Latest Trends in Global FDI Flows

1. LatestTrends in Global FDI Flows doc. Ing. Tomáš Dudáš, PhD.

4. Basic Data • Global FDI Flows • 2010 – 1 244 bln. USD (+ 5 %) • 2009 – 1 185 bln. USD • 2008 – 1 449 bln. USD • 2010 - Slight recovery of FDI flows after declines in 2008 and 2009 • The global financial and economic crisis caused a decline in optimism in the corporate sector and thus decrease the willingness to invest

5. Basic distribution of FDI flows • For the first time in history,  the share of developing countries and transition economies surpassed  the share of economically developed countries • The main factor behind this trend is the continuing shift of production capacities to countries with lower production costs • It should be however noted that there is a strongdifferentiation in the group of developing countries  

9. Comparison of M&A and greenfield projects

10. New players in the field of FDI flows • Private equity funds • Cross border acquisitions of 122 bln. USD in 2010 • The transactions are still 70% below the peak in 2007 • Sovereign wealth funds • At the end of 2009 there were about 80 such funds with total assets of 5.9 trillion USD • These funds made FDI transactions in the value of 10 bln. USD in 2010

11. New players in the field of FDI flows • State owned transnational corporations • Internationalization of state owned corporations from emerging economies is an important factor in FDI flows • Total of 650 internationally active enterprises with more than 8500 foreign affiliations • 19 from the top 100 TNCs were state owned in 2010

15. Regional FDI inflows - Africa • The decline of FDI inflows that begun in 2008 continued also in 2010 • Total inflow in 2010 - 55 bln. USD (- 9%) • The share of the region on global FDI inflows slipped below 10 % • Extractive industries are still the leaders– 43 % of the total FDI inflows • West Africa – approx. 1/3 of the total inflows • West Africa – Ghana had record FDI inflows, on the other hand investors are losing interest in Nigeria

17. Regional FDI inflows - Africa • Southern Africa – decline by 24 % • South Africa lost 70 % of its inflows on a year to year basis • Decline of FDI inflows to Angola – the oil industry reached its peak • Central and Eastern Africa – 10,7 bln. USD • It’s the most problematic region of Africa • Mostly FDI into mining industry • Notable exceptions – in 2010 FDI into the telecom industry in Democratic Republic of Congo • Largest investors in Africa – companies from EU, China, India and the United Arab Emirates

19. Regional FDI inflows – Southeast and South Asia • It’s the most successful region with FDI infloes of 300 bln. USD (+24 %) in 2010 • But - Huge differences across the region • ASEAN countries doubled their FDI inflows in 2010 (79 bln. USD) • China and Hong Kong – mild growth(+11 % a +32 %) • India, South Korea and Taiwan decline • India –31 %, South Korea -8 %, Taiwan -11 %

21. Regional FDI inflows – Southeast and South Asia • ASEAN countries • Malaysia + 537 %, Indonesia + 173 %, Singapore + 153 % • Growing production cost increased interest in cheap countries such as Vietnam or Laos • South Asia • India – decline caused by unfavourable macroeconomic conditions and government regulations • On the other hand – Bangladesh is getting to be interesting as a low cost production base (ex. textile industry|

22. Regional FDI outflows – Southeast and South Asia • This region has considerable FDI outflows– 230 bln. USD in 2010 • The most advanced countries of the region are the most active investors • China, Hong Kong, Taiwan, South Korea, Singapore, India • In 2010 China surpassed for the first time in FDI outflows Japan

24. Regional FDI inflows – West Asia • Countries in this region gained FDI of 58 bln. USD • The FDI inflows are dominated by two main countries – Saudi Arabia and Turkey • Saudi Arabia – delays and stops in several joint-ventures in the oil extracting industry • Turkey – decline of FDI inflows due to the end of privatization transactions • Rising tensions in the region also decreased interest of foreign investors

26. 2010 was a good year for the region – FDI inflows reached the level of 159 bln. USD (+13 %) Main factor behind the growth – rising cross-border mergers and acquisitions in the region Chinese and Indian corporations are starting to play an important role – especially in the extractive industry Acquisitions of 20 bln. USD in 2010 Regional FDI inflows – Latin America

27. Regional FDI inflows – Latin America • On the other hand, greenfield projects are mostly started by TNCs from developed countries • Largest recipients of FDI inflows in 2010 were Brazil, Mexico and Chile • Latin American TNCs made fairly large investments abroad in 2010 (76 bln. USD), originating mostly from the largest economies of the region– Brazil and Mexico

30. This region gained FDI of 68 bln. USD (-5 %, -40 % in 2009) Russia is the largest FDI recipient in the region (41 bln. USD) Foreign investors are attracted by the extractive industries and by the growing consumer market FDI inflows to Balkans continued to decline for the third straight year The absence of Greek corporations contributes to the decline Problem of the region is the absence of export oriented FDI projects Regional FDI inflows – Southeast Europe and CIS

32. Regional FDI inflows – developed countries • 2010 – 602 bln. USD (-46 % below the peak in 2007) • Huge differences across the group • North America– increase of 44 % (252 bln. USD) • Europe - -19 % • United Kingdom - -36 % • FDI disinvestments in Netherlands and Switzerland • Japan – disinvestments • On the other hand, TNCs from developed countries are still the major investors on global level - 935 bln. USD (+10 %)