world investment report 2002 transnational corporations ...intel's manufacturing sites, january...

UNCTAD/WIR/2002 & Corrigendum

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

World Investment Report 2002 Transnational Corporations

and Export Competitiveness

UNITED NATIONS New York and Geneva, 2002

Printed in Switzerland UNCTAD/WIR/2002/Corr.1 GE.02-51422-August 2002 – 14,200 English Only

1

CORRIGENDUM Ref.: Sales N° E.02.II.D.4

UNCTAD/WIR/2002

12 June 2003 Geneva

United Nations Conference on Trade and Development

WORLD INVESTMENT REPORT 2002 TRANSNATIONAL CORPORATIONS AND EXPORT COMPETITIVENESS

Page 86: Table IV.1. The world's top 100 non-financial TNCs, ranked by foreign assets, 2000 Total assets of Repsol-YPF (ranked 20th) should read $48,776, not $487,763. Page 127: Table V.3. Intel's manufacturing sites, January 2002 should read as follows:

Country Facility Function Year built Current process technology

United States Facility 1 Wafer fabrication1978, 1992, 1996, 1999, 2003

a0.13-, 0.25-, 0.35-micron 16 000

Facility 2 Wafer fabrication 1980, 1993, 2002 a

0.13-, 0.18-, 0.25-, 0.35-micron 5 500

Facility 3 Wafer fabrication 1988 0.13-, 0.18-micron 8 500

Facility 4 Wafer fabrication 1994 0.28-, 0.35-, 0.50-micron 2 700

Facility 5Wafer fabrication, assembly and testing 1996, 1999, 2001 0.13-, 0.18- micron 10 000

Facility 6 Systems Manufacturing 1996 .. 1 400

Facility 7 Wafer fabrication 2001 0.18-micron 1 845

Ireland Facility Wafer fabrication 1993, 1998, 2004 a

0.18-, 0.25-micron 3 400

Israel Facility 1 Wafer fabrication 1985 0.35-, 0.50-, 0.75-, 1.0-micron 800Facility 2 Wafer fabrication 1999 0.18-micron 1 500

Malaysia Facility 1Board manufacturing, assembly and testing 1996, 1997 .. 7 790

Facility 2 Assembly and testing 1988, 1994, 1997 ..

Philippines Facility 1 Assembly and testing 1997, 1998 .. 5 984Facility 2 Assembly and testing 1979, 1995 ..

China Facility Assembly and test 1997, 2001 .. 1 227

Costa Rica Facility Assembly and test 1997, 1999 .. 1 845

Source : www.intel.com, January 2002.

a Estimated construction completion.

Employees

Table V.3. Intel’s manufacturing sites, January 2002

Printed in Switzerland UNCTAD/WIR/2002/Corr.1 GE.02-51422-August 2002 – 14,200 English Only

2

Page 299: first paragraph, line 3, …"except for New Zealand"… Should read …"except for Australia and New Zealand".... 15: the column of 1980 under North America For Canada, should read 23,783 For the United States, should read 215, 375. Page 315: Annex table B.4, the column of 1980 United States "United States 0", should read "United States –".

NOTE

UNCTAD serves as the focal point within the United Nations Secretariat for all matters related to foreigndirect investment and transnational corporations. In the past, the Programme on Transnational Corporations wascarried out by the United Nations Centre on Transnational Corporations (1975-1992) and the TransnationalCorporations and Management Division of the United Nations Department of Economic and Social Development(1992-1993). In 1993, the Programme was transferred to the United Nations Conference on Trade and Development.UNCTAD seeks to further the understanding of the nature of transnational corporations and their contribution todevelopment and to create an enabling environment for international investment and enterprise development.UNCTAD’s work is carried out through intergovernmental deliberations, technical assistance activities, seminars,workshops and conferences.

The term “country” as used in this study also refers, as appropriate, to territories or areas; the designationsemployed and the presentation of the material do not imply the expression of any opinion whatsoever on the partof the Secretariat of the United Nations concerning the legal status of any country, territory, city or area or of itsauthorities, or concerning the delimitation of its frontiers or boundaries. In addition, the designations of countrygroups are intended solely for statistical or analytical convenience and do not necessarily express a judgementabout the stage of development reached by a particular country or area in the development process. The referenceto a company and its activities should not be construed as an endorsement by UNCTAD of the company or itsactivities.

The boundaries and names shown and designations used on the maps presented in this publication do notimply official endorsement or acceptance by the United Nations.

The following symbols have been used in the tables:

Two dots (..) indicate that data are not available or are not separately reported. Rows in tables have beenomitted in those cases where no data are available for any of the elements in the row;

A dash (-) indicates that the item is equal to zero or its value is negligible;

A blank in a table indicates that the item is not applicable, unless otherwise indicated;

A slash (/) between dates representing years, e.g., 1994/95, indicates a financial year;

Use of a hyphen (-) between dates representing years, e.g., 1994-1995, signifies the full period involved,including the beginning and end years;

Reference to “dollars” ($) means United States dollars, unless otherwise indicated;

Annual rates of growth or change, unless otherwise stated, refer to annual compound rates;

Details and percentages in tables do not necessarily add to totals because of rounding.

The material contained in this study may be freely quoted with appropriate acknowledgement.

UNITED NATIONS PUBLICATION

Sales No. E.02.II.D.4

ISBN 92-1-112551-0

Copyright © United Nations, 2002All rights reserved

Manufactured in Switzerland

ii

PREFACE

In today's globalizing world economy, no country can sustain growth or achieve development withoutactive participation in world trade. All countries need exports to help them raise standards of living andescape poverty. For developing countries in particular, the challenge is not only to expand and diversifytheir exports, but also to make them more competitive.

Transnational corporations (TNCs) are increasingly involved in this process, providing additionalresources and technology and facilitating access to new markets. But in order to take full advantage of theirpartnerships with TNCs, governments must do their utmost to mobilize their own countries' resources andcapabilities. Investments in education and health pay enormous dividends in building productive labourforces. Investments in science and technology — and in particular information and communicationstechnologies — are essential if countries are to keep pace with an increasingly knowledge-based economy.These are areas where far-sighted government policies can make the difference between integration andmarginalization.

This year's World Investment Report examines the role of TNCs in making the exports ofdeveloping and transition countries more competitive. It highlights the strategies used by TNCs in theirinternational production networks. And it aims to help countries — especially the least developed countries— adopt sound policies, attract foreign investment and make their exports, as they surely should be, a keypart of their strategy to achieve Millennium Development Goals. I hope this report reaches a wide readershipand strengthens global partnerships for development.

Kofi A. AnnanNew York, July 2002 Secretary-General of the United Nations

iii

ACKNOWLEDGEMENTS

The World Investment Report 2002 (WIR02) was prepared - under the overall direction ofKarl P. Sauvant - by a team led by Anh-Nga Tran-Nguyen and comprising Victoria Aranda, AmericoBeviglia Zampetti, Kumi Endo, Torbjörn Fredriksson, Masataka Fujita, Kálmán Kalotay, GabrieleKöhler, Padma Mallampally, Michael Mortimore, Abraham Negash, Ludger Odenthal, Miguel PérezLudeña, Katja Weigl and James Xiaoning Zhan. Specific inputs were prepared by Sung Soo Eun, PeterFroehler, Jörg Weber and Zbigniew Zimny.

Principal research assistance was provided by Mohamed Chiraz Baly, Bradley Boicourt,John Bolmer, Lizanne Martinez and Tadelle Taye. Four interns assisted with the WIR02 at variousstages: Fatma Ben Fadhl, David Fischer, Stijn Mentrop and Pauline Rauwerda. The production of theWIR02 was carried out by Christopher Corbet, Monica Adjivon-Conteh, Christiane Defrancisco, LyndaPiscopo, Chantal Rakotondrainibe and Esther Valdivia-Fyfe. Graphics were done by Diego Oyarzun-Reyes. WIR02 was desktop published by Teresita Sabico. The Report was edited by Vishwas Govitrikarand Praveen Bhalla.

Sanjaya Lall was principal consultant and adviser.

Experts from within and outside the United Nations provided inputs for WIR02. Majorinputs were received from Greg Felker, Don Lecraw, Henry Loewendahl and Alvin G. Wint. Inputswere also received from John O.B. Akara, Katalin Antalóczy, Octavio de Barros, Daniel Chudnovsky,Mark Curtis, Andrea Éltetö, Carlos García Fernández, Andrea Goldstein, Masayo Ishikawa, DanutaJablonska, Soon-Hyung Kwon, Antônio Corrêa de Lacerda, Andrés López, Marjan Svetlicic, Friedrichvon Kirchbach, Hoyuan Xing and Yuan Ziwei.

A number of experts were consulted on various chapters. The report has also benefitedfrom inputs provided by participants in two regional seminars organized jointly with the Center onTransnational Studies of Nankai University (in December 2001, Tianjin, China) and the United NationsEconomic Commission for Latin America and the Caribbean (in January 2002, Santiago de Chile).The UNCTAD FDI Indices were discussed at an ad-hoc expert meeting in November 2001. The specialtopic was discussed at a Global Seminar in Geneva in June 2002 in cooperation with the DevelopmentPolicy Forum of the German Foundation for International Development.

Comments and feedback were received during various stages of preparation from YilmazAkyuz, Armenia C. Ballesteros, Nazha Benabbes Taarji, Douglas van der Berghe, Karl Brenke, RudolfBuitelaar, Graciana del Castillo, Marquise David, José Durán, Persephone Economou, Enrique Egloff,Magnus Ericsson, David Frans, Klaus Friedrich, Anabel González, Charles Gore, Khalil Hamdani, SusanHayter, Yao-Su Hu, Grazia Ietto-Gillies, Yuthasak Kanasawat, Guy Karsenty, Faizullah Khilji, Kee BeomKim, Jesse Kreier, Nagesh Kumar, Sam Laird, Robert Lipsey, Raymond J. Mataloni, Andrew Mc Dowell,Mina Mashayekhi, John A. Mathews, Joseph Mathews, Joerg Mayer, Helge Müller, Rajah Rasiah, Christophvon Rohr, Frieder Roessler, René Samek, Valdas Samonis, Magdolna Sass, Leo Sleuwaegen, ChristianeStepanek-Allen, Shigeki Tejima, Taffere Tesfachew, Rob van Tulder and Janina Witkowska.

Numerous officials of central banks, statistical offices, investment promotion agencies and othergovernment offices, and officials of international organizations and non-governmental organizations, as wellas executives of a number of companies, also contributed to WIR02, especially through the provision of dataand other information. Most particularly, the Malaysian Industrial Development Authority, the Ministry ofForeign Trade and Economic Cooperation of China, the Philippines Economic Zone Authority and the Boardof Investment of Thailand provided information on policies.

The Report benefited from overall advice from John H. Dunning, Senior Economic Advisor.

The financial support of the Governments of Germany, Norway and Sweden is gratefullyacknowledged.

iv

Table of contents

Page

PREFACE ...................................................................................................................................................... iii

ABBREVIATIONS ....................................................................................................................................... xiii

OVERVIEW .................................................................................................................................................. xv

PART ONETRENDS IN INTERNATIONAL PRODUCTION

CHAPTER I. GLOBAL TRENDS ............................................................................................................. 3

Introduction .............................................................................................................................................................. 3A. Trends in FDI flows .......................................................................................................................................... 3B. Developments in international production .................................................................................................... 14

1. The significance of foreign affiliates in their host economies .............................................................. 142. The Transnationality Index of host countries ....................................................................................... 20

CHAPTER II. BENCHMARKING FDI PERFORMANCE AND POTENTIAL ................................. 23

A. Introduction and methodology ........................................................................................................................ 23B. The UNCTAD Inward FDI Performance Index ............................................................................................ 24C. The UNCTAD Inward FDI Potential Index ................................................................................................... 29D. Comparing rankings on the two Indices ........................................................................................................ 29

Annex to Chapter II. Methodology and data used for calculating UNCTAD’s Inward FDIPerformance Index and Inward FDI Potential Index .......................................................................................... 34

CHAPTER III. REGIONAL TRENDS ..................................................................................................... 37

A. Developed countries ......................................................................................................................................... 371. United States ......................................................................................................................................... 372. Western Europe ..................................................................................................................................... 40

a. European Union ........................................................................................................................ 40

b. Other Western Europe ............................................................................................................... 433. Japan ...................................................................................................................................................... 434. Other developed countries .................................................................................................................... 47

B. Developing countries ........................................................................................................................................ 491. Africa ..................................................................................................................................................... 492. Asia and the Pacific ............................................................................................................................... 553. Latin America and the Caribbean ......................................................................................................... 62

C. Central and Eastern Europe ........................................................................................................................... 69D. The least developed countries ......................................................................................................................... 73

CHAPTER IV. THE LARGEST TRANSNATIONAL CORPORATIONS ........................................ 87

A. The 100 largest TNCs worldwide .................................................................................................................... 871. Highlights .............................................................................................................................................. 872. Transnationality ..................................................................................................................................... 953. Developments in 2001 ........................................................................................................................... 99

B. The 50 largest TNCs from developing countries ........................................................................................... 991. Highlights .............................................................................................................................................. 992. The Network Spread Index ................................................................................................................... 109

C. The 25 largest TNCs from Central and Eastern Europe ............................................................................. 111

vi

World Investment Report 2002: Transnational Corporations and Export Competitiveness

Page

PART TWOTNCs AND EXPORT COMPETITIVENESS

INTRODUCTION ........................................................................................................................................ 117

CHAPTER V. INTERNATIONAL PRODUCTION SYSTEMS ............................................................ 121

A. Drivers and features ......................................................................................................................................... 121B. Case studies ....................................................................................................................................................... 126

1. Control through equity relations in a technology-driven internationalproduction system: Intel ........................................................................................................................ 126

2. Control through non-equity relations in a marketing-driven internationalproduction system: Limited Brands ...................................................................................................... 132

3. Control through equity and non-equity relations in a production-driven internationalproduction system: Toyota .................................................................................................................... 134

4. Control in transition in a technology-driven international production system: Ericsson ..................... 1345. Outsourcing becomes more generalized: the rise of contract manufacturers ....................................... 139

C. Conclusions ....................................................................................................................................................... 139

CHAPTER VI. PATTERNS OF EXPORT COMPETITIVENESS ........................................................ 143

A. Global competitiveness patterns ..................................................................................................................... 143B. TNCs and exports ............................................................................................................................................. 151

1. The overall picture ................................................................................................................................ 1512. Primary products ................................................................................................................................... 1543. Services ................................................................................................................................................. 1574. Manufacturing ....................................................................................................................................... 160

C. Some winner countries ..................................................................................................................................... 1611. China ..................................................................................................................................................... 1612. Costa Rica ............................................................................................................................................. 1673. Hungary ................................................................................................................................................. 1694. Ireland .................................................................................................................................................... 1725. Mexico ................................................................................................................................................... 1736. Republic of Korea ................................................................................................................................. 176

Annex to chapter VI. Winners in world trade, 1985-2000 .................................................................................. 182

CONCLUSIONS: Benefiting from export competitiveness ..................................................................... 185

PART THREEPROMOTING EXPORT-ORIENTED FDI

INTRODUCTION ........................................................................................................................................ 193

CHAPTER VII. POLICY MEASURES .................................................................................................... 197

A. Policy related to market access ....................................................................................................................... 197B. Improving access to imported inputs ............................................................................................................. 200C. Trade facilitation .............................................................................................................................................. 201D. Export performance requirements ................................................................................................................. 203E. Incentives ........................................................................................................................................................... 204

1. The evolution of incentives ................................................................................................................... 2042. WTO rules on export subsidies ............................................................................................................. 208

a. Prohibited and actionable subsidies .......................................................................................... 208b. Special and differential treatment ............................................................................................. 211c. Doha results .............................................................................................................................. 211

3. Implications for the future use of incentives ........................................................................................ 211

F. Export processing zones ................................................................................................................................... 214

vii

Table of Contents

Page

CHAPTER VIII. TARGETED PROMOTION ......................................................................................... 221

A. Targeting export-oriented FDI ........................................................................................................................ 2211. Why target? ........................................................................................................................................... 2212. What to target? ...................................................................................................................................... 222

a. Identifying comparative advantages ......................................................................................... 223b. Segmenting the market for export-oriented FDI ...................................................................... 226

3. How to target? ....................................................................................................................................... 2304. What are the pitfalls and risks? ............................................................................................................. 235

B. Investment facilitation ..................................................................................................................................... 237C. Aftercare services ............................................................................................................................................. 238

CONCLUDING OBSERVATIONS: Benefiting more from export expansion ....................................... 243

REFERENCES ............................................................................................................................................. 249

ANNEX A. ADDITIONAL TEXT TABLES AND FIGURES ................................................................... 265

ANNEX B. STATISTICAL ANNEX ........................................................................................................... 291

SELECTED UNCTAD PUBLICATIONS ON TRANSNATIONAL CORPORATIONSAND FOREIGN DIRECT INVESTMENT ................................................................................................ 347

QUESTIONNAIRE ...................................................................................................................................... 351

Boxes

I.1. Impact of the September 11 events on FDI flows ............................................................................................. 5I.2. Changes in FDI regimes in 2001 ...................................................................................................................... 7I.3. BITs and DTTs in 2001 ..................................................................................................................................... 8I.4. Issues discussed in the WTO Working Group on the Relationship between Trade and Investment ................ 9I.5. The Doha WTO ministerial Conference on investment ................................................................................... 10I.6. UNCTAD’s post-Doha technical assistance work programme in the area of investment ................................ 11I.7. Financing international production locally ....................................................................................................... 15III.1. Going east: FDI in Germany’s new Länder ..................................................................................................... 42III.2. Is China more attractive to Japanese investors than ASEAN? ......................................................................... 44III.3. Botswana: the role of FDI in economic restructuring ...................................................................................... 53III.4. New trade and investment initiatives in sub-Saharan Africa in response to AGOA ........................................ 54III.5. The accession to the WTO of Taiwan Province of China: implications for FDI ............................................. 58III.6. FDI potential in West Asia ................................................................................................................................ 59III.7. FDI and the economic crisis in Argentina ........................................................................................................ 63III.8. Mexico: FDI in financial services .................................................................................................................... 67III.9. The new system of incentives for investors in Poland ..................................................................................... 69III.10. Toyota/PSA’s investment in the Czech Republic .............................................................................................. 69III.11. The wave of outward FDI from Slovenia ......................................................................................................... 73III.12. The United Republic of Tanzania: harnessing FDI for development ............................................................... 75III.13. UNCTAD’s Investment Policy Reviews .......................................................................................................... 81III.14. BIT negotiations with a focus on LDCs ........................................................................................................... 82III.15. Opportunities and conditions in LDCs: the UNCTAD - ICC Investment Guides ............................................ 82IV.1. Are some TNCs bigger than countries? ............................................................................................................ 90IV.2. A global player in brewing: South African Breweries ..................................................................................... 107V.1. Li & Fung: a full-package provider ................................................................................................................. 131V.2. Volkswagen’s strategy in Mexico ..................................................................................................................... 135V.3. Ford’s strategy in Mexico ................................................................................................................................. 136V.4. Flextronics: specializing in the manufacture of others’ products ..................................................................... 140VI.1. Dynamic products in world trade, 1985-2000 .................................................................................................. 147VI.2. Kenya’s dynamic horticultural export industry ................................................................................................ 155VI.3. The food value chain ......................................................................................................................................... 156VI.4. FDI in the salmon industry in Chile ....................................................................................................... 157

viii


Page

VI.5. Indian computer software and services exports ................................................................................................ 158VI.6. Ireland: the growth of services exports ............................................................................................................. 159VI.7. Flextronic’s Industrial Parks in Hungary .......................................................................................................... 170VI.8. FDI and the trade balance: the case of China ................................................................................................... 186VI.9. Upgrading and embedding export-oriented operations in a host economy:

the case of Motorola in China ........................................................................................................................... 188VII.1. Potential obstacles to market access ................................................................................................................. 197VII.2. The phasing out of the Multi-Fibre Arrangement ............................................................................................. 199VII.3. Trade facilitation: what are the concerns? ....................................................................................................... 201VII.4. The Advance Cargo Information System .......................................................................................................... 202VII.5. UNCTAD’s ASYCUDA Programme ................................................................................................................ 202VII.6. The evolving use of incentives in Ireland ......................................................................................................... 204VII.7. The use of investment incentives in FDI targeting: the Malaysian experience .............................................. 206VII.8. The treatment of subsidies in the GATS ........................................................................................................... 210VII.9. Estonia: attracting export-oriented FDI by providing an enabling environment ............................................ 213VII.10. The role of EPZs in exports: evidence from selected countries ...................................................................... 214VII.11. FDI in some developing country EPZs ............................................................................................................. 215VII.12. EPZs in Hungary ............................................................................................................................................... 216VII.13. EPZs and the “race to the bottom“ ................................................................................................................... 218VIII.1. Singapore: an early mover in targeting export-oriented FDI .......................................................................... 222VIII.2. Targeting investors in a specific niche: sun-dried tomatoes in Kyrgyzstan .................................................... 223VIII.3. Trade analysis tools for investment targeting ................................................................................................... 224VIII.4. Assessing the potential for export-oriented FDI: the case of Albania ............................................................. 227VIII.5. The targeted approach of Thailand ................................................................................................................... 229VIII.6. Costa Rica’ s CINDE: the “other” story of promotional effectiveness ............................................................ 232VIII.7. Training diplomats in FDI promotion ............................................................................................................... 233VIII.8. Training courses in investor targeting ............................................................................................................... 233VIII.9. Moving from a non-focused to a targeted approach: the case of a southern European IPA ............................ 234VIII.10. Building an FDI-based cluster: the case of Socware in Sweden ...................................................................... 236VIII.11. Good governance in investment promotion ...................................................................................................... 238VIII.12. Helping an affiliate to expand exports: the case of Black & Decker in the United Kingdom ......................... 239VIII.13. Office of the Investment Ombudsman, Republic of Korea .............................................................................. 240VIII.14. Promoting supplier transnationalization ........................................................................................................... 246VIII.15. Cluster development: the case of Singapore ..................................................................................................... 248

Figures

I.1. FDI inflows and real growth rates of GDP in the world , 1980-2001 .............................................................. 6I.2. FDI inflows and real growth rates of GDP in developed countries, 1980-2001 .............................................. 6I.3. FDI inflows and real growth rates of GDP in developing countries, 1980-2001 ............................................. 6I.4. FDI inflows and real growth rates of GDP in Central and Eastern European countries, 1990-2001 ............... 6I.5. The share of the largest 5, 10 and 30 recipients in total FDI inflows

to developing countries, 1990-2001 .................................................................................................................. 11I.6. Value of cross-border M&As and their ratio to world GDP, 1987-2001 .......................................................... 12I.7. Total resource flows to developing countries, by type of flow, 1990-2001 ..................................................... 12I.8. The ratio of FDI inflows to bilateral ODA flows to developing countries, 1980-2000 ................................... 13I.9. Profitability of foreign affiliates operating in Japan and the United States, 1989-1999 .................................. 18I.10. Comparison of reinvested earnings of FDI inflows and profits of foreign affiliates

in the United States, 1983-1999 ........................................................................................................................ 19I.11. Transnationality index of host economies, 1999 .............................................................................................. 21II.1. Host country determinants of FDI .................................................................................................................... 24II.2. The UNCTAD Inward FDI Performance Index, by host economy:

the top 20 and the bottom 20, 1998-2000 ......................................................................................................... 28II.3. The UNCTAD Inward FDI Potential Index, by host economy:

the top 20 and the bottom 20, 1998-2000 ......................................................................................................... 30III.1. Developed countries: FDI flows, top 10 countries, 2000 and 2001 ................................................................ 38III.2. United States FDI inflows and outflows, by major partner, 1990-2001 ........................................................... 38III.3. United States FDI inflows and outflows, by major sector and industry, 1990-2001 ........................................ 39III.4. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index for the

United States and selected Western European countries, 1988-1990 and 1998-2000 ..................................... 39III.5. Developed countries: FDI flows as a percentage of gross fixed capital formation,

top 10 countries, 1998-2000 ............................................................................................................................. 41III.6. Planned FDI by Japanese manufacturing TNCs over the next three years, 1995-2001 ................................... 43

ix

Table of Contents

Page

III.7. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Indexfor "other" developed countries, 1988-1990 and 1998-2000 ............................................................................ 46

III.8. Japan’s imports from Japanese foreign affiliates, 1987-1999 .......................................................................... 47III.9. FDI inflows and their share in gross fixed capital formation in Africa, 1990-2001 ....................................... 48III.10. Africa: FDI inflows, top 10 countries, 2000 and 2001 ..................................................................................... 49III.11. Africa: FDI flows as a percentage of gross fixed capital formation, top 10 countries, 1998-2000 ................. 49III.12. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index

for selected countries in Africa, 1988-1990 and 1998-2000 ............................................................................ 51III.13. Africa: FDI outflows, top 10 countries, 2000 and 2001 .................................................................................. 55III.14. FDI inflows and their share in gross fixed capital formation

in developing Asia and the Pacific, 1990-2001 ................................................................................................ 56III.15. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index

for selected countries in Asia, 1988-1990 and 1998-2000 ............................................................................... 56III.16. Developing Asia and the Pacific: FDI inflows, top 10 economies, 2000 and 2001 ........................................ 57III.17. Developing Asia and the Pacific: FDI flows as a percentage of gross fixed

capital formation, top 10 economies, 1998-2000 ............................................................................................. 60III.18. Developing Asia and the Pacific: FDI outflows and their share in the world, 1990-2001 .............................. 60III.19. Developing Asia and the Pacific: FDI outflows, top 10 economies, 2000-2001 ........................................... 61III.20. FDI inflows and their share in gross fixed capital formation in

Latin America and the Caribbean, 1990-2001 .................................................................................................. 62III.21. Latin America and the Caribbean: FDI inflows, top 10 economies, 2000 and 2001 ....................................... 62III.22. Latin America and the Caribbean: FDI flows as a percentage of gross fixed

capital formation, top 10 economies, 1998-2000 ............................................................................................. 66III.23. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index

for selected countries in Latin America, 1988-1990 and 1998-2000 ............................................................... 66III.24. Spanish FDI in Brazil, Argentina, Chile and Mexico, 1994-2001 ................................................................... 67III.25. FDI in privatization in Brazil, 1996-2001 ........................................................................................................ 67III.26. FDI inflows in the manufacturing sector in Brazil, 1996-2001 ........................................................................ 67III.27. Latin America and the Caribbean: FDI outflows, top 10 economies, 2000 and 2001 .................................... 68III.28. Central and Eastern Europe: FDI inflows, top 10 countries, 2000 and 2001 .................................................. 69III.29. Central and Eastern Europe: FDI flows as a percentage of gross fixed capital formation,

top 10 countries, 1998-2000 ............................................................................................................................. 70III.30. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index

for selected countries in Central and Eastern Europe, 1992-1994 and 1998-2000 .......................................... 71III.31. Central and Eastern Europe: FDI outflows, top 10 economies, 2000 and 2001 ............................................. 72III.32. LDCs: FDI inflows as a percentage of gross fixed capital formation, top 10 countries, 1998-2000 ............... 73III.33. LDCs: FDI inflows, top 10 countries, 2000 and 2001 ..................................................................................... 74III.34. LDCs: FDI inflows and their share in the world inflows and developing-county inflows, 1986-2001 .......... 79III.35. LDC rankings based on the UNCTAD Inward FDI Performance and Potential Indices, 1998-2000 .............. 76III.36. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index

for selected LDCs, 1988-1990 and 1998-2000 ................................................................................................. 76III.37. FDI inflows and ODA flows to LDCs, 1985-2001 ........................................................................................... 77III.38. FDI inflows, cross-border M&A sales and privatizations in LDCs, 1987-2001 .............................................. 78III.39. BITs and DTTs concluded by LDCs, 1990-2001 ............................................................................................. 79IV.1. The transnationalization of the world’s top 100 TNCs, 1990-2000 ................................................................. 96IV.2 The 10 biggest increases in transnationality among the world’s top 100 TNCs, 1999-2000 ........................... 98IV.3. The 10 biggest decreases in transnationality among the world’s top 100 TNCs, 1999-2000 .......................... 98IV.4. The transnationalization of the top 50 TNCs from developing economies, 1993-2000 ................................. 103IV.5. Shares of industry groups among the top 50, 1999-2000 ................................................................................ 105IV.6. The top 50 industry groups and their average transnationality index, 1993-1999 ........................................... 106IV.7. Foreign assets of the largest TNCs from developing countries, 1999 and 2000 .............................................. 108IV.8. Average Network Spread Index of the top 50, by home economy, 2000 ......................................................... 109IV.9. Comparison of the Network Spread Index by industry, between the top 100 and the top 50 TNCs ............... 110IV.10. The top 25 TNCs of CEE: comparison of Russian and other firms, 2000 ...................................................... 111V.1. The global value chain of product components ................................................................................................ 123VI.1. World export market shares, 2000. and changes. 1985-2000 ........................................................................... 144VI.2 Shares of resource-based and non-resource based products in world trade, 1976-2000 .................................. 144VI.3. Shares of manufactured products in world exports by technology groupings, 1976-2000 .............................. 145VI.4. Average annual growth rates of world exports, by technology intensity, 1985-2000 ...................................... 146VI.5. Shares of the top 10 exporters of manufactured exports in developing countries ........................................... 149VI.6. Number of developing and CEE countries with exports of $500 million or more ........................................... 149VI.7. China: share of foreign affiliates in total exports 1986-2001 ........................................................................... 163VI.8. China: exports of high-technology products and share of foreign affiliates and

State-owned firms, 1996-2000 .......................................................................................................................... 163

x


Page

VI.9. Winners in the high-technology manufactures trade, 1985-2000 ..................................................................... 183VI.10. Winners in the medium-technology manufactures trade, 1985-2000 ............................................................... 183VI.11. Winners in the low-technology manufactures trade, 1985-2000 ...................................................................... 184

Tables

I.1. Selected indicators of FDI and international production, 1982-2001 .............................................................. 4I.2. Distribution of world FDI inflows, 1986-2001 ................................................................................................. 7I.3. Cross-border M&As worth over over $1 billion, 1987-2001 ........................................................................... 12I.4. Top 10 winners and losers in FDI flows in 2001 .............................................................................................. 13I.5. Most favoured host economies as a priority location in 2002-2005, by region,

as a percentage of total responses by TNCs ..................................................................................................... 14I.6. Significance of employment in foreign affiliates in the manufacturing sector

in selected host economies, 1985-1999 ............................................................................................................ 16I.7. Significance of sales of foreign affiliates in manufacturing in selected host economies, 1985-2000 ............. 17I.8. Significance of value added of foreign affiliates in selected host economies, 1985-1999 .............................. 17I.9. Significance of profits of foreign affiliates in manufacturing in selected host economies, 1985-1999 ........... 18I.10. Significance of R&D expenditures of foreign affiliates in selected host economies, 1986-1999 ................... 19II.1. Values of and country rankings by the UNCTAD inward FDI Performance Index and

Inward FDI Potential Index, 1988-1990 and 1998-2000 .................................................................................. 25II.2. Inward FDI Performance Index, by region, 1988-1990 and 1998-2000 .......................................................... 27II.3. Country classification by FDI performance and potential, 1988-1990 and 1998-2000 ................................... 31II.4. Correlation between the UNCTAD Inward FDI Performance Index

and factors determining FDI, 1998-2000 .......................................................................................................... 35III.1. Exports, FDI and international production of 30 largest Japanese firms, 1996 and 2001 ............................... 47III.2. Africa: accumulated FDI outflows from major developed countries, 1981-2000 ............................................ 51III.3. FDI outflows from major investors to Africa, by sector, 1996-2001 ............................................................... 52III.4. Regional headquarters established by foreign firms in Hong Kong, China, 2001 ........................................... 57III.5. The 12 largest TNCs from China, ranked by foreign assets, 2001 ................................................................... 61III.6. Annual average FDI growth rates in LDCs, 1986-2001 ................................................................................... 74III.7. Growth trends in FDI and bilateral ODA flows, 1990-2000 ............................................................................ 77III.8. LDC signatories to main international investment-related instruments, as of June 2002 ................................ 80III.9. Existence of investment promotion agencies in LDCs, as of June 2002 ......................................................... 81IV.1. The world’s non-financial 100 TNCs, ranked by foreign assets, 2000 ............................................................ 86IV.2. Snapshot of the world’s 100 top TNCs, 2000 ................................................................................................... 89IV.3. The top 20 TNCs ranked by value of cross-border M&A activity, 1987-2001 ................................................ 89IV.4. Newcomers to the world’s top 100 TNCs, 2000 ............................................................................................... 91IV.5. Departures from the world's top 100 TNCs, 2000 ............................................................................................ 92IV.6. Home economies of the world’s top 100 TNCs by transnationality index

and foreign assets, 1990, 1995 and 2000 .......................................................................................................... 93IV.7. Industry composition of the top 100 TNCs, 1990, 1995 and 2000 .................................................................. 96IV.8. The world’s top 10 TNCs in terms of transnationality, 2000 ........................................................................... 97IV.9. Average transnationality index of the top 5 TNCs in each industry, and their

shares in the assets, sales and employment of the top 100, 1990, 1995 and 2000 ........................................... 98IV.10. The top 50 non-financial TNCs from developing economies, ranked by foreign assets, 2000 ...................... 100IV.11. Snapshot of top 50 TNCs from developing economies, 2000 .......................................................................... 102IV.12. The top 5 TNCs from developing economies in terms of transnationality, 2000 ............................................. 103IV.13. Newcomers to the top 50 TNCs from developing economies, 2000 ................................................................ 103IV.14. Departures from the top 50 TNCs from developing economies, 2000 ............................................................. 104IV.15. Industry composition of the top 50 TNCs from developing economies, 1998 1999 and 2000 ........................ 104IV.16. Home countries of the top 50 TNCs from developing economies,

by transnationality index and foreign assets, 1998, 1999 and 2000 ................................................................. 108IV.17. The top 25 non-financial TNCs based in Central and Eastern Europe, ranked by foreign assets, 2000 ......... 112IV.18. The Network Spread Index of the top 50 Russian exporters, by industry, 2000 .............................................. 113V.1. Examples of different International Production Systems ................................................................................. 124V.2. The world’s leading semiconductor manufacturers, 2001 ................................................................................ 126V.3 Intel’s manufacturing sites, January 2002 ........................................................................................................ 127V.4. Winners and losers in semiconductor exports,1985-2000 ................................................................................ 128V.5. Winners and losers in North American garment imports, 1985, 2000 ............................................................. 129V.6. Winners and losers in West European garment imports, 1985, 2000 ............................................................... 130V.7. Winners and losers in Japanese garment imports, 1985, 2000 ......................................................................... 130V.8. The top 10 automobile manufacturers, ranked by vehicle production, 2000 ................................................... 133V.9. Winners and losers in the automobile industry exports to the North American market, 1985, 2000 .............. 134V.10. The top telecom equipment manufacturers, 2000 ............................................................................................. 136

xi

Table of Contents

Page

V.11. Winners and losers in telecommunications equipment exports, 1985, 2000 .................................................... 138V.12. The five largest contract electronics manufacturers, 1995 and 2002 ............................................................... 139VI.1. The structure of world trade in major product categories, by region, 1985 and 2000 ..................................... 148VI.2. The top 20 export winners, by technology category, 1985-2000 ..................................................................... 150VI.3. Shares of foreign affiliates in the exports of selected host economies,

all industries and manufacturing, selected years .............................................................................................. 154VI.4. The degree of transnationality of United States firms, by sector, 1992 and 1997 ........................................... 158VI.5. China’s competitiveness in world trade, 1985-2000 ........................................................................................ 162VI.6. China: exports by the leading foreign affiliates, 2000 .................................................................................... 164VI.7. China: shares of domestic companies and foreign affiliates in the

export of selected goods, 1996 and 2000 .......................................................................................................... 166VI.8. Costa Rica’s competitiveness in the North American market, 1985-2000 ....................................................... 167VI.9. Costa Rica: exports by the 20 leading foreign affiliates, 2000 ......................................................................... 168VI.10. Hungary’s competitiveness in the Western European market, 1985-2000 ....................................................... 169VI.11. Hungary: exports by the 50 leading foreign affiliates, 2000 ............................................................................ 171VI.12. Ireland’s competitiveness in the Western European market, 1985-2000 .......................................................... 172VI.13. Ireland: exports by the 55 leading foreign affiliates, 1998 ............................................................................... 174VI.14. Mexico’s competitiveness in the North American market, 1985-2000 ............................................................ 175VI.15. Mexico: exports by the 35 leading foreign affiliates, 2000 .............................................................................. 176VI.16. The Republic of Korea‘s competitiveness in the world market, 1985-2000 .................................................... 177VI.17. Republic of Korea: exports by the leading 50 companies, 2000 ..................................................................... 178VII.1. Estimated incentives for selected FDI projects, 1995-2000 ............................................................................. 205

Box figures

I.1.1. Effects of the September 11 events on FDI plans of Japanese TNCs .............................................................. 5I.2.1. Types of changes in FDI laws and regulations, 2001 ....................................................................................... 8I.3.1. BITs concluded in 2001, by country group ....................................................................................................... 8I.3.2. DTTs concluded in 2001, by country group ..................................................................................................... 8III.1.1. Distribution of inward FDI stock in Germany’ new Länder, by region, 1991-1999 ........................................ 42III.2.1. Japanese FDI outflows to ASEAN-4 and China, 1995-2001 ........................................................................... 44III.2.2. Planned relocation of production sites of Japanese TNCs to China

as a result of China’s accession to the WTO .................................................................................................... 45III.2.3. Investment climate of ASEAN-4 compared with China ................................................................................... 45III.6.1. The UNCTAD Inward FDI Performance Index and Inward FDI Potential Index

for selected countries in West Asia, 1988-1990 and 1998-2000 ...................................................................... 59III.7.1. Financial flows to Argentina 1994-2001 .......................................................................................................... 63VI.8.1. The trade balance of foreign affiliates in China, 1990-2001 ............................................................................ 186VI.8.2. The share of imports of capital goods in total imports by foreign affiliates in China, 1990-2001 .................. 186VIII.3.1. Exports profile of Mozambique ........................................................................................................................ 225

Box tables

I.2.1. National regulatory changes, 1991-2001 .......................................................................................................... 7III.2.1. The 10 most promising destinations for manufacturing FDI by Japanese TNCs

over the next three years, 1995-2001 surveys .................................................................................................. 50IV.1.1. How large are the top TNCs, vis-à-vis economies in 2000? ............................................................................ 98IV.1.2. The concentration ratio of the largest 100 TNCs in world GDP, 1990 and 2000 ............................................. 99V.4.1 Flextronics’ selected global facilities, 2002 ..................................................................................................... 146VI.1.1. Dynamic products in world exports, ranked by change in market share, 1985-2000 ...................................... 147VIII.4.1. Albania’s export products, 1995-1999 .............................................................................................................. 227

Annex A. Additional text tables and figures

Tables

A.I.1. Distribution of world FDI flows by absolute amounts, FDI flows per $1,000 GDPand FDI flows per capita, by region, 1990-2001 .............................................................................................. 265

A.I.2. Cross-border M&A deals with values of over $1 billion completed in 2001 ................................................... 266A.I.3. Number of parent corporations and foreign affiliates, by region and economy, latest available year ............. 270A.I.4. Comparison between FDI inward stock and assets of foreign affiliates

in selected host economies, latest available year .............................................................................................. 274

xii


Page

A.I.5. Labour productivity of foreign affiliates and domestic firms in manufacturingin selected host economies, latest available year .............................................................................................. 274

A.I.6. Data for the transnationality index of host economies, 1999 ........................................................................... 275A.II.1. Raw data and scores for the variables included in the UNCTAD

Inward FDI Potential index, 1998-2000 ........................................................................................................... 276A.II.2. Raw data and scores for the variables included in the UNCTAD

Inward FDI Potential index, 1988-1990 ........................................................................................................... 280A.III.1 The largest 30 cross-border M&A sales in LDCs, 1987-2001 ......................................................................... 284A.III.2. The largest 30 foreign affiliates in LDCs, 2001 ............................................................................................... 285A.V.1. Toyota’s international production system, 2001 ............................................................................................... 286A.V.2. World motor-vehicle production by the top 10 TNCs, 2000 ............................................................................ 287A.VI.1. Distribution of total exports and intra-firm exports of foreign affiliates of

United States TNCs in the manufacturing sector, by category, 1993 and 1998 ............................................... 288A.VI.2. The trade performance of foreign affiliates and EPZs in Hungary, 1995-2000 ............................................... 288A.VI.3. The top ten Hungarian export products, 1999 .................................................................................................. 289A.VI.4. The largest contract electronics manufacturers in Central and Eastern Europe, November 2001 ................... 289

Annex B: Statistical annex

Definitions and sources ............................................................................................................................................... 291

A. General definitions ............................................................................................................................................... 2911. Transnational corporations ........................................................................................................................ 2912. Foreign direct investment .......................................................................................................................... 2913. Non-equity forms of investment ................................................................................................................ 291

B. Availability, limitations and estimates of FDI data providedin the World Investment Report ............................................................................................................................ 2921. FDI flows ............................................................................................................................................... 292

(a) FDI inflows ......................................................................................................................................... 292(b) FDI outlows ........................................................................................................................................ 296

2. FDI stocks ............................................................................................................................................... 299

C. Data revisions and updates .................................................................................................................................... 300D. Data verification ............................................................................................................................................... 300E. Definitions and sources of the data in annex tables B.5-B.10 .............................................................................. 300F. Definitions and sources of the data on cross-border M&As in annex tables B.7 - B.10 ...................................... 301

Annex tables

B.1 FDI inflows, by host region and economy, 1989-2001 ........................................................................................ 303B.2 FDI outflows, by home region and economy, 1989-2001 ................................................................................... 307B.3 FDI inward stock, by host region and economy,

1980, 1985, 1990, 1995, 1999 and 2001 .............................................................................................................. 310B.4 FDI outward stock, by home region and economy,

1980, 1985, 1990, 1995, 1999 and 2001 .............................................................................................................. 315B.5 FDI flows as a percentage of gross fixed capital formation,

by host region and economy, 1989-1999 ............................................................................................................. 319B.6 FDI stock as a percentage of gross domestic product,

by host region and economy, 1980, 1985, 1990, 1995 and 1999......................................................................... 328B.7 Cross-border M&A sales, by region/economy of seller, 1987-2001 ................................................................... 337B.8 Cross-border M&A sales, by region/economy of purchaser, 1987-2001 ............................................................ 341B.9 Cross-border M&A, by sector and industry of seller, 1987-2001 ....................................................................... 344B.10 Cross-border M&A, by sector and industry of purchaser, 1987-2001 ................................................................ 345

PART ONETRENDS IN INTERNATIONAL PRODUCTION

CHAPTER I

GLOBAL TRENDS

Introduction

Global foreign direct investment (FDI)flows declined sharply in 2001. Inflows fellby 51 per cent and outflows by 55 per cent.This reversal � after steady growth since1991 and very large rises in 1999 and 2000� reflects two factors: the slowing of economicactivity in major industrial economies anda sharp decrease in their stock market activity.These combined to s low down newinternational investment, particularly thecross-border mergers and acquisitions (M&As)that have driven recent FDI. Developedcountries have borne the brunt of decliningFDI (59 per cent) but developing countrieshave a lso suffered (a l though only by arelatively small 14 per cent). The economiesin transition of Central and Eastern Europe(CEE) are the only ones to have remainedimmune to this general downturn (a 2 percent increase) .1

The fall in FDI in 2001 is likely tocontinue for most countries in 2002. However,over the longer term, international production� production under the common governanceof transnational corporations (TNCs) � seemsset to raise its share of global economicactivity. Part One of WIR02 deals with trendsin FDI flows and the role of TNCs in hosteconomies in terms of such aspects as FDIs tock and f lows , sa les , va lue added ,employment , p rof i t s , and research anddevelopment (R&D). It also benchmarks theFDI performance and potential of host countriesand looks at the largest TNCs.

