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 On Planning for development: UNCTAD World Investment Reports

Published by United Nations Conference on Trade and Development - UNCTAD
World Investment Reports (complete series since 1991):
World Investment Report 2016.
Reforming International Investment Governance

Growing unease with the current functioning of the global international investment agreement (IIA) regime, together with today’s sustainable development imperative, the greater role of governments in the economy and the evolution of the investment landscape, have triggered a move towards reforming international investment rule making to make it better suited for today’s policy challenges. As a result,the IIA regime is going through a period of reflection, review and revision. As evident from UNCTAD’s October 2014 World Investment Forum (WIF), from the heated public debate taking place in many countries, and from various parliamentary hearing processes, including at the regional level, a shared view is emerging on the need for reform of the IIA regime to ensure that it works for all stakeholders. The question is not about whether to reform or not, but about the what, how and extent of such reform.

World Investment Report 2014.
Global Value Chains: Investment and trade for development

About 60 per cent of global trade, which today amounts to more than $20 trillion, consists of trade in intermediate goods and services that are incorporated at various stages in the production process of goods and services for final consumption. The fragmentation of production processes and the international dispersion of tasks and activities within them have led to the emergence of borderless production systems. These can be sequential chains or complex networks, their scope can be global or regional, and they are commonly referred to as global value chains (GVCs).
GVCs lead to a significant amount of double counting in trade, as intermediates are counted several times in world exports but should be counted only once as “value added in trade”. Today, some 28 per cent of gross exports consist of value added that is first imported by countries only to be incorporated in products or services that are then exported again. Some $5 trillion of the $19 trillion in global gross exports (in 2010 figures) is double counted. Patterns of value added trade in GVCs determine the distribution of actual economic gains from trade to individual economies.

Towards a New Generation of Investment Policies

Mobilizing investment and ensuring that it contributes to sustainable development is a priority for all countries. A new generation of investment policies is emerging, as governments pursue a broader and more intricate development policy agenda, while building or maintaining a generally favourable investment climate.
“New generation” investment policies place inclusive growth and sustainable development at the heart of efforts to attract and benefit from investment. This leads to specific investment policy challenges at the national and international levels. At the national level, these include integrating investment policy into development strategy, incorporating sustainable development objectives in investment policy and ensuring investment policy relevance and effectiveness. At the international level, there is a need to strengthen the development dimension of international investment agreements (IIAs), balance the rights and obligations of States and investors, and manage the systemic complexity of the IIA regime.
To address these challenges, UNCTAD has formulated a comprehensive Investment Policy Framework for Sustainable Development (IPFSD), consisting of
(i) Core Principles for investment policymaking,
(ii) guidelines for national investment policies, and
(iii) options for the design and use of IIAs.
UNCTAD’s IPFSD can serve as a point of reference for policymakers in formulating national investment policies and in negotiating or reviewing IIAs. It provides a common language for discussion and cooperation on national and international investment policies. It has been designed as a “living document” and incorporates an online version that aims to establish an interactive, open-source platform, inviting the investment community to exchange views, suggestions and experiences related to the IPFSD for the inclusive and participative development of future investment policies.

Non-equity modes of international production and development

Cross-border non-equity modes (NEMs) of international production generated at least $2 trillion in sales globally in 2010 and are growing rapidly, shaping world trade and investment patterns, with important implications for development... production is not exclusively about foreign direct investment (FDI) on the one hand and trade on the other. NEMs - which include contract manufacturing, services outsourcing, contract farming, franchising, licensing, and management contracts - allow transnational corporations to coordinate activities in their global value chains and influence the management of host-country firms without owning equity stakes in those firms. Transnational corporations manage the activities of NEM partner firms in their global value chains - for example, a local company in a host country assembling a product or providing information technology (IT) support - through contracts or, equally important, through access to transnational corporations´ technology, skills, business models or internal markets. Transnational corporations seldom take equity stakes in NEM partner firms, although the partner firms are tied to the transnational corporations´ global networks.
...UNCTAD...cites concerns about the impact of NEMs in host developing economies. For example, working conditions may be poor, particularly in the case of contract manufacturing in labour-intensive activities, since NEM partner firms are under strong competitive pressure to reduce costs. In some instances, NEMs can be used to circumvent social and environmental standards. The report also points to pitfalls for long-term industrial development: Developing countries need to mitigate the risk of remaining locked into low value-added activities and need to avoid overdependence on foreign technologies and inputs.

