Greenfield FDI and crossborder M

1
Greenfield FDI and cross-border MAs some
trends and policy considerations

• UNCTAD Course on
• Key Issues
• on the International Economic Agenda
• Turin
• July 2001
• presented by Gabriele Köhler

UNCTAD
2
Global inflows of FDI 1993-2000, US billions,
by groups of countries
Note figures for 2000 are estimates
Source UNCTAD
3
FDI inflows and outflows by region and economy
US millions, 1999
Note Africa includes South Africa Central and
Eastern Europe includes Developing Europe
Source UNCTAD
4
The 10 largest FDI recipient countries1999, US
billions
Source UNCTAD
5
Africa FDI inflows, largest recipients, 1998
and 1999 (Billions of dollars)
Source UNCTAD, FDI/TNC database and World
Investment Report 2000.
6
Asia and the Pacific FDI inflows, largest
recipients, 1998 and 1999 (Billions of
dollars)
Source UNCTAD, FDI/TNC database and annex table
B.1.
7
Latin America and the Caribbean FDI inflows
largest recipients 1998 and 1999 (Billions of
dollars)
Source UNCTAD, FDI/TNC database
8
Central and Eastern Europe FDI inflows, 1998
and 1999 (Billions of dollars)
Source UNCTAD, FDI/TNC database and annex table
B.1.
9
Share of the ten largest FDI recipients among
developing economies, selected periods

Source UNCTAD, FDI/TNC database. Notes
For 1980-1982, ten largest developing economy
FDI recipients were Saudi Arabia, Brazil,
Mexico, Singapore, Hong Kong, Malaysia,
Argentina, Egypt, Bermuda and Chile. For
1990-1992, ten largest developing economy FDI
recipients were China, Singapore, Malaysia,
Mexico, Argentina, Hong Kong, Thailand, Bermuda,
Indonesia and Brazil. For 1996-1998, ten
largest developing economy FDI recipients were
China, Brazil, Hong Kong, Mexico, Singapore,
Argentina, Malaysia, Chile, Thailand and
Venezuela.
10
FDI flows/gross fixed capital formation per
cent, 1996-98, selected developed countries
Source UNCTAD
11

FDI inflows standardized by market size (FDI
inflows per 1,000 GDP)

Source WIR 2000
Source UNCTAD
12
TNC activities

• 60,000 TNCs
• 700,000 foreign affiliates
• more firms investing abroad, including SMEs
• more countries source of outward FDI
• but high level of concentration 100 largest TNCs
  predominate in terms of production, assets,
  employment, sales

Source UNCTAD
13
The 10 largest TNCs in the world, by foreign
assets, US billions, 1998
Source UNCTAD
14
The 10 largest TNCs in Central and Eastern
Europe, by foreign assets, US millions, 1998
Source UNCTAD
15
The 10 largest TNCs from developing countries, by
foreign assets, US millions, 1998
Source UNCTAD
16
World exports and sales of foreign
affiliates1995-1999, UStrillions
Source UNCTAD
17
Value of cross-border MAs in relation to the
value of FDI flows, 1987-99, per cent, by host
region
Source UNCTAD
18
Number of cross-border mega deals 1995-1999,
deals with transaction values of more than US 1
billion
Source UNCTAD
19
The driving forces of cross-border MAs
Source UNCTAD
20
Surge of cross-border MAs raises
concernsbecause MAs might

• not add to productive capacity
• often result in layoffs or closure of activities
• lead to market dominance and reduced competition
• lead to a loss of control over strategic firms or
  industries
• threaten national culture and identity or eroding
  national sovereignty.

Source UNCTAD
21
What are the differences between green-field FDI
and cross-border MAs?

• At the time of entry
• MAs do not necessarily add to capital stock for
  production
• MAs are less likely to transfer new or better
  skills or technology
• MAs may result in closures of RD activity or
  higher-order functions
• MAs do not immediately generate, and more
  frequently reduce, employment, or change its
  terms and conditions in consolidating markets.
• MAs can conserve employment in growing markets
• MAs can increase market concentration and reduce
  competition
• Over time
• MAs can be followed by sequential investment.
• MAs can trigger transfers of new or better
  technology (hard and soft)
• Effects on market structure may persist,
  particularly in oligopolistic industries.

Source UNCTAD
22
Policy is crucial

• in general
• industrial policy (or a policy on the various
  economic sectors)
• technology and innovation policies
• employment and labour policies
• investment policy, including regarding FDI
• trade policy
• moreover, in the case of MAs
• competition policy especially important

Source UNCTAD