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Global Trends in Foreign Direct Investment
Scale, Developments and Consequences
Hafiz Mirza
Professor of International BusinessBradford School of Management
Chief, Development IssuesDivision on Investment
UNCTAD
BCIB Launch
“China is a sleeping dragon. Let it sleep, for when it wakes it will shake the world”. Napoleon
Inward FDI from 1980 to 2007
2
Transition economies
Developed economies
Developing economies
0
400
800
1 200
1 600World total
3
FDI from Emerging accounts for 15% of Global FDI (up from 5% in 1990) Emerging economies account for about 25% of all TNCs In 1990, there were 19 such companies among the Fortune 500; by 2005,
the number had risen to 47; and 58 by 2006 State ownership relatively common compared with developed-country
counterparts
Harbingers of the Future
Economy 1990 2006
Hong Kong, China 11'920 688'974
Russian Federation .. 156'824
British Virgin Islands 875 123'512
Singapore 7'808 117'580
Taiwan Province of China 30'356 113'910
Brazil 41'044 87'049
China 4'455 73'330
Korea, Republic of 2'301 46'760
South Africa 15'004 43'499
Cayman Islands 648 40'395
Mexico 2'672 35'144
Malaysia 753 27'830
Chile 1'149 26'787
Argentina 6'057 24'047
Panama 3'876 21'176
Indonesia 86 17'350
India 124 12'964
United Arab Emirates 14 11'830
Venezuela 1'221 11'559
Colombia 402 9'960
Source: UNCTAD, FDI/TNC database4
Top 20 Developing and Transition Economies
(Stock of FDI)
US$ Billions
Source: UNCTAD 2006, p. 119.
(Millions of dollars)
Figure 2. Intra-regional and inter-regional flows in developing countries excluding offshore financial centres, average 2002-2004
16
21
702
1 201
754
403
LAC2 701
Africa2 105
Asia47 881
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Sovereign Wealth Funds:Top Investment Locations
6
$100-700 Bn
$30-100 Bn
$10-30 Bn
$0.1-10 Bn
7
International Expansion in Oil, Gas & Minining
35
35
46
46
49
53
66
98
114
129
188
366
512
550
584
1 291
1 045
749
1 427
0 200 400 600 800 1 000 1 200 1 400
ONGC
Norsk Hydro
Lukoil
CNOOC
Sinopec
Statoil
Petrobras
Petronas
BG
Inpex
CNPC/ Petro China
Repsol-YPF
ConocoPhillips
Chevron
ENI
Total
Royal Dutch Shell
BP
ExxonMobil
Oil and gas production of selected TNCs outside their home country, 2005, million barrels of oil equivalent
Source: UNCTAD, based on data from IHS
10%+ of Global FDI
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Foreign Production Locations by Oil & Gas TNCs from Emerging Economies
1995
Source: UNCTAD, based on data from IHS
9
…and in
2005
Source: UNCTAD, based on data from IHS
TNC Involvement in Infrastructure
(Billions of US$)
10
0
10
20
30
40
50
60
70
80
90
100
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Total Electricity, gas and water Telecommunications
10% of Global FDI
Top Infrastructure TNCs
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Rank Electricity Natural gas Telecommunications Transport Water and sewage
1 Electricité de France Gaz de France Vodafone Group Hutchison Whampoaa Veolia Environnement
2 E.On Spectra Energy Corp. Telefónica Grupo Ferrovial YTL Powerb
3 Suezc Centrica Deutsche Telekom Abertis Grupo Agbar
4 RWE Groupc Gas Natural France Télécom AP Moller-Maersk Waste Management Inc
5 Endesa Transcanada Corp. Vivendi Inc DP World Shanks Group6 Vattenfall Enbridge Inc Liberty Global Inc China Ocean Shipping Waste Services Inc7 National Grid Sempra Energy TeliaSonera Canadian National Railways Co. Stericycle Inc8 AES Corp. El Paso Corp. SingTel Skanska Hyflux Limited
9 Fortum Hunting Plc Telenor PSA International Clean Harbors Inc10 Duke Energy Corp. Williams Companies Nortel Networks Hochtief ..11 EDP Energias de Portugal Hong Kong & China Gas Co. KPN Vinci ..12 International Power Plc Distrigaz 'D' BT Group Macquarie Airports ..13 CLP Holdings Canadian Utilities Ltd. Verizon Communications Deutsche Bahn ..14 Iberdrola Iwatani International Corp. SES Bouyguesd ..
15 Unión Fenosa .. Telecom Italia Orient Overseas International ..16 PPL Corp. .. América Móvil Babcock & Brown Infrastructuree ..
17 Atel - Aare Tessin .. Mobile Telecommunications Co. Grupo ACS ..18 Public Service Enterprise Group .. TDC A/S Enka Insaat ve Sanayib ..
19 Keppel Corp. .. Portugal Telecom Obrascon Huarte Lain ..20 Cofide-CIR Group .. Tele2 Kansas City Southern ..
Source : Annex table A.III.(top infra) and A.III.(top50).a Also active in eectricity and telecommunications.b Also active in electricity.c Also active in water and sewage.d Also active in telecommunications.e Also active in telecommunications and electricity.
Significant Chinese and Indian
Infrastructure Investments in Africa
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TNC Profitability 1997-2007
13
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ b
illi
on
0
1
2
3
4
5
6
7
8
%
Profits Profitability
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Development Challenges
Host-country gov’t
• Governance, institutions
• Sectoral policies and institutions
• TNC-specific policies (entry and operations, contracts, taxation,IIAs)
Making FDI work for sustainable development
TNC Activities
TNCs
• Abide by local laws• Uphold high standards
when local governance is weak
Home-country gov’t
• Promote responsible TNC behaviour
• Assist host countries
Int. Community
• Guidelines• Pressure, sanctions• Assist host countries
Civil society
• Monitor TNCs and governments
• Provide expertise
Implications for Research:Sources of Competitive Advantage
Firm-Specific Advantages
Home Country Advantages
Development Process or Stage
Advantages
Ownership
and Access
Expertise and Technology
(1)
Access to Resources and Activities
(2)
Relative Advantages
(3)
Product Process
& Value Chain
Niches
Production and Process
Technologies (4)
Access to Created Access
(5)
Market Niches
(6)
Networks
and Relationships
Business
Models
(7)
Kinship
(8)
Intra-Developing Country Relations
(9)
Organisational Structures and Business Culture
Forms of Governance
(10)
Cultural Affinity
(11)
Institutional Affinity
(12)
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