Investing in a low-carbon economy

There are some major changes in global FDI patterns that preceded the global crisis and that will most likely gain momentum in the short and medium term. Firstly, the relative weight of developing and transition economies as both destinations and sources of global FDI is expected to keep increasing. These economies, which absorbed almost half of FDI inflows in 2009, are leading the FDI recovery. Secondly, the recent further decline in manufacturing FDI, relative to that in the services and primary sectors, is unlikely to be reversed. Thirdly, in spite of its serious impact on FDI, the crisis has not halted the growing internationalization of production.
This year’s Report focuses on climate change, and in particular the role of transnational corporations. As enterprises with formidable knowledge, cutting-edge technology, and global reach, TNCs are necessarily among the primary actors in the global effort to reduce greenhouse gas emissions and shift towards a low-carbon economy. The Report stresses that with the right policy initiatives, incentives and regulatory framework, TNCs can and must contribute significantly to both mitigation and adaptation. It also proposes a global partnership to galvanize low-carbon investment and advocates concrete initiatives such as a new technical assistance centre to support policy formulation and implementation in developing countries.

Transnational Corporations, Agricultural Production and Development

The Report covers, in particular, questions such as:
  • What are the differences between individual regions in terms of their responses in FDI flows to the crisis? Why did the crisis affect FDI to developing countries later than developed countries?
  • What are the prospects for FDI in 2009 as well as for the medium term?
  • How has the crisis affected national and international policies related to FDI? Has the path of more liberalizations been continued or reversed?
  • In the midst of a major industrial restructuring, which companies are the winners and losers in the universe of the world´s largest TNCs?
  • Why is agriculture such a special industry for developing countries - and what are its longer term prospects? What role can TNCs play in improving the productivity of agriculture in developing economies?
  • How robust is the renewed interest by TNCs in agriculture? Who are the new investors and how do they differ from traditional TNCs? What are the pros and cons of developing country farmers being drawn into global agribusiness value chains?
  • What can developing countries expect from the renewal of FDI in agriculture? Given the past record, will this time the impact of TNCs in agriculture be different?
  • How does TNC participation in agricuture affect socially sensitive issues, including those related to food security and the food crisis; as well as the non-food uses of agricultural produce for biofuels?
  • What policy challenges does TNC involvement in agriculture raise? How are they being addressed within the framework national economic strategies, with the aim of maximizing benefits and minimizing costs from TNC involvement?
  • Are policy makers sufficiently prepared to meet the challenges? How can the international community support them?

According to WIR09, after decades of slow growth, TNCs´ interest and participation in agriculture - including FDI - is again on the rise. Despite this rise, in most countries today only a small share of FDI goes to agriculture. There are nevertheless some developing countries, including least developed countries (LDCs), where the share of agriculture in inward FDI is relatively important. Renewed interest of foreign investors in agricultural investment is significant enough to raise questions about whether FDI and other forms of TNC participation in agriculture can contribute to the development of this long neglected industry. WIR09 suggests an integrated policy approach that takes into account all concerns arising from TNC involvement.

Transnational corporations and the infrastructure challenge

Host countries need to consider when it is appropriate to draw TNCs into the development and management of infrastructure. They also need to find ways of ensuring that projects with TNC involvement lead to the expected development effects. This is a complex policy challenge.
As policy priorities and options vary between countries, so too does the optimal mix of public and private (including TNC) investment. Designing and implementing appropriate policies to harness the potential role of TNCs in infrastructure require adequate skills and capabilities. Governments need to prioritize among competing demands for different projects, establish clear and realistic objectives for the projects chosen, and integrate them into broader development strategies. This means that government agencies have to possess the necessary institutional capacity and skills to guide, negotiate, regulate and monitor the projects. This applies not only at the central level, but also in provincial and municipal governments.
While many developing countries seek foreign investment to develop their physical infrastructure, convincing foreign companies to invest has in many cases become even more challenging.

Transnational Corporations, Extractive Industries and development

World Investment Report 2007 (WIR07) is the seventeenth in a series published by the United Nations Conference on Trade and Development (UNCTAD). The Report analyses the latest trends in foreign direct investment (FDI) and puts a special focus in 2007 on the role of transnational corporations (TNCs) in the extraction of oil, gas, and metal minerals.

Higher prices for many minerals have led to renewed investor interest in the extractive industries. TNCs  ( including some of the world´s largest corporations) play a key role in the mining of metals and in the extraction of oil and gas. Privately owned TNCs dominate the harvesting of metal minerals, while State-owned companies from developing and transition economies are key players in oil and gas. Many such State-owned firms are emerging as TNCs in their own right.