The growth of international productionis driven by economic and technologicalforces. I t is also driven by the ongoingliberalization of FDI and trade policies.National policy regimes are converging towardsa more welcoming s tance on FDI , ascompetition for investment intensifies. Thecompetition is particularly marked for export-oriented investment, as countries try to boost

expor t compet i t iveness in a se t t ing ofaccelerating technological change and freer,closer-knit markets. Part Two analyses therole of TNCs in the export competitivenessof developing countries. Part Three thenlooks at policies that can be pursued to attractexport-oriented FDI and increase benefitsfrom it.

A. Trends in FDI flows

World FDI inflows and outflows in2001 amounted to $735 billion and $621billion, respectively (table I.1), a drop of51 per cent in the former and 55 per centin the latter.2 This was the first drop ininflows since 1991 and in outflows since1992, and the largest over three decadesin both.3 FDI inflows to developed countriesfell by about half, from $1 trillion in 2000to $503 billion in 2001. Inflows to developingcountries decreased by much less � 14 percent � from $238 billion to $205 billion.Trends in FDI outflows were very similar:outward investment from developed countriesdeclined from $1.4 trillion in 2000 to $0.6trillion, while that from developing countriesalso declined but by much less (annex table B.2).

Pre l iminary da ta for such majordeveloped countries as Germany, France,Japan and the United States do not provideany clear indication for the future. For somecountries, they suggest that both outflows4

and inflows5 may decline further in 2002,while for others the data suggest that eitheroutflows or inflows may decline. The pictureis similar for developing countries. FDI flowsto China will probably rise in 2002, whilethose to Argentina, Brazil and Indonesiaare likely to remain well below the peakof the 1990s.

The decline in FDI in 2001 reflectsa slowdown in the world economy. Morethan a dozen countries � including the world�sthree largest economies � fell into recession


4

in 2001 (Uni ted Nat ions Depar tment ofEconomic and Social Affairs and UNCTAD,2002; UNCTAD, 2002a). To the extent thatthe events of 11 September 2001 exacerbatedthis slowdown, they may also have contributedto the further decline in FDI. Still, the impactof these events on overseas investment plansof TNCs was modest according to varioussurveys (box I.1). FDI in 2001 was higherthan that in 1998 ($696 billion), after whichdramatic increases in cross-border M&Asled to record flows in 1999 and 2000.

The decline in FDI flows in 2001followed rapid increases during the late 1990s.There was a similar pattern during the late1980s and early 1990s, and in 1982-1983.

Thus, this is the third downward cycle inFDI, each punctuating a long upward trendin FDI every ten years or so. These swingsreflect changes in several factors. The mainones a re bus iness cyc les , s tock marke tsentiment and M&As. These short-term factorswork in tandem with longer-term factors,sometimes offset t ing and at other t imesreinforcing them.

There is, on the other hand, a stableand positive relationship between global FDIflows and the level and growth of worldGDP.6 Technologica l change , shr ink ingeconomic distance and new managementmethods favour international production.Their impact is, however, countered by cyclical

Table I.1. Selected indicators of FDI and international production, 1982-2001(Bil l ions of dollars and percentage)

Value at current prices Annual growth rateItem (Billions of dollars) (Per cent)

1982 1990 2001 1986-1990 1991-1995 1996-2000 1999 2000 2001

FDI inflows 59 203 735 23.6 20.0 40.1 56.3 37.1 -50.7FDI outflows 28 233 621 24.3 15.8 36.7 52.3 32.4 -55.0FDI inward stock 734 1 874 6 846 15.6 9.1 17.9 20.0 22.2 9.4FDI outward stock 552 1 721 6 582 19.8 10.4 17.8 17.4 25.1 7.6Cross border M&As a .. 151 601 26.4b 23.3 49.8 44.1 49.3 -47.5Sales of foreign affiliates 2 541 5 479 18 517c 16.9 10.5 14.5 34.1 15.1c 9.2c

Gross product of foreign affiliates 594 1 423 3 495d 18.8 6.7 12.9 15.2 32.9d 8.3d

Total assets of foreign affiliates 1 959 5 759 24 952e 19.8 13.4 19.0 21.4 24.7e 9.9e

Exports of foreign affiliates 670 1 169 2 600f 14.9 7.4 9.7 1.9 11.7f 0.3f

Employment of foreign affiliates (thousands) 17 987 23 858 53 581g 6.8 5.1 11.7 20.6 10.2g 7.1g

MemorandumGDP (in current prices) 10 805 21 672 31 900 11.5 6.5 1.2 3.5 2.5 2.0Gross fixed capital formation 2 285 4 841 6 680h 13.9 5.0 1.3 4.0 3.3 ..Royalties and licence fee receipts 9 27 73h 22.1 14.3 5.3 5.4 5.5 ..Exports of goods and non-factor services 2 081 4 375 7 430i 15.8 8.7 4.2 3.4 11.7 -5.4

Source : UNCTAD, based on its FDI/TNC database and UNCTAD estimates.a Data are only available from 1987 onwards.b 1987-1990 only.c Based on the following regression result of sales against FDI inward stock (in mill ions dollars) for the period 1982-

1999: sales=323+2.6577*FDI inward stock.d Based on the following regression result of gross product against FDI inward stock (in millions dollars) for the period

1982-1999: gross product=364+0.4573*FDI inward stock.e Based on the following regression result of assets against FDI inward stock (in millions dollars) for the period 1982-

1999: Assets= -1 153+3.8134*FDI inward stock.f For 1995-1998, based on the regression result of exports of foreign affi l iates against FDI inward stock (in mil l ions

dollars) for the period 1982-1994: Export=254+0.474*FDI inward stock. For 1999-2001, the share of exports offoreign aff i l iates in world export in 1998 (34 per cent) was applied to obtain the values.

g Based on the following regression result of employment (in thousands) against FDI inward stock (in millions dollars)for the period 1982-1999: employment=12 138+6.0539*FDI inward stock.

h Data are for 2000.i WTO estimates.Note: Not included in this table are the value of worldwide sales by foreign aff i l iates associated with their

parent firms through non-equity relationships and the sales of the parent firms themselves. Worldwidesales, gross product, total assets, exports and employment of foreign affiliates are estimated by extrapolatingthe worldwide data of foreign aff i l iates of TNCs from France, Germany, Italy, Japan and the UnitedStates (for sales and employment) and those from Japan and the United States (for exports), thosefrom the United States (for gross product), and those from Germany and the United States (for assets)on the basis of the shares of those countries in the worldwide outward FDI stock.

CHAPTER I GLOBAL TRENDS

5

fluctuations in income and growth. On thesupply side, FDI is affected by the availabilityof investible funds from corporate profitsor loans, which is in turn affected by domesticeconomic conditions (WIR93 , p. 92). Onthe demand side, growing overseas marketslead TNCs to invest, while depressed marketsinhibit them. The more interdependent hostand home economies become, and the morewidely a recession or upswing spreads, thegreater are the corresponding movementsin global FDI (WIR93 , p. 94).

Data for 1980-2001 show that a bulgein global FDI accompanies high economicgrowth, and a trough accompanies low growth(figure I.1). However, the relationship between

GDP growth and FDI is not uniform acrossgroups of economies. They go together indeveloped (figure I.2) but not in developingcountries (figure I.3). In CEE, FDI inflowshave continued to grow since liberalizationbegan in the early 1990s, and this regionhas not seen an FDI downturn during thecurrent decline (figure I.4). One explanationfor the different patterns of FDI flows isthat business cycles spread much faster acrossdeve loped count r ies than o thers . Asupplementary explanation may be that somecountries (as in CEE) had been cut off fromsubstantial FDI flows for so long that theyhave a lot of �catching up� to do � short-term cycles do not affect their attractiveness.

The effects of the terrorist attacks of 11September 2001 on FDI flows are difficult togauge. Company surveys suggest that they werelimited. In October/November 2001, a surveyby UNCTAD, the Agence Française pour lesInvestissements Internationaux and AndersenConsulting revisited a number of the firms theyhad surveyed before 11 September (UNCTAD,2001a). The finding was that few expected tochange their investment plans in the light ofthe attacks. Similarly, a survey by the JapanExternal Trade Organization (JETRO) found inOctober 2001 that nearly half the Japanese firmssurveyed did not expect to change their FDIplans (box figure I.1.1).a These findings areconsistent with a survey by A.T. Kearney inSeptember/October 2001: two-thirds of corporateexecutives of the world�s 1,000 largest firmssaid that they intended to invest abroad at moreor less the levels already planned, 16 per centsaid that their FDI in 2001 would increase, and20 per cent that it would decline.b A surveyof 643 firms by the Multilateral InvestmentGuarantee Agency (MIGA) in October 2001 foundthat there was no effect on the expansion plansof 64 per cent of respondents (MIGA, 2002).Virtually none of the respondents intended tocancel their FDI projects.c

On the other hand, the higher level ofuncertainty created by the September 11 events,including higher perceived political risk (associatedwith war and terrorism), may have induced some

companies to adopt a �wait-and-see� attitude.Firms may have placed planned investmentson hold until they had a clearer picture ofeconomic developments and the longer-termimpact of the events on the United States. Thiswas reflected in the JETRO survey, accordingto which more than half the respondents wereunable to make an assessment. Some companiesare reported to have cancelled planned investmentsafter the September 11 events.d

Box figure I.1.1. Effects of the September 11events on FDI plans of Japanese TNCs

(Percentage)

Source : UNCTAD, based on the data provided bythe JETRO International Research Division.

Box I.1. Impact of the September 11 events on FDI flows

Source : UNCTAD .a The survey was conducted by JETRO in October 2001. The results are based on responses by 659 respondents out

of 720 Japanese TNCs (both manufacturing and services). The results were made available to UNCTAD by theJETRO International Economic Research Division.

b A.T. Kearney Press release, 8 October 2001.c Based on some 130 respondents.d Business Latin America (EIU), 24 September 2001.


6

Figu

re I

.2.

FD

I in

flow

s an

d r

eal

grow

th r

ates

of

GD

P in

dev

elop

ed c

oun

trie

s, 1

980-

2001

(Bil

lion

s of

dol

lars

and

per

cent

age)

Figu

re I

.3.

FD

I in

flow

s an

d r

eal

grow

th r

ates

of

GD

P in

dev

elop

ing

cou

ntr

ies,

198

0-20

01(B

illi

ons

of d

olla

rs a

nd p

erce

ntag

e)

Figu

re I

.4.

FD

I in

flow

s an

d r

eal

grow

th r

ates

of

GD

P in

Cen

tral

and

Eas

tern

Eu

rop

ean

co

un

trie

s, 1

99

0-2

00

1(B

illi

ons

of d

olla

rs a

nd p

erce

ntag

e)

Figu

re I

.1.

FD

I in

flo

ws

and

rea

l gr

ow

th r

ates

of

GD

P i

n t

he

wo

rld

, 1

98

0-2

00

1(B

illi

ons

of d

olla

rs a

nd p

erce

ntag

e)

Sour

ce:

UN

CTA

D,

FDI/

TNC

dat

abas

e, d

ata

from

UN

CTA

D s

ecre

tari

at a

nd U

ND

ESA

.So

urce

: U

NC

TAD

, FD

I/TN

C d

atab

ase,

dat

a fr

om U

NC

TAD

sec

reta

riat

and

UN

DES

A.

Sour

ce:

UN

CTA

D,

FDI/

TNC

dat

abas

e, d

ata

from

UN

CTA

D s

ecre

tari

at a

nd U

ND

ESA

.So

urce

: U

NC

TAD

, FD

I/TN

C d

atab

ase,

dat

a fr

om U

NC

TAD

sec

reta

riat

and

UN

DES

A.


7

The economic slowdown has intensifiedcompetitive pressures, forcing companiesto search for cheaper locations. This mayhave resulted in increased FDI in activitiesthat benefit from relocation to, or expansionin, low-wage economies. Outflows may alsohave risen from countries in which domesticmarkets have been growing slower than foreignmarkets. There are signs that both factorshave contributed to the recent increase ofJapanese FDI to China (chapter III.A.3) andthe growth of flows to CEE. More generally,there has been a redistribution of FDI towardsdeveloping countries and CEE, where growth

has recently been higher than in developedcountries. The shares of developing countriesand CEE in global FDI inflows reached 28per cent and 4 per cent respectively in 2001,compared to an average of 18 per cent and2 per cent in the preceding two years (tableI.2).7 The rise in developing countries� sharesmay also reflect the further liberalizationof their FDI regimes8 � a trend that continuedin 2001 (box I.2) and was reinforced by thegrowth in the number of bilateral investmenttreaties (BITs) and double taxation treaties(DTTs) (box I.3).

Box table I.2.1. National regulatory changes, 1991-2001

Item 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Number of countries that introduced changes in their investment regimes 35 43 57 49 64 65 76 60 63 69 71 Number of regulatory changes 82 79 102 110 112 114 151 145 140 150 208 of which: -more favourable to FDI a 80 79 101 108 106 98 135 136 131 147 194 - less favourable to FDI b 2 - 1 2 6 16 16 9 9 3 14

Source : UNCTAD, based on nat ional sources .a Including liberalizing changes or changes aimed at strengthening market functioning, as well as increased incentives.b Including changes aimed at increasing control as well as reducing incentives.

/...

In 2001, 208 changes in FDI laws weremade by 71 countries, raising the total numberof annual changes to its highest level since theWIR began reporting on them (box table I.2.1).Of the changes in 2001, 194 (93 per cent) created

Box I.2. Changes in FDI regimes in 2001

a more favourable investment climate (box figureI.2.1) in an effort to attract more FDI. The Asianand Pacific region introduced the largest numberof such changes (43 per cent).

Table I.2. Distribution of world FDI inflows, 1986-2001 (Percentage)

Region 1986-1990 1991-1992 1993-1998 1999-2000 a 2001

Developed countries 82.4 66.5 61.2 80.0 68.4Western Europe 38.4 46.0 33.7 51.9 45.7

European Union 36.2 45.3 32.1 50.2 43.9Japan 0.2 1.2 0.3 0.8 0.8United States 34.6 12.7 21.7 22.6 16.9

Developing countries 17.5 31.2 35.3 17.9 27.9Africa 1.8 2.2 1.8 0.8 2.3Latin America and the Caribbean 5.0 11.7 12.3 7.9 11.6Asia and the Pacific 10.6 17.4 21.2 9.2 13.9

Central and Eastern Europe 0.1 2.2 3.5 2.0 3.7

MemorandumLeast developed countries 0.4 1.1 0.6 0.4 0.5

Source: UNCTAD, FDI/TNC database.a Years characterized by exceptionally high cross-border M&A activity.Note: The shaded years are FDI trough periods, while non-shaded years are FDI growth periods.


8

Box I.2. Changes in FDI regimes in 2001(concluded)

Box figure I.2.1. Types of changes in FDI lawsand regulations, 2001

Source: UNCTAD, based on national sources.

Source : UNCTAD.

Box I.3. BITs and DTTs in 2001

In 2001 alone, a total of 97 countries (thelargest number ever) were involved in theconclusion of 158 BITs, bringing the total from1,941 at the end of 2000 to 2,099 by the endof 2001. Developing countries have intensifiedthe practice of concluding BITs among themselves:66 in 2001 (compared with 36 in 2000) (boxfigure I.3.1). Asian countries concluded 70 BITs(19 among themselves), followed by Africancountries with 58 BITs (29 among themselves),and Latin American countries 21 (5 among

Box figure I.3.1. BITs concluded in 2001, bycountry group

Source: UNCTAD, BITs and DTTs databases./ . . .

Box I.3. BITs and DTTs in 2001(concluded)

themselves). CEE countries signed 18 BITs withdeveloping countries, 12 with the developedones and 10 among themselves.

The least developed countries (LDCs) haveshown a keen interest in entering into BITs(see chapter II.D). A total of 23 LDCs wereinvolved in the conclusion of 51 BITs in 2001.Of these, 13 were signed among the LDCsthemselves, 24 with the rest of the developingworld, 12 with developed countries and twowith economies in transition.

The total number of DTTs grew from 2,118at the end of 2000 to 2,185 by the end of 2001.A total of 63 countries were involved (19 fromthe developed world, 30 from developing countriesand 14 from CEE) in 67 DTTs (15 amongcountries of the developing world, six betweencountries of CEE) (box figure I.3.2).

Box figure I.3.2. DTTs concluded in 2001,by country group

Source: UNCTAD, BITs and DTTs databases.

As part of i ts work programme oninternational investment agreements, UNCTADhas organized several BIT and DTT negotiationfacilitation events since 1998 that resulted inthe conclusion of a number of these treaties.These events have provided a platform fordeveloping countries to negotiate BITs withother interested countries, and among themselves.For that purpose, UNCTAD has provided thefacilities and technical support, including theservices of a resource person, but has notparticipated in the negotiations themselves. Suchevents have considerably reduced the cost andtime involved in negotiating and finalizing BITsamong the countries involved, and they havebeen highly successful.

Source : UNCTAD.


9

At the mult i lateral level , membercountries of the World Trade Organization(WTO) have addressed investment issuessince the Organization�s first MinisterialConference in Singapore in 1996. Since then,WTO members have been engaged in anana lys i s o f the re la t ionships be tweeninternational trade and investment and theirimpl ica t ions for economic growth anddevelopment (box I.4). The issue of investmentfigured prominently in the preparatory phasefor the Fourth WTO Ministerial Conference,which was held in Doha, Qatar, from 9 to14 November 2001. It was debated untilthe final hours of the conference and resultedin an agreement that gave further directionto the WTO�s work (box I.5). Part of thiswork involves a substantial technical assistanceeffort aimed at helping developing countriesto eva lua te the impl ica t ions of c losermultilateral cooperation for their development

process. Relevant international organizations,including UNCTAD, are called upon to providesuch assistance (box I.6).

In spite of the substantial liberalizingmeasures of the past decade, developingcountries stil l attract less than a third ofworld FDI flows, and these flows remainhighly concentrated. In 2001, the five largesthost countries in the developing world received62 per cent of total inflows and the 10 largestreceived three-quarters (figure I.5). The levelof concentration of FDI in developing countrieshas in fact risen in recent years (figure I.5).Flows to the 49 LDCs, in particular, remainmarginal; in 2001, they received only 2 percent of total FDI flows to developing countriesand 0.5 per cent of world FDI (table I.2).

However, absolute values tell only halfthe story. A different picture emerges once

The agenda of the Working Group has beenas follows:

�Implications of the relationship between tradeand investment for development and economicgrowth, including: economic parameters relatingto macroeconomic stability, such as domesticsavings, fiscal position and the balance ofpayments; industrialization, privatization,employment, income and wealth distribution,competitiveness, transfer of technology andmanagerial skills; domestic conditions ofcompetition and market structures.

The economic relationship between tradeand investment: the degree of correlation betweentrade and investment flows; the determinantsof the relationship between trade and investment;the impact of business strategies, practices anddecision-making on trade and investment,including through case studies; the relationshipbetween the mobility of capital and the mobilityof labour; the impact of trade policies andmeasures on investment flows, including theeffect of the growing number of bilateral andregional arrangements; the impact of investmentpolicies and measures on trade; countryexperiences regarding national investment policies,including investment incentives and disincentives;the relationship between foreign investmentand competition policy.

Stocktaking and analysis of existinginternational instruments and activities regardingtrade and investment: existing WTO provisions;

bilateral, regional, plurilateral and multilateralagreements and initiatives; implications fortrade and investment flows of existinginternational instruments.

On the basis of the work above: identificationof common features and differences, includingoverlaps and possible conflicts, as well as possiblegaps in existing international instruments;advantages and disadvantages of entering intobilateral, regional and multilateral rules oninvestment, including from a developmentperspective; the rights and obligations of homeand host countries and of investors and hostcountries; the relationship between existingand possible future international cooperationon investment policy and existing and possiblefuture international cooperation on competitionpolicy� (WTO, 1998, annex 1: checklist of issuessuggested for study).

The WTO already addresses certain aspectsof foreign investment. In particular, the Agreementon Trade-related Investment Measures (TRIMs)elaborates on existing GATT provisions byprohibiting certain performance requirements.The General Agreement on Trade in Services(GATS) contains rules relating to the establishmentby a service supplier of a �commercial presence�abroad. And the Agreement on Subsidies andCountervailing Measures bears on certain aspectsof incentives, especially as regards export-orientedFDI.

Box I.4. Issues discussed in the WTO Working Group on the Relationship between Tradeand Investment

Source : UNCTAD, based on WTO, 1998.


10

After difficult negotiations, the DohaWTO Ministerial Conference agreed on thefollowing text with respect to investment(paras. 20-22):

20. �Recognizing the case for a multilateralframework to secure transparent, stable andpredictable conditions for long-term cross-border investment, particularly foreign directinvestment, that will contribute to the expansionof trade, and the need for enhanced technicalassistance and capacity-building in this areaas referred to in paragraph 21, we agree thatnegotiations will take place after the FifthSession of the Ministerial Conference on thebasis of a decision to be taken, by explicitconsensus, at that Session on modalities ofnegotiations.

21. We recognize the needs of developingand least-developed countries for enhancedsupport for technical assistance and capacitybuilding in this area, including policy analysisand development so that they may betterevaluate the implications of closer multilateralcooperation for their development policiesand objectives, and human and institutionaldevelopment. To this end, we shall workin cooperation with other relevantintergovernmental organisations, includingUNCTAD, and through appropriate regionaland bilateral channels, to provide strengthenedand adequately resourced assistance to respondto these needs.

22. In the period until the Fifth Session,further work in the Working Group on theRelationship Between Trade and Investmentwill focus on the clarification of: scope anddefinition; transparency; non-discrimination;modalities for pre-establishment commitments

based on a GATS-type, positive list approach;development provisions; exceptions and balance-of-payments safeguards; consultation and thesettlement of disputes between Members. Anyframework should reflect in a balanced mannerthe interests of home and host countries, andtake due account of the development policiesand objectives of host governments as wellas their right to regulate in the public interest.The special development, trade and financialneeds of developing and least-developedcountries should be taken into account asan integral part of any framework, which shouldenable Members to undertake obligations andcommitments commensurate with theirindividual needs and circumstances. Due regardshould be paid to other relevant WTOprovisions. Account should be taken, asappropriate, of existing bilateral and regionalarrangements on investment.�

In the closing plenary session of theDoha Ministerial Conference, on 14 November2001, the chair stated that, as far as paragraphs20, 23, 26 and 27 of the Declaration wereconcerned: �with respect to the reference toan �explicit consensus� being needed, in theseparagraphs, for a decision to be taken at theFifth Session of the Ministerial Conference,my understanding is that, at that session, adecision would indeed need to be taken byexplicit consensus, before negotiations ontrade and investment and trade and competitionpolicy, transparency in government procurement,and trade facilitation could proceed. In myview, this would also give each member theright to take a position on modalities thatwould prevent negotiations from proceedingafter the Fifth Session of the MinisterialConference until that member is preparedto join in an explicit consensus.�a

Box I.5. The Doha WTO Ministerial Conference on investment

Source: UNCTAD, based on �Ministerial declaration�, Ministerial Conference, Fourth Session, Doha,9-14 November, WT/MIN(01)/DEC/W/1 (14 November 2001) .

a http://www.wto.org/english/thewto_e/minist_e/min01_e/min01_chair_speaking_e.htm.

FDI inflows are adjusted for the size of theeconomy. In relation to the size of their markets,the performance of developing countries improvesrelative to developed countries (annex tableA.I.1). This is true overall and for manysubregions and countries that receive smallamounts of FDI; in particular, regions andsubregions such as Central Asia, South, Eastand South-East Asia and Latin America andthe Caribbean performed better than most ofthe others in the 1990s.

In terms of FDI per capita (annex tableA.I.1), developing countries in general, andSouth, East and South-East Asia in particular,receive less than developed countries, reflectingtheir larger populations. Latin America andthe Caribbean receives more FDI per capitathan Asia. The share of non-EU countries inWestern Europe in FDI inflows and outflowsimproves once flows are normalized by GDPor population. The position of CEE also improvesif FDI is assessed by economic size or inabsolute values.


11

The decline in FDI flows in 2001 largelyreflects a fall in cross-border M&As � theprincipal vehicle since the mid-1990s forFDI in developed countries.9 The declinein cross-border M&As is, in turn, attributableto slower economic growth and prospectsof reduced profit, particularly in developedmarkets. It may also be the result of a lullin the consol ida t ion process of cer ta inindustries acquired through M&As,10 reflecting,for example, companies� need to digest theacquisitions made. Finally, the fall in shareprices has played an important role becauseit has meant a reduction in the value of (assetsacquired through) M&As. Moreover, theexchange of shares is an important meansof financing M&As. In 2000, for instance,shares were used to finance some 44 percent of all cross-border M&A deals.11 In2001, the market value of stocks listed inthe six major stock exchanges fell by one-third (from $29 trillion at the peak in 2000to $19 t r i l l ion a t the t rough inSeptember 2001).12 As a result, the value

of cross-border M&As concludedthrough the exchange of sharesfell to 24 per cent of the totalin 2001. Lower share prices alsomade it difficult for companiesto raise funds by issuing new stock,again with knock-on effects onFDI.13

As a result, the total valueof cross-border M&As completedin 2001 ($594 billion � see annextables B.7 and B.8) was only halfof what it had been in 2000.14

In relation to GDP also, the shareof cross-border M&As almosthalved to less than 2 per cent,a level comparable to that of 1998(figure I.6).15 The fall in M&As,particularly, reflected the decline

in mega mergers. The value of all worldwideM&As in 2001, domestic and foreign (around$1.6 trillion), was also half the value reportedin 2000.16

The number of cross-border M&Asalso declined, from more than 7,800 in 2000to some 6,000 in 2001. The number of cross-border deals worth over $1 billion fell from175 to 113, their total value falling from$866 billion to $378 billion (table I.3). Theearlier sharp increases in FDI in 1999 and2000 � by some 56 per cent and 37 per cent,respectively � were driven mainly by thesemega M&As.17

It could be argued that 2001 saw areturn of FDI to �normal� levels after thehectic M&A activity (primarily in developedcountries) of the previous two years. Indeveloping count r ies and economies intransition, FDI in 2001 in fact proved fairlyresilient despite the global economic downturnand the September 11 events. This resilience

Figure I.5. The share of the largest 5, 10 and30 recipients in total FDI inflows to

developing countries, 1990-2001(Percentage)

Source: UNCTAD, FDI/TNC database.

Box I.6. UNCTAD�s post-Doha technical assistance work programme in the area ofinvestment

Source : UNCTAD.

In response to the WTO Doha Ministerial,and after consultations with a wide range ofdelegations, UNCTAD developed a technicalassistance programme that focuses on the threeelements identified in paragraph 21 of the DohaMinisterial Declaration: policy analysis anddevelopment, human resources capacity-buildingand institutional capacity-building. A number

of these activities are undertaken jointly withthe WTO.

As of June 2002, two intensive trainingworkshops (in Pretoria and Alexandria), oneregional seminar (in Singapore), and two nationalseminars (in China and Indonesia) had beenheld.


12

Figure I.7. Total resource flowsa to developing countries,b by type of flow, 1990-2001(Billions of dollars)

Source : UNCTAD, based on World Bank, 2002a.a Net l iabil i ty transactions, of original maturity of longer than one year.b The World Bank classif ies Central and Eastern European countries as developing countries and excludes some

economies considered developing by UNCTAD (Hong Kong, China; Singapore; Taiwan Province of China; Kuwait;Cyprus; Qatar; United Arab Emirates).

c Preliminary.

was more pronounced incomparison to inflows of portfolioinves tment and bank lending(figure I.7). On a net basis (inflowsless outflows), FDI flows werethe only positive component ofprivate capital flows to developingcount r ies and economies intransition during 2000-2001. Thetotal of net private capital flowswas projected to be a low of $31bill ion in 2001 (IMF, 2002, p.29).18

FDI in developing countrieshas been larger than official inflowsfor every year since 1993 (figureI.7). It was 10 times larger thanbi la te ra l off ic ia l development

assistance (ODA) in 2000 (figure I.8); thiscontrasts with the latter half of the 1980s,when the two were about equal. It needsto be stressed, however, that, for LDCs, ODAremains of paramount importance. But evenfor these countries, the ratio of FDI to bilateralODA rose until 1999, reaching almost one,but it declined in 2000 (figure I.8). Inflowsof FDI accounted for 60 per cent of totalresource flows to developing countries in2000, compared to 6 per cent in 1980 andone quarter in 1990.

The ratio of FDI inflows to GDP inboth developed and developing countriesfell, from 5.1 per cent in 2000 to 2.1 per centin 2001 in the former, and from 3.7 per cent

Figure I.6. Values of cross-border M&As and their ratioto world GDP, 1987-2001

Source: UNCTAD, FDI/TNC and cross-border M&A databases.

Table I.3. Cross-border M&As worthover $1 billion, 1987�2001

Number Percentage Value PercentageYear of deals of total (billion dollars) of total

1987 14 1.6 30.0 40.31988 22 1.5 49.6 42.91989 26 1.2 59.5 42.41990 33 1.3 60.9 40.41991 7 0.2 20.4 25.21992 10 0.4 21.3 26.81993 14 0.5 23.5 28.31994 24 0.7 50.9 40.11995 36 0.8 80.4 43.11996 43 0.9 94.0 41.41997 64 1.3 129.2 42.41998 86 1.5 329.7 62.01999 114 1.6 522.0 68.12000 175 2.2 866.2 75.72001 113 1.9 378.1 63.7

Source : UNCTAD, cross-border M&A database.


13

to 3.0 per cent in the latter.19 Over thelonger term, this ratio had risen from 0.5per cent in 1980 and 0.9 per cent in 1990for the world, and from 0.3 per cent in 1980and 1 per cen t in 1990 for deve lopingcountries. Most of the steepest declines inFDI inflows and FDI outflows in 2001 occurredin developed countries (table I.4).

What of the prospects? Despite thedampening impact of weak demand in thelargest economies, the medium-term (three-year) prospects for FDI are promising. MajorTNCs, according to the UNCTAD et al. survey,plan to continue their international expansion(UNCTAD, 2001a) . This wi l l focus on

production as well as distribution functions.The preferred mode of expansion will continueto be cross-border M&As in developedcount r ies and greenf ie ld inves tment indeveloping countries. More specifically, thesurvey suggests that the preferred destinationswill be the United States among developedcountries as a whole; Germany, the UnitedKingdom and France in Europe; China inAsia; Brazil in Latin America; Poland inEastern Europe; and South Africa in Africa(table I.5). A survey by the Japan Bank forInternational Cooperation (IBIC) in July/August 2001 yielded similar results. As manyas 72 per cent of the Japanese TNCs surveyedsaid that they would strengthen and expand

Table I.4. Top 10 winners and losers in FDI flows in 2001

FDI inflows FDI outflows(Billions of dollars) (Billions of dollars)

Winner Loser Winner Loser Increases Decreases Increases Decreases

in absolute in absolute in absolute in absoluteEconomy value Economy value Economy value Economy value

1 Mexico 10.0 Belgium and Luxembourg -194.6 Italy 9.2 United Kingdom -214.52 France 9.7 United States -176.5 Japan 6.5 Belgium and Luxembourg -174.73 China 6.1 Germany -163.3 Australia 6.1 France -92.74 South Africa 5.8 United Kingdom -62.8 Singapore 5.2 United States -51.05 Singapore 3.2 Canada -39.2 Mexico 2.7 Hong Kong, China -50.46 Morocco 2.5 Hong Kong, China -39.1 Panama 1.8 Sweden -33.47 Turkey 2.3 Denmark -25.3 Ireland 1.4 Netherlands -27.38 Saudi Arabia 1.9 Spain -15.7 Cayman Islands 1.0 Spain -26.99 Chile 1.8 Ireland -14.3 China 0.9 Switzerland -26.310 Italy 1.5 Sweden -10.6 Kuwait 0.6 Finland -16.8

Source : UNCTAD, FDI/TNC database.

Figure I.8. The ratio of FDI inflows to bilateral ODA to developing countries, 1980-2000

Source : UNCTAD, FDI/TNC database and OECD International Development Statist ics online database.Note: The ratio of one (1) indicates FDI=ODA.


14

their foreign operations, a jump of 55 per centcompared to the previous year (JBIC, 2002;see also section on Japan).20 A MIGA 2001survey shows similar trends: nearly 80 percent of the respondents plan to expand FDIin both developed and developing countriesin the next three years (MIGA, 2002).

The potential for FDI remains largein many developing countries. Many have juststarted to allow FDI in utilities and otherservice industries, and should see fresh inflowswhere conditions are conducive. Others thathave already attracted such FDI may getsequential investments after the init ialprivatization. As the stock of FDI grows, thepotential for reinvesting earnings rises, especiallywhere profits are healthy. Though developingcountries cannot de-link themselves entirelyfrom global economic fluctuations, they retainconsiderable drawing power on their own.

For TNCs in t radable goods andservices in particular, the issue is less whetherto produce at home or abroad and more whereto locate their production facilities (and otherfunctions) for maximum efficiency. In anincreasingly globalized world, the �F� inFDI is fading. This is particularly so forcompanies tha t have accumula ted theexperience and capabilities needed to operateinternationally. Such firms increasingly regardthe globe as a borderless whole, and maketheir location decisions mainly on economicand strategic grounds rather than nationality.Thus, from the supply side, the potentialfor FDI is limited only (or largely) by thepotential for investment in general. It isup to the demand side to ensure that theconditions and policies investors need forefficient operation are in place.

B. Developments ininternational production

There are now some 65,000 TNCs(firms that control assets abroad) engagedin international production, with about 850,000affiliates abroad (annex table A.I.3). Theglobal FDI stock reached nearly $7 trillionin 2001. Value added by TNCs is estimatedat $3.5 trillion and total sales at $18.5 trillion,compared to world exports at $7.4 trillion(table I.1). Foreign affiliates accounted foran estimated 11 per cent of world GDP in2001 compared to 7 per cent in 1990. Thissection looks at various measures of TNCactivity: investment, employment, sales, valueadded, profits and innovative activities. (Therole of TNCs in exports is examined separatelyin Part Two.)

1. The significance of foreignaffiliates in their host economies

The value of FDI flows is an obviousmeasure of the role of TNCs. It is, however,difficult to assess that role correctly fromFDI flows alone: FDI figures may not showthe true value of investments by TNCs, whereaff i l i a tes ra i se funds in domest ic orinternational markets. For example, affiliatesof Japanese TNCs raised $3 billion fromlocal banks alone in 1998 (Japan, METI,2001a, p. 160), equivalent to 13 per centof Japanese FDI outflows. They also raisedfunds through bonds and stocks and via loansfrom local partners. Data for several largecountries such as Japan, Germany and theUnited States show that the value of FDI

Table I.5. Most favoured host economies as a priority location in 2002-2005,by region, as a percentage of total responses by TNCs

(Percentage)

Central andDeveloped countries Developing Asia Latin America Eastern Europe Africa and West Asia

United States 27 China 27 Brazil 31 Poland 33 South Africa 17Germany 16 Indonesia 10 Mexico 20 Hungary 20 Egypt 12United Kingdom 12 Thailand 10 Argentina 15 Czech Republic 18 Turkey 8France 10 Malaysia 9 Chile 10 Russia 11 Morocco 8Italy 6 India 9 Colombia 5 Romania 4 Nigeria 6Japan 5 Korea, Republic of 7 Peru 4 Bulgaria 4 Saudi Arabia 6Spain 5 Taiwan Province of China 7 Bolivia 3 Ukraine 2 United Arab Emirates 5Sweden 3 Viet Nam 5 Venezuela 3 Other 7 Israel 2Canada 3 Hong Kong, China 4 Other 8 Angola 2Ireland 2 Philippines 4 Other 4Other 13 Singapore 4

Other 4

Source: UNCTAD, 2001a.


15

inward stock21 is considerably lower thanthat of the total assets of foreign affiliates.The ratio of FDI inward stock to assets offoreign affiliates is only one quarter to onefifth in these economies (annex table A.I.4).

In many host developing countries,the two magni tudes a l so d i ffe r bu t thedifferences are smaller, suggesting that affiliatesrely more on parent firms. There are, however,exceptions. For example, Botswana, witha high domestic savings rate, has a ratioof assets to FDI resembling that of developedhost countries (UNCTAD, forthcoming (a)and box I.7). In the aggregate, world assetsof foreign affiliates are estimated to be threeto four times higher than world FDI stock(table I.1). On the other hand, FDI may exceedthe value of assets in host countries whenit is used for operating costs or to repay

debt by foreign affiliates, or when it is investedin financial assets.

And what of employment? While assetsheld by foreign affiliates are a reasonableindicator of production capacity, they maynot be a good measure of their employmentcapacity. The number of employees in foreignaffiliates worldwide is estimated at 54 millionin 2001 ( table I .1) , and this has growndramatically in developing countries. (Forearlier figures, see WIR94.) While the numbermay not be la rge in re la t ion to to ta lemployment in the developing world, theyare significant in countries that have attractedsustained FDI (for Asia, see table I.6). Foreignaffiliates are major employers in Singapore,account ing for more than ha l f o f to ta lemployment in manufacturing.22 Hong Kong(China), Malaysia and Sri Lanka have seenincreas ing shares of a ff i l i a tes in to ta l

In the second half of the 1990s, �the biggestcapital project ever seen in Botswana�a tookplace. It involved a doubling of the productioncapacity of the largest diamond mine at Orapa,owned and operated by a foreign affil iate,Debswana Diamond Company, a 50-50 per centjoint venture between De Beers, a leadinginternational diamond group, and the Government.The project involved a total investment of some$320 million. Yet, Botswana�s total FDI inflows(involving FDI by all foreign affiliates) duringits realization were only $290 million during1997-2000. This apparent paradox arises fromthe methodology used to report FDI inflows.

FDI inflows are a balance-of-paymentsmeasure, comprising reinvested earnings of foreignaffiliates and the financing of these affiliatesby parent companies in the form of loans orequity capital. They do not include financingthrough loans by affil iates from local orinternational capital markets and co-financingby local shareholders.

The Orapa expansion was financed largelyby non-FDI means. Nearly one-fifth of the projectwas financed by a cash injection by the foreignshareholder, through a loan raised by the DeBeers Group from local banks. The balance wasprovided by using reinvested profits, which wouldotherwise have been distributed to the owners.Only the foreign shareholder�s part in this re-

Box I.7. Financing international production locally

investment � that of De Beers � qualifies asFDI, and has been recorded as increased FDIinflows into Botswana. On the other hand, thefinancing of the part of the project by the localshareholder, the Government, is not recordedas FDI. Assuming that both shareholderscontributed reinvested earnings in equalproportions, only 40 per cent of the total valueof the project was financed through FDI. Inaddition, given that this 40 per cent representedprofits earned in Botswana and reinvested thereby the foreign partner, the project was undertakenwithout an infusion of fresh capital from abroad.Reinvested earnings are recorded in the balanceof payments as FDI inflows, because theassumption is that the foreign parent firm couldhave repatriated the profits, but instead decidedto reinvest them.b

This points to limitations of FDI inflowsas a measure of the growth of internationalproduction because, regardless of the sourcesof funds, that segment of Botswana�s economythat is part of international production has grownmore than is indicated by FDI figures. Theselimitations come particularly into play indeveloping countries like Botswana that haveno shortage of local savings, a liberalized capitalaccount and high creditworthiness � and thatalso have large foreign affiliates participatingin joint ventures.

Source : UNCTAD, for thcoming a .a �Debswana gearing up and up� Sunday Times. Business Times, http://www.btimes.co.za/97/0824/world/ world2.htm;

�Botswana lends De Beers R455m�, Daily Mail and Guardian, Business, 8 July 1999, http://www.mg.co.za/ mg/za/archive/99jul/08julpm-business.html.

b For more on this, see WIR99, pp. 160-161.


16

employment over the past decade. LatinAmerica is different. Reflecting relativelylow FDI inflows during the 1980s and theearly 1990s, the share of employment inforeign affiliates declined in Brazil and Mexicoduring this period (table I.6), though it isnot clear whether this trend has continuedas no data are available for the subsequentperiod.

Other popular measures of foreignactivity are sales and value added .23 Dataon these show similar trends (tables I.7-I.8. According to data on manufacturing sales,the developing countries with the highestshares of foreign affiliates are Singaporeand Malaysia. The growth of sales by foreignaffiliates in China is impressive (table I.7).These countries also have high shares offoreign affiliates in value added. As far asaffiliates in developed countries are concerned,Ireland, the Netherlands and Sweden scorehigh.

Foreign affiliates tend to have higherlabour productivity (as measured by valueadded per employee) than domestic firms.24

The ratio is two or higher in Ireland andthe Netherlands among developed economies,and in China, Singapore and Taiwan Provinceof China among developing ones (annex tableA.I.5). In the late 1990s, employees of foreignaffiliates in manufacturing generated valueadded ranging from $7,000 (China) to $120,000(Singapore) in developing countries, andfrom $60,000 - $70,000 (France, Finland,Japan Norway and Sweden) to $270,000(Ireland) in developed countries. In Franceand Sweden, labour product iv i ty inmanufacturing was lower in foreign affiliatesthan in local firms.

