FDI trends and APEC performance

1. FDI trends and APEC performance

2. FDI in the current market GIPB Results Implications for IPIs Learning Objectives of the Course

3. FDI in the recent economic recession • Recession • Most severe recession since the Great Depression • Global FDI flows dropped by about 40% between 2007 and 2009. • Recovery • FDI inflows increased across all major economic groupings in 2011 • In developing and transition economies driven by robust greenfield investments, in developed countries due largely to cross-border M&As • Slower FDI growth predicted in 2012 • Business response • Significant decrease in access to credit • Re-capitalization of banks is taking place slowly in many countries • Lower corporate profits • Leading site selection firms report slowdown and postponement of investment projects • Companies restructuring to deal with the crisis; cautious about recovery • Investment plans frozen or discarded • De-locations and outright plant closures Source: World Investment Report 2012, United Nations Conference on Trade and Development UNCTAD Global Investment Trends Monitor, Issue No. 9, 2012

4. Investment flows – Global • Global FDI in 2011 at $1.5 trillion • FDI inflows rose 16%, but remained 23% below their 2007 peak • Developing and transition economies respectively accounted for 45% and 6% of global FDI FDI inflows, global and by groups of economies, 1995-2011 (Billions of dollars) Source: World Investment Report 2012, United Nations Conference on Trade and Development

5. 2011 investment flows – Developing economies and APEC • Developing economies • FDI inflows increased by 11%, reaching a record $684 billion • APEC • FDI inflows increased by 16% to $733 billion • Accounted for nearly half of the global total • APEC-8 • FDI inflows increased by 6% to $82 billion • FDI inflows to China increased by 8%, to the USA by 15% and to Russia by 22%.

6. Investment flows – APEC • Like the global trend of the last 20 years, inflows have trended strongly upward with periodic setbacks. • APEC’s recovery has been stronger: 2011 only 8% under the 2007 peak • Most inflows go to the U.S. (31% of 2011 total), PR China (17%), Hong Kong, China (11%) and Russia (7%) FDI Inflows to APEC, 1992-2011 US$ billion Source: UNCTAD FDI Database

7. Investment flows – APEC-8 FDI Inflows to the APEC-8, 2002-2011 • Most FDI in 2011 went to Mexico (24%), Indonesia (23%) and Chile (21%) • Biggest % increase in FDI between 2009 and 2011 happened in Indonesia (288%), Thailand (97%), and Chile (34%) Millions of USD Source: UNCTAD FDI Database

8. Prospects for FDI recovery: 2012-2014 • Slower FDI growth in 2012, with flows leveling off at about $1.6 trillion • Projections show FDI reaching $1.8 trillion in 2013 and $1.9 trillion in 2014 • A resurgence in economic uncertainty and the possibility of lower growth rates in major emerging markets risks undercutting this favorable trend Global FDI flows, 2002-2011, and projections for 2012-2014 Source: World Investment Report 2012, UNCTAD

9. Top 20 source countries for FDI in 2011 US = Japan + UK + France + Hong Kong US$ billion

10. What can governments do to improve their chances? Longer term: • Better infrastructure and skills ..... Expensive investments • Market size/growth and factor costs are functions of the market - difficult to influence. • Proximity to markets, climate, resource endowments, and other natural characteristics are what they are.

11. What can governments do to improve their chances? Short term: • A better investment climate: • Can be achieved with greater simplicity, transparency, and predictability • Is a result of better public organization, coordination, and communication with the private sector • Reduces costs and risk to investors, instantly improving the expected return on investment for your location • Good facilitation - compensates (at least to an extent) for weaknesses in the investment climate, giving investors clarity and security where there is none, through the provision of information and assistance.

12. Why IPIs should bridge the corporate information gap • Information markets do not work perfectly. As a result, companies often limit their search to those locations they are already familiar with. • Effective IPI marketing convinces companies to consider different countries and new types of opportunities. • Current financial instability may make companies more cautious about their medium-term foreign expansions. • Making investor-relevant information easily available lessens their perceptions of risk. • Having highly relevant, accurate, and up-to-date information reduces an investor’s market entry cost. • Providing that information to investors, makes a location more competitive.

13. FDI in the Current market GIPB Results Implications for IPIs Learning Objectives of the Course

14. GIPB mirrors companies’ site selection process • Stepping in the shoes of two companies (manufacturing and software) a site location consultant assessed: • IPI Websites-- The extent to which IPIs offer country and sector information suitable to assist potential investors in their location search. • Inquiry handling -- A mystery shopper approach tested each IPI’s ability to interact with and manage two distinct investment inquiries, provide relevant information and make a business case for investment. • A 2011 survey of 3,600 US large companies ($25m+) conducted by DCI Consulting reveals that: • 47% of respondents would use the IPI website in their next location search. • Only 17% of respondents say they would not contact the IPI during the investment decision process • Site location consultants are more likely to use the IPI services for information in the screening process.

15. Countries are missing investment projects and jobs GIPB 2012 Regional Results: Web Site & Inquiry-Handling APEC When foreign companies come knocking, most IPIs fail even to respond.

16. 2009-2012 trends • Overall, Web sites improved from 59% to 61%. • Average inquiry-handling dropped from an already weak 28% to 22%. • APEC-8, LAC, and SSA were flat. • Only MENA showed significant progress. • All other regions did worse in 2012. Regional Comparison 2006*, 2009, 2012 -6% % change from GIPB 2009 -2% -5% 1% 1% 6% -4% -3% 0% APEC-8 *GIPB 2006 did not assess Australia , Brunei Darussalam, Canada, Chinese Taipei, Japan, Malaysia, Mexico, New Zealand, Peru, Russia, or the United States.

17. The world’s top improvers between 2009 and 2012 • None of the top 10 improvers are from APEC • Biggest APEC improvements were: • Chinese Taipei (+24%) • Mexico (+10%) • Indonesia (+10%) Top 10 world improvers and top 3 APEC improvers

18. APEC performance (by tier) BEST PRACTICE: 81-100% GOOD: 61-80% AVERAGE: 41-60% WEAK: 21-40% VERY WEAK: 0-20%

19. FDI in the Current Market GIPB Results Implications for IPIs Learning Objectives of the Course

20. Get the basics right …… facilitation, facilitation, facilitation • IPIs underestimate what is needed • Without proper facilitation no investment promotion effort will pay off • The smaller the IPI budget, the more sense facilitation makes • Focus on the basics: Walk before you run • Countries where doing business is more challenging • Bigger role for the IPI to inform and facilitate foreign investors • Lesser known countries • Bridge the information gap through the work of the IPI to attract investment • The Web allows all IPIs to promote cost-effectively …... but there must also be a capacity to directly interact with investors

21. FDI in the Current Market GIPB Results Implications for IPIs Learning Objectives of the Course

22. Learning objectives of the GIPB course Day One • Understand the types of information investors need and their process for site selection decision making • Engage in a simulated investor inquiry simulation and discuss the realities and challenges of competing for investment • Review a case study of why the application of good investment facilitation techniques matters • Learn how to effectively promote your location online

23. Learning objectives of the GIPB course Day Two • Apply learning about online investment promotion from Day One to a case on an IPI Web site • Understand the standards of performance for providing support to investors and how to evaluate the quality of responses to investor inquiries • Learn how to meet investors’ information needs through the appropriate design of IPI services and supporting systems and processes • Engage in an effective inquiry handling exercise • Develop an action plan to strengthen investment facilitation

24. Thank you. Questions