Cecilia Sager, Manager Karin C. Millett, HeadInvestment Generation Investment Generation
Vienna Office FIAS, World Bank Group
Thessaloniki, September 11, 2008
Investing in Emerging European Markets: Trends and ProspectsStrategic Partnership between Hellenic Ministry of Foreign Affairs and FIAS
Key Elements of Today’s Presentation
• Strategic Partnership between Hellenic Ministry of Foreign Affairs and FIAS
• FIAS, a joint facility of the WB, IFC and MIGA• Overview of global and Eastern Europe FDI flows• Factors influencing FDI flows, including trends and
prospects• FIAS Investment Generation Vienna Office—in the
region, for the region, reaching out to private sector investors
Strategic Partnership: Hellenic Ministry of Foreign Affairs (MFA) and FIAS
• Based on discussions, MFA and FIAS have agreed to:– Establish productive link between FIAS Investment
Generation work and Greek and other European countries to facilitate investments in regions of mutual interest.
– Geographic priorities: Eastern Europe and Middle East/North Africa
– Building bilateral linkages between FIAS work and Greek private sector
– Shared staffing and knowledge exchange
The interests of our audience…
• Before we tell you about us, we would like to hear about you, our audience– Private sector? Already investing abroad? Where?
Sectoral interests?– Consultants? Areas of interest?– Academics? Areas of interest?– Other?
• Our work may be relevant to all of you as actors and agents in public policy, the marketplace and research
World Bank Group—Who we are
• World Bank (IBRD/IDA), IFC, MIGA• World Bank—lending to governments for
development priorities• IFC – advisory services, investment in private
sector, both equity participation and loans• MIGA – providing guarantees (insurance) to
private sector against: breach of contract by government, expropriation, war and civil disturbance, currency transfer restrictions
• FIAS – the Investment Climate Advisory Service (partnership of WB, IFC, MIGA)
FIAS: 20 years of experience in investment climate
FIAS total program spending
• Multi-donor advisory service on investment climate• 105 staff in 8 locations • Mission: increase private investments in developing countries• Business model: require client requests and 50% co-funding • 219 projects in 82 countries (last 3 years)
WBG - Stimulating Reform through Benchmarking
• Doing Business - annual review of around 180 countries - and selected cities - to assess objective measures of business regulations and their enforcement – Doing Businees in SEE - covers 22 cities in seven
economies: Albania, Bosnia and Herzegovina, Croatia, Kosovo, FYROM, Montenegro, and Serbia
• FDI Indicators - new FIAS instrument to review specific conditions for cross-border investment
DB and FDI Indicators: what they measure
Starting a businessDealing with licensesEmploying workers
Registering propertyGetting credit
Protecting investorsPaying taxes
Trading across bordersEnforcing contractsClosing a business
Foreign ownership restrictions
Investment promotion
Pre-establishment procedures
Access to land
Currency convertibility and repatriation
Expropriation and int’l arbitration
DB vs. FDI INDICATORS
- - - - - - - - - - - - - - - - - - - - - - - - -
Doing Business Indicators SEE & CIS (1)
World Bank-Doing Business Report
2009 rank 2008 rank Change in rank
Albania 86 135 +50
Armenia 44 41 -3
Azerbaijan 33 97 +64
Bosnia and Herzegovina 119 117 -2
Bulgaria 45 44 -1
Croatia 106 107 +1
Georgia 15 21 +6
FYROM 71 79 +8
Kazakhstan 70 80 +10
Doing Business Indicators SEE & CIS (2)
World Bank Doing Business Report
2009 rank 2008 rank Change in rank
Kyrgyz Republic 68 99 +31
Moldova 103 92 -11
Montenegro 90 84 -6
Romania 47 47 0
Russia 120 112 -8
Serbia 94 91 +3
Tajikistan 159 156 -3
Turkey 59 60 +1
Turkmenistan na na na
Ukraine 145 144 -1
Uzbekistan 138 145 +7
World Bank Group’s Role in Investment Climate Development
• Creating the institutional foundations for effective markets
• Promoting open and competitive markets• Ensuring social safety nets
TO CONTRIBUTE TO: – Job and wealth creation– Opportunity for all – Better governance
FDI Indicators: Benchmarking Investment Climate for FDI
• Objectives - Extend thematic coverage of DB indicators to areas of FDI regulation in order to:– Stimulate appetite for investment climate reforms (as effectively
demonstrated by DB)– Respond to needs of public policy makers, business,TA
providers, and academics• Coverage - Six topical indicators measuring FDI
regulation and administrative processes. • Methodology consistent with DB and anchored in
standardized surveys administered primarily to investment lawyers, accountants and consultants.
• Timing - 22 pilot countries tested in 4 successive phases (Nov ’07 – Oct ’08). Rollout in 80 countries, planned for Jan’09.
FDI Indicators: Examples of preliminary results from pilot tests
Types of land occupancy rights available for a foreign firm:
Right to Buy (Freehold)
Right to Lease (Leasehold)
Private State Private State
Cameroon
Ethiopia
Ghana
Mozambique
Nigeria
(1) Many countries continue to have sector- specific restrictions on FDI:
(2) Several countries in Sub-Saharan Africa require an additional approval for foreign investors:
(3) The quality of land rights for foreign investors varies considerably across the world:
(4) Sub-Saharan African countries vary significantly in the type of land occupancy rights they offer:
Can a foreign company establish a subsidiary without an investment approval?
Yes/No Median # Days(if ‘No’)
Cameroon 14
Ethiopia 10
Ghana N/A
Mozambique 60
Nigeria N/A
- Yes
- No
23
35
38
38
50
61
65
67
71
81
85
90
Mozambique
Ethiopia
Ghana
China
Nigeria
Nicaragua
Cameroon
Russia
Peru
Argentina
Colombia
Chile
strongweak
sectoral openness index (0-100)
quality of land use rights index (0-100)
60
62
72
88
88
89
90
95
97
100
100
100
Ethiopia
Russia
China
Argentina
Nicaragua
Cameroon
Chile
Peru
Ghana
Colombia
Nigeria
Mozambique
openclosedsectoral openness index (0-100)
Factors other than Investment Climate affect FDI flows—prospects are good…
• Cross-border mergers and acquisition (vs. Greenfield investments) are the major drivers of global FDI
• US and the EU15 continue to dominate as recipients of world FDI
• Among emerging markets, China remains by far the main recipient of FDI
• Liberalization of trade and investment policies expected to continue
• Developing countries increasingly outward investors
*Source: World Investment Prospects to 2011; The Economist Intelligence Unit
However…..
• Geopolitical climate more threatening
• Signs of emerging protectionism against FDI, particularly among developed countries
• Apparent weakening of appetite for globalization
• Financial market woes making financing tighter
Factors influencing location decision
Factors attracting investment by region(per cent of total number of responses for all factors in the region)
North
America EU15NewEU12 SEE and CIS
South, East and South-East Asia
World average
Follow the leader 2 3 3 6 6 4
Skilled labor 11 11 12 4 4 9
Low-cost labor - - 12 8 8 9
Size of local market 24 20 12 25 25 21
Access to capital market 7 6 2 1 1 2
Access to natural resources 6 4 8 5 5 6
Access to regional market 10 11 13 12 12 10
Growth of local market 12 12 19 31 31 20
Government effectiveness, incentives 7 11 6 1 1 5
Stable investment environment 20 19 12 4 3 10
Source: UNCTAD, WIPS 2007-2009
Investment trends in SEE & CIS
Top investment destinations Top investors
Key sectoral opportunities include: automotive components, light manufacturing, IT
services, back office services
However, there are challenges…
• Deficiencies in investment climate and doing business conditions
• Availability of labor (sometimes due to skills mix, other times the cost, and sometimes the lack of availability due to outward migration)
• Inadequate infrastructure• Slowdown in growth in Europe - possibly
recession - will affect FDI flows in short term
FIAS Experience with Investor Outreach in the Western Balkans
• Invest in Western Balkans Program commenced operations in 2005,
based in Vienna
– Primary objective: To promote investment in Western Balkans through
improving outreach capacity of Investment Promotion Intermediaries
• Extensive network of relationships with potential investors
• IWB results to date:
Investments/Jobs: 10 investments generated (€145m), 500 direct jobs,
750 indirect jobs, 54 investor site visits
Enhancing client promotional capacity: Strengthened marketing capability
in partner institutions – marketing strategies and outreach plans
In 2008, IWB helped secure an investment by Oberndorfer in Croatia. This €5 million investment in
the construction materials sector is their first investment outside of Austria and Phase I entails 60
direct jobs.
FIAS Investment Generation Vienna Office – in the region, for the region
• Leading FIAS Investment Generation work in Eastern Europe and Central Asia.
• Communicating Policy Reform through public-private dialogue, engaging with domestic and foreign investors in client countries
• Providing advice and technical assistance to analyze, package and implement reforms
• Assisting with formulating and implementing national FDI strategies, based on sectoral competitiveness
• Actively reaching out to potential investors to: - Stimulate interest in productive investment, particularly in Greenfield investment
ImprovedInvestmentclimate
ImprovedInvestor
Servicing
FDI friendly policies
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Investment
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FeedbackLoop
Investment Generation Vienna - Goals