Prof i ts , or net income of fore ignaffiliates, is another useful measure of therole of TNCs in host economies. Countrieswith a higher share of foreign profits ornet income are not necessarily the same as

Table I.6. Significance of employmenta in foreign affiliates in the manufacturingsector in selected host economies, 1985-1999

(Percentage)

Sources: UNCTAD, based on UNCTAD FDI/TNC database (employment of foreign affiliates) and UNIDO Industrial StatisticsDatabase (employment of al l f irms).

a Defined as the number of employees of foreign affiliates divided by the number of employees of all firms in the manufacturingsector.

Notes: Data for the Netherlands, Sweden and the United Kingdom refer to majority-owned foreign aff i l iates only.Data for foreign aff i l iates for Sri Lanka are approval data.

Economy 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Developed countries:

Austria 32.0 33.5 35.3 35.1 37.7 39.7 36.0 39.9 37.1 41.9 28.9 29.6 28.9 27.9 27.6 ..Finland .. .. .. .. .. .. .. .. .. 8.8 9.0 11.8 10.7 12.8 .. ..France .. .. .. .. .. .. .. .. .. .. .. .. .. 22.7 .. ..Germany .. .. .. .. .. .. 14.2 15.6 16.3 16.5 .. .. .. .. .. ..Ireland .. .. .. .. 34.5 34.7 34.5 34.3 34.9 35.8 35.6 36.3 36.7 36.8 .. ..Italy .. .. 11.8 .. .. .. .. .. .. .. .. .. 14.0 .. .. ..Japan .. .. .. 1.2 1.3 1.3 1.4 1.4 1.3 1.6 1.6 1.6 1.7 1.8 .. ..Netherlands .. .. .. .. .. .. .. .. .. .. 24.7 24.1 .. .. .. ..Norway .. .. .. .. .. .. .. 6.3 .. .. .. 13.2 .. .. .. ..Portugal .. .. .. .. .. .. .. .. .. .. .. 7.3 7.9 7.9 .. ..Sweden .. .. .. .. .. .. .. .. 18.5 18.3 22.6 23.7 24.3 26.8 31.4 ..United Kingdom .. .. .. .. .. .. .. .. 15.9 15.8 14.2 19.5 18.0 .. .. ..United States 8.9 8.8 9.3 10.8 12.7 13.3 14.0 13.9 13.7 14.0 13.5 13.6 13.5 15.1 15.8 ..

Developing economies and countries in Central and Eastern Europe:

Brazil .. .. 24.3 .. .. .. .. .. .. .. 13.4 .. .. .. .. ..Hong Kong, China 10.2 11.5 11.7 13.1 13.0 12.9 13.4 13.2 14.2 16.9 19.3 20.3 22.5 .. .. ..Indonesia .. .. .. .. .. .. .. 3.3 .. .. .. 4.7 .. .. .. ..Madagascar .. .. .. .. .. .. .. .. .. .. .. .. .. 88.4 .. ..Malaysia 29.8 30.5 33.6 36.4 39.7 43.2 45.6 45.9 43.2 43.7 38.5 .. .. .. .. ..Mexico 42.7 .. .. .. .. .. .. .. 17.9 .. .. .. .. .. .. ..Nepal .. .. .. .. .. .. .. .. .. .. .. .. .. .. 25.0 ..Singapore 55.0 56.4 58.0 59.5 59.8 59.7 58.1 56.8 55.1 55.1 54.8 53.4 52.3 49.9 48.5 ..Slovenia .. .. .. .. .. .. .. .. .. .. .. .. .. .. 13.1 14.9Solomon Islands .. .. .. .. .. .. .. .. .. .. 5.1 .. .. .. .. ..Sri Lanka 19.2 19.0 24.2 25.7 26.9 26.8 32.6 41.8 28.2 30.9 34.3 .. .. .. .. ..Taiwan Province of China 10.7 10.1 9.2 9.6 11.7 12.8 11.9 9.9 10.6 .. .. .. .. .. .. ..Turkey .. 1.5 .. .. .. 3.2 .. .. .. .. .. .. .. .. .. ..Viet Nam .. .. .. .. .. .. .. .. .. .. .. 22.6 .. .. .. ..


17

those with a higher share of foreign valueadded. There is, for example, an interestingcontrast between Japan and the United Statesin this respect (figure I.9). Although foreignaffiliates play an insignificant role in Japaneseproduction, they play a more significant one

in Japanese profits; the profitability (profitsdivided by sales) of foreign affil iates inJapan is twice that of domestic firms (Japan,METI, 2001b). On the other hand, foreignaffiliates in the United States do not earnas much as domestic firms and account for

Table I.8. Significance of value addeda of foreign affiliates inselected host economies, 1985-1999

(Percentage)

Sources: UNCTAD, based on FDI/TNC database (value added for foreign affiliates) and UNCTAD secretatiat (GDP).a Defined as value added of foreign affiliates divided by GDP.Notes: Data on value added for France, Ireland, Netherlands, Norway and the United Kingdom represent data for

majority-owned foreign affiliates.

Economy 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000


Finland .. .. .. .. .. .. .. .. .. 3.4 4.3 5.3 5.7 6.1 9.5 ..France .. .. .. .. .. .. .. .. 4.0 4.2 4.1 ..Ireland 19.6 29.6 20.0 22.5 23.8 21.3 22.3 23.1 24.4 26.8 30.2 30.6 31.8 35.8 40.2 ..Japan .. .. .. .. .. .. .. 1.1 0.6 0.6 0.6 0.5 ..Netherlands .. .. .. .. .. .. .. .. .. .. 7.5 10.2 .. .. .. ..Norway .. .. .. .. .. .. .. 0.9 1.0 1.2 2.3 2.2 ..Portugal .. .. .. .. .. .. .. 7.1 6.0 6.4 6.2 ..Sweden .. .. .. .. .. .. .. .. .. .. .. .. .. 9.3 11.5 ..United Kingdom .. .. .. .. .. .. .. .. 5.5 6.0 5.9 6.6 6.0 ..United States .. .. .. .. .. .. .. 4.2 4.3 4.4 4.4 4.6 4.7 4.8 4.9 ..

Developing countries and countries in Central and Eastern Europe:

China .. .. .. .. .. .. .. .. .. .. 4.4 4.2 4.8 .. .. ..Czech Republic .. .. .. .. .. .. .. .. .. .. .. .. .. .. 10.2 13.7Estonia .. .. .. .. .. .. .. .. .. .. .. .. .. .. 8.4 ..Hungary .. .. .. .. .. .. .. .. .. .. .. .. .. .. 24.0 24.2India 1.1 .. 1.5 1.4 1.4 1.3 1.3 .. 1.4 1.3 1.0 .. .. .. .. ..Malaysia 15.8 15.0 15.5 15.0 16.1 17.5 18.6 20.1 20.6 23.1 23.8 .. .. .. .. ..Slovenia .. .. .. .. .. .. .. .. .. .. .. .. .. .. 3.5 5.4Viet Nam .. .. .. .. .. .. .. .. .. .. 11.3 11.6 12.5 .. .. ..

Table I.7. Significance of salesa of foreign affiliates in manufacturing inselected host economies, 1985-2000

(Percentage)

Sources: UNCTAD, based on UNCTAD FDI/TNC database (employment of foreign affiliates) and UNIDO Industrial StatisticsDatabase (employment of al l f irms).

a Defined as sales of foreign aff i l iates divided by sales of al l f i rms in the manufacturing sector.

Economy 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000


Austria .. .. .. .. .. .. .. .. .. .. 25.4 25.2 26.3 26.2 25.8 ..Finland .. .. .. .. .. .. .. .. .. 9.1 8.6 13.4 11.5 12.8 .. ..Germany .. .. .. .. .. .. 25.3 25.5 26.1 26.1 .. .. .. .. .. ..Ireland 50.2 50.0 52.0 55.1 56.2 54.0 53.9 55.5 58.3 61.6 65.2 66.4 69.2 74.9 .. ..Italy 17.7 .. 20.3 .. 21.9 .. 26.4 .. 24.9 .. 26.7 .. 28.3 .. .. ..Japan .. .. .. 3.0 3.1 3.3 3.1 3.1 2.9 3.8 3.9 3.7 4.0 3.9 .. ..Netherlands 38.6 .. .. .. .. .. .. .. .. 46.5 .. .. .. .. .. ..Portugal .. .. .. .. .. .. .. .. .. .. .. 16.1 16.3 16.3 .. ..Sweden .. .. .. .. .. .. .. .. .. .. .. .. .. 28.8 39.5 ..United Kingdom .. .. .. .. .. .. .. .. 25.8 25.8 25.1 35.0 34.1 .. .. ..United States 10.0 9.9 11.0 12.4 15.0 16.4 16.7 16.5 17.0 17.6 17.5 17.0 16.4 18.1 18.0 ..

Developing economies:

China .. .. .. .. .. 2.3 5.3 7.1 9.1 11.3 14.3 15.1 18.6 24.3 27.7 31.3Hong Kong, China 20.1 19.3 19.1 24.3 20.2 22.6 26.0 27.0 30.8 35.7 43.5 44.6 44.8 .. .. ..India .. .. 6.4 6.4 5.8 5.4 5.5 .. 6.1 5.5 3.1 .. .. .. .. ..Malaysia 34.0 36.1 37.8 38.0 40.8 44.1 45.4 47.6 48.6 52.6 50.1 .. .. .. .. ..Singapore 72.4 73.5 75.3 74.7 76.2 76.9 75.4 74.7 74.8 75.1 76.6 75.9 75.8 76.0 81.1 ..Taiwan Province of China 12.7 12.7 13.7 13.5 15.0 17.8 19.2 20.9 18.7 21.5 .. .. .. .. .. ..Turkey .. 6.8 .. .. .. 2.7 .. .. .. .. .. .. .. .. .. ..


18

less than 1 per cent of total profits. Theprofit share is considerably lower than anyother measure of the significance of foreignaffiliates in the United States. In developingcountries such as Mexico and Singapore,foreign affiliates account for a fairly largeshare � more than one-third � of total profitsin manufacturing (table I.9).

In general, the share of foreign affiliatesin host economies is lower in terms of profitsthan in terms of other variables. As the

difference between value added and profitsis mainly wages and salaries, this suggeststhat employees of foreign affiliates are betterpaid than those of domestic firms. This does,indeed, seem to be the case (WIR94). It is,however, also possible that, especially invery competitive markets with low country-risk (e.g. in the United States), TNCs arewilling to settle for lower profit margins.Transfer pricing may also play a role. Highor low profits of foreign affiliates affectthe volume of FDI flows, as part of themis often used for reinvestment. However,there seems to be no strong relationshipbetween reinvested earnings and the levelof net income of foreign affiliates (figureI.10). Reinvested earnings and profits offoreign affiliates vary from year to year.

Another impor tan t aspec t o finternational production is innovative activityby foreign affiliates. The presence of researchand development (R&D) can signify thataffiliates are engaging in complex and high-value funct ions. R&D can contr ibute tocapacity-building in host countries and providesp i l lover benef i t s to loca l researchers .According to the scattered data available,the share of foreign affiliates� R&D in thetotal R&D of host countries is lower thantheir share in production. However, thereare wide variations: foreign affiliates accountedfor 2 per cent of R&D in Japan and 66 percent in Ireland in the late 1990s (table I.10),

Table I.9. Significance of profitsa of foreign affiliates in manufacturing inselected host economies, 1983-1999

(Percentage)

Sources: UNCTAD, based on UNCTAD's FDI/TNC database (profits of foreign affiliates) and UNIDO Industrial StatisticsDatabase (profits of al l f irms).

a Defined as profi ts of foreign aff i l iates divided by profi ts of al l f i rms in the manufacturing sector.

Economy 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000


Canada .. .. .. 14.4 .. .. .. .. 8.8 .. .. .. .. .. .. ..Finland .. .. .. .. .. .. .. .. .. 1.2 2.5 3.5 5.7 4.4 .. ..France .. .. 13.2 .. .. .. .. 12.7 .. .. .. .. .. .. .. ..Japan .. .. .. 0.9 0.8 0.5 0.5 0.2 0.4 0.6 0.7 0.7 0.7 0.5 .. ..Netherlands .. .. .. .. .. .. .. .. .. .. 29.7 33.9 .. .. .. ..Norway .. .. .. .. .. .. .. 7.7 .. .. .. .. .. .. .. ..Sweden 4.2 .. .. .. .. .. .. .. .. 11.2 .. .. .. .. .. ..United Kingdom 13.1 .. .. .. .. .. .. 14.7 .. .. .. .. .. .. .. ..United States .. .. .. .. .. .. .. 0.4 0.6 1.4 1.4 1.6 1.7 1.9 1.5 ..


India .. .. .. .. .. .. .. .. 2.9 2.7 2.4 .. .. .. .. ..Malaysia 9.1 11.1 12.2 14.4 13.6 13.7 12.9 12.0 10.7 19.0 14.2 .. .. .. .. ..Mexico 12.7 .. .. .. .. .. .. .. 34.3 .. .. .. .. .. .. ..Singapore 22.3 37.6 41.1 39.7 40.2 38.4 37.3 30.6 36.6 37.5 42.7 42.7 40.6 39.5 56.8 ..Slovenia .. .. .. .. .. .. .. .. .. .. .. .. .. .. 41.3 32.7Taiwan Province of China 3.3 5.0 5.5 7.4 7.6 6.2 6.6 8.4 7.0 9.8 .. .. .. .. .. ..

Figure I.9. Profitabilitya of foreignaffiliates operating in Japan and the

United States, 1989-1999 (Percentage)

Source : UNCTAD, FDI/TNC database.a Defined as profits before taxes divided by sales.


19

with other developed countries ranging inbe tween . In deve loping and t rans i t ioneconomies, affiliates in Hungary and TaiwanProvince of China also accounted for a highshare of R&D � over 50 per cent. However,most other developing countries were notsuccess fu l in a t t rac t ing R&D by TNCs(WIR01) .

The share of R&D conducted abroadby parent firms varies widely by home country.In the United States, 87 per cent of theR&D by TNCs was conducted at home in1998 (United States, Department of Commerce,2001); in Japan, the figure was 97 per cent

in 1995 (Japan, MITI, 1998). These sharescan be compared with the one-third and one-quarter of total sales generated by the foreignaffiliates of United States and Japanese TNCs.However, these trends are not representativeof other developed countries (WIR99) . Abroader coverage of data is available frompatents taken out internationally (in the UnitedStates) by parent companies and affiliates,which reflects better their pattern of R&Dspending.25 The patent data show that, insmaller countries (e.g. Belgium, the Netherlandsand Switzerland), the ratio of overseas todomestic patenting was over half in the early

Table I.10. Significance of R&D expenditures of foreign affiliates inselected host economies, 1986-1999

(Percentage)

Sources: UNCTAD, based on OECD 2001a, table 59, UNCTAD's FDI/TNC database and World Bank, 2001b.Notes: Data refer to R&D expenditures of foreign affi l iates as a percentage of R&D expenditures of all enterprises.

Economy 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999


Canada .. .. .. .. .. .. .. 31.8 29.7 29.7 31.7 34.6 34.2 ..Finland .. .. .. .. .. .. .. .. .. .. .. 13.3 13.2 14.9France .. .. .. .. .. .. .. .. 14.2 17.1 16.7 .. 16.4 ..Greece .. .. .. .. .. .. .. 6.5 .. 3.8 3.4 3.6 .. ..Ireland .. .. .. .. .. .. .. 71.0 .. 64.6 .. 65.6 .. ..Japan .. .. .. .. .. .. .. 0.9 1.5 1.4 0.9 1.3 1.7 ..Netherlands .. .. .. .. .. .. .. .. .. .. .. 20.6 21.8 ..Portugal .. .. .. .. .. .. .. .. .. .. .. .. .. 18.0Spain .. .. .. .. .. .. .. .. .. 26.8 .. 35.7 .. 32.8Sweden .. .. .. .. .. .. .. 14.7 10.4 18.4 18.7 15.9 17.5 ..United Kingdom .. .. .. .. .. .. .. .. 28.0 29.2 30.1 32.5 30.1 31.2United States .. .. .. .. .. .. .. 12.1 13.0 13.3 12.4 12.2 14.9 ..


Czech Republic .. .. .. .. .. .. .. .. .. .. .. 1.3 2.7 6.4Hungary .. .. .. .. .. .. .. .. 22.6 21.8 44.4 65.3 78.5 ..India .. 0.5 0.4 0.3 0.4 0.4 .. 2.0 1.6 .. .. .. .. ..Taiwan Province of China 28.0 26.2 26.1 23.1 29.9 52.9 33.1 24.5 65.3 .. .. .. .. ..Turkey .. .. .. .. .. .. .. 16.3 29.4 32.8 21.7 18.6 10.1 ..

Figure I.10. Comparison of reinvested earnings of FDI inflows and profits offoreign affiliates in the United States, 1983-1999

(Billions of dollars)



20

1990s. Even the United Kingdom, a largerbut highly internationalized economy, hada ratio of 56 per cent, Germany 21 per centand Sweden 42 per cent. Thus, apart fromJapan and the United States, TNC R&D isquite internationalized, although most ofit continues to be undertaken in other industrialcountries.

2. The Transnationality Index ofhost countries

This index was developed by UNCTADto compare the transnationality of countriesin which TNCs operate (WIR99). It attemptsto measure the transnationalization of economicactivity of host countries in real terms, takinginto consideration both the production potentialcreated through inward FDI and the resultsof this investment. The transnationality indexfor a country is based on two FDI variablesand two variables related to foreign firms�operations in a host country:

� FDI inf lows as a percentage of grossf ixed capital formation;

� FDI inward stock as a percentage ofGDP;

� value added by foreign aff i l iates as apercentage of GDP; and

� employment by foreign aff i l iates as apercentage of total employment.

The simple average of these four sharesresults in the Transnationality Index of ahost country (annex table A.I.6). The firsttwo shares indicate the importance of inwardFDI flows and stocks in an economy. A largercapital base � corresponding to larger FDI� indicates the potential to produce more.The last two shares capture the significanceof foreign affiliates. The two sets of variablesare correlated: high FDI shares are normallyreflected in more activities by foreign affiliatesin a country. The average value of the firsttwo variables of the 74 countries for whichit is calculated was 24.0 in 1999, higherthan the average of the last two which was9 .8 (annex tab le A. I .6 ) . The averageTransantionality Index of these 74 countrieswas 16.9.

The world�s most transnational hosteconomy is Hong Kong (China), followedby Belgium and Luxembourg, Trinidad andTobago and Nigeria. Regionally most hostcountries with a high Transnationality Indexare in Latin America (figure I.11). In general,

the average index, by group of economies,is higher for developing (19.5 in 1999) thanfor developed countries (18.0) and for CEE(11.2). The low index number for CEE reflectsthe fact that this region opened its marketsto foreign investors only in the 1990s.

The ranking of some economies basedon the Transnationality Index is significantlydifferent from their ranking based on theFDI variables alone. Denmark (ranking 18thamong 74 countries by the TransnationalityIndex as opposed to 38th by the FDI sharesonly) , Greece ( ranking 35th and 59th ,respectively), Honduras (ranking 13th and42nd), Spain (ranking 33rd and 48th) andTaiwan Province of China (ranking 60th and69th) are typical examples. This suggeststhat foreign affiliates in these countries usemore resources than those provided by parentfirms and/or generate more employment andvalue added per unit of resources than doforeign affiliates in other host countries.

Notes

1 Starting with this year�s Report, some changesare made to the country composition in eachgroup of economies. CEE now includes allcountries of former Yugoslavia; South Africais now included in Africa; and Malta is groupedwith developed countries. For details, seethe definitions and sources in Annex B.

2 All FDI figures in WIR02 and previous WIRsare in current prices. In constant prices (usingthe world import prices of 1995 as the baseyear), world inflows and outflows would be$872 billion and $736 billion, respectively.

3 FDI inflows declined in 1976 (by $6 billionor 24 per cent), 1982 (by $10 billion or 15per cent), 1983 (by $8 billion or 13 per cent),1985 (by $2 billion or 4 per cent) and 1991(by $43 bil l ion or 21 per cent). Similarly,outflows declined in 1974 (by $2 billion or6 per cent), 1980 (by $9 billion or 15 percent), 1982 (by $25 billion or 47 per cent)and 1991 (by $35 billion or 15 per cent).

4 FDI outflows in the first four months of 2002were: $0.8 billion for Germany ($9.3 billionduring the same period of 2001), $14.7 billionfor France ($24.4 billion), $15.1 billion forItaly ($5.2 billion), $14.7 billion for Japan($14.4 billion), $20 billion for the UnitedKingdom (27.4 billion during the first quarteronly) and $21.3 billion for the United States($22.9 billion during the first quarter only).

5 FDI inflows in the first quarter of 2002 were$6.7 billion for Brazil ($6.8 billion during thesame period of 2001), $2.8 billion for Mexico($3.0 billion), $6.7 billion for the United Kingdom($24.0 billion) and $24.6 billion for the UnitedStates ($42.6 billion), $24.6 billion for China


21

Figure I.11. Transnationality indexa of host economies,b 1999(Percentage)

Source : UNCTAD estimates.a Average of the four shares : FDI inflows as a percentage of gross fixed capital formation for the past three years,

1997-1999; FDI inward stocks as a percentage of GDP in 1999; value added of foreign aff i l iates as a percentageof GDP in 1999; and employment of foreign aff i l iates as a percentage of total employment in 1999.

b Only the economies for which data for al l of these four shares are available were selected. Data on value addedare available only for Finland, France (1998), Italy (1997), Japan (1998), Netherlands (1996), Norway, Portugal,Sweden, United Kingdom (1997), United States, China (1997), India (1995), Malaysia (1995), Singapore and TaiwanProvince of China (1994) . For other economies, data were estimated by applying the ratio of value added of UnitedStates aff i l iates to United States outward FDI stock to total inward FDI stock of the country. Data on employmentare available only for Austria, Denmark (1996), Finland, France (1998), Germany, Ireland, Italy (1997), Japan (1998),Netherlands (1996), Norway (1996), Portugal (1996), Sweden, United Kingdom (1997), United States, Hong Kong(China) (1997), Indonesia (1996) and Singapore. For other countries, data were estimated by applying the ratioof employment of Finnish, German, Japanese, Swedish, Swiss and United States affiliates to Finnish, German, Japanese,Swedish, Swiss and United States outward FDI stock to total inward FDI stock of the economy. Data for France,Ireland, Netherlands, Norway, Sweden and United Kingdom refer to majority-owned foreign aff i l iates only.

For Albania, Belarus, Bosnia and Herzegovina, Croatia, Estonia, Lithuania, the Republic of Moldova, Poland, Ukraineand Yugoslavia, the employment impact of foreign-owned aff i l iates was estimated on the basis of their per capitainward FDI stocks. For the benchmark data, see annex table A.I.5. With the exception of the Czech Republic, Hungaryand Slovenia, the value added of foreign-owned firms was estimated on the basis of the per capita inward FDIstocks. For the benchmark data, see annex table A.I.3.


22

($20.7 billion during the first six months), $15.3billion for Germany (-$0.3 billion for the firstfour months), $9.2 billion for France ($12.6billion for the first four months) and $6.4 billionfor Japan ($11.5 billion for the first four months).

6 The correlation between the FDI growth rateand the GDP growth rate was 0.3 during 1971-2000. Similarly, a simple regression of FDIinflows against GDP during the same periodis as follows:

FDI inflows = -190.9 + 0.0251(GDP).R2 = 0.75 , adjusted R2 = 0.55,t-value of GDP coefficients = 6.0.

7 In earlier years as well, when the growth ratesof the world economy were low, the shareof developing countries in world flows rose:from an average of 22 per cent during 1976-1980 to 39 per cent during 1981-1982; andfrom 18 per cent during 1986-1990 to 31per cent during 1991-1992.

8 This is what a number of Asian countries didin partial response to the Asian financial crisis(see WIR98).

9 For a detailed account on trends in cross-border M&As and their impact on economicdevelopment, see WIR00.

10 For example, in the transport, storage andcommunications industries, the value of cross-border M&As declined from almost $366 billionin 2000 to just over $121 billion in 2001;and in the motor vehicle and other transportequipment industries, from about $25 billionin 2000 to about $5.7 billion in 2001 (annextable B.9).

11 Data from the UNCTAD cross-border M&Adatabase. This figure represents deals concludedthrough the exchange of shares.

12 The six major stock exchanges are the NewYork Stock Exchange, the NASDAQ, the TokyoStock Exchange and the stock exchanges ofFrankfurt, London and Paris. Nihon KeizaiShimbun, 2 October 2001.

13 For example, Japanese TNCs financed some30 per cent of capital expenditures in theiraffiliates in the United States and Europe withfunds raised through stocks and bonds in 1998(Japan, METI, 2001a, pp. 166-172).

14 The data cover completed cross-border M&Adeals involving more than 10 per cent equityonly. For details on the nature of the data,see �Definitions and Sources� in annex B.

15 In comparison, the ratio of FDI to GDPworldwide was 2.3 per cent, 4.8 per cent and2.4 per cent, respectively in 2001, 2000 and1998.

16 �M&A volume down almost a half in 2001�,Financial Times, 10 December 2001.

17 Some prominent examples were the $200-billion acquisition of Mannesmann (Germany)by VodafoneAirTouch (United Kingdom) in 2000and the $60-billion deal of AirTouchCommunications (United States) and Vodafone

Group (United Kingdom) in 1999. Bycomparison, in 2001, the largest cross-borderdeal (the acquisition of VoiceStream (UnitedStates) by Deutsche Telekom AG (Germany))was worth �only � $29 billion (annex tableA.I.2).

18 Flows are netted out. The other components� net portfolio investment flows and othernet private capital flows such as bank lending� were projected to be negative in 2001, -$30 billion and -$114 billion, respectively(IMF, 2002).

19 Figures for FDI flows to developing countriesare strongly affected by the geographical coverageof estimates made by different sources. Forexample, the Institute of International Financeestimates $132.5 billion in 2000, $148.8 billionin 2001 and $117.1 billion in 2002 in directequity investments for 29 emerging countries,which include seven countries in CEE (seeIIF, �Capital flows to emerging marketeconomies�, 30 January 2002). In comparison,UNCTAD�s estimate for developing countriesis based on data on FDI covering all of Africa,Asia (except Japan and Israel), Latin Americaand the Caribbean, and Oceania (except Australiaand New Zealand), while that for CEE is basedon all economies of that region.

20 The survey covered 501 respondentmanufacturing firms.

21 Defined as the total value of equity and reservesin foreign affiliates held by parent companies,plus loans by their parent companies to theaffiliates. (For details, see �Definitions andSources� in annex B.)

22 Although the share of employment of foreignaffiliates in total employment is higher in SriLanka than in Singapore, Sri Lanka�s data onaffiliates� employment are overestimated asthey are figures for cumulative (potential)employment in approved FDI projects, someof which have not been realized.

23 While sales data are more widely availablethan value-added data, appropriate sales datado not exist to measure the size of foreignaffiliates� activity in the services sector (e.g .wholesale trade, financial institutions). Onthe other hand, value-added data do not sufferfrom measurement problems, or from differencesin interpretation of the concept (unlike sales,which can be operating revenues, total revenuesor net sales). As value added is the value ofoutputs minus the inputs that firms purchase(or net addition to production), it can becompared with GDP.

24 Labour productivity can reflect many differencesother than efficiency between firms: capitalintensity, capacity utilization, scale economies,extent of vertical integration and so on.

25 The data for 1991-1995 are taken from Cantwelland Janne, 1998.

CHAPTER II

BENCHMARKING FDI PERFORMANCEAND POTENTIAL

A. Introduction and methodology

Benchmarking national economies isnow an important tool for policy-making (Lall,2001b). Comparisons with similar economiesare a good indication of how well countriesare doing against the competit ion, whilecomparisons with better performing economiescan show where to head in the future. Sinceattracting FDI is now an important policyconcern for countr ies a t a l l levels ofdevelopment, it is useful to develop benchmarksof inward FDI performance.

One simple way to benchmark FDIperformance is to compare the absolute valuesof inflows or the shares of FDI in nationalinvestment. The World Investment Reporthas long provided such data (see tables inannex B). These comparisons do not, however,take into account the size of the host economy.It is a reasonable assumption that the largerthe economy (as measured by GDP) the moreFDI it will get. It is more interesting to assesshow successful an economy is in attractingFDI after taking size into account. This canimplicitly capture the effect of other factorsto which foreign investors are sensitive: politicaland macroeconomic stability, the FDI policyregime, industrial competitiveness, naturaland human resources, and the like.

WIR01 introduced an Inward FDI Indexto benchmark success in attracting FDI.1

This chapter simplifies and revises that index,renaming i t the UNCTAD Inward FDIPerformance Index. The Inward FDIPerformance Index is the ratio of a country�sshare in global FDI flows to its share in globalGDP. Countries with an index value of onereceive FDI exactly in line with their relativeeconomic size. Countries with an index valuegreater than one attract more FDI than maybe expected on the basis of relative GDP.They may have exceptionally welcomingregulatory regimes, be very well managedin macroeconomic terms, or have efficient

and low-cost business environments. Theymay offer other competitive attractions: goodgrowth prospects, ample and economical skilledlabour, natural resources , good R&Dcapabilities, advanced infrastructure, efficientfinancial support or well-developed supplierclusters. Or they may have privileged accessor a favourable location for exporting to largemarkets, or serve as entrepôt bases or taxhavens, and so on. On the other hand, countrieswith index values below one may suffer frominstability, poor policy design and implementationor competitive weaknesses in their economies.

The Inward FDI Performance Indexshould be treated with care as an indicatorof countries� inward FDI positions. Thereare problems in compiling and comparing FDIinflow data.2 Tax havens will tend to showmassive inflows in relation to their size. Somecountries may have �lumpy� inflows for shortperiods, say because of newly discoveredresources, mega M&As involving foreigninvestors or large privatizations. Economiesthat have been re la t ively isola ted f rominternational capital flows and have recentlyopened up may also get a substantial waveof FDI. Even countries with steady FDI inflowsmay change ranks if their share in globalGDP changes.

To offset these problems, the coverageof the Index excludes most tax havens (itends up with a sample of 140 countries) anduses data for three-year periods rather thana single year. However, this does not overcomeall the difficulties, as noted in the discussionbelow. The Index is calculated for two periodsspanning the past decade: 1988-1990 and1998-2000.

WIR02 also constructs an index torank countries according to their potentialto attract FDI: the UNCTAD Inward FDIPotential Index. It is not possible, with theavailable data, to capture the host of factorsthat can affect FDI (figure II.1). Social, political

24


and institutional factors are difficult to quantifyat the national level. It is particularly difficultto compare how eff ic ient ly pol ic ies areimplemented. Many economic andcompetitiveness factors � of the type relevantto foreign investors � are also difficult tobenchmark. Take, for instance, the skillsavailable for manufacturing or services. Dataon enrolments in formal education, generallyused to benchmark the skill base, cannot capturethe availability or quality of specific skills.There are similar problems in comparingtechnological capabilities or infrastructure.Such factors as the strength of local suppliersor the efficacy of support institutions areeven more difficult to measure. Finally, FDIdecisions depend also on the perception ofindividual TNCs, and this may be at variancewith data based on past performance.

This said, it is still useful to benchmarkthe key measurable factors (apart from thesize of an economy) that are expected toaffect inward FDI. After examining a largenumber of variables, construction of the FDIPotential Index settled on eight; the finalindex is then an unweighted average of theirnormalized values.3 The variables are therate of growth of GDP; per capita GDP;share of exports in GDP; telephone linesper 1,000 inhabitants; commercial energy

use per capita; share of R&D expendituresin gross national income; share of tertiarystudents in the populat ion; and countryrisk . The annex to this chapter gives therationale for their inclusion, a brief descriptionand sources of information for these variables.The FDI Potential Index is also calculatedfor the two periods, 1988-1990 and 1998-2000.

Note that these two indices are notintended to provide a full-blown model ofFDI location or to measure the impact ofFDI on host economies. The exercise is moremodest: to provide useful data to policy-makersand analysts on relative performance.

B. The UNCTAD Inward FDIPerformance Index

The Inward FDI Performance Indexvalues for countries vary widely (table II.1).There are nine countries with FDI PerformanceIndex values of one (whose inward FDImatches their size). There are 31 countriesfor which FDI is more or less in line withtheir s ize ( taking a broader median FDIPerformance Index ranging from 1.2 to 0.8),43 countries that get more FDI than expectedgiven their size, and 66 that get less.

Figure II.1. Host country determinants of FDI

Source: UNCTAD, WIR98, p. 91.

25

CHAPTER II BENCHMARKING FDI PERFORMANCE AND POTENTIAL

Table II.1. Values of and country rankings by the UNCTAD Inward FDI PerformanceIndex and Inward FDI Potential Index, 1988-1990 and 1998-2000a

FDI Performance Index FDI Potential Index Value Rank Score 0-1 Rank

Economy 1988-1990 1998-2000 1988-1990 1998-2000 1988-1990 1998-2000 1988-1990 1998-2000

Albania 3.9 0.6 1 2 8 1 0.165 0.207 9 7 100Alger ia 0.0 0.3 126 111 0.198 0.216 7 6 9 6Angola -0.0 5.1 129 3 0.151 0.166 105 126Argentina 1.2 1.4 4 8 3 7 0.204 0.317 7 2 5 5Armenia 0.2 2.5 112 1 5 0.204 0.170 7 1 123Australia 2.8 0.6 2 2 8 8 0.475 0.569 1 5 1 6Austria 0.4 0.7 9 8 7 5 0.458 0.524 1 7 2 3Azerbai jan 9.2 3.3 3 8 0.224 0.174 6 4 121Bahamas 0.5 1.1 8 2 4 8 0.342 0.462 2 8 2 8Bahrain 1.9 1.3 3 1 4 0 0.324 0.430 3 3 3 0Bangladesh 0.0 0.1 127 122 0.098 0.162 130 128Belarus 0.1 0.5 122 9 0 0.312 0.305 3 6 5 8Belgium and Luxembourg 3.9 13.8 1 3 1 0.516 0.604 11 1 0Benin 2.6 0.8 2 3 7 1 0.086 0.160 134 130Bol iv ia 1.0 3.0 5 4 1 0 0.154 0.266 103 7 6Botswana 2.2 0.3 2 9 109 0.297 0.346 4 1 4 5Brazi l 0.4 1.3 9 5 4 2 0.209 0.241 7 0 8 9Brunei Darussalam 0.0 0.1 125 128 0.315 0.424 3 5 3 3Bulgar ia 0.8 1.8 6 7 2 4 0.301 0.321 3 9 5 3Burkina Faso 0.1 0.2 116 116 0.137 0.185 112 113Cameroon -0.3 0.1 137 120 0.164 0.181 9 9 115Canada 1.3 1.6 4 6 3 0 0.618 0.629 2 5Chi le 3.7 2.3 1 5 1 7 0.239 0.342 5 6 4 7China 0.9 1.2 6 1 4 7 0.234 0.251 5 9 8 4Colombia 0.4 0.7 9 6 7 7 0.213 0.242 6 9 8 8Congo, Dem. Rep. of the -0.1 0.2 134 118 0.097 0.085 131 138Congo 0.3 0.7 107 7 9 0.171 0.207 9 1 101Costa Rica 2.6 1.0 2 4 5 6 0.223 0.316 6 5 5 6Côte d�Ivoire 0.4 0.9 101 6 4 0.150 0.195 107 108Croatia 0.8 1.7 6 5 2 7 0.218 0.343 6 8 4 6Cyprus 1.9 0.4 3 5 102 0.331 0.414 3 0 3 4Czech Republic 2.8 2.5 2 0 1 3 0.325 0.380 3 1 3 9Denmark 0.8 2.8 6 2 1 2 0.517 0.615 1 0 8Dominican Republ ic 1.9 1.6 3 2 3 1 0.191 0.328 8 0 5 2Ecuador 1.5 1.2 4 1 4 5 0.171 0.199 9 2 107Egypt 2.8 0.5 2 1 9 1 0.172 0.287 9 0 6 6El Salvador 0.2 1.1 111 5 0 0.127 0.332 119 4 9Estonia 9.4 2.3 2 1 6 0.282 0.391 4 7 3 7Eth iop ia 0.1 0.5 118 9 7 0.085 0.171 135 122Finland 0.5 1.9 8 1 2 2 0.559 0.626 6 6France 0.9 0.8 6 0 6 9 0.510 0.553 1 3 1 9Gabon 1.4 0.5 4 4 9 6 0.188 0.253 8 1 8 3Gambia 1.9 0.9 3 4 6 2 0.199 0.250 7 5 8 5Georgia 0.5 1.4 8 8 3 6 0.235 0.140 5 8 134Germany 0.3 1.3 106 4 3 0.520 0.547 9 2 0Ghana 0.2 0.3 113 107 0.140 0.179 110 117Greece 1.3 0.1 4 5 125 0.301 0.414 4 0 3 5Guatemala 2.0 0.5 3 0 9 4 0.110 0.234 125 9 1Guinea 0.6 0.3 7 4 106 0.129 0.203 118 106Guyana 0.7 2.2 7 2 1 9 0.110 0.351 127 4 3Hait i 0 .4 0.1 102 124 0.065 0.133 139 136Honduras 1.2 1.0 4 9 5 3 0.155 0.232 101 9 3Hong Kong, China 5.4 5.9 4 2 0.441 0.589 2 1 1 3Hungary 5.0 1.1 6 4 9 0.274 0.357 4 8 4 2Iceland 0.3 0.4 104 9 8 0.516 0.604 1 2 9India 0.1 0.2 121 119 0.165 0.204 9 6 104Indonesia 0.8 -0.6 6 3 138 0.203 0.189 7 3 110Iran, Islamic Rep. of -0.1 0.0 135 135 0.154 0.278 102 6 9Ireland 0.7 5.1 7 1 4 0.377 0.599 2 5 11Israel 0.4 0.8 100 7 0 0.388 0.531 2 4 2 1Italy 0.6 0.2 7 9 115 0.412 0.464 2 3 2 7Jamaica 1.9 1.7 3 3 2 6 0.186 0.265 8 3 7 9Japan 0.0 0.1 128 131 0.557 0.586 7 1 4Jordan 0.4 0.6 9 7 8 6 0.179 0.301 8 7 6 0Kazakhstan 3.3 2.0 1 7 2 1 0.269 0.260 4 9 8 2Kenya 0.5 0.2 9 0 117 0.127 0.168 120 124Korea, Republic of 0.5 0.6 9 3 8 7 0.449 0.558 1 9 1 8Kuwait 0.0 0.0 124 132 0.229 0.425 6 1 3 2Kyrgyzstan 3.9 1.0 1 4 5 5 0.186 0.139 8 2 135Latv ia 4.7 1.6 7 3 2 0.358 0.289 2 6 6 5Lebanon 0.1 0.1 117 126 0.141 0.297 109 6 2Libyan Arab Jamahiriya 0.5 -0.1 8 6 136 0.182 0.218 8 5 9 5Li thuania 1.0 1.5 5 6 3 3 0.332 0.304 2 9 5 9Madagascar 0.5 0.4 8 9 9 9 0.121 0.184 121 114Malawi 1.1 1.0 5 1 6 1 0.150 0.203 106 105

/.. .

26


Table II.1. Values of and country rankings by the UNCTAD Inward FDI PerformanceIndex and Inward FDI Potential Index, 1988-1990 and 1998-2000a (concluded)

FDI Performance Index FDI Potential Index Value Rank Score 0-1 Rank

Economy 1988-1990 1998-2000 1988-1990 1998-2000 1988-1990 1998-2000 1988-1990 1998-2000

Malaysia 4.4 1.2 8 4 4 0.252 0.368 5 2 4 0M a l i 0.3 0.7 105 7 6 0.132 0.216 117 9 7Mal ta 2.4 4.6 2 8 5 0.324 0.500 3 4 2 4Mexico 1.5 0.7 4 2 7 8 0.196 0.278 7 7 7 0Moldova, Republic of 1.7 1.7 3 8 2 9 0.285 0.194 4 6 109Mongo l ia 0.8 0.5 6 6 9 3 0.254 0.266 5 1 7 5Morocco 0.6 0.4 7 6 101 0.178 0.237 8 8 9 0Mozambique 0.3 1.8 109 2 3 0.068 0.178 137 118Myanmar 1.9 0.6 3 6 8 2 0.067 0.083 138 139Namibia 0.5 0.9 9 4 6 3 0.164 0.279 9 8 6 8Nepal 0.1 0.0 120 133 0.110 0.163 126 127Netherlands 3.1 3.3 1 9 7 0.520 0.592 8 1 2New Zealand 4.0 1.0 1 0 5 4 0.429 0.492 2 2 2 5Nicaragua 0.0 3.1 123 9 0.087 0.206 133 102Niger 0.7 0.1 6 9 121 0.102 0.185 128 112Nigeria 4.0 0.8 11 7 2 0.134 0.204 114 103Norway 0.9 1.0 5 9 6 0 0.560 0.634 5 4Oman 1.2 0.1 4 7 130 0.306 0.335 3 8 4 8Pakistan 0.6 0.2 7 7 114 0.141 0.159 108 132Panama -2.8 2.5 139 1 4 0.225 0.384 6 3 3 8Papua New Guinea 5.1 1.5 5 3 4 0.160 0.263 100 8 0Paraguay 0.6 0.6 7 5 8 5 0.182 0.213 8 4 9 9Peru 0.2 0.8 114 6 8 0.174 0.282 8 9 6 7Phi l ipp ines 1.7 0.6 3 9 8 9 0.139 0.265 111 7 8Poland 1.9 1.4 3 7 3 8 0.256 0.329 5 0 5 1Portugal 3.2 0.9 1 8 6 5 0.288 0.411 4 3 3 6Qatar -0.1 0.5 133 9 2 0.451 0.530 1 8 2 2Romania 0.8 1.0 6 4 5 7 0.201 0.248 7 4 8 7Russian Federation 0.3 0.3 108 104 0.310 0.291 3 7 6 4Rwanda 0.6 0.1 7 3 129 0.072 0.094 136 137Saudi Arabia 0.3 0.1 103 127 0.222 0.332 6 6 5 0Senegal 0.6 0.6 7 8 8 3 0.133 0.180 116 116Sierra Leone 1.0 0.0 5 5 134 0.101 0.078 129 140Singapore 13.8 2.2 1 1 8 0.470 0.641 1 6 3Slovakia 1.5 1.5 4 0 3 5 0.287 0.361 4 4 4 1Slovenia 0.6 0.3 8 0 110 0.291 0.429 4 2 3 1South Africa -0.0 0.2 131 113 0.220 0.266 6 7 7 7Spain 2.5 1.1 2 6 5 2 0.353 0.455 2 7 2 9Sri Lanka 0.5 0.4 8 5 103 0.135 0.187 113 111Sudan -0.1 1.0 132 5 8 0.047 0.166 140 125Suriname -12.7 -2.0 140 140 0.166 0.315 9 4 5 7Sweden 0.9 4.1 5 7 6 0.608 0.650 3 2Switzerland 1.4 1.4 4 3 3 9 0.594 0.617 4 7Syrian Arab Republic 0.5 0.3 9 2 105 0.171 0.320 9 3 5 4Taiwan Province of China 0.9 0.3 5 8 112 0.444 0.570 2 0 1 5Tajikistan 0.7 0.6 7 0 8 0 0.240 0.176 5 5 120Macedonia, TFYR 0.5 0.9 9 1 6 6 0.194 0.250 7 8 8 6Tha i land 2.6 1.3 2 5 4 1 0.235 0.298 5 7 6 1To g o 1.1 1.2 5 2 4 6 0.166 0.177 9 5 119Trinidad and Tobago 2.4 2.8 2 7 11 0.227 0.295 6 2 6 3Tunisia 0.7 0.8 6 8 6 7 0.179 0.268 8 6 7 4Turkey 0.5 0.1 8 3 123 0.192 0.275 7 9 7 2Uganda -0.0 1.0 130 5 9 0.115 0.228 123 9 4Ukraine 0.4 0.5 9 9 9 5 0.287 0.261 4 5 8 1United Arab Emirates 0.1 -0.1 115 137 0.324 0.488 3 2 2 6United Kingdom 3.3 1.8 1 6 2 5 0.478 0.559 1 4 1 7United Republic of Tanzania 0.1 0.6 119 8 4 0.120 0.161 122 129United States 1.1 0.8 5 0 7 4 0.649 0.666 1 1Uruguay 0.5 0.3 8 7 108 0.233 0.348 6 0 4 4Uzbekistan 0.3 0.4 110 100 0.251 0.233 5 3 9 2Venezuela 0.5 1.1 8 4 5 1 0.246 0.269 5 4 7 3Viet Nam 1.0 2.0 5 3 2 0 0.134 0.277 115 7 1Yemen -0.6 -1.0 138 139 0.090 0.216 132 9 8Zambia 4.2 1.7 9 2 8 0.111 0.160 124 131Zimbabwe -0.2 0.8 136 7 3 0.152 0.147 104 133

Source: UNCTAD.

a Covering 140 countries.Notes: The Inward FDI Performance Index for 1988-1990 for some countries refer to periods different from 1988-

1990 as follows: 1989-1991 for Myanmar, 1990-1992 for Slovenia, 1991-1993 for Mongolia; 1992-1994for Albania, Armenia, Belarus, Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan, Latvia, Lithuania,Poland, Republic of Moldova, Romania, Russian Federation, Slovakia, Ukraine and Uzbekistan; 1993-1995for Croatia and Kyrgyzstan, and 1994-1996 for Azerbaijan, Georgia, Tajikistan and the former YugoslavRepublic of Macedonia. For other notes, please see annex table A.II.2.

