNCs from engaging in NEMs with partners having poor labour or environmental records. Many TNCs will conduct audits and factory inspections of NEM partners, and will disengage from business with partners that consistently fail to meet the TNC’s code of conduct. Developing country governments can consider partnering with donor states, international organizations, civil society specialists and industry associations to deliver practical management training and technical assistance to domestic firms in these areas.

c. Labour issues and environmental protection
Concerns about labour malpractices and environmental damage related to NEM require government and industry efforts to ensure that internationally recognized labour rights are respected, and environmental protection is in place. One crucial policy issue is to ensure respect for labour standards, as embodied in ILO conventions. This not only requires translating these standards into domestic law, but also effective control by the host-country authorities that domestic NEM firms respect these standards. Another critical issue is the protection of domestic stakeholders in case of a termination of the NEM relationship by the TNC. Ensuring “responsible divestment” is not only an issue of contractual relationships and relevant host-country regulatory and legal farmeworks (including social adjustment policies) but also a social responsibility dimension on the part of the TNCs involved. The causing of environmental harm by NEM operations raises the issue of legal liability. While the domestic NEM firm bears direct responsibility

***
Maximizing the development contribution of NEMs requires an integrated policy approach, combining a wide range of different policy tools and instruments, with particular attention given to overall industrial policy objectives, investment, trade and technology policies. What kind of policies fit best is situation- and context-specific, depending among others on, (i) a country’s level of economic and technological development, (ii) its actual and latent NEM-potential, and (iii) its broader development and industrial policy

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strategies. All of this is taking place in a dynamic context, where the rise and fall of competitive NEM-related industries around the globe requires a continuing reassessment and adjustment of a particular country’s overall development strategy and policy instruments. Enhanced coordination between different policymakers and institutions, as well as building on first-hand private sector experience, with a view to fostering synergies, is crucial in this context.

Notes
Strictly speaking, alternative forms of TNC overseas operations are not new; some forms, such as licensing and management contracts, were commonly used in past eras (Jones, 2010; Wilkins and Schröter, 1998). 2 The OLI model explains why some firms choose to expand overseas and others do not (ownership advantages), why firms choose specific locations (location advantages), and why they choose to “make” rather than “buy” (internalization advantages). 3 NEMs can be both domestic and international/ cross-border in scope. In WIR11 all reference to NEMs will be to cross-border arrangements. 4 For example, in management contracts and concessions the TNCs are technically the NEMs because they offer technology and expertise to local partners, including governments in the case of infrastructure and extractive industries. However, this leads to control over a host country business entity without ownership. 5 These linkages between affiliates and local NEMs may also include second- and third-tier suppliers that are in some way dependent on or controlled by the TNC principal. 6 For instance, in contract manufacturing, the report focuses on the final stage of production. In electronics this is associated with the final assembly of a consumer electronic good, typified by large electronics manufacturing services firms like Hon Hai (Taiwan Province of China) and Flextronics (Singapore). Seen from this perspective, NEM firms dominate world trade associated with final consumer electronics goods. However, within the context of the entire electronics supply there are many other players. 7 Assigning a sales-equivalent value to some of these forms is conceptually difficult (e.g. concessions are generally measured as investment values). There is also a paucity of reliable data.
1

Much of this labour was trained by affiliates, especially in South-East Asia, thereby creating assets which were later taken up by contract manufacturers. 9 Such strategies remain very much a part of the dynamics of the industry. 10 See the company website at: www.lifunggroup. com/eng/businesses/sourcing.php (accessed 9 June 2011). The company’s business is largely in garments and footwear. 11 Based on information from Nasscom, XMG Global, IDC and Gartner. 12 Estimates of the global share of these countries in the industry range as high as 78 per cent. See XMG Global report cited in “World’s outsourcing revenue worth $373 billion”, by Eileen Yu, ZDNet Asia, 23 September 2009; available at: www.zdnetasia.com. 13 There remain doubts about how persistent higher returns might be. For example, in the case of franchising, Alon, Drtina and Gilbert (2007) found no sustainable profit advantage for franchise networks over non-franchise networks. 14 Pfizer decreased its own plants by almost 50 per cent (to 46 plants) from 2003 to 2008. Key considerations for outsourcing decisions include the ability to supply, capacity flexibility, cost competitiveness, and technology, while ensuring supply chain integrity/reliability, product quality, and regulatory compliance. Information from Pfizer website www.pfizer.com. 15 See “Why Wal-Mart’s First India Store Isn’t a WalMart”, Time, 15 May 2009; available at: www.time. com and “Walmart: India Fact Sheet”, February 2011; available at: http://walmartstores.com. 16 See Franchise Malaysia, “Government to the fore”, available at www.ifranchisemalaysia.com. 17 This included an English skill enhancement programme for which funding was granted to support language training of individuals; and other initiatives such as tax incentives and concessions. See “Philippines call center industry enjoy the strong Government support”, available at: www.pitonglobal/resource16.html. 18 For instance, it has taken initiatives to improve human resources quality and has encouraged innovations to strengthen the development of the industry. Expenses on staff training and on development, including research and development can be deducted against income tax at 200 per cent and 160 per cent to 200 per cent, respectively. A 50 per cent excise tax deduction is provided for purchase of equipment for research and development. Companies established in technological parks will be exempted from property taxes and will receive discounts on service taxes. See Brasscom, “Brazil IT-BPO Book: 2008−2009”, (brazilexportati.files.wordpress.com) and Brasscom “Government Support”, (www.brasscom.org).
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See “Foxconn to hire more workers in China”, BBC News, 19 August 2010; available at: www.bbc. co.uk. 20 See NASSCOM, India (2010), “Impact of the IT-BPO industry in India: a decade in review”, available at: www.nasscom.in. 21 See “Chilean global services industry”, IDC Study for CORFO, 2009, available at: www.investchile.com. 22 See “IT-BPO Road Map 2011-2016” (www.bpap. org) and “IT-BPO road map 2011-2016: driving to global leadership”. 23 Information provided by Nestlé. 24 See “Contract farming offers fresh hope for Africa’s declining agriculture”, East Africa Policy Brief, No. 2, 2007 (www.worldagroforestry.org). 25 The Franchise Factor. Franchise directions, franchising consulting and trainings, by Bendeta Gordon (2008). Available at: www.franchize.co.za. 26 “IHG invests in China’s future hospitality talent with three new IHG academies”, 31 May 2011; IHG website at: www.ihgplc.com; and “IHG in Greater China - IHG Greater China Facts Sheet”, IHG website. 27 Fast food chains including McDonald’s, Taco Bell and Burger King have been criticized for underpayment to contracted tomato suppliers (contract farmers). In 2005 Florida tomato suppliers won their first wage rise since the 1970s after Taco Bell’s decision to end a consumer boycott by paying an extra cent per pound of tomatoes. Actions continue towards ensuring better conditions for contracted tomato suppliers (Schlosser, Eric (2007) “Penny foolish”, New York Times, 29 November). 28 For instance, in order to gain greater flexibility in responding to the sourcing requirements of TNCs’ contract manufacturers, services outsourcing firms and contract farmers increasingly hire short-term workers or outsource human resources to “temp agencies” (Barrientos, 2007; van Liemt, 2007). 29 Data as of 31 March 2011: www.saasaccreditation. org/certfacilitieslist.htm. 30 ISO (2010) ISO Survey for 2009. 31 Interview with Linda Johansson, head of inspections for H&M India; http://somo.nl. The company applied a methodology for obtaining bona fide responses from workers. 32 See “Philippine IT-BPO road map 2016: driving to global leadership”, Everest Global and Outsource2Philippines; available at: www.ncc.gov. ph. 33 See “Auto parts cost strike JVs for technology, consolidation looms”, The Economic Times, 23 May 2011, available at: http://articles.economictimes. com. 34 Carl J. Kosnar, “Global economic development through the utilization of the franchising system”, www.kosnar.com.
19

Total exports from Guangdong province amounted to $22.2 billion, while total Chinese exports amounted to $1,577.9 billion (Ministry of Commerce PRC). Toy exports from Guangdong province held a share of 58 per cent of total Chinese toy exports (Chinese Toy Association). 36 See “Bangladesh ranks fourth in global apparel exports”, The Daily Star, 25 July 2010. 37 This is expected to grow to $37 billion by 2011. Increasingly, companies such as Marks and Spencer, Haggar Clothing, Little Label, Boules Trading Company, Castle, Quest Apparel, Wal-Mart, JC Penny, Nautica, Docker and Target are sourcing textiles and apparels from India. See “Textiles and apparel”, IBEF, November 2010; www.ibef.org. 38 A share of goods for processing trade is due to intra-firm trade between affiliates or between parents and affiliates of the same TNC. 39 Calculated from UN Comtrade data. 40 “Segments”, IHG website at: www.ihgplc.com. This access is created by international chains’ brand reputation, international quality standards, centralized marketing and customer loyalty programmes, and in particular their global booking systems. In addition, they are able to negotiate directly with tour operators, large travel agencies and large companies and other organizations, thus generating preferred access to otherwise unreachable customer segments. 41 In fact, partly because licensees can possess significant absorptive capacity, there are risks for TNCs. In the case of MBD its largest customer, Hyundai Heavy Industries, with 26 per cent of MBD’s licensing deals, is now competing with it for market shares based on its own proprietary diesel engine (Pyndt and Pedersen, 2006). 42 7-Eleven, Inc. – Web Corporate Communication 2011. Available at: www.franchise.7-eleven.com. 43 For example, cooperatives and other associations in contract farming arrangements, albeit ostensibly tipping the balance of power against TNCs, are generally regarded favourably by the latter. 44 Examples of such companies include Acer and HTC (both consumer electronics, Taiwan Province of China), Integrated Microelectronics Inc. (the Philippines), LG and DA Corporation (electronics, Republic of Korea), Piramal Health Care (India), Sonda (IT-BPO, Chile), Trinunggal Komara (garments, Indonesia), Varitronix (electronic displays, Hong Kong (China)) and Yue Yuen (footwear, Taiwan Province of China) (WIR06). 45 Other electronic contract manufacturers, especially Taiwanese, are also being granted an increasing number of patents – e.g. Inventec and Quanta – but the numbers they are assigned are a long way behind Hon Hai.
35

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“IFI CLAIMS announces top global companies ranked by 2010 U.S. patents”; available at: www. ificlaims.com. 47 The other three are from the Republic of Korea. 48 Acer and AsusTek spun off their contract manufacturing arms as “Wistron” and “Pegatron” respectively. 49 However, there is also a significant market in renovated machinery (Rasiah, 2009). 50 Important local industries for wealth and job creation such as construction and real estate benefit from the growth of commercial and shopping centres based on the expansion of franchise networks. 51 In this framework, conflicts arise because of concern that foreign brands and products alter local consumers’ preferences or habits (i.e. losing touch with host-country culture and traditions) (Grünhagen, Witte and Pryor, 2010). 52 See, for instance, Magleby (2007). 53 Project Shakti was launched by Hindustan Lever (Unilever’s business in India) in 2000 to distribute its soaps and shampoos, by the end of 2009 employing some 45,000 “Shakti entrepreneurs”. See www.unilever.com. 54 Source: www.tourismpartnership.org. 55 This can occur through “crowding out” (where NEMs out-compete local firms which do not enjoy the advantages of transfers of knowledge and skills from TNCs), or its obverse, “crowding in”. 56 In Egypt, a new Ministry for Communication and Information Technology (MCIT) was established and assigned the mandate to upgrade the national telecommunication system to enhance Egypt’s position on global value chains. See the national strategy of Egypt’s Ministry for Communication and Information Technology (MCIT), available at: www. mcit.gov.eg. 57 In the Philippines, the government not only offered tax benefits for the relocation of business processing operations by foreign companies, but it also established centres of excellence to support the training of its labour force. The industrial policy authorities also supported the creation of linkages through an “Industry Cluster” approach to enhance industrial competitiveness, promote investments in the countryside and develop micro, small, and
46

medium-sized enterprises. See the Philippines’ Department of Trade and Industry: www.dti.gov.ph/ dti. 58 The record of active credit support is mixed. While on the one hand subsidized finance does increase access to credit for SMEs, it does so at the risk of lower profitability and non-performance of borrowers (UNCTAD, 2001). 59 Because factoring relies less on collateral, it can assist access to finance for producers who are less creditworthy than their clients (often TNCs). It can also be particularly attractive in financial systems with weak commercial laws and enforcement (Klapper, 2006). 60 UNCTAD conducted a survey of 238 IPAs on their role in attracting NEMs. A total of 91 questionnaires were completed, representing an overall response rate of 38 per cent. Respondents included 27 IPAs from developed countries, 54 from developing countries and 10 from economies in transition (UNCTAD, forthcoming c). 61 See “Franchising overview” on the Austrade website available at: www.austrade.gov.au. 62 See a list of export promotion activities related to franchise at MATRADE’s website, available at: www. matrade.gov.my. 63 Richter, John (2009) “Ex-Im Bank: a valuable partner for ifa members seeking to export”, Franchising World, October; available at: www.franchise.org. 64 For a discussion of the criteria for determining a “covered investment” and the role of development considerations in this context, see UNCTAD (2011 d). 65 See MIGA’s website: www.miga.org. 66 While there is no international legally binding competition instrument, a series of non-binding instruments offer recommendations on the design of domestic competition laws (e.g. the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices or the UNCTAD Model Law on Competition). In terms of regional initiatives, European competition law stands out as supranational law directly applicably in EU Member States, but competition rules also exist in RTAs (UNCTAD, 2000).

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. 2009 .... I... Top 10 contract manufacturers in electronics................................6... 2010 ........ 2009 .............3.....................7..... Use of contract manufacturing by major garment and footwear brand owners....... 2009 .... 220 IV.......... List of IIAs................................. I..... 204 Cross-border M&A deals worth over $3 billion completed in 2010 ............................ by source/destination... 225 .............................. 191 Value of cross-border M&As...........9.................6...................ANNEX TABLES 185 ANNEX TABLES I........................2...... by region/economy of seller/purchaser........5......... 210 III..... 221 IV..... Top 15 outsourcing IT-BPO service providers..5...............2............2...... 2005–May 2011 ... 223 IV.......... as of end May 2011 .................. Selected MSI standards ............................ Top 10 pharmaceutical contract manufacturers.............................. I........ I... Top 15 global franchise chains........................................ by sector/industry... 199 Cross-border M&As.1......1.. by sector/industry....................... 222 IV.............................3.. 195 Number of cross-border M&As...4...... 2009 ... FDI flows..... 205 Value of greenfield FDI projects............................. I.................. 2000........ Top 10 global semiconductor foundry contract manufacturers....... I.............1................ 2005–May 2011 ..........4........... Selected industry association codes .. 2009 .... 203 Number of cross-border M&As........ ranked by revenues........... by region and economy... by region/economy of seller/purchaser....... 2005–2010.......... ranked by revenues... by region and economy............ ranked by revenues..........................................7...... 218 IV.................................................... ranked by revenues............................ 213 III........... by source/destination.............. 1990..... ranked by revenues...... 2009 ................ 2005–April 2011 .................................. 219 IV........ I. ranked by revenues........... 2005–May 2011 ........ 2009 ........ selected indicators...... 2005–May 2011 .... 224 IV...... I................................. 216 III.................3....... 2005–April 2011 ............................... Top 10 auto parts contract manufacturers...... 187 FDI stock................. 206 Number of greenfield FDI projects...........8...

by region and economy. by source. 34. by sector and industry. by region and economy. 12. 1990–2010 FDI outward stock as percentage of gross domestic products. 3. 1990–2010 FDI outflows. 7. 18. by destination.unctad. 14. 1990–1992 and 2007–2009 Estimated world outward FDI flows. 22. by home region/economy. 28. 1990–2010 FDI outward stock. 5. 19. 2003–April 2011 Estimated world inward FDI stock. 2003-2010 Number of parent corporations and foreign affiliates. by sector/industry. by sector and industry. by sector/industry. by sector and industry. 1990–May 2011 Value of cross-border M&A purchases. 17. 26. by region and economy. by sector/industry. 1990–May 2011 Number of cross-border M&A sales. 1990–2010 The world’s top 100 non-financial TNCs. 2010 Outward FDI projects by State-owned TNCs. 1990–2010 FDI inward stock as percentage of gross domestic products. 1990–May 2011 Value of cross-border M&A sales. by region/economy of purchaser. 31. 24. 1990–2010 FDI outflows as a percentage of gross fixed capital formation. 2003–April 2011 Number of greenfield FDI projects. 21. 27. by region and economy. 10. 9. 1990–May 2011 Number of cross-border M&A purchases. by sector/industry. 16. 2003–April 2011 Number of greenfield FDI projects.186 World Investment Report 2011: Non-Equity Modes of International Production and Development List of annex tables available on the UNCTAD website. by sector and industry. 33. 25. 30. 1990–2009 Estimated world outward FDI stock. 2003–April 2011 Number of greenfield FDI projects. by source. 32. 2003-2010 Outward FDI projects by State-owned TNCs. FDI inflows. latest available year . 4. www. 2010 The top 50 financial TNCs. ranked by foreign assets. 15. 20. 8. 29. 2. by sector/industry. 1990–2010 FDI inward stock. by sector/industry. ranked by foreign assets. 1990–1992 and 2007–2009 Inward FDI Performance and Potential Index ranking. 1990–May 2011 Number of cross-border M&A sales. 1990–May 2011 Number of cross-border M&A purchases. 1990–May 2011 Cross-border M&A deals worth over $1 billion completed in 2010 Value of greenfield FDI projects. 1990–2010 Value of cross-border M&A sales.org/wir 1. by destination. 2003–April 2011 Value of greenfield FDI projects. 2003–April 2011 Value of greenfield FDI projects. 23. by region and economy. 1990–May 2011 Value of cross-border M&A purchases. by region/economy of seller. 1990–2010 FDI inflows as a percentage of gross fixed capital formation. by region and economy. by region/economy of purchaser. by region/economy of seller. ranked by Geographical Spread Index (GSI). 1990–2009 Estimated world inward FDI flows. by sector and industry. by region and economy. 6. 13. 11. 2010 The top 100 non-financial TNCs from developing and transition economies.

19 1 468 16 193 8 206 691 1 107 4 223 4 805 114 978 110 673 75 893 118 701 1 468 4 045 2 179 3 877 14 313 15 324 41 826 42 068 128 170 346 291 9 932 7 747 .308 589 294 177 308 891 270 750 327 564 10 719 9 750 5 627 6 636 5 545 8 751 2 543 3 384 295 318 215 226 665 1 920 571 1 176 3 933 5 888 1 165 1 282 a 622 485 470 576 a a 11 98 45 51 a 20 42 77 74 5 173 999 3 084 3 252 977 1 341 1 504 1 120 .ANNEX TABLES 187 Annex table I.0 0 0 0a 65 119 .119 238 1 245 4 142 5 052 4 220 1 620 4 323 949 1 702 20 574 14 142 6 865 3 183 1 746 1 114 1 549 133 7 203 9 297 3 831 8 385 164 310 155 047 102 949 84 112 170 617 77 142 78 200 104 857 5 246 2 418 2 055 1 269 3 621 3 111 2 699 1 546 21 146 18 949 26 616 17 802 90 778 67 002 21 271 21 005 369 243 .88 210 4 818 15 296 8 798 10 875 4 438 5 152 2 775 .10 845 20 073 9 498 707 1 663 2 322 1 261 94 349 1 028 1 817 2 015 2 045 172 629 6 564 31 843 .8 10 . by region and economy.16 a .20 35 92 148 128 .4 4 314 84 949 71 848 96 221 64 184 34 027 33 905 47 439 55 626 80 208 4 218 37 627 46 134 623 5 355 2 111 4 499 2 436 2 188 7 709 6 818 3 951 7 384 2 045 2 377 .1.62 16 597 336 217 128 73 350 10 171 18 726 18 293 14 305 134 87 55 608 67 485 26 927 31 904 5 405 4 414 5 219 4 701 5 490 2 741 816 .279 .15 .86 193 600 530 432 328 1 802 1 390 167 151 137 052 74 717 9 737 21 598 38 836 31 326 25 778 30 399 272 384 161 056 44 381 11 020 74 793 77 085 64 155 68 512 10 186 .951 43 718 32 435 15 149 26 964 .2 .534 75 445 7 13 33 1 681 6 809 289 342 .31 a 87 159 117 94 0 a a .16 141 10 293 19 603 23 561 14 839 13 698 9 681 3 930 10 902 3 055 4 665 2 706 1 452 6 483 11 367 9 921 13 910 4 847 3 573 2 429 4 693 3 581 4 687 . FDI flows.27 a 1 0 255 47 .8 608 279 277 .4 .582 834 25 020 30 802 64 264 76 993 9 135 24 547 5 328 11 896 28 941 27 737 36 771 10 322 176 006 156 186 196 390 91 489 71 140 45 908 7 655 54 113 45 225 27 006 41 294 8 411 137 a 165 a 159 a 172 a 165 a 122 a 3 071 3 843 6 824 917 83 2 950 5 413 6 415 5 800 10 781 14 074 11 857 .8 .93 30 a 7 3a 4a 5a 4 4 4 4a 8a 24 a 10 a 14 a 875 1 058 1 542 923 25 a 9a 15 a 154 a 5a .1 - 2 174 803 1 910 509 1 170 527 1 323 337 1 829 044 1 541 232 850 975 935 190 1 274 118 983 284 434 171 475 763 1 199 325 906 199 370 016 407 251 39 025 29 452 7 381 10 854 80 127 164 314 .21 30 123 071 71 174 3 406 8 864 2 111 7 139 .31 423 150 511 641 862 41 829 104 248 27 706 26 593 80 833 86 271 80 156 102 622 7 072 5 473 21 966 21 326 51 118 75 824 42 907 270 434 27 538 46 214 15 369 224 220 16 101 91 897 .1 035 .5 542 24 707 .10 a .6 561 130 465 297 430 330 604 363 543 174 298 251 662 25 692 60 294 114 652 57 177 21 406 23 413 104 773 237 136 215 952 306 366 152 892 228 249 .7a 0a 9 7 8 126 a -a -a .9 .0 0 0 .16 453 25 960 26 330 19 975 39 239 40 202 .9 2a - /… .0 1 52 a .2 2 .1 521 182 122 143 226 683 1 968 6 943 287 134 .21 667 37 735 282 755 .31 689 .1 293 561 332 343 429 459 573 032 658 002 510 578 573 568 38 160 46 259 63 132 73 413 60 167 55 040 12 236 23 143 24 775 24 045 18 468 16 926 1 081 1 795 1 662 2 594 2 761 2 291 5 376 10 043 11 578 9 495 6 712 6 386 1 038 2 013 4 689 4 111 2 674 3 833 a 1 654 2 449 2 805 2 487 1 952 1 304 a a 2 305 3 534 2 426 2 601 2 682 1 600 a 783 3 308 1 616 2 758 1 688 1 513 25 924 23 116 38 357 49 367 41 699 38 114 7 126 6 976 9 522 12 718 12 662 11 323 53 53 255 171 135 111 34 34 344 137 a 171 a 37 a 82 131 190 209 119 111 312 a 319 a 427 a 446 a 381 a 418 a 45 71 76 70 47 37 a 145 636 855 1 220 1 685 2 527 105 125 386 382 141 303 a 8 17 19 6 14 a 9a 83 108 132 395 218 248 a 225 82 65 180 a 109 a 148 a 814 106 138 338 .0a 8a .28 260 9 785 30 196 20 350 676 1 840 1 006 845 760 1 041 39 046 13 976 119 383 3 577 34 514 .15 060 44 626 80 460 86 595 40 712 37 144 .1 814 2 869 1 797 2 725 1 731 1 838 1 539 4 750 7 652 12 451 .99 .31 137 25 409 31 579 2 946 15 462 45 781 50 264 .146 .6 507 22 550 24 426 11 939 .14 84 127 .1 1 2 5 .4 209 2 281 .6 .1 935 13 588 25 990 28 623 12 195 51 020 55 305 33 251 58 253 451 244 388 090 324 351 367 490 57 726 79 794 41 665 38 585 393 518 308 296 282 686 328 905 103 682 169 858 92 454 91 937 16 786 33 604 16 160 26 431 1 040 563 208 693 8 604 7 210 1 695 7 960 73 548 128 019 74 699 56 263 3 703 462 .4 31 7 0 0a 1a 0a 0 .0 .69 234 462 781 a 882 132 1 405 389 745 679 1 154 983 686 671 792 652 606 515 690 030 11 145 13 670 32 658 50 685 310 177 558 902 .1 251 1 548 4 526 3 138 4 598 .50 526 588 644 1 514 1 947 .1 . 2005–2010 (Millions of dollars) Region/economy World Developed economies Europe European Union Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Other developed Europe Gibraltar Iceland Norway Switzerland North America Canada United States Other developed countries Australia Bermuda Israel Japan New Zealand Developing economies Africa North Africa Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Tunisia Other Africa West Africa Benin Burkina Faso Cape Verde Côte d’ Ivoire Gambia Ghana Guinea Guinea-Bissau Liberia Mali Mauritania Niger Nigeria Saint Helena Senegal Sierra Leone Togo Central Africa Burundi Cameroon Central African Republic Chad FDI inflows 2005 2006 2007 2008 2009 2010 2005 2006 FDI outflows 2007 2008 2009 2010 982 593 1 461 863 1 970 940 1 744 101 1 185 030 1 243 671 619 134 977 888 1 306 818 965 113 602 835 601 906 503 730 635 832 895 753 514 975 387 825 313 100 496 075 581 719 850 528 487 968 346 531 304 689 10 784 7 933 31 154 6 858 7 011 6 613 34 370 58 893 93 429 142 041 23 595 61 714 3 920 7 805 12 389 9 855 3 351 2 170 1 186 1 864 2 234 4 050 5 725 4 860 11 653 5 463 10 444 6 451 2 927 6 781 12 871 2 691 11 812 2 216 2 966 .1 15 322 .24 246 31 050 45 397 46 843 25 716 32 472 44 261 577 .38 14 a 30 51 129 566 739 947 a 4 978 4 898 6 087 8 249 8 650 6 099 0 0 0 52 210 273 a 272 a 208 a 237 a 83 59 97 53 a 33 a 36 a 77 77 49 24 a 50 a 41 a 2 675 3 051 5 985 4 395 5 400 7 959 a a a 14 10 14 a 1 0 1 225 309 284 270 337 425 a 32 35 57 117 42 72 a .