Drawing on unique data, the Report examines TNC involvement in the extraction of mineral resources and maps the key countries and companies. It also discusses how the forces driving investment change as raw materials progress up the "value chain" to become finished products, and as different types of companies participate. In view of recent discussion of the so-called "resource curse," the Report explores how the participation of TNCs may help or hinder long-term, broad-based economic development in developing countries -- the best approach for reducing poverty and raising living standards. It considers how energy and mineral extraction can help governments achieve such aims.

In addition to the general information on definitions and sources provided in this year´s World Investment Report, more detailed methodological notes for the data on FDI flows and stocks used in the Report - including how they were obtained for each economy - are available in electronic format only.

FDI from Developing and Transition Economies: Implications for Development

This year´s World Investment Report focuses on the rise of foreign direct investment (FDI) by transnational corporations (TNCs) from developing and transition economies.
New sources of FDI are emerging among developing and transition economies. This phenomenon has been particularly marked in the past ten years, and a growing number of TNCs from these economies are emerging as major regional - or sometimes even global - players. The new links these TNCs are forging with the rest of the world will have far-reaching repercussions in shaping the global economic landscape of the coming decades.
The Report examines the magnitude of this phenomenon and examines its drivers and determinants, i.e.: what economic factors and policy developments lead firms from developing countries to venture abroad? For low-income countries, FDI from developing countries can be of great importance. In some of them, it accounts for a significant share of all FDI flows. The Report also discusses the development implications of the rise of these new sources of FDI, along with policy responses, for both home and host developing countries.
As in previous years, the Report also presents the latest data on FDI and traces the global and regional trends of FDI and international production by TNCs. Global FDI inflows rose substantially in 2005. A major contributing factor to this strong growth was the marked increase in the inflows to developed countries. Rising global demand for commodities was reflected in the steep increase in natural resource-related FDI, although the services sector continued to be the major recipient of FDI. Among developing regions, Asia remained the main magnet for FDI flows, followed by Latin America, where re-invested earnings have played a major role. Africa´s share in world FDI inflows was still small, but its FDI growth rate has nonetheless surpassed those of other developing regions.
A substantial Statistical Annex is also included, with data on FDI flows and stock for more than 200 economies. The PDF version of WIR05 and the Statistical Annex are available in a CD-ROM.
METHODOLOGICAL NOTES: Definitions and Sources. In addition to the general information on definitions and sources provided in this year´s World Investment Report, more detailed methodological notes for the data on FDI flows and stocks used in the Report - including how they were obtained for each economy - are available in electronic format only.

Transnational Corporations and the Internationalization of R&D

World Investment Report 2005 (WIR05) presents the latest trends in foreign direct investment (FDI) and explores the internationalization of research and development by transnational corporations (TNCs) along with the development implications of this phenomenon.
Part One highlights recent global and regional trends in FDI and international production by TNCs. Global FDI flows resumed growth in 2004, but inflows continued to decline in developed countries. This Part documents the fact that developing regions are leading the recovery in FDI flows. It also documents different trends and patterns between developed and developing countries as regards the financing component of FDI (equity investment, reinvested earnings, intra-company loans) as well as the modes of investment (mergers and acquisitions, greenfield FDI).
Part Two assesses the implications of the recent surge in R&D internationalization by TNCs. R&D activities at growing levels of complexity are increasingly being established in selected developing countries. In contrast to past experience, this R&D often goes beyond local market adaptation and involves highly complex activities targeted on global markets. The Report discusses the driving forces behind this trend and considers how host as well as home countries are affected. Finally, the Report analyses the need for active government policies to enhance development benefits from TNCs´ internationalization of R&D. The Report underlines the importance of coherent policies in order to create an environment conducive to fruitful interaction between the R&D activities of TNCs and those of domestic firms and institutions. A final chapter outlines the role of international agreements in this area.
A substantial Statistical Annex is also included, with data on FDI flows and stock for more than 200 economies. The PDF version of WIR05 and the Statistical Annex are available in a CD-ROM.
METHODOLOGICAL NOTES: Definitions and Sources
In addition to the general information on definitions and sources provided in this year´s World Investment Report, more detailed methodological notes for the data on FDI flows and stocks used in the Report - including how they were obtained for each economy - are available in electronic format only.