27


How do regions fare according to theIndex? The developed world is more or lessbalanced in terms of the FDI it receives vis-à-vis its economic size � with index-valuesat or close to one in both periods (table II.2).However, within the group of developedcountries, there are interesting differences:the European Union scores highest and �otherdeveloped countries�4 the lowest (the latterref lect ing the low score for Japan) . Inconsidering performance on the basis of theIndex, it is important to recall that the greaterpart of FDI in developed countries takes placein the form of M&As. Thus, the implicationsfor them of a given position on the Indexmay be different, to some extent, from thosefor countries for which the same positionprimarily reflects greenfield investments. Inboth cases, however, similar (relative) additionsare being made to host country productionthat is part of the international productionsystems of foreign firms, and many of thelonger-term consequences are similar.5

The transition economies of CEE haveranked, as a group, at almost the same levelthroughout the decade, and receive more orless the FDI that their GDP would warrant.The developing world as a whole has alsomaintained its score over time, but its FDIinf lows ref lect i t s re la t ive s ize . Amongdeveloping regions, Africa shows a large fallin its score, with both subgroups losing ground.In particular, �other Africa� (sub-SaharanAfrica) goes from a score of 0.8 to 0.6,suggesting a loss in its relative attractiveness,even given its low share of global GDP. Bycontrast, Latin America and the Caribbeanshow a marked improvement in their scores.This ref lects the s t rong performance ofcountries in South America; other countriesin the region, including Mexico, show asignificant fall in ranking.

Asia as a whole moves from a scoreof above one to below one. This reflectsweakened performance in West Asia and Eastand South-East Asia. There is, however, amarked difference between the two subregions.West Asia has a very low score in both periods(the lowest of all regions in the second),while East and South-East Asia retain a valueof well above one in both. South Asia improvesits score, but from a very low base; by theend of the decade its score was the secondlowest of those for all developing regions.

The country rankings for FDIperformance yield interesting findings. Thetop 20 countries include five small developedcountries, 12 developing economies and threefrom CEE (figure II.2). The bottom 20 countriesare mainly developing countries, includingseveral LDCs, but they also include Japanand Greece.

There is marked heterogeneity amongcountries with similar FDI performance, largelyreflecting the effect of short-term factors.In 1998-2000, for instance, the global leadersare Belgium/Luxembourg, Hong Kong (China)and Angola. Belgium/Luxembourg, as a richeconomy located in the heart of Europe, isexpected to have (and retain) a high rank.Angola, by contrast, scores high towards theend of the period because it received a surgeof FDI in petroleum in response to more stablepolitical conditions; the surge took it to secondplace from 129th position in 1988-1990. Oneimplication of this difference in the underlyingfactors between the two is that a rich andwell-located country that does well on theIndex may expect to sustain good performanceover time, while a poor country that receivesa sudden inflow may not, once investmentshave �adjusted� to its new situation unlessit leverages the large inflows to grow rapidly.

Table II.2. Inward FDI PerformanceIndex, by region, 1988-1990 and 1998-2000

Region 1988-1990 1998-2000

World 1.00 1.00Developed countries 1.01 1.00

Western Europe 1.28 1.72European Union 1.28 1.74Other Western Europe 1.33 1.22

North America 1.12 0.82Other developed countries 0.29 0.12

Developing countries 0.99 0.99Africa 0.80 0.52

North Africa 0.84 0.42Other Africa 0.77 0.60

Latin America and the Caribbean 0.91 1.37South America 0.72 1.28Other Latin America and the Caribbean 1.33 1.57

Asia 1.07 0.85West Asia 0.26 0.11Central Asia .. 1.58South, East and South-East Asia 1.31 1.00East and South-East Asia 1.73 1.20South Asia 0.12 0.16

The Pacific 4.40 0.58Central and Eastern Europe 0.89a 0.98

Source: UNCTAD.a 1992-1994. As most of the countries in this region did

not exist in their present form before 1992, the periodfor the Index is adjusted.

28


Figure II.2. The UNCTAD Inward FDI Performance Index, by host economy:the top 20 and the bottom 20, 1998-2000

Source: UNCTAD.

29


Largely because of the influence ofshort-term factors, Performance Index rankingschange dramatically over the two periods.6There are thus 37 countries that improvedtheir rank by 20 or more places over theperiod and 43 that lost 20 or more places.The biggest �winners�, apart from Angola,are Panama, Nicaragua and Armenia. Oman,Greece, Botswana and Sierra Leone, on theother hand, moved down the list. Note againthat the shifts in ranks reflect not only relativechanges in FDI inflows but also in relativeGDP; thus, a drop in rank might well indicate,for instance, improved prosperity with relativelyhigher GDP and stable FDI.

Many of the rankings in the latest periodare in line with expectations, but they alsocontain surprises. Countries with PerformanceIndex values of more than one include severaladvanced industrial economies whose FDIperformance ref lects h igh incomes andtechnological s t rengths (e .g . the UnitedKingdom) or a location within large regionalmarkets such as the EU (e.g. Ireland). Insome countries, like Sweden, the high indexvalue reflects large M&A activity (Swedenhas one of the largest jumps in ranking).Some economies such as Hong Kong (China)and Singapore, are strategically placed asservice centres for large dynamic hinterlandsor as export bases (but Singapore loses rankbecause FDI growth has not kept pace withincome growth, probably reflecting, at leastpartly, the adverse impact of the Asian financialcrisis on the regional market in which it islocated). In many other countries with highscores, the scores reflect the end of politicalor economic crises, transition from commandto market-oriented economies, or massiveprivatization programmes.

Countries with low index values thatreceive less FDI than warranted by theirsize, also vary greatly. Some are very largeeconomies that attract large amounts of FDI,albeit low in relation to GDP (United States).Others traditionally have been relatively closedto FDI (e.g. Japan and the Republic of Korea,though the latter moves up in the ranks becauseof recent liberalization). Some have attractedsignificant FDI in the past, but in the recentperiod are suffering from economic or politicalshocks (e.g. Indonesia). Many are simplypoor or have not improved their investmentclimate sufficiently to compete effectivelyfor FDI.

C. The UNCTAD Inward FDIPotential Index

The Inward FDI Potential Index alsoyields interesting results. In contrast to thePerformance Index that is based on FDIinflows, this index is based largely on structuraleconomic factors that tend to change fairlyslowly over time. As a result, the index valuesfor countries are fairly stable over time,7

and correspond by and large to levels ofeconomic development. The top 20 economies,based on the Inward FDI Potential Indexin 1998-2000 include all four high-incomedeveloping economies (Hong Kong, China;Republic of Korea; Singapore; and TaiwanProvince of China), as well as mature industrialcountries (figure II.3). The bottom 20 ranksare all held by developing countries.

Most developed countries tend to sustainsimilar ranks over time, while some developingcountries and economies in transition makelarge upward or downward leaps. The largestimprovements in the FDI Potential Index ranksare by Guyana, El Salvador and Lebanon,and the largest declines by Georgia, Tajikistanand Moldova.

D. Comparing rankings onthe two Indices

The FDI Potential Index does not, forreasons given above, �explain� flows of FDIin a statistical sense. However, it is usefulto compare the rankings based on the twoindices as a rough guide to whether countriesare performing adequately given their (restrictedset of) structural assets.

The ranking of countries accordingto the Performance and Potential Indicesyields a fourfold matrix, as follows:

� countries with high FDI performance (i.e.above the mid-point of the ranking byperformance of all countries) and highpotential (i.e. above the mid-point of theranking by the potential of all countries):the �front-runners�;

� countries with high FDI performance (i.e.above the mid-point of the ranking byperformance of all countries) and lowpotential (i.e. below the mid-point of theranking by the potential of all countries):the � above-potential economies�;

30


Figure II.3. The UNCTAD Inward FDI Potential Index,a by host economy:the top 20 and the bottom 20, 1998-2000

Source: UNCTAD.a Based on eight economic and policy variables.

31


� countries with low FDI performance (i.e.below the mid-point of the ranking byperformance of all countries) and highpotential (i.e. above the mid-point of theranking by the potential of all countries):the � below-potential economies�; and

� countries with low FDI performance (i.e.below the mid-point of the ranking byperformance of all countries) and lowpotential (i.e. below the mid-point of theranking by the potential of all countries):the �under-performers�.

In 1998-2000, there are 42 front-runners,countries that combine strong potential andperformance (table II.3). This group includesleading industr ial countries l ike France,Germany,8 Sweden, Switzerland and the UnitedKingdom, Asian �tigers� � including newerones � such as Hong Kong (China), Malaysia,Singapore and Thailand, and well-performing(at the time) Latin American economies suchas Argentina and Chile. It also includes strongentrants to the FDI scene such as CostaRica, Hungary, Ireland and Poland.

Table II.3. Country classification by FDI performance and potential, 1988-1990 and 1998-2000

High FDI performance Low FDI performance

1998-2000

High FDI potential

Low FDI potential

High FDI potential

Low FDI potential

Source: UNCTAD.

Front-runnersArgentina, Bahamas, Bahrain, Belgium andLuxembourg, Bulgaria, Canada, Chile, Costa Rica,Croatia, Czech Republic, Denmark, DominicanRepublic, El Salvador, Estonia, Finland, France,Germany, Guyana, Hong Kong (China), Hungary,Ireland, Israel, Latvia, Lithuania, Malaysia, Malta,Namibia, Netherlands, New Zealand, Norway,Panama, Peru, Poland, Portugal, Singapore,Slovakia, Spain, Sweden, Switzerland, Thailand,Trinidad and Tobago and United Kingdom.

Above potentialAngola, Armenia, Azerbaijan, Bolivia, Brazil, China,Côte d�Ivoire, Ecuador, Gambia, Georgia,Honduras, Jamaica, Kazakhstan, Kyrgyzstan,Malawi, Mozambique, Nicaragua, Papua NewGuinea, Republic of Moldova, Romania, Sudan,TFYR Macedonia, Togo, Tunisia, Uganda,Venezuela, Viet Nam and Zambia.

1988-1990

Front-runnersAustralia, Azerbaijan, Bahrain, Belgium/Luxembourg, Botswana, Canada, Chile, China,Costa Rica, Croatia, Cyprus, Czech Republic,Denmark, Estonia, France, Greece, Hong Kong(China), Hungary, Kazakhstan, Latvia, Lithuania,Malaysia, Malta, Mongolia, Netherlands, NewZealand, Norway, Oman, Poland, Portugal,Republic of Moldova, Singapore, Slovakia, Spain,Sweden, Switzerland, Taiwan Province of China,Tajikistan, Thailand, Trinidad and Tobago, UnitedKingdom and United States.

Above-potentialAlbania, Argentina, Benin, Bolivia, DominicanRepublic, Ecuador, Egypt, Gabon, Gambia,Guatemala, Guinea, Honduras, Indonesia, Jamaica,Kyrgyzstan, Malawi, Mexico, Myanmar, Niger,Nigeria, Papua New Guinea, Philippines, Rwanda,Sierra Leone, Togo, Tunisia, Viet Nam and Zambia.

Below-potentialAustralia, Austria, Belarus, Botswana, BruneiDarussalam, Cyprus, Egypt, Greece, Iceland,Islamic Republic of Iran, Italy, Japan, Jordan,Kuwait, Lebanon, Mexico, Oman, Qatar, Republicof Korea, Russian Federation, Saudi Arabia,Slovenia, Suriname, Syrian Arab Republic, TaiwanProvince of China, United Arab Emirates, UnitedStates and Uruguay.

Under-performersAlbania, Algeria, Bangladesh, Benin, Burkina Faso,Cameroon, Colombia, Dem. Rep. of Congo, Congo,Ethiopia, Gabon, Ghana, Guatemala, Guinea, Haiti,India, Indonesia, Kenya, Libyan Arab Jamahiriya,Madagascar, Mali, Mongolia, Morocco, Myanmar,Nepal, Niger, Nigeria, Pakistan, Paraguay,Philippines, Rwanda, Senegal, Sierra Leone, SouthAfrica, Sri Lanka, Tajikistan, Turkey, Ukraine,United Republic of Tanzania, Uzbekistan, Yemenand Zimbabwe.

Below-potentialAustria, Bahamas, Belarus, Brazil, BruneiDarussalam, Bulgaria, Colombia, Finland, Georgia,Germany, Iceland, Ireland, Israel, Italy, Japan,Kuwait, Panama, Qatar, Republic of Korea,Russian Federation, Saudi Arabia, Slovenia, SouthAfrica, Ukraine, United Arab Emirates, Uruguay,Uzbekistan and Venezuela.

Under-performersAlgeria, Angola, Armenia, Bangladesh, BurkinaFaso, Cameroon, Côte d'Ivoire, Dem. Rep. ofCongo, El Salvador, Ethiopia, Ghana, Guyana, Haiti,India, Islamic Republic of Iran, Jordan, Kenya,Lebanon, Libyan Arab Jamahiriya, Madagascar,Mali, Morocco, Mozambique, Namibia, Nepal,Nicaragua, Pakistan, Paraguay, Peru, Republic ofCongo, Romania, Senegal, Sri Lanka, Sudan,Suriname, Syrian Arab Republic, TFYR Macedonia,Turkey, Uganda, United Republic of Tanzania,Yemen and Zimbabwe.

32


The group of above-potential economiescomprise mainly countries without strongstructural capabilities that have done wellin attracting FDI. Most are relatively poorand lack a strong industrial base. Note thatBrazil appears in this category because, whileits potential remained relatively stable overthe 1990s at a level comparable to thoseof other Latin American host countries (tableII.1), by the end of the decade it was buildingupon its capabilities to attract FDI in linewith its size, especially through privatization(in 1988-1990 it showed strong potential butlow performance). China is also in this group,although a decade ago (1988-1990) it waslisted in the group of front-runners. This isbecause its ranking on the FDI Potential Index(based, it should be recalled, on eight variables)slipped below the mid-point of the rankingof all countries, even though its score forthe Index rose between these two periods(table II.1).

The group of below-potential economiesinclude many rich and relatively industrializedeconomies that have a weak FDI performancebecause of policy and a tradition of low relianceon FDI (e.g. Japan, Italy, Taiwan Provinceof China and the Republic of Korea, especiallyin the earlier period), political and social factorsor weak competitiveness (not captured bythe variables used here). The United Statesalso falls within this category in the latestperiod, as FDI inflows to this country arerelatively low given the relative size of theeconomy, even though it is the largest hostcountry with the highest score on the PotentialIndex. The group also includes developingcountries that are relatively capital-abundant(e.g. Saudi Arabia), or where FDI flows maynot reflect the extent of TNC participationadequately because of a reliance on localfinancing (Botswana). Mexico appears, onthe basis of the latest data, to have a relativelyweak FDI performance with lower potential;at the start of the decade it had a strongFDI performance. The weaker performance

in the later period reflects slow growth inFDI inflows relative to the world average,and, more importantly, faster growth in GDPrelative to the world average.

The under-performers are generallypoor countries that, for economic or otherreasons, do not attract their expected shareof global FDI. Some countries in the groupof above-potential economies moved into thisgroup after a significant decline in FDI inflowscaused by a major financial crisis over thepast decade (e.g. Indonesia, the Philippines).

Other changes in country positioningare a lso in teres t ing. There are pol icyimplications for the countries that remainin the same category over time: the front-runners need to retain their competitive edgeand ability to attract FDI, the under-performershave to improve both, and so on. Similarly,there are implications for countries that retainhigh potential but slide in terms of FDI attracted(Australia is a good example): if they wishto attract more FDI, they may need to addressspecific problems related to poor investorperceptions. Countries that move from under-performers to above-potential economies (e.g.Armenia) need to s t r ive to bui ld thei rcompetitive potential quickly to retain theiredge in attracting investors.

This analysis can offer many interestinginsights for FDI analysis and policy. However,the indices are still at a formative stage.There is much that can be done to improve,broaden and deepen them, in particular theInward FDI Potential Index. It does not includea number of factors that are known to affectinternational investment flows, and there maybe more appropriate variables that could replacesome of those now used; the problem is, ofcourse, to obtain satisfactory quantitativedata for a large number of countries. It ishoped that this constraint will, at least inpart, be relieved over time.

33


Notes

1 The WIR01 Inward FDI index was theunweighted average of a country �s sharein global FDI flows divided by three things:its share in global GDP, its share in globalemployment and its share in global exports.The Inward FDI Performance Index introducedhere is a simplified version in which theemployment and export variables have beendropped � the former because of its overlapwith GDP as a measure of market size andeconomic strength, and the latter becauseof the ambiguous nature of its relationshipto FDI. Other indices have been developedto measure and rank countries� relativeperformance and/or attractiveness with respectto inward FDI. The FDI Confidence Index,constructed by A.T. Kearney, uses data froman annual survey of senior executives ofthe world�s 1,000 largest corporations. Thatindex is a weighted average of the numberof high, medium, low and no-interestresponses to a question about the likelihoodof investment in a country in the next oneto three years (Kearney, A.T, 2001). Anotherindex is the FDI Sustainability Index, developedby The Economist Advisory Group to scoresubsidiary sustainability, supplemented bythe inclusion of qualitative factors at thefirm, industry, regional, national and globallevels. The Transnationality Index, developedby UNCTAD to measure the overallsignificance of international production inan economy, is another measure (see chapterI ) .

2 Some problems in the use of flow data forderiving the Index are noted in the annex

to this chapter.3 Each variable is normalized to make it

comparable to the others: a score of oneis assigned to the highest value the variabletakes for the economies in the sample, anda score of zero to the lowest value. Theother countries are assigned scores betweenone and zero, taking into account their distancefrom the highest and the lowest. This isdone by taking the value of a variable fora country, subtracting from it the lowestvalue for that variable among the countries,and dividing the result by the differencebetween the highest and lowest values ofthat variable among the countries (see annexto this chapter).

4 These include Australia, Israel, Japan andNew Zealand.

5 See WIR00 for a comparative discussion ofcross-border M&As and greenfield FDI.

6 The correlation between the ranks in theInward FDI Performance Index in the twoperiods is 0.48.

7 The rank correlation coefficient of the InwardFDI Potential Index over the two periodsis 0.84, much higher than for the PerformanceIndex (0.48).

8 Were it not for the acquisition of Mannesmannby VodafoneAirTouch in 2000, Germany wouldbe in the group of below-potentialeconomies .

9 GDP, which indicates market size as wellas the overall economic strength of aneconomy and is undoubtedly an importantdeterminant of FDI inflows, has been omittedbecause it is factored into the Inward FDIPerformance Index.

34


The UNCTAD Inward FDIPerformance Index

The UNCTAD Inward FDIPerformance Index is formulated as follows:

wi

wi

GDPGDPFDIFDIINDi

//

=

Where,INDi = The Inward FDI Performance Index of the ith countryFDIi = FDI inflows in the ith countryFDIw = World FDI inflowsGDP

i = GDP in the ith country

GDPw

= World GDP.

As in the case of the Inward FDI Indexof WIR01, three-year averages of FDI inflowsand GDP are used for calculating this Index.The use of FDI flow data has certain problems.In addition to imperfect reporting and non-inclusion of certain items in FDI data bysome countries (see definitions and sourcesin annex B), problems arise on account ofthe growing importance of M&As as a modeof FDI entry. M&As not only exacerbatethe lumpiness of FDI inflows, but may alsodistort the relationship between FDI inflowsas repor ted in balance-of-payments (orfinancial) terms and the real resource flowsexpected to accompany them. Nevertheless,data on FDI inflows are the best practicalmeans for building the Index: reliable FDIstock data (i.e. that are not simply aggregationsof flow data) are available for fewer countries,especially developing countries, than flowdata. Moreover, they do not show the currentvalue of stocks, which may be misleadingif inflows took place some years earlier.

Table II.1 gives the UNCTAD InwardFDI Performance Index and rankings by theindex for 1988-1990 and 1998-2000 for allcountries for which data are available.

The UNCTAD Inward FDIPotential Index

The Inward FDI Potential Index isthe average of the scores on eight variablesfor each country. The score for each variableis derived as follows: the value of a variable

Annex on methodology and data used for calculating UNCTAD�s Inward FDIPerformance Index and Inward FDI Potential Index

for a country is taken, and subtracted fromit is the lowest value for that variable amongthe countries; the result is then divided bythe difference between the highest and lowestvalues of that variable among the countries.The country with the lowest value is givena score of zero and the country with thehighest value, a score of one. Mathematically,it is expressed as

Vi - VminScore =Vmax - Vmin

where,Vi = the value of a variable for the county iVmin = the lowest value of the variable among

the countriesVmax= the highest value of the variable among

the countries.

The Inward FDI Potential Index usesindicators for key FDI determinants on whichcomparable data are available. This set ofvariables does not, of course, cover all theimportant factors affecting FDI. However,the excluded var iables are di f f icul t tobenchmark across large numbers of countries(see figure II.1 for a comprehensive list).The choice of variables is based on findingsof studies on FDI determinants (WIR98 ;Dunning, 1993). The correlation between eachof a number of variables considered to beimportant, including the variables selectedfor the construction of the FDI Potential Index,and the FDI Performance Index is shownin annex table II.1.

The eight variables comprising theInward FDI Potential Index are:

� GDP per capita.1 This variable shows thelevel of economic development of a hostcountry. It captures the size andsophistication of the demand for goodsand services. It also shows the availabilityof developed institutions, good livingconditions and the like, all of which attractFDI. In addition, higher per capita GDPoften connotes higher labour productivityand stronger innovative capabilities, allconducive to FDI. (On the other hand,it also denotes higher wages, which mightadversely affect low-cost labour-seekingFDI. On balance, however, low wages perse are not a major factor inducing FDI.)

35


� Real GDP growth (for the past 10 years).This variable is a predictor of the futuresize of a host-country market, one of themain determinants of FDI. Higher growthcan also mean rising productivity that couldinduce other kinds of FDI.

� Exports as a percentage of GDP. This showsthe degree of international exposure ofa country. International business through

trade generally lays the ground for inward(as well as outward) FDI and the internationalproduction that serves to substitute foror complement trade. (FDI, in turn, canaffect the export-GDP ratio positively. Thiswould have to be taken into account inorder to establish a clear causal relationshipbetween the two. In the present analysis,the export ratio is included as an approximateindicator of the openness of an economy

Table II.4. Correlation between the UNCTAD Inward FDI Performance Indexand factors determining FDI, 1998-2000

Independent variable FDI inflows share/GDP share

Economic determinantsGDPa -0.024

* GDP growth ratesb 0.018* GDP per capitaa 0.310

Exportsc 0.060* Share of exports in GDPc 0.376

Share of trade in GDPd 0.549* Telephone lines per 1,000 inhabitantse 0.327

Road nertworks per 1,000 inhabitantsc 0.141Railways, goods transported (ton-km. per $ million of GDP)f -0.006

* Commercial energy use per capitag 0.125Internet users as a % of total populationh 0.106

* Share of R&D expenditures in GDPi 0.193Science and engineering students as a % of total populationj 0.107Tertiary gross enrolment ratio as a % of relevant age groupk 0.094

* Students enrolled in tertiary institutions as a % of total populationl 0.150Number of employeesm -0.071Labour cost per worker (in manufacturing)n 0.234Consumer price indexo 0.182External debt as a % of GDPp 0.027

Policy and business facilitation determinants* Country riskq 0.262

Corruptionf 0.286FDI regulationk -0.283Property rightsk -0.197Trade policyk -0.226Number of bilateral investment treatiesr -0.098Number of double taxation treatiesr -0.062Number of investment promotion agenciesr -0.042Number of export processing zonesr -0.044

Source: UNCTAD.a Based on 192 countries.b Based on 177 countries.c Based on 181 countries.d Based on 178 countries.e Based on 188 countries.f Based on 90 countries.g Based on 130 countries.h Based on 185 countries.i Based on 81 countries.j Based on 140 countries.k Based on 154 countries.l Based on 167 countries.m Based on 149 countries.n Based on 78 countries.o Based on 161 countries.p Based on 136 countries.q Based on 138 countries.r Based on 189 countries.

Note: * denotes the variables selected for constructing the Inward FDI Potential Index. Correlation based on raw datafor a cross-section of countries.

36


and the attendant competitive advantagesthat serve to attract FDI.)

� Number of telephone lines per 1,000inhabitants. Telecommunications (as wellas road and railway networks, not includedin the analysis) are part of the basic physicalinfrastructure needed to conduct business.Their availability (and cost) is particularlyimportant for FDI, as TNCs seek tocoordinate production activity acrosscountries.2

� Commercial energy use per capita. Thisis a proxy for the availability and costof energy, which is an important inputfor many production activities and canbe expected to be a factor influencing FDI,particularly of an efficiency-seeking type.

� R&D expenditures as a percentage of grossnational income . This indicates thetechnological capabilities of a host economy,including innovative capacity � an importantfactor attracting created-asset-seeking FDI.In products and processes that areknowledge-based, competition tends to besevere and, as R&D activities in these areasare costly and risky, the quest for suchassets is a driving force for internationalproduction.

� Students in tertiary education as a percentageof total population. This is a measureof the extent of higher education and relatedskills that a country�s workforce embodies.An educated and skilled workforce is aninducement for FDI in industries facingglobal and regional competition.

� Country risk. This includes the politicaland commercial risks related to investingin a country. Political risk is related tofactors such as a government�s ability tofulfil its commitments and commercial riskto factors such as currency shortages (whichaffect the ability to remit profits) and suddendevaluations or financial crises that affectthe ability of investors to plan for andmeet financial commitments. Country riskis an indicator of the degree of political,economic and social stability of a country.The higher the risk assessment for a country,the less attractive it is for investors. Countryrisk assessments are provided by a numberof institutions. Country ratings (on a scale

of 0-100; the higher the number, the lowerthe risk) prepared by the PRS (PoliticalRisk Services) Group/International CountryRisk Guide, a country risk assessmentcompany based in the United States, areused to measure country risk.3 In choosingthis variable, country rankings fromEuromoney and country risks from Coface,an export credit insurance company inFrance, were also examined.4

The raw data and scores for eachof the variables listed above are given inannex tables A.II.1 and A.II.2.

N o t e s

1 GDP, which indicates market size as well as theoverall economic strength of an economy andis undoubtedly an important determinant of FDIinflows, has been omitted because it is factoredinto the Inward FDI Performance Index.

2 Road and railway networks that determine thecosts of transporting goods and people are alsoan important aspect influencing investors. Theyhave not been included in the index becauseof a lack of data for a number of countries andalso to minimize the number of variables.

3 The country rating is based on a set of 22components grouped into three major categoriesof risk: political risk comprising 12 components(government stability; socio-economic conditions;investment profile; internal conflict; externalconflict; corruption; military in politics; religioustensions; law and order; ethnic tensions;democratic accountability; and bureaucraticquality), financial risk comprising 5 components(foreign debt as a percentage of GDP; foreigndebt service as a percentage of exports; currentaccount as a percentage of exports; net liquidityas months of import cover; and exchange ratestability); and economic risk comprising 5components (GDP per head of population; realannual GDP growth; annual inflation rate; budgetbalance as percentage of GDP; and currentaccount balance as a percentage of GDP). Incalculating the risk rating, the political risk ratingcontributes 50 per cent of the composite rating,while the other two risk categories each contribute25 per cent. For further details, see InternationalCountry Risk Guide (www.ICRGOnline.com).

4 The correlation between the country risk variableby PRS and the Inward FDI Performance Indexis 0.262, while the correlation with Euromoney�scountry risk is 0.169, and that with Coface�scountry risk is 0.238. The correlation result isbetter for the country risk variable of PRS thanthat of Coface, and the former variable was availableon its website for a longer time series.

CHAPTER III

REGIONAL TRENDS

Nearly all regions of the world sharedin the global decline in FDI in 2001. Byfar the largest fall in flows took place inthe developed world. Inward FDI flows toa number of developed countries plungedas TNCs responded to the economic recession,and as cross-border M&As decreasedsubstantially in number and value. OutwardFDI from developed countries plunged aswell. FDI flows to and from developingcountries declined much less, and the picturethere was more varied. Flows to Africaand to the economies in transition of Centraland Eastern Europe (CEE) increased, whileflows to the least developed countries (LDCs)remained steady. This chapter takes a closerlook at trends in FDI by region.

A. Developed countries

After reaching a peak in 2000, FDIflows to and from developed countries fellsharply in 2001. Outflows declined by 55per cent in 2001, to $621 billion, while inflowsmore than halved, to $735 billion (annex tablesB.1 and B.2) . Twenty- three out of 26developed countries experienced a declinein FDI inflows, as TNCs curtailed their cross-border M&As s igni f icant ly agains t thebackground of the economic slowdown inmajor indust r ia l ized economies and theconsolidation of industries that had takenplace during the 1990s. FDI outflows alsodeclined, and are expected to remain lowin 2002.

1. United States

Despite the economic slowdown andthe events of September 11, the United Statesretained its position as the largest FDI recipientand regained that of the world’s largestinvestor, although both inward and outwardflows in 2001 fell below the 1998 levels.Outward FDI declined by 30 per cent, downto $114 billion (figure III.1), while inflowsmore than halved, to reach $124 billion. Thefall in inflows reflected fewer and smaller

M&A transactions by foreign firms in theUnited States , part ly in response to theeconomic slowdown in major home countries.Few transactions exceeded a value of $4billion, as against more than 10 transactionsabove that level in 2000 (Bach, 2002). Therelative weakness of the euro against thedollar may also have played a role in reducingcross-border M&As in the United States.Nevertheless, such activity continued to bethe primary mode of FDI entry, with TNCsfrom Germany taking the lead.1 In fact ,Germany became the second largest homecountry for investment in the United States,behind Switzer land, pushing the UnitedKingdom to the fifth place. The share ofEU countries in FDI inflows to the UnitedStates declined from 74 per cent in 2000to 48 per cent in 2001 (figure III.2). Flowsof FDI to the Uni ted States f rom Lat inAmerica and the Caribbean, West Asia, Japanand developing Asia decreased, with FDIflows by Japanese firms turning negativeon balance (partly due to intercompany debtoutflows and negative reinvested earnings),the la t ter presumably weakened by therecession in their home economy and also,to some extent, because they redirected theirinvestments to Asia.

The services sector, led by financeand insurance, accounted for one-third ofUnited States inward FDI in 2001 (figureIII .3) . Retai l t rade and real estate werethe only activities that attracted increasedinflows. Compared to the beginning of thedecade, FDI in services (and, in particular,financial services) has outperformed investmentin the traditional manufacturing industriesin recent years.

According to the UNCTAD indicesof Inward FDI Performance and Potential,the United States leads in investment potentialbut ranks much lower in its FDI relativeto GDP (figure III.4 and table II.1). Indeedthe country’s performance posi t ion hasweakened over the pas t decade. Thisasymmetry may be expla ined by the

��


Figure III.1. Developed countries: FDI flows, top 10 countries, 2000 and 2001a



a Ranked on the basis of the magnitude of 2001 FDI flows.

Figure III.2. United States FDI inflows and outflows, by major partner, 1990-2001(Billions of dollars)

Source: UNCTAD, FDI/TNC database, based on the United States Department of Commerce, Bureau of EconomicAnalysis, www.bea.doc.gov, data retrieved in June 2002.

��

CHAPTER III REGIONAL TRENDS

Figure III.3. United States FDI inflows and outflows, by major sector and industry,1990-2001


Source: UNCTAD, FDI/TNC database, based on the United States Department of Commerce, Bureau of EconomicAnalysis, www.bea.doc.gov, data retrieved in June 2002.

Figure III.4. The UNCTAD Inward FDI Performance Index and Inward FDIPotential Index for the United States and selected Western European

countries, 1988-1990 and 1998-2000

Source: UNCTAD, based on table II.1 and annex table B.1.

��


competitive strengths of United States firms.Still, the United States remains an attractivesite for investment, and leading TNCs continueto regard it favourably, according to surveysof major investors.2

As in previous years , the maindestination for United States outward FDIin 2001 was again the EU, which receivedmore than 40 per cent of these outflows(figure III.2). The country’s NAFTA partners– Canada and Mexico – together accountedfor more than a quarter of total outflows,a major recipient being financial servicesin Mexico. FDI f lows thus cont inue tostrengthen the consolidation of the NorthAmerican market, with Mexico emergingas an increas ingly impor tant par tner.Developing countries accounted for morethan a third of outflows, up from the previousyear, but these were strongly affected bya single large acquisition in Mexico.3 Othermajor transactions undertaken by UnitedStates firms include acquisitions in Germany(pharmaceut icals) , Canada (natural gas ,computer-related services), Asia (electronics,pharmaceuticals), and the United Kingdom(publishing) (Bach, 2002; annex table A.I.2).

Services continued to account for morethan half of outward FDI, with financialservices responsible for the largest share(figure III.3). Investment in machinery andequipment increased while that in transportservices and electronics plunged, at leastpartly reflecting the economic slowdownand the impact of September 11 (EIU, 2002c).As the economy revived, FDI into and outof the United States picked up as well: inflows,having plunged in the third quarter of 2001(accounting for only 10 per cent of totalinflows during that year), increased in thefourth quarter partly in response to a revivalin consumer confidence, a positive growthof GDP of 1.3 per cent, and low interestrates that encouraged consumer spending.During the first quarter of 2002, both inflowsand outflows continued to grow.

2. Western Europe

a. European Union

FDI inflows and outflows to and fromthe EU (including intra-EU FDI) declinedby about 60 per cent in 2001 (to $323 billionand $365 billion, respectively). Most flowsremained wi th in the EU, and most

concentra ted increas ingly on services(particularly utilities, media and finance).4

Cross-border M&As involving EU firms fellin number and value (annex tables B.7 andB.8) .

Although the largest share of the EU’sFDI flows goes to other EU members, theregion as a whole continues to outperformthe Uni ted Sta tes , as both investor andrecipient, as it has done since 1998. Despitethe recession in 2001 and the September11 events, the United States remains themost attractive location for FDI from theEU (MIGA, 2002).

The overall trends as well as inter-country differences in FDI flows in the EUreflect trends and differences in cross-borderM&As, since most flows into and from theEU (like those into and from other developedcountries) occur through M&As. Cross-borderM&As involving EU firms declined in numberand value in 2001 (annex tables B.7 andB.8); there were fewer large deals , andnone was comparable to the mega dealsundertaken during 1999 and 2000, when therewas a surge in such deals.

Some EU countries experienced asignificant decline in FDI inflows in 2001compared to the previous year. Examplesinclude Germany (where inf lows wereunusually high in 2000 due to a single cross-border acquisition), the United Kingdom and,on a smaller scale, Denmark and Finland(where FDI inflows decreased by more thanhalf and where M&As had also boostedinflows in 2000). On the other hand, FDIinflows remained steady or increased in onlythree countries – France, Greece and Italy– in 2001. Similarly, on the outward side,severa l EU countr ies had under takenexceptionally large cross-border M&A dealsin 2000, resulting in high FDI outflows,compared to which 2001 outf lows fe l lconsiderably. These countries include Franceand the United Kingdom and, on a smallerscale, Denmark, Finland and Sweden. Atthe same time, increased or steady outflowswere also observed in some countries, suchas Ireland, Italy and Portugal.

Countries of the EU rank high, wellahead of the United States, when FDI inflowsare considered in re la t ion to domest icinvestment (figure III.5), with Belgium andLuxembourg, Sweden, and Ireland leading

��


the list. They also generally rank high onUNCTAD’s Transnationality Index (figureI.16) as well as on the UNCTAD indicesof Inward FDI Performance and Potential(figures II.2, II.3 and III.4), their investmentperformance broadly matching their potential,with above average performances by Belgiumand Luxembourg, and Ireland. Nevertheless,there are a few “below-potential” economies,including Austria and Italy, which, like Iceland,the United States and Japan, combine arelatively low ranking in FDI performancewith a relatively high ranking in FDI potential.The asymmetry in these cases might be partlydue to policy or investment-facilitation-relatedfactors or short- term factors specif ic tothe period covered by the indices. Germany,the United Kingdom and France, in that order,are the most favoured investment locationsfor the next three years, according to thesurvey on corporate investment strategiescited earlier (UNCTAD, 2001a).

The f ive larges t home and hosteconomies for FDI to and from the countriesof the EU (including intra-EU FDI) werethe same in 2001 as in 2000 – Belgium andLuxembourg, France, Germany, the Netherlandsand the United Kingdom – although the orderchanged (figure III.1). Different factorscontributed to the performance of individualcountries.

FDI into France rose by23 per cent, or $9.7 billion –the largest increase in flows toa developed country in 2001.5

In Greece, FDI inflows increasedby about 50 per cent , to$1.6 billion, mainly due to market-or iented FDI made throughacquisitions by European andUnited States companies.6 InItaly, inward flows increasedby 11 per cent, partly due tothe acquisition of Elettrogen bya Spanish investor group for $3.2bi l l ion . Flows in to theNetherlands remained steady.This country, given its openness,favourable inves tmentenvironment, good infrastructure,and privileged location at thecentre of the EU, has becomean important FDI recipient inthe region; it continues to attractEuropean headquar ters andEuropean distribution centres of

foreign TNCs.7 United Kingdom inflows,on the other hand, dropped sharply as cross-border M&As by foreign firms fell.8 Despitethese developments, the country regainedi ts posi t ion as the region’s larges t FDIrecipient. Flows to Belgium and Luxembourgalso declined substantially, in the light ofrevised 2000 figures; comparing data onFDI f lows to and f rom Belgium andLuxembourg in 2001 with those in 2000illustrates the difficulty of assigning valuesto FDI taking place through M&As.9 Themost significant decline in inflows (over80 per cent) occurred in Germany,10 wherean increasing share of recent FDI has goneto the eastern part of Germany (box III.1).Inflows into Ireland declined by 60 per cent,ref lec t ing the economic downturn thatparticularly affected United States electronicsaffiliates in the country (which representa large share of FDI into Ireland).

The largest EU outward investor in2001 was France (the second largest investorworldwide), but its outflows fell by overhalf compared to 2000.11 Belgium andLuxembourg retained its position as the secondlargest outward investor from the regiondue to large cross-border M&As in insuranceand communications industries (annex tableA.I.2). The Netherlands was the third largest,with outflows falling by more than a third

Figure III.5. Developed countries: FDI flows as apercentage of gross fixed capital formation,

top 10 countries, 1998-2000a

(Percentage)


a Ranked on the basis of the magnitude of 1998-2000 FDI inflows asa percentage of gross fixed capital formation.

��


and the United States replacing the EU asthe main destination. Germany came fourth;its outflows remained almost steady. Again,its major destination was the United States,led by the acquisition of VoiceStream Wirelessby Deutsche Telekom. The largest declinein outflows from the EU, in both absoluteand relat ive terms, was recorded by theUnited Kingdom,12 which ranked fifth among

EU countries in outward FDI (figure III.1).Outf lows f rom Spain a lmost ha lved, asinvestors cut back in Latin America, despitelarge acquisitions by Telefónica.13 The crisisin Argentina resulted in heavy losses forsome Spanish firms. Contrary to this trend,outflows from Italy increased by 75 percent from a relatively low level, partly asthe country had participated only modestlyin cross-border M&As during the 1990s.14

In the more than 10 years since reunification,the new Länder region in the eastern part ofGermany has succeeded in attracting about 2,000foreign companies from over 50 countries. Incomparison with domestic firms, foreign affiliatesin the region typically are more export oriented.They are also more likely to establish linkages withsuppliers in the local economy and bring insignificant technological know-how. In some cases,they are important employers, especially for theautomobile industry around Leipzig, semiconductormanufacturing in Dresden and the chemical industryin the “Chemical Triangle” of Saxony-Anhalt (Belitz,Brenke and Fleischer, 2000; IIC 2001b; Dickmanand Ritter, 2002). FDI in the region, mainly in natural-resource-based manufacturing activities, andchemicals and machinery, accounted for about 4per cent of the total FDI stock in Germany in 1999(box figure III.1.1).a A recent survey by the AmericanChamber of Commerce underlined the attractivenessof the region.b

The factors driving these developments includea long industrial tradition and availability of a skilledlabour force in certain regions, as well as marketaccess (not only to the regional market, but alsoto the western part of Germany and CEE), costadvantages and investment opportunities arisingfrom privatization (Belitz, Brenke and Fleischer,2000). The majority of privatization-relatedacquisitions were undertaken by investors fromthe western part of Germany. Only about 6 per centof privatized companies during 1991-1994 wereacquired by foreign companies, and their sharein total investment and employment was estimatedat 10 per cent. In the second half of the 1990s,the involvement of foreign investors might haveincreased slightly, as they acquired projects thathad failed under investors from the western partof Germany.