3 134 8 8 80 580 37 374 34 161 1 391 4 20 457 8 041 2 254 8 8 736 .3 .61 85 57 - FDI outflows 2007 2008 14 59a 13 3 112 36 58 18 3 998 912 51 1 .15 - 2009 35 87a 4a 89 46 37 5 1 373 8 .19 76 . FDI flows.4 215 9 2 390 16 768 1 9 24 .10 084 8 061 3 088 36 8 398 16 1 834 9 405 0 7 26 1 7 019 15 2 336 32 073 1 .0 222 729 773 339 239 141a 792 647 18 764 9 796 495 97 92 427 733 5 695 37 1 324 69 169 514 108 701 71 546 6 473 366 34 585 12 534 9 049 194 152 185 5 491 179 1 329 1 008 37 155 143 1 896 1 551 745 928 29 734 382 1 777 60 813 119 338 .58 11 519 8 744 6 504 12 .3 1 151 .288 15 066 6 984 10 252 493 77 54 2 579 348 847 2 589 27 932 127 861 511 508 600 24 122 241 962 5 884 117 221 101 912 128 .13 44 15 698a 8 333a .8 7 66 89 30 11 164 1 263 .91 25 .17 115 .3 54 96a 7a 109 44 52 13 . Plurinational State of Brazil Chile Colombia Ecuador Falkland Islands (Malvinas) Guyana Paraguay Peru Suriname Uruguay Venezuela.7 - 2010 7 81a 5a 153 18a 129 6a 1 885 1 163a .508 25 916 109 1 469 241 592 669 20 052 287 2 498 28 626 142 359 565 1 159 245 7 549a 14 963a 26a 26 1 085 90 160 882 4 .1 404 24 622 97 1 413 78 687 797 18 679 508 2 363 48 068 25 105 161 977 80a 30 526a 12 894a 86a 31 1 626 89 150 201a 2 138 - 2005 13 65a 15 91 10 48 33 1 218 221 56 1 0 .113 38 .80 25 742a 6 379a .3 .527 121 616 40 98 459 69 833 43 916 5 537 281 18 822 7 298 6 656 271 . Democratic Republic of Equatorial Guinea Gabon Rwanda São Tomé and Principe East Africa Comoros Djibouti Eritrea Ethiopia Kenya Madagascar Mauritius Mayotte Seychelles Somalia Uganda United Republic of Tanzania Southern Africa Angola Botswana Lesotho Malawi Mozambique Namibia South Africa Swaziland Zambia Zimbabwe Latin America and the Caribbean South and Central America South America Argentina Bolivia.0 3 2 966 .2a .13 930 21 1 33 999 19 645 11 898 1 311 3 2 517 2 183 4 662 10 6 36 1 170 7 747 1 .3 105 20 485 109 1 347 366 600 523 15 334 434 1 773 65 226 46 118 73 657 160 42 100a 17 878a 24a 41 2 165 103 38 541 3 117 - 2010 2 816a 2 939 695a 170a 42 3a 3 728 9a 27 56a 184a 133a 860 430 369a 112a 848 700a 15 105 9 942 529a 55 140a 789 858 1 553 93a 1 041 105 159 171 111 103 86 481 6 337 622 48 438 15 095 6 760 164 188a 419 7 328 180a 2 355 .1 6 474 18 1 372 14 354 0 . by region and economy.2a 21 101 65 - 2006 18 106a 3 42 24 10 8 6 298 194 50 1 0 .22 - FDI inflows 2007 2008 2 275 1 808 1 243 269 82 35 4 085 8a 195 .12 6 063 1 0 68 129 43 603 35 449 2 439 0 28 202 2 172 1 098 8 7 .610 2 570 .0 109 96 1 169 383 179 87a 729 679 28 588 16 581 528 56 9 592 720 9 006 106 939 52 206 733 126 163 92 134 9 726 513 45 058 15 150 10 596 1 006 178 320 6 924 209 2 106 349 34 029 170 2 078 903 754 1 006 26 295 626 2 196 80 570 99 174 200 1 103 267 51 742a 18 749a 24a 57 2 870 142 30 1 437 13 266 - 2009 2 083a 664 1 636 33a 119 14a 3 638 9a 100 0 221a 141 1 066 257 275 108a 816 645 19 999 11 672 579a 48 60a 893 516 5 365 66 695 105 140 997 75 772 55 287 4 017 423 25 949 12 874 7 137 319 144a 209 5 576 151 1 593 .43 .794 209a 103 33a 3 667 8a 229 .7 270 20 45 544 13 471 4 066 712 .65a 1a .1 14 345 14 2 377 29 211 4 2a 20 598a 8 539a .4 450 8a 289 15 76 273 47 062 30 294 964 .127 1 164 338 31 443a 22 969a 64a 40 1 667 152 75 867 7 234 2 483a 1 727 . 2005–2010 (continued) (Millions of dollars) Region/economy Congo Congo.23 86 3 61 731 23 412 12 247 1 504 7 7 067 2 573 913 .38a 1a 1 . Bolivarian Republic of Central America Belize Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Panama Caribbean Anguilla Antigua and Barbuda Aruba Bahamas Barbados British Virgin Islands Cayman Islands Cuba Dominica Dominican Republic Grenada Haiti Jamaica Montserrat Netherlands Antillesb Puerto Rico 2005 1 475 769 242 14 16 1 424 1 22 .23 67a 17 - /… .1 265 21 86 42 5 86 24a 380 494 14 699 6 794 279 57 52 108 348 6 647 .1 1 524 8 154 1 98 26 40 1 5 758 21 2 209 24 526 .32 61 .9 9 6 380a 7 451a .188 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I.80 16 .95 25 1 8 256 9 2 704 38 320 30 82 29 339a 8 769a .46 357 103 78 082 72 198 44 266 5 265 .9 090a 10 221a 16a 19 1 123 70 26 682 1 42 36 2006 1 925 256 470 268 31 38 2 588 1 108 0 545 51 295 105 0 146 96a 644 597 10 501 9 064 486 89 72 154 387 .11 1 273 3 213 3 6 .0 5 .1 1 157 16 2 095 43 207 3 3 29 121a 13 333a .1.0 102 173 3 467 323 1 493 .

Federated States of Nauru New Caledonia Niue Palau Papua New Guinea Samoa Solomon Islands Tokelau Tonga Tuvalu Vanuatu Wallis and Futuna Islands 2005 93 78 40 940 108a 216 101 215 834 44 498 1 049 515 1 984 234 3 321 1 538 47 2 500a 12 097 583 10 031 10 900 .6 4 333 2 528 52 3 779 38 151 1 467 19 504 13 724 1 555 284 100 185 253 108 312 59 621 44a 8 409 2 591 845 5 432 51 901 300 1 086 28 42 546 1 615 135 1 5 438 752 46 947 239 815 9 318 228 7 172 976 1 544 8 588 8 448 40 9 579 2 192 1a 354 14 3 6a 6a 1a 1 673 2a .1.11a 1 863a 3 907 0a 1 780 2 015 70a 231 585 174 283 68 000a 76 077 19 230 .0a 749 1a .8 30a 1 93 2a 0 0 4 2 1 - 2009 9a 219 579 219 500 26 309 .1 791 116 72 8 636 1 126 66 .6 14a 0 7 4a 8 .8 6 029a 3 498 2 2 549 15 820 66a 178 256 133 173 52 150 50 581 20 251 . 2005–2010 (continued) (Millions of dollars) Region/economy Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Trinidad and Tobago Turks and Caicos Islands Asia and Oceania Asia West Asia Bahrain Iraq Jordan Kuwait Lebanon Oman Palestinian Territory Qatar Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates Yemen South.8a 31 .102 6 10 287 19 897 9 19 397 380 49 62 25 185 16a 24 5 900 .3 1 553 2 723 66a 193 191 142 941 56 530 63 991 17 197 . by region and economy.7 4 273 480 56 701 434 483 4 914 187 6 060 428 2 921 29 348 9 517 8 2 400 1 278 3 370 31a 1 6a 1a . Islamic Republic of Maldives Nepal Pakistan Sri Lanka South-East Asia Brunei Darussalam Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Singapore Thailand Timor-Leste Viet Nam Oceania Cook Islands Fiji French Polynesia Kiribati Marshall Islands Micronesia.2 6 2 0 5 1 - 2006 370 14a 151 611 151 566 22 570 980 305 .11 924 10 892 56a 128 997 85 402 21 160 44 979 11 175 636 54 7 399 14 812 4 14 285 386 109 29 28 782 17 12 2 726 39 6 021 103 18 809 970 85 45 0 1 10a 0 .7 3 34 10 5a 72 0a FDI inflows 2007 2008 134 272 131 830 97a 340 387 339 252 78 211 1 756 972 2 622 112 3 376 3 431 28 4 700a 22 821 1 242 22 047 14 187 917 261 041 151 004 83 521 54 341 67a 2 628 2 305 373 7 769 34 297 243 666 78 25 350 1 670 91 6 5 590 603 75 740 260 867 6 928 324 8 595 715 2 916 37 033 11 355 9 6 739 1 134 .269a 62 11 183 15 079 15 14 626 346 46 46 42 223 6a 17 2 664 6 13 329 487 19 739 5 122 853a 71 3a 16a 0 49a 0 0 2 1 - /… .0a 4 .75 14 965 259 .708 54 5 877 16 405 29 15 929 356 71 20 33 845 9a 18 2 249 1 7 930 359 18 464 4 116 700a 79 3 8a 0 58a . China Korea.138 8 211 875 263 125 127a .0 3 2 1 - 2010 7a 244 656 244 585 12 999 334 52 28 2 069 574 317 . Republic of Macao.135 2 2 106 14 568 54a 187 513 114 391 22 469 61 081 19 720 3 13 11 107 17 709 21 17 234 302 98 55 55 413 .4 19 0 17 .7a 5 4 675 1 11 314 3 536 32 702 3 003 184 39 .105a 4 881 1 608 245 7 424 27 821 238 792 6 20 328 1 647 64 . Democratic People’s Republic of Korea.30 17 95 6 2a 44 1a 2009 104 146 106 709 95a 309 414 307 527 65 993 257 1 452 2 430 1 114 4 804 1 471 265 8 125 32 100 1 434 8 411 4 003 129 241 534 161 096 95 000 52 394 2a 7 501 2 770 624 2 805 42 458 185 700 15 35 649 3 016 112 39 2 338 404 37 981 370 539 4 877 319 1 430 579 1 963 15 279 4 976 50 7 600 1 887 1a 114 10 3 8a 8a 1a 1 146 2a 423 1 120 15 2a 32 1a 2010 141 99 92 549 97a 359 357 357 846 58 193 156 1 426 1 704 81 4 955 2 045 115a 5 534a 28 105 1 381a 9 071 3 948 .7 .256 4 053 300a 125 .0 3 076 189 11 218 529 65 124 0 10 16a 0 54a 31 1a .0 10 2 1 700 6a 218 560 218 436 40 180 1 620 34 13 9 091 987 481 . East and South-East Asia East Asia China Hong Kong.2a 1 2 7 2 1 - FDI outflows 2007 2008 0 5a 221 727 221 688 34 175 1 669 8 48 9 784 848 70 . China Mongolia Taiwan Province of China South Asia Afghanistan Bangladesh Bhutan India Iran.0a 28 - 2006 110 234 109 883 58a 284 741 283 463 67 112 2 915 383 3 544 121 3 132 1 588 19 3 500a 17 140 659 20 185 12 806 1 121 216 351 131 829 72 715 45 060 .329a 299 653 188 291 105 735 68 904 38a 6 873 2 558a 1 691 2 492 31 954 76 913 12 24 640 3 617 164 39a 2 016 478 79 408 496a 783 13 304 350a 9 103 756a 1 713 38 638 5 813 280 8 173a 1 511 1a 129a 26a 4 9a 10a 1a 1 003a 2a 29 2 238 16a 2a 39 1a 2005 341 .39 .0 376 58 1 12a 17a 1a 417 3a 96 3 64 28 0a 57 1a 178 161 159 2 801 99a 377 857 375 665 91 564 1 794 1 856 2 829 .350 80 1 064 3 750 65a 73 599 51 907 12 261 27 196 6 359 60 2 6 028 3 524 3 2 985 452 45 38 18 169 15 11 3 065 .1 1a 34 .302 171 337 116 189 72 406 33 625 50a 7 055 1 240 188 1 625 14 411 271 845 9 7 622 3 136 53 2 2 201 272 40 737 289 381 8 336 28 4 065 236 1 854 15 460 8 067 1a 2 021 267 1 160 8a 5 7a 0a 1a .3a 86 176 86 051 12 452 1 135 89 163 5 142 715 234 13 352a .8 5 160a .ANNEX TABLES 189 Annex table I. FDI flows.15 11 584a 2 177 .

Samoa. Central African Republic. Uganda. Chad. Saint Lucia. Niger.0 12 767 275 555 1 169 623 2006 23 723 395 11 4 259 33 88 0 23 328 3 705 3 . Lesotho. Comoros. Fiji. Lesotho. by region and economy. Burkina Faso. Djibouti. Mali. Saint Vincent and the Grenadines. Nepal. Ethiopia. Eritrea. Rwanda. Chad. Benin. Kyrgyzstan.146 0a . Mali. Niger. Kiribati. Yemen and Zambia.133 393 476 526 FDI outflows 2007 2008 51 581 1 448 28 28 289 157 947 . Timor-Leste. Kazakhstan. Azerbaijan. Cambodia. FDI/TNC database (www. Senegal. Paraguay. Barbados. Sao Tome and Principe. Lao People’s Democratic Republic. e Small island developing countries include: Antigua and Barbuda. . Angola. Haiti. Republic of Moldova.12 47 . Equatorial Guinea.1 3 118 .9 1 235 46 52 11 47 432 53 326 102 .16 . Bhutan. Palau. Uganda. Guinea. Burundi. Nepal. Sierra Leone. Sudan. Seychelles. Saint Kitts and Nevis.89 . Kiribati. Solomon Islands. Botswana. United Republic of Tanzania. Lao People’s Democratic Republic. Togo.1. Mongolia.1 50 134 . Maldives. Democratic Republic of Congo. Tuvalu. Bahamas.203 29 189 2 60 532 8 232 43 6 7 806 0a 4 51 697 736 1 819 8 352 215 Source: UNCTAD. Myanmar.2 286 15 76 3 153 . Zambia and Zimbabwe.0a 17 45 916 673 1 234 3 627 291 60 386 1 896 81 13 1 425 108 283 . a Estimates. Bolivia. Jamaica. Republic of Tajikistan. Samoa. Mauritius. Mozambique. Bangladesh.1 23 151 . 2005-2010 (concluded) (Millions of dollars) Region/economy South-East Europe and the CIS South-East Europe Albania Bosnia and Herzegovina Croatia Montenegro Serbia The FYR of Macedonia CIS Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyzstan Moldova.0a 7 43 665 162 441 3 809 42 2010 60 584 52 . Turkmenistan. Cape Verde. b This economy dissolved on 10 October 2010. Tuvalu and Vanuatu. Burundi.unctad.385 0a . Trinidad and Tobago. Central African Republic. Swaziland. Malawi.584 354 1 170 6 278 182 240 29 701 339 731 5 604 174 20 888 11 935 5 083 FDI inflows 2007 2008 91 090 12 837 656 2 080 5 035 934 3 439 693 78 252 699 . Republic of Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan Memorandum Least developed countries (LDCs)c Landlocked developing countries (LLDCs)d Small island developing states (SIDS)e 2005 31 116 4 877 264 613 1 825 501 1 577 96 26 239 239 1 680 305 453 1 971 43 191 12 886 54 418 7 808 192 14 831 6 832 3 728 2006 54 516 9 875 325 766 3 473 622 4 256 433 44 642 453 . Liberia. Grenada. Marshall Islands. Dominica.4 749 1 805 1 750 11 119 209 534 55 073 360 856 9 891 705 26 083 15 736 5 833 120 986 12 601 988 932 6 179 960 2 955 586 108 385 935 14 2 180 1 564 14 322 377 713 75 002 376 1 277 10 913 711 33 030 25 420 7 968 2009 71 618 7 824 979 246 2 911 1 527 1 959 201 63 794 778 473 1 886 658 13 771 190 128 36 500 16 3 867a 4 816 711a 26 538 26 190 4 250 2010 68 197 4 125 1 097 63 583 760 1 329 293 64 072 577 563 1 350 549 9 961 234 199 41 194 45a 2 083a 6 495 822a 26 390 23 022 4 210 2005 14 310 273 4 0 239 4 22 3 14 037 7 1 221 2 . Papua New Guinea. Uzbekistan. Solomon Islands. d Landlocked developing countries include: Afghanistan. Rwanda. FDI flows. c Least developed countries include: Afghanistan. Tonga. Somalia. Ethiopia. Vanuatu.14 58 490 10 556 31 70 1 204 0a 16 55 594 1 010 3 049 1 693 851 2009 48 802 1 371 36 .190 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I.org/fdistatistics). Bhutan. Madagascar. Federated States of Micronesia. Mauritania. Timor-Leste. São Tomé and Principe. Guinea-Bissau. Comoros. Gambia. Nauru. The FYR of Macedonia. Armenia. Malawi. Burkina Faso.

..a. 2 385 243 733 34 227 32 043 6 953 4 762 2 893 156 348 93 995 438 631 118 209 642a 497 30 265 86 804 2 995 951 212 716 2 783 235 216 769 118 858 265a 22 367 50 322 24 957 1 731 604 154 268 45 728 3 537 19 955 451 8 842 1 398 11 545 108 540 33 401 213 28a 192a 2 483 216a 1 605a 263a 38a 3 247a 132a 146a 45a 23 786a 295a 284a 427a 2010 19 140 603 12 501 569 7 614 844 6 890 387 154 999 670 013 47 971 29 530 129 893 139 205a 16 438 82 706 1 008 378 674 217a 33 559 91 933 247 097 337 401 10 838 13 449 114 691a 9 866a 589 825 193 141 110 241 70 012 50 678 15 022 614 473 348 667 1 086 143 724 457 1 903a 11 771 171 833a 538 950 4 012 516 561 111 3 451 405 874 209 508 123 3 266a 77 810 214 880 70 129 5 951 203 553 972 206 067 19 498 73 095a 19 342a 42 023a 20 743a 31 367 347 905 95 396 849 905a 1 140 6 641a 675a 9 098a 1 917a 190a 4 888a 1 234a 2 155a 2 310a 60 327a 1 615a 495a 955a 1990 2 094 169 1 948 644 887 519 810 472 4 747 40 636 ... 11 227 112 441 151 581 2 882 159 14 942 60 184 . 124 8 .. . 106 900 95 900 66 .. 5 132 97 814 111 231 5 681 570 37 989 59 998 . 7 342 .. 560 15 652 50 720 229 307 77 047 75 10 884 66 087 816 569 84 807 731 762 244 556 37 505 1 188 201 441 4 422 145 525 20 229 1 836 183 163 1 321 155 15 18 393 2 202 2 4a 6 ... 846a 22a 3a 54a 1 219a 47a FDI outward stock 2000 7 962 170 7 083 477 3 759 713 3 492 863 24 821 179 773 .. .a.ANNEX TABLES 191 Annex table I. 2000...2.b /… . . 203 305 461 1 018 19 794 136 379 768 129 194 123 256 897 845 266 850 663 34 026 232 161 2 931 653 237 639 2 694 014 392 111 95 979 108a 9 091 278 442 8 491 857 354 44 224 3 281 249 655 1 942 402 33 40 942 6 699 11 0a 9 7a 2 255a 22a 4a 117a 4 144a 117a 13a 2010 20 408 257 16 803 536 10 023 881 8 933 485 169 697 736 725 1 486 20 600 15 523 194 948a 5 779 130 617 1 523 046 1 421 332a 37 876 20 685 348 737 475 598 833 2 092 137 575a 1 528a 890 222 36 839 64 253 1 486 2 830 7 603 660 160 336 086 1 689 330 1 090 396 10 504 170 481a 909 411 5 459 459 616 134 4 843 325 1 320 196 402 249 2 932a 66 299 831 074 17 642 3 131 845 122 429 23 562 1 814 5 447a 13 269a 2 745a 286 98 867 6 793 63a 11a 1 23a 139a 3a 960a 62a 27a 171a 5 041a 364a . 1990.a... 465 68 731 109 10 571 0 282 1 643 65 916 12 636 203 905 47 045 263a 147 12 391 34 245 652 444 112 843 539 601 102 629 80 364 4 476 9 850 7 938 517 322 60 675 23 962 1 561 11 043 678 3 011 55 7 615 36 712 14 013 ... 2010 (Millions of dollars) Region/economy World Developed economies Europe European Union Austria Belgium and Luxembourg Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Other developed Europe Gibraltar Iceland Norway Switzerland North America Canada United States Other developed countries Australia Bermuda Israel Japan New Zealand Developing economies Africa North Africa Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Tunisia Other Africa West Africa Benin Burkina Faso Cape Verde Côte d’ Ivoire Gambia Ghana Guinea Guinea-Bissau Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leone Togo 1990 2 081 299 1 563 969 808 896 761 851 10 972 58 388 . by region and economy...... 112 .b 1 363 9 192 . FDI stock.b 39a 4a 975a 157a 319a 69a 8a 2 732a 229a 59a 286a 8 539a 258a 243a 268a FDI inward stock 2000 7 445 637 5 653 192 2 440 473 2 322 264 31 165 195 219 .. 34 557 738 73 100 259 52 109 925 925 541 866 6 094 1 280 27 925 180 275 23 29 . 2 704 2 846 21 644 73 574 2 645 24 273 390 953 271 613 14 113 22 870 127 089 121 170 2 084 2 334 . .

a. FDI stock. 42a FDI outward stock 2000 648 2a 254a 43a 70a . 2010 (continued) (Millions of dollars) Region/economy Central Africa Burundi Cameroon Central African Republic Chad Congo Congo.b 1 45 32 325 87a 234 204 515 115 170 96 041 21 141 29 51 946 11 154 2 989 247a 1a 214 505 138 7 676 19 129 43 86 104 93 8 273 22a 10 507a 89 345 374 41a 67 132a 20 788a 2a 709a 2010 1 039 2a 245a 43a 70a 3a 663a 13 1 063 306a 6a 504a 247 89 971 4 672a 448 2a 24a 3 57 81 127a 60a 3 290a 288 732 781 406 071 307 495 29 841 21 180 949 49 838 22 772 324a 2a 238 3 319 304 19 889 98 576 51 88 7 382 168 66 152a 169a 31 559a 326 710 366 98a 239 252a 84 478a 2a 288a /… . by region and economy. Plurinational State of Brazil Chile Colombia Ecuador Falkland Islands (Malvinas) Guyana Paraguay Peru Uruguay Venezuela...a..a 124a 668a 107a 168a 213a ..a.2. Democratic Republic of Equatorial Guinea Gabon Rwanda São Tomé and Principe East Africa Comoros Djibouti Eritrea Ethiopia Kenya Madagascar Mauritius Seychelles Somalia Uganda United Republic of Tanzania Southern Africa Angola Botswana Lesotho Malawi Mozambique Namibia South Africa Swaziland Zambia Zimbabwe Latin America and the Caribbean South and Central America South America Argentina Bolivia.b 280a 387 115a 10a 132a 130 33 208 2 517 2 . Bolivarian Republic of Central America Belize Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Panama Caribbean Anguilla Antigua and Barbuda Aruba Bahamas Barbados British Virgin Islands Cayman Islands Cuba Dominica Dominican Republic Grenada Haiti Jamaica Montserrat 1990 3 808 30a 1 044a 95a 250a 575a 546a 25a 1 208a 33a 0a 1 701 17a 13a ..a..b 6a 388 17 191 1 024 1 309 83 228 25 2 047 9 207 336a 2 655a 277a 111 377 103 311 74 815 9 085 1 026 37 143 16 107 3 500 1 626 0a 45a 418 1 330 671 3 865 28 496 89 1 324 212 1 734 293 22 424 145 2 275 8 066 11a 290a 145 586a 171a 126a 1 749a 2a 66a 572a 70a 149a 790a 40a FDI inward stock 2000 5 733 47a 1 600a 104a 576a 1 889a 617 1 060a . 2 672 3 876 1 630 23a 875a 648a .. 2000.192 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I.b 55 11a 7 199 21a 40 337a 941a 931a 141 683a 515 4a 807 2 778 62 208 7 978 1 827 330 358 1 249 1 276 43 451 536a 3 966a 1 238a 502 012 424 209 309 055 67 601 5 188 122 250 45 753 11 157 6 337 58a 756a 1 325 11 062 2 088 35 480 115 154 301 2 709 1 973 3 420 1 392 97 170 1 414 6 775 77 803 231a 619a 760 2 988a 308a 32 093a 25 585a 74a 275a 1 673a 348a 95a 3 317a 83a 2010 38 835 86a 4 828a 369a 4 168a 15 983a 3 994 7 374a 1 438a 435 163a 30 913 58a 878 438a 4 102a 2 262a 4 452 2 319a 2 017 566a 5 853 7 966 182 762 25 028a 1 299 1 129a 961a 5 489 5 290 132 396a 902a 8 515a 1 754a 1 722 278 1 307 203 899 541 86 685 6 869 472 579 139 538 82 420 11 815 75a 1 754a 3 105 41 849 14 830 38 022 407 662 1 243 13 500 7 760 6 399 25 870 327 249a 4 698 20 945 415 074 978a 2 401a 2 284 9 062a 1 706a 212 034a 133 967a 317a 590a 14 731a 1 268a 603a 10 829a 118a 1990 372 0a 150a 18a 37a 0a 167a 165 99a 1a 1a 64a 15 653 1 447 0 2 80 15 004 38a 80 57 645 56 014 49 346 6 057 7 41 044 154 402 18a 134 122 186 1 221 6 668 20 44 56 . 1990.

