foreign direct investment – trends and determinants · kazakhstan uzbekistan kyrgyz republic data...
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Foreign Direct Investment –Trends and Determinants
Ralf KrügerDivision on Investment and Enterprise, UNCTAD
Workshop on FDI in Advanced Fossil Fuel Technologie sDushanbe, Tajikistan13 September 2011
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Agenda
1. Why look for foreign investors?
2. How to measure foreign investment?
3. What makes investors invest in a location?
4. Global FDI trends
5. FDI in selected countries
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FDI is a package with a lot of development potential
• FDI is more than just money, it embodies many elements needed for economic development
• Some important elements of the package are:– Finance/capital– Technology– Market contacts– Managerial know-how
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Agenda
1. Why look for foreign investors?
2. How to measure foreign investment?
3. What makes investors invest in a location?
4. Global FDI trends
5. FDI in selected countries
Counting FDI, Greenfield and M&A projects
FDI in the balance of payments:• Investment in another economy• A long-term relationship • With a lasting interest and control
The modes of entry of FDI projects are:
Greenfield InvestmentsCross Border Mergers and
Acquisitions (M&As)
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Agenda
1. Why look for foreign investors?
2. How to measure foreign investment?
3. What makes investors invest in a location?
4. Global FDI trends
5. FDI in selected countries
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FDI: Locational Determinants
Decision for a specific location
General policy framework(Good governance, property rights, economic/political/social stability)
…
Natural resource-seeking motives(Access to raw materials)
Efficiency-seeking motives(Different comparative advantages of countries)
Strategic asset-seeking motives(Access to technology; participation in clusters)
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2
3
4
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6Business facilitation measures(Investment promotion, aftercare, incentives)
Market-seeking motives(Market size/growth, per capita income)
Economic Determinants(by motive of
TNC)
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Agenda
1. Why look for foreign investors?
2. How to measure foreign investment?
3. What makes investors invest in a location?
4. Global FDI trends
5. FDI in selected countries
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FDI inflows, global and by group of economies, 1980 –2010 (Billions of dollars)
Figure I.3, WIR11, p. 3.
Developing countries lead the way out of the crisis
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Agenda
1. Why look for foreign investors?
2. How to measure foreign investment?
3. What makes investors invest in a location?
4. Global FDI trends
5. FDI in selected countries
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Trends in project countries
• All 9 countries saw strong GDP growth over 2000-2010 period
• All countries have some peaks in greenfield projects
• Electricity does not capture a large share of foreign investment
• Some deals in Kazakhstan, Tajikistan and Ukraine; China & India with low shares
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Annex
Foreign investment over GDP, 1993-2010 for:Afghanistan MongoliaChina TajikistanIndia UkraineKazakhstan UzbekistanKyrgyz Republic
Data sources:FDI UNCTAD, FDI/TNC databaseGreenfield UNCTAD, based on information from the Financial
Times Ltd, fDi Markets (www.fDimarkets.com)M&As UNCTAD cross-border M&A database.GDP United Nations Statistics Division and UNCTAD
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Afghanistan
-5%
0%
5%
10%
15%
20%
25%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
Greenfield(values) /GDP
Foreign investment over GDP, 1993-2010
15
China
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
M&A sales / GDP
Greenfield (values) /GDP
FDI in electricity /GDP
M&A sales (value) inelectricity / GDP
Greenfield (value) inelectricity (coal, oil &natural gas) / GDP
Foreign investment over GDP, 1993-2010
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IndiaForeign investment over GDP, 1993-2010
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Kazakhstan
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
M&A sales /GDP
Greenfield(values) /GDP
FDI inelectricity /GDP
M&A sales(value) inelectricity /GDP
Foreign investment over GDP, 1993-2010
18
Kyrgyz Republic
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
M&A sales /GDP
Greenfield(values) /
Foreign investment over GDP, 1993-2010
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MongoliaForeign investment over GDP, 1993-2010
0%
10%
20%
30%
40%
50%
60%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
M&A sales / GDP
Greenfield(values) / GDP
20
TajikistanForeign investment over GDP, 1993-2010
0%
10%
20%
30%
40%
50%
60%
70%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
Greenfield (values)/ GDP
Greenfield (value)in electricity (coal,oil & natural gas) /GDP
21
UkraineForeign investment over GDP, 1993-2010
-2%
0%
2%
4%
6%
8%
10%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
M&Asales /GDP
Greenfield(values) /GDP
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UzbekistanForeign investment over GDP, 1993-2010
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1993
1995
1997
1999
2001
2003
2005
2007
2009
FDI/GDP
M&A sales /GDP
Greenfield(values) /GDP
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FDI inflows to developing and transition economies, by region, average of 2005-2007 and 2008-2010 (Billions of dollars)
Figure I.6, WIR11, p. 5.
Trends diverge by host region