Emerging Themes in Investment Policy

New challenges and their consequences

Ivan Nimac, Head Vienna OfficeInvestment Climate Department

World Bank Group

Investment Policy Global Workshop Vienna, 14th May 2012

Emerging Markets benefit most from the slow recovery of FDI flows in the aftermath of the global economic crisis

Source: United Nations Conference on Trade and Development (UNCTAD)

Global FDI Inflows (US$ Trillion)

♦ Global FDI inflows recover slowly after the global economic downturn, but are still well below the pre-crisis average

♦ For the first time ever developing and transition economies attracted more than 50% of total FDI flows

15% Source: AT Kearney Foreign Direct Investment Confidence Index 2012

Change in investment portfolio (last two years in %)

♦ Large and medium sized emerging markets are able to benefit most from the slow recovery

♦ In particular China, India and Brazil are in the lead of a trend that is expected to continue over the next years

Developed countries Developing countries

Especially in turbulent times, an attractive and stable business environment is a key concern for investors

Source: Ernst & Young’s 2011 European attractiveness survey

Key location factors for investors (812 respondents)

Source: World Investment and Political Risk 2010, Multilateral Investment Guarantee Agency (MIGA)

Major obstacles for investors (% of respondents)

♦ International investors look at a favorable and stable business environment when investing abroad, and especially in turbulent times, strong protection by the rule of law

♦ Yet, the investment policy framework remains weak in many developing countries according to various data sources

4

Linking Competitiveness Analysis to Investment Policy

SECTOR/INDUSTRY ANALYSIS

• Industry trends• Market trends• Price trends• Competition and

ownership policy• Links to national/global supply chains• Technological trends• Global policy trends (WTO/AFTA)

Price Factors • Factor costs• Input costs• Finance availability/cost• Transaction costs

•Taxes and customs duties• Investment law • Non-tariff barriers• Utilities service quality, price• Regulatory barriers• Market structure & competition policy• Factor market rigidities (e.g., min. wage)• Price controls/subsidies• Product quality standards• Risk

APPROPRIATE ROLE FOR GOVERNMENT

DETERMINANTS OF COMPETITIVENESS

Productivity Factorso Skillso Innovationo Managemento Infrastructure

Public PolicyPrivate Sector

Emerging Themes in Investment Policy – New challenges and their consequences

The panelists:

Sergiu Ciobanu, Deputy Minister of Economy, Moldova

Alexander Schwartz, Partner, TJP Vienna

Roel Spee, Global Leader, Plant Location International (PLI), IBM Business Services

Robert Whyte, Global Product Specialist, Investment Policy, Investment Climate Department, World Bank Group

Thank you!

Ivan Nimac

Head Vienna OfficeInvestment Climate DepartmentWorld Bank Group

Inimac@worldbank.org

www.wbginvestmentclimate.org