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BOPCOM—13/25
Twenty-Sixth Meeting of the
IMF Committee on Balance of Payments Statistics
Muscat, Oman
October 28–30, 2013
World Investment Report 2013
Prepared by the
UNCTAD
1
WORLD INVESTMENT REPORT 2013
Global Value Chains: Investment and Trade for Development
Masataka Fujita
Division on Investment and Enterprise
UNCTAD
2
Contents
• Global and regional investment trends
• Recent policy developments
• Global value chains and development
1
3
FDI recovery road proves bumpy, with 18% decline in 2012 Global FDI inflows (Billions of dollars)
1,473
2,003 1,816
1,216 1,409
1,652
pre-crisis
average 2005-
2007
2007 2008 2009 2010 2011
1,351
2012
+ 17% - 18%
Average annual
growth rate
2
4
Flows in 2013 are expected to remain close to 2012 level, and
could rise in 2014 – 2015
Global FDI flows 2004 – 2012, and projections 2013 – 2015 (Billions of dollars)
• Forecasts for 2013
close to 2012 level;
upper range at $1.45
trillion aligned with the
pre-crisis average
• FDI may slowly
increase to $1.6
trillion in 2014 and
$1.8 trillion in 2015
• However significant
risks to this growth
scenario remain
3
5
Developing economies surpass developed economies as
FDI recipients for the first time FDI inflows by group of economies, 1995 – 2012 (Billions of dollars)
0
500
1 000
1 500
2 000
2 500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
52%
World total
Developing economies
Transition economies
Developed economies
42%
4
6
9 of the 20 largest FDI recipients are developing economies
Top 20 host economies, 2012 (Billions of dollars)
14
14
16
20
25
26
28
28
29
30
45
51
57
57
62
65
65
75
121
168
20 Sweden (38)
19 Kazakhstan (27)
18 Colombia (28)
17 Indonesia (21)
16 France (13)
15 India (14)
14 Spain (16)
13 Luxembourg (18)
12 Ireland (32)
11 Chile (17)
10 Canada (12)
9 Russian Federation (9)
8 Singapore (8)
7 Australia (6)
6 United Kingdom (10)
5 British Virgin Islands (7)
4 Brazil (5)
3 Hong Kong, China (4)
2 China (2)
1 United States (1)
(x) = 2011 ranking
Developed economies
Developing economies
Transition economies
5
7
Outward FDI from developing economies accounts for
1/3 of global total Shares in global FDI outflows, by group of economies, 2000–2012 (Per cent)
6
Developed economies
Developing and transition economies
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
12%
88%
35%
65%
8
China moves up from the sixth to the third largest
investor, after the United States and Japan Top 20 investor economies, 2012 (Billions of dollars)
17
19
21
21
23
26
30
33
33
37
42
44
51
54
67
71
84
84
123
20 Luxembourg (30)
19 Ireland (167)
18 Norway (19)
17 Chile (21)
16 Singapore (18)
15 Mexico (28)
14 Italy (9)
13 Republic of Korea (16)
12 Sweden (17)
11 France (8)
10 British Virgin Islands (10)
9 Switzerland (13)
8 Russian Federation (7)
7 Canada (12)
6 Germany (11)
5 United Kingdom (3)
4 Hong Kong, China (4)
3 China (6)
2 Japan (2)
1 United States (1)
(x) = 2011 ranking
Developing economies
Transition economies
329
Developed economies
7
9
Global FDI drop is due to developed economies, flows into
developing regions remain at their high level FDI inflows by region, 2010–2012 (Billions of dollars)
• FDI flows to developed
countries plummet
• FDI flows to developing
economies see a small
overall decline, with some
bright spots:
• Africa bucks the trend
• Developing Asia loses
growth momentum, but
remains at historically high
levels
• Latin America and the
Caribbean register a small
decline
• FDI is on the rise in
structurally weak
economies
• Transition economies see a
relatively small decline
8
FDI inflows
2010 2011 2012
World 1 409 1 652 1 351
Developed economies 696 820 561
Developing economies 637 735 703
Africa 44 48 50
Asia 401 436 407
East and South-East Asia 313 343 326
South Asia 28 44 34
West Asia 59 49 47
Latin America and the Caribbean 190 249 244
Oceania 3 2 2
Transition economies 75 96 87
Structurally weak, vulnerable and small economies 45 56 60
LDCs 19 21 26
LLDCs 27 34 35
SIDS 5 6 6
Region
10
All the three sectors see a decline, but the services
sector remains resilient FDI projects inflows by sector (Billions of dollars)
Primary
Manufacturing
Services
Value of greenfield projects, 2011–2012 Value of cross-border M&As, 2011–2012
76 25
453
264
385
323
2011 2012
137 47
205
137
214
124
2011 2012
- 16%
- 33%
- 42%
- 67%
- 42%
- 45%
- 33%
- 66%
9
11
International production continues to grow at a steady
pace
72 million of employees
$26 trillion of sales
$7 trillion of value added
(~9% of global GDP)
$87 trillion of managed assets
Change vs. 2011
+6%
+7%
+6%
+4%
Selected key performance indicators, foreign affiliates of TNCs, 2012
10
International production of TNCs continues to expand at a steady rate
because FDI flows, even at lower levels, add to the existing FDI stock
12
Contents
• Global and regional investment trends
• Recent policy developments
• Global value chains and development
11
13
Changes in national investment policies, 2000 – 2012 (Per cent)
Most countries remain keen to attract FDI while
becoming more selective and reinforcing regulatory
frameworks
0
25
50
75
100
94%
Liberalization/promotion 75%
6%
Restriction/regulation 25%
12
14
The number of newly signed IIAs continues to decline
but the total number has reached 3,196 Trends in IIAs, 1983–2012
13
15
Contents
• Global and regional investment trends
• Recent policy developments
• Global value chains and development
14
16
Trade is increasingly driven by global value chains (GVCs),
leading to a significant amount of double counting
Global gross exports “Double counting”
(foreign value added in
exports)
Value added in trade
~19 ~5
~14
28%
ESTIMATES
Value added in global trade, 2010 (Trillions of dollars)
15
17
The contribution of GVCs to economic growth can be
significant Domestic value added in trade as a share of GDP, by region, 2010 (Per cent)
30%
14%
27%
22%
16%
37%
18%
24%
25%
30%
28%
13%
12%
26%
18%
22%
Least Developed Countries
Memorandum item:
Transition Economies
South America
Caribbean
Central America
Latin America and Caribbean
West Asia
South Asia
East and South - East Asia
Asia
Africa
Developing Economies
Japan
United States
EU
Developed Economies
Global
Developing country average
26%
16
18
GVCs are typically coordinated by TNCs
Global trade in goods and
services
Non-TNC
trade
All TNC-related
trade
Intra-firm trade TNC arm's length
trade
TNC-related trade:
~80%
ESTIMATES
NEM-generated
trade, selected
industries
Global gross trade (export of goods and services), by type of TNC involvement, 2010 (Trillions of dollars)
~ 19 ~ 4
~ 15 ~ 6.3
~ 2.4
~ 6.3
17
19
The presence of TNCs drives GVC participation Correlation between inward FDI stock and GVC participation, 187 countries, 1990 – 2010
18
20
FDI shapes patterns of value added in trade Key value added trade indicators (median values), by quartile of FDI stock
relative to GDP, 2010
1st quartile
(Countries with high FDI
stock relative to GDP)
2nd quartile
3rd quartile
4th quartile
(Countries with low FDI
stock relative to GDP)
Foreign value added in export
18%
17%
24%
34%
Value added contribution of
trade to GDP
21%
24%
30%
37%
19
21
Longer term, the ideal development path involves not just
participation but also domestic value added creation GDP per capita growth rates for countries with high/low growth in GVC
participation, and high/low growth in domestic value added share, 1990-2010
GVC participation
growth rate
Growth of the domestic value added
component of exports
Low
Low
High
High
+ 2.2% + 3.4%
+ 0.7% + 1.2%
+ n.n% median GDP per capita
growth rates =
20
22
A number of factors and conditions may facilitate ‘climbing’
the GVC development ladder
Resource-
based
Low-tech
manufacturing,
basic services
Mid-level
manufacturing
and services
Sophisticated
manufacturing
and services
Knowledge-
based services
Integrating
• Enter (increase relative
importance of) more
fragmented GVCs
• Increase exports of
intermediate goods and
services
Upgrading
(Focus on product and
process upgrading)
• Increase productivity and
value added produced within
existing GVC segments
Upgrading
(Focus on functional and
chain upgrading)
• Move to (or expand to) higher
value segments in GVCs
• Move to (or expand to) more
technologically sophisticated
and higher value GVCs
GVC development stages
• Effective national innovation system, R&D
policies, and intellectual property rules
• Presence of TNCs capable of GVC
coordination and a domestic and
international supplier base
• Pool of highly trained workers
• Presence of domestic supplier base fully
integrated in multiple GVCs (reduced
reliance on individual GVCs)
• Absorptive capacities at higher technology
levels, capacity to engage in R&D activities
• Pool of relatively low-cost skilled workers
• Availability and absorptive capacities of
domestic supplier firms and partners
• Reliable basic infrastructure services (utilities
and telecommunications)
• Pool of relatively low-cost semi-skilled
workers
• Conducive investment and trading
environment
• Basic infrastructure provision
• Pool of relatively low-cost workersValue creation
Part
icip
ation
Value creation
Part
icip
ation
Value creation
Part
icip
ation
(i)
Participation/ value
creation archetypal
moves
(ii) Share of exports by level of technological sophistication
21
The contribution of GVCs to development can be significant,
however participation in GVCs also involves risks
• Value added trade contributes nearly 30 per
cent to developing countries’ GDP on
average
• There is a positive correlation between
participation in GVCs and growth rates of
GDP per capita
• GVCs have a direct economic impact on
value added, jobs and income
• Participation in GVCs can help countries’
acquisition and dissemination of
technologies and skills, and spread
international best practices, including on
social and environmental issues, e.g.
through the use of CSR standards
• GVCs can also be an important avenue for
developing countries to build productive
capacity, opening up opportunities for
longer-term industrial upgrading
• GDP contribution of GVCs can be limited if
countries capture only a small share of the
value added created in the chain
• Also, a large part of GVC value added in
developing economies is generated by foreign
affiliates of TNCs, which can lead to relatively
low “value capture”, e.g. as a result of transfer
pricing or income repatriation
• Technology dissemination, skill building and
upgrading are not automatic. Developing
countries face the risk of remaining locked into
relatively low value added activities
• Environmental impacts and social effects,
including on working conditions, occupational
safety and health, and job security, can be
negative
• The potential “footlooseness” of GVC activities
and increased vulnerability to external shocks
pose further risks
22
24
Countries need to make a strategic choice whether or not to
promote GVCs
23
• Countries need to carefully weigh the pros and cons of GVC participation, and the
costs and benefits of proactive policies to promote GVCs or GVC-led
development strategies, in line with their specific situation and factor endowments
• Some countries may decide not to promote GVC participation. Others may not
have a choice: for the majority of smaller developing economies with limited
resource endowments there is often little alternative to development strategies
that incorporate a degree of participation in GVCs . The question for those
countries is not so much whether to participate in GVCs, but how. In reality, most
countries are already involved in GVCs one way or another
• Promoting GVC participation requires targeting specific GVC segments, i.e. GVC
promotion can be selective. Moreover, GVC participation is only one aspect of a
country’s overall development strategy
25
Policies matter to make GVCs work for development A policy framework for GVCs and development
Embedding GVCs in
development strategy
Enabling participation
in GVCs
Building domestic
productive capacity
Providing a strong
environmental, social
and governance
framework
Synergizing trade and
investment policies
and institutions
• Incorporating GVCs in industrial development policies
• Setting policy objectives along GVC development paths
• Creating and maintaining a conducive environment for trade and
investment
• Putting in place infrastructural prerequisites for GVC participation
• Supporting enterprise development and enhancing the bargaining
power of local firms
• Strengthening skills of the workforce
• Minimizing negative effects and risks associated with GVC
participation through regulation, public and private standards
• Supporting local firms in complying with international standards
• Ensuring coherence between trade and investment policies
• Synergizing trade and investment promotion and facilitation
• Creating ‘Regional Industrial Development Compacts’
24
26
Regional industrial development compacts for regional value chains
Regional trade and investment agreements could evolve
into regional industrial development compacts
25
27
Visit UNCTAD websites:
www.unctad.org/diae
and
www.unctad.org/wir
www.unctad.org/fdistatistics
Thank You!
26
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