Box figure III.1.1. Distribution of inward FDIstock in Germany’ new Länder,a

by region, 1991-1999(Billions of dollars and percentage)

S o u r c e : UNCTAD, based on Deutsche Bundesbank,unpublished data.

a Not including East Berlin.

Recently, factors such as more flexibility inlabour-market negotiations (as compared to westernGermany) and emerging industrial clusters havebecome important. Government assistance also playsa role. Incentives related to transfer payments forthe post-reunification structural adjustment of theeastern part of Germany are available to both domesticand foreign investors. During 1991-1999, the shareof grants in total investment was about 30 per cent,for both domestic and foreign investments (IIC,2001a). However, certain incentives for enterprisesoperating in the region have to be phased out by2004 (and by 2003 for in the case of investmentsin certain industries, such as automobiles), followinga decision by EU competition authorities.c

Box III.1. Going east: FDI in Germany’s new Länder

Source: UNCTAD, based on data and information from the Deutsche Bundesbank; the New GermanLänder Industrial Investment Council (www.iic.de) and the five regional economic promotionagencies.

a Data on FDI in the new Länder have been compiled by the Deutsche Bundesbank since July 1991. Data on EastBerlin are included in the figures for the western part of Germany.

b Of the 1,200 United States companies that responded to a survey (including the 50 largest United States investorsin Germany), 80 per cent considered the new Länder a feasible investment location, and over 33 per cent thoughtthat this region had special advantages for foreign investors. While proximity to CEE markets was cited as partof the attractiveness of the new Länder, more flexible labour markets and regulatory systems as well as advantageouswage levels, compared with other parts of Germany, were also considered important (IIC, 2001b).

c Neue Züricher Zeitung, “EU Gelder für Ostdeutschland werden erst 2004 reduziert”, 12 February 2002.

��


b. Other Western Europe

The rest of Western Europe followedsimilar patterns. FDI inflows ($13 billion)and outf lows ($15 bil l ion) fel l in 2001.Countries under this grouping, taken together,rank higher than EU countries in FDI potential,although this is not matched by their FDIperformance, according to the UNCTADindices (table II.1).

FDI flows into Switzerland declinedby almost 40 per cent, after the surge in2000 led by two acquisitions (Alusuisse LonzaGroup by Alcan Aluminium of Canada, andCablecom Holding by the United States firm,NTL, for $4.8 b i l l ion and $3.7 b i l l ion ,respectively). Increased inflows from theUni ted Sta tes , the larges t inves tor inSwitzerland since 1986, and stable FDI fromEU countries, together accounted for morethan two-thirds of the inflows during 1996-2000, mainly in finance and insurance. FDIoutflows from Switzerland declined evenmore: by 60 per cent. Most outward FDItook the form of M&As. Examples includethe acquisition of Ralston Purina (UnitedStates) by Nestlé and Lincoln Re (UnitedStates) by Swiss Reinsurance. PharmaceuticalTNCs and finance and insurance companieshave also become strong investors abroad,

accounting for about half the outflows during1996-2000. Most of the expansion has beenin CEE, Latin America and the United States– a shift away from the EU destinationsthat traditionally accounted for more thanhalf of total outward FDI. FDI inflows intoNorway continued their declining trend, fallingby half in 2001. FDI in natural-resource-related activities accounted for the largestshare of inflows. Outflows also declined,and became negat ive (annex table B.2) .Iceland has recently attracted North AmericanTNCs, which, perhaps, consider the countryas a s tepping s tone in to the Europeanmarket . 15 Fur thermore , the country i sincreasingly investing abroad through cross-border M&As (WIR01), although at modestlevels compared to other developed countries.

3. Japan

Japan’s domestic investment fell in2001,16 but its investment abroad grew by21 per cent (to $38 billion) and is expectedto keep growing. According to a survey ofmanufacturing TNCs by the Japan Bank forInternational Cooperation in 2001 (JBIC,2002), 72 per cent of respondents plannedto increase their outward investment overthe next three years, compared to 21 percent in 1999 and 55 per cent in 2000 (figureIII .6) .

Figure III.6. Planned FDI by Japanese manufacturing TNCs overthe next three years, 1995-2001 surveys a

(Percentage)

Source: Japan Bank for International Cooperation (JBIC), 2000 and 2002.

a Fiscal year.

Note: Based on 422 respondent firms for the 1995 survey, 432 for the 1996 survey, 445 for the 1997 survey,455 for the 1998 survey, 472 for the 1999 survey, 469 for the 2000 survey and 501 for the 2001 survey.

��


The Japanese investment gap between Chinaand the ASEAN-4 (Indonesia, Malaysia, thePhilippines and Thailand) has narrowed since 1999($2.7 billion and $2.9 billion in 2001, respectively)(box figure III.2.1). Even before

Box figure III.2.1. Japanese FDI outflows toASEAN-4 and China, 1995-2001


Source : UNCTAD, FDI/TNC database .

its accession to the WTO, China had become themost attractive location for Japanese TNCs. In asurvey of planned FDI in the next three years byJapanese manufacturing TNCs (JBIC, 2002), Chinaemerged as the leading destination by far. The

ASEAN-4 ranked at some distance below China,though all, except for the Philippines, remainedamong the top 10 destinations (box table III.2.1).

Japan accounted for 28 per cent of the FDIstock in Thailand (1999), 22 per cent in Malaysia(1997) and 20 per cent in Indonesia (1997). Thesecountries are therefore eyeing the increasing flowsto China with some apprehension. Surveys reinforcethese concerns. Some 57 per cent of Japanesemanufacturing TNCs find China more attractivethan the ASEAN-4.a A survey by JETRO in October2001 suggested that one-fifth of Japanese TNCsplanned to relocate production sites from Japanand other countries to China because of its accessionto the WTO (box figure III.2.2). At the same time,however, 99 per cent of Japanese TNCswith investments in the ASEAN countries said theywould not relocate to China (JETRO, 2002). Thisdoes not, of course, mean that their productionin China will not expand faster than in ASEAN.

Outflows were fairly diversified bydestination. For the first time, the largestrecipient, with $13 billion, was the UnitedKingdom, followed by the United States.17

FDI outflows doubled in the former andhalved in the latter. These two countriesalone accounted for 52 per cent of the totalFDI outflows in 2001. More than half ofJapanese investment in the United Kingdomin 2001 was in financial and insurance services.Service investments dominated Japanese FDIin both countries, accounting for more thanone-third of the total.18

In other regions, however, manufacturingcontinued to dominate Japanese FDI.

Investment in developing Asia remained steady,as production, particularly in electrical andelec t ronics indust r ies , was re located inresponse to cost pressures. The rising shareof East and South-East Asia (one fifth oftotal Japanese FDI in 2001) reflected thegrowing role of China, which took nearly30 per cent of Japanese investment in theregion. Other Asian countries, particularlymembers of the Association of South-EastAsian Nations (ASEAN), received less, causingconcern in ASEAN (box III.2). FDI in LatinAmerica also declined, while it continuedto remain marginal in Africa and West Asia.

Box III.2. Is China more attractive to Japanese investors than ASEAN?

Box table III.2.1. The 10 most promising destinations for manufacturing FDI by Japanese TNCsover the next three years,a 1995-2001 surveys b

(Per cent)

Rank 1996 survey Ratio 1997 survey Ratio 1998 survey Ratio 1999 survey Ratio 2000 survey Ratio 2001 survey Ratio

1 China 68 Chinana 64 China 55 China 55 China 65 China 822 Thailand 36 United States 36 United States 41 United States 39 United States 41 United States 323 Indonesia 34 Indonesia 28 Thailand 23 Thailand 27 Thailand 24 Thailand 254 United States 32 Thailand 25 Indonesia 16 India 15 Indonesia 15 Indonesia 145 Viet Nam 27 India 23 India 15 Indonesia 15 Malaysia 12 India 136 Malaysia 20 Viet Nam 19 Philippines 14 Viet Nam 11 Taiwan Province 11 Viet Nam 12

of China Taiwan Province 117 India 18 Philippines 14 Malaysia 14 Malaysia 9 India 10 of China8 Philippines 13 Malaysia 13 Viet Nam 14 Philippines 9 Viet Nam 9 Korea, Rep. of 89 Singapore 10 Brazil 8 Brazil 11 United Kingdom 9 Korea, Rep. of 9 Malaysia 8

10 United Kingdom 7 Taiwan Province 8 United Kingdom 10 Brazil 8 Philippines 8 Singapore 6and Taiwan of ChinaProvince of China

Source : JBIC, 2000 and 2002.a The share of f irms that consider the country as promising in total respondent f irms (multiple responses).b Fiscal year.Note: ASEAN-4 and China are highlighted.

/ . . .

��


Box III.2. Is China more attractive to Japanese investors than ASEAN? (concluded)

Source: UNCTAD.a JBIC, 2000; 2002. On the basis of 469 respondent Japanese manufacturing TNCs.

Box figure III.2.3. Investment climate of ASEAN-4 compared with Chinaa

Box figure III.2.2. Planned relocation of production sites of Japanese TNCs to Chinaas a result of China’s accession to the WTO a

(Percentage of TNCs responding)

Source : JETRO, In te rna t iona l Economic Resea rch Div i s ion .a Based on 645 responses among the 720 Japanese TNCs surveyed by JETRO in October 2001.b Based on 136 out of the 645 responses (21.1 per cent) from TNCs planning to relocate their production to China. M u l t i p l e

replies apply.

However, Japanese TNCs are concerned aboutthe investment climate in China (box figure III.2.3),particularly about rules relating to establishment,the transparency of investment rules, and the taxsystem. While Malaysia and Thailand are betterpositioned in most aspects of the investment climate,they lag behind China in market growth, production

costs and labour supply (box figure III.2.3). Accordingto the JBIC survey, nearly twice as many Japanesemanufacturing TNCs consider these economicattractions stronger in China as those who considerthem stronger in ASEAN.

Source: UNCTAD, on the basis of data and f igure provided by JETRO, Internat ional Economic Research Division. a Japanese TNCs were asked to assess the investment climate of ASEAN (4) compared with that of China in each of the 14 areas according to

the following scaling: 2 for much better; 1 for better; 0 for the same; -1 for worse; and -2 for much worse.Note: Based on 340 responses for Indonesia, 335 for Malaysia, 317 for the Phil ippines and 386 for Thailand surveyed

by JETRO in October 2001.

�


Inward FDI in Japan declined forthe second year in a row. By 2001, inflows($6 billion) were half the peak reached in1999.19 While cross-border M&As fell, therewere some large acquis i t ions intelecommunications and insurance.20 Fiveglobal electronics contract manufacturers21

also acquired plants (JETRO, 2002). Accordingto both the UNCTAD/AFII/Andersen survey(UNCTAD, 2001a) and the MIGA survey(MIGA, 2002), prospects for FDI inflowsto Japan are bet ter than those for otherdeveloped countries such as Sweden andIreland, both of which have shown dramaticimprovements in the UNCTAD Inward FDIPerformance Index (table II.1). Japan hasalso improved its own FDI performance overthe past decade, but this remains much lowerthan its capacity to attract FDI as measuredby the UNCTAD Inward FDI Potential Index(figure III.7).

In the light of Japan’s position asa country with sustained surpluses in itsbalance of trade, increased FDI from Japansince the mid-1980s has drawn attentionto the relationship between the country’strade and international production. Since1993, the net effects of outward FDI onJapan’s trade balance in the manufacturingsector are estimated to be negative (Japan,Institute for International Trade and Investment,2000). However, the activities of Japanese

manufacturing affiliates abroad rarely havenegative effects on Japan’s manufacturedexports (Lipsey and Ramstetter, 2001). Indeed,of the top 30 exporters that accounted forhalf of Japanese total exports in 2001, onlyfour (NEC, Mazda Motors, Isuzu Motorsand Nippon Steel) experienced a declinein exports between 1996 and 2001 (tableIII .1) .

The negative trade balance effectsof outward FDI are apparently attributableto imports. Japan’s imports from its affiliatesabroad are increasing faster than exportsby Japanese parent firms. In fact, the shareof “reverse imports” in Japanese importsrose from 4 per cent a decade ago to 15per cent in 1999 (figure III.8). In comparison,United States imports from overseas affiliatesof its TNCs accounted for about one-fifthof total imports in 1998, a share that hasremained the same since 1990. Simultaneously,the composi t ion of Japanese impor ts i schanging rapidly. Machinery and equipment,in par t icular, e lec t r ica l and e lec t ronicsmachinery, now account for 31 per cent– 14 percentage points higher than a decadeago. This implies that a horizontal divisionof labour is taking place within TNCs inthis industry. Japan provides an interestingcase of outward FDI changing the structureof trade – both exports and imports – ofhost and home countries.

Figure III.7. The UNCTAD Inward FDI Performance Index and Inward FDIPotential Index for "other" developed countries, 1988-1990 and 1998-2000


�


Table III.1. Exports, FDI and international production of 30 largest Japanese firms,1996 and 2001(Billions of yen)

1996 2001

Exports from International Exports from InternationalTNCs a Sales b parent firms FDI production Salesb parent firms FDI production

Toyota Motor Corp. 10 719 2 829 331 2 037 13 424 4 136 718 7 652Sony Corp. 4 593 1 251 1 209 919 7 315 1 961 .. 1 463Honda Motor Co., Ltd. 4 252 1 275 225 .. 6 464 1 773 .. ..Matsushita Electric Industrial Co., Ltd. 6 795 1 445 .. 951 7 682 1 529 .. 2 243Nissan Motor Co., Ltd. c 6 039 1 310 570 2 355 6 090 1 522 905 2 704Canon Inc. 2 558 971 140 691 2 908 1 367 .. 872Toshiba Corp. 5 120 1 147 .. .. 5 951 1 264 246 1 726Mitsubishi Motors Corporation 3 537 989 .. .. 3 277 1 133 .. ..Mitsubishi Heavy Industries, Ltd. 3 017 739 .. .. 3 045 1 050 48 241Hitachi, Ltd. 8 124 983 115 1 995 8 417 1 047 174 ..NEC Corporation 4 397 690 .. .. 5 410 699 489 ..Mazda Motor Corp. c 1 843 709 125 602 2 016 683 155 1 125Mitsubishi Electric Corp. 3 511 636 87 421 4 129 674 129 702Suzuki Motor Corp. c 1 381 483 79 186 1 600 629 117 ..Fujitsu Ltd. 3 762 351 536 752 5 484 614 .. ..Seiko Epson Corp. 511 350 .. .. 1 341 610 .. ..Sharp Corporation 1 651 584 .. .. 2 013 596 .. ..Isuzu Motors Ltd. c 1 682 602 44 84 1 569 488 82 88Yamaha Motor Co., Ltd. 733 292 74 .. 884 448 .. 613Sanyo Electric Co., Ltd. 1 687 103 167 472 2 241 432 .. ..Nippon Steel Corp. 2 955 485 54 .. 2 750 423 69 ..Fuji Heavy Industries Ltd. 1 077 165 86 346 1 312 395 .. ..Kawasaki Heavy Industries Ltd. 1 086 293 .. .. 1 060 365 .. ..Victor Co. of Japan, Ltd. 807 281 .. .. 934 351 .. ..Fuji Photo Film Co., Ltd. 1 085 238 91 .. 1 440 336 .. 785Denso Corp. 1 423 229 .. .. 2 015 318 .. ..Japan IBM c 1 497 289 .. .. 1 585 312 .. ..Ricoh Co., Ltd. 1 113 169 .. 223 1 538 300 .. ..Nikon Corporation 333 132 17 121 484 270 .. ..Murata Manufacturing Co., Ltd. 322 98 11 .. 584 266 14 99

Source: UNCTAD, based on World Scope CD-ROM (for sales), Toyo Keizai, 1996 and 2001 (for FDI and internationalproduction), and Nikkei Sangyo Shimbun, 27 December 2001 (for exports).

a Ranked according to export size.b Consol idated.c Foreign affi l iate.

Figure III.8. Japan’s imports from Japanese foreign affiliates, 1987-1999(Billions of yen and percentage)

Source: Japan, Ministry of Economy, Trade and Industry (METI), 2001a, p. 60.

��


4. Other developed countries

Among other developed countries,Australia was less affected by the recessionand other events in the United States, asits economy is more closely linked to Asiaand the Pacific than to North America. FDIoutflows from Australia doubled in 2001,reaching $11 bi l l ion, and ref lect ing theacquisition by BHP of Billiton (United Kingdom)for $11.5 b i l l ion22 (annex table A.I .2) .Manufacturing accounted for two-thirds ofoutward FDI, compared to about 50 percent a decade earlier. Australia has beenan important investor in the Asia-Pacificregion, mainly in Japan, New Zealand, South-East Asia and the Pacific Island economies.The largest Australian affiliates are locatedin that region, predominantly in resource-based manufacturing. FDI flows into Australiashowed a large fal l , down to $4 bil l ion,compared to a record high of $12 billionthe previous year. Mining continued to declinein importance for inward FDI, while servicescontinued to rise. The main investors inAustralia were European firms, though theUnited States had accounted for an equalshare during the period 1997-1999. Investorsf rom the Paci f ic region contr ibuted asignificant but falling share.

FDI flows declined for New Zealand:inflows almost halved, from $3.2 billion to$1.7 billion, and outflows decreased by 70per cent, from $0.9 billion to $0.3 billion.Inf lows were mainly in resource-basedindustries, with Australia the main investor,followed by the United States, the UnitedKingdom and Japan. Australia was the maindestination for outflows from New Zealand,traditionally accounting for about half ofthe la t ter ’s outward FDI and recent lyincreasing this share to almost three-quarters,ahead of the United Kingdom, the UnitedStates and Japan.

Since Canada’s main economic partneris the United States, the slowdown thereaffected Canadian FDI in 2001. Inflows fellby 60 per cent23 and outflows by 25 percent compared to the previous year, whichwas characterized by unprecedented FDIrelated to relatively large M&As (figureIII.1). Although diminished in number andin volume, cross-border M&As in Canadacontinued to play an important role as amode of entry for TNCs. Large M&As,mainly by United States (in utilities) and

United Kingdom firms, drove inward FDI.Most outward FDI went to the United States,but investments in Mexico also rose rapidly(from low levels), reflecting the integratingeffects of NAFTA. The services sector isgaining in importance over resource-basedactivities in Canadian outflows.

* * *

Data for early 2002 suggest that FDIto and from the developed countries willremain low (see chapter I). Cross-borderM&As – the preferred mode of entry forTNCs (UNCTAD, 2001a; MIGA 2002) –are expected to remain low. However, aseconomic growth picks up, flows are likelyto recover.

B. Developing countries

1. Africa

FDI flows to Africa (including SouthAfrica) rose from $9 billion in 2000 to morethan $17 billion in 2001, following relativelylow levels in previous years (figure III.9).While this increase looks impressive at firstsight, it masks the fact that, for most Africancountries, FDI flows remained at more orless the same level as in 2000. The increaseby $8 billion is largely due to a few largeFDI projects – notably in South Africa andMorocco (figure III.10) – and the way theyare reflected in FDI statistics. Around 80per cent of the growth is explained by a

Figure III.9. FDI inflows and theirshare in gross fixed capital formation

in Africa, 1990-2001(Billions of dollars and percentage)


��


large increase in FDI flows into South Africa,the result of an unbundling of cross-shareholdings involving London-listed Anglo Americanand De Beers of South Africa; it is recordedas an increase in FDI inflows because AngloAmerican purchased De Beers shares bypaying the mainly South African-based ownersin Anglo American shares.24 The other mainproject responsible for the increase wasthe sale of a 35-per-cent stake of Maroc-Telecom to a foreign investor, boosting inflowsinto Morocco to almost $2.7 billion in 2001.Thus the higher FDI inflow figures for 2001should not be mistaken for a fundamentalchange in the trend. Inflows stagnated formany other countries, though at levels higherthan during the early 1990s, before the policyenvironment for FDI began to improve.

As a resul t of these except ionaltransactions, the share of Africa in globalFDI inflows increased from 1 per cent in2000 to 2 per cent in 2001, but it remainssmall. If economic size is taken into account,however, there is little difference betweenAfrica and other developing regions as regardsinward FDI. In fact, some African countriesreceive more FDI relative to GDP than theaverage developing country. Moreover, for22 of the 53 African countries, the ratio

of FDI inflows to gross fixed capital formationin 1998-2000 was higher than for developingcountries as a whole (figure III.11 and annextable B.5). Most of these 22 countries areLDCs with relatively small economies, suchas Cape Verde, Djibouti, Lesotho and Togo.

There were some interesting trendsin FDI inflows within the continent:

• The year 2001 saw a number of remarkabledevelopments regarding FDI flows to NorthAfrica: they increased by 83 per cent to$5.3 billion – an unprecedented figure forthis subregion. However, as with thedevelopments in Africa in general, the largeincrease masks diverging trends amongindividual North African countries. Thelion’s share of the increase was accountedfor by the jump in FDI flows to Morocco,from $200 million in 2000 to almost $2.7billion in 2001. As already mentioned, thisincrease was due to the sale of a 35 percent stake in the local telecom operator,Maroc-Telecom, to France’s Vivendi Universalas part of that latter company’s M&A-based global expansion strategy over thepast few years (chapter IV). FDI flowsto Algeria and Sudan also increased, onaccount of FDI in the gas and petroleum

Figure III.11. Africa: FDI flows as apercentage of gross fixed capital

formation, top 10 countries, 1998-2000a

(Percentage)


a Ranked on the basis of the magnitude of 1998-2000FDI inflows as a percentage of gross fixed capitalformat ion.

Figure III.10. Africa: FDI inflows, top10 countries, 2000 and 2001a



a Ranked on the basis of the magnitude of 2001 FDIinf lows.

��


industries. Overall, the share of North Africain total FDI flows to Africa declined slightly,from 33 per cent to 31 per cent, as thelarge increase in absolute flows to NorthAfrica was more than offset by an evenlarger increase in FDI flows to sub-SaharanAfrica.

• Flows to sub-Saharan Africa surpassed,for the first time ever, the mark of $10billion, to reach $11.8 billion in 2001. Asmentioned earlier, this was largely the resultof the Anglo American-De Beers deal. Withoutthat transaction, sub-Saharan Africa asa whole would show little change, as theincrease in FDI flows to South Africa isalmost identical to the increase in FDIflows to the subregion as a whole. Therewere slightly fewer countries that experiencedan increase in FDI inflows (19) that yearthan those that incurred a decline (21).Behind South Africa, two oil-producingcountries – Angola and Nigeria – rankedsecond and third in terms of absolute inflows.A considerable gap exists between thesethree countries (all of which received flowsof more than $1 billion) and the othercountries of the subregion. The group ofthe next largest FDI recipients – all ofwhich received more than $200 million,led by Côte d’Ivoire with $257 million– also includes three LDCs: Mozambique,Uganda and the United Republic ofTanzania . These three countries haveexperienced steadily increasing inflows overthe past few years, with Mozambique andthe United Republic of Tanzania benefitingfrom their proximity to South Africa. Morethan two-thirds, or 69 per cent, of totalFDI flows to Africa in 2001 were accountedfor by sub-Saharan Africa.

• FDI inflows to the 34 African LDCsincreased by some $600 million (or 16per cent), to almost $4.2 billion in 2001,but only 19 of them registered an increasein 2001. For Africa as a whole, the growthin FDI inflows does not mean that allcountries experienced an increase. Onlyhalf of the 34 LDCs registered an increasein 2001. Among these, three (Angola,Mozambique and Sudan) together accountedfor the lion’s share of the total increasefor African LDCs. Angola, with $240 million(in petroleum-related FDI) registered byfar the largest jump, and remained, withmore than $1.1 billion, the largest FDIrecipient among African LDCs. Overall,

the share of African LDCs in total FDI flowsto the continent fell from more than 40 percent to just a quarter, largely due to theabove-mentioned developments in South Africa;excluding that particular transaction, grossomodo, FDI to LDCs was similar to thatof non-LDC African countries.

The performance of African countriesin attracting FDI, as measured by their rankingson UNCTAD’s Inward FDI PerformanceIndex, is mixed. Most of the 36 countriesfor which that Index could be calculatedrank low on it for the period 1998-2000.There is only one African country, Angola,that made it to the top 20 in that period.Angola’s ranking is largely due to its richendowment of offshore petroleum whichspurred massive FDI from 1996 onwards.On the other hand, i t is also remarkablethat only four of the bottom 20 rankingsare occupied by African countries – LibyanArab Jamahiriya, Niger, Rwanda and SierraLeone. This suggests that, although absoluteflows to many African countries remainminimal, in relative terms the countries performbetter than the absolute figures would suggest.Moreover, half of the African countr iesincluded in the rankings improved their positionon the list between 1988-1990 and 1998-2000. These countries are from all of thecontinent’s subregions and at various levelsof development, including more advancedcountries such as South Africa and LDCssuch as the Democrat ic Republic of theCongo and Uganda (figure III.12).

Turning to UNCTAD’s FDI PotentialIndex, only 7 of the 20 countries with animproved FDI Performance Index rankingsaw a parallel increase in their potential:Ethiopia, Mali, Mozambique, Namibia, Sudan,Tunisia and Uganda. All of them have hadrelatively high GDP growth rates for theperiod 1990-2000, the minimum being 3.8per cent . This suggests tha t improvedeconomic performance attracted more FDI.Also, the share of LDCs in the group ofAfr ican countr ies wi th improved FDIPerformance Index values is remarkable:they account for 11 of the 20 countries.Among them are a number of countries thatare well-known for their sustained effortstowards greater political and economic stability,such as Mal i , Mozambique, the Uni tedRepublic of Tanzania and Uganda. Others,such as Angola, Cameroon or Congo, mighthave improved because of renewed possibilities

��


for exploi t ing thei r na tura l resourceendowments. Moreover, the fact that a goodhalf of the African countries on the l istimproved thei r pos i t ion on the FDIPerformance Index squares well with thefact that, since the beginning of the 1990s,FDI flows into Africa have been increasinggradually after a long period of stagnation.

Ranking by the Inward FDI PotentialIndex does not feature any African countryamong the top 20 countries, while 11of the bottom 20 are from the continent.This is not surprising, given that mostAfrican countries have mediocre economicgrowth rates, insufficient infrastructureand a low level of education: all factorscritical for obtaining high values on thatIndex. In general, African countries seemto perform better on the PerformanceIndex than on the Potential Index, sothat a fairly large number of them (9)fall into the group of above-potentialeconomies and only one (Egypt) into thatof below-potential economies, althoughthe majority (22) rank low on both indices(table II .3).

Most of the FDI flows to Africacome from only a small number of homecountries (table III.2), led by the UnitedStates, France and the United Kingdom.During the period 1996-2000, the UnitedStates alone accounted for more than37 per cent of total flows from developedcountries, France for 18 per cent and

the United Kingdom for 13 per cent. Germanyand Portugal followed at some distance.Japan has been a relatively small investor(Fujita, 2001a).

Overall , the trend towards a moreeven distribution of the origins of FDI flowsto Africa that seemed to emerge during themid-1990s (UNCTAD, 1999a) came to ahalt during the period 1996-2000. It shouldbe noted, however, that for all but four of

Table III.2. Africa: accumulated FDI flowsfrom major developed countries,a 1981-2000

(Millions of dollars)

Country 1981-1985 1986-1990 1991-1995 1996-2000

Australia -13 -149 -33 -99Austria 72 33 7 221Belgium 99 40 -47 242Canada 27 37 146 626Denmark 19 24 1 340Finland - 38 3 8France 1 239 1 001 2 066 4 362Germany 504 332 402 2 475Italy 455 217 213 678Japan 350 1 143 201 340Netherlands 94 153 297 816New Zealand - - - -Norway 99 12 145 -148Portugal - - 96 1 560Spain - - 50 476Sweden 177 48 4 197Switzerland -6 73 452 69United Kingdom 882 2 193 2 376 3 269United States 1 866 404 278 9 249

Source: UNCTAD, based on OECD, unpublished data.a The countries listed in the table are the members of the OECD’s

Development Assistance (DAC) Committee.

Figure III.12. The UNCTAD Inward FDI Performance Index and Inward FDIPotential Index for selected countries in Africa, 1988-1990 and 1998-2000


��


19 major developed countries, accumulatedFDI flows to Africa were higher in the secondhalf of the 1990s than in the first half. Onlytwo home countries, Australia and Norway,recorded net divestment over the five-yearperiod, 1996-2000.

The bouncing back of the UnitedStates to the top position among sourcesfor FDI in Afr ica is , perhaps , the mostremarkable development during 1996-2000.Its FDI flows increased in both North andsub-Saharan Africa. While flows to NorthAfr ica recovered f rom two per iods ofsubstantial divestments (-$581 million in theperiod 1986-1990, and -$454 million in 1991-1996) to more than $3.8 billion in 1996-2000, flows to sub-Saharan Africa recoveredfrom a longer period of relatively low levels($986 million for the period 1986-1990 andonly $106 million in 1991-1996) to almost$5 billion in accumulated flows during 1996-2000.25 TNCs from the United States werevery active in South Africa, often buyingback the affiliates they had sold when pullingout of the country during the apartheid era.At the same time, FDI from the United Statesalso went to other sub-Saharan countries.For example, United States TNCs were atthe forefront of exploring newly-found oiland natural gas reserves in Angola and alongthe western coastline of the continent.

Of the developed countries, Portugalbecame the second largest investor in NorthAfrica after the United States during theperiod 1996-2000, while France, traditionallythe most important source of FDI for thatsubregion, fell back to third place, despitean increase in flows to $605 million comparedto $492 million in the period 1991-1995.However, Por tugal ’s r i se i s due to oneexceptional year (2000) when its outflowsamounted to more than $1 billion. Geographicproximity might play a role in Spain beingthe fourth largest investor in North Africa,while it ranks only tenth for flows to sub-Saharan Africa. However, FDI flows fromSpain to North Africa grew more slowly

than they did to southern Africa. Spain ranksjust after the United Kingdom, from whichflows increased significantly in 1996-2000($506 million), compared to previous periods,when flows were even negative at times.Significant investments from the UnitedKingdom in Egypt, including in the retailsector, were among the main drivers behindthis development.

FDI flows from almost all EU countries– including France, Germany, the Netherlands,Portugal , Spain, Sweden and the UnitedKingdom – to sub-Saharan Africa increasedfrom $1 billion per annum in 1991-1995,to $2 billion per annum in 1996-2000. Flowsfrom the same countries to North Africashowed a similar picture. The combinedflows from the EU countries to North Africarose from $814 million to $2.6 billion betweenthe two periods. This trend may have beeninfluenced by the fact that, during the 1990s,North African countries concluded agreementswith the EU on the creation of a free tradearea. A striking difference between NorthAfrica and sub-Saharan Africa is that countriessuch as Germany and the Netherlands –major investors in southern Africa – accountedfor relatively small amounts of FDI in NorthAfrica during 1996-2000. Overall, however,the home-country distribution of FDI flowsto both North and sub-Saharan Africa wassomewhat similar during 1996-2000.

Data for FDI flows to Africa frommajor home countries suggest that the primarysector has remained the most important overthe past decade, with a share of 55 percent in the accumulated FDI to Africa forthe period 1996-2000 (table III.3).26 Oiland petroleum are largely responsible forthis performance. Services industries havegained in importance in recent years, althoughtheir share (25 per cent) in total FDI flowsis much lower than that of the primary sector.In the past two years, however, FDI flowsinto services were higher or as high as thoseinto the primary sector, especially on accountof banking and finance, transportation and

Table III.3. FDI outflows from major investorsa to Africa, by sector, 1996-2000(Millions of dollars and per cent)

Total Distribution Sector 1996 1997 1998 1999 2000 1996-2000 share

Primary sector 3 133 4 369 5 056 2 726 2 029 17 314 54.6Secondary sector 1 085 1 114 1 233 1 812 1 297 6 541 20.6Tertiary sector 624 2 155 52 3 108 1 931 7 871 24.8 Total 4 842 7 639 6 341 7 647 5 257 31 726 100.0

Source: UNCTAD, based on data obtained from various central banks and ministries.a France, Germany, Japan, the Netherlands, Switzerland, the United Kingdom and the United States only.

��


trading. The first two industries benefited,at least partially, from privatization processesas well as from a few cross-border M&Asin a small number of African countries.Transportation FDI includes flows into Liberiain connection with flag-of-convenience shipping,which, statistically, is counted as FDI but,de facto , has l i t t le do wi th i t . As formanufacturing, it was the least importantsector for FDI over the past decade. Foodproducts as well as steel and metal productsaccounted for the largest share of FDI flows

into this sector. FDI flows into electricaland electronic equipment, textiles or motorvehicles – all industries that play a prominentrole in attracting FDI in other developingregions – were insignificant. It should benoted that even if the amounts of FDI inflowsinto manufacturing and service industrieswere often limited, they nonetheless playedan important role in some countries in thedevelopment of local industries, as in thecase, for example, of Botswana (box III.3).

Botswana stands out as the sole graduatefrom the category of LDCs, becoming a middle-income country within one generation. Its progresswas spearheaded by the discovery of rich depositsof diamonds in 1967. Unlike other developingcountries, Botswana has been open to FDI sinceit gained independence in 1966. It decided to exploitdiamonds in a joint venture with foreign investorsand avoided nationalizations. FDI, and theGovernment’s handling of the fiscal, social andeconomic pressures of transformation, were keyfactors in Botswana’s economic success.Somewhat unusually for a developing country,it has managed to create a long-termmacroeconomic environment conducive to a soundinvestment climate.

Botswana’s early opening to FDI wasrewarded with large inflows in the 1970s. A recordannual inflow of $127 million was registered in1979. Between 1975 and 2000, flows remainedquite stable, with five-year annual averageshovering between $50 million (during 1981-1985)and $70 million (in 1986-1990 and 1996-2000), exceptfor the 1991-1995 period when they were negative.Very large negative flows – of $287 million –occurred in 1993 because of losses and subsequentchanges in the ownership of a copper-nickel mine.Until the 1990s, Botswana received adisproportionately larger amount of FDI than theother 13 members of the Southern AfricanDevelopment Community (SADC) regional groupingto which it belongs, or than the LDCs as a group(to which it belonged at independence). Duringthe 1990s Botswana lost its position vis-à-visthese countries as they opened up to FDI, amongothers, through privatization, which Botswanahas not yet implemented.

On an annual basis, FDI inflows were lumpy,with peaks determined by investments in threediamond mines and copper and nickel mines. Morerecently, however, with no shortage of localsavings, liberalization of the capital account anda further improvement of Botswana’screditworthiness, the link between large FDIprojects and FDI inflows has become weaker, as

Box III.3. Botswana: the role of FDI in economic restructuring

investors have a choice of financing optionstypically unavailable in many developing countries.A major $400 million expansion of the Orapadiamond mine during 1998-2000 did not preventa fall in FDI inflows from $96 million in 1998 to$30 million in 2000.

Foreign firms came to play a significant rolein many industries early in Botswana’s developmenteffort. In partnership with the Government, theydeveloped the mining sector. FDI also contributedto the development of the manufacturing sector,although this is small (4-5 per cent of GDP). Inthe services sector, commercial banks have alwaysbeen foreign-controlled. Other service industrieswith a strong foreign presence include insuranceand business services. Foreign firms are prominentin road transport, wholesale trading andconstruction. In tourism, of a total of 331enterprises licensed and operating between March1997 and February 2001, more than two-thirdswere foreign, half of them being joint ventureswith local partners.a By contrast, agriculture,beef-processing and infrastructure services havealways been the domain of local, mainly State-owned firms. Such firms are also visible in financialservices. On the other hand, the local privatesector has always been rather weak, especiallyin manufacturing. This poses one of the mostformidable challenges to Botswana’s development,which has so far been driven mainly by large State-owned and foreign firms.

In terms of qualitative impact, early inflowsof FDI strongly boosted export receipts andgovernment revenues which were invested wiselyand created the foundation for long-term growth.Concentrated in mining, FDI has had little directimpact on employment. Linkages with the localeconomy appear weak, one of the reasons beinga dearth of local businesses. More importantly,FDI has provided the resources critical for thefirst phase of the diversification of Botswana’seconomy, from purely agriculture to include mining.It has also contributed to the second phase ofdiversification, “beyond diamonds”, but thisremains an unfinished business and a continuingchallenge to the Government.

Source : UNCTAD, for thcoming a .a Information from the Department of Tourism of Botswana.

��


Obviously, the industrial pattern ofFDI flows differs among individual homecountries. In the case of the United States,for example, oil and petroleum have accountedfor more than 60 per cent of all FDI outflowsto Africa since 1996. In the case of theNetherlands, most FDI went into the primarysector, while most FDI from other homecountries such as Germany, Japan and theUnited Kingdom, went into services. TNCsfrom the United Kingdom were particularlyactive in banking and finance as well asin trading, and German firms concentratedon construction and real estate. JapaneseFDI went mainly into transportation, mostof which had to do with flag-of-convenienceshipping.

The di f ference in the indust r ia lcomposition of FDI flows into Africa is largelyexplained by the different industrial structuresof the home countries. The United States,for example, hosts a large number of oiland petroleum companies, while the largebanking-related outflows from the UnitedKingdom to Africa are due to that country’sstrong financial industry. 27

Future FDI is also likely to focus ona few countries. Surveys by UNCTAD/AFII/Andersen (UNCTAD, 2001a) and MIGA (MIGA,2002) suggest that South Africa will remainthe main destination, followed quite far behindby Egypt.28 The former survey also revealedthat TNCs prefer to tap African markets byexporting rather than investing. Only about20 per cent of the respondents saw greenfieldFDI as an option, and only 12 per centconsidered acquiring an African firm. Bothmodes of FDI accounted for considerably highershares in other developing regions. Recentinitiatives to grant African manufactures betteraccess to developed-country markets maystrengthen manufacturing FDI. The AfricanGrowth and Opportunity Act (AGOA) initiativeby the United States, and the European Union’s“Everything-but-Arms” programme are expectedto help in this respect (see Part Three).

AGOA has also had an impact on intra-African FDI and trade. Mauritian garmentfirms are buying more South African textiles,and South African firms are investing inneighbouring countries. For example, theTransvaal Clothing Corporation (TRALCO)has announced plans to construct a plant inSwaziland (box III.4).29

According to the 2001 and 2002 Reportsof the President of the United States on theImplementation of AGOA (USTR, 2001b, 2002),the adoption of this Act in May 2000 has startedto generate new trade and investment responsesin a number of beneficiary countries. Reportedly,these have included the following (although itis difficult to ascertain whether they would havetaken place in any event):

• In Cape Verde, a fish-processing company wasacquired by a United States company, and twonew investments in the garment industry wereannounced by Portuguese companies.

• In Ghana, a United States company is investingin a tuna-processing plant.

• In Kenya, the Government has so far announcednew investments, and expansions of existinginvestments, in apparel production, amountingto $13 million and providing over 20,000 newjobs .

• In Malawi, AGOA has led to FDI in two garmentfactories (by a European company and aTaiwanese company) and the creation of atleast 4,350 jobs. Total employment couldincrease eventually by 10,000, for a total of20,000 workers.

• In Mauritius, FDI worth $78 million has alreadytaken place. In the near future, there areprospects of Asian and European companiesbuilding cotton-yarn spinning mills. In addition,there are reports of substantial new orders frommajor United States retailers.

• In Senegal, a leading Senegalese apparel andtextile company plans to enter into partnershipwith a United States textile manufacturer anda Malaysian firm to export to the United States,with the potential creation of 1,000 jobs.

• In South Africa, the establishment of a new$100 million clothing facility expected to employ13,000 workers has been announced by aMalaysian company. South African companiesare also receiving new orders from a varietyof United States clothing companies and retailers.

• In Namibia, a new investment is planned inthe apparel and textile sector of more than $250million, leading to 8,000 new jobs over the nextfive years and 18,000 jobs over the next 10years .

• In the United Republic of Tanzania, reportsindicate the expansion of a textile mill inpartnership with a United States firm involving1,000 jobs.

Box III.4. New trade and investment initiatives in sub-Saharan Africa in response to AGOA

Source : USTR, 2001b, pp. 114-115 and USTR, 2002, pp. 30-31.

��


While these schemes to provideprivileged access to United States and EUmarkets for African exports may stimulateFDI, a note of caution is in order. The effectsof such access may be temporary and confinedto activities like apparel, in which thereare significant constraints on exports byother developing countries. FDI may flowto African countries to exploit their temporaryprivileges, despite high costs, and withdrawonce the privileges end (or when the endingof the Multi-Fibre Arrangement makes themless important). It is thus vital to use theduration of the privileges to build up localskills, linkages and infrastructure in Africaand make the facilities fully competitive(for detai ls , see Part Three).

Total outflows from the region stoodat -$2.5 billion in 2001, compared with $1.4billion in 2000. For the first time ever inthe past 30 years, FDI flows from Africawere negative. This means that, on a netbasis, Africans sold more of their foreignaffiliates and repatriated the capital, thanthey invested abroad. However, the FDIoutflows are – as the inflow figures – distortedby the Anglo American-De Beers transaction(figure III.13).30 Excluding that transaction,FDI outflows from Africa would have beenreduced only by some $650-$800 million in2001. That decline in turn was largely dueto a reduction in FDI outflows from Liberia(more than $500 million in 2001). As almostall FDI into Liberia is related to the registering

of ships under flag-of-convenience, it haslittle significance for the overall FDI trendsin Africa. For all other African countries,FDI flows were insignificant, not surpassingthe $100 million mark even for such a largecountry as Nigeria.

