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BANGKOK 2011

“FDI Trends, Opportunities, and Implications”

FDI in LDCs, Landlocked Economiesand Economies in Transition in the Asia and the Pacific

Bangkok, Thailand, 1 December 2011

DR HENRY LOEWENDAHL

fDi Intelligence, Financial Times Ltd

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About the presentation• Focus 16 countries:

• Armenia, Azerbaijan, Bangladesh, Bhutan, Cambodia, Georgia, Kazakhstan, Kyrgyzstan, Lao, Mongolia, Myanmar, Nepal, Tajikistan, Timor, Turkmenistan, Uzbekistan

• Focus on greenfield FDI (GFDI)• Strong economic development benefits• Main target of investment promotion agencies• Data from fDi Markets*

• Presentation covers:• Introduction to FDI• FDI trends• FDI performance• FDI opportunities• Implications for the region

*Note that it is not possible to track all FDI. The data from fDi Markets includes most major projects and is a barometer of greenfield FDI trends. Also note that jobs & capital investment data includes announced projects and estimates.

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Foreign direct investment in LDCs, Landlocked Economies and Economies in Transition in Asia and the Pacific

INTRODUCTION TO FDI

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Introduction to FDITypes of FDI to promote

Type Key sectors Benefits

Greenfield • Natural resources• Manufacturing• HQs• R&D

• Job creation• Exports • Import substitution• Long term capital

inflows

M&A/Equity

• Sunrise industries (e.g. software)

• Sunset industries (e.g. automotive)

• Capital inflows• Globalization of

economy• Safeguarded jobs

Alliances / Partner-ships

• R&D-intensive industries

• Services outsourcing

• Manufacturing outsourcing

• Technology & innovation

• Globalization of SMEs

• Exports & jobs (via contracts)

Privatization

• Utilities• Finance• Infrastructure

• Capital inflows• Reduced debt• Foreign expertise

Type of FDI by sector and benefits

Immigrant/Diaspora

Equity (eg SWFs)

M&A (new)

Alliances & partnerships

Re-investment (following M&A)

Re-investment (existing subsidiary)

Joint ventures

Greenfield (new establishment)

0 20 40 60 80 100

% IPAs targeting FDI by type

Source: WAVTEQ Ltd study for Quebec Ministry of Development, Economy, Innovation and Export, 2010

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Foreign direct investment in LDCs, Landlocked Economies and Economies in Transition in Asia and the Pacific

FDI TRENDS IN THE 16 COUNTRIES

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2008 2009 20100

5

10

15

20

25

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%23.5 23.3

19.7

1.35%

1.97%

1.58%

FDI flows % of global FDI flows

$ b

illio

n

% o

f g

lob

al F

DI

flow

s

FDI trends in 16 countriesOfficial FDI flows

Source: fDi Intelligence, based on UNCTAD data

• $20 billion per annum FDI flows to the region• Kazakhstan accounts for over 50% of the FDI flows (with Turkmenistan, two-thirds)• Excluding these 2 countries, global share of the region increased to 0.6% in 2010

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2008 2009 2010 2011*0

50

100

150

200

250

300

350

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

305

259

220250

1.8% 1.8%

1.5%

1.7%

No. GFDI projects % of global GFDI projects

No

. F

DI

pro

ject

s

% o

f g

lob

al p

roje

cts

FDI trends in 16 countriesGreenfield FDI projects

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd. *to 18 November 2011

• Strong growth in number of FDI projects in 2011 (but below 2008 peak)• Global share of the 16 countries in FDI projects was same as FDI flows in 2010• Kazakhstan accounted for 20% of projects (compared to 50% of FDI flows)

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2008 2009 2010 2011*0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%65,149

56,234

38,043

45,292

1.7%

2.2%

1.5%

2.0%

No. GFDI projects % of global GFDI projects

No

. F

DI

job

s cr

ea

ted

% o

f g

lob

al F

DI

job

s cr

ea

ted

FDI trends in 16 countriesGreenfield FDI job creation

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd. *to October 2011

• Strong growth in number of FDI jobs created in 2011 YTD• Global share of jobs was same in 2010 as FDI flows and projects• Kazakhstan accounted for 28% of FDI jobs in the 16 countries over the period

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GFDI trends by country2003 to mid-November 2011

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd. Jobs and capital investment data to October 2011

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GFDI trends by source region2003 to mid-November 2011

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd. Jobs and capital investment data to October 2011

• The 16 countries are attracting FDI from all main regions of the world• Asia-Pacific, Western Europe, and Rest of Europe (primarily Russia and Turkey)

are the main sources of FDI• North America is less important as a source

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• Russia has been the leading investor in the 16 countries since 2003 by no. projects• In 2011 YTD top investors are India/UK/US followed by Russia and Japan• Fastest growing investors are Vietnam, India, China, Malaysia, and Japan

GFDI trends by source country2003-September 2011 – PROJECTS

FDI projects in the 16 countries by source country (origin of the investment)

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd.