The Shift Towards Services

WIR04 presents the latest trends in foreign direct investment and explores the shift towards services, with a special analysis of offshoring service activities.
Part One discusses recent global and regional trends in FDI and international production by TNCs. Global FDI flows bottomed out in 2003, but there were some regional differences. The sectoral pattern of FDI is shifting towards services. Outward FDI from developing countries is becoming significant. There is also optimism that inflows to these countries will increase in 2004 and beyond.
Part Two deals with FDI in services - an important but often neglected area of FDI in the context of development. It examines the shift of FDI towards services with a focus on the entry of TNCs into new service areas. Services FDI, especially in intermediate and infrastructure services, affects the economic performance of a host-country in all sectors. The offshoring of corporate services is taking off rapidly, thanks to advances in information and communications technologies. However, the potential of such offshoring can only be harnessed if countries adopt appropriate policies.
Part Three analyses key issues relating to national and international policies on FDI in services. As many services are deeply embedded in the social, cultural and political fabric of host societies, the impact of FDI on those services could be far-reaching. Therefore, national policies matter - not only to attract FDI in services, but also to maximize its benefits and minimize its potential negative impacts. The proliferation of international investment agreements (IIAs) covering FDI in services has resulted in a multifaceted and multilayered network of international rules that affect national policy-making.
The WIR04 includes a substantial statistical annex, which is also available on CD-ROM.
Quick Links: | World Investment Directory Online |

FDI Policies for Development: National and International Perspectives

The World Investment Report 2003 focuses on the foreign direct investment (FDI) downturn, its reasons and the role of national policies and international investment agreements (IIA) in attracting FDI to a country and for a country to benefit from it.
Part One discusses the overall trends in FDI. FDI flows have dropped drastically and no rebound is expected in 2003. The reasons for the downturn are discussed from a global perspective, as well as by region - developed countries, Africa, Asia and the Pacific, Latin America and the Caribbean, and Central and Eastern Europe.
Part Two focuses on key issues that straddle national FDI policies and international investment agreements with a view to bringing out the development dimension. Special attention is given to the rise of IIAs, the right to regulate, home country measures and corporate social responsibility.
The report includes a statistical annex of over 100 pages.
Quick Links: | Press Conference Opening Statements |

Transnational Corporations and Export Competitiveness

The first principal finding is that foreign direct investment (FDI) inflows in 2001 declined to $735 billion. This is less than half the 2000 figure. Behind this decline is the slowdown in the world economy and a weakening of business confidence, both of which were accentuated by the September 11 events in the United States, and both of which contributed to a sharp reduction of cross border mergers and acquisitions that take place predominantly between industrialized countries. In light of the prolonged economic recession and the slow recovery of business confidence, especially in the United States, UNCTAD does not expect a rebound of FDI flows this year. Despite the decline in FDI flows, the expansion of international production continues, although at a slower pace. However, developments differ markedly between various parts of the world. The FDI downturn was concentrated in the developed countries (-59%), with only modest declines in flows to developing countries (-14%) and even a small increase in flows to Central and Eastern Europe (2%). There were also significant variations within the third world, with lower levels of inflows to Asia and Latin America but an increase to Africa. Africa, however, still remains a marginal recipient of FDI.

Promoting linkages

The World Investment Report 2001 examines the issue of linkages between foreign affiliates of multinational enterprises and local companies in developing countries. Worldwide FDI flows again reached record levels in 2000. FDI remains the main driver of the expansion of the international production system. Forging linkages between foreign affiliates and domestic firms is a main challenge for policy-makers in developing countries in order to benefit from FDI as much as possible. WIR 2001 pays particular attention to this challenge. The objective is not to raise linkages at any cost, but to use them to upgrade the competitive capabilities of domestic enterprises. Fostering linkages is an important means of diffusing knowledge, information and skills from a foreign investor. In a technology and skill driven world, this can contribute to increasing the efficiency and growth potential of the host economy. WIR 2001 provides valuable information on country and company experience in this field.

Cross-border Mergers and Acquisitions and Development

The contribution of foreign direct investment to development is now widely recognized.
There is a perception, however, that this contribution may be affected by the way investment enters a country. It may come in the form of a new enterprise or the expansion of an existing enterprise; it may also come through a merger or an acquisition. Acquisitions, in particular, arouse concerns, especially over employment, ownership and market structure. And the concerns become urgent when the host economy is a developing one.
Given the recent explosion in cross-border mergers and acquisitions, UNCTAD´s 10th World Investment Report is a highly timely and important document. This phenomenon calls for just the sort of careful and dispassionate analysis that has become the hallmark of the WIRs.
Cross-border mergers and acquisitions are a part of economic life in a liberalizing and globalizing world. But accepting a more open market in the interests of growth and development does not mean relaxing the requirements of public vigilance. On the contrary, a freer market - and particularly the emerging global market for enterprises - calls for greater vigilance as well as stronger and better governance. To this end, World Investment Report 2000 provides us with a valuable resource.
Kofi A. Annan
Secretary-General of the United Nations