2. Asia and the Pacific

FDI flows to the developing economiesof Asia and the Pacific declined from $134billion in 2000 to $102 billion in 2001. Muchof the decline was due to an over 60 percent drop in flows to Hong Kong, China,which had recorded a mass ive inf low($62 billion) in 2000 (WIR01 , p. 25). Ifthis is discounted, inflows in 2001 were atthe peak reached in the previous decade.While they remained stagnant in North-Eastand South-East Asia , they increasedsignificantly in South and Central Asia (by32 per cent and 88 per cent, respectively)(figure III.14). The share of developingeconomies of the Asia-Pacific region in globalinflows increased from 9 per cent in 2000to nearly 14 per cent in 2001. Accordingto the UNCTAD Inward FDI indices, duringthe past decade, while FDI potential improvedin many economies (e.g. Hong Kong (China),Republic of Korea and Taiwan Provinceof China) FDI performance decl ined inMalaysia and Singapore (figure III.15 andtable II .1).

Within these overal l t rends,economies performed unevenly in 2001.China regained its position – lost toHong Kong, China in 2000 – as thelargest recipient in both the regionand the developing world . India ,Kazakhstan, Singapore and Turkey wereleading recipients in their respectivesubregions (figure III.16).

FDI inf lows to China – thelargest recipient among developingcountries for most of the past decade– regained their momentum after threeyears of stagnation, to reach $47 billionin 2001. The momentum continued inthe first half of 2002, when inflowsincreased by 19 per cent over the sameperiod of 2001. The upward trend inFDI is likely to be sustained in thecoming years, particularly in the lightof the country’s accession to the WTO(see WIR00 , box III.2). Aside frominvestment by new entrants, reinvested

Figure III.13. Africa: FDI outflows,top 10 countries, 2000 and 2001a



a Ranked on the basis of the magnitude of 2001 FDI outflows.

�


earnings of foreign affiliates in China havebecome an important source of FDI, accountingfor about one-third of the total inflows during2000-2001. FDI continues to play a prominentrole in China’s economy. For example, foreignaffiliates now account for 23 per cent of thetotal industrial value added, 18 per cent oftax revenues and 48 per cent of total exports(China, MOFTEC, 2001a).

The FDI boom inNorth-East Asia subsided, withinflows falling from $76 billionin 2000 to $30 billion in 2001.The growth of FDI to th issubregion in 2000 was largelydue to a doubling of inflowsto Hong Kong, China, mostlyon account of a single largeacquis i t ion intelecommunications, valued at$24 bi l l ion (WIR01 , p .25) .Nevertheless, the role of theHong Kong, China, economyas a business hub for the regioncontinued to be strengthened.By 2001, 3 ,237 TNCs hadestablished regional officesthere (including 944 regionalheadquarters), an 8 per centincrease over the previous year( table I I I .4) . FDI in theRepublic of Korea fell by two-thirds in 2001, to $3 billion,as the wave of post-financial-cr is is M&As ta i led off . 31

Inflows to Taiwan Provinceof China in 2001 amounted

to $4 billion, thus remaining at historicallyhigh levels. Its accession to the WTO hasincreased its attractiveness for internationalinvestment, particularly in the services sector(box III.5). The new regulations governingM&As passed in January 2002 are anotherfactor that will encourage TNC participationin the restructuring of the economy.32

Figure III.14. FDI inflows and their share in grossfixed capital formation in developing Asia and the

Pacific, 1990-2001 (Billions of dollars and percentage)


Note: North East Asia includes: Hong Kong (China); Korea, DemocraticPeople's Republic of; Korea, Republic; Macau (China); Mongolia;and Taiwan Province of China.South East Asia includes: Brunei Darussalam; Cambodia; Indonesia;Lao People's Democratic Republic; Malaysia; Myanmar; Philippines;Singapore; Thailand; and Viet Nam.South Asia includes: Afghanistan; Bangladesh; Bhutan; India;Maldives; Nepal; Pakistan; and Sri Lanka.

Figure III.15. The UNCTAD Inward FDI Performance Index and Inward FDIPotential Index for selected countries in Asia, 1988-1990 and 1998-2000


�


Table III.4. Regional headquarters established by foreign firmsin Hong Kong, China, 2001a

(Number)

By industry

By regional By parentBy home economyb headquarters firms By area of responsibilityb

United States 221 Manufacturing: 66 133 China 782Japan 160 Electronics 63 112 Taiwan Province of China 486United Kingdom 90 Biotechnology 3 21 Singapore 392China 70 Services: 750 700 Republic of Korea 356Germany 56 Construction, architectural,

engineering and surveying 44 64 Tha i land 329Netherlands 48 Wholesale, retail and

trade-related services 375 255 Malaysia 312France 43 Tourism, entertainment,

restaurants and hotels 18 22 Phi l ipp ines 311Switzerland 34 Transportation and

related services 61 59 Japan 298Singapore 25 Telecommunicat ions 21 20 Indonesia 276Taiwan Province of China 22 Financial services 94 136 Australia 220Others 180 Business and professional

services 81 67 India 216Information technology 40 53 Other countries/territories 135Media and mult i-media 16 24 in the region

Others 285 354Tota l above 949 c 1 101 d 1 187 e 4 113 f

Source: Hong Kong Census and Statistics Department, 2002.a As at 1 June.b Ranked in descending order.c The total is higher than the actual number (944) due to the inclusion of joint ventures undertaken by two or more

foreign investors.d The total is higher than the actual number (944) due to the fact that some regional headquarters are engaged

in more than one line of business.e The total is higher than the actual number (944) due to the fact that some parent f irms are engaged in more

than one line of business.f The total is higher than the actual number (944) due to the fact that some regional headquarters are responsible

for more than one area.

Flows to South-East As iastagnated at $13 billion. Part of thereason was continued divestment ($3billion in 2001) in Indonesia, wheredivestments have exceeded inflows sincelate 1998. In Malaysia, FDI remainedstagnant; in response, the Governmentintroduced a number of incent ives ,inc luding the extens ion of thereinvestment allowance period from 5to 15 years, and tax measures to benefitthe machinery and equipment industryand manufacturing-related services.Inflows to the Philippines rose from$1.2 billion in 2000 to $1.8 billion in2001. FDI in Singapore also increasedby 59 per cent to $9 billion, the firsttime since 1998, but still below thepeak of $11 billion reached in 1997.Faced wi th the eros ion of i t scompetitiveness in electronics vis-à-vis o ther countr ies in the region,Singapore has designated biomedicalsc iences as the next p i l la r of i t smanufacturing growth, and has been

Figure III.16. Developing Asia and the Pacific:FDI inflows, top 10 economies, 2000 and 2001a



a Ranked on the basis of the magnitude of 2001 FDI inflows.

��


Taiwan Province of China joined the WTO(as the Separate Customs Territory of Taiwan,Penhu, Kinmen and Matsu) in January 2002.Fulfilment of i ts WTO obligations involvessubstantial trade and investment liberalization,which will have an impact on its inward andoutward FDI.

Accession to the WTO has made theeconomy of the Province more attractive to foreigninvestors. In services, in which FDI was largelyrestricted, Taiwan Province of China has committedto liberalizing a number of industries, includingbusiness services, communications, distribution,education, financial services, health and socialservices, and maritime and air transport services.The removal of foreign equity limitations willnot only attract new investors, but also enableforeign joint-venture partners to increase theirequity shares in existing affiliates. Indeed, afterthe preliminary liberalization measures taken bythe Province in the process of accession to theWTO, FDI flows to the economy during 2000-2001 doubled from their annual average of the1990s (annex table B.1), mainly boosted by flowsto the services sector. The share of the servicessector in total inflows increased from an averageof 37 per cent during the 1990s to 58 per centin 2001.

Unlike services, most manufacturingindustries in Taiwan Province of China had beenlargely open to foreign investors and had alreadyattracted a significant amount of FDI. Accessionto the WTO may not, therefore, immediately havesubstantial FDI-generating effects. Indeed, thereduction of import restrictions and the eliminationof trade-related investment measures in industriessuch as automobiles may reduce flows by eroding

the incentive for “barrier-hopping” FDI.a

Nevertheless, over time, freer access to the importof inputs could help improve the cost-qualityconditions of manufacturing, and increase theattractiveness of the economy as a site forefficiency-oriented manufacturing FDI.

Accession-related liberalization of tradeand investment will probably also accelerateoutward investment from the economy. As thedomestic market becomes more open, increasedcompetitive pressures in a number of previouslyprotected industries will necessitate restructuringand induce more domestic firms to invest abroad.In fact, in response, partly to the long lobbyingof the business community, and partly to theimperatives of the post-accession tradingenvironment, the authorities in Taiwan Provinceof China have already lifted restrictions on directinvestment into the mainland. The $50 millionceiling on individual projects has been removedand approval for investments of less than $20million has become automatic. Effective January2002, the authorit ies also l ifted the ban oninvestments in notebook computers, third-generation mobile phones and consumerelectronics products in the mainland.

In sum, accession to the WTO will makethe island economy more attractive to FDI. Theservices sector will replace manufacturing as theengine of growth for inward FDI. In themanufacturing sector, FDI will play a moreprominent role in the process of restructuringand consolidation in response to a new and morecompetitive landscape. As the FDIregime willbe gradually liberalized, both inflows and outflowsare likely to reach new and higher levels.

Box III.5. The accession to the WTO of Taiwan Province of China: implications for FDI

Source: UNCTAD.a In the automobile industry, there will be a significant reduction of import tariffs, a phasing out of quotas, as well

as the elimination of local-content requirements and tax incentives for domestically-produced automobileengines, chassis and bodies. This may reduce the incentive for some foreign investors to invest directly indomestic subcontractors or may induce them to bring in foreign suppliers.

improving infrastructure and targeting high-potential companies in that industry throughvarious investment funds, including venturecapital. Leading companies in biotechnologyfrom both Europe and Japan have signedup to relocate to Singapore (EIU, 2002a).FDI in Thailand increased by $1 bil l ionto $3.8 billion, but remained lower than itspeak level in 1998. TNCs cont inued toconsolidate their regional auto-manufacturingbases in Thailand. Auto and auto componentmanufacturers such as BMW, Honda, Toyota,Land Rover and Ishikawaj ima-Har imaannounced expansion or entry there. Viet

Nam is entering a new era as host to FDI,strengthened by its bilateral trade agreementwith the United States and the prospectsof its accession to the WTO. Although FDIcommitments in the country rose by a third,to $3 billion in 2001, FDI flows on a balance-of-payments basis remained at the samelevel as in 2000 ($1.3 billion).

Inflows into South Asia reached $4billion, a 32 per cent increase over the previousyear. Of this, $3.4 bill ion went to India(a 47 per cent increase). India, by far thelargest recipient in the region, has been

��


taking steps to liberalize its FDI regimefurther. Inflows into other economies in thesubregion stagnated or declined, apparentlydue to perceived instability in the investmentenvironment, particularly after the September11 event.

West Asia is estimated to have received$4.1 billion in FDI in 2001, considerablyhigher than in the previous year. Turkeyhad the largest inflows in the region (roughly$3 billion). FDI into Saudi Arabia alsoincreased, helped by the establishment ofthe Saudi Arabian General Investment Authority(SAGIA) and the introduction of tax incentivesand a law allowing wholly-owned foreignaffiliates. The subregion as a whole (thepetroleum sector apar t ) cont inues to bemarginal as a recipient of FDI, though manycountries in the region have liberalized theirregimes. It has largely missed out on linkingup to the international production systemsthat have driven export growth in East and

South-East Asia.33 There are many countriesin the subregion with the cheap labour thatcan attract export-oriented operations inlow- to medium-technology goods (Sadikand Bolbol, 2001), a strategy pursued thusfar only by Turkey. Moreover, consideringthe market s ize of the region – a lmostequivalent to that of China as measuredby GDP – there is much greater potentialfor market-seeking FDI than has been realized(box III .6).

FDI in Central Asia rose by 88 percent in 2001, to $3.6 billion, driven by thedoubling of inflows to Kazakhstan ($2.8billion). Resource-based activities – particularlyin copper and zinc, as well as in oil andgas extraction – absorbed the largest shareof inflows (77 per cent). The Pacific regionremains marginal in terms of FDI inflows,with $200 million in FDI in 2001. Politicalinstability and poor infrastructure compoundthe structural constraints of location and

Total FDI in West Asia accounted for lessthan 0.6 per cent of world flows in 2001, one-tenth of its share in world GDP.

The distribution of FDI is uneven in theregion, partly reflecting, political instability andrisk (Fujita, 2001b). Overall, however, judgingfrom the ratios of FDI to GDP and domesticinvestment, the role of FDI has declined in WestAsian economies over the past 15 years. Turkey,

which had the largest inflows in the region(roughly $3 billion) in 2001 (annex table B.1),is an exception. However, even in Turkey, inflowsare not commensurate with the country’s potential(tables II.1 and II.3). Among the eight countriesin this region for which the UNCTAD InwardFDI Performance Index and Inward FDI PotentialIndex have been calculated, only Jordan improvedits position based on both indices over the pastdecade (box figure III.6.1).

Box III.6. FDI potential in West Asia

Source : UNCTAD.

Box figure III.6.1. The UNCTAD Inward FDI Performance Index and Inward FDI PotentialIndex for selected countries in West Asia, 1988-1990 and 1998-2000

Source: UNCTAD, based on table II .1 and annex table B.1.

�


size in the Pacific island countries. However,in both these subregions, FDI accountedfor a significant share of gross fixed capitalformation (23 per cent during 1998-2000),far higher than in other developing anddeveloped regions (figure III.17 and annextable B.5).

Overall, prospects for FDIin the Asia-Pacific region remainbright. Surveys suggest that Asiawill continue to be an importantlocation for the expansion of activitieswithin TNCs’ international productionsys tems. The UNCTAD/AFII /Andersen survey reported that overhalf the respondents saw “improved”or “significantly improved” prospectsfor FDI in the region in the nextthree to f ive years (UNCTAD,2001a). China topped the list in Asia,followed by Indonesia and Thailand.The recent MIGA survey also ranksIndia, Malaysia and Singapore asfavoured destinations. Greenfieldinvestment will become, once again,af ter the M&A boom during thefinancial crisis, the preferred optionby far for TNC entry into the region(MIGA, 2002).

Outward FDI from developing Asia,at about $32 billion in 2001, hit its lowestlevel since 1998 (figure III.18), mainly becauseof a massive fall in outflows from the largesttraditional investor, Hong Kong, China. Theterritory’s outflows in 2001 were only $9 billion,compared to $59 billion in 2000. Singapore

overtook Hong Kong, China asthe region’s s ingle larges toutward investor (figure III.19).Outflows from Singapore doubledin 2001. This increase wasboosted by two major cross-border M&A deals : theacquisition of Cable & WirelessOptus of Australia by SingTelof Singapore ($9 billion) andthe acquisition of the Dao HengBank Group of Hong Kong,China, by the DBS Group ofSingapore ($6 billion) (annex tableA.I.2). Indian TNCs acceleratedthei r outward inves tment ,particularly the asset-seekingkind, via cross-border M&As.The value of cross-borderacquis i t ions by Indian f i rmsdoubled, to over $2 billion in2001 (annex table B.8). Indeed,one of the distinctive featuresof outward FDI from developingAsia is the shift in the modeof entry over the past two years,from greenfield investment to

Figure III.17. Developing Asia and the Pacific:FDI flows as a percentage of gross fixed capital

formation, top 10 economies, 1998-2000a

(Percentage)

Source: UNCTAD, FDI/TNC database.a Ranked on the basis of the magnitude of 1998-2000 FDI inflows

as a percentage of gross fixed capital formation.

Figure III.18. Developing Asia and the Pacific: FDIoutflows and their share in the world, 1990-2001

(Billions of dollars and percentage)


�


Figure III.19. Developing Asia and thePacific: FDI outflows,

top 10 economies, 2000-2001a



a Ranked on the basis of the magnitude of 2001 FDIoutf lows.

Table III.5. The 12 largest TNCs from China, ranked by foreign assets, 2001(Millions of dollars and number of employees)

Ranking by Assets Sales Employment TNIa

Foreign (Perassets TNIa Corporation Industry Foreign Total Foreign Total Foreign Total cent)

1 3 China Ocean Shipping(Group) Company Transportation 9 382 16 926 2 149 6 757 4 124 74 669 30.9

2 4 China National OffshoreOil Corporation Petroleum 4 814 8 635 976 3 669 13 24 406 27.5

3 5 China State ConstructionEngineering Corporation Construction 3 739 8 099 1 818 5 790 6 833 236 464 26.8

4 1 China National Cereal, Oils andFoodstuff Imp and Exp Corp. Trade 3 707 5 014 6 446 13 004 359 25 000 41.6

5 12 China National PetroleumCorporation Petroleum 3 350 83 254 1 600 41 089 4 400 1 167 129 2.8

6 2 China National Chemicals Impand Exp Corp. Trade 2 788 4 928 9 148 16 011 350 7 950 39.4

7 9 SHOUGANG Group Steel and iron 969 6 675 467 4 401 2 086 179 997 8.88 6 China National Metals and

Minerals Imp and Exp Corp. Trade 729 2 797 998 4 277 570 7 145 9.19 7 China Harbor Engineering

Company (Group) Construction 520 3 271 6 579 17 826 812 70 160 18.010 11 Shanghai Baosteel Group

Corporation Steel and iron 383 19 389 1 211 8 643 50 113 896 5.311 8 Haier Group Corporation Refrigerator production 328 3 188 976 7 260 803 31 281 8.812 10 ZTE Corporation Telecommunication

equipment 17 1 205 260 1 685 120 12 961 5.9


a TNI is the abbreviation for “transnationality index”. The transnationality index is calculated as the average ofthe following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment tototal employment.

M&As. The latter reached $25 billion in2001, about 80 per cent of the outflowsfrom the region.34

FDI from Taiwan Province of Chinafell by 18 per cent in 2001 . Much of itsinvestment went to China, as its industrieshave steadily relocated there. The nature

of activities transferred to China has changedover time, from labour-intensive ones in the1980s to capital-intensive and high-technology(electronics and computer components) onesin the late 1990s. The trend is l ikely tocontinue, given the easing of restrictionson FDI from Taiwan Province of China intoChina and the WTO access ion of botheconomies. Outward FDI from the Republicof Korea declined by almost 50 per cent,to about $2.6 billion in 2001. Korean TNCscontinued to sell off non-core activities abroad,leading to a reduction in their foreign assetsby almost a third between the late 1990sand 2001. Over half of Korean outwardFDI stock remains in the manufacturing sector(mainly in electrical and electronics); two-thirds of it is located in Asia and a quarterin North America.35

Firms from China have been expandingabroad rapidly. The top 12 Chinese TNCs,mainly State-owned enterprises, now controlover $30 billion in foreign assets with over20,000 foreign employees and $33 billionin foreign sales in 2001 (table III.5). Non-State-owned enterprises are now followingthe State-owned ones abroad, although mostof them are small and medium-sized TNCs.Non-State-owned firms now have investmentsin over 40 countries, not only in Asia but

�


also in other parts of the world. Amongthe leading non-State-owned TNCs are theHuawei Technologies Corporation (40 foreignaffiliates), the Wanxiang Group (9 foreignaffiliates) and Zheng Tai Group (7 affiliates)(Zhan and Ge, 2002).

3. Latin America and theCaribbean36

FDI into Lat in America and theCaribbean declined for the second year ina row. The region received $85 billion in2001, 11 per cent less than in 2000, whichin turn was 13 per cent lower thanin 1999 (figure III.20). FDI flowsto the te lecom indust ry droppedsubstantially, as did flows to twoof the largest countries (Argentinaand Brazil). (See box III.7 on theimpact of the Argentine crisis onFDI flows.)

However, Mexico doubled itsinflows to $25 billion, overtakingBrazil to become the largest FDIrecipient in the region for the firsttime since 1995 (figure III.21 andannex table B.1). The increase wasdriven by the acquisition of Banamex(Banacci) by Citigroup for $12.5 billion– the second largest acquisition inthe region ever and the third largestwor ldwide in 2001 (annex tableA.I .2) .37 FDI in Chile also roseby 50 per cent, to reach $5.5 billion.

According to UNCTAD’s InwardFDI Performance Index, a majority ofthe economies in Latin America andthe Caribbean are at tract ing sharesof global inflows that exceed their sharesin global GDP. Of the 24 economiesin the region for which the Index hasbeen calculated (chapter II), 16 hadvalues of one or higher. Accordingto the UNCTAD Inward FDI PotentialIndex, it is the smaller, middle-incomeeconomies tha t have the grea tes tpotential in the region, while those withthe lowest GDP per capita have theleast. Partly because the FDI PotentialIndex captures mainly structural factorsother than the size of an economy,large economies like Mexico and Brazilrank relatively low on the FDI PotentialIndex, despite being considered countries

with great potential by TNCs interviewedfor a recent survey (see below). Some smallCaribbean and Central American economiesand some countries with important naturalresources rank relatively high on performance,despite poor potential. As a percentage oftotal investment (measured by gross fixedcapital formation), countries with importantnatural resources received the largest flowsof FDI during 1998-2000, with Bolivia andTrinidad and Tobago heading the list (figureIII.22). It is worth noting that Bolivia’s rankingon the FDI Performance Index has improvedconsiderably over the past decade (figureIII .23).

Figure III.21. Latin America and the Caribbean:FDI inflows, top 10 economies, 2000 and 2001a



a Ranked on the basis of the magnitude of 2001 FDI inflows.

Figure III.20. FDI inflows and their share ingross fixed capital formation in Latin America

and the Caribbean, 1990-2001(Billions of dollars and percentage)


�


FDI played an important role in Argentina’seconomy in the 1990s. The ratio of FDI to grossfixed capital formation rose, and its level inthe period 1998-2000 was comparable to thatof Brazil and Mexico (annex table B.5). Flowsrose steadily, peaking in 1999, partly on accountof the acquisition of the oil company YPF byRepsol of Spain (box figure III.7.1). The shareof foreign affiliates in the sales of the 1,000largest firms in Argentina increased from 34per cent in 1990 to 68 per cent in 2000.a

In 1999, the country began to slide intorecession and suffer from high levels of countryrisk and growing uncertainty about the futureof the currency convertibility scheme that hadbeen in place since 1991. Nevertheless, FDIinflows in 2000 were the second highest since1992. However, portfolio flows (partly linkedto M&As) had already turned negative in 1999(box figure III.7.1).b The deepening crisis finallyaffected FDI inflows in 2001 and they fell (by70 per cent) to the level of the early 1990s; theyare expected to fall further in 2002. Totalinvestment in foreign affiliates declined by 30per cent in 2001, reaching its lowest level since1996, and it is expected to fall another 50 percent in 2002.c That compares with a fall in totaldomestic investment of 16 per cent in 2001, andan expected fall of nearly 50 per cent in 2002.d

As with East Asia in 1997-1998 (WIR98),the fall in foreign currency prices of domesticassets, and the fact that many domestic firms

Box III.7. FDI and the economic crisis in Argentina

are heavily indebted and have limited accessto liquidity (due, among other reasons, to thebreakdown in the domestic financial system),may lead to acquisitions by foreign firms. Thedepreciation also increases the attractivenessof the country for export-oriented FDI. Asyet, however, there are no signs of this occurringon a substantial scale. In fact, some firms withsignificant investments in the 1990s – forexample, France Télécom and HSBC – haveannounced that they will not make moreinvestments in Argentina in the near future,and have even suggested that they mightwithdraw entirely.e Some smaller firms – suchas the German autoparts maker, Kautex, andthe United States grain trader, Tradigrain –have abandoned their operations in the country.f

Campofrio, a Spanish meat-processing andpackaging firm, has put its Argentine affiliateon sale.g

Argentina’s economy has now gonethrough three years of deep recession. In 2001,domestic GDP was more than 8 per cent belowthe 1998 level and a further fall of at leastanother 15 per cent is expected in 2002 (IMF,2002). The Convertibili ty Scheme wasabandoned early in 2002 and, by the end ofJune 2002, the peso had been devalued vis-à-vis the dollar to almost a quarter of its valuesix months earlier. Bank deposits have beenfrozen, giving rise to public demonstrationsagainst the banking system and eroding thetrust of Argentine citizens in local banks.

Box figure III.7.1. Financial f lows to Argentina 1994-2001


/...S o u r c e : UNCTAD, based on data from Argentina, Ministerio de Economia.

�


It is too early to tell how thesedevelopments will affect FDI inflows and TNCoperations in the country. The impact willdepend on a number of factors:

• The effect of the devaluation on the relativeprices of Argentine exports . So far thedevaluation of the peso has not had a majorinflationary impact on domestic prices.Consumer prices are estimated to haveincreased by 20 per cent between Januaryand April 2002, and possible further increasesof 30-40 per cent are envisaged during 2002.h

If price rises continue to be modest, asignificant devaluation of the real exchangerate could be achieved, not only makingimports more expensive (and hence creatingnew opportunities for local firms) but alsoturning Argentina into an attractive locationfor export-oriented FDI. In fact, some foreignfirms have already announced plans toincrease exports from their Argentine affiliates.For example, Accenture plans to exportinformation services from Argentina, tocompete with those from India and thePhilippines.i Others are reconsidering theplanned closure of production lines. Forexample, Fiat Iveco was to close its truckproduction facilities in Argentina and importthose vehicles from Brazil , but is nowreconsidering this decision.j However, exportincreases may take some time to occur.Furthermore, the possibility of a resumptionof high inflation reversing the real-exchange-rate decline (and the consequent improvementin export competit iveness) cannot bedisregarded.

• The extent to which market-seeking FDI takesadvantage of the “bargain prices” ofdomestic assets resulting from the crisis andthe devaluation. Banks and other portfolioinvestors in Argentine firms – including so-called “vulture funds” – as well as TNCs,with or without foreign affiliates in the country,could acquire stock in indebted firms thatcannot meet their obligations but have apromising future. For instance, some Brazilianfirms interested in expanding their operationsabroad have already expressed their interestin acquiring Argentine firms.k However, nomajor acquisitions of firms in distress inmanufacturing and/or services have beenmade so far, with the exception of theacquisition by Ambev, the Brazilian brewinggroup, of a 36 per cent voting stake inQuilmes, Argentina’s largest brewer. Theacquisition of the cash-strapped Quilmes wasmainly motivated by the objective of

integrating the activities of the two firms inorder to consolidate their dominating positionsin Latin America’s Southern Cone; both ofthem had already invested in countries suchas Bolivia, Chile, Paraguay, Uruguay andVenezuela.

• The depth and duration of the recession. Therecession has created significant idle capacityin most industries, particularly in firms thathave not been able to increase their exportsto compensate for the fall in domestic demand.For instance, the production of cars, whichis dominated by TNCs, nearly halved between1998 and 2001. Foreign affiliates have sufferedmajor losses in recent years, especially inbanking, telecom services, supermarkets andoil refining. As a result , many TNCs areadopting a “wait and see” attitude.l Althoughonly a small number have reacted by pullingout of the country,m few, if any, are committingfurther funds to the affiliates they alreadyhave or to new projects in the country.

• Attitudes and policies with respect to inwardFDI. A significant proportion of Argentinecitizens seem to believe that the country hasbeen “sold out” to foreign investors. Onefactor explaining the present widespreadmistrust of foreign investors is the largeincrease in rates for services after privatizationin util i t ies such as telecommunications.n

According to polls by the Argentine marketresearch firm Graciela Romer & Asociados,while 60 per cent of the citizens surveyedagreed that utilities should be privatized inFebruary 1992, that figure fell to 23 per centin December 2001 (Graciela Romer &Associates, 2002). A recent poll by Gallupand two Argentine market research firms alsoshowed that 55 per cent of Argentine citizensdo not trust privatized firms. The financialcrisis that led to the freezing of bank accountsand to the conversion of dollar-denominateddeposits into peso-denominated ones at arate significantly below the market rate ofexchange led most Argentines (70 per centof those surveyed by the Argentine marketresearch firm Hugo Haime y Asociados) tobelieve that foreign-owned banks had “takentheir deposits away”. Although foreign banksdid not make the decision either on the freezingof the deposits or on their conversion topesos, their headquarters generally have beenreluctant to provide funds to keep their localbranches afloat. (Argentina’s central bankwas forced to suspend the operations of theArgentine affiliate of ScotiaBank for thatreason.)

/...

Box III.7. FDI and the economic crisis in Argentina (continued)

�


Apart from the change in attitudes towardsforeign investors that may or may not be reflectedin FDI policies, a number of measures have beentaken, or are being discussed (including with theindustries involved), that directly affect manyTNCs in the country, such as a bankruptcy law,restrictions on banking activities, the freezingand conversion to pesos of utility tariffs, anda windfall tax on oil exports.

The crisis may also have negative effectsfor Argentine firms that made significant outwardinvestments during the 1990s, especially for thosethat have relied heavily on foreign credit. In fact,IMPSAT, a firm that had expanded to many LatinAmerican countries to provide telecom services,was not able to make a scheduled bond interestpayment in December 2001 (the bond had beenissued in the United States market) and hasrecently agreed to a plan through which its

creditors will become the firm’s main stockholders.Affiliates of IMPSAT have also had problemsin meeting their debt obligations.p

To sum up, there is considerable uncertainty,affecting FDI in Argentina at present, as regardsboth economic factors and policy with respectto inward FDI and the large public serviceindustries that have been privatized with TNCparticipation. However, should Argentina’seconomic situation improve, with a resumptionof growth, a significant real peso devaluation,and an environment of institutional stability,foreign investors may well be induced to investagain in this country that is rich in naturalresources and human capital. Furthermore, if theSouthern Common Market (MERCOSUR) is ableto make progress again, that will become anadditional factor to induce FDI back into Argentina.

Source : Chudnovsky and López.a Estimates based on data from Prensa Economica, October 1991 and October 2001; and Mercado, August 1991 and

July 2001.b A similar contrast between the behaviour of FDI and portfolio capital was observed during the Asian and Mexican

crises in 1997-1998 and 1994-1995, respectively (see WIR98).c According to data from the Centro de Estudios para la Produccion of the Secretariat of Industry. The data show the

total amount of real investments in foreign affiliates, irrespective of the source of financing of those investments.d Latin America Concensus Forecasts, 17 June 2002.e France Télécom’s Chairperson said that the company was likely to exit Telecom Argentina (Business News Americas,

22 March 2002). HSBC’s chairperson said that the bank’s policy “is to invest for the long term, but it is entirelypossible that political events in Argentina could cause us to reassess this policy” (Financial Times, 5 March 2002).

f La Nación, 7 March and 9 March 2002.g La Nación, 12 April 2002.h Latin America Consensus Forecasts, ibid.i La Nación, 31 March 2002.j La Nación, 12 March 2002.k La Nación, 15 March 2002.l For instance, the president of Volkswagen’s Brazilian operations said that while VW’s plant in Buenos Aires is

viable – in March its chief financial officer had said that the firm was to close down the factory – the company willmake no more investments for the time being (AFX Europe, 2 May 2002).

m For example, two foreign banks, Bank of Nova Scotia (Canada) and Credit Agricole (France), pulled out of thecountry in 2002. The former has suspended the activities of its Argentine affiliate, Scotia Bank Quilmes, for lackof liquidity and has put it up for sale. The Government has taken control of the local affiliates of Credit Agricoleafter the parent company decided to abandon them (El Pais, 21 May 2002).

n Although there has been an improvement in the availability and quality of public services after privatization, atpresent most citizens appear to favour a re-nationalization of those services.

o Página 12, 24 March 2002.p Clarín, 12 March 2002.

Box III.7. FDI and the economic crisis in Argentina (concluded)

According to the UNCTAD/AFII /Andersen survey, FDI prospects for LatinAmerica and the Caribbean over the nextthree years are likely to improve, althoughnot as much as in East Asia or Central andEastern Europe (UNCTAD, 2001a) . Onequarter of the respondents – a higher shareof respondents than in any other developingregion – considered M&As the most favouredform of expansion into the region. This surveyand the similar one conducted by MIGA(MIGA, 2002) concluded that, in the nearfuture, FDI in the region will continue tobe concentrated in Brazil, Mexico and, toa lesser extent, Chile.38 By sector, the MIGA

survey shows that Brazil is attracting interestin both manufacturing and services, whileMexico is considered a top destination onlyfor manufacturing, and Chile and Argentinaonly for services.

Most of the slowdown of FDI inflowsto Latin America and the Caribbean can beattributed to a decline in Spanish FDI (figureIII.24), which in 1999 and 2000 financed largeM&As in services, very often involvingprivatizations (WIR00, p. 59). In general,FDI inflows through privatizations have sloweddown in the region, particularly in Brazil,where they had reached $8.7 billion in 1999


and $7 billion in 2000, but were only $1billion in 2001 (figure III.25); they are unlikelyto resume their high levels of the past inthe near future. Some other countries, such

as Argentina and Chile, have alreadycompleted most of their privatizationprogrammes, while others such asEcuador, Paraguay or Uruguay arefinding it politically difficult to sellState-owned enterprises.

The sectoral breakdown ofinward FDI to the region changedin 2001 from the pattern observedin previous years . FDI into theservices sector in Mexico rose toalmost two-thirds of total inflows,from an average of 23 per cent inthe period 1994-2000, driven by largeacquisitions in banking (box III.8)and telecommunications. In contrast,Brazi l saw a decl ine in FDI inservices , especial ly te lecom andfinancial services, which had attractedlarge M&As by foreign firms in 1999and 2000,39 and an increase in themanufacturing sector, which has beenattracting substantially larger FDIinflows since the devaluation of itscurrency in 1998 (figure III.26). InBrazil’s electricity industry, FDI halvedin 2001 despite the urgent need for

investment in power generation,40 mainlybecause of disagreements about the regulatoryframework governing the industry.41

Figure III.22. Latin America and the Caribbean:FDI flows as a percentage of gross fixed capital

formation, top 10 economies, 1998-2000a

(Percentage)

Source: UNCTAD, FDI/TNC database.a Ranked on the basis of the magnitude of 1998-2000 FDI inflows

as a percentage of gross fixed capital formation.

Figure III.23. The UNCTAD Inward FDI Performance Index andInward FDI Potential Index for selected countries in Latin America,

1988-1990 and 1998-2000



Box III.8. Mexico: FDI in financialservices

In recent years, the share of financialservices in Mexico’s total inflows has grownsignificantly. In 2001, the industry experiencedthe single largest foreign investment ever madein Mexico: the acquisition of Banamex (themost important bank in Mexico) by the UnitedStates financial group, Citicorp, for nearly$12.5 billion. This acquisition boosted theshare of financial services in Mexico’s inflows,from 32 per cent in 2000 to 58 per cent in 2001.These shares contrast with the average sharefor financial services of 10 per cent during1994-1999.

The increasing interest of foreigninvestors in the financial services industryhas been one of the important characteristicsof FDI in Mexico only in recent years, eventhough the opening up of the industry to FDIstarted in 1994 as a result of the negotiationson NAFTA and the subsequent liberalizationand deregulation, between 1996 and 1999, ofMexico’s legal framework for regulatingfinancial services. The Foreign InvestmentLaw of 1993 originally limited FDI participationin holding companies for financial groups andcommercial banks to 30 per cent. In 1996, thelaw was revised, allowing participation of upto 49 per cent. A further revision in 1999allowed majority foreign ownership. However,the participation of foreign financial institutionsin such activities in Mexico is subject to theprovisions of a bilateral or an internationalagreement regulating the establishment ofaffiliates in the country and conditional onobtaining the relevant authorizations.

Another factor behind the growth of FDIin financial services was the difficult situationfaced by Mexican financial intermediaries asa result of the financial and balance-of-payments crisis in 1995. This resulted in anurgent need for quick capitalization.

Facili tated by the changes in law,Mexico’s financial services industry attractedinvestments by a number of foreign financialgroups between 1994 and 2001, includingCiticorp (Citibank) of the United States in1994; Bank Bilbao-Vizcaya of Spain in 1995;Bank of Montreal of Canada in 1996; BancoSantander of Spain in 1997; Bank Bilbao-Vizcayaof Spain again in 2000; and Citicorp of theUnited States, in the previously mentionedacquisition in 2001. In view of the financialand technological strengths of theseinstitutions, their presence has the potentialto translate into major improvements in Mexicanfinancial services with the consequent benefitsfor users of greater availability of credit,attractive rates and security of savings.

Source : García.

Figure III.26. FDI inflows in themanufacturing sector in Brazil, 1996-2001


Source: UNCTAD, based on data from the Central Bankof Brazil.

Figure III.25. FDI in privatization inBrazil, 1996-2001 (Billions of dollars)

Source: UNCTAD, based on data from the CentralBank of Brazil.

Figure III.24. Spanish FDI in Brazil,Argentina, Chile and Mexico, 1994-2001


Source: UNCTAD, based on data from Secretaría deEconomía (Mexico), Central Bank of Brazil,Dirección General de Cuentas Internacionales,Ministerio de Economía (Argentina) and Comitéde Inversiones (Chile).

�


The recession in the United Statesdirectly affected manufacturing in Mexicoand the Caribbean basin, particularly in maquilaenterprises exporting to the United States.42

In Mexico, FDI inflows in the manufacturingsector declined by $4 billion in 2001. FDIinto resource-based activities was especiallyimportant in the Andean countries. Boliviareceived $647 million in FDI, half of it inoil and gas extraction; Ecuador received $1.3billion, 85 per cent of which was in petroleum;and Venezuela attracted $3.4 billion in totalinflows, 24 per cent lower than in 2000, amidconcerns over political and economic stability.43

Most FDI outflows from Latin Americancountries remain within the region. Chilecontinued to be the largest investor abroadwith $3.8 billion in outflows in 2001 (figureIII.27), followed by Mexico with $3.7 billion.Mexican companies continue to expand intothe United States; for example, the food group,Bimbo, acquired Orowit in the United Statesfor $610 million in January 2002.

C. Central and EasternEurope

In 2001, FDI flows to and from Centraland Eastern Europe (CEE) remained at levelscomparable to those of the previous year.

In fact, while global FDI inflows declinedby more than 40 per cent – and this slowdownaffected all regions except Africa – flowsinto CEE grew by two per cent in 2001. Theyrose in 14 of the region’s 19 countries, andits share of world inflows rose from 2 percent in 2000 to 3.7 per cent in 2001. Thissuggests that CEE is viewed as a stable andpromising region for FDI, its overall economicgrowth having been less affected by the globalslowdown in 2001 than that of any other region.The survey by UNCTAD/AFII/Andersen(UNCTAD, 2001a) found that two-thirds ofthe respondents expected CEE to have improvedor significantly improved prospects for FDIin the next three to five years. This is thehighest proportion of positive responses forall regions in the world covered by the survey.

FDI continues to be highly concentratedby country. Five countries (Poland, the CzechRepublic, the Russian Federation, Hungaryand Slovakia) accounted for three-quartersof the region’s inflows in 2001. Of these,all but Slovakia have dominated FDI inflowsto CEE since the early 1990s. The UNCTAD/AFII/Andersen survey found that Poland,Hungary, the Czech Republic and the RussianFederation (in that order) were the favouredlocat ions for four- f i f ths of respondents(UNCTAD, 2001a). The survey by MIGA(MIGA, 2002) drew similar conclusions: Polandwas the most popular location, followed bythe Czech Republic, Hungary and the RussianFederat ion. The concentrat ion of FDI isexpected to continue in the near future.

Poland, the region’s leading recipientsince 1996, suffered a decline in 2001 (figureIII.28). The reasons lie in the Polish economy:pr ivat iza t ion i s coming to an end andmacroeconomic problems have surfaced. TheGovernment has launched a new and extendedincentive scheme to attract fresh investors(box III .9) , s imilar in many respects toschemes already in place in Hungary andthe Czech Republic (WIR98 , p. 289). FDIin the Czech Republic, the region’s second-largest FDI recipient since 1998, declinedmoderately – by one per cent – in 2001.Inflows were led by some major greenfieldinvestments, including a major venture byToyota (Japan) and PSA (France) for themanufacture of automobiles (box III.10).This opens up opportunities for the Czechauto-supplier industry to diversify beyondinputs for Volkswagen/Skoda, so far the onlylarge car producer in the country.

Figure III.27. Latin America and theCaribbean: FDI outflows, top 10

economies, 2000 and 2001a



a Ranked on the basis of the magnitude of 2001FDI outflows.

�


Box III.9. The new system of incentives forinvestors in Poland

In May 2002, a new law on financialsupport for investment entered into force inPoland. It stipulates the principles and formsof such financial support, applicable to bothforeign and domestic investors. Investmentsbenefiting from the scheme should meet oneof the following conditions:

• The value of the new investment is at least%10 million;

• The value of the new investment is at least%500,000, results in the development andmodernization of an existing business, andmaintains at least 100 jobs (or 50 jobs ifthe investment is made in one of the prioritylocations) for at least five years;

• As a result of the investment, at least 20new jobs are created for at least five years;

• The investment involves technologicalinnovation, making it possible to manufacturemodern and competitive goods or services; or

• The investment introduces modern,environmentally-friendly technologies.

Financial support to new investmentscan take a number of forms.

For investors, these are (individually ortogether):

• A subsidy determined as a percentage ofthe value of a new investment, but notexceeding 50 per cent of the maximum amountof public assistance provided for a givenlocation;

/...

Figure III.28. Central and EasternEurope: FDI inflows, top 10 countries,

2000 and 2001a




Box III.9. The new system of incentivesfor investors in Poland (concluded)

• A subsidy not exceeding the value of %4,000per job for the creation of new employment;and

• A subsidy of up to %1,150 per employee forthe training of the workers hired.

For the host communities, these include:

• Assistance in the creation or improvementof the physical infrastructure to support theinvestment made by the investor.

The details of financial support to individualprojects are spelt out in agreements concludedbetween the Ministry of the Economy and theinvestor, or the investor and the host community.Each agreement lays down the obligations ofthe investor and/or the community, in particularthe location and value of the investment, thetimetable of the project, the number of personsemployed and training courses. The agreementalso determines the amount and timing of thefinancial support, and the circumstances underwhich assistance is to be repaid by the investor.Cumulative assistance provided to an individualenterprise under various titles cannot exceedthe stipulated ceiling on allowable State aid.

Source: UNCTAD, based on information providedby the Ministry of Economy of Poland.

Box III.10. Toyota/PSA’s investment in theCzech Republic

Toyota and PSA have agreed jointly todevelop and produce small cars in the CzechRepublic, aiming at a low-price niche. The joint-venture partners had visited and pre-selectedvarious industrial sites in the Czech Republic,Hungary and Poland in the second half of 2001before settling on Kolin in the Czech Republic.The plant they have started building will bethe biggest greenfield investment in the CzechRepublic since the start of the country’s transitionto a market system. Total investment, includingresearch, development and start-up costs, willbe about $1.5 billion. The Kolin car plant isscheduled to start producing in 2005. Onceoperational, it is expected to employ 3,000 peopleand produce some 300,000 cars per year. Anadditional 7,000 jobs are expected to be createdin service and supply firms.

