Auteur : DITE, UNCTAD (Principal research assistance provided by Fabrice Hatem and by an UNCTAD team comprising Philippe Dedekind, Masataka Fujita, Kornel Mahlstein, Gianluca Mele, Barbara Myloni and Jean-François Outreville, under the overall guidance of Anne Miroux)
Editeur : UNCTAD
To download the full report : https://unctad.org/en/docs/wips2008_en.pdf
Financial crisis, economic downturn affecting firms’ plans for future foreign investment
The economic downturn and financial instability have caused the largest transnational corporations (TNCs) to become more cautious about their medium-term foreign direct investment (FDI) ambitions, UNCTAD’s World Investment Prospects Survey 2008-2010[1] reports. The percentage of companies planning large increases in investment overseas over the next three years has dropped significantly from 2007. The annual survey, known as the WIPS, was released today in conjunction with the World Investment Report 2008 (UNCTAD/PRESS/PR/2008/YYY-ZZZ). WIPS results are based on 226 responses to queries sent to the world’s largest transnational corporations.
The survey indicates that a majority of respondent companies still plan to increase their international investment expenditures, albeit at a more moderate level, over the next three years. This is largely due to an underlying and persistent trend towards expanding the share of TNC production, employment, and sales abroad. This trend towards internationalization will affect all corporate functions, including research and development (R&D) and decision-making centres, which so far have tended to remain in TNCs’ home countries.
Analysis by home region shows the quickly growing international ambitions of companies from the developing world, particularly Asia, while FDI prospects for companies from developed countries, especially North American and Japan, have dimmed as compared to a year ago. Although still very focused on investing in their home regions, companies are expressing a growing interest in « far-shore » investments, providing evidence of a gradual extension of their strategic scope.
Responses from TNCs to UNCTAD queries indicate that five very large countries are considered the most attractive destinations for future foreign investment: China, India, the United States, the Russian Federation, and Brazil. Their rankings are unchanged from last year’s survey. However, the Russian Federation and Brazil caught up noticeably in terms of the number of specific mentions they received from responding companies. It is noteworthy that four of the five top destinations are the emerging economies known collectively as BRICs (Brazil, Russia, India, and China).. Among the top 15 destination countries, Viet Nam again ranks 6th; Germany and Indonesia have improved to 7th and 8th,respectively, while Australia, the United Kingdom, Poland, and France have declined slightly in the rankings but still remain among the top 15. Newcomers to the top 15 are South Africa, Canada, and Turkey.
Market growth, market size, and access to international/regional markets are by far the most important factors influencing companies’ choices of investment location (50% of answers combined), followed by quality of business environment, including availability of skilled labour (8%), suppliers (6%), and adequate infrastructure (7%). The legal environment and government effectiveness were also mentioned frequently by TNCs responding to the survey. Availability of cheap labour, although not a negligible factor on average (8% of responses), appears to be a major determinant only for a few labour-intensive manufacturing activities such as garment production.
Market growth, market size, and access to international/regional markets are by far the most important factors influencing companies’ choices of investment location (50% of answers combined), followed by quality of business environment, including availability of skilled labour (8%), suppliers (6%), and adequate infrastructure (7%). The legal environment and government effectiveness were also mentioned frequently by TNCs responding to the survey. Availability of cheap labour, although not a negligible factor on average (8% of responses), appears to be a major determinant only for a few labour-intensive manufacturing activities such as garment production.
The World Investment Prospects Survey 2008-2010 is the most recent of a series of surveys on FDI prospects. UNCTAD has carried similar surveys since 1995.
To download the full report: report
To download the press release: release: release
To download a powerpoint presentation: presentation
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[1] The World Investment Prospects Survey 2008-2010 is available free of charge. It can be also obtained from the UNCTAD website (http://www.unctad.org/en/docs//wips2008_en.pdf ).