2010 (continued) (Millions of dollars) Region/economy Netherlands Antillesc Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Trinidad and Tobago Turks and Caicos Islands Asia and Oceania Asia West Asia Bahrain Iraq Jordan Kuwait Lebanon Oman Palestinian Territory Qatar Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates Yemen South.b 61a 2010 1 222a 1 560a 2 110a 1 312a 17 424a 557a 3 674 953 3 662 985 575 214 15 154 6 487a 20 406 6 514 37 040 15 196 1 551a 31 428a 170 450 8 715a 181 901 76 175a 4 196a 3 087 772 1 888 390 578 818a 1 097 620 1 475a 127 047 14 631a 4 512a 64 288 260 980 1 625a 6 072 160a 197 939 27 600a 876a 205a 21 494 5 008 938 401 11 225a 5 958 121 527a 2 088a 101 339 8 273a 24 893a 469 871a 127 257a 342 65 628a 11 967 41a 2 256a 342a 20a 5 354a 7a 129a 1 745a 51a 654 1a 115a 35a 450 1990 21a 21a 67 651 67 600 8 674 719 158 3 662 43 590a . 2000.b 1 368 37 53 1 723a 63a 15 193 154a 11 150 751a 180a 311 743 240 645 20 691a 201 653a 572a 5 186 2 809a 0a 9 735a 6 795 12a 477 2a 1 657 2 039a 25a 12a 1 892 679 64 303 33a 38 8 732a 13a 10 318 281a 4 528a 30 468 8 242 1 650a 2 333 14a 284a 69a -a 70a -a -a 1 582a 9 -a -a 1a -a -a FDI inward stock 2000 277a 487a 807a 499a 7 280a 4a 1 075 324 1 072 694 60 465 5 906 ... Democratic People’s Republic of Korea.a.. 1990. Republic of Macao.. 86 1 753 406a 7 808 418 51 25a 26a FDI outward stock 2000 6a 293a 608 615 608 366 16 564 1 752 44 1 677 586 611a 809a 74a 5 285 107a 3 668 1 938a 12a 591 801 504 301 27 768a 388 380 21 497 66 655 2 949 69 1 733 572a 489 86 84 551 512a 193 6 940a 26 15 878 2 044a 56 755 2 203 249 39 210a 2010 106a 2 119a 2 276 635 2 276 194 161 029 7 883 483 18 676 7 150 2 228 1 644a 25 712a 16 960 418a 23 802 55 560a 513a 2 115 165 1 586 468 297 600a 948 494 138 984 . 245 8 9 472 0a .ANNEX TABLES 193 Annex table I.2.. FDI stock.b 191a 201 228 97 168 100 92 407 2 555a 1 727 380 431 529 681a 343 1 703a ..a.b 3 135 608 4 988 2 577a 932a 1 912a 17 577 1 244a 19 209 1 069a 1 336a 1 012 229 716 103 193 348 455 469 1 044a 43 738 2 801 182a 19 521 29 834 17a 2 162 4a 16 339 2 597a 128a 72a 6 919 1 596 266 291 3 867a 1 580 25 060a 588a 52 747 3 211a 18 156a 110 570 29 915 20 596a 2 630 34a 356 139a -a 67a 0a 97a 935a 53 106a 0a 15a . China Mongolia Taiwan Province of China South Asia Afghanistan Bangladesh Bhutan India Iran..a.b 96 758 6 582a 300 010a 25 454a 441 41a 122a 4a 225a 1a 27 21 /… . 2 328 4a 1 150 14a 5a 58 927 49 032 4 455a 11 920 2 301 30 356 422 45 124 .. China Korea. by region and economy.a. East and South-East Asia East Asia China Hong Kong.a. Islamic Republic of Maldives Nepal Pakistan Sri Lanka South-East Asia Brunei Darussalam Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Singapore Thailand Timor-Leste Viet Nam Oceania Cook Islands Fiji French Polynesia Kiribati New Caledonia Niue Palau Papua New Guinea Samoa Solomon Islands Tokelau Tonga Tuvalu Vanuatu 1990 408a 160a 316a 48a 2 365a 2a 345 270 342 937 31 194 552 .

Bhutan. Armenia. São Tomé and Principe. 16 20 499 0 1 24 92 16 33 23 20 141 . . . Uganda. Democratic Republic of Congo. a Estimates. . .. Trinidad and Tobago.. 170 . Federated States of Micronesia.194 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. Kiribati. . Niger. Guinea. Kiribati. Vanuatu. Ethiopia... Botswana. . .... f Small island developing countries include: Antigua and Barbuda.. Solomon Islands.. this value is included in the regional and global total. . Papua New Guinea. Solomon Islands.. . Tonga. e Landlocked developing countries include: Afghanistan. United Republic of Tanzania. Burundi. Nepal. 11 051 7 471 7 166 FDI inward stock 2000 60 841 5 682 247 1 083 2 796 1 017 . . Rwanda. Ethiopia. Malawi. Lao People’s Democratic Republic. Paraguay. Haiti.. Maldives. Timor-Leste.. Equatorial Guinea.. Central African Republic... .. Liberia.. Palau. Gambia. Mauritius. 2 974 1 448 1 555 2010 472 876 8 775 145a 82a 4 154 3 928 375 91a 464 101 85a 5 790 205 155 16 176 1 68 433 655a . d Least developed countries include: Afghanistan. Sierra Leone. . Tuvalu and Vanuatu. by region and economy. Bahamas. Kazakhstan. Niger. Republic of Moldova. Uganda.. FDI stock. ... . . Republic of Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan Memorandum Least developed countries (LDCs)d Landlocked developing countries (LLDCs)e Small island developing states (SIDS)f 1990 . Cambodia.. . However. Togo. c This economy dissolved on 10 October 2010.. Madagascar. . Mauritania. .. Chad.. Nepal. Central African Republic. FDI/TNC database (www.. .. 1990. .. Samoa.. . Timor-Leste.. . . b Negative stock value. Seychelles. Jamaica. Swaziland. Burkina Faso. Rwanda. Lao People’s Democratic Republic.. .. Lesotho. 2000.. ... Mali. Bangladesh. Benin. Bolivia. Kyrgyzstan. . Myanmar. Dominica. Burundi.. Grenada. . Zambia and Zimbabwe. Samoa. Guinea-Bissau. 540 55 159 513 3 735 1 306 784 10 078 432 449 32 204 136a 949a 3 875 698 37 437 35 896 20 102 2010 687 832 76 414 4 355a 7 152a 34 374 20 584 5 456 4 493a 611 418 4 206a 9 593 9 940 7 821 81 352 974 2 837 423 150a 915a 8 186a 57 985 4 460a 151 689 169 599 60 634 1990 . Sao Tome and Principe. Yemen and Zambia. 2010 (concluded) (Millions of dollars) Region/economy South-East Europe and the CIS South-East Europe Albania Bosnia and Herzegovina Croatia Serbia Montenegro The FYR of Macedonia CIS Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyzstan Moldova. . .. Saint Kitts and Nevis. . .. .. . Comoros... Saint Vincent and the Grenadines. ... Senegal. Somalia.. Cape Verde. . . Mali. Lesotho. Azerbaijan. Nauru. . Tuvalu. Turkmenistan... .. Comoros. Uzbekistan. 1 089 844 202 FDI outward stock 2000 21 339 840 . Mozambique.org/fdistatistics). . Fiji. Mongolia. Barbados. Malawi. . 7 966 10 865 27 144 3 576 Source: UNCTAD. .. Djibouti.unctad. 824 . Burkina Faso. Marshall Islands. Bhutan. Chad.. Angola. 9a .2.. Tajikistan.. Saint Lucia. . Sudan. . Eritrea. The FYR of Macedonia..

3 268 128 4 023 Net purchasesb 2008 706 543 568 041 358 981 306 734 3 049 30 146 7 1 725 34 2 841 4 13 179 56 806 61 340 2 697 41 3 693 21 358 3 31 8 109 .2 2005 462 253 359 551 233 937 210 111 3 871 4 067 52 579 11 921 16 2 720 58 255 4 677 1 159 415 3 375 23 565 6 847 3 140 586 .21 147 23 065 310 2 426 .12 1 608 .1 278 1 898 9 024 .11 683 2 853 89 163 11 181 6 773 18 2 976 1 133 1 332 2 313 4 408 1 57 289 2007 1 022 725 891 896 559 082 527 718 9 661 961 971 1 343 107 5 761 .211 82 813 7 608 1 141 195 91 846 9 6 467 1 300 2011 (Jan-May) 224 163 189 614 56 764 47 314 6 584 799 .50 .10 2 176 2 958 984 11 5 961 2 711 13 788 9 451 129 6 318 3 004 136 322 19 516 116 806 .455 .433 4 12 606 32 4 568 7 361 79 865 12 464 67 401 6 975 2 070 1 613 1 223 662 1 407 63 801 8 685 3 351 1 478 1 438 390 46 5 334 175 2006 625 320 527 152 350 740 333 337 1 145 1 794 807 294 1 154 11 235 3 1 321 19 423 41 388 7 309 2 337 2 731 25 760 11 97 35 005 517 25 560 773 537 5 324 194 15 7 951 15 228 125 421 17 403 1 174 39 254 4 289 11 647 165 591 37 841 127 750 10 821 10 508 1 083 8 061 .25 53 668 432 1 164 4 2009 2010 2011 (Jan-May) 224 163 135 369 63 981 48 869 1 275 .2 981 15 323 3 248 5 330 167 6 453 17 440 31 016 .40 691 4 507 8 408 11 316 30 346 56 379 4 578 4 092 144 830 105 849 9 891 8 216 1 401 4 665 .4 668 50 724 15 112 136 1 757 2 333 .3 546 .86 162 770 728 1 715 1 926 50 57 51 686 4 563 171 646 31 363 50 31 .60 3 - /… .909 5 169 6 095 110 1 153 4 590 31 911 6 903 1 559 2 892 .238 2 9 1 395 .125 122 4 910 .14 654 32 390 6 108 222 984 54 653 31 099 52 247 116 1 1 144 556 4 664 737 720 319 814 .1 128 78 451 58 795 1 495 1 6 677 55 880 4 30 22 631 .3.5 871 406 1 469 524 25 473 454 454 14 0.2 045 835 9 506 1 232 25 395 3 316 3 316 - 249 732 338 839 160 785 215 654 102 709 33 825 89 694 17 328 3 345 1 653 .829 270 10 641 6 102 12 729 45 362 226 646 114 314 46 751 44 141 179 895 70 173 46 080 94 747 43 439 18 454 . Value of cross-border M&As.0 4 653 391 41 565 7 157 24 313 7 138 386 518 0 465 .221 136 858 844 1 234 1 100 100 611 .8 156 966 .30 40 3 382 2 998 235 .13 6 994 9 465 13 966 25 010 94 088 138 576 8 000 20 848 86 088 117 729 31 525 58 366 26 602 31 949 400 503 403 9 747 5 012 16 966 .3 472 .8 885 7 24 251 .3 519 .17 3 198 .5 771 126 39 077 5 140 1 475 993 145 333 4 3 665 . 2005–May 2011 (Millions of dollars) Net salesa Region / economy World Developed economies Europe European Union Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Other developed Europe Andorra Faeroe Islands Gibraltar Guernsey Iceland Isle of Man Jersey Liechtenstein Monaco Norway Switzerland North America Canada United States Other developed countries Australia Bermuda Israel Japan New Zealand Developing economies Africa North Africa Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Tunisia Other Africa Angola Botswana Burkina Faso Cameroon Cape Verde 2005 462 253 403 731 316 891 304 740 1 713 4 277 2 551 24 6 196 12 093 82 2 923 25 172 47 501 872 2 470 725 40 445 9 61 7 989 12 21 326 1 487 1 648 1 851 117 148 21 217 7 892 93 940 12 150 .2 377 195 98 .ANNEX TABLES 195 Annex table I.57 8 313 28 207 44 091 723 721 811 23 630 47 35 7 339 .457 1 448 3 324 3 785 10 893 .42 4 162 1 668 621 1 707 674 3 018 .1 561 96 154 .7 468 1 310 0 17 .1 181 92 .142 2007 1 022 725 841 714 568 988 537 890 4 720 8 258 5 775 846 3 226 .799 68 680 114 922 14 494 15 913 12 892 5 633 12 892 5 633 1 603 10 279 88 - 74 320 40 893 .275 5 037 73 975 96 947 2 702 3 184 1 004 1 470 76 1 091 601 377 324 3 2 1 697 1 714 - 47 29 24 162 71 481 11 606 3 199 50 170 19 900 23 826 39 702 13 404 667 1 424 3 714 2 171 489 990 .176 .5 247 672 .227 221 816 437 7 831 22 206 265 866 100 888 164 978 66 948 44 222 1 424 684 16 538 4 081 100 381 8 076 2 182 1 713 200 269 5 894 1 2008 706 543 581 394 273 301 251 169 1 327 2 491 227 .892 .4 068 13 015 16 496 253 4 001 8 425 .128 .405 1 024 6 675 . by region/economy of seller/purchaser.526 2 505 17 505 .1 612 493 2006 625 320 497 324 300 382 260 680 6 985 3 640 1 274 812 2 078 179 2 169 41 030 16 427 5 238 1 522 10 176 6 887 15 539 115 51 304 194 644 .2 560 .1 066 1 014 .325 81 0 3 016 8 994 57 873 14 313 43 560 13 515 3 987 .18 10 954 .317 .3 570 .881 .552 .4 084 7 385 10 184 40 477 118 670 16 718 32 328 23 760 86 342 17 598 63 159 .471 50 2010 338 839 251 705 123 354 113 539 432 9 406 24 684 .1 279 993 136 418 33 708 18 770 147 748 22 132 0 212 17 35 251 14 997 6 620 262 698 35 253 227 445 45 395 33 530 850 1 363 9 251 401 104 812 21 193 16 283 82 15 895 307 .5 336 .234 400 468 .47 1 448 4 613 51 8 490 3 551 .1 185 213 2 127 6 762 72 462 2 083 315 4 002 1 042 2 208 148 332 8 669 1 439 58 309 9 816 85 427 14 157 52 7 171 1 910 94 737 14 470 80 267 33 613 26 530 .9 638 .3 273 14 252 117 292 1 236 .475 20 1 4 2009 249 732 203 530 133 871 116 226 1 797 12 089 151 52 2 669 1 651 28 508 724 12 790 477 1 853 1 712 1 109 109 20 444 13 17 988 776 504 314 13 32 173 1 098 25 164 17 645 260 66 414 1 630 15 275 51 475 11 389 40 085 18 185 22 206 820 803 .

700 759 31 1 .2 43 1 085 - 3 2 2 1 1 268 34 181 4 883 .80 258 3 3 140 15 1 3 036 88 4 359 71 .45 2008 2009 2010 2011 (Jan-May) - Eritrea Ethiopia Gabon Ghana Guinea Kenya Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Namibia Nigeria Rwanda Senegal Seychelles Sierra Leone South Africa Swaziland Togo Uganda United Republic of Tanzania Zambia Zimbabwe Latin America and the Caribbean South America Argentina Bolivia.1 579 .1 358 .591 .1 600 3 899 3 453 446 .4 1 2 587 - 12 587 0. 2005–May 2011 (continued) (Millions of dollars) Net salesa Region / economy Congo Congo.57 0 1 4 293 8 329 2 899 0.50 11 1 488 6 257 2 15 710 11 686 92 7 757 544 3 210 77 7 3 324 3 306 17 701 .443 2 898 294 173 .457 19 13 3 943 60 272 29 481 18 026 3 457 0 8 874 1 642 .131 .4 405 145 2 304 44 4 432 41 207 980 969 - 0.411 2 900 1 563 158 350 .1 684 448 4 158 8 854 1 5 43 650 1 7 990 164 2 601 82 413 432 84 1 59 19 1 037 - .241 4 215 2 11 6 .39 2 637 447 1 319 21 53 164 .10 112 .25 7 25 5 092 8 7 14 563 8 427 358 2 993 . by region/economy of seller/purchaser.88 16 0 679 .3 929 3 /… .1 512 9 592 2 693 3 5 017 2 047 93 3 .779 5 775 55 0 26 3 903 59 441 10 2 899 493 2 232 160 1 524 449 .1 203 35 8 296 .3 268 153 30 104 .1 053 .261 - 18 206 418 66 2 817 20 1 2 466 4 765 274 5 243 .1 32 .2 3 434 2 3 247 185 .2 454 - 191 1 491 16 3 740 3 104 .5 27 59 .512 2 264 .3 283 24 7 568 3 234 .77 6 539 1 480 4 303 29 3 10 1 135 157 .34 835 5 140 3 717 226 2 061 1 1 559 42 595 862 - 900 26 15 .3.265 22 115 1 604 29 .216 - .1 633 6 1 .1 594 356 .1 079 11 006 .60 38 3 .5 342 111 .156 665 .1 369 829 .16 89 0 8 541 25 .2 874 2 1 557 5 367 85 468 3 027 999 19 49 427 67 10 216 - 82 122 396 5 375 2 2 490 89 31 4 301 20 648 13 697 877 .2 029 72 3 329 70 166 103 9 4 50 619 212 275 92 39 1 - 12 .597 6 49 40 6 676 1 1 7 15 452 8 121 . Plurinational State of Brazil Chile Colombia Ecuador Guyana Paraguay Peru Uruguay Venezuela.30 13 - 1 .196 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I.1 237 28 .0 10 013 2 513 .44 40 195 13 152 569 10 785 466 1 384 195 .2 799 11 .1 635 2 079 .463 .77 2 501 55 211 416 .146 166 2 086 1 800 1 .1 336 4 12 768 4 503 344 .25 13 .173 2 505 .4 358 .1 .18 18 1 21 40 119 232 27 9 024 8 240 . Democratic Republic of Equatorial Guinea 2005 13 2006 20 2007 2008 435 .1 245 30 537 3 .248 17 452 .0.0. Bolivarian Republic of Central America Belize Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Panama Caribbean Anguilla Antigua and Barbuda Aruba Bahamas Barbados British Virgin Islands Cayman Islands Dominican Republic Haiti Jamaica Netherlands Antillesc Puerto Rico Saint Kitts and Nevis 0.3 0 3 316 5 979 2 592 200 3 384 244 315 2 34 13 .2 200 2009 5 2010 175 2011 (Jan-May) 2005 2006 - Net purchasesb 2007 .1 20 832 242 0.760 4 889 .20 512 - 232 10 046 1 28 064 19 923 160 18 629 431 697 6 3 699 4 97 370 317 2 750 160 4 442 .43 642 140 18 226 . Value of cross-border M&As.

ANNEX TABLES 197 Annex table I.34 124 .17 1 170 886 247 36 7 755 4 496 5 734 661 1 162 388 308 4 4 9 076 97 84 .7 980 8 646 949 29 096 29 083 12 25 936 826 3 654 .4 2 .10 4 67 310 77 962 26 843 .5 180 3 933 .667 .3 172 7 432 .2 005 74 .134 2 908 3 771 29 .85 2 664 .2 94 469 40 103 1 002 33 45 1 416 210 79 5 160 15 780 767 15 611 54 365 .654 .533 26 434 1 26 421 .742 2 .0 1 291 9 693 346 230 4 0 4 7 125 529 146 8 - 473 36 706 4 617 452 .758 13 20 337 767 3 2 204 38 291 3 543 108 .4 95 9 698 325 325 1 150 16 100 .161 413 2 4 798 7 883 330 4 424 .3 319 .100 7 .203 150 150 .3.529 10 266 865 121 422 2 14 831 .1 167 0 74 858 30 2 139 1 083 2 352 /… .2 514 23 916 54 275 275 21 729 1 039 - 207 94 398 22 099 4 497 322 2 147 .18 3 9 005 3 942 41 79 2 530 71 423 22 602 190 440 3 963 .2 092 3 .1 010 190 5 566 88 8 154 64 2 940 .336 1 332 354 .7 070 13 476 .30 40 537 13 358 85 89 236 116 12 771 61 27 179 20 998 7 207 5 449 5 165 67 3 110 738 526 207 5 5 443 6 171 1 141 .632 10 16 1 6 9 .0 9 10 389 5 1 667 110 3 441 30 4 578 457 101 9 019 1 9 018 4 321 266 201 15 991 3 969 3 216 3 574 176 12 022 3 097 2 825 264 . Republic of Macao.129 21 44 023 19 983 4 514 725 103 6 352 6 603 199 7 481 24 041 12 597 3 653 8 195 194 0 554 1 877 1 877 9 567 290 1 946 1 829 5 706 . China Mongolia Taiwan Province of China South Asia Bangladesh Iran.125 97 70 792 35 350 4 275 4 1 345 716 5 127 5 405 356 23 117 35 441 21 163 12 090 8 003 1 057 14 6 745 6 715 30 7 533 112 .103 473 642 386 13 264 41 2 053 376 20 32 089 16 144 5 965 12 024 .57 344 .580 .64 34 55 .15 3 139 4 9 480 0 9 388 2 509 . East and SouthEast Asia East Asia China Hong Kong.5 279 955 7 21 360 65 250 22 431 . Value of cross-border M&As.429 6 094 9 6 049 36 12 913 3 .3 3 6 188 .2 157 40 467 35 851 21 490 7 461 6 951 .233 601 6 029 1 442 1 313 5 983 72 298 39 888 37 941 . Islamic Republic of India Maldives Nepal Pakistan Sri Lanka South-East Asia Brunei Darussalam Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Singapore Thailand Viet Nam Oceania Cook Islands Fiji French Polynesia Guam Marshall Islands Nauru New Caledonia Niue Papua New Guinea Samoa Solomon Islands Tuvalu Vanuatu South-East Europe and the CIS South-East Europe Albania Bosnia and Herzegovina Croatia 2005 2006 2007 2008 2009 2010 2011 (Jan-May) 2005 2006 Net purchasesb 2007 2008 2009 2010 2011 (Jan-May) .153 621 125 16 415 856 144 48 822 23 390 9 332 7 102 46 133 7 6 770 5 371 4 4 405 956 6 20 061 0 6 1 706 6 976 . by region/economy of seller/purchaser.1 200 .129 538 .36 72 .2 169 33 65 227 5 556 10 5 537 .1 048 3 882 0 106 .15 560 323 . China Korea.10 810 283 0.7 2 762 872 224 50 1 0.410 750 13 5 948 1 21 15 340 53 716 42 819 25 456 11 298 9 106 .55 298 42 2 849 300 34 748 15 741 10 898 3 028 1 956 .24 552 291 291 4 325 10 .3 893 .167 8 93 521 53 089 29 201 14 455 9 915 52 .2 282 .993 13 488 13 482 6 18 922 913 9 751 .1 810 1 097 142 172 .2 590 3 277 .1 1 165 7 426 2 372 412 234 12 45 160 3 14 30 448 2 192 164 1 022 674 2 236 68 909 16 287 178 34 773 496 108 10 124 102 13 238 1 225 52 622 17 226 5 375 8 707 1 194 593 1 356 12 654 695 10 427 3 13 1 147 370 22 743 30 2 070 2 781 2 621 14 240 142 859 . 2005–May 2011 (continued) (Millions of dollars) Net salesa Region / economy Trinidad and Tobago US Virgin Islands Asia West Asia Bahrain Iraq Jordan Kuwait Lebanon Oman Qatar Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates Yemen South.1 325 1 863 316 .3 15 13 998 893 2 306 25 7 851 2 864 59 91 .1 297 18 587 .174 6 992 1 416 25 770 1 051 .324 43 20 167 .2 487 .