The Czech Republic has succeeded inattracting this project partly by virtue of itsgeographical position within Europe, skilledengineers, relatively developed infrastructureand advantageous labour costs, as well as itscompetitive system of incentives introducedin 1998 (WIR98, p. 289). The authorities in

/...

�


Box III.10. Toyota/PSA’s investment in theCzech Republic (concluded)

the Czech Republic hope that with the entryof Toyota and PSA the country will becomethe car assembly centre and automotive supplyhub for countries poised to enter the EU.Toyota and PSA would also introducecompetit ion in a market so far largelydominated by the incumbent local producer,Skoda Auto (an affiliate of Volkswagen), whichemploys 24,000 people in the Czech Republic,produces 7 per cent of GDP and 10 per centof national exports. For the large suppliernetwork currently serving mainly Skoda Auto(more than half of the world’s 50 leadingsuppliers have facilities in the Czech Republic)or exporting to the European continent, theToyota/PSA plant may offer a new supplyoutlet. Local suppliers, however, would haveto compete with other suppliers in WesternEurope. Both PSA and Toyota have substantial,non-labour-intensive, advanced suppliernetworks around their plants in WesternEurope, consisting of firms not yet presentin the Czech Republic. However, thesesuppliers may not transfer any business tothe Czech Republic unless the orders exceedtheir current capacities in Western Europe.

Source: UNCTAD, based on CzechInvest, 2002;Carey, 2002; and Anderson, 2002.

FDI inflows to the Russian Federationdeclined for the second year in successionin 2001, despite the attractiveness of thatcountry’s natural resources and high GDPgrowth, reflecting continued difficulties inthe domest ic bus iness environment . InHungary, robust GDP growth spurred a surgeof FDI (by about 40 per cent), the highestinward FDI f low s ince i t s pr ivat izat ionprogramme ended in 1998. Most of the inflowsto Hungary took place in the form ofassociated FDI, including investments bysuppliers to foreign affiliates in the automotiveand electronics industries (Ernst & Young,2002). In Slovakia , FDI inflows declinedsomewhat after a privatization-related peakin 2000. Slovakia’s inflows in 2001 were,nevertheless, the second highest since thestart of that country’s transition to a marketeconomy.

Most of the other countries in theregion saw their FDI inflows grow in 2001,helped by stability and above-average growthrates in the region,44 as well as ongoingprivatization in some latecomer countriesand some industries. Slovenia, for example,

opened such key indust r ies astelecommunications and banks to foreigninvestors in 2001. Some of the highest FDIgrowth in the region, however, reflects thevery low levels in 2000, for some countries(Yugoslavia, the Former Yugoslav Republicof Macedonia , Belarus , Bosnia andHerzegovina). On the other hand, notableexceptions to the FDI growth trend wereobserved in Bulgaria and Latvia .

Parallel with the surge of FDI inflows,their share in the gross fixed capital formationof the region reached high levels by theend of the 1990s, exceeding 25 per centin 1999. This increase was particularly highin 1996-1999 (annex figure B.5). In termsof FDI inflows relative to gross fixed capitalformat ion Bulgar ia , Croat ia , the CzechRepublic, Estonia, Lithuania, Latvia and theRepublic of Moldova were the regional leadersin 1998-2000 (figure III.29). These high ratiosreflect the small size of the national economies,due either to small populations (e.g. theBaltic states) or very low GDP levels percapita (e.g. Bulgaria and the Republic ofMoldova). The Czech Republic is a notableexception, its high ratio reflecting mainlythe high inflows it has received.

The steady performance of many CEEcountries in attracting inward FDI in 2001means that the majority of these countries

Figure III.29. Central and Eastern Europe:FDI flows as a percentage of gross fixed

capital formation, top 10 countries,1998-2000a

(Percentage)



�


continue to keep their position as high-potential,high-performance recipients of FDI (chapterII), while others, such as Slovenia, may bepoised to move out of their present positionsinto that group. Of the 17 CEE countriescovered by UNCTAD’s Inward FDIPerformance and Inward FDI Potential indices,nine countries were already front-runnersin the early phase of transition (1992-1994),combining high FDI potential with high FDIperformance.45 With the exception of theRepublic of Moldova, these countries combineda favourable geographical location (closenessto Western European markets) with goodinitial conditions for transition (EBRD, 2000).Three countries were below-potential recipients(low performance despite high potential),46

and two countries (Romania and the FormerYugoslav Republic of Macedonia) wereunder-performers (low potential combinedwith low performance). With the exceptionof Slovenia, the two lat ter groups werecharacterized by greater geographical distancefrom Western European markets and difficultinitial conditions for transition (EBRD, 2000).

At the end of the millennium, thenumber of front-runners remained the same:nine. The composition of this group wasfairly stable: only Bulgaria joined it as anewcomer, while the Republic of Moldova

moved out into the group of above-potentialeconomies. The above-potential group lostAlbania but gained, besides the Republicof Moldova, Romania and the Former YugoslavRepublic of Macedonia. The fact that mostof the newcomers are south-east Europeancountries indicates a gradual shift in thegeography of FDI towards that subregion.At the other end of the spectrum, the groupof below-potential economies was reducedto three: Belarus, the Russian Federationand Slovenia.

A more detailed analysis of UNCTAD’sindices of Inward FDI Performance and Potentialfor six key countries (the Czech Republic,Estonia, Hungary, Poland, Romania and theRussian Federation) (figure III.30) highlightsa tendency among all but the Russian Federationtowards greater FDI potential over the 1990s.FDI performance shows more divergence.For Estonia and Hungary – countries thattook an early lead in attracting privatization-related FDI – the Index fell somewhat astheir privatization programmes were nearingcompletion. In contrast, the performance ofRomania, one of the late-privatizing countries,improved by 1998-2000. In the RussianFederation, where privatization with FDI didnot take off, the weak performance of 1992-1994 further deteriorated in 1998-2000.

Figure III.30. The UNCTAD Inward FDI Performance Index and Inward FDIPotential Index for selected countries in Central and Eastern Europe,

1992-1994 and 1998-2000


Note: As most of the countries in Central and Eastern Europe did not exist before 1992, the period of the FDIPerformance Index is adjusted for 1992-1994.

�


Judging from registered values, FDIoutflows from CEE declined by 12 per centin 2001 (figure III.31). The region’s sharein world FDI outflows for that year was three-fifths of 1 per cent, up slightly from three-tenths of 1 per cent in 2000. The RussianFederation, which accounts for almost four-fifths of the FDI from the region, recordeda decrease in outflows in 2001, despite theinvestment abroad of windfall gains from highoil and gas prices enjoyed by the leading Russianfirms.47 YUKOS, the third largest Russianoil and gas company, acquired the Anglo-Norwegian engineering firm, Kvaerner, as wellas a stake in a Slovak pipeline and an oilfieldin Kazakhstan. FDI outflows from Hungarydeclined slightly, too, despite the conclusionof a major telecom acquisition by Hungary’sMATAV in the Former Yugoslav Republicof Macedonia. A number of other countries(Estonia, Croatia and Slovenia) had stronggrowth in outward FDI, although from a verylow base. Most of these new investmentsfrom the smaller countries are directed toneighbouring countries (box III.11; WIR01,pp. 37 and 252). In some countries suchas Estonia, Hungary and Poland, an importantpart of outward FDI is carried out by foreignaffiliates (e.g. Deutsche Telekom-ownedMATAV). Relative to gross fixed capitalformation, it is only in Estonia, Hungary andthe Russian Federation that the ratio exceeds3 per cent (figure III .29).

Box III.11. The wave of outward FDI fromSlovenia

From 1993 to 2001, Slovenia’s outwardFDI stock more than tripled, from $281 millionto $898 million, displaying one of the highestgrowth rates in CEE. The geography of outwardFDI, too, changed. Before independence in1991, driven by “system-escape” motivations(the need to circumvent the restrictions ofthe socialist economy), most of the outwardFDI of Slovene companies had been directedat developed markets (Svetlicic, Rojec andLebar, 1994). After 1993, Bosnia andHerzegovina, Croatia, the Former YugoslavRepublic of Macedonia and Yugoslavia, beganrapidly to gain importance, with Sloveniabecoming one of the most important hubs forinvestment flows into the reconstruction ofsouth-eastern Europe. Since 1994, accordingto data from the Bank of Slovenia, all theseother countries together account for two-thirdsof Slovenia’s total outward stock.

This pattern of outward FDI from Sloveniais driven both by pull factors, such as rapidchanges in the international environment(especially in south-eastern Europe), and pushfactors, such as the small domestic market.Indeed, the disintegration of former Yugoslavia,and the temporary loss of its market, pushedSlovene firms to go international in order tosurvive. Internationalization was largely helpedby the traditionally strong ownershipadvantages of Slovene firms. Most of themhad their origins in large and old, butrestructured and privatized, companies,although some new and smaller firms alsostarted investing abroad in the 1990s. Thefact that “old” firms, which had already startedto internationalize in the 1960s and 1970s, arethe most transnationalized demonstrates thatsuch early internationalization proved to beinstrumental in the subsequent tide of outwardFDI. These firms appear to have gained self-confidence from their early experience, whichhelped them prepare themselves for moredemanding forms of international competition.Case studies also demonstrate that these firmshave successfully combined knowledge offoreign markets with their own R&D efforts(Jaklic and Svetlicic, 2002). They typically haveabove-average and fast-growing R&Dexpenditures and high-skilled labour intensity.Outward investors represent less than 2 percent of the total corporate sector in terms ofnumber of firms; they, nevertheless, provide30 per cent of employment and produce 40per cent of exports (Jaklic and Svetlicic, 2002).

The internationalization of Slovene firmsis driven mainly by market-seeking and first-mover motives. Apart from technological

/...

Figure III.31. Central and EasternEurope: FDI outflows, top 10 economies,

2000 and 2001a



a Ranked on the basis of the magnitude of 2001 FDIoutf lows.

�


Box III.11. The wave of outward FDI fromSlovenia (concluded)

advantages, they possess specific know-howabout how to do business in the other countriesof former Yugoslavia. Slovenian firms can easilyre-establish their previous business networksand build on the fact that their products andbrand names are well known there. They arealso aware that such advantages risk erosionover time if they do not move (back) into thosemarkets fast enough. In turn, labour-cost motiveshave played only a minimal role in the expansionof Slovene firms into countries of formerYugoslavia. This may be because so far fewof them have located manufacturing capacitiesthere. Their affil iates focus, instead, ondownstream services such as marketing anddistribution.

For many Slovene firms, other countriesformerly part of Yugoslavia serve as aspringboard for wider transnationalization. Theaverage outward investing Slovene firm has 4.4affiliates, a number already slightly higher thanthat of firms in a number of those countries.The most transnationalized firms have over 20affiliates worldwide.

One of the most important lessons fromthe Slovene case concerns the way firms fromthat county have used internationalization asan instrument to get out of a situation thatcombined the loss of previous markets with thecrisis of transition. Internationalization hasproved to be more useful as a leverage forsurvival than seeking protection from theGovernment.

Source: UNCTAD, based on Jaklic and Svetlicic,2002, and Svet l ic ic e t a l . , 1994.

D. The least developedcountries48

FDI inflows to the 49 least developedcountries (LDCs) are small in absolute terms.(It should be noted that no systematic dataexist on non-equity linkages between domesticfirms in LDCs and TNCs.) Nevertheless,they often make a contribution to local capitalformation. The share of FDI flows in grossdomestic capital formation during 1998-2000averaged 7 per cent for LDCs as a group,compared to 13 per cent for a l l o therdeveloping countries (figure III.32), andit is significantly higher in a number ofcountries within the LDC group. FDI in theLDCs rose from an annual average of $0.6billion during 1986-1990 to an annual average

of $3.7 billion during 1996-2000. If the groupof LDCs is split into major oil-exportingcountries (Angola, Equatorial Guinea, theSudan and Yemen) and other LDCs, thepicture changes. In the first group, FDI inflowsrose from an annual average of $49 millionduring 1986-1990 to an annual average of$1.2 billion during 1996-2000, and to $1.6billion in 2001. The share of the four oilexporters rose from less than 10 per centduring 1986-1990 to some 40 per cent by2001. The respective figures for the otherLDCs are $0.6 billion, $2.5 billion and $2.3billion.

Figure III.32. LDCs: FDI inflows as apercentage of gross fixed capital

formation, top 10 countries, 1998-2000a

(Percentage)



In 2001, despite the general slowdown,FDI in LDCs as a group rose slightly to$3.8 billion, mainly on account of increasedflows to Angola (figure III.33), but it waslower than its peak of 1999 ($5.4 billion).Overall, however, the share of LDCs in totalFDI flows to developing countries has declinedover time, from 2.3 per cent in 1986-1990to 1.8 per cent during 1996-2000, althoughit rose slightly in 2001 (figure III.34).

These average f igures h ide largevariations. For example, 16 of the 49 LDCsattracted more FDI relative to gross domesticcapital formation than the average developingcountry (figure III.32 and annex table B.5).

�


FDI in 21 LDCs grew faster than 20 per centper annum, and in another seven at between10 and 20 per cent (table III.6). Individualperformance differed greatly over the period1986-2001 (or the period for which the dataare available): Burundi, at one extreme, sawa decline of 22 per cent, while Uganda, atthe other, saw an increase of 99 per cent.In Sierra Leone and Yemen, divestment hasexceeded new FDI for the past several years.In contrast, FDI has increased rapidly incountries such as Bangladesh, Equatorial

Figure III.33. LDCs: FDI inflows, top10 countries, 2000 and 2001a




Figure III.34. LDCs: FDI inflows andtheir share in the world inflows and

developing-county inflows, 1986-2001a



Guinea, Ethiopia, Lesotho, Mozambique,Myanmar, the Sudan, and the United Republicof Tanzania. In particular, the United Republicof Tanzania experienced a dynamic growthin FDI inflows in the 1990s (box III.12).Angola was the largest recipient among LDCsin most of the years during 1986-2001,attracting FDI inflows almost equal to thoseof Peru in 2001.

Clearly, some LDCs have the potentialto attract more FDI. According to UNCTAD’sInward FDI Performance and Potential Indices,eight out of the 25 LDCs for which theseindices are constructed are above-potentialeconomies, with a higher rank for performancethan for capacity (figure III.35). Of these,several (e.g. Angola, Mozambique, Ugandaand Zambia) are resource-rich countries.However, 17 of the 25 LDCs rank as under-

Table III.6. Annual average FDI growthrates in LDCs, 1986-2001

(Per cent)

Growth rates Country

More than 20% Angola LesothoBangladesh Malawia

Benin Malic

Burkina Faso MozambiqueCape Verdea São Tomé

and Principed

Djibouti Senegalc

Equatorial Guinea Sudana

Ethiopiab TogoGambiaa Ugandac

Guinea-Bissau United Republic of Tanzaniac

Lao People’s Democratic Republicc

10-19.9% Afghanistana MadagascarChad MaldivesCongo, Democratic Republic of Myanmare

Kiribati

0-9.9% Cambodia Samoaa

Guinea VanuatuNepal Zambia

Decline Bhutanb NigerBurundi RwandaCentral African Republic Sierra Leonea

Comorosa Solomon IslandsEritread SomaliaHaiti Tuvaluf

Liberia YemenMauritania


a Annual average growth rate from 1987-2001.b Annual average growth rate from 1990-2001.

c Annual average growth rate from 1988-2001.

d Annual average growth rate from 1996-2001.

e Annual average growth rate from 1989-2001.

f Annual average growth rate from 1994-2001.

�


performers in the UNCTAD indices. Nonefalls into the category of front-runner orbelow-potential economies. Between 1988-1990 and 1998-2000, the Performance Indeximproved significantly for such LDCs as

Angola, Mozambique and the Sudan, whileit deteriorated for Niger, Rwanda, and SierraLeone (table II.1). FDI potential improvedin Mozambique and Yemen, but performancedeclined in the latter (figure III.36).

The United Republic of Tanzania is a newentrant in the FDI field. Its efforts to harnessFDI to its development process date back nominallyto 1985, when the country decided to initiate theprocess of transition from a centrally-plannedto a market-based economy. However, it was onlyin the second half of the 1990s – when theeconomic situation improved, the privatizationprogramme began in earnest, market-orientedreforms reached a crit ical mass, and soundfoundations for an enabling framework for FDI(including especially the Tanzania Mining Act,considered “the best of its kind”) were put inplace – that foreign investors responded. During1995-2000, the United Republic of Tanzania receiveda total of $1 billion in FDI, compared to $90 millionduring the preceding six years (annex table B.1).This is a remarkable performance for a countrythat was receiving hardly any FDI just 10 yearsago.

The acceleration of inflows between 1992and 1996 considerably improved the country’sFDI performance relative to other LDCs whichhave also worked hard to receive more FDI but,with a few exceptions, have not been verysuccessful. The United Republic of Tanzania has,furthermore, improved its position vis-à-visneighbouring countries. Overall, during 1995-2000, it received inflows comparable to those ofUganda ($1.1 billion) and Mozambique ($0.9 billion),both included by WIR98 among the seven front-runners in Africa in FDI performance. After 1996,however, although growing in absolute terms,annual inflows into the United Republic of Tanzaniadid not keep pace with the inflows into LDCs,sub-Saharan Africa or neighbouring countries(except for poorly-performing Kenya), and Tanzanialost some of the gains of the mid-1990s.

The largest sector for FDI in the UnitedRepublic of Tanzania is mining, and the largestsingle industry is gold. At the end of 1998,cumulative FDI in mining was estimated at $370million. This suggests a share of mining incumulative FDI inflows of above 50 per cent.Judging from data on total investments in majorforeign affiliates, most of which were establishedduring 1997-2000, the sectoral composition ofthe largest projects is: mining (65 per cent), services

(19 per cent), and manufacturing (16 per cent).The largest source of FDI in the country is theUnited Kingdom, followed by the United States,Ghana and South Africa.

As FDI inflows have increased, thequalitative impact of FDI on the economy hasalso become noticeable, especially in theindustries in which FDI is concentrated. Inmining, FDI has served as an engine of growthand has helped increase gold exports. In banking,it has contributed to the modernization of theindustry. Foreign investors have restructuredprivatized enterprises, boosting theircompetitiveness. They have typically contributedto the transfer of technology and skills. Althoughthe impact is strongest in the industries in whichFDI is concentrated, it has implications for theentire economy. Noticeable overall impacts ofFDI include a contribution to the inflow ofexternal resources (15 per cent in 1998); a changefrom a negative to a positive contribution tothe balance of payments; the contribution offoreign affiliates to overall exports and inflowsof hard currency from tourism; an increasedshare of FDI in capital formation, and thusgrowth; and the diversification of the economyaway from agriculture towards mining andservices.

These positive impacts – which hardlyexisted until the mid-1990s go some way towardsachieving the country’s FDI objectives. Theobjectives are, among others, “to increase theshare of foreign direct investment in total externalresource inflows” and “to invest in export areasin which Tanzania has comparative advantage”.(Tanzania Planning Commission, 1996, pp. 16-17). However, the scale of these impacts is stillsmall and a number of desired impacts are notoccurring (such as linkages to the local economyor the encouragement of local science andtechnology capacities).a Thus, after initialsuccesses with FDI, the challenge for the UnitedRepublic of Tanzania is now to push FDI to newfrontiers, to attract higher levels of FDI inflowsthan those received in the second half of the1990s, and to increase the scale and scope ofthe benefits of these inflows to its economy.

Source : UNCTAD, 2002c.a These objectives were stated in the Planning Commission’s 1996 National Investment Promotion Policy document.

Box III.12. The United Republic of Tanzania: harnessing FDI for development


Figure III.35. LDC rankings based on the UNCTAD Inward FDI Performance andPotential Indices, 1998-2000

Source: UNCTAD.

Note: The width of the band is 20 ranks around the 45 degree line.

Figure III.36. The UNCTAD Inward FDI Performance Index and Inward FDIPotential Index for selected LDCs, 1988-1990 and 1998-2000



The structure of external financialflows to LDCs changed in the 1990s.Official development assistance (ODA)remained the largest component,49 butdeclined in absolute and relative termsbetween 1995 and 2000. LDCs as a wholereceived $12.5 billion in bilateral andmultilateral ODA in net terms in 2000,compared to $16.8 billion in 1990. Theamount of bilateral ODA declined from$9.9 billion to $7.7 billion during thisperiod (figure III.37). FDI, on the otherhand, became more prominent: in 28 LDCsFDI increased, whi le b i la tera l ODAdecreased during the 1990s (table III.7).But only in seven LDCs (Angola ,Equatorial Guinea, the Gambia, Lesotho,Myanmar, the Sudan and Togo), did FDIinflows exceed bilateral ODA in 2000and three of them are major oil exporters.Thus most LDCs must rely on ODA astheir major source of finance.

FDI f lows into LDCs are alsohighly concentrated, though the shareof the top five recipients is lower nowthan i t was in the late 1980s. In theperiod 1986-1990, the top five recipientcountries accounted for 78 per cent ofFDI inflows; by 1996-2001, their sharehad declined to 55 per cent.50 The bulkof FDI in LDCs (more than 90 per cent)is through greenfield investments. Onlya few (notably the United Republic ofTanzania and Zambia) have recorded

M&As of any significance since1987 (figure III.38). Some dealshave not involved local firms butonly foreign affiliates. For example,the second largest M&A in LDCsso far has been the $260 millionacquisition of Texaco Inc-YetagunNatural in Myanmar51 by PremierOil Plc from the United Kingdomin 1997 (annex table A.III.1).

The limited extent of M&Asin LDCs partly reflects the natureof their privatization programmes.Many LDCs have now enacted new

Table III.7. Growth trends a in FDI andbilateral ODA flows, 1990-2000

AngolaCambodiaHait iLao People’s Democratic Republic

Benin MadagascarBhutan MalawiEritrea MaldivesSierra Leone Uganda

Liber ia AfghanistanMaur i tania BangladeshNiger Burkina FasoRwanda BurundiSamoa Cape VerdeSolomon Islands Central African RepublicSomal ia ChadTuva lu ComorosYemen Democratic Republic

of the CongoDj ibout i

Equatorial GuineaEth iop iaGambiaGuineaGuinea-BissauKir ibat iLesothoM a l iMozambiqueMyanmarNepalSao Tome and PrincipeSenegalSudanTo g oUnited Republic of TanzaniaVanuatuZambia

FDI (-) FDI (+)

ODA (-)

ODA (+)

Source: UNCTAD, FDI/TNC database andOECD Development AssistanceCommittee, International Develop-ment Statistics, online databases.

a Calculated as the slope of the linear regressionfor FDI and ODA flows between 1990 and2000.

Figure III.37. FDI inflows and ODA flowsto LDCs, 1985-2001


Source : UNCTAD, FDI/TNC database and OECD Development AssistanceCommittee, International Development Statistics, online databases.

�


or revised legislation allowing foreign investorsto participate in privatization. Examples areMauritania, Nepal, the United Republic ofTanzania, Uganda and Zambia (UNCTAD,2000c; UNCTAD and ICC, 2001; UnitedStates, Commercial Services, 1999, 2001a,b,c).

Owing to proximity and history, TNCsfrom Western Europe have been more activein African LDCs than those from the UnitedStates and Japan (UNCTAD, 1999a). JapaneseFDI to Afr ican LDCs has mainly beenmot ivated for tax reasons:“flag-of-convenience” investment in shippingin Liberia accounts for some three-fourthsof all Japanese FDI in Africa. In the AsianLDCs, in contrast , there is considerableintraregional FDI. Firms from Malaysia,Singapore and Thailand are major investorsin Cambodia, the Lao People’s DemocraticRepublic and Myanmar. Malaysia accountedfor more than one-third of the FDI stockin Cambodia in 1997, Thailand for 35 percent of the FDI stock in the Lao People’sDemocratic Republic in 1999, and Singaporeand Thailand together for 39 per cent ofthe FDI stock in Myanmar in 1998.

There is limited information on thesectoral breakdown of FDI in LDCs.Countries for which data are available52

show a broad industry distribution. In theSolomon Islands, for example, most FDI

Figure III.38. FDI inflows, cross-border M&Asales and privatizations in LDCs, 1987-2001


Source: UNCTAD, FDI/TNC database and cross-border M&A database.

Note: Cross-border M&As (as well as privatizations) include purchasesfinanced via both domestic and international capital marketsthat are not categorized as FDI. Furthermore, M&A dataare expressed as the total transaction amounts of particulardeals at the time of closure of the deals. Therefore, thereis no direct relationship between FDI and cross-borderM&As.

goes into the fisheries industry.In the Lao People’s DemocraticRepublic, FDI has gone mainlyinto agricultural production. Thepetroleum sector dominates FDIin a few LDCs, including Angola.While manufacturing is the largestsector for FDI in Cambodia andUganda, the services sec toraccounts for the largest share ofinward FDI stock in Cape Verdeand Nepal. In Ethiopia, the largestrecipient is the hotel industry.

The largest foreign affiliatesin LDCs are spread across hostcountries and industries. Largef inancia l a f f i l ia tes are rare inLDCs; with the exception of afew resource-based companies,most foreign affiliates are smallby international standards (annextable A.III.2). The geographicalbreakdown of the largest foreignaffiliates in LDCs by home countryshows the dominance of investors

from France, Japan and the United Kingdom.

LDCs have improved their investmentclimate at the national, bilateral and multilaterallevels. At the national level, most of themnow have legislation in place offering a rangeof guarantees to foreign investors. ManyLDCs have liberalized FDI regulations, andno longer discriminate between foreign anddomest ic inves tors . They a l low prof i trepatriation and protection against expropriation,and offer incentives and stronger standardsof treatment to foreign investors. Indeed,all the changes made in 2001 to the nationalregulatory frameworks in LDCs53 were inthe direction of liberalization.

At the bilateral level, by the endof 2001, 41 LDCs had concluded 292 bilateralinvestment treaties (BITs) for the protectionand promotion of foreign investment, of which126 were in the 1990s (figure III.39). Therewere 138 BITs with developed countries(36 during the 1990s) and BITs with otherdeveloping countries grew rapidly, from 10at the end of the 1980s to 126 by the endof 2001. LDCs have also begun to concludeBITs among themselves : 17 had beenconcluded by the end of 2001.

In addition, 33 LDCs had enteredinto 138 double taxation treaties (DTTs)by the end of 2001 (39 during the 1990s,

�


f igure I I I .39) . Of these , 90 were wi thdeveloped countries, 41 with other developingcountries, 4 with countries of Central andEastern Europe and 3 between LDCsthemselves. The pace of concluding DTTshas not picked up in recent years, in contrastwith BITs (figure III.39).

LDCs are par t ic ipat ing more inmultilateral agreements having a bearingon investment (table III.8). As of June 2002,20 LDCs had acceded to the Conventionon the Recogni t ion and Enforcement ofForeign Arbitral Awards, and 37 LDCs hadratified or signed the Convention on theSettlement of Investment Disputes betweenStates and Nationals of Other States. TheICSID Convention provides access to itsarbitration mechanism for investment disputes.There are now 34 LDCs that are full membersof the Multilateral Investment GuaranteeAgreement (MIGA), and six are in the processof fulfilling membership requirements. In addition,30 of the LDCs have become members ofthe WTO. They are thus parties to the threemain agreements bearing on investment: theAgreement on Trade-related InvestmentMeasures (TRIMs), the General Agreementon Trade in Services (GATS) and the Agreementon Trade-related Aspects of Intellectual PropertyRights (TRIPS). Another 11 have observerstatus in the WTO. This brings LDCs in linewith international principles and standardson trade, investment and intellectual propertyrights protection, while allowing them to enjoyspecial treatment by reason of their developmentstatus (UNCTAD, 2000d).

Figure III.39. BITs and DTTs concludedby LDCs, 1990-2001 (Cumulative number)

Source: UNCTAD, on the basis of the country tablesand UNCTAD BITs and DTTs databases.

LDCs have been promoting inwardFDI more actively: 38 countries had establishedinvestment promotion agencies (IPAs) byJune 2002. Some, like Madagascar and theSudan, have introduced “one-stop windows”to simplify procedures and facilitate the entryof foreign investors. And 28 LDCs havejoined the World Association of InvestmentPromotion Agencies (WAIPA), which promotescooperation among IPAs on a regional andglobal scale, to share experiences and helpIPAs with technical assistance and training(table III .9; WAIPA, 2001).

In ternat ional organizat ions l ikeUNCTAD help countries to attract FDI andharness it to their development objectives.UNCTAD undertakes in-depth InvestmentPolicy Reviews to help improve nationalFDI regimes (box III .13). I t also assistsLDCs in negotiating BITs and DTTs, andhas facilitated 42 such agreements (box III.14).Jointly with the International Chamber ofCommerce (ICC), UNCTAD has also beenproducing investment guides for LDCs, toensure that reliable information on investmentopportunities and conditions reaches potentialinvestors (box III.15).

A growing number of LDCs recognizethe role that FDI can play in providing inputsother than finance: the skills, knowledge,technology and access to international marketsi t offers to promote growth and reducepoverty. Many LDCs have improved theirinvestment regimes but this has not provedsufficient to attract enough FDI. WhileFDI to LDCs has increased, it has not keptpace with the flows to other developingcountries. Private capital inflows have beenincreasing more slowly than official flowshave been declining, which means that LDCs’access to foreign savings has been declining.Moreover, the sustainability of recent increasesin FDI f lows to LDCs remains a matterof concern.

Efforts are needed to ensure that FDIflows to LDCs not only continue to grow, butare also upgraded to increase their developmentalimpact. The international community can playa role here, by ensuring that investmentopportunities are communicated to corporateexecutives and by helping LDCs enhance theirattractiveness to investors. And, in particular,ODA flows to LDCs need to increase, as FDIis not a substitute for ODA; the characteristicsand functions of both are different.Complementarities between the two types

��


Table III.8. LDC signatories to main international investment-related instruments,as of June 2002

Country CREFAAa ICSIDb MIGAc TRIMsd GATSe TRIPsf

Afghanistan √ g

Angola √ √ √ √Bangladesh √ √ √ √ √ √Benin √ √ √ √ √ √Bhutan h h h

Burkina Faso √ √ √ √ √ √Burundi √ √ √ √ √Cambodia √ i √ h h h

Cape Verde √ h h h

Central African Republic √ √ √ √ √ √Chad √ √ √ √ √Comoros √Democratic Republic of the Congo √ √ √ √ √Djibouti √ √ √ √Equatorial Guinea √Eritrea √Ethiopia i √ h h h

Gambia √ √ √ √ √Guinea √ √ √ √ √ √Guinea Bissau i g √ √ √Haiti √ i √ √ √ √KiribatiLao People’s Democratic Republic √ √ h h h

Lesotho √ √ √ √ √ √Liberia √ g

Madagascar √ √ √ √ √ √Malawi √ √ √ √ √Maldives √ √ √Mali √ √ √ √ √ √Mauritania √ √ √ √ √ √Mozambique √ √ √ √ √ √Myanmar √ √ √Nepal √ √ √ h h h

Niger √ √ g √ √ √Rwanda √ g √ √ √Samoa √ √ h h h

Sao Tome and Principe i h h h

Senegal √ √ √ √ √ √Sierra Leone √ √ √ √ √Solomon Islands √ g √ √ √Somalia √Sudan √ √ h h h

Togo √ √ √ √ √TuvaluUganda √ √ √ √ √ √United Republic of Tanzania √ √ √ √ √ √Vanuatu √ h h h

Yemen i √ h h h

Zambia √ √ √ √ √ √

Source: UNCTAD.

a Convention on the Recognition and Enforcement of Foreign Arbitral Awards.b Convention on the Settlement of Investment Disputes between States and Nationals of other States.c Convention Establishing the Multi lateral Investment Guarantee Agency.d Agreement on Trade-related Investment Measures.e General Agreement on Trade in Services.f Agreement on Trade-related Aspects of Intellectual Property Rights.g Countries in the process of fulf i l l ing membership requirements of MIGA.h Observer status in the WTO.i Signed but not ratif ied.

��


Box III.13. UNCTAD’s InvestmentPolicy Reviews

Many LDCs have significantly liberalizedtheir FDI regimes, and Governments are keento know how well their reforms are working:How much new FDI is coming in and is it ofthe right kind? Does its impact on the nationaleconomy conform with the stated objectives?What more should be done to improve thequantity and quality of inflows? With thedismantling of traditional monitoring systems,policy-makers are often unable to assess theimpact of investment measures. UNCTAD’sInvestment Policy Reviews (IPRs) are intendedto fill this void.

IPRs are undertaken by UNCTAD uponrequests by Governments. They have beencompleted for three LDCs (Ethiopia, Ugandaand the United Republic of Tanzania) and fiveother countries (Ecuador, Egypt, Mauritius, Peruand Uzbekistan). As of July 2002, IPRs werein progress in Botswana, Lesotho, Ghana andNepal. Other LDCs that have requested IPRsinclude Benin, Cambodia, Mauritania andMozambique.

The IPRs are funded primarily through extra-budgetary resources. More specifically,individual country projects are funded on a cost-sharing basis by the United Nations DevelopmentProgramme (UNDP), donor Governments, hostGovernments and, as appropriate, the local andtransnational private sectors (by sponsoringindividual workshops or providing in-kindsupport, such as technical studies or industryexperts).

The IPRs are conducted by UNCTAD staffand international and national experts, with inputsfrom the Government and the private sector.The reviews are discussed in workshops involvingpublic officials and other stakeholders. Theyare also considered by UNCTAD’sCommission on Investment, Technology andRelated Financial Issues. The final texts are widelydisseminated.

The IPRs have a common format. Thereare three sections: the country’s objectives andcompetitive position in attracting FDI; the FDIpolicy framework and administrative procedures;and policy options. The reviews examine howpolicies affect FDI flows. Since investor responseis based on both policy and non-policy factors,a key feature of the reviews is to survey actualinvestors on how they perceive currentinvestment conditions and opportunities. Potentialinvestors are also surveyed.

Overall , the IPRs assess a country’spotential in attracting FDI and the effectiveness

/...

Table III.9. Existence of investmentpromotion agencies in LDCs,

as of June 2002

MemberCountry IPA of WAIPA

AfghanistanAngola √ √Bangladesh √ √Benin √ √BhutanBurkina FasoBurundiCambodia √Cape Verde √ √Central African Republic √Chad √ComorosDemocratic Republic of Congo √ √Djibouti √ √Equatorial GuineaEritrea √Ethiopia √ √Gambia √ √Guinea √ √Guinea-BissauHaiti √ √Kiribati √ √Lao People’s Democratic Republic √Lesotho √ √Liberia √Madagascar √Malawi √ √Maldives √ √Mali √ √Mauritania √ √Mozambique √Myanmar √Nepal √ √Niger √ √RwandaSamoa √ √Sao Tome and PrincipeSenegal √ √Sierra Leone √ √Solomon Islands √ √SomaliaSudan √ √Togo √TuvaluUganda √ √United Republic of Tanzania √ √Vanuatu √ √Yemen √ √Zambia √ √

Source: UNCTAD, information obtained from WAIPA.

of capital flows need to expand in orderto maximize their developmental impact. Anumber of the measures proposed in theLDC Programme of Action, adopted in May2001 at the Third United Nations Conferenceon the Least Developed Countries (UNCTAD,2002b), are of relevance in this respect andshould be actively pursued.

��


Box III.13. UNCTAD’s InvestmentPolicy Reviews (concluded)

of policies in leveraging the competit ivestrengths of a country. They provide policyrecommendations that are concise, practical andgeared to implementation by decision-makers.They also include proposals for coherenttechnical assistance and follow-up. A fewcountries have already implemented or are inthe process of implementing the recommendedactions. Mauritius, for example, is finalizing areview of its fiscal incentives regime.

Source : UNCTAD.

Box III.14. BIT negotiations with a focus onLDCs

UNCTAD assists LDCs in the area of BITsby facilitating negotiations between partnercountries. Two negotiating events took placein 2001. In the first event, 18 countries (10 LDCs,6 developing and 2 developed countries)participated in the bilateral negotiations. Theywere Belgium, Benin, Burkina Faso, Burundi,Cameroon, Chad, Comoros, Egypt, Ghana, Guinea,Madagascar, Malaysia, Mali , Mauritania,Mauritius, South Africa, Switzerland and Zambia.A total of 42 BITs were finalized and initialled,9 treaties were negotiated, and 22 agreementswere signed during the Third United NationsConference on LDCs in Brussels, in May 2001.Another round for LDCs (Cambodia, Eritrea,Malawi, Mozambique, Uganda and Zambia) wasorganized to negotiate with Belgium-Luxembourg,France, the Netherlands and Sweden in October2001. As a result, 13 BITs were concluded. Thesenegotiating events provide LDCs with theopportunity not only to conclude treaties, butalso to exchange experiences and comparenegotiating approaches.

Source : UNCTAD.

Box III.15. Opportunities and conditions inLDCs: the UNCTAD - ICC Investment

Guides

The project on “investment guides andcapacity-building for least developed countries”is a collaborative venture by UNCTAD and theInternational Chamber of Commerce (ICC). Itsobjective is to bring together parties withcomplementary interests: firms seekingopportunities and countries seeking investors.This is not always a straightforward exercise,since firms are driven by strategic considerationsas much as by locational advantages, andcountries have economic and social objectivesthat transcend attracting foreign investment.

/...

Box III.15. Opportunities and conditions inLDCs: the UNCTAD - ICC Investment

Guides (concluded)

The UNCTAD-ICC guides are intended toserve two purposes at once: to furnish potentialinvestors with an assessment tool and to furnishGovernments with a marketing tool. Apart frombeing clearly structured and attractivelypresented, these third-party guides offer thecrit ical advantage of credibili ty. This isunderscored by a short concluding chapter thatsummarizes the perceptions of the private sectoralready established in the country of its strengthsand weaknesses as an investment location.

As of May 2002, guides had been producedfor Bangladesh, Ethiopia, Mali, Mozambiqueand Uganda, and work had started for Cambodiaand Nepal. The guides are available on theUNCTAD website and the ipanet.net websiteof the Multilateral Investment Guarantee Agency(MIGA).

Source : UNCTAD.

Notes

1 The acquisition of VoiceStream Wireless Corp.by Deutsche Telekom for $29.4 billion was thelargest cross-border M&A deal undertaken in2001 (annex table A.I.2). Cross-border M&Aswere also important in commercial lending, foodindustries, banking, insurance, publishing andelectronic security.

2 About 200 leading TNCs were surveyed in July-August 2001 (MIGA, 2002) and were revisiteda month after September 11. Similar results wereobtained through a survey among 129 TNCsconducted by UNCTAD, Invest in France Agency(AFII) and Andersen, in summer 2001 andupdated by telephone interviews in November2001, according to which the United Statesemerged as the preferred investment locationamong developed countries (see UNCTAD, 2001afor the results of this survey). These surveysrevealed that the investment plans of the majorityof respondents were unaffected by the eventsof September 11 (box I.1).

3 Of Banamex by Citigroup for $12.5 billion (annextable A.I.2).

4 The largest foreign affiliates in services (excludingfinance and insurance) in the EU are linked tofirms within the region. The exception is Ireland,where the major foreign affiliates in IT-relatedservices are United States-owned (UNCTAD,forthcoming b).

5 Increases in FDI inflows have continued in 2002,fuelled by announcements of large-scale M&As,such as the acquisition of the agrochemicalunit of Aventis by Bayer (Germany) for a reported$6.7 billion. “Bayer confirms CropSciencepurchase”, Financial Times, 3 October 2001.

6 Including the acquisition of Aqua Spring byPerrier Vittel of Nestlé, as well as FDI in telecomsand utilities.

��


7 During 2001, 86 foreign investment projectsassisted by the Netherlands Foreign InvestmentAgency (NFIA) were attracted into the country,originating mainly from the United States asin previous years and despite the recession.The majority of investments were IT activities,although investment in manufacturing also tookplace. While the majority of projects weregreenfield investments, there were some follow-up investments as well. Twenty-two Europeanheadquarters, 28 European distribution centres,several call centres and shared-services centres,and two new R&D establishments were locatedin the Netherlands in 2001 (NFIA, 2002).

8 Cross-border M&A transactions completed in2001 fell by 62 per cent in value from the previousyear’s record high, totalling $24.4 billion in 2001.This was unsurprising, since the lion’s shareof FDI flows traditionally originates in the UnitedStates (United Kingdom, National Statistics,2002).

9 The FDI inflows and outflows of Belgium andLuxembourg were very modest in 2001 comparedwith the previous year. The exceptionally highamounts in 2000, however, became evident onlyafter the data were significantly revised to reflectthe value of transactions related to a cross-border M&A deal, as the transaction and therelated value were determined and reflectedin the balance-of-payments statistics onlyretroactively. On the basis of the revised data,Belgium and Luxembourg became the secondlargest FDI recipient (behind the United States)and the second largest outward investorworldwide (behind the United Kingdom) in 2000.

10 Against the background of the largest ever cross-border M&A transaction, the takeover ofMannesmann by VodafoneAirTouch for some$200 billion in 2000, Germany’s inflows in 2001are still above the annual average of the 1995-1998 period.

11 French TNCs have invested significantly inthe United States recently. Vivendi, a formerutility company, had acquired media companiesfor some $50 billion between mid-2000 and end-2001 (Financial Times, 21 December 2001).Furthermore, outflows in 2000 were significantlyinfluenced by France Télécom’s acquisition ofOrange Plc of the United Kingdom. Large cross-border M&As in 2001 include the acquisitionof full ownership of Axa Financial Inc. of the UnitedStates and Blue Circle Industries in the UnitedKingdom (annex table A.I.2).

12 This looks less dramatic when one takes intoconsideration the exceptionally large outflowsgenerated by the acquisition of Mannesmannby VodafoneAirTouch in 2000, as mentioned earlier.

13 Including acquisitions of telephone operatorsin the Mexican market such as Norcel, Cedetel,Bajacel, Movitel, for a total reported value of2.1 billion euro. In 2002, Telefónica acquireda majority stake in the Mexican mobile operator,Pegasus. “Telefónica avanza en la negociaciónpara adquirir la firma mexicana Pegaso”, El País,13 February 2001.

14 Cross-border M&As by Italian TNCs includedthe acquisition of LASMO (United Kingdom)by ENI and Euralux (Luxembourg) by Mediobancafor $4.0 billion and $1.1 billion, respectively.