Foreign Direct Investment and the Challenge of Development

WIR 99 is the ninth Report in an annual series that has been recognized as the most up-to-date and comprehensive source of information as well as analysis regarding foreign direct investment (FDI).
Part I, entitled Trends,examines the most recent global and regional trends in FDI. It describes the world´s 100 largest TNCs, the 50 largest TNCs in developing countries and the 25 largest TNCs in Central Europe; analyses the momentum for an increasing globalization of economies through FDI and the activities of TNCs; and explores the growing importance of mergers and acquisitions in fuelling FDI flows. It also reviews recent developments in bilateral and regional investment agreements including the reasons for the end of negotiations of the Multilateral Agreement on Investment.
Part II, entitled FDI and the Challenge of Development, looks at the impact of FDI on key objectives of economic development: increasing financial resources for investment, enhancing technological capabilities, boosting export competitiveness, generating and upgrading employment, and protecting the environment.
The Report concludes that although FDI can yield major economic benefits for the host country, such benefits can be enhanced through appropriate policies. Governments therefore have an important role to play in creating the conditions that attract FDI and in maximizing the positive contribution that FDI can make to growth and development.

1998 - Trends and Determinants

Transnational corporations, market structure and competition policy

Improving economic efficiency by making markets more competitive -- and thereby serving development -- is subject to the same need to make choices. Given the particular characteristics of developing countries -- low income levels, skewed distribution of wealth, lack of infrastructure, low levels of education, asymmetries in information, to mention a few - - the incidence of conflicts between market outcomes and competing objectives is often more frequent in these countries.
For example, where foreign exchange is temporarily in limited supply, certain import restrictions might be needed -- thus limiting contestability -- to ensure that critical imports are not disrupted, e.g., that foreign exchange reserves are used for machine parts instead of luxury goods. Or, where a country is characterized by dispersed rural communities, the market will often not provide these with certain basic services (such as roads, telecommunications services and railways); in these cases, governments might need to ensure that certain services reach segments of the national market which otherwise could not support such services. They could do so, for instance, by providing the services through state-owned enterprises or, where private operators are involved, by providing these with market power so that services in less-economically viable markets can be cross-subsidized from profits earned in larger segments of the market.48 A policy alternative to consider in such a case would be more direct government involvement in the form of subsidized provision of the services in question. The decision in this case -- whether to allow concentration combined with cross subsidization or to provide subsidies -- would involve a careful consideration of the quite different trade-offs associated with these two options (possibly less efficiency in the market, on the one hand, versus a direct budgetary expense on the other).

1996 - Investment, Trade and International Policy Agreements

1995 - TNCs and Competitiveness

Transnational corporations, employment and the workplace

The World Investment Report 1994 analyses the impact of an integrated international production system on the quantity and quality of employment, human resource development and, more generally, to the organization of work.
The report includes a statistical annex with FDI statistics and other related indicators.
Policy makers and trade union leaders must find innovative ways to respond to the ongoing changes in the international economy. Not only must they address the many new issues raised by integration at the level of production; but, in a more open and integrated world economy, policy makers must coordinate more carefully the traditional instruments for domestic economic management with policies relating to international economic relations, including, in particular, foreign direct investment (FDI) and other forms of TNC activity.

Transnational Corporations and Integrated International Production

The World Investment Report 1993 analyses the evolving strategies and changing organizational structures of TNCs, and the implications of the increasing functional, cross-national integration of their activities for the location of international production. In spite of an overall decline in world-wide flows of foreign direct investment in the early 1990s, there are many features of the world economic environment pointing to a continuing and important role for transnational corporations.
The report includes a statistical annex with FDI statistics and other related indicators.

Transnational Corporations as Engines of Growth

The World Investment Report 1992 analyses the relationship between TNCs and economic growth. Since the early 1980s, world investment flows have been expanding rapidly, much faster than other key economic variables such as world trade and world output. A number of major new developments in the global economic situation have placed foreign direct investment in a central position to influence the pace and the nature of economic growth in most countries. Finally, developing countries themselves have implemented notable and, in many cases, dramatic policy changes, in order to open their economies to greater contributions by transnational corporations.
The report includes a statistical annex with FDI statistics and other related indicators.

The Triad In Foreign Direct Investment

This first volume in the World Investment Report series analyses the Triad (Japan, the European Community and the United States) in terms of foreign direct investment.
It looks at the role transnational corporations play in promoting regional economic integration around the three poles of the Triad,
describes the linkages between foreign direct investment and trade, technology and financial flows, and
highlights policy implications for developing countries and the international community.

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