Kyrgyzstan. Nepal.80 1 814 3 061 . Bhutan.14 547 Tajikistan 12 Turkmenistan 47 Ukraine 6 386 Uzbekistan Unspecified Memorandum Least developed countries 573 (LDCs)d Landlocked developing 1 707 countries (LLDCs)e Small island developing 115 states (SIDS)f 7 582 419 280 5 5 064 115 . d Least developed countries include: Afghanistan. Paraguay.946 1 504 141 4 860 175 20 691 1 833 18 598 260 11 981 . Jamaica. Saint Lucia. Saint Kitts and Nevis. Marshall Islands. Equatorial Guinea. Samoa.174 7 599 7 599 7 528 16 -8 393 9 373 . Mozambique. São Tomé and Principe. Turkmenistan. .1 898 . Madagascar. Azerbaijan. Comoros. Yemen and Zambia. Burkina Faso. Bahamas. b Net purchases by region/economy of the ultimate acquiring company.10 2 346 16 61 046 - Source: UNCTAD cross-border M&A database (www. Democratic Republic of Congo. Bolivia. Seychelles. Value of cross-border M&As. Niger. The FYR of Macedonia.3. f Small island developing countries include: Antigua and Barbuda. Papua New Guinea. Mauritius.0 254 9 082 37 16 192 354 518 161 2 352 . Botswana. Cambodia. Palau.529 6 842 430 6 029 383 24 613 51 546 . Nauru. Togo. Tuvalu. Burkina Faso. Guinea. Lao People’s Democratic Republic. Republic of Russian Federation . Chad.198 5 032 1 503 3 507 23 10 134 .261 2 676 1 803 . Lesotho. United Republic of Tanzania. 2005–May 2011 (concluded) (Millions of dollars) Net salesa Region / economy 2005 2006 2007 2008 2009 2010 2011 (Jan-May) 2005 2006 Net purchasesb 2007 2008 2009 2010 2011 (Jan-May) Montenegro Serbia Serbia and Montenegro 549 The FYR of Macedonia 0 Yugoslavia (former) 17 CIS . Swaziland. Tajikistan. e Landlocked developing countries include: Afghanistan. Sao Tome and Principe. Central African Republic.263 . Ethiopia. Burundi. Federated States of Micronesia. Maldives. Chad. Gambia. Solomon Islands. Niger. Samoa.242 4 13 507 5 933 42 . Dominica. Somalia. Sierra Leone. Lao People’s Democratic Republic. Republic of Moldova.2 649 30 101 44 2 907 322 1 2 201 639 9 735 13 8 979 26 137 . Armenia. Central African Republic. The data cover only those deals that involved an acquisition of an equity stake of more than 10%. Benin. Uzbekistan. Kiribati. Kazakhstan. Timor-Leste.2 552 144 1 824 362 10 3 6 596 30 14 1 322 5 079 147 4 .1 280 53 28 256 423 2 500 53 727 179 24 22 529 5 1 816 584 1 357 920 501 57 19 570 204 2 16 104 . Malawi. by region/economy of seller/purchaser. Bhutan. Mali. Malawi.7 20 171 519 2 047 16 634 972 12 486 .774 1 708 31 19 46 4 056 0. Djibouti. Rwanda. Burundi. Trinidad and Tobago. Liberia.1 052 4 438 0. Haiti. Mauritania. Bangladesh. Note : Cross-border M&A sales and purchases are calculated on a net basis as follows: Net cross-border M&A sales in a host economy = Sales of companies in the host economy to foreign TNCs (-) Sales of foreign affiliates in the host economy. Vanuatu. Mongolia. a Net sales by the region/economy of the immediate acquired company. Barbados. Kiribati. Timor-Leste. Uganda. c This economy dissolved on 10 October 2010. Lesotho. Ethiopia.9 7 502 1 324 8 237 217 . Sudan.198 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. Guinea-Bissau. Comoros.6 234 Armenia 4 Azerbaijan Belarus 4 Georgia 232 Kazakhstan 1 474 Kyrgyzstan 155 Moldova. Rwanda. Myanmar.1 751 10 6 319 261 110 2 688 . Uganda. Solomon Islands. Tonga. net cross-border M&A purchases by a home economy = Purchases of companies abroad by home-based TNCs (-) Sales of foreign affiliates of home-based TNCs. Tuvalu and Vanuatu. Mali. Angola. Nepal. Eritrea.org/fdistatistics). Zambia and Zimbabwe. Saint Vincent and the Grenadines. Grenada. Cape Verde.unctad. Senegal. Fiji.

1 13 69 176 75 2 3 . 2005–May 2011 (Number of deals) Net salesa Region / economy World Developed economies Europe European Union Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Other developed Europe Andorra Faeroe Islands Gibraltar Guernsey Iceland Isle of Man Jersey Liechtenstein Monaco Norway Switzerland North America Canada United States Other developed countries Australia Bermuda Israel Japan New Zealand Developing economies Africa North Africa Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Tunisia Other Africa Angola Benin Botswana 2005 5 004 3 805 2 271 2 108 57 64 29 31 90 13 53 222 374 9 20 42 118 14 14 11 3 126 44 37 41 13 5 81 115 482 163 .ANNEX TABLES 199 Annex table I. Number of cross-border M&As.1 1 6 156 207 814 335 1 3 21 38 25 28 1 93 125 1 667 426 1 241 659 363 28 59 161 48 1 047 60 11 .1 8 2 2 49 .2 .1 84 119 1 458 395 1 063 469 246 8 49 137 28 839 53 16 1 14 1 37 .1 5 1 14 53 578 196 382 169 52 8 11 90 8 360 13 1 1 12 /… . by region/economy of seller/purchaser.1 82 131 1 234 337 897 398 209 11 38 126 14 765 54 6 4 1 1 48 1 2006 5 747 4 446 2 519 2 216 77 63 2 23 14 85 8 66 265 229 20 13 94 59 1 2 39 1 146 8 16 1 2 7 109 185 681 303 1 3 14 50 14 18 1 .1 Net purchasesb 2007 7 018 5 443 3 117 2 782 104 77 2 21 12 82 10 66 404 264 17 14 128 121 4 2 42 1 173 30 25 .1 6 3 4 53 66 1 013 303 710 431 283 5 16 85 42 975 58 15 1 3 2 7 2 43 1 2010 5 405 3 638 1 944 1 780 31 77 4 23 26 85 8 37 155 185 .1 2008 6 425 4 732 2 853 2 548 75 61 6 46 10 102 4 109 381 286 27 10 82 119 .15 14 17 2 53 160 1 301 422 879 354 107 2 34 192 19 1 061 60 13 1 8 3 1 47 1 2011 (Jan-May) 2 036 1 484 737 662 13 13 2 53 3 9 4 26 87 82 2 17 15 1 17 1 53 5 2 .11 3 8 3 2 41 133 888 306 582 256 58 9 22 160 7 746 56 14 5 3 3 3 42 1 2010 5 405 3 644 1 989 1 723 36 21 1 273 9 43 3 58 219 147 1 2 33 55 4 4 33 4 165 21 18 6 5 5 54 167 336 266 2 1 32 .1 20 36 113 15 7 12 2 107 62 8 17 7 3 150 117 474 164 1 6 3 4 5 1 2 87 55 1 228 344 884 466 305 8 22 98 33 1 290 75 14 9 2 3 61 1 1 2011 (Jan-May) 2 036 1 420 804 718 11 22 13 13 22 6 18 56 108 1 4 13 55 4 .1 4 2 54 20 7 8 1 54 42 181 86 1 1 40 44 487 130 357 129 87 6 16 20 501 44 4 3 1 40 1 2 2005 5 004 3 741 2 109 1 828 62 49 1 3 7 112 3 56 253 226 13 8 48 52 1 3 26 1 91 15 10 2 6 82 154 544 281 1 5 47 11 4 .1 3 4 51 1 1 2006 5 747 4 326 2 531 2 354 44 87 29 5 53 90 10 68 224 426 11 46 49 111 10 18 12 3 88 49 29 44 12 7 148 144 537 177 1 1 2 3 4 3 2 81 80 1 380 324 1 056 415 229 8 35 57 86 1 219 107 25 5 14 1 1 2 2 82 2 1 2007 7 018 5 187 2 955 2 717 48 81 30 17 54 89 13 91 232 434 9 27 76 140 17 17 20 2 163 55 32 48 15 8 162 148 689 238 2 6 1 3 7 1 4 93 121 1 717 420 1 297 515 252 7 31 106 119 1 552 116 20 2 9 1 4 1 3 96 1 4 2008 6 425 4 603 2 619 2 419 30 86 28 32 72 75 19 52 178 337 13 26 62 150 14 18 10 116 43 11 38 14 6 193 164 632 200 1 1 3 4 6 1 86 98 1 491 374 1 117 493 306 8 30 99 50 1 501 106 23 4 11 1 2 1 4 83 1 2009 4 239 2 920 1 476 1 344 19 50 14 22 29 39 5 25 101 169 15 8 41 85 4 4 10 4 74 48 15 18 6 2 147 73 317 132 .4.1 1 2 5 7 3 1 78 67 1 200 252 948 334 180 6 25 44 79 1 062 72 21 2 11 2 .1 7 53 1 221 28 36 7 7 4 106 161 600 305 1 1 20 4 5 13 1 2 84 174 1 436 351 1 085 443 153 31 42 185 32 1 011 47 8 6 1 1 39 3 2009 4 239 2 666 1 522 1 328 42 15 3 160 6 43 32 191 196 7 5 32 45 2 34 4 104 3 20 3 2 4 50 94 231 194 1 3 11 .

1 22 2 146 63 3 50 1 2 1 6 19 1 2 1 16 .1 3 33 1 1 1 192 92 5 36 23 14 13 1 37 11 20 6 63 .1 18 .1 .1 22 1 2 132 39 3 20 7 4 1 2 2 42 1 3 13 9 14 2 51 2 1 3 9 19 1 Net purchasesb 2007 .1 79 2 4 1 67 2 3 36 1 3 1 8 4 2 2007 2 3 5 2 2 1 1 2 2 7 1 3 1 2 1 41 2 5 2 5 425 265 43 2 126 20 26 9 1 2 30 1 6 .1 4 6 1 2 38 1 1 174 67 .1 80 24 15 3 3 2 27 .2 /… .10 39 1 3 3 2 26 .1 1 1 27 1 1 4 400 250 41 .1 97 2 5 3 2 75 1 9 63 1 2 2 20 5 6 2008 2 1 2 1 1 .1 1 .1 2 3 5 1 5 2 1 2 1 1 3 37 3 2 5 2 378 266 44 2 116 31 30 2 1 5 28 4 3 64 1 7 4 46 6 48 4 25 12 1 2009 1 2 2 1 5 3 . by region/economy of seller/purchaser. 2005–May 2011 (continued) (Number of deals) Net salesa Region / economy Burkina Faso Burundi Cameroon Cape Verde Congo Congo.1 2 17 11 . Number of cross-border M&As.4 86 1 4 5 2 1 59 4 10 64 4 2 42 3 2 2011 (Jan-May) 1 3 3 2 1 4 23 1 161 116 20 43 11 19 3 4 1 9 1 3 2 27 1 1 18 3 4 18 2 11 3 1 2005 2 14 2 1 3 26 .1 24 3 .1 64 1 2 4 4 20 37 .4.1 2009 1 10 1 1 .1 3 22 5 45 .2 2 1 5 17 4 29 2 1 1 6 3 5 2006 4 12 .2 22 1 3 2 2 221 130 11 44 29 22 7 1 .1 29 1 116 37 1 19 3 8 1 4 1 34 5 .1 2 1 21 17 1 2010 1 2 5 . Plurinational State of Brazil Chile Colombia Ecuador Guyana Paraguay Peru Suriname Uruguay Venezuela.200 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I.1 112 21 36 8 1 2 28 6 .2 .1 5 52 1 39 3 3 2010 1 .1 1 1 1 3 1 9 4 1 2 1 .1 10 .1 39 14 5 2011 (Jan-May) 1 1 2 7 68 39 6 15 5 6 1 5 2 .1 1 35 13 16 1 2 38 . Bolivarian Republic of Central America Belize Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Panama Caribbean Anguilla Antigua and Barbuda Aruba Bahamas Barbados British Virgin Islands Cayman Islands Cuba Dominican Republic 2005 1 1 1 1 1 3 3 2 2 1 24 1 2 3 2 147 77 5 1 37 9 13 1 3 2 5 37 3 4 2 1 23 1 3 33 6 1 1 10 4 2006 1 1 1 4 1 2 1 2 1 3 2 4 5 2 5 1 34 2 4 3 250 135 40 54 14 13 6 1 8 .1 3 3 28 5 69 1 9 19 35 1 2008 3 6 4 . Democratic Republic of Equatorial Guinea Gabon Ghana Guinea Kenya Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Namibia Nigeria Reunion Rwanda Senegal Seychelles Sierra Leone South Africa Swaziland Togo Uganda United Republic of Tanzania Zambia Zimbabwe Latin America and the Caribbean South America Argentina Bolivia.

China Mongolia Taiwan Province of China South Asia Bangladesh Iran.1 1 1 2 2008 .1 1 261 1 13 86 4 134 21 3 1 1 . Republic of Macao. Democratic People’s Republic of Korea.15 44 .1 2 100 9 2 5 2 1 1 Net purchasesb 2007 4 .1 809 129 15 1 3 19 3 2 8 10 12 56 680 226 61 116 39 10 176 175 2 278 5 123 10 129 11 4 .1 25 57 56 1 169 2 9 63 4 74 16 1 9 2 2 3 1 2010 1 2 6 .1 9 2 10 63 18 1 883 430 232 144 19 5 3 27 159 1 147 7 4 294 2 3 40 91 .ANNEX TABLES 201 Annex table I. East and South-East Asia East Asia China Hong Kong.1 .49 1 7 16 2 40 10 1 1 /… . 2005–May 2011 (continued) (Number of deals) Net salesa Region / economy Haiti Jamaica Netherlands Antillesc Puerto Rico Saint Kitts and Nevis Saint Lucia Trinidad and Tobago US Virgin Islands Asia West Asia Bahrain Iraq Jordan Kuwait Lebanon Oman Qatar Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates Yemen South.1 7 2 233 5 3 24 67 5 91 36 2 8 1 1 2 .1 2 278 30 2 7 3 1 .1 832 57 3 4 4 3 1 1 29 12 775 408 217 138 25 7 1 20 101 1 94 1 5 266 2 30 92 13 96 29 2 11 3 1 1 4 2006 2 3 5 6 1 854 86 2 9 1 2 2 5 51 13 1 768 396 224 119 1 17 6 1 28 139 1 130 .4 1 813 166 28 2 23 1 7 19 13 5 68 647 252 69 110 50 1 1 21 166 163 1 2 229 11 113 9 78 17 1 5 1 2 1 1 2009 6 .1 2 5 11 248 . Number of cross-border M&As.2 808 60 9 .1 8 225 2 2 35 75 .1 1 1 1 1 2010 2 2 5 2 808 101 3 4 13 3 2 11 2 44 18 1 707 325 146 105 45 1 8 20 122 2 115 1 . by region/economy of seller/purchaser.1 6 6 7 6 8 3 15 1 748 345 148 117 55 2 23 142 3 139 .49 47 45 25 11 .1 .1 1 2011 (Jan-May) 4 .1 . China Korea.4.1 11 103 31 14 12 1 1 1 1 3 3 1 1 2008 1 1 2 1 011 138 9 2 8 14 2 2 2 12 60 27 873 403 236 93 37 2 35 158 1 3 136 2 1 10 5 312 1 54 80 18 89 41 30 6 3 1 1 1 2009 1 3 2 693 77 3 2 12 2 2 2 8 2 31 13 616 279 142 67 59 5 6 112 1 104 .1 5 260 2 1 60 59 12 76 18 31 7 1 1 1 1 3 2011 (Jan-May) 1 295 37 1 3 2 1 5 12 13 258 98 52 22 12 1 6 5 46 39 1 3 3 114 1 29 19 7 36 7 14 1 1 2005 3 7 1 1 630 66 8 3 11 2 1 4 8 7 22 564 190 45 117 17 1 10 99 98 275 5 120 8 134 10 .1 3 62 12 35 3 .1 3 1 1 2007 13 1 9 1 1 1 999 116 6 4 4 .3 2 565 73 3 1 7 5 5 9 3 4 36 492 266 97 88 57 . Islamic Republic of India Maldives Nepal Pakistan Sri Lanka South-East Asia Brunei Darussalam Cambodia Indonesia Malaysia Myanmar Philippines Singapore Thailand Viet Nam Oceania American Samoa Cook Islands Fiji French Polynesia Guam Marshall Islands New Caledonia Northern Mariana Islands Papua New Guinea Samoa Solomon Islands Tonga Tuvalu Vanuatu 2005 1 5 4 1 1 .2 1 1 1 2006 6 3 5 1 649 91 14 4 6 2 4 1 14 4 42 558 190 38 118 30 1 3 137 134 1 2 231 1 1 117 .

Mozambique. Timor-Leste. Palau. Rwanda. Madagascar. Tuvalu.1 65 5 752 3 19 2010 83 3 1 1 1 80 1 . Guinea. Mali. Lao People’s Democratic Republic. d Least developed countries include: Afghanistan. Botswana.2 Source: UNCTAD cross-border M&A database (www. Papua New Guinea. United Republic of Tanzania. by region/economy of seller/purchaser. Lesotho. Number of cross-border M&As. Mauritius. Malawi. Nepal. Cambodia. Armenia. 2005–May 2011 (concluded) (Number of deals) Net salesa Region / economy South-East Europe and the CIS South-East Europe Albania Bosnia and Herzegovina Croatia Montenegro Serbia Serbia and Montenegro The FYR of Macedonia Yugoslavia (former) CIS Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyzstan Moldova. Chad. Togo. Central African Republic. Uzbekistan. Burundi. Barbados. Net purchases by region/economy of the ultimate acquiring company. Burundi.8 64 1 4 54 4 1 399 7 25 Net purchasesb 2007 102 9 6 1 2 93 1 1 11 70 10 425 . This economy dissolved on 10 October 2010. Maldives. Ethiopia. Cape Verde. Saint Vincent and the Grenadines. Equatorial Guinea. Nepal. Tuvalu and Vanuatu. Myanmar. Grenada. Timor-Leste. Uganda. Benin. Kiribati. Solomon Islands. Bolivia. Republic of Moldova. Saint Lucia.202 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. Haiti. Sierra Leone. Bahamas. Eritrea.1 12 1 185 122 2 1 14 31 12 2010 477 18 1 11 1 4 1 459 3 10 3 12 3 343 84 1 25 38 22 2011 (Jan-May) 115 10 5 4 1 105 3 3 2 2 2 73 20 6 21 6 2005 51 . Chad. Central African Republic. Yemen and Zambia. Senegal. The data cover only those deals that involved an acquisition of an equity stake of more than 10%. Mongolia.4. Solomon Islands. Net sales by the region/economy of the immediate acquired company. Malawi. Republic of Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan Unspecified Memorandum Least developed countries (LDCs)d Landlocked developing countries (LLDCs)e Small island developing states (SIDS)f 2005 137 30 1 6 7 14 1 1 107 3 1 5 6 3 1 66 1 2 19 17 30 22 2006 202 39 1 9 8 1 4 10 5 1 163 2 1 7 2 2 5 101 37 6 36 33 16 2007 279 73 4 8 18 2 21 20 206 5 1 7 9 9 5 2 118 3 1 43 3 31 79 34 2008 321 46 6 4 12 20 2 2 275 4 3 4 4 6 6 181 63 4 23 50 22 2009 343 17 2 2 2 3 7 1 326 3 2 . Vanuatu. Marshall Islands.10 60 9 45 6 444 2 11 27 2006 62 . Gambia. Jamaica. Kiribati. Niger. Kyrgyzstan. The FYR of Macedonia. Uganda. Samoa.unctad. Zambia and Zimbabwe. Seychelles.2 2 4 .1 1 75 4 608 5 4 4 2011 (Jan-May) 31 1 . Mauritania. Dominica. Comoros.2 13 23 2008 123 4 1 3 119 6 1 108 4 554 4 11 21 2009 70 1 . Turkmenistan. Bhutan. Note : Cross-border M&A sales and purchases are calculated on a net basis as follows: Net cross-border M&A sales in a host economy = Sales of companies in the host economy to foreign TNCs (-) Sales of foreign affiliates in the host economy. e Landlocked developing countries include: Afghanistan. Tajikistan. Swaziland. a b c . Sudan. Mali. Federated States of Micronesia. São Tomé and Principe.1 31 27 4 160 . Angola. Ethiopia. f Small island developing countries include: Antigua and Barbuda. Burkina Faso.org/fdistatistics). Lao People’s Democratic Republic. Liberia. Lesotho. Niger. Sao Tome and Principe.9 1 . Tonga. Somalia. net cross-border M&A purchases by a home economy = Purchases of companies abroad by home-based TNCs (-) Sales of foreign affiliates of home-based TNCs. Democratic Republic of Congo. Nauru. Fiji. Comoros. Bhutan. Azerbaijan. Djibouti. Rwanda.1 70 1 . Paraguay. Saint Kitts and Nevis. Burkina Faso. Samoa. Kazakhstan. Bangladesh. Guinea-Bissau. Trinidad and Tobago.

565 141 570 Services 297 581 369 228 612 128 290 228 125 561 136 196 Electricity. net cross-border M&A purchases by sector/industry = Purchases of companies abroad by home-based TNCs. a Net sales in the industry of the acquired company.251 843 8 228 7 691 .8 202 .779 . Cross-border M&As. cross-border M&A database (www.176 40 3 799 9 263 2 497 .111 29 30 110 63 Education 1 474 . beverages and tobacco 37 047 6 736 49 950 131 855 9 636 39 125 Textiles. hunting.235 16 613 23 053 44 241 20 695 .429 860 1 048 559 1 931 Health and social services 2 293 10 624 8 140 2 222 1 123 9 056 Community.3 244 89 397 71 293 658 . .524 1 660 3 882 7 783 820 5 429 29 069 35 192 684 5 409 17 534 6 370 15 255 47 613 6 421 14 890 8 305 27 908 9 102 9 118 5 827 .5.115 3 302 3 360 9 439 1 665 2 621 792 116 379 2 856 .197 183 .5 270 270 87 692 6 604 2 033 Source: UNCTAD.189 4 728 . storage and 75 783 113 915 66 328 34 325 15 912 15 762 communications Finance 53 912 107 951 249 314 73 630 9 535 31 929 Business services 84 366 80 978 102 231 100 701 17 167 45 634 Public administration and defense 324 .1 220 .18 197 3 683 3 372 406 4 241 .605 35 781 322 .1 704 .1 714 945 Total 462 253 625 320 1 022 725 706 543 249 732 338 839 Primary 17 145 43 093 74 013 90 201 48 092 73 461 Agriculture.77 2 005 2 663 3 086 2 214 2 584 Chemicals and chemical products 31 709 48 035 116 736 73 563 32 559 32 243 Rubber and plastic products 2 639 6 577 7 281 1 200 15 5 987 Non-metallic mineral products 11 281 6 166 37 800 28 944 118 3 151 Metals and metal products 20 371 46 312 69 740 14 215 . The data cover only those deals that involved an acquisition of an equity stake of more than 10%.18 656 10 222 .4 422 42 155 51 111 9 493 .462 Publishing and printing 4 933 24 386 5 543 4 658 66 4 977 Coke. Note : Cross-border M&A sales and purchases are calculated on a net basis as follows: Net Cross-border M&As sales by sector/industry = Sales of companies in the industry of the acquired company to foreign TNCs (-) Sales of foreign affiliates in the industry of the acquired company.164 49 802 87 466 158 951 290 701 709 043 408 746 183 003 166 007 50 150 25 270 47 613 .480 6 638 1 400 574 340 634 428 822 25 274 .2 031 94 134 48 891 218 661 244 667 36 280 54 667 .17 184 23 059 4 105 9 465 Motor vehicles and other transport 8 524 7 475 3 099 11 608 8 753 7 484 equipment Other manufacturing 4 205 1 552 2 305 . in the industry of the acquiring company (-) Sales of foreign affiliates of home-based TNCs.2 113 7 422 19 766 3 360 9 526 .804 35 011 537 4 320 536 8 112 .1 096 .2 953 1 938 Machinery and equipment 1 467 17 664 20 108 15 060 2 431 7 922 Electrical and electronic equipment 11 938 35 305 24 483 14 151 17 763 13 237 Precision instruments 11 339 7 064 .714 8 472 489 15 715 67 434 15 107 14 27 .5 477 28 861 43 080 . clothing and leather 1 818 1 799 8 494 2 112 410 962 Wood and wood products 333 1 922 5 568 3 166 821 . by sector/industry. social and personal 15 627 17 060 15 625 1 002 3 434 4 739 service activities Other services 105 1 896 2 856 4 893 624 2 050 462 253 625 320 1 022 725 706 543 249 732 338 839 2 816 32 650 95 021 53 131 29 097 52 971 85 2 856 887 4 240 1 476 675 2 731 29 794 118 804 163 847 17 763 3 124 3 266 809 . quarrying and petroleum 9 647 43 245 71 591 87 303 47 059 68 019 Manufacturing 147 527 212 998 336 584 326 114 76 080 129 183 Food. gas and water 40 158 1 402 103 005 48 969 61 627 .1 881 Construction 4 319 9 955 12 994 2 452 10 391 7 035 Trade 15 946 11 512 41 307 17 458 3 658 14 468 Hotels and restaurants 3 273 14 476 9 438 3 499 1 422 5 411 Transport.4 198 4 827 6 349 2005 2006 Net purchasesb 2007 2008 2009 2010 2011 (Jan-May) 224 163 38 525 183 38 342 79 220 7 710 458 220 769 255 37 869 388 161 2 604 2 994 11 748 4 923 6 783 2 337 106 418 1 561 .9 201 .org/fdistatistics).8 357 3 702 673 1 045 45 574 48 088 12 187 15 386 224 103 316 920 42 487 47 087 .5 220 .37 504 7 868 33 644 32 401 19 339 19 176 3 795 10 254 27 622 52 296 37 632 119 862 . petroleum and nuclear fuel .46 337 . forestry and 7 499 .17 058 .130 570 .2 247 506 5 524 471 1 798 1 148 548 901 311 409 110 555 125 669 50 893 57 088 17 652 27 025 .260 4 352 1 433 2 773 2 635 5 800 1 880 6 404 4 428 7 397 .15 477 1 112 122 .ANNEX TABLES 203 Annex table I. 2005–May 2011 (Millions of dollars) Net salesa Sector/industry 2005 2006 2007 2008 2009 2010 2011 (Jan-May) 224 163 45 096 1 813 43 283 62 688 5 393 356 291 87 .185 527 33 943 65 811 10 050 . b Net purchases by the industry of the acquiring company.3 088 .1 663 5 225 . in the industry of the acquiring company.unctad.152 2 422 2 898 1 033 5 441 fisheries Mining.

204 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. by sector/industry. social and personal service activities Other services 2005 5 004 265 38 227 1 522 158 41 40 96 9 321 38 76 146 160 167 148 78 44 3 217 97 99 441 49 351 484 1 402 10 22 85 149 28 2006 5 747 413 39 374 1 688 130 62 75 97 21 275 55 91 155 187 257 152 84 47 3 646 110 118 425 101 352 531 1 651 7 22 85 178 66 2007 7 018 485 64 421 1 993 213 56 78 90 14 325 66 130 218 228 266 155 86 68 4 539 135 149 588 134 436 712 1 972 10 19 124 197 63 2008 6 425 486 59 427 1 976 220 64 49 60 20 316 63 91 199 265 309 184 95 41 3 962 159 114 590 123 343 563 1 681 8 43 95 177 66 2009 4 239 433 63 370 1 153 109 39 26 37 16 225 35 22 95 134 203 109 74 29 2 653 130 96 324 77 211 458 1 109 13 30 59 116 30 2010 5 405 600 70 530 1 485 167 49 46 34 17 307 53 42 123 175 199 140 86 47 3 320 166 129 445 115 288 557 1 320 2 26 110 110 52 2011 (Jan-May) 2 036 264 25 239 544 71 15 21 21 4 110 7 10 51 63 74 45 31 21 1 228 57 34 180 28 98 187 533 4 12 34 45 16 2005 5 004 199 24 175 1 367 147 20 25 105 9 252 51 79 133 124 162 140 77 43 3 438 61 44 276 14 285 1 492 1 188 . in the industry of the acquiring company (-) Sales of foreign affiliates of home-based TNCs. petroleum and nuclear fuel Chemicals and chemical products Rubber and plastic products Non-metallic mineral products Metals and metal products Machinery and equipment Electrical and electronic equipment Precision instruments Motor vehicles and other transport equipment Other manufacturing Services Electricity.86 15 22 50 25 2010 5 405 344 42 302 1 286 119 42 33 38 9 269 33 24 139 160 179 120 78 43 3 775 70 56 264 40 214 1 923 1 006 1 18 68 76 39 2011 (Jan-May) 2 036 174 14 160 524 45 17 14 28 102 12 6 54 63 92 55 23 13 1 338 47 16 124 17 84 553 425 . cross-border M&A database (www.84 12 39 111 54 Net purchasesb 2007 7 018 350 35 315 1 872 237 36 58 100 16 266 60 110 205 195 255 164 122 48 4 796 92 83 374 56 346 2 121 1 545 . quarrying and petroleum Manufacturing Food. forestry and fisheries Mining.6.72 22 52 127 58 2009 4 239 221 28 193 909 71 26 10 20 4 191 25 16 87 127 144 91 60 37 3 109 98 48 198 26 169 1 728 816 . The data cover only those deals that involved an acquisition of an equity stake of more than 10%.7 7 26 41 5 Source: UNCTAD. in the industry of the acquiring company. a Net sales in the industry of the acquired company. storage and communications Finance Business services Public administration and defense Education Health and social services Community.81 22 35 75 27 2006 5 747 288 34 254 1 523 110 39 37 110 10 231 49 102 162 166 254 159 49 45 3 936 75 55 354 24 304 1 661 1 331 . Note : Cross-border M&A sales and purchases are calculated on a net basis as follows: Net Cross-border M&As sales by sector/industry = Sales of companies in the industry of the acquired company to foreign TNCs (-) Sales of foreign affiliates in the industry of the acquired company. Number of cross-border M&As. b Net purchases by the industry of the acquiring company. . clothing and leather Wood and wood products Publishing and printing Coke. gas and water Construction Trade Hotels and restaurants Transport.org/fdistatistics).77 12 69 123 52 2008 6 425 296 40 256 1 850 180 22 52 72 11 323 41 92 224 247 259 203 88 36 4 279 155 73 352 60 260 1 887 1 305 . hunting. 2005–May 2011 (Number of deals) Net salesa Sector/industry Total Primary Agriculture.unctad. beverages and tobacco Textiles. net cross-border M&A purchases by sector/industry = Purchases of companies abroad by home-based TNCs.

Annex table I. Bolivarian Rep.0 Denway Motors Ltd AXA SA-Life Assurance Business.7.0 5.8 3.3 7. nec Crude petroleum and natural gas Pharmaceutical preparations Prepackaged Software Radiotelephone communications Cable and other pay television services Pharmaceutical preparations 16 4.5 Egyptian Co for Mobile Services Egypt Crude petroleum and natural gas Converted paper and paperboard products. or publishing & printing Information retrieval services Real estate investment trusts Radiotelephone communications Crude petroleum and natural gas Crude petroleum and natural gas Men’s shirts and nightwear Computer integrated systems design Crude petroleum and natural gas Crude petroleum and natural gas Investment offices.1 9. nec Highway and street construction Radio & TV broadcasting & communications equipment Railroads. nec Management investment offices. cross-border M&A database (www. except radiotelephone 20 4.0 Liberty Global Inc United States 25 26 27 28 3.ON US LLC Solvay Pharmaceuticals SA Fomento Economico Mexicano SAB de CV Repsol YPF Brasil SA Millipore Corp Sybase Inc ZAO “Kyivstar GSM” Unitymedia GmbH Ratiopharm International GmbH Food preparations.1 4.3 3.3 3.6 7.7 3. Note: As long as the ultimate host economy is different from the ultimate home economy. of United States United States 19 4.4 United Kingdom United States Soybean oil mills Pharmaceutical preparations Frozen specialties. nec 100 100 100 100 100 36 100 100 100 100 100 50 100 100 80 Bharti Airtel Ltd India 100 Kraft Foods Inc United States Acquiring company Home economya Industry of the acquiring company Shares acquired 100 Rank Host economya 1 Value Acquired company ($ billion) 18.7 4. nec Telephone communications.7 Zain Africa BV Nigeria ANNEX TABLES 3 9.org/fdistatistics).4 Germany 33 34 35 36 37 38 3. China United Kingdom United States Mechanical power transmission equipment. open-end Investors.1 3. nec Gold ores Investors. China Australia United Kingdom United States United States Netherlands China Germany United States Russian Federation United States Israel Telefỏnica SA Spain 50 100 100 100 100 100 100 40 100 100 100 100 100 40 100 100 51 Investment offices.6 7. 205 .3 3.1 6. nec Motor vehicle parts and accessories Life insurance Pharmaceutical preparations 24 4. nec Crude petroleum and natural gas Crude petroleum and natural gas Men’s shirts and nightwear Telephone communications.8 Cadbury PLC United Kingdom 2 10.unctad.0 Bridas Corp BP PLC-Permian Basin Assets Intoll Group RBS WorldPay Argentina United States Australia United Kingdom Investment offices.9 EDF Energy PLC Lihir Gold Ltd T-Mobile(UK)Ltd E.2 HS1 Ltd Andean Resources Ltd Springer Science+Business Media Deutschland GmbH Interactive Data Corp General Growth Properties Inc Sunrise Communications AG BP PLC Arrow Energy Ltd Tommy Hilfiger Corp United States United States Switzerland Canada Australia Netherlands 39 3.UK OSI Pharmaceuticals Inc Hong Kong. nec 29 3.8 Republic of Venezuela-Carabobo Block 17 18 4. nec Investors. nec Source: UNCTAD. line-haul operating Gold ores 32 3.4 3.1 6. nec 3.4 Tomkins PLC United Kingdom 21 22 23 Cable and other pay television services 4. Cross-border M&A deals worth over $3 billion completed in 2010 Industry of the acquired company Candy and other confectionery products Radiotelephone communications Radiotelephone communications Electric services Gold ores Radiotelephone communications Natural gas distribution Pharmaceutical preparations Malt beverages Crude petroleum and natural gas Laboratory analytical instruments Prepackaged Software Radiotelephone communications Cable and other pay television services Pharmaceutical preparations Crude petroleum and natural gas Crude petroleum and natural gas Plastics foam products Radiotelephone communications Pinafore Acquisitions Ltd China Lounge Investments Ltd Friends Provident Holdings(UK) Ltd{FPH} Ruby Acquisition Inc KDDI Corp Vale SA Abbott Laboratories Nestlé SA Trebol Holdings Sarl Cisco Systems Inc Investor group Goldcorp Inc Investor group Interactive Data Corp SPV Brookfield Asset Management Inc CVC Capital Partners Ltd Apache Corp CS CSG(Australia)Pty Ltd Phillips-Van Heusen Corp Nippon Telegraph & Telephone Corp CNOOC Ltd Apache Corp Canada Pension Plan Investment Board Investor group Japan Brazil United States Switzerland Spain United States Canada Canada Guernsey United States Canada Luxembourg United States Australia United States Japan China United States Canada United States Canada Hong Kong.1 4.5 East Resources Inc Pactiv Corp United Kingdom Papua New Guinea United Kingdom United States Belgium Mexico Brazil United States United States Ukraine Germany Germany Venezuela.0 8.1 3.7 Bunge Participacoes e Investimentos SA Piramal Healthcare Ltd Kraft Foods Inc Abertis Infraestructuras SA Brazil India United States Spain Investors.3 3.5 7.1 Dimension Data Holdings PLC South Africa 40 41 42 43 3. nec Telephone communications.7 Brasilcel NV Brazil 4 5 6 7 8 9 10 11 12 13 14 15 9. M&A deals that were undertaken within the same economy are still considered cross-border M&As. except radiotelephone Iron ores Pharmaceutical preparations Chocolate and cocoa products Investment offices.1 3. China United Kingdom United States Orange Participations SA France Royal Dutch Shell PLC Reynolds Group Holdings Ltd Netherlands New Zealand Investor Group India Investors.5 5.2 3. except radiotelephone Telephone communications. except radiotelephone Investors.4 Tandberg ASA Norway 30 31 Books: publishing. except radiotelephone Crude petroleum and natural gas Crude petroleum and natural gas Investment advice Investors. nec 100 62 100 100 100 100 100 100 26 Computer peripheral equipment.2 4. nec Gold ores Radiotelephone communications Electric services Pharmaceutical preparations Investors.7 3. nec Life insurance Pharmaceutical preparations Telephone communications. nec Functions related to depository banking. nec Investor Group Newcrest Mining Ltd Orange PLC PPL Corp Abbott Laboratories Investor Group China Petrochemical Corporation{Sinopec Group} Merck KGaA Sheffield Acquisition Corp OAO “Vympel-Kommunikatsii” {Vimpelkom} Liberty Media Corp Teva Pharmaceutical Industries Ltd Hong Kong. a Immediate country.

Democratic Republic of Côte d’ Ivoire Djibouti Equatorial Guinea 2005 709 764 530 218 269 658 252 532 8 407 2 766 98 282 784 8 795 632 8 674 31 432 58 853 1 006 2 396 4 267 15 549 176 960 2 016 67 27 928 644 1 065 80 749 10 586 9 624 54 697 17 125 358 79 6 585 10 103 192 441 40 661 151 779 68 120 14 322 928 24 2 961 49 789 96 152 844 4 588 2 257 2 109 21 96 32 2 330 9 28 2006 884 087 598 448 352 000 325 512 21 207 3 048 55 356 1 356 4 621 959 9 555 46 102 69 942 2 107 563 8 937 15 372 768 3 071 11 046 4 35 230 864 1 015 54 346 3 039 24 941 10 777 50 176 26 488 4 118 40 3 847 18 482 167 743 13 772 153 971 78 706 18 988 807 10 825 47 509 577 267 768 6 684 4 047 15 3 844 60 9 120 2 637 108 9 2007 940 100 650 301 413 499 375 229 14 112 5 951 74 396 4 926 6 561 2 448 13 159 53 171 73 012 1 600 2 691 8 321 24 187 155 305 10 959 36 25 148 2 809 4 161 90 486 600 35 838 10 920 73 112 38 270 1 291 24 13 930 23 024 142 970 13 745 129 225 93 832 17 597 763 183 4 262 70 548 480 268 353 8 039 4 150 10 3 651 26 7 455 3 889 24 2008 By source 1 461 783 1 027 741 586 118 537 991 22 632 13 731 161 242 4 110 13 249 403 9 294 83 660 92 741 5 406 4 997 17 252 41 024 418 669 11 565 164 32 483 2 459 10 506 3 991 297 1 638 41 876 20 974 102 049 48 128 786 88 12 521 34 733 306 426 76 871 229 556 135 197 29 919 3 521 37 15 598 85 561 560 404 054 15 587 7 019 2 504 3 541 560 414 8 569 48 169 12 2009 952 200 685 086 411 360 383 270 10 106 8 407 9 725 1 487 8 840 94 3 385 64 849 67 727 1 670 3 304 14 871 28 440 575 292 8 366 622 29 299 1 042 6 641 62 400 661 38 928 14 007 68 461 28 090 518 74 8 722 18 776 182 289 29 039 153 250 91 438 16 156 5 156 2 575 66 652 899 248 451 14 866 2 216 34 1 810 18 237 117 12 650 10 18 18 2010 806 969 569 081 343 026 317 370 7 443 4 890 77 239 2 001 4 013 1 245 4 292 46 893 66 161 1 332 508 5 055 21 469 725 267 4 772 14 18 488 2 334 4 785 713 1 571 545 36 335 13 354 67 849 25 656 584 35 3 707 21 330 148 127 16 135 131 992 77 929 9 049 1 424 6 720 60 033 703 218 697 14 602 3 211 3 138 27 46 11 392 493 9 18 2011 (Jan-Apr) 295 867 203 876 125 589 119 723 1 909 1 177 3 4 207 329 2 751 1 062 2 938 12 311 22 565 392 649 823 7 164 5 3 426 9 6 677 512 336 130 90 16 132 4 496 29 630 5 866 169 27 1 563 4 107 50 793 6 740 44 053 27 494 4 111 378 1 837 21 058 111 87 154 7 131 5 5 7 125 26 2005 709 764 225 107 148 751 145 730 3 681 4 101 3 703 89 4 815 1 751 1 898 1 274 10 321 13 188 680 7 702 9 397 7 536 1 470 1 129 30 89 4 105 13 771 791 10 704 9 021 380 9 974 7 244 16 888 3 021 2 15 1 756 1 248 58 059 21 501 36 558 18 297 6 847 365 4 798 5 338 949 421 460 90 290 42 208 15 226 13 689 5 696 4 300 1 715 1 582 48 082 583 217 488 900 2 158 764 300 2006 884 087 286 272 213 079 210 078 1 861 3 879 16 995 220 6 887 1 641 698 1 455 16 104 17 884 1 669 8 321 6 687 9 939 3 066 967 204 870 4 879 15 014 4 065 19 038 11 258 616 17 516 6 797 31 548 3 001 180 628 2 194 52 959 14 623 38 337 20 233 3 815 4 833 13 741 1 840 540 760 101 510 67 453 9 708 27 349 20 920 5 201 1 154 3 122 34 057 2 549 866 728 1 427 405 528 85 2007 World as source 2008 2009 By destination 940 100 1 461 783 952 200 298 350 462 450 305 231 212 965 314 699 191 644 208 204 307 195 186 381 2 861 2 864 1 547 9 568 10 634 3 540 6 857 9 495 4 257 180 428 185 6 799 4 516 3 805 2 004 1 975 2 206 764 1 371 1 144 1 083 2 252 956 17 572 22 201 11 201 18 514 35 163 19 750 4 195 4 704 1 748 9 384 7 661 4 095 3 903 8 176 4 776 9 790 14 112 12 121 616 2 409 594 1 164 1 225 1 104 654 182 619 287 383 197 5 288 9 131 8 721 21 530 32 766 13 557 10 649 7 164 4 958 21 519 33 613 15 379 5 732 3 331 5 416 927 822 193 19 397 27 726 13 729 4 068 2 498 2 714 22 898 60 395 47 869 4 762 7 505 5 263 52 84 94 2 594 3 125 2 260 4 022 4 294 3 003 55 733 107 896 87 961 7 767 17 594 16 043 47 966 90 302 71 919 29 652 39 855 25 626 20 937 27 362 15 200 17 1 439 860 3 268 6 318 9 804 6 692 1 941 1 829 464 559 778 883 917 593 041 93 210 212 811 96 933 53 452 100 174 37 708 13 281 21 418 1 597 13 003 13 363 18 213 4 170 22 872 1 677 4 842 17 855 5 760 18 2 709 1 978 18 138 21 957 8 483 39 757 112 637 59 224 7 585 11 170 13 691 9 310 2 089 308 9 252 234 2 460 344 1 054 9 128 223 1 226 1 042 59 5 3 316 309 1 723 6 41 94 1 295 2 887 2010 806 969 263 509 148 924 143 123 1 889 4 554 4 515 440 5 473 341 996 1 475 8 516 13 748 1 035 7 349 4 436 10 084 974 1 558 356 261 9 826 9 999 2 582 7 958 3 760 776 14 833 1 836 23 556 5 800 706 16 2 169 2 909 71 524 14 397 57 127 43 061 37 107 13 475 813 4 523 130 491 622 84 078 25 407 1 806 13 827 1 762 3 516 2 430 2 066 58 671 1 101 728 447 5 275 37 695 213 1 387 1 2011 (Jan-Apr) 295 867 74 017 49 018 47 329 697 557 2 154 43 1 759 173 297 699 2 585 5 854 888 1 176 2 492 1 815 884 513 152 29 1 156 3 131 740 5 204 2 808 49 3 255 1 009 7 212 1 689 433 1 256 19 347 3 626 15 720 5 652 3 774 7 200 562 1 109 200 740 27 417 4 414 621 704 3 2 300 61 726 23 002 116 497 25 1 296 869 1 600 /… . 2005–April 2011 (Millions of dollars) World as destination Partner region/economy World Developed countries Europe European Union Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Other developed Europe Iceland Liechtenstein Norway Switzerland North America Canada United States Other developed countries Australia Bermuda Greenland Israel Japan New Zealand Developing economies Africa North Africa Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Tunisia Other Africa Angola Benin Botswana Burkina Faso Cameroon Cape Verde Congo Congo. Value of greenfield FDI projects.206 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. by source/destination.8.

ANNEX TABLES 207 Annex table I. Value of greenfield FDI projects. Plurinational State of Brazil Chile Colombia Ecuador Guyana Paraguay Peru Suriname Uruguay Venezuela. 2005–April 2011 (continued) (Millions of dollars) World as destination Partner region/economy Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Mali Mauritania Mauritius Mozambique Namibia Niger Nigeria Reunion Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Swaziland United Republic of Tanzania Togo Uganda Zambia Zimbabwe Latin America and the Caribbean South America Argentina Bolivia.8. by source/destination. Bolivarian Republic of Central America Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Panama Caribbean Aruba Bahamas Barbados Cayman Islands Cuba Dominican Republic Guadeloupe Haiti 2005 24 2 16 2 212 9 30 5 358 4 198 33 3 224 723 10 20 189 443 2 9 11 421 717 390 290 10 2006 42 27 2 524 1 926 7 961 5 834 811 3 523 318 35 9 33 1 105 1 711 54 1 656 416 5 205 2007 18 36 184 3 589 29 9 12 074 8 823 447 5 383 1 928 84 31 267 25 659 2 625 81 103 40 61 2 296 29 16 626 1 2 74 498 2008 2009 By source 3 24 3 8 590 216 314 2 392 2 2 168 177 1 4 452 9 608 9 64 37 667 20 023 17 675 370 14 803 371 541 24 16 2 1 549 919 3 21 842 19 35 1 429 11 495 32 32 104 28 9 15 16 164 12 991 573 9 693 1 453 54 213 88 48 870 2 369 48 308 46 1 919 49 804 7 744 30 2010 15 3 517 1 028 1 254 4 953 49 36 9 10 19 946 16 791 1 434 8 755 2 207 3 362 75 135 2 821 2 988 62 150 62 2 578 66 71 167 4 72 22 2 2011 (Jan-Apr) 7 121 2 357 775 3 830 9 9 838 4 412 781 1 029 362 33 34 3 2 172 5 273 11 5 250 12 152 22 119 2005 969 20 2 088 400 5 431 96 546 909 336 598 1 107 80 868 21 051 11 9 13 57 727 3 467 94 1 520 67 2 148 60 65 433 50 505 3 537 343 20 487 4 919 1 719 2 822 422 5 4 852 490 10 908 9 737 467 86 278 227 7 651 64 964 5 192 285 55 42 847 1 122 9 2006 5 1 507 1 727 83 1 030 249 81 246 372 542 3 595 65 1 11 053 13 1 243 247 400 4 947 263 421 325 1 926 127 64 461 42 621 10 389 2 588 10 578 4 244 2 043 1 058 311 6 593 1 756 3 060 17 825 358 630 14 34 16 199 114 476 4 016 11 450 807 25 139 2007 World as source 2008 2009 By destination 2 499 703 310 333 4 232 913 9 21 21 124 4 808 6 570 56 409 18 354 437 3 708 46 17 22 2 600 820 3 331 1 273 474 174 47 37 242 538 294 58 2 103 11 607 1 557 443 1 791 1 448 3 087 4 172 35 722 6 722 273 253 313 2 2 979 1 296 328 1 421 137 1 68 409 5 148 11 873 7 509 14 3 315 400 289 410 2 022 63 847 38 235 5 489 1 448 16 720 2 891 3 080 515 10 607 2 540 2 648 2 288 23 172 1 274 249 880 897 17 767 96 2 010 2 439 16 3 127 709 2 090 2 941 4 613 965 726 1 2 306 2 358 903 2010 276 1 062 537 2 658 1 400 1 549 41 4 319 5 211 54 3 192 393 100 12 492 1 717 927 128 230 52 5 891 994 8 339 1 228 682 2011 (Jan-Apr) 269 151 5 193 234 1 766 509 3 0 237 503 1 208 513 234 750 83 5 1 042 468 990 2 024 947 1 449 58 257 46 893 3 494 191 28 714 8 421 2 903 269 12 2 016 474 400 9 646 606 131 95 437 7 478 10 889 1 718 22 21 9 377 690 22 241 125 406 109 094 118 195 82 557 6 700 637 35 952 8 951 8 836 313 1 000 175 10 693 95 4 299 4 906 37 716 339 375 469 934 32 517 154 2 928 5 134 64 48 30 1 180 2 098 267 1 74 696 7 593 1 780 36 866 11 325 2 280 325 12 38 13 324 352 801 31 036 2 354 727 1 170 83 23 761 849 2 089 3 362 3 27 32 842 1 255 136 91 932 7 100 668 43 184 8 077 8 835 64 7 6 304 11 599 308 5 787 19 052 1 767 304 877 172 14 462 272 1 197 7 210 7 130 124 6 048 145 59 /… .

China Korea. Federated States of New Caledonia Papua New Guinea South-East Europe and the CIS South-East Europe Albania Bosnia and Herzegovina 2005 2006 2007 2008 2009 2010 By source 887 19 30 12 4 3 22 3 368 400 217 413 184 143 176 092 73 776 35 705 20 877 14 526 1 085 20 2 618 860 535 16 181 4 554 2 837 2 393 54 199 91 3 177 39 9 763 13 302 2 925 13 863 5 951 1 315 364 48 4 367 3 671 3 551 105 523 27 613 23 217 54 1 192 308 143 637 148 438 105 888 49 029 15 313 31 143 1 10 403 38 442 14 35 666 1 643 6 1 087 26 47 978 66 41 390 157 18 121 344 18 127 7 951 2 782 43 41 29 988 1 961 81 460 28 202 15 274 26 764 11 220 25 953 24 20 651 5 197 16 65 36 224 37 1 039 13 544 1 111 11 216 7 898 1 379 9 1 18 663 545 96 524 29 178 7 837 35 178 150 24 181 17 961 50 17 314 503 4 54 36 33 953 400 20 566 1 538 7 683 3 193 573 6 3 3 19 190 1 432 105 15 2011 (Jan-Apr) 11 70 135 10 688 129 33 4 2 188 20 1 757 1 015 2 629 2 913 59 447 39 749 9 834 8 194 19 177 2 544 7 045 25 6 400 518 31 20 52 12 652 1 4 927 521 11 3 840 2 230 1 122 51 51 4 837 53 3 2005 2006 2007 World as source 2011 2008 2009 2010 (Jan-Apr) By destination 32 281 17 23 186 17 6 857 715 746 496 86 12 1 144 64 666 320 299 23 398 579 540 948 385 457 288 227 111 962 67 236 159 371 92 944 51 978 19 553 742 8 670 1 932 1 739 1 870 456 20 110 3 447 2 766 1 024 1 223 12 346 2 426 2 074 887 384 2 216 1 500 688 65 431 1 441 2 116 1 779 406 2 349 13 792 6 266 4 226 1 105 6 1 050 4 18 1 109 19 009 21 848 6 030 2 573 26 821 21 187 14 776 9 741 3 755 3 434 6 236 3 207 1 919 676 13 330 15 063 21 311 9 114 2 155 16 762 34 241 13 160 10 835 5 016 190 4 010 952 1 049 22 381 576 292 512 236 249 130 813 108 662 111 582 94 555 3 899 6 327 509 10 252 556 243 3 770 90 380 180 510 74 335 7 798 173 3 829 354 288 3 137 67 492 2 957 574 100 50 022 8 807 99 781 84 579 4 999 2 674 108 1 033 6 388 54 404 537 2 447 15 45 358 2 532 1 441 303 1 055 716 82 065 148 865 11 659 235 12 750 372 4 380 13 603 7 696 1 000 29 358 1 122 904 51 838 7 043 38 222 92 409 34 759 31 561 1 106 56 1 228 3 1 805 30 248 2 93 28 538 6 177 48 852 531 27 402 523 8 863 78 4 403 15 1 528 6 533 1 157 4 301 3 104 53 3 000 21 111 3 521 115 648 205 7 17 17 9 1 28 142 898 252 513 248 239 58 434 134 275 77 928 8 522 20 416 8 937 82 48 136 194 258 9 407 17 426 4 567 891 5 406 549 95 300 293 1 440 1 883 6 378 5 922 2 191 3 830 1 876 2 038 28 897 81 296 57 365 84 463 118 237 170 311 52 273 9 689 6 680 24 205 11 700 12 667 135 208 11 232 264 351 477 19 523 4 4 554 6 481 238 6 861 975 410 26 702 464 48 60 206 15 433 12 048 23 093 9 632 33 914 20 28 192 860 83 4 760 24 117 633 4 996 242 11 105 2 366 4 774 611 11 17 871 306 94 376 29 923 18 972 27 082 18 400 30 034 23 928 6 076 22 7 45 901 1 659 25 314 20 1 310 14 141 2 881 576 21 446 2 734 - 260 368 25 425 672 2 140 1 518 265 726 374 346 77 075 79 088 2 410 5 700 1 489 5 249 2 034 4 478 595 1 799 1 118 2 056 2 958 3 216 88 11 694 3 977 6 234 19 537 18 370 2 628 4 316 12 996 23 715 17 057 2 144 308 188 651 295 258 331 343 99 422 128 068 140 398 83 691 114 024 95 115 2 831 3 147 2 442 8 175 324 1 225 3 178 175 7 625 70 176 2 852 338 8 525 4 719 350 28 909 64 396 6 169 51 564 8 284 43 986 110 957 128 31 1 942 511 32 27 224 86 738 1 205 13 237 249 45 243 25 206 12 747 527 4 091 4 368 5 825 6 048 10 11 395 11 7 3 63 197 5 506 559 2 212 977 847 170 3 3 21 270 3 600 547 602 56 233 126 549 706 1 103 139 12 467 18 266 563 4 497 227 4 954 11 767 4 291 16 365 443 173 66 204 57 056 9 327 2 254 289 1 359 9 912 1 403 19 755 22 939 7 173 44 897 4 142 169 3 800 173 81 972 13 553 4 398 2 507 179 347 392 259 5 901 2 744 1 085 1 682 160 384 116 358 393 578 2 701 2 978 36 731 27 317 1 169 20 168 1 241 16 057 10 478 12 369 59 075 4 751 77 3 200 967 115 416 19 160 3 268 1 836 1 965 12 088 1 890 10 400 9 596 7 036 42 510 1 558 372 16 1 144 53 928 6 852 85 1 238 /… . China Mongolia Taiwan Province of China South Asia Afghanistan Bangladesh Bhutan India Iran.8. 2005–April 2011 (continued) (Millions of dollars) World as destination Partner region/economy Jamaica Martinique Puerto Rico Saint Lucia Trinidad and Tobago Asia West Asia Bahrain Iraq Jordan Kuwait Lebanon Oman Palestinian Territory Qatar Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates Yemen South. by source/destination. Democratic People’s Republic of Korea. Value of greenfield FDI projects. Republic of Macao. East and SouthEast Asia East Asia China Hong Kong. Islamic Republic of Maldives Nepal Pakistan Sri Lanka South-East Asia Brunei Darussalam Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Singapore Thailand Timor-Leste Viet Nam Oceania Fiji Micronesia.208 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I.

Tajikistan. Nauru. c Small island developing countries include: Antigua and Barbuda. Kyrgyzstan. Mauritius. Note: Data refer to estimated amount of capital investment.fDimarkets. Chad. Comoros. Tonga. Mali. Bolivia. Timor-Leste. Trinidad and Tobago. Burkina Faso. Kiribati. b Landlocked developing countries include: Afghanistan. Ethiopia. Equatorial Guinea. Mali. Central African Republic. Turkmenistan. Barbados. Papua New Guinea. Lesotho. Lesotho. Burkina Faso. Saint Vincent and the Grenadines. Central African Republic. Armenia. Timor-Leste. Saint Kitts and Nevis. Mauritania. Azerbaijan. Bangladesh. Guinea. Yemen and Zambia. by source/destination. Uganda. Lao People’s Democratic Republic. 2005–April 2011 (concluded) (Millions of dollars) World as destination Partner region/economy Croatia Montenegro Serbia The FYR of Macedonia CIS Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyzstan Moldova. Kiribati. Seychelles. Rwanda. Niger. based on information from the Financial Times Ltd. Maldives. Senegal. Solomon Islands. Madagascar. Chad. Grenada. Sierra Leone. . Uganda. Republic of Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan Memorandum Least developed countries (LDCs) a Landlocked developing countries (LLDCs)b Small island developing states (SIDS)c 2005 416 26 238 34 260 33 237 2 25 404 267 383 699 419 2006 224 83 17 565 2 14 35 70 14 812 2 632 656 194 822 2007 2008 2009 2010 By source 2 703 1 269 130 981 7 31 692 405 322 10 1 18 712 28 026 18 118 17 758 9 9 4 230 988 3 584 512 53 1 715 525 1 991 47 30 35 13 97 523 429 7 15 522 13 221 22 211 11 951 13 617 31 5 1 195 2 400 1 487 1 166 90 4 252 73 638 2 553 1 255 255 4 212 2 426 645 1 132 1 070 2011 (Jan-Apr) 3 43 5 4 784 77 62 18 4 563 64 65 164 2 431 2005 1 034 912 788 57 691 334 1 282 828 886 3 705 538 430 40 819 952 2 7 015 900 19 141 14 862 2 622 2006 514 407 2 996 2 867 47 729 194 817 753 455 3 437 63 76 37 031 9 4 306 590 17 083 16 569 3 178 World as source 2007 2011 2008 2009 2010 (Jan-Apr) By destination 1 712 3 836 1 325 2 263 164 1 769 732 120 267 3 2 668 6 975 3 274 3 794 2 447 499 2 514 809 458 144 68 419 96 256 47 077 44 796 17 590 2 440 258 726 188 20 1 762 2 348 1 452 373 364 376 2 255 1 781 1 724 403 998 1 905 4 105 718 23 4 196 19 489 1 504 2 034 3 464 3 440 534 10 101 50 138 425 320 38 46 459 58 453 30 198 33 355 9 224 269 185 483 1 1 042 834 3 463 1 370 348 407 6 751 6 740 4 123 3 320 819 843 488 900 2 415 1 685 25 427 24 363 3 207 62 915 48 933 3 013 42 524 23 071 2 297 37 037 29 103 4 104 10 510 14 126 4 055 Source: UNCTAD. Togo. Kazakhstan. Tuvalu. Guinea-Bissau.ANNEX TABLES 209 Annex table I. Cambodia. Samoa. Dominica. Bhutan. Malawi. Haiti. Mozambique. Republic of Moldova. Benin. Samoa. Djibouti. Mongolia. Burundi. Saint Lucia. Palau. Bahamas. Solomon Islands. Bhutan. Ethiopia. Uzbekistan. fDi Markets (www. Lao People’s Democratic Republic. Democratic Republic of Congo. Burundi. Nepal. Cape Verde. Malawi. Somalia. Federated States of Micronesia. Paraguay. Value of greenfield FDI projects. Vanuatu. Jamaica. The FYR of Macedonia. a Least developed countries include: Afghanistan. Gambia. United Republic of Tanzania. Eritrea. Marshall Islands.8. Sudan.com). Zambia and Zimbabwe. Tuvalu and Vanuatu. Sao Tome and Principe. Niger. Liberia. Rwanda. Comoros. Swaziland. Fiji. Angola. Nepal. Botswana. São Tomé and Principe. Myanmar.

Democratic Republic of Côte d’ Ivoire Djibouti Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau 2005 10 560 9 057 4 920 4 586 220 125 6 5 22 152 25 185 649 1 026 39 12 76 322 11 54 26 3 238 28 21 13 41 183 272 832 334 17 4 90 223 3 126 419 2 707 1 011 145 22 1 55 775 13 1 321 70 24 13 1 4 6 46 1 3 2006 12 277 10 291 5 860 5 426 263 142 6 22 41 142 44 190 688 1 262 54 19 94 288 24 66 29 3 351 38 26 13 4 49 232 285 1 051 434 30 3 102 299 3 278 243 3 035 1 153 159 52 108 808 26 1 779 87 28 1 17 5 1 4 59 4 1 2007 2008 2009 2010 By source 12 245 16 422 14 192 14 142 10 356 13 474 11 651 11 574 6 344 8 027 7 147 6 872 5 896 7 331 6 583 6 316 252 281 201 214 191 209 141 141 7 12 4 11 8 10 18 23 32 53 12 34 136 179 208 138 39 26 13 11 183 203 133 130 912 1 060 984 812 1 278 1 464 1 320 1 362 61 74 28 27 30 30 21 15 98 132 146 136 335 519 444 399 15 18 9 17 13 18 12 15 94 83 64 64 3 3 3 3 309 453 406 376 40 45 39 38 37 88 47 57 13 26 13 13 2 9 2 10 27 31 20 23 461 622 623 609 294 334 326 335 1 026 1 349 1 346 1 303 448 696 564 556 27 25 9 11 3 7 3 6 71 113 109 93 347 551 443 446 3 037 3 894 3 340 3 439 259 331 326 299 2 778 3 563 3 014 3 140 975 1 553 1 164 1 263 154 208 164 172 33 64 62 57 1 1 66 120 74 84 702 1 131 827 915 19 29 37 35 1 700 2 650 2 297 2 302 64 199 173 151 18 45 40 34 2 3 2 9 23 14 25 2 3 5 14 4 1 3 14 8 5 46 154 133 117 2 4 4 2 1 2 2 2 2 2 1 2 1 1 2 2011 (Jan-Apr) 4 874 4 022 2 295 2 127 51 39 2 11 11 36 6 49 254 444 9 13 39 135 2 36 1 134 9 12 2 5 214 117 496 168 8 3 38 119 1 309 137 1 172 418 70 9 30 296 13 781 60 1 1 59 2 2 2005 10 560 5 145 4 074 3 975 104 163 134 5 151 78 63 35 492 285 28 205 192 138 84 75 2 9 112 272 30 260 118 20 171 106 643 99 1 1 20 77 790 207 583 281 115 2 23 122 19 4 509 463 209 45 47 15 59 10 33 254 18 6 3 1 10 2 1 4 1 4 1 17 3 2006 12 277 6 163 4 888 4 756 90 126 286 15 179 68 55 44 588 372 29 243 146 149 110 59 14 12 138 336 56 375 117 25 304 122 698 132 5 22 105 927 179 748 348 135 2 34 149 28 5 337 448 200 50 51 11 46 15 27 248 15 4 1 8 2 2 3 1 3 3 2 16 3 World as source 2007 2011 2008 2009 2010 (Jan-Apr) By destination 12 245 16 422 14 192 14 142 4 874 6 355 7 526 6 618 6 766 2 216 4 912 5 802 4 633 4 418 1 400 4 725 5 578 4 466 4 265 1 344 109 111 74 82 30 210 183 104 96 35 150 146 101 122 28 7 18 10 17 2 149 145 113 183 67 67 66 36 31 12 32 44 25 27 8 38 38 24 33 16 570 697 414 373 93 456 727 692 454 143 38 48 40 29 12 218 154 110 150 55 116 184 175 187 71 178 232 172 186 55 33 52 28 23 9 45 47 35 42 4 26 17 15 28 6 9 9 15 15 7 131 174 160 144 54 343 376 225 307 89 82 82 57 51 11 371 360 204 218 73 101 85 57 93 35 23 23 12 24 4 452 577 391 384 115 86 87 98 67 20 685 896 1 079 899 290 187 224 167 153 56 1 2 4 2 1 2 25 45 31 29 8 159 176 136 118 48 1 036 1 206 1 516 1 788 649 168 218 260 318 108 868 988 1 256 1 470 541 407 518 469 560 167 178 240 254 322 100 4 1 2 1 2 21 42 21 29 18 179 203 163 179 34 25 33 30 26 14 5 110 7 728 6 731 6 470 2 379 388 852 692 630 232 195 364 262 219 69 33 73 32 20 7 54 85 103 73 10 20 40 17 17 1 58 93 48 52 30 2 13 12 9 6 28 60 50 48 15 193 488 430 411 163 10 35 33 34 7 1 6 17 13 7 6 1 2 1 3 1 1 3 8 2 4 1 1 4 1 3 5 15 5 8 7 2 5 8 9 1 3 2 3 1 2 1 1 10 10 8 8 5 3 5 3 4 1 1 3 3 3 4 20 22 23 11 2 3 1 2 2 - /… . Number of greenfield FDI projects.210 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. by source/destination.9. 2005–April 2011 World as destination Partner region/economy World Developed countries Europe European Union Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom Other developed Europe Iceland Liechtenstein Norway Switzerland North America Canada United States Other developed countries Australia Bermuda Greenland Israel Japan New Zealand Developing economies Africa North Africa Algeria Egypt Libyan Arab Jamahiriya Morocco Sudan Tunisia Other Africa Angola Benin Botswana Burkina Faso Cameroon Cape Verde Congo Congo.

9. Number of greenfield FDI projects.ANNEX TABLES 211 Annex table I. 2005–April 2011 (continued) World as destination Partner region/economy Kenya Lesotho Liberia Madagascar Mali Mauritania Mauritius Mozambique Namibia Niger Nigeria Reunion Rwanda São Tomé and Principe Senegal Seychelles Sierra Leone Somalia South Africa Swaziland United Republic of Tanzania Togo Uganda Zambia Zimbabwe Latin America and the Caribbean South America Argentina Bolivia. by source/destination. Plurinational State of Brazil Chile Colombia Ecuador Guyana Paraguay Peru Suriname Uruguay Venezuela. Bolivarian Republic of Central America Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua Panama Caribbean Aruba Bahamas Barbados Cayman Islands Cuba Dominican Republic Guadeloupe Haiti Jamaica Martinique Puerto Rico Saint Lucia Trinidad and Tobago Asia West Asia Bahrain Iraq Jordan Kuwait Lebanon Oman Palestinian Territory Qatar 2005 4 1 3 32 1 1 86 66 2 34 15 1 3 11 13 1 1 1 10 7 1 3 1 1 1 1 165 232 3 1 6 15 11 9 2006 3 2 1 7 41 128 91 16 40 15 2 1 2 15 21 2 19 16 1 10 4 1 1 562 423 9 12 46 16 1 20 2007 2008 2009 By source 2 26 26 2 5 8 1 6 27 21 1 29 65 50 1 2 4 7 9 1 3 3 1 7 3 226 219 230 146 168 156 27 15 21 66 102 63 26 24 37 9 13 6 3 2 12 6 3 5 1 1 2 8 61 7 2 2 2 43 2 3 19 2 1 6 3 1 4 2 1 410 297 11 1 6 28 6 4 10 8 38 2 4 26 2 4 13 1 5 1 5 1 2 229 582 34 14 77 11 6 50 10 59 5 5 7 35 7 15 1 8 2 2 2 1 890 437 32 1 13 39 4 3 22 2011 2010 (Jan-Apr) 17 8 13 61 3 3 1 2 273 173 22 72 50 12 5 5 1 6 81 5 2 5 52 7 10 19 1 7 2 1 4 1 2 1 1 876 414 13 9 29 14 4 18 10 8 7 29 1 92 61 7 35 11 2 1 1 4 24 2 19 3 7 2 4 1 628 118 4 2 2 14 2 18 2005 13 2 4 3 3 5 7 38 2 1 3 3 2 62 2 11 6 14 2 568 368 42 2 169 39 46 4 3 2 29 7 25 165 12 4 1 3 136 1 8 35 1 2 1 5 8 1 2 8 6 3 476 498 27 8 24 10 11 13 23 2006 12 3 3 4 1 5 6 1 25 1 5 2 1 76 7 1 15 14 3 588 339 52 9 152 39 32 5 3 23 8 16 213 20 5 2 2 177 3 4 36 2 1 9 1 2 2 1 13 5 4 297 699 49 4 32 21 18 37 5 44 World as source 2011 2007 2008 2009 2010 (Jan-Apr) By destination 8 19 29 35 19 1 1 1 1 2 1 5 6 1 3 4 3 2 1 3 1 2 1 5 2 4 14 5 5 2 5 23 10 16 5 5 14 8 6 3 2 1 1 20 47 40 33 13 8 13 26 6 3 1 4 9 10 8 2 3 2 1 1 5 2 2 1 59 120 109 95 41 3 1 1 6 17 11 23 7 1 1 7 41 16 21 2 5 17 15 13 10 2 5 13 13 3 820 1 169 1 229 1 180 524 457 648 687 753 350 112 123 114 116 56 4 3 14 6 2 154 254 276 348 163 30 70 112 58 34 77 78 61 106 51 8 10 6 7 5 1 1 1 2 2 4 3 8 1 37 64 76 59 22 2 21 16 8 21 10 11 323 39 7 16 11 217 6 27 40 1 2 2 8 2 2 18 1 4 3 899 588 34 2 20 9 11 16 1 31 23 453 19 11 17 10 355 7 34 68 1 3 6 7 16 1 1 5 20 5 5 695 1 106 68 18 34 30 9 55 2 82 16 487 68 19 18 7 320 7 47 55 2 1 4 12 13 2 3 1 15 1 1 4 801 1 016 70 16 26 28 27 42 1 85 22 365 43 13 11 9 238 10 40 62 1 2 6 8 10 1 2 26 2 2 4 653 914 56 46 47 32 32 38 1 64 6 150 14 8 3 5 100 2 18 24 2 2 1 3 5 2 2 2 4 1 1 619 339 26 10 9 7 11 25 28 /… .