15 The Government of Iceland has systematicallymade its business environment more attractivefor FDI through a series of tax cuts. The country’scorporate income tax of 18 per cent is now amongthe lowest in Europe. Furthermore, a 5 per centcorporate income tax is applied to companiesregistered in Iceland as International TradingCompanies and engaged in export activities.The country’s attractiveness for FDI, in spiteof its small size, is reflected in its high rankingbased on the UNCTAD FDI Potential Index,though this potential is not matched in termsof actual FDI performance according to theUNCTAD Inward FDI Performance Index (tableII.1).

16 According to data on plant and equipmentinvestment compiled by Nihon Keizai Shimbun,domestic investment declined by 3.3 per centin all industries. It is expected to decline furtherin 2002 by 12.9 per cent. Nihon Keizai Shimbun,7 April 2002.

17 Investment in the United States was dominatedby such M&As as the $9.8 billion acquisitionof AT&T Wireless by NTT Docomo and the$2.3 billion investment in Lucent Technologiesby Furukawa Electric.

18 Japanese TNCs also expanded existingmanufacturing facilities in Europe, and some70 per cent of Japanese manufacturing affiliatesin Western Europe were considering expandingtheir facilities in 2001-2002 (JETRO, 2001).

19 On a notification basis, as reported by theMinistry of Finance, FDI inflows did not declinein 2000. This was essentially due to largedivestments during that year that were recordedin FDI inflows on a balance-of-payments basis,but not on a notification basis. Similarly, in2001, the decline in FDI inflows on the latterbasis was small.

20 For example, VodafoneAirTouch invested in JapanTelecom to become the latter’s largest shareholder.In insurance, United States firms, such as AIGand Prudential, acquired Japanese firms in 2001.

21 They are Solectron (United States), FlextronicsInternational (Singapore), Celestica (Canada),SCI Systems (United States) and Jabil Circuit(United States). See chapter V for a furtheranalysis of contract manufacturers.

22 The acquisition was not financed only by FDI.23 Against the background of the acquisition of

Seagram by Vivendi (France) in 2000, whichaccounted for more than half of Canada’s totalinflows.

24 According to the South African Reserve Bank,“these inflows were largely a consequence ofthe cancellation of the cross-shareholdingbetween the Anglo-American Corporation, whichis the non-resident company, and the De BeersMining Company” (SARB, Quarterly Bulleting,September 2001, p. 23). Therefore the increasein FDI inflows to South Africa was accompaniedby a simultaneous decline in FDI outflows fromSouth Africa.

25 Data from United States Department ofCommerce. Apart from outflows from the UnitedStates to North and sub-Saharan Africa, another$48 million went to the continent without furtherspecification of their precise regional destination.

��


26 FDI outflow data to Africa are available forFrance, Germany, the Netherlands, Switzerland,the United Kingdom and the United States. ForSwitzerland, information is available only atthe sectoral level, while all other countries reporttheir figures by individual industry.

27 Due to the unavailability of relevant data, thissectoral analysis does not include FDI outflowsfrom a number of other significant homecountries for FDI in Africa, and in particular,from Asia. Although the figures in table III.3include the most important home countries andrepresent approximately 75 per cent of all FDIflows from OECD-DAC member countries during1996-2000, the absence of data for certain homecountries might bias the results in certainrespects. A good example is FDI totelecommunications which is insignificant forthe home countries included in table III.3, butwhich accounted for a large share in privatization-related FDI in Africa during the 1990s. Muchof the FDI in this industry was undertaken byAsian companies (in particular from Malaysia)or from other African countries, including SouthAfrica. Nonetheless, overall, the figures providedhere give a fair picture of the recent trends inthe sectoral composition of FDI flows into Africa.

28 Some respondents to the UNCTAD/AFII/Andersen survey also mentioned Nigeria andAngola as interesting locations (UNCTAD, 2001a).The MIGA survey mentioned Mozambique, Côted’Ivoire, Morocco, Nigeria, Mali, Mauritius,Senegal, Ghana and Kenya, in that order (MIGA,2002).

29 DeloitteToucheTohmatsu, USA-RSA BusinessSpotlight, 27 February 2002.

30 While the swap of Anglo American and De Beersshares might have contributed to additionalFDI outflows from South Africa, instead, thecomplex deal led to a large-scale repatriationof capital to South Africa. This is partly dueto the fact that some key shareholders inDe Beers who also held Anglo American sharessold part of their interest in Anglo Americanand repatriated the capital to South Africa.

31 In 2002, General Motors Corp. announced a$400 million deal to take over three auto plantsfrom Daewoo Motors Co., and Lehman Brotherssigned a tentative deal to invest $1 billion inWoori Finance Holding.

32 Taipei Times, 18 January 2002.33 Foreign firms are already actively involved in

infrastructure development (in particular waterand power plants) planned in many parts ofthis region, though they do not bring in muchFDI because of the special financing schemesnormally used for infrastructure projects (e.g.build-operate-transfer or project finance).

34 Assuming that every dollar of cross-border M&As,as reported in annex table B.8, istranslated into FDI flows.

35 http://koreaexim.go.kr/osis/osismain.html36 For an in-depth examination of FDI issues relating

to Latin America and the Caribbean, see ECLAC,2002.

37 Two other important deals in Mexico were theacquisition of the insurance company SCA by

ING from the Netherlands for $800 million, andthe acquisition by Vodafone of a 34 per centstake in Iusacell for $1 billion.

38 Both surveys, conducted before the debt defaultand devaluation of December 2001, had rankedthe FDI prospects for Argentina also relativelyhigh.

39 Two large telecom operators, Telefónica (Spain)and Portugal Telecom, decided not to increasetheir local stakes in the Brazilian telecom industrybecause of perceived adverse market conditions(EIU, Business Latin America, 8 February 2002).

40 EIU, Business Latin America, 4 February 2002.41 Differences between investors (both foreign

and local) and regulators related mainly to therestrictive terms of natural gas sales by theState-owned Petrobras and the way the nationalpower grid apportioned electricity across thesystem. EIU, Business Latin America, 4 February2002.

42 Exports by the maquila sector in Mexico fellby 3.3 per cent in 2001 (Mexico, Secretaría deEconomía, 2001). EPZ exports also fell in CostaRica (27 per cent) and the Dominican Republic(2 per cent).

43 Prospects for new FDI in oil have been fadingsince the Government of Venezuela raisedroyalties in November 2001 from 16.6 per centto 30 per cent. Another deterrent to foreigninvestors is the new rule that the State oilmonopoly, Petróleos de Venezuela (PDVSA),must hold a majority stake in new joint ventures.

44 In 2001, the real GDP of CEE grew by 2.9 percent, compared with 2.3 per cent for thedeveloping countries and 0.9 per cent for thedeveloped countries (UNDESA and UNCTAD,2002, pp. 41-46).

45 Croatia, the Czech Republic, Estonia, Hungary,Latvia, Lithuania, Poland, the Republic ofMoldova and Slovakia. Albania also fell in theabove-potential category as it had highperformance despite low potential.

46 Belarus, the Russian Federation and Slovenia.47 The registered outflows of the Russian

Federation do not include capital flight, estimatedto exceed $20 billion per year.

48 This section updates the Overview of UNCTAD,2001c. For an up-to-date analysis of the economicsituation of LDCs, see UNCTAD, 2002b.

49 In developing countries taken as a whole,however, FDI became the largest componentof net resource flows (see chapter I.A).

50 In 1986-1990, these were Angola, Lesotho, Liberia,Myanmar and Zambia; in 1996-2001, these wereAngola, Cambodia, Lesotho, Myanmar and theSudan.

51 The ultimate parent firm of the acquired companyin this transaction is Texaco Inc. of the UnitedStates .

52 Bangladesh, Cambodia, Cape Verde, Ethiopia,Lao People’s Democratic Republic, Myanmar,Nepal, Solomon Islands and Uganda.

53 There were eight changes in six countries(Burkina Faso, the Democratic Republic of theCongo, Eritrea, Sierra Leone, the Sudan andthe United Republic of Tanzania) in 2001.

CHAPTER IV

THE LARGEST TRANSNATIONALCORPORATIONS

This chapter looks at developmentsin the universe of the largest non-financialTNCs,1 ranked by their foreign assets in2000: the 100 largest worldwide (table IV.1),the largest 50 from developing countries(table IV.10) and the largest 25 from theeconomies in transition of Central and EasternEurope (CEE) (table IV.17).

It should be noted that the data –and therefore the discussion – refer to theyear 2000, at the height of the stock marketboom and cross-border M&A act ivi t ies .Things have changed considerably in 2001and 2002 – as exemplified by events in thetelecoms industry; these will be discussedin next year ’s WIR . The foreign assets,sales and employment of the top 100 TNCsin the year 2000 accounted for 11 per cent,14 per cent and 14 per cent, respectively,of the estimated foreign assets, sales andemployment2 of some 65,000 TNCs nowoperating in the world (table I.1 and annextable A.I.3). The lion’s share of their foreignopera t ions i s control led by companiesheadquartered in a limited number of countries.Nonetheless, the role of the largest TNCsbased in these countries is growing, despitethe fact that the share of developing countriesin total FDI outflows has declined over thepast decade (see annex table A.I.1). Thelargest TNCs from Asia and Latin America– which dominate the l ist of the largestfrom developing countries – have recentlybeen expanding abroad at a brisk pace. Inaddit ion, some TNCs from Africa, morespecifically from South Africa, have, in recentyears, opted for a strategy of internationalgrowth, partly through cross-border M&As.The degree of transnationalization of a numberof the 25 larges t TNCs f rom CEE isincreasing as well.

A. The 100 largest TNCsworldwide

1. Highlights

In 2000, Vodafone (United Kingdom)climbed to the top position among the world’s100 largest non-financial TNCs (table IV.1).The company’s ascent to the top was theresult of a string of cross-border takeoverdeals concluded in that year and crownedby the acquisition of Mannesmann (Germany)– ranked e ighteenth in 1999 – which,consequently, disappeared from the l is t .Vodafone’s appearance in the list highlightstwo major factors that affected the rankingof the top 100 in 2000: first, the year markedthe peak of an unprecedented wave of cross-border M&As that engulfed a l l majorindustries, most of all the telecommunicationsand other “new economy” industries; second,and somewhat related to the first, the year2000 saw the peak of an almost uninterrupted10-year-long stock-market rally in NorthAmerica and Western Europe. This resultedin dramatically increased asset valuationsfor the companies listed in these marketsand actively involved in M&As. Indeed,the top 100, as a group, expanded significantlyin size, with two-digit growth rates in theirassets and sales, both foreign and total (tableIV.2) . The ascent of another te lecomcompany – Telefonica (Spain) – into thetop 10 also test if ies to these factors, asdoes the rise of Vivendi Universal (France)to the fourth spot after a series of acquisitionsthat turned what was originally a util i tycompany into the largest media and telecomcompany by foreign assets . Even someof the regulars in the top 10 – such as thepetroleum companies, ExxonMobil and BP

��


Ta

ble

IV

.1.

Th

e w

orl

d’s

to

p 1

00

no

n-f

ina

nc

ial

TN

Cs

, ra

nk

ed

by

fo

reig

n a

ss

ets

, 2

00

0(M

illi

on

s o

f d

oll

ars

an

d n

um

be

r o

f e

mp

loye

es)

Ra

nk

ing

in

20

00

:

Ran

kin

g i

n 1

999:

A

ss

ets

S

ale

s

E

mp

loy

me

nt

Fo

reig

nF

ore

ign

TN

Ia

as

se

tsT

NIa

as

se

tsT

NIa

Co

rpo

rati

on

Ho

me

eco

no

my

Ind

ust

ryb

Fo

reig

nTo

tal

Fo

reig

nc

Tota

lF

ore

ign

Tota

l(P

er

cen

t)

11

5-

-V

od

afo

ne

Un

ite

d K

ing

do

mTe

leco

mm

un

ica

tio

ns

22

1 2

38

22

2 3

26

7 4

19

11

74

7 2

4 0

00

29

46

58

1.4

27

31

74

Ge

ne

ral E

lect

ric

Un

ite

d S

tate

sE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

15

9 1

88

43

7 0

06

49

52

8 1

29

85

3 1

45

00

0 3

13

00

04

0.3

33

02

22

Exx

on

Mo

bil

Un

ite

d S

tate

sP

etr

ole

um

exp

l./r

ef.

/dis

tr.

10

1 7

28

14

9 0

00

14

3 0

44

20

6 0

83

64

00

0 9

7 9

00

67

.74

42

47

79

Viv

en

di

Un

ive

rsa

lF

ran

ceD

ive

rsif

ied

93

26

0 1

41

93

5 1

9 4

20

39

35

7 2

10

08

4 3

27

38

05

9.7

58

44

82

Ge

ne

ral M

oto

rsU

nit

ed

Sta

tes

Mo

tor

veh

icle

s 7

5 1

50

30

3 1

00

48

23

3 1

84

63

2 1

65

30

0 3

86

00

03

1.2

64

63

43

Ro

yal

Du

tch

/Sh

ell

Un

ite

d K

ing

do

m/

Ne

the

rla

nd

sP

etr

ole

um

exp

l./r

ef.

/dis

tr.

74

80

7 1

22

49

8 8

1 0

86

14

9 1

46

54

33

7 9

5 3

65

57

.57

24

10

18

BP

Un

ite

d K

ing

do

mP

etr

ole

um

exp

l./r

ef.

/dis

tr.

57

45

1 7

5 1

73

10

5 6

26

14

8 0

62

88

30

0 1

07

20

07

6.7

88

06

81

Toyo

ta M

oto

rJa

pa

nM

oto

r ve

hic

les

55

97

4 1

54

09

1 6

2 2

45

12

5 5

75

.. 2

10

70

93

5.1

95

53

07

3Te

lefó

nic

aS

pa

inTe

leco

mm

un

ica

tio

ns

55

96

8 8

7 0

84

12

92

9 2

6 2

78

71

29

2 1

48

70

75

3.8

10

47

50

80

Fia

tIt

aly

Mo

tor

veh

icle

s 5

2 8

03

95

75

5 3

5 8

54

53

55

4 1

12

22

4 2

23

95

35

7.4

115

79

49

IBM

Un

ite

d S

tate

sE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

43

13

9 8

8 3

49

51

18

0 8

8 3

96

17

0 0

00

31

6 3

03

53

.51

24

41

24

5V

olk

swa

ge

nG

erm

an

yM

oto

r ve

hic

les

42

72

5 7

5 9

22

57

78

7 7

9 6

09

16

0 2

74

32

4 4

02

59

.41

36

4-

-C

he

vro

nTe

xaco

Un

ite

d S

tate

sP

etr

ole

um

exp

l./r

ef.

/dis

tr.

42

57

6 7

7 6

21

65

01

6 1

17

09

5 2

1 6

93

69

26

54

7.2

14

52

48

53

Hu

tch

iso

n W

ha

mp

oa

Ho

ng

Ko

ng

, C

hin

aD

ive

rsif

ied

41

88

1 5

6 6

10

2 8

40

7 3

11 2

7 1

65

49

57

05

5.9

15

23

19

57

Su

ez

Fra

nce

Ele

ctri

city

, g

as

an

d w

ate

r 3

8 5

21

43

46

0 2

4 1

45

32

211

11

7 2

80

17

3 2

00

77

.11

69

37

50

Da

imle

rCh

rysl

er

Ge

rma

ny/

Un

ite

d S

tate

sM

oto

r ve

hic

les

..

18

7 0

87

48

71

7 1

52

44

6 8

3 4

64

41

6 5

01

24

.01

711

31

14

Ne

ws

Co

rpo

rati

on

Au

stra

liaM

edia

36

10

8 3

9 2

79

12

77

7 1

4 1

51

24

50

0 3

3 8

00

84

.91

84

112

Ne

stlé

Sw

itze

rla

nd

Fo

od

& b

eve

rag

es

35

28

9 3

9 9

54

48

92

8 4

9 6

48

21

8 1

12

22

4 5

41

94

.71

96

2-

-To

talF

ina

Elf

Fra

nce

Pe

tro

leu

m e

xpl.

/re

f./d

istr

. 3

3 1

19

81

70

0 8

2 5

34

10

5 8

28

30

02

0 1

23

30

34

7.6

20

87

16

54

Re

pso

l Y

PF

Sp

ain

Pe

tro

leu

m e

xpl.

/re

f./d

istr

. 3

1 9

44

48

77

6 1

5 8

91

42

56

3 1

6 4

55

37

38

72

9.3

21

51

20

32

BM

WG

erm

an

yM

oto

r ve

hic

les

31

18

4 4

5 9

10

26

14

7 3

4 6

39

23

75

9 9

3 6

24

56

.32

24

82

24

2S

on

yJa

pa

nE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

30

21

4 6

8 1

29

42

76

8 6

3 6

64

10

9 0

80

18

1 8

00

57

.22

37

7-

-E

.On

Ge

rma

ny

Ele

ctri

city

, g

as

an

d w

ate

r .

. 1

14

95

1 4

1 8

43

86

88

2 8

3 3

38

18

6 7

88

39

.42

43

21

3A

BB

Sw

itze

rla

nd

Ma

chin

ery

an

d e

qu

ipm

en

t 2

8 6

19

30

96

2 2

2 5

28

22

96

7 1

51

34

0 1

60

81

89

4.9

25

10

33

35

Ph

ilip

s E

lect

ron

ics

Ne

the

rla

nd

sE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

27

88

5 3

5 8

85

33

30

8 3

4 8

70

18

4 2

00

21

9 4

29

85

.72

68

--

An

glo

Am

eri

can

Un

ite

d K

ing

do

mM

inin

g &

qu

arr

yin

g 2

6 0

00

30

61

6 1

8 1

00

20

57

0 2

30

00

0 2

49

00

08

8.4

27

19

17

13

Dia

ge

oU

nit

ed

Kin

gd

om

Fo

od

& b

eve

rag

es

25

98

0 3

7 5

50

15

88

0 1

8 4

70

59

58

7 7

2 4

74

79

.12

89

11

58

9W

al-

Ma

rt S

tore

sU

nit

ed

Sta

tes

Re

tail

25

74

2 7

8 1

30

32

10

0 1

91

32

9 3

00

00

0 1

30

0 0

00

24

.32

94

32

92

7H

on

da

Mo

tor

Jap

an

Mo

tor

veh

icle

s 2

5 5

76

46

14

6 4

1 9

09

57

45

4 5

6 2

00

11

2 4

00

59

.53

02

64

32

5A

lca

tel

Fra

nce

Ma

chin

ery

an

d e

qu

ipm

en

t 2

4 4

61

39

52

4 2

5 2

69

29

48

7 .

. 1

31

59

87

2.8

31

53

57

Bri

tish

Am

eri

can

To

ba

cco

Un

ite

d K

ing

do

mTo

ba

cco

23

86

0 2

5 0

76

16

37

4 1

7 6

03

82

58

3 8

6 8

05

94

.43

26

63

46

8N

issa

n M

oto

rJa

pa

nM

oto

r ve

hic

les

23

34

7 5

1 6

10

28

68

0 4

8 7

17

39

69

8 1

33

83

34

4.6

33

37

46

36

BA

SF

Ge

rma

ny

Ch

em

ica

ls 2

3 2

08

36

19

7 2

6 3

32

33

74

6 4

8 9

17

10

3 2

73

63

.23

41

82

76

Ro

che

Sw

itze

rla

nd

Ph

arm

ace

uti

cals

22

96

0 4

2 4

69

17

23

2 1

7 5

37

56

09

9 6

4 7

58

79

.73

53

14

13

3B

aye

rG

erm

an

yP

ha

rma

ceu

tica

ls 2

1 2

88

33

91

7 2

4 8

75

28

81

8 6

5 9

00

12

2 1

00

67

.73

67

43

66

7E

ni

Ita

lyP

etr

ole

um

exp

l./r

ef.

/dis

tr.

20

78

8 4

5 6

88

19

311

44

60

6 2

1 2

79

69

96

93

9.7

37

49

24

8U

nil

eve

rU

nit

ed

Kin

gd

om

/N

eth

erl

an

ds

Div

ers

ifie

d 2

0 3

82

52

58

7 2

6 0

67

44

25

4 2

15

00

0 2

95

00

05

6.8

38

85

57

6F

ord

Mo

tor

Un

ite

d S

tate

sM

oto

r ve

hic

les

19

87

4 2

83

39

0 5

1 6

91

17

0 0

58

18

5 2

64

35

0 1

17

30

.13

91

86

34

Rio

Tin

toU

nit

ed

Kin

gd

om

/A

ust

ralia

Min

ing

& q

ua

rryi

ng

19

40

5 1

9 4

43

9 7

35

9 9

72

33

41

5 3

4 3

99

98

.24

05

62

54

8A

ve

nti

sF

ran

ceP

ha

rma

ceu

tica

ls 1

9 2

64

38

14

2 1

4 0

88

20

94

04

4 4

77

d 1

02

48

95

3.7

/...

��

CHAPTER IV THE LARGEST TRANSNATIONAL CORPORATIONS

Ta

ble

IV

.1.

Th

e w

orl

d’s

to

p 1

00

no

n-f

ina

nc

ial

TN

Cs

, ra

nk

ed

by

fo

reig

n a

ss

ets

, 2

00

0 (

co

nti

nu

ed

)(M

illi

on

s o

f d

oll

ars

an

d n

um

be

r o

f e

mp

loye

es)

Ra

nk

ing

in

20

00

:

R

anki

ng

in

199

9:

As

se

ts

Sa

les

Em

plo

ym

en

t

Fo

reig

nF

ore

ign

TN

Ia

as

se

tsT

NIa

as

se

tsT

NIa

Co

rpo

rati

on

Ho

me

eco

no

my

Ind

ust

ryb

Fo

reig

nTo

tal

Fo

reig

nc

Tota

lF

ore

ign

Tota

l(P

er

cen

t)

41

79

44

69

Texa

s U

tilit

ies

Co

mp

an

y (T

XU

)U

nit

ed

Sta

tes

Ele

ctri

city

, g

as

an

d w

ate

r 1

9 2

24

43

42

0 7

76

1 2

2 0

09

4 6

77

16

54

03

5.9

42

89

45

85

Mit

sui

& C

om

pa

ny

Jap

an

Wh

ole

sale

tra

de

19

11

8 6

4 0

71

45

90

1 1

28

16

2 5

65

9 3

9 3

44

26

.74

35

9-

-P

fize

rU

nit

ed

Sta

tes

Ph

arm

ace

uti

cals

19

10

0 3

3 5

00

10

00

0 2

9 4

00

56

00

0 9

0 0

00

51

.14

45

83

95

1H

ew

lett

-Pa

cka

rdU

nit

ed

Sta

tes

Ele

ctri

cal

& e

lect

ron

ic e

qu

ipm

en

t .

. 3

4 0

09

27

50

5 4

8 8

71

..

87

94

45

3.4

45

41

61

77

Ca

rre

fou

rF

ran

ceR

eta

il 1

7 1

37

24

06

5 2

8 6

64

60

29

8 2

09

54

2 3

30

24

76

0.7

46

60

67

70

Pro

cte

r &

Ga

mb

leU

nit

ed

Sta

tes

Div

ers

ifie

d 1

6 9

67

34

19

4 1

9 9

13

39

95

1 .

. .

.4

8.3

47

27

42

26

Co

ca-C

ola

Un

ite

d S

tate

sF

oo

d &

be

vera

ge

s 1

6 5

60

20

83

0 1

2 7

40

20

46

0 2

8 2

00

37

00

07

2.7

48

68

48

62

Pe

ug

eo

tF

ran

ceM

oto

r ve

hic

les

16

33

4 4

6 9

63

28

46

6 4

2 9

78

54

50

0 1

72

40

04

4.2

49

25

61

Th

om

son

Ca

na

da

Med

ia 1

5 5

22

15

69

9 6

09

4 6

51

4 3

3 6

00

36

00

09

5.3

50

61

57

60

Do

w C

he

mic

al

Un

ite

d S

tate

sC

he

mic

als

15

50

0 3

5 9

91

16

74

7 2

9 5

34

24

00

0 5

3 2

89

48

.35

17

11

44

1S

iem

en

sG

erm

an

yE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

..

75

22

9 3

1 3

01

71

38

8 .

. 4

48

00

04

1.2

52

99

02

0A

stra

zen

eca

Un

ite

d K

ing

do

mP

ha

rma

ceu

tica

ls 1

5 0

00

18

00

0 1

5 0

09

15

80

4 4

7 0

00

57

00

08

6.9

53

14

75

52

Ro

yal

Ah

old

Ne

the

rla

nd

sR

eta

il 1

4 8

27

23

99

0 3

3 6

53

48

00

0 .

. 2

48

05

38

2.5

54

22

70

19

Sto

ra E

nso

Oys

Fin

lan

dP

ap

er

14

72

7 1

9 8

41

11

34

8 1

2 1

12

26

69

7 4

1 7

85

77

.35

56

93

24

4M

oto

rola

Un

ite

d S

tate

sTe

leco

mm

un

ica

tio

ns

14

71

3 4

2 3

43

21

79

6 3

7 5

80

58

00

0 1

47

00

04

4.1

56

95

54

95

Hit

ach

iJa

pa

nE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

14

65

0 9

2 8

04

22

11

0 7

5 4

83

67

81

9 3

37

911

21

.75

73

3-

-C

om

pa

gn

ie D

e S

ain

t-G

ob

ain

Fra

nce

No

n-m

eta

llic

min

era

l p

rod

uct

s 1

4 4

87

29

22

2 1

9 8

29

26

79

8 1

25

13

0 1

71

12

56

5.6

58

10

0-

-V

eri

zon

Co

mm

un

ica

tio

ns

Un

ite

d S

tate

sTe

leco

mm

un

ica

tio

ns

14

46

6 1

64

73

5 1

97

6 6

3 4

23

..

26

3 5

52

4.0

59

70

38

47

Joh

nso

n &

Jo

hn

son

Un

ite

d S

tate

sP

ha

rma

ceu

tica

ls 1

4 4

36

34

24

5 1

2 1

39

29

84

6 4

9 3

38

10

1 9

01

43

.76

09

97

31

00

SB

C C

om

mu

nic

ati

on

sU

nit

ed

Sta

tes

Tele

com

mu

nic

ati

on

s 1

4 3

00

98

65

1 6

90

0 5

1 3

74

..

22

0 0

89

9.3

61

86

65

93

RW

EG

erm

an

yE

lect

rici

ty,

ga

s a

nd

wa

ter

13

80

0 6

0 0

00

16

40

0 4

4 6

00

45

51

3 1

52

13

22

9.9

62

78

55

71

Ma

tsu

shit

a E

lect

ric

Ind

ust

ria

lJa

pa

nE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

13

74

5 7

2 5

18

33

97

4 6

8 8

62

14

3 7

73

29

0 4

48

39

.36

35

07

16

1A

ES

Un

ite

d S

tate

sE

lect

rici

ty,

ga

s a

nd

wa

ter

13

65

9 3

1 0

33

4 1

85

6 6

91

..

26

60

65

6.5

64

96

--

De

uts

che

Po

stG

erm

an

yT

ran

spo

rt a

nd

sto

rag

e 1

3 4

95

13

9 3

80

8 9

65

30

70

7 5

1 6

13

27

8 7

05

19

.16

51

66

31

7M

ich

elin

Fra

nce

Ru

bb

er

tyre

s 1

2 9

00

15

95

0 1

2 5

57

14

32

6 9

6 5

04

12

8 1

22

81

.36

63

86

83

1E

rics

son

Sw

ed

en

Tele

com

mu

nic

ati

on

s 1

2 6

40

26

35

2 2

3 2

61

29

82

8 6

2 6

98

10

5 1

29

61

.96

73

96

22

4M

cDo

na

ld's

Un

ite

d S

tate

sR

est

au

ran

ts 1

2 4

75

21

68

5 8

42

0 1

4 2

45

25

0 0

00

36

4 0

00

61

.86

82

1-

-W

PP

Gro

up

Un

ite

d K

ing

do

mB

usi

ne

ss s

erv

ice

s 1

2 1

45

13

37

2 3

65

7 4

45

3 .

. 5

1 1

95

78

.56

92

88

73

0V

olv

oS

we

de

nM

oto

r ve

hic

les

12

13

3 2

1 0

53

16

23

7 1

7 4

89

47

56

5 7

2 0

31

72

.27

05

3-

-G

laxo

Sm

ith

Klin

eU

nit

ed

Kin

gd

om

Ph

arm

ace

uti

cals

11

95

3 2

7 4

47

18

52

8 2

7 0

06

58

00

0 1

07

51

75

5.4

71

72

61

40

Ca

no

nJa

pa

nE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

11

73

7 2

4 6

27

4 9

97

24

18

5 4

7 1

77

86

67

34

0.9

72

92

52

96

Su

mit

om

oJa

pa

nW

ho

lesa

le t

rad

e 1

1 6

72

39

28

6 1

0 1

35

80

00

0 9

15

3 3

0 7

15

24

.17

38

17

88

6M

erc

k &

Co

Un

ite

d S

tate

sP

ha

rma

ceu

tica

ls 1

1 6

48

40

15

5 7

29

2 4

0 3

63

26

20

0 4

9 3

00

33

.47

44

56

94

6R

ob

ert

Bo

sch

Ge

rma

ny

Ma

chin

ery

an

d e

qu

ipm

en

t 1

1 0

79

22

80

0 2

1 1

40

29

36

0 1

08

76

1 1

98

66

65

8.4

75

17

77

23

Da

no

ne

Fra

nce

Fo

od

& b

eve

rag

es

10

94

9 1

6 1

79

9 9

10

13

41

3 8

8 2

85

86

65

78

1.1

76

40

10

04

7C

em

ex

Me

xico

No

n-m

eta

llic

min

era

l p

rod

uct

s 1

0 8

87

15

75

9 3

02

8 5

62

1 1

5 4

48

25

88

46

0.9

77

75

80

97

Nis

sho

Iw

ai

Jap

an

Wh

ole

sale

tra

de

10

67

2 2

9 1

45

19

49

6 5

2 2

13

1 9

51

4 3

13

39

.77

83

6-

-C

ab

le &

Wir

ele

ssU

nit

ed

Kin

gd

om

Tele

com

mu

nic

ati

on

s 1

0 6

22

34

32

1 1

0 2

53

14

67

8 4

8 8

33

54

91

96

3.2

79

97

--

Jap

an

To

ba

cco

Jap

an

Tob

acc

o 9

95

9 2

9 1

59

3 7

60

41

18

0 .

. 4

1 7

03

18

.78

09

85

99

9It

och

uJa

pa

nW

ho

lesa

le t

rad

e 9

89

4 4

1 6

26

18

73

6 9

7 9

44

..

38

86

71

5.2

81

32

98

37

Bri

dg

est

on

eJa

pa

nR

ub

be

r/ty

res

9 7

56

18

88

4 1

0 8

94

18

59

1 8

9 7

54

10

2 6

15

65

.9

/...

��


Tab

le I

V.1

. T

he

wo

rld

’s t

op

10

0 n

on

-fin

an

cia

l T

NC

s,

ran

ke

d b

y f

ore

ign

as

se

ts,

20

00

(c

on

clu

de

d)

(Mil

lio

ns

of

do

lla

rs a

nd

nu

mb

er

of

em

plo

yee

s)

Ra

nk

ing

in

20

00

:

R

anki

ng

in

199

9:

As

se

ts

Sa

les

Em

plo

ym

en

t

Fo

reig

nF

ore

ign

TN

Iaa

ss

ets

TN

Iaa

ss

ets

TN

IaC

orp

ora

tio

nH

om

e e

con

om

yIn

du

stry

bF

ore

ign

Tota

lF

ore

ign

cTo

tal

Fo

reig

nTo

tal

(Pe

r ce

nt)

82

20

81

15

L'A

ir L

iqu

ide

Fra

nce

Ch

em

ica

ls 9

64

3 1

0 7

00

5 7

60

7 4

80

20

90

0 3

0 3

00

78

.78

32

5-

-P

ea

rso

nU

nit

ed

Kin

gd

om

Med

ia 9

55

6 1

3 0

62

4 5

80

5 7

87

18

81

7 2

4 6

88

76

.28

48

34

97

2F

ujit

suJa

pa

nE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

9 4

76

41

93

6 1

5 2

75

44

22

9 7

1 0

00

18

7 3

99

31

.78

53

5-

-N

ors

k H

ydro

Asa

No

rwa

yD

ive

rsif

ied

9 3

78

22

19

1 1

6 1

18

17

72

7 2

1 9

01

38

16

66

3.5

86

7-

-In

terb

rew

Be

lgiu

mF

oo

d &

be

vera

ge

s 9

27

4 1

0 3

83

6 7

04

7 3

84

33

00

0 3

6 4

63

90

.28

73

4-

-C

arn

iva

lU

nit

ed

Sta

tes

Tou

rism

9 2

00

9 8

00

5

98

3 7

79

27

00

0 3

2 0

00

64

.78

82

9-

-A

lca

nC

an

ad

aM

eta

l a

nd

me

tal

pro

du

cts

9 0

30

18

40

7 8

52

3 9

24

4 2

6 0

00

37

00

07

0.5

89

88

66

87

Ma

rub

en

iJa

pa

nW

ho

lesa

le t

rad

e 9

00

0 5

2 6

82

40

00

0 9

6 4

38

..

31

34

22

8.3

90

13

95

12

Ca

db

ury

- S

chw

ep

pe

sU

nit

ed

Kin

gd

om

Fo

od

& b

eve

rag

es

8 8

45

9 6

51

5 4

12

6 8

34

29

64

8 3

6 4

60

84

.19

16

79

4E

lect

rolu

xS

we

de

nE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

8 8

10

9 5

19

13

08

9 1

3 5

76

78

96

9 8

7 1

28

93

.29

26

3-

-L

G E

lect

ron

ics

Ko

rea

, R

ep

ub

lic o

fE

lect

rica

l &

ele

ctro

nic

eq

uip

me

nt

8 7

50

17

70

9 9

33

1 1

8 5

58

20

07

2 4

6 9

12

47

.59

31

27

41

0A

kzo

No

be

lN

eth

erl

an

ds

Ph

arm

ace

uti

cals

8 6

00

10

90

0 1

1 9

00

12

60

0 5

5 6

00

68

40

08

4.9

94

65

88

63

Usi

no

rF

ran

ceM

eta

l a

nd

me

tal

pro

du

cts

8 5

41

14

29

7 5

19

0 1

4 7

71

24

18

0 6

0 5

21

44

.99

56

7-

-C

on

oco

Un

ite

d S

tate

sP

etr

ole

um

exp

l./r

ef.

/dis

tr.

8 3

11 1

5 6

18

10

62

1 3

1 9

36

8 2

80

17

57

94

4.5

96

90

97

56

Mit

sub

ish

i Mo

tors

Jap

an

Mo

tor

veh

icle

s 8

16

9 2

8 7

32

15

08

4 3

7 9

05

2 0

91

24

36

02

5.6

97

76

83

83

Pe

tró

leo

s d

e V

en

ezu

ela

Ve

ne

zue

laP

etr

ole

um

exp

l./r

ef.

/dis

tr.

8 0

17

57

08

9 4

9 7

80

53

23

4 5

45

8 4

6 9

20

39

.79

85

42

83

8R

en

au

ltF

ran

ceM

oto

r ve

hic

les

7 9

36

19

65

3 2

4 1

21

37

38

3 9

8 0

00

16

6 1

14

54

.69

98

2-

-P

etr

on

as

Ma

lays

iaP

etr

ole

um

exp

l./r

ef.

/dis

tr.

7 6

90

36

59

4 1

1 7

90

19

30

5 3

80

8 2

3 4

50

32

.81

00

94

--

Ph

ilip

Mo

rris

Un

ite

d S

tate

sD

ive

rsif

ied

7 4

25

79

06

7 3

2 0

51

63

27

6 .

. 1

78

00

02

2.4

So

urc

e:

UN

CT

AD

/Era

smu

s U

niv

ers

ity

da

tab

ase

.

a

Th

e t

ran

sna

tio

na

lity

ind

ex

(TN

I) i

s ca

lcu

late

d a

s th

e a

vera

ge

of

the

fo

llow

ing

th

ree

ra

tio

s: f

ore

ign

ass

ets

to

to

tal

ass

ets

, fo

reig

n s

ale

s to

to

tal

sale

s a

nd

fo

reig

n e

mp

loym

en

tto

to

tal

em

plo

ym

en

t.b

In

du

str

y c

las

sif

ica

tio

n f

or

co

mp

an

ies

fo

llo

ws

th

e U

nit

ed

Sta

tes

Sta

nd

ard

In

du

str

ial

Cla

ss

ific

ati

on

.c

In a

nu

mb

er

of

ca

se

s c

om

pa

nie

s r

ep

ort

ed

on

ly t

ota

l fo

reig

n s

ale

s w

ith

ou

t d

isti

ng

uis

hin

g b

etw

ee

n e

xp

ort

fro

m t

he

pa

ren

t c

om

pa

ny

an

d s

ale

s o

f th

eir

fo

reig

n a

ffil

iate

s.

So

me

fo

reig

n

sa

les

fi

gu

res

m

igh

t th

ere

fore

a

lso

in

clu

de

p

are

nt

co

mp

an

y

ex

po

rts

.d

Em

plo

ym

en

t fo

r o

uts

ide

E

uro

pe

...

Da

ta o

n f

ore

ign

ass

ets

, fo

reig

n s

ale

s a

nd

fo

reig

n e

mp

loym

en

t w

ere

no

t a

vail

ab

le.

In c

ase

of

no

n-a

vail

ab

ilit

y, t

he

y a

re e

stim

ate

d u

sin

g s

eco

nd

ary

so

urc

es

of

info

rma

tio

no

r o

n t

he

ba

sis

of

the

ra

tio

s o

f fo

reig

n t

o t

ota

l a

ss

ets

, fo

reig

n t

o t

ota

l s

ale

s a

nd

fo

reig

n t

o t

ota

l e

mp

loy

me

nt.

No

te:

In s

om

e c

om

pa

nie

s, f

ore

ign

in

vest

ors

ma

y h

old

a m

ino

rity

sh

are

of

mo

re t

ha

n 1

0 p

er

cen

t.

��


– consolidated their positions through a numberof cross-border M&As. Despite these changes,the composition of the top 10 remained fairlys table compared to previous years : theremaining places were filled with regularson the list, including General Electric, last

year’s largest TNC by foreign assets, RoyalDutch/Shell, Toyota Motor and General Motors– which remain the larges t automobi lemanufacturers on the list – and Fiat, whichreplaced DaimlerChrysler3 in third placeamong the car manufacturers.

In general, the ranking of the top100 is also related to the degree of theirparticipation in cross-border M&As. Thelargest 20 companies most actively involvedin cross-border M&As accounted for one-fifth of the total value of cross-border M&Adeals during the past 15 years: 1987-2001(table IV.3). Many of the largest TNCs alsofigure in this league. The recent boom inM&A activity has made large TNCs largerthan ever. This is illustrated by the valueand number of M&As in which some ofthe largest have been involved. For example,BP spent $94 billion for its 98 cross-borderM&A transactions during 1987-2001, andGeneral Electric concluded 228 cross-borderM&As during the same period (table IV.3).Indeed, some of the largest TNCs are largerthan many countries, if the size of both ismeasured by value added (box IV.1).

Table IV.3. The top 20 TNCs ranked by value of cross-border M&A activity,a 1987-2001

Valueb

(bllions of NumberRank Name Home country Industry dollars) of deals

1 Vodafone United Kingdom Telecommunications 297.6 282 BP United Kingdom Petroleum 94.1 983 Daimler-Benz/DaimlerChrysler Germany/United States Motor vehicles 54.6 884 Deutsche Telekom Germany Telecommunications 52.8 245 Mannesmann Germany Telecommunications & engineering 44.7 476 AXA/AXA-UAP France Insurance 41.6 737 ZENECA Group United Kingdom Pharmaceuticals 35.8 168 BT United Kingdom Telecommunications 32.9 479 Aventis France Pharmaceuticals 31.7 38

10 Nestlé Switzerland Food and beverages 28.1 13611 General Electric United States Electronic and electrical equipment 25.4 22812 Roche Holding Switzerland Pharmaceuticals 24.7 2313 Allianz/Allianz Holding Germany Insurance 23.9 10114 Suez France Electric, gas and water distribution 23.3 10615 Zurich Insurance Switzerland Insurance 22.7 3716 News Corporation Australia Media 22.6 8217 Citigroup United States Banking 21.5 5218 Deutsche Bank Germany Banking 20.6 9419 Seagram Canada Food and beverages 20.2 2420 Aegon Netherlands Insurance 18.8 28Top 10 713.9 595Top 20 937.7 1 370Total 4 605.2 59 273

Source: UNCTAD cross-border M&A database, based on data from Thomson Financial Securities Data Company.

a Includes cross-border M&As concluded by their affi l iates.b Includes only the deals for which information on transaction values is available.

Table IV.2. Snapshot of the world’s top100 TNCs, 2000

(Billions of dollars, number ofemployees and percentage)

ChangeVariable 2000 1999 2000 vs. 1999

Assets Foreign 2 554 2 115 20.8 Total 6 293 5 101 23.4Sales Foreign 2 441 2 129 14.6 Total 4 797 4 318 11.1Employment Foreign 7 132 946 6 057 557 17.8 Total 14 257 204 13 385 861 6.5Average index oftransnationality 55.7 52.3 3.4a

Source: UNCTAD/Erasmus University database.

a The change between 1999 and 2000 is expressedin percentage points.

��


There is no doubt that TNCs have beengrowing in size at rates exceeding those of manyeconomies. The sales of the 500 largest firmsin the world nearly tripled between 1990 and 2001,awhile world GDP in current prices increased1.5 times between these two years. UNCTAD’s100 TNCs also increased their total sales, from$3.2 trillion to almost $4.8 trillion between 1990and 2000.

The size of large TNCs is sometimescompared to that of countries’ economies, asan indicator of the influence that the former havein the world economy. According to onecomparison of the sales volume of firms withthe GDP of countries, the sales of the top 200firms accounted for 27.5 per cent of world GDPin 1999 (Anderson and Cavanagh, 2000). Of the50 largest “economies”, 14 were TNCs and 36were countries.

However, a comparison of the sales of firmswith the GDP of countries is conceptually flawed,as GDP is a value-added measure and sales arenot. A comparable yardstick requires that salesbe recalculated as value added. For firms, valueadded can be estimated as the sum of salariesand benefits, depreciation and amortization, andpre-tax income (De Grauwe and Camerