Foreign Direct Investment:attract more to benefit more

Khalil HamdaniIstanbul, 20 November 2013

OIC countries can be more active in FDI (UNCTAD data, inflows, billions of dollars)

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

WorldDeveloping coountriesOIC countries

OIC countries are now more open to FDI (UNCTAD data, inflows, percent of GDP)

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

0

1

2

3

4

OIC countriesDeveloping countries

OIC country experiences vary by region(UNCTAD data, inflows per capita, dollars)

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

$0

$50

$100

$150

$200

$250

$300

$350

ASIA (8) MENA (19)SSA (22) Economies in transition (7)

African members rely on FDI more for capital formation(UNCTAD data, inflows, percent of gross fixed capital investment)

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0

5

10

15

20

25

30

35

40

ASIA (8) MENA (19)SSA (22) Economies in transition (7)

Largest OIC recipients of FDI

Largest OIC providers of FDI

Intra-OIC FDI: acquisitions have slowed (UNCTAD data, billions of dollars)

Intra-OIC FDI: main buyers (cross-border acquisitions)

Intra-OIC FDI: main locations(cross-border acquisitions)

Intra-OIC FDI: greenfield projects(UNCTAD data, estimated capital expenditure, billions of dollars)

world

Intra-OIC FDI: main industries(UNCTAD data, greenfield projects, 2003-2012, capital expenditure, billions of

dollars)

Intra-OIC FDI played an important role(UNCTAD data, billions of dollars)

2000

2002

2004

2006

2008

2010

2012

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

OIC FDI inflowsOIC FDI outflowsIntra-OIC FDI (es-timated by author)

OIC countries can be more active on outward FDI (UNCTAD data, outflows, percent of GDP)

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

0

0.5

1

1.5

2

2.5

Developing countriesOIC countries

Intra-OIC FDI potential: current account surplus (UNCTAD data, billions of dollars)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

More open investment policies

• Reduction of barriers to FDI(opening up more sectors to foreign investment, lifting of ownership restrictions, employment of non-nationals, etc)

• Strengthening of standards of treatment (national treatment, legal protection to foreign investors, etc)

• Enhancing the functioning of the market(supervision of banking and financial services, protection of intellectual property rights, environmental standards, etc)

• Investment promotion and facilitation (image building, one-stop service, aftercare, policy advocacy, etc)

• Incentives

An improved investment climate

Linkages policies and programmes

Strengthening hard and soft infrastructure

Strategic FDI attraction

Strategic policy coordination

Source: Altenburg, 2005.

Investment strategy

Investment strategy: an example

• Shift from a natural resource-based to a knowledge-based economy• Diversify industrial base • Target biotechnology, pharmaceuticals and petrochemical products

• Encourage SMEs and entrepreneurship development

• Develop clusters of knowledge-based activities

BACKWARD

SUPPLIERS

FORWARD

CONSUMERSTNC

Work with existing investors

PRODUCT STEWARDSHIP

SUPPLY CHAIN MANAGEMENT

A A A

Improved productivityHigher incomes for suppliers Reduced costs for company

Better products for consumers Enlarged market share for company

The greater the linkages between foreign affiliates and local enterprises and public institutions, the greater the spillovers into the domestic economy.

Enhancing FDI benefits

Channels Education and training Support for SMEs Backward linkages Linkages with technology

partners Forward linkages with

customers

Participation in global supply chains

Outward investment

Benefits

Production efficiency Productivity growth Technological and

managerial capabilities Entrepreneurial activity Market diversification Upgrading of production Export growth

Incentives

Carefully targeted, strategic incentive packages may be relevant and useful to:

• enhance the benefits from investment and trade in extractive industries.

• diversify industrial and export base.• attract FDI into infrastructure, manufacturing and services.

• create linkages between FDI and domestic investment.

Recommendations• encourage investment among the OIC countries, through

intergovernmental agreements, financing facilities and joint investment projects to improve cross-border transactions and infrastructure.• Mandate your envoys in OIC countries to promote intra-OIC FDI.

• expand knowledge sharing within the OIC on FDI, using existing institutions and involving private sector. • Intensify cooperation among investment promotion agencies.

• generate reliable data on FDI at the country level that is comparable across OIC countries in conformity with international standards.

Intra-OIC FDI, trade and development (UNCTAD data, current account net, 2012, billions of dollars, for 57 OIC countries)

-$50,000

$0

$50,000

$100,000

$150,000

Intra-OIC FDI

Intra-OIC

trade and

development