Papua New Guinea. Rwanda. Angola. Bhutan. Solomon Islands. Mali. Saint Vincent and the Grenadines. Madagascar. Democratic Republic of Congo. Dominica. Tuvalu and Vanuatu. Chad. Timor-Leste. Niger. Kazakhstan. Mauritania. Benin. Chad. São Tomé and Principe. 2005–April 2011 (concluded) World as destination Partner region/economy Saudi Arabia Syrian Arab Republic Turkey United Arab Emirates Yemen South. Paraguay. Sierra Leone. Nepal. Lesotho. Zambia and Zimbabwe. Number of greenfield FDI projects. Kiribati.212 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table I. Guinea. Uzbekistan. Ethiopia. Samoa. Lesotho. Federated States of Micronesia. Democratic People’s Republic of Korea. Cambodia. fDi Markets (www. Sao Tome and Principe. Republic of Tajikistan. China Mongolia Taiwan Province of China South Asia Afghanistan Bangladesh Bhutan India Iran. Myanmar. Seychelles. Timor-Leste. East and South-East Asia East Asia China Hong Kong. Kyrgyzstan. Burkina Faso. Trinidad and Tobago. Botswana. Marshall Islands.9. The FYR of Macedonia. Mongolia. Bahamas. Tuvalu. Eritrea. Republic of Macao. Cape Verde. Central African Republic. c Small island developing countries include: Antigua and Barbuda. Palau. Djibouti. . Barbados. Comoros. Rwanda. Mauritius. Nauru. Bolivia. Togo. Uganda. Ethiopia. Swaziland. Nepal. Lao People’s Democratic Republic. Fiji. Burundi. Sudan. Senegal. United Republic of Tanzania. Federated States of New Caledonia Papua New Guinea South-East Europe and the CIS South-East Europe Albania Bosnia and Herzegovina Croatia The FYR of Macedonia Montenegro Serbia CIS Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyzstan Moldova.com). China Korea. Saint Kitts and Nevis. Guinea-Bissau. Malawi. Burundi. Niger. Malawi. b Landlocked developing countries include: Afghanistan. Mali.fDimarkets. Bangladesh. Armenia. Tonga. Yemen and Zambia. a Least developed countries include: Afghanistan. Saint Lucia. Gambia. Equatorial Guinea. Comoros. Maldives. Uganda. based on information from the Financial Times Ltd. Republic of Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan Memorandum Least developed countries (LDCs)a Landlocked developing countries (LLDCs)b Small island developing states (SIDS)c 2005 20 65 102 933 514 141 99 186 88 214 1 4 191 7 6 5 205 2 9 73 6 84 19 12 182 8 2 6 174 2 4 2 12 1 139 14 7 21 4 2006 58 51 210 1 139 586 129 119 217 121 315 3 297 7 4 4 238 5 71 9 100 36 17 2 1 207 14 7 7 193 1 2 7 5 154 24 7 12 8 2007 2008 2009 By source 54 56 32 2 1 32 62 61 145 266 229 4 1 647 844 261 170 256 1 156 380 3 358 9 1 6 3 423 1 1 5 2 135 19 177 47 36 3 2 298 31 16 15 267 3 21 8 2 7 1 1 192 3 29 33 52 14 1 453 820 330 134 222 134 294 2 267 16 5 4 339 7 10 114 14 119 51 24 4 1 244 21 8 4 9 223 20 9 3 10 1 151 2 27 29 49 14 2011 2010 (Jan-Apr) 28 87 211 1 1 462 806 267 121 241 1 176 372 6 339 13 3 8 3 284 14 75 23 106 38 28 2 1 1 266 32 1 2 13 2 1 13 234 2 15 19 3 9 160 26 22 36 16 8 21 47 510 267 85 52 80 50 157 2 148 2 2 2 1 86 1 2 18 2 28 25 10 1 1 71 5 2 1 1 1 66 6 6 1 46 7 5 13 11 2005 58 24 68 229 3 2 978 1 589 1 257 126 119 9 8 70 691 5 7 591 10 66 12 698 4 6 76 8 92 66 156 120 1 169 2 1 1 906 148 13 26 45 11 53 758 12 20 11 11 29 3 13 512 6 1 126 14 133 173 22 2006 94 16 86 290 3 3 598 1 734 1 407 160 2 88 6 3 68 1 056 3 12 2 984 9 5 2 28 11 808 5 98 8 125 2 62 197 112 199 4 1 1 2 777 140 11 17 39 27 3 43 637 8 14 19 19 25 3 6 396 2 128 17 152 172 17 World as source 2011 2007 2008 2009 2010 (Jan-Apr) By destination 54 108 140 116 38 16 29 19 21 8 97 171 156 146 47 293 490 401 309 128 4 10 5 6 2 3 311 1 526 1 218 150 4 72 13 6 63 764 1 5 695 17 2 1 28 15 1 021 6 8 82 11 172 3 97 254 123 265 3 1 1 1 780 156 8 23 32 9 5 79 624 8 17 19 20 33 4 12 383 4 5 108 11 109 169 21 4 589 1 972 1 548 224 4 88 14 7 87 1 072 2 13 972 20 4 11 28 22 1 545 4 35 136 21 214 6 143 304 331 351 12 3 1 6 1 168 231 16 25 40 22 14 114 937 20 43 28 40 62 7 6 573 4 11 125 18 327 358 48 3 785 1 638 1 167 275 1 97 9 3 86 850 6 17 2 745 15 3 4 35 23 1 297 8 31 118 15 158 5 119 311 276 256 9 2 1 5 843 136 7 20 30 18 1 60 707 20 44 26 29 46 2 9 403 6 10 92 20 267 327 25 3 739 1 721 1 301 209 112 7 8 84 857 9 30 2 747 11 8 4 20 26 1 161 4 34 124 12 187 5 96 321 209 1 168 7 5 906 175 6 20 42 14 11 82 731 9 24 39 30 32 11 451 1 7 113 14 288 242 34 1 280 563 424 70 1 32 1 1 34 357 1 6 329 1 2 2 6 10 360 13 46 3 51 2 24 121 40 60 4 2 1 279 61 3 9 11 3 1 34 218 2 6 9 4 21 2 4 135 3 2 22 8 97 97 13 1 113 643 207 116 198 122 226 215 7 3 1 244 9 73 1 25 92 29 15 189 9 7 2 180 10 14 2 133 21 9 13 8 Source: UNCTAD. Republic of Moldova. Liberia. Burkina Faso. Solomon Islands. Jamaica. Grenada. Somalia. Haiti. Turkmenistan. Lao People’s Democratic Republic. Central African Republic. Samoa. by source/destination. Bhutan. Kiribati. Islamic Republic of Maldives Nepal Pakistan Sri Lanka South-East Asia Brunei Darussalam Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Singapore Thailand Timor-Leste Viet Nam Oceania Fiji Micronesia. Vanuatu. Mozambique. Azerbaijan.

1. as of end-May 2011a Economies and territories 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 Afghanistan Albania Algeria Angola Anguilla Antigua and Barbuda Argentina Armenia Aruba Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium c Belize Benin Bermuda Bolivia. Democratic Republic of Cook Islands Costa Rica Côte d’ Ivoire Croatia Cuba Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Fiji Finland France Gabon Gambia Georgia Germany Ghana BITs 3 40 46 8 0 2 58 36 23 64 40 30 29 10 58 93 8 14 22 38 9 14 8 68 14 7 21 14 28 9 4 14 51 127 6 6 12 14 20 10 58 58 27 78 55 7 2 15 18 100 22 7 4 27 29 71 101 12 13 29 136 26 DTTs 1 30 31 4 6 41 39 6 66 94 37 1 26 27 22 43 106 6 2 6 8 12 7 38 11 8 68 2 4 108 1 5 1 26 107 7 1 3 3 1 4 20 55 12 43 77 116 7 1 9 49 2 50 9 8 94 133 5 6 35 105 8 Other IIAs b 2 5 6 7 1 7 16 2 16 63 2 12 3 3 2 63 9 5 1 14 4 6 17 1 17 61 6 8 16 4 22 2 1 5 5 25 15 17 8 5 8 2 15 6 5 3 60 63 63 9 10 6 11 15 10 4 4 63 5 3 63 63 6 5 5 63 5 Total 6 75 83 15 5 15 115 77 6 105 221 79 1 68 59 35 103 262 23 21 7 44 54 22 69 12 33 197 22 15 37 22 158 12 6 10 19 102 249 30 15 20 25 3 39 36 118 73 129 218 234 16 19 22 38 164 34 11 8 140 43 11 228 297 23 24 69 304 39 . List of IIAs. Plurinational State of Bosnia and Herzegovina Botswana Brazil British Virgin Islands Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Cayman Islands Central African Republic Chad Chile China Colombia Comoros Congo Congo.ANNEX TABLES 213 Annex table III.

China Madagascar Malawi Malaysia Mali Malta Mauritania Mauritius Mexico Moldova.1. Republic of Monaco Mongolia Montenegro Montserrat Morocco Mozambique Myanmar Namibia Nepal Netherlands New Caledonia New Zealand Nicaragua Niger Nigeria Norway Oman Pakistan Palestinian Territory Panama Papua New Guinea Paraguay BITs 43 2 17 19 2 8 5 11 15 58 9 81 62 60 4 1 37 94 16 16 52 42 11 24 90 58 28 23 45 50 3 4 32 52 2 9 6 67 17 22 19 36 28 39 1 43 16 61 24 6 13 5 98 5 17 5 22 15 33 47 2 22 6 24 DTTs 52 3 1 4 1 29 69 35 80 60 37 1 71 52 96 12 75 22 40 13 5 10 85 49 16 5 51 33 3 4 12 6 48 70 7 2 9 82 2 60 2 43 49 46 6 31 3 6 49 4 7 8 7 131 1 50 1 15 110 28 59 14 7 5 Other IIAs b 63 9 11 9 6 10 4 10 3 63 28 14 17 1 6 63 4 63 10 20 10 4 8 2 15 13 1 14 61 8 7 5 10 23 63 63 2 8 8 22 9 60 7 7 17 3 3 2 5 7 6 12 4 3 63 1 14 11 6 5 27 9 6 5 9 4 15 Total 158 14 28 29 8 22 9 22 47 190 72 175 139 98 11 135 93 253 38 111 84 86 32 7 34 190 120 45 42 157 91 13 13 54 29 163 133 11 19 23 171 28 142 28 86 94 88 7 77 21 11 117 34 25 25 15 292 2 69 28 12 42 152 70 112 7 45 17 44 . Democratic People’s Rep. List of IIAs. of Korea. as of end-May 2011a (continued) Economies and territories 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 Greece Grenada Guatemala Guinea Guinea-Bissau Guyana Haiti Honduras Hong Kong. Islamic Republic of Iraq Ireland Israel Italy Jamaica Japan Jordan Kazakhstan Kenya Kiribati Korea.214 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table III. China Hungary Iceland India Indonesia Iran. Republic of Kuwait Kyrgyzstan Lao People’s Democratic Republic Latvia Lebanon Lesotho Liberia Libyan Arab Jamahiriya Liechtenstein Lithuania Luxembourg c Macao.

Note that the numbers of BITs and DTTs in this table do not add up to the total number of BITs and DTTs as stated in the text. List of IIAs. but also agreements where negotiations are only concluded. since some economies/territories have concluded agreements with entities that are not listed in this table.1. . Bolivarian Republic of Viet Nam Yemen Zambia Zimbabwe BITs 32 35 62 53 45 82 69 6 2 2 6 1 22 24 46 7 3 41 53 37 2 46 76 27 28 3 5 70 118 41 23 31 39 36 2 4 1 12 54 82 23 15 66 38 104 15 47 30 49 2 28 58 37 12 31 DTTs 8 40 90 66 37 74 68 2 8 4 5 3 13 23 14 53 14 4 81 63 42 3 67 96 38 11 1 6 109 118 33 19 16 62 37 2 17 47 82 12 4 12 46 48 153 10 155 11 35 28 52 9 21 14 Other IIAs b 22 16 63 63 11 61 4 9 10 5 10 2 12 6 2 8 5 29 63 63 2 6 9 63 5 11 7 9 63 26 6 5 3 23 5 1 5 2 10 9 19 3 2 9 5 11 63 7 65 17 3 2 6 19 7 9 9 Total 62 91 215 182 93 217 141 17 18 11 17 5 19 1 57 44 101 29 12 151 179 142 5 8 122 235 70 50 11 20 242 262 80 47 50 124 76 3 11 3 39 110 183 38 6 36 117 97 320 32 267 58 87 4 62 129 53 42 54 Source: UNCTAD. Province of China Tajikistan Thailand The FYR of Macedonia Timor-Leste Togo Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Tuvalu Uganda Ukraine United Arab Emirates United Kingdom United Republic of Tanzania United States Uruguay Uzbekistan Vanuatu Venezuela. a This includes not only agreements that are signed and entered into force. as of end-May 2011a (concluded) Economies and territories 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 Peru Philippines Poland Portugal Qatar Romania Russian Federation Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Samoa San Marino São Tomé and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands Somalia South Africa Spain Sri Lanka Sudan Suriname Swaziland Sweden Switzerland Syrian Arab Republic Taiwan. c BITs concluded by the Belgo-Luxembourg Economic Union. b These numbers include agreements concluded by economies as members of a regional integration organization.ANNEX TABLES 215 Annex table III. based on IIA database. Note also that because of ongoing reporting by member States and the resulting retroactive adjustments to the UNCTAD database the data differ from those reported in the WIR10.

2. Selected MSI standards (Standards referenced and subjects covered in code) Multi-stakeholder initiatives 4C Association Standard 4C code of conduct • • • • Universal principles referenced in the standards UN Universal Declaration of Human Rights UN Convention against Transnational Organized Crime ILO Fundamental Labour Standards OECD Guidelines for Multinational Enterprises Topics addressed Human rights Labour practices Environment Human rights Labour practices Environment Environment Human rights Labour practices Human rights Labour practices Human rights Labour practices Human rights Labour practices Labour wwpractices Environment Human rights Labour practices Human rights Labour practices Environment Bribery Environment Human rights Labour practices Environment Environment Human rights Labour practices Environment Bribery Bonsucro Bonsucro Standard • UN Declaration on Rights of Indigenous People • ILO Fundamental Labour Standards • None specifically CERES Clean Clothes Campaign CERES Principles Code of Labour Practices for • ILO Fundamental Labour Standards the Apparel Industry Including Sportswear ETI Base Code Fair Labor Association Workplace Code of Conduct Fair Wear Code of Conduct FSC Principles and Criteria • ILO Fundamental Labour Standards • ILO Fundamental Labour Standards • ILO Fundamental Labour Standards • Universal Declaration of Human Rights • ILO Fundamental Labour Standards Ethical Trading Initiative (ETI) Fair Labour Association Fair Wear Foundation Forest Stewardship Council (FSC) GoodWeave Global Reporting Initiative (GRI) GoodWeave code of conduct Global Reporting Initiative Sustainability Reporting Guidelines • ILO Fundamental Labour Standards • UN Universal Declaration of Human Rights • UN Framework Convention on Climate Change • UN Convention on the Elimination of All Forms of Discrimination against Women • ILO Fundamental Labour Standards • UN Framework Convention on Climate Change • UN Charter of Rights for Children ILO Conventions relating to Labour Welfare • None specifically • The major international standards relevant for CSR are referenced in ISO 26000 Green-e Energy International Federation of Organic Agriculture Movements (IFOSM) ISO Greene Climate Standard IFOAM Standard (Currently under development) ISO14000 ISO 26000 Marine Stewardship Council (MSC) Roundtable on Sustainable Biofuels (RSB) Roundtable on Sustainable Palm Oil (RSPO) MSC environmental standard • The Code of Conduct for Responsible Fishing (UN FAO) Environment for sustainable fishing RSB Principles & Criteria • None specifically Human rights Labour practices Environment Human rights Labour practices Environment Human rights Labour practices RSPO Principles and Criteria for Sustainable Palm Oil Production (RSPO P & C) SA8000 • • • • UN Declaration on the Rights of Indigenous Peoples UN Convention on Biological Diversity ILO Fundamental Labour Standards ILO Convention on Indigenous and Tribal Peoples Social Accountability International • UN Universal Declaration of Human Rights • UN Convention on the Elimination of All Forms of Discrimination Against Women • UN Convention on the Rights of the Child • ILO Fundamental Labour Standards .216 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table III.

ANNEX TABLES 217 Annex table III.2. Workers Rights Consortium Code of Conduct WRAP Code of conduct . Selected MSI standards (concluded) (Standards referenced and subjects covered in code) Multi-stakeholder initiatives Sustainable Agriculture Network (SAN) /Rainforest Alliance Transparency International Standard SAN Standards Universal principles referenced in the standards • UN Universal Declaration of Human Rights • UN Children´s Rights Convention • ILO Fundamental Labour Standards • None specifically Topics addressed Human rights Labour practices Environment Bribery Transparency International Business Principles for Countering Bribery UTZ CERTIFIED Code of Conduct Voluntary Principles on Security and Human Rights UTZ CERTIFIED • ILO Fundamental Labour Standards Human rights Labour practices Environment Voluntary Principles on Security and Human Rights Human rights • UN Universal Declaration of Human Rights • UN Code of Conduct for Law Enforcement Official • UN Basic Principles on the Use of Force and Firearms by Law enforcement Officials • ILO Fundamental Labour Standards • Other ILO Conventions • ILO Fundamental Labour Standards Human rights Labour practices Human rights Labour practices Workers Rights Consortium Worldwide Responsible Accredited Production (WRAP) Source: UNCTAD.

based on data from individual initiatives.218 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table III.3. Selected industry association codes (Subjects covered and intergovernmental organization standards referenced) Industry association Business Social Compliance Initiative (BSCI) Caux Round Table Standard [code] BSCI Code of conduct • • • • Intergovernmental organization standards referenced UN Universal Declaration of Human Rights UN Global Compact ILO Fundamental Human Rights Conventions OECD Guidelines for Multinational Enterprises Topics addressed Human rights Labour practices Environment Bribery Human rights Labour practices Environment Bribery Environment Human rights Labour practices Environment Bribery Human rights Labour practices Environment Human rights Labour practices Environment Bribery Caux Round Table Principles for Business • None specifically Confederation of European Paper Industries (CEPI) Electronic Industry Citizenship Coalition CEPI Code of Conduct Electronic Industry Code of Conduct • None specifically • • • • • UN Universal Declaration of Human Rights UN Global Compact UN Convention Against Corruption ILO Fundamental Human Rights Conventions OECD Guidelines for Multinational Enterprises Equator Principles Equator Principles • ILO Fundamental Labour Standards Forética Norma SGE 21 • • • • • UN Universal Declaration of Human Rights UN Global Compact Tripartite Declaration on Multinational Businesses and Social Policy Other ILO Conventions OECD Guidelines for Multinational Enterprises International Chamber of Commerce ICC Business Charter for Sustainable Development ICC Rules of Conduct to Compact Extortion and Bribery • None specifically • • • UN Convention Against Corruption UN Global Compact OECD Convention on Combating Bribery of Foreign Public Officials Environment Bribery International Council of Toy Industries (ICTI) International Hydropower Association (IHA) International Mining and Metals Council (IMMC) International Council of Toy Industries (ICTI) CARE Code of conduct IHA sustainability Guidelines Principles for Sustainable Development Performance • ILO Fundamental Labour Standards Human rights Labour practices Environment Human rights Labour practices Environment Bribery • None specifically • • • • • UN Global Compact Rio Declaration Other ILO Conventions OECD Guidelines for Multinational Enterprises OECD Convention on Combating Bribery of Foreign Public Officials Petroleum Industry (IPIECA) Responsible Care (Chemical industry) World Economic Forum Partnering Against Corruption Initiative (PACI) World Cocoa Foundation Guidelines for Reporting Greenhouse Gas Emissions The Responsible Global Charter The PACI Principles for Countering Bribery • None specifically Environment • UN Global Compact • • • UN Global Compact OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions OECD Guidelines for Multinational Enterprises Labour practices Environment Bribery Sustainability Principles • None specifically Human rights Labour practices Environment Human rights Labour practices World Federation Sporting Foods Industry (WFSFI) WFSFI Code of Conduct • ILO Fundamental Labour Standards Source: UNCTAD. .

Gateway. while LDC TV was 12% OBM and 88% ODM. Malaysia. Dell. Viet Nam Mainly in China. countries. Mitsubishi Electric 61 000 Brazil. 31 698 Mexico. Malaysia. 2009 a Company Foxconn/ Hon Hai Home economy Taiwan Province of China Singapore Revenues ($ billion) 59.ANNEX TABLES 219 Annex table IV. Brazil and Mexico Also sell PC monitors under its various own brands such as AOC and Topview. Singapore. Manufacturing operations in many Czech Republic countries. Lenovo. Lenovo. United States China. China. Germany. Czech Republic. Americas. IBM. Acer. Romania. United States.4 64 719 China.9 160 000 Brazil. IBM.. Celestica has a regional technology centre in Thailand and a global design services facility based in Taiwan Province of China. Panasonic. Toshiba. Dell. . United Kingdom and Japan. Quanta Taiwan Province of China 25. Microsoft. China 8. Hewlett-Packard. Motorola Apple Inc. Lenovo. Hewlett-Packard. United Kingdom. 5. IBM. FSC. Nokia. Nokia. HewlettPackard. Sony Ericsson. Dell.9 39 239 Wistron has R&D centres in China and the Netherlands. Flextronics 30. Toshiba. Singapore. Hewlett-Packard. HewlettPackard. Europe and Asia. Indonesia..5 29 646 Jabil 13. China. Lenovo Acer. Ukraine. Mexico China. A number of factories are in China. Hewlett-Packard. Mexico. Total of the top 10 196. Sony. Gericom. Top 10 contract manufacturers in electronics. Philippines. 59 manufacturing and design facilities United Kingdom. Compal Taiwan Province of China Taiwan Province of China Taiwan Province of China United States 20. R&D facilities in the United States. Malaysia. Western Digital. Viet Nam. Samsung. Malaysia. in over 20 countries covering the France. Mexico. Sony. Dell. Mexico. Inventec 13. Nintendo. Cisco. Pace. Wistron 13. Dell. United Kingdom Sanmina-SCI United States .5 Cisco.2 IBM. NetApp. Fujitsu-Siemens. Research in Motion. Caterpillar .4 Apple Inc. Hitachi. 20 manufacturing and design facilities world wide. Software and service outsourcing centres in China. Cisco. HunManufactures products in 18 gary.0 24 479 Celestica Canada 6. Poland. Sony Ericsson. United States. General Electric Dell. Sharp Corporation. Austria. Eastman Kodak.4 58 025 China. a These companies are commonly referred to as “electronic manufacturing services”(EMS) providers. Thailand. Lenovo.. Microsoft.. LG. based on data from Bloomberg and company annual reports. ranked by revenues. Cisco. Hungary. Hewlett-Packard. United States. Also in Poland. Hewlett-Packard. 2009 revenues of PC monitors was made up of 31% own brand manufacturing (OBM) and 69% original design manufacturing (ODM). About 20 factories in China. Singapore. Amazon Alcatel-Lucent. Dell. Fujitsu. Research in Motion. Microsoft. Fujitsu-Siemens. Malaysia Have a number of factories in China. Brazil. Republic of Korea. Asia and Europe. TPV Technology Hong Kong. China. Source: UNCTAD. Hungary. Czech Republic. Czech Republic. Germany Manufactuirng operations in the Americas. Cisco. Europe and Asia. . Toshiba Acer Inc.3 Selected major clients Apple Inc. Huawei. Mexico. Brazil. Samsung. Research in Motion 35 000 China. Malaysia. Thailand . Intel.5 . India Manufacturing facilities in 30 countries covering the Americas. Cisco. Acer. Viet Nam.. Lenovo Global Major overseas production employment bases 611 000 Other relevant information China. Research in Motion. Siemens AG. Ireland. Compaq. Siemens AG. Poland. Echostar. Hewlett-Packard Apple Inc.1.