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• Turkey is a much more important investor in job creation as is China and UAE• US is less important (US companies have smaller projects due to sector focus)• UK, Germany, Singapore and Japan are leading countries in 2011 YTD

GFDI trends by country2003-September 2011- JOBS

FDI job created in the 16 countries by source country (origin of the investment)

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd.

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• Fastest growing sectors in 2011 in the 16 countries are: financial services, textiles, food & tobacco, & chemicals

GFDI trends by sector2003-September 2011

Source: fDi Markets database, fDi Intelligence, Financial Times Ltd.

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Other factors

Finance Incentives or Taxes or Funding

Skilled workforce availability

Lower Costs

Regulations or business climate

Natural Resources

Proximity to markets or customers

Domestic Market Growth Potential

0% 10% 20% 30% 40% 50% 60%Source: fDi Markets database, fDi Intelligence, Financial Times Ltd. Based on sample of 154 FDI projects

Investment motives (% of companies citing factor in the 16 countries)

Location determinantsGFDI in 16 countries (2003-Sept 2011)

• FDI driven primary by access to the domestic market• Access to the regional market and to natural resources also very important• The regulatory and business climate is more important than for FDI in the rest of world• Low proportion citing costs and skilled workforce indicates limited efficiency-seeking FDI

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Foreign direct investment in LDCs, Landlocked Economies and Economies in Transition in Asia and the Pacific

FDI PERFORMANCE OF THE 16 COUNTRIES

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Population (2010/2011)

GDP (2010) FDI flows (2008-10)

FDI projects (2008-Sept 11)

FDI jobs (2008-sept 11)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Global share of 16 countriesPopulation, GDP, and FDI

• The 16 countries account for 321 million people with a combined GDP of $530 billion• They attracted $66.2 billion FDI flows in the last three years• An estimated 200,000 jobs were created by greenfield projects since 2008• Region outperforms the world relative to GDP but underperforms relative to population

Share of the 16 countries in world population, GDP, and FDI

Source: fDi Intelligence, Financial Times Ltd.

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Country performancePopulation, GDP, and FDI

GDP Population FDI flows FDI projects FDI jobs

Georgia 2.2% 1.4% 4.2% 12.7% 13.9%

Kazakhstan 26.1% 5.2% 57.2% 19.1% 27.2%

Mongolia 1.2% 0.9% 4.7% 2.3% 1.2%

Armenia 1.8% 1.0% 3.4% 6.2% 1.3%

Azerbaijan 10.2% 2.8% 1.6% 13.4% 6.7%

Cambodia 2.2% 4.2% 3.2% 13.2% 9.6%

Turkmenistan 5.3% 1.6% 10.9% 3.7% 6.3%

Bhutan 0.3% 0.2% 0.1% 0.7% 0.3%

Kyrgyzstan 0.9% 1.7% 1.1% 1.4% 1.8%

Lao 10.6% 2.0% 1.3% 5.9% 4.2%

Tajikistan 1.1% 2.4% 0.7% 1.5% 2.3%

Timor 0.1% 0.3% 0.6% 0.1% 0.5%

Uzbekistan 7.3% 8.7% 3.4% 6.8% 9.8%

Nepal 3.0% 8.3% 0.1% 2.6% 1.2%

Myanmar 8.1% 15.0% 3.5% 2.3% 2.7%

Bangladesh 19.8% 44.3% 4.1% 8.0% 10.9%

Share in GDP, population and FDI of the 16 countries*

Source: fDi Intelligence, Financial Times Ltd. *GDP 2010, Population 2010/2011, FDI flows 2008-10, FDI projects and jobs 2008-Sept 2011

Comparing GDP and Population with FDI attracted:• Best performing: Georgia,

Kazakhstan, Mongolia• Above average: Armenia,

Azerbaijan, Cambodia, Turkmenistan• Average performance: Bhutan,

Kyrgyzstan, Lao, Tajikistan, Timor, Uzbekistan

• Weak performance: Nepal, Myanmar, Bangladesh

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Foreign direct investment in LDCs, Landlocked Economies and Economies in Transition in Asia and the Pacific

