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FDI Trends & Developments

European Regional Economic Forum 2010

The Role of FDI in Developing Knowledge-Based Competitiveness

in European Regions

Elisabeth Tuerk Legal Expert, UNCTAD, Division on

Investment and Enterprise (DIAE), Geneva

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Outline

• UNCTAD – some background • Latest trends & developments

• FDI & investment policies

• FDI & (regional) competitiveness

Entrepreneurship

Investment Policy Reviews

Inve

stmen

t Tre

nds

and P

olicy

Mon

itor

ISAR

IIAs

Investment Information

Systems

Mission:Investment and Enterprise for Development

Research & Analysis

Technical Assistance

Inve

stm

ent

Fac

ilita

tion

C

ompa

ct

Consensus Building

WIR WIF

UNCTAD – Some Background

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The Crisis ended 4-year FDI boom

($ billions)

• Global FDI declined from $2 trillion (2007) to $1.7 trillion (2008)• FDI flows to developed economies fell by 29%, to $962 billion • FDI flows to developing economies rose 17%, to $621 billion• Transition economies posted a new record high, with inflows reaching $114 billion, a 26% increase

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Global FDI Quarterly Index, 2000-2009

Base 100: quarterly average of 2005

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Cross-border M&A Sales & Int. Greenfield Projects, 2007-

2009

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Top Recipients of FDI Inflows

The US remained the largest recipient country, followed by France, China, UK & the Russian Federation.

The fact that half of the top 20 recipients are emerging economies is symbolic of the changing FDI landscape of 2008.

Global FDI inflows, top 20 economies, 2007–2008($ billion)

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TNC’s Int. Investment Plans

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WIR & Global Investment Trends Monitor

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National Policy Trends: Overall more favourably to FDI

National policy changes towards FDI

6.012.0

21.0 23.0

94.088.0

79.0 77.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1992-2002 2003-2004 2005-2007 2008

Less favourable More favourable

However, in some countries a more restrictive FDI approach has emerged Additionally: signs of increasing “covert” protectionism, e.g.,

– favouring domestic investment or invoking “national security” exceptions that stretch the definition of national security

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International Policy Trends: IIA Network Growing

•In 2008: 59 BITs and 75 DTTs were signed;•1st half of 2009: 25 BITs were signed;•By 1st half of 2009, totals: 2.717 BITs and 2.825 DTTs.

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Other Int. Investment Agreements, 1957-2008

Growring

0

50

100

150

200

250

300

1957-1967 1968-1978 1979-1989 1990-2000 2001-2008

Nu

mb

er o

f II

As

oth

er t

han

BIT

s an

d D

TT

s

By period Cumulative

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Resulting in ... A Spaghetti Bowl of IIAs

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UNCTAD’s Quarterly Investment Policy Monitor

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Impact of FDI

• FDI can improve the competitiveness of, e.g., • human resources, local firms, regions &

countries

• FDI can upgrade competitiveness, thr., e.g. • technology transfer, knowledge spillovers, local

innovation, enhancing exports, infrastructure projects

• Virtuous cycle: • FDI improves competitiveness while

competitiveness also attracts FDI

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Harnessing FDI for (Regional) Competitiveness

• Improving locational determinants of FDI, • both economic & policy determinants

• Strengthening (regional) investment promotion • e.g. regional investment promotion agencies

• Offering the right incentives for investors • e.g. tax incentives, special economic zones,

science and technology parks

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To Conclude...

• Upgrading competitiveness focus on the relevant types of FDI

• (Regional) policies focus on these relevant types of FDI

• Regional policy on FDI interlinked & coherent with national policies

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Visit UNCTAD Websites

www.unctad.org/diae www.unctad.org/wirwww.unctad.org/fdistatistics

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Thank you for your attention!

Elisabeth.Tuerk@unctad.orgIIA@unctad.org