Ford. 59 771 The company has operations in 32 countries. . Hino. BMW. CNH. Ford and Renault. It has 18 factories in China alone. Mitsubishi. India. 96 000 mainly in Europe. electronic materials and batteries. China (15). Hyundai. Fiat/ Chrysler. Most of its overseas manufacturing facilities are concentrated in China (9 locations).1b General Motors. United Kingdom (3) and Italy (3).. based on Bloomberg. Fahr.1 In addition to Toyota. tires. Ford and other automotive manufacturers. Europe (12%) and Asia-Pacific (15%). 2009 Employeesc Other relevant informationc 220 Company Home economy Total global automotive parts sales ($ billion) Selected major clients Denso Corp Japan 32a General Motors.6 About 76% of the sales revenues were 270 687 with 41% in Germany. Brazil (5). the geographical sales distribution were United States (39%). 11. It has 2 R&D centres in the United States. LG Chem Republic of Korea 13. DKW. Krupp Titan. About 99% of the sales are to external Europe (33%). In 2008. Koegel. Other major customers include VW Group. and 79% with other customers. Indonesia. Portugal. The company has a global network of 25 business locations in 15 countries. India (5). Brazil. and the rest of the world (22%). Chrysler. 29% in Germany. Sales in 2009 were concentrated in Europe (34% of global sales). ZF operations cover 5 continents: Europe. 14 June 2010. General Motors. Lotus. BMW. United Kingdom.Annex table IV. China is the largest host country in terms of revenues. Daewoo.8 General Motors. VW. Ford. Slovakia (3). NAFTA (14%) customers. Toyota. other European countries (26%). a Fiscal year. Americas (12%). The company has 300 subsidiaries and regional companies in 60 countries. Daimler. Europe (34) and Asia-Oceania (48). Nissan and Hyundai. Caterpillar. Belgium. Mercedes Benz. powertrain. Thailand (1). and passenger and light truck and Asia (15%). This includes for the chassis and safety division. France (7). Continental Germany 18. About 21% of the revenues were from GM and affiliates. General Motors. About 81% of the company's total revenues in 2008 were from the petrochemical sector and 19% from information. Mexico and Canada in that order. BMW. Toyota accounted for 30% of Denso's sales. Ford. in the Americas (99%). Iveco. Peugeot. ZF Friedrichs. About 76% of the sales in Japan were with third party customers. BMW. Toyota. Argentina.4% of the overseas sales. Mercedes Benz. For FY 2009. Germany (10%). Robert Bosch Germany 25. the company's largest customers were Ford Motor Company. China (19). 130000 58 414 Johnson Controls United States 12. Has 256 manufacturing operations in 26 countries covering five continents with the following manufacturing/ assembling facilities in: United States (49). Asia-Pacific and other countries (21%). Other major manufacturing centres: United Kingdom. BMW. Mitsubishi. Mazda. World Investment Report 2011: Non-Equity Modes of International Production and Development Total of the top 10 . Chrysler. It has 33 R&D centers across the world with significant presence in Europe and the United States. 146 600 Delphi Holding United States 11. Volvo.. China. In 2008. and Automotive News: “Top 100 Global Suppliers”. India (5). Mexico and Canada. Taiwan Province of China and Poland. United States (10). The company has 175 manufacturing/assembly plants in 27 countries.7 Among the major customers include: Alfa Romeo. North America. Renault. Faurecia has plants in Mexico. Major production bases include Thailand. Toyota.4 General Motors. Faurecia France 13 PSA Peugeot-Citroën contributed 20% of the 2009 sales. Poland. Honda. Ford.Germany hafen . Republic of Korea (4). Freightliner Trucks. annual reports of companies. with 15% in the Americas. Brazil.7 Volkswagen. South Africa (5). South Africa (2). Suzuki. Magna International Canada 17. General Motors (GM). Of the 117 production companies. Other overseas R&D facilities are in China. Mexico (29). Argentina (4). Czech Republic. Czech Republic and India. other major customers include Volkswagen. Germany.8a In FY 2010. Brazil (5). generated outside Germany. Kia.2 Source: UNCTAD. United States. 178. 13 000 148 228 with 33% in Germany. b Estimate. Mexico (4).2. Aisin Seiki Japan 22. Subaru. China and the United States (with many factories). Deer & Co. Note: These figures do not include after-market sales and unrelated sales of the respective companies. Europe (98%) and Asia-Pacific (93%). Turkey. About 25% of sales in 2009-2010 were outside of Japan. Viet Nam. GM. Mazda. Porsche. Isuzu. India and Brazil. Honda. of which 71 domestic and 83 overseas.. Suzuki. Volvo. Ford. Cummins. c 2010. interior. Hyundai Motor. 17% in NAFTA and 14% in Asia. 31 were in Germany. Spain. Part of the Peugeot group. 120 000 Operates in 33 countries with 34 overseas subsidiaries in the Americas. It has manufacturing facilities in India. It has a network of 200 production sites in 32 countries. Daimler. Renault/ Nissan. . ZF Group has 117 production companies in 26 countries and eight main development locations. Europe (26%). Sweden. South America. 74 447 Has 154 subsidiaries. Asia-Pacific and Middle East & Afica.. China accounted for 64. Chrysler-Fiat. Most of the overseas production plants are in the United States. ranked by revenues. . Top 10 auto parts contract manufacturers. Daimler. About 42% of sales in fiscal year 2009-2010 were generated outside Japan. Mexico (3%). Customers are mainly the tier 1 auto suppliers. Operates in 46 countries and consists of automotive and rubber groups. Daimler.

China. United Kingdom.. Italy. GlycoMimetics Inc. 348 8 418 2 000 . China. Elan. United States. Guerbet. Czech Republic. Enobia. It has a R&D facility in Germany. Italy and Turkey. Brazil and Greece. Merck. Has over 200 international pharmaceutical companies including some of the major global ones. Thailand. Novacta Biosystems Ltd. and Singapore.. France and Japan. company’s annual reports and information. Inc. KaloBios Pharmaceuticals Inc. Has facilities in a number of countries. Athera. Amgen. United States 1 640 9 200 The company has 20 facilities worldwide covering 5 continents.3.ANNEX TABLES 221 Annex table IV. based on Bloomberg. Duke Medicine. Production sites in North and South America. Major customers from 50 top pharma companies. Switzerland. Has R&D facilities in India. Source: U  NCTAD. France and Italy. . Also operates in 14 locations with development and manufacturing facilities in the United States. AstraZeneca. ranked by revenues. Global employment Major overseas production bases Catalent Pharma Solutions. MorphoSys. Germany. China and India. Top 10 pharmaceutical contract manufacturers. Italy. InterMune. Amgen & Wyeth Pharmaceuticals. Asia revenues are mainly generated in India. Bayer Schering Pharma Ag. Japan and France. Japan 625 . United States. Switzerland. Endo Pharmaceuticals. including Pfizer. has facilities in Brazil. Genzyme Corp. MedImmune. 9 939 Patheon Inc. Roche and AstraZeneca. Belgium. GlaxoSmithKline. United States. Canada 530 4 000 Fareva Holding Haupt Pharma AG Total of the top 10 France 418 5 000 Germany . United Kingdom. Bayer. Has many pharmaceutical company customers including some of the largest ones and Omega Pharma. . Genentech.. b Evonik (Degussa) is a significant contract manufacturer and specific information on the company is not available. MorphoSys. India. Merck. In the area of pharmaceutical. Europe and Asia. NicOx. Nycomed Danmark. a Only includes revenues from contract manufacturing activities. Has faclities in United States. including Germany. Of which: 19 of the world’s 20 largest pharmaceutical companies. Production facilities in Canada and the United Kingdom include also process & pharma development.. Lonza Group AG Switzerland 1 310 8 386 Boehringer Ingelheim Verwaltungs GmbH Royal DSM Germany 1 096 6 200 Netherlands 1 006 4 374 Piramal Healthcare Ltd India 735 7 311 Jubilant Life Sciences (formerly known as Jubilant Organosys Limited) NIPRO Corporation India 710 5 950 The company has production facilities in the United States and Canada. . United Kingdom. Spain. GlaxoSmithKline. Novartis. 2009 a Companyb Home economy Contract mfg revenue ($ million) Selected major clients Most of the top 50 pharmaceutical companies. Denmark. Top 20 customers account for 55% of revenues. Genzyme Pharmaceuticals. Italy. Production facilities for contract manufacturing are in Austria. GlaxoSmithKline. Austria and other European countries. Clients include Amgen. Indonesia. share of revenues from outside India is growing. About 33% of the company's revenues is from contract pharmaceutical operations. 6 of the world’s 10 largest biotechnology companies and 5 of the world’s 10 largest speciality pharmaceutical companies.. Genentech. APT Pharmaceuticals Inc. Has about 300 customers worldwide. Spain. However. In China operation limited to material sourcing. About 28% of the total revenues are from contract manufacturing.

About 70% of Christian Dior's production are supplied from Europe (France. Adidas Group 1 693 Germany 14 894 69 . Thailand. by dollar volume. About 76% of the full product line is produced by independent suppliers for Hugo Boss. H&M is serviced by multiple suppliers in many different locations. Central and South America (16%). mainly in Asia and Europe.FairLabor. United States 5 019 .. VF United States 7 143 60 Polo Ralph Lauren .... a Europe. India (coordinated from Bangalore). including China. NIKE also has contract manufacturing agreements with independent factories in Argentina. 3 308 . Its key suppliers are overseas partners (90% of manufacturing is done outside Japan. 36 804 Morocco.... . Gap uses contract manufacturing extensively. South America and the Caribbean. and Others ~5%. 2% and 1% of total NIKE Brand footwear. Use of contract manufacturing by major garment and footwear brand owners. 94 in Africa and 51 in Americas produced for Inditex. America. About 660 factories in East and Southeast Asia. ~300 Total of the selected major brand owners . Onward Holdings . Italy and Spain). India. .. Europe (20).. North Africa & Middle East (20). . 351 (292 in developing and transition economies. 480 in Asia... China and Viet Nam are the main procurement sources in addition to 300 000 in audited facilities Cambodia and Bangladesh.org) and company’s reports. As a consequence. Mexico and Taiwan Province of China.. . During FY 2010. Thailand and Viet Nam. contract factories in Viet Nam.. All footwear is produced by contract suppliers outside of the United States. 43 275 Turkey. Indonesia. Central America & the Caribbean (39). Europe.. June 2010 (www. South America (14) and Sub-Saharan Africa (5). the Caribbean and Central America. . this brand firm purchased merchandise from approximately 191 vendors in different parts of the world. Indonesia. North America ~5%. Indonesia and Thailand. 1 014 .. Nearly 85% of the cost of footwear of Collective Brands in 2009 were supplied by contract factories in China. . 30 in Turkey. 14 264 Portugal. . Major production bases/ other information The use of subcontractors for fashion and leather goods operations represented about 43% of the cost of sales of Christian Dior in 2010. and over 98%.. Hugo Boss has its own production facilities and outsourced a significant portion of its production requirement to third-party suppliers. The Jones Group United States 3 327 . 256 385 in South Asia.. Three main areas of sourcing for Benetton are: China coordinated from Hong Kong (China).. 728 . respectively.. 100 in China. Regional procurement continues to play an important role. 1500+ .. Almost all of NIKE Brand apparel is manufactured outside of the United States by independent contract manufacturers located in 33 countries such as in China. El Salvador. Brazil. the Middle East and Africa (EMEA). World Investment Report 2011: Non-Equity Modes of International Production and Development Hugo Boss Germany 2 241 . 9% North Africa and 2% Americas. 23%.. . . Sweden 14 507 30 675 The Gap Inc United States 14 197 .. . and 22 in Viet Nam). Asia ~20%. China. 222 Brand firm . with additional production located in the Middle East and Africa. . Benetton has a network of contract suppliers in different countries.. 139 956 .. 11% Western Europe. Phillips Van Heusen United States 2 399 55 Most of the brand firm's dress shirts and all of its sportswear are sourced and manufactured in the Far East. Thailand and Turkey. United States and Canada (18). . In FY 2010. Source: UNCTAD. Jones Group has long-term mutually satisfactory business relationships with many of its contractors and agents but do not have long-term written agreements with any of them. North America (18%).... Its footwear is sourced and manufactured through third party suppliers principally in the Far East. 1237 . based on Fair Labour Association. . Nearly all the apparel products were manufactured outside North America during 2010. . were produced outside the United States. Like other brand firms. . 400+ Puma Rudolf Dassler Germany Sport 3 530 45 A majority of Puma's contract suppliers are in Asia. .. It has multiple contract suppliers based in different low cost producing countries. 27% in Asia. by dollar volume. Europe (12%) and Africa( 3%). India and Mexico to produce footwear for sale primarily within those countries.. “2009 Annual Report”. . India.. . Inditex SA . 53 085 India. 450+ . Viet Nam... In 2010. Onward does not own any factories. 2009 Number of supplier factories Number of supplier workers . It outsource production to suppliers in various countries. Europe and South America. In 2010.. . Some 599 suppliers in Europe. about 66% of goods of VF were manufactured by outsourcing with 51% of suppliers from Asia..4. 51 604 in the Americas and 24 367 in EMEAa). Indonesia) coordinated from Bangkok. . Mexico. . American Eagle Outfitters Inc United States 2 991 20+ Abercrombie & Fitch Company United States 2 929 28 191 Benetton Italy 2 925 .. About 51% of its production are produced in Eastern Europe.Annex table IV. Turkey.. The brand firm works with some 675 contract suppliers in about 30 countries. Japan 2 668 . The firm is diversifying its manufacturing base not only between countries but also within China in order to reduce costs.. less than 2%... .. Its branded products are produced by third-party contract manufacturers located in more than 20 countries. Indonesia. Apparel sold by Jones Group is produced in accordance with the firm's design. South East Asia (Thailand. Lao PDR. Sri Lanka. Adidas is serviced by multiple suppliers in many locations. 580 in the EMEA region and over 400 in South Asia produced for H&M.. the Middle East. in particular for South (including tier 2 and 3 suppliers). primarily in Asia and Central and South America.. Viet Nam. China (186)... the Indian subcontinent. 101 . primarily in Asia. Home economy Total sales Number of supplier Number countries of suppliers Christian Dior (includes LVMH) France 25 459 . Gap's contract factories include South Asia (188 factories). As of December 2010. Most of the suppliers are in Asia in countries such as China. the procurement volume increased considerably in Brazil and Argentina. The firm did not source more than 5% of its merchandise from any single factory or supplier during FY 2010.. . Southeast Asia (180). Thailand and India manufactured approximately 37%. 308 508 (for factories part of the "cluster"): 161 080 Bangladesh. of the brand firm's products were produced in the United States. of which 70-80% is done in China).. .. Spain 13 336 . 600 823 026 (490 670 in North Asia. selected indicators. 1 230 H&M Hennes & Mauritz AB . In FY 2010. Collective Brands Inc United States . the firm sourced 13% of footwear from Viet Nam and the remaining 3% from different countries including Brazil. the sourced products of Benetton including those under contract manufacturing represented approximately 50% of its total production. Nike United States 19 083 46 . . India. The brand firm does not own or operate any manufacturing facilities. Cambodia. specification and production schedules through an extensive network of independent factories located throughout the world.. Malaysia.. primarily in Asia. Cambodia.. 34%. North Asia (57). Indonesia. Products are manufactured to meet the firm's specifications and standards.

the United Kingdom.000 are in Fujitsu Services. See “Vaswani to lead Dell Services” applications and BPO arm”. Australia and other locations. Outsourcing Alert (http://www. It has significant operations in different parts of the world including the United States.000 in managed services sector. Singapore.900. including India. a subsidiary. South Asia.438 of which 18. Singapore and the Phlippines. Australia.315. 172 554 . France. with most of them located in developing economies. Netherlands. CSC has services centres globally including in India. 000 in services. ranked by revenues. the Philippines. Medical BPO. Viet Nam. In 2007. Guatemala. 108. Europe. Fujitsu has a network of 91 data centers and outsourcing services in 16 countries worldwide. Singapore and Viet Nam. 2009 Company Home economy IT-BPO Revenue ($ Million) 38 201 Global employment Major service centres United States International Business Machines Corporationa Hewlett-Packard Companya United States 426. Australia and Canada. Dell International Services has a number of operations in India. Viet Nam.600 of which 139. TDS.963 (5. HP has services locations in more than 50 countries. . Key service centres are in the United States. of which 41.ANNEX TABLES 223 Annex table IV. NTT locations include the United States. Systems Integration. as well as Services. Spain. India. of which 34.500. . 49. has about 1. Finland. Middle-East. respective companies’ annual reports and information. Services. Jamaica. Singapore. “Global Outsourcing 100: 2010” for ranking of top 15 IT-BPO service providers. Costa Rica and Spain. It has presence in many countries. About 100. 324. Ghana. Germany. It operates in the Americas.400 people in 14 global bases. Malaysia and Eastern European countries. China. It’s subsidiary. Australia. Africa and the Asia Pacific region. 94.000.com/2010/).5. of which 143. Dell Services Applications and BPO activities include more than 15.. its presence in India and China is notable. China.500 in IT-BPO in over 50 countries. of which 17. Chile.698. It has 7 global business centres located in India. Poland and Ireland.000 in global IBM has over 50 IT-BPO related service centres in more than 40 business services. the United Kingdom and also many developing countries such as China. Unisys Corporation United States Total . Eastern Europe. Eastern Europe.324 in Managed Four key offshore locations for Managed Services: India. The global service centres are located in various parts of the world. based on data from International Association of Outsourcing Professionals. Business Standard.200 employees in IT-BPO services. a b 2010 data. It has more than 20.751. Philippines. of which 43. Mexico. It has presence also in Malaysia.000 in BPO activities. in IBM’s delivery centres in India where most are involved in BPO services. Sweden and the United Kingdom. about 30% of HP Services’ global work force was based in India.000 Tata Consultancy TCS has achieved scale in Latin American markets. Wipro has service facilities in the United States.000.517. 231. out of which 22.071. 172.000 staff work countries.000 employees globally.750 in offshore sites). 34 935 Fujitsu Ltd Japan 27 071 Xerox Corporationa United States 9 637 Accenturea Ireland 9 179 204.b 38. majority in technology services and Accenture has a global delivery network of more than 50 centres outsourcing activities. Argentina. Europe. of which 45.outsourcing-alert. Mexico.000.000 experienced services professionals. of which 46. India and the United Kingdom. In developing countries. of which 190.000 Capgemini has presence in over 36 countries. including China and Singapore. Philippines. Emerio. China. Japan. Morocco.500 22. centres in India. 96. Logicaa United Kingdom 5 459 Logica has service operations in more than 35 countries with outsourced service delivery in India. Middle East and Africa. Australia. Indonesia. Tata Consultancy Services Atos Origina Wipro India France India 5 164 5 011 4 189 396. NTT Data Corporation Japan 8 925 Computer Sciences United States Corporation (CSC) Capgeminia Dell France United States 6 451 6 071 5 622 108. and research papers by consultancy firms. Brazil and China. EMC Corporation United States 3 875 2 754 48. 6 April 2011. the Philippines and India. located in different parts of the world. Canada and the Philippines. Romania.036.000 are in services. employs 1. including United Kingdom. Brazil. It has outsourcing outsourcing service workforce in India alone. Top 15 outsourcing IT-BPO service providers. Sources: UNCTAD.. Latin America.. Malaysia.543 is in System Integration and IT services. Bloomberg. 136. Poland. Morocco and Poland.

. based on Franchise Times. Top 15 global franchise chains. Inc. Wendy's/Arby's Group Home economy United States Japan United States United States United States United States United States Canada United States United States United States United States United States United States United Kingdom .6. Domestic units 13 918 6 378 5 166 21 881 7 534 4 410 6 119 3 324 5 905 348 253 3 745 5 142 4 585 920 .. 77 9 >75 >60 >60 34 >90 6 35 57 >40 >75 10 12 >80 . 56 82 59 28 37 5 45 53 11 34 52 43 4 38 32 . 117 15 109 98 76 70 95 8 47 72 76 98 21 21 100 (all brands) . Inc Doctor's Associates. Franchise Brand McDonald's 7-Eleven KFC Subway Burger King Ace Hardware Pizza Hut Circle K Stores Wendy's Parent company McDonald's Corporation Seven and i Holdings Co. Ltd. Marriott International Resorts & Suites Hilton Hotels & Resorts RE/MAX Taco Bell Blockbuster Holiday Inn Hotels & Resorts Total of the top 15 Hilton Worldwide RE/MAX.... “Top 200 Franchise Systems”.. Inc InterContinental Hotels Group . 2009 Worldwide sales in 2009 ($ million) 70 693 53 700 17 800 12 900 12 789 12 500 10 400 9 148 9 000 8 539 7 700 7 500 7 000 6 200 5 840 251 709 Number of Number of countries developing Internationali.. Yum! Brands. Inc Blockbuster. Franchise Direct. October 2010. Source: U  NCTAD. LLC Yum! Brands.com/top100globalfranchises/rankings/?year=2010) and company’s annual reports. Total units 31 967 35 603 12 459 30 257 11 925 4 630 11 068 7 077 6 630 531 526 6 552 5 345 7 405 1 353 . ranked by revenues. Inc. “Top 100 Global Franchises 2010” (http:www..224 World Investment Report 2011: Non-Equity Modes of International Production and Development Annex table IV. Ace Hardware Corp.covered and transition International zation degree (worldeconomies units (Per cent) wide) covered 18 049 29 225 7 293 8 376 4 391 220 4 949 3 753 725 183 273 2 807 203 2 820 433 . . Burger King Holdings. Yum! Brands. franchisedirect. Marriott Hotels. Inc Alimentation Couche-Tard Inc.

IBM. Sales are from AMD annual report “foundry services”. Infineon. Intersil. VIA Technologies and Zoran Corporation. United States. Freescale Semiconductor. Texas Instruments. Although all its production/fabrication facilities are in Singapore. United States 2 Jazz Semiconductor was acquired by Tower Semiconductor in 2008.. . Sony. The company has marketing offices in the United States. ranked by revenues. 3 360 2 Vanguard Taiwan International Province Semiconductor of China (VIS) 394 3 236 2 TowerJazz Israel 309 1 600 Israel. Conexant. It is the world's largest pure play semiconductor foundry. such as Xilinx. 2009 Company Home economy Revenue ($ Million) Selected clients Global employment Major production bases Taiwan Province of China. 73 Source: UNCTAD. GlobalFoundries' revenues and market share are expected to surge in 2010. Japan. . “Market Share: Semiconductor Foundry. France and Italy. International Rectifier. the company was acquired by Advanced Technology Investment Company (Abu Dhabi).. 10 test and assembly facilities. Vishay . In 2010. 2009”. Texas Instruments. With the acquisition of Chartered Semiconductor in late 2009. About 69% of the revenues are outside China (with 56% from North America and 13% from Taiwan Province of China). Ikanos. Fairchild Semiconductor.7. Singapore Market share (Per cent) Other relevant information TSMC is a significant outsource manufacturer for advanced IC producers. Singapore. Infineon. China. a In 2009. Marvell. Russia. MediaTek. Realtek and Novatek. Agilent 13 051 Technologies and leading fabless design companies. Taiwan Semiconductor Taiwan Manufacturing Province Company of China (TSMC) 9 246 TSMC serves more than 400 customers worldwide. Qualcomm. GlobalFoundries was formerly part of AMD and has only started operations in March 2009. TSMC does not design. Another major customer is Winbond Electronics Corporation. ARM. National Semiconductor... All its production facilities are based in China. b Globalfoundries was formerly part of AMD. Samsung and Toshiba. Xilinx. STMicroelectronics. Top 10 global semiconductor foundry contract manufacturers. It is also engaged in collaborative R&D with Freescale.. Broadcom and Qualcomm. Taiwan Province of China. Bloomberg and company’s information and reports. Toshiba. LSI Logic. United IBM Microelectronics States 285 . VIS started as a subcontractor to TSMC. which include many of the world's largest semi10 000 conductor companies. Semiconductor fabs are located mainly in Republic of Korea and United States. On Semiconductor. April 2010. Qualcomm. Worldwide. based on Gartner. Altera. AMD. Like many other foundries. four suppliers. It has 15 fabrication facilities. Nvidia. Samsung Electronics Republic of Korea 290 Customers include Dell. . IC assembly plants are located in Republic of Korea and China. Some of its customers include ST Microelectronics. Sanken. Ixys. Germany and Singapore. which include Applied Micro Circuits Corporation. 26 390 Conexant.ANNEX TABLES 225 Annex table IV. Fabrication facilities are located in the United States. Japan. NEC.. United States. More than 62% of revenues in 2008–2010 came from overseas customers outside of the economy. Marvell Technology Group. It has two fabs in the Republic of Korea Taiwan Province of China 5 Semiconductor Manufacturing International China Corporation (SMIC) Republic of Korea 1 071 10 307 5 Dongbu HiTek 440 Analog Devices. Broadcom. Silicon Mitus TSMC account for nearly 30% of its revenues. GlobalFoundries has more than 150 customers.2% of the net operating revenues. and a representative office in Hong Kong (China). UMC purchased a majority of silicon wafers from a few suppliers. Siltronic AG. 3 500 Singapore 8 GlobalFoundriesb United States 1 101 With Chartered Semiconductor. the top 10 customers accounted for 63. Xilinx and Apple. Qualcomm. AMD. Include semiconductor companies such as Atheros Communications. 46 United Taiwan Microelectronics Province Corporation of China (UMC) 2857 The major customers of UMC include Qualcomm. 39 900 Republic of Korea and the United States 1 Total of the top 10 . Broadcom. 14 678 . It has a sales and R&D networks in Taiwan Province of China. India and Israel. Semiconductor R&D facilities in United States. China.. The top 10 of its major customers accounted for more than 80% of the company's revenues.Siliconix. The company has two fabrication facilities and both are in Republic of Korea. Japan 14 SingaChartered Semiconductora pore 1 542 Motorola. Europe and Japan. Shin-Etsu Handotai Corporation. - . United States 1 . Apple and Texas Instruments. the company has a business presence in 11 countries in 2009. National Semiconductor. Texas Instruments. manufacture or market semiconductor products under its own brand name. The new company's name is TowerJazz. Panavision. Through manufacturing partnerhsip with strategic alliances TowerJazz has accessed to production facilities in China. MEMC Corporation and Sumco Group (including Sumco Corporation and Formosa Sumco Technology Corporation) were the major suppliers. 5 R&D pilot lines. In 2010. Intel.

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