FDI OPPORTUNITIES

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Azerbaijan

Georgia

Uzbekistan

Lao

Bangladesh

Cambodia

Kazakhstan

Mongolia

0% 50% 100% 150% 200% 250% 300% 350% 400%

Growth FDI projectsGrowth FDI jobs

Source: fDi Intelligence FDI Forecasting Model

Regional FDI forecasts Greenfield FDI 2010-2015

• Number of FDI projects per annum forecast to double by 2015• Job creation to increase from an estimated 29,000 in 2010 to over 50,000 in 2015• Greenfield FDI in the region to grow much faster than in the rest of the world

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Hotels & TourismMetals

Automotive ComponentsChemicals

Leisure & EntertainmentElectronic Components

Real EstateMedical Devices

Industrial MachineryBuilding & Constr. Materials Food, Beverages & tobacco

Consumer ElectronicsSpace & Defence

HealthcareMinerals

Coal, Oil and Natural GasWood Products

Renewable Energy

0% 50% 100% 150% 200% 250% 300%

Source: fDi Intelligence FDI Forecasting Model

Global sector forecastGreenfield FDI projects, 2010-2015

Forecast growth in GFDI projects (sectors with above average growth)

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FDI opportunities• 1.5% of FDI firms globally are currently considering FDI in the 16

countries (similar to share of global FDI projects):• India, UK, and US are main source countries currently

considering FDI in the region (=nearly one-third of companies)• China, Malaysia, Japan, South Korea, and Thailand have the

next highest number of companies considering FDI in the region (=over one-third of companies)

• Coal, Oil & Gas and Financial Services are top 2 sectors companies are considering FDI in (nearly one-quarter of companies)

• Industrial, Food & Beverages, Real Estate & Hotels, Automotive, Electronics, Renewable Energy, Professional Services, and Textiles are the next main sectors of current investor interest

Source: fDi Markets ‘Investor Signals’, fDi Intelligence, Financial Times Ltd

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FDI opportunitiesFirms with current expansion plans

Company with expansion Source country Sector Target countries for greenfield FDI Amount

Guangxi LiuGong Mach. China Machinery Cambodia  Guangzhou Fortunique China Plastics Cambodia, Myanmar  Club Mediterranee France Hotels Cambodia  Punjab National Bank India Banking Bangladesh  Vandana Luthra India Healthcare Nepal $9m

Nestor Pharmaceuticals India Pharma Myanmar  Lava International India Telecom Bangladesh $15m

Ciputra Indonesia Real estate Myanmar, Laos  Mizuho Financial Japan Finance Burma, Laos and Bangladesh  Master Additives Malaysia Chemicals Cambodia, Myanmar NATedex Poland Chemicals Georgia $5mWoori Finance South Korea Banking Cambodia $50m

Hana Bank South Korea Banking Cambodia, Kazakhstan, Uzbekistan  Logitech Switzerland Electronics Bangladesh, Nepap  Chang Hwa Taiwan Banking Cambodia, Laos  Six Senses Thailand Hotels Bhutan  Avolus UK Airline CIS  Chevron USA Gas Bangladesh $1 bn

Handster USA Software CIS  Petrovietnam Vietnam Chemicals Cambodia, Myanmar, Laos  

Source: fDi Markets ‘Investor Signals’, fDi Intelligence, Financial Times Ltd

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Foreign direct investment in LDCs, Landlocked Economies and Economies in Transition in Asia and the Pacific

IMPLICATIONS

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Implications for the region• The 16 countries have population over 320 million and GDP over $0.5 trillion

• Relative to GDP they outperform rest of world in attracting FDI• Relative to population, they underperform, implying weakness in attracting job creating

FDI especially in manufacturing & export services

• GFDI projects in region forecast to double in 2015 compared to 2010• Russia, US, UK, Turkey, Germany, India, China, Japan, and South Korea like to be the

major and fastest growing sources of FDI in the 16 countries• Coal, Oil & Gas and Financial Services to remain most important sectors• Textiles, Metals, Food & Drink, Industrial Machinery, Real Estate & Hotels, Building &

Construction Materials and increasingly Chemicals, Automotive, Electronics, and Renewable Energy to offer growing FDI opportunities

• Current country performance indicates future potential:• Georgia, Kazakhstan & Mongolia are the best performing to date in attracting FDI• Nepal, Myanmar, and Bangladesh have potential to attract much more FDI

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CONTACTS

Dr Henry LoewendahlSenior Advisor, Representing fDi Intelligence, Financial Times Ltd Managing Director, WAVTEQ Ltd

E-mail: henry.loewendahl@wavteq.com

Skype/MSN: hloewendahl

Linkedin: Henry Loewendahl

M: +44(0) 792 474 6365

W: www.fdiintelligence.comW: www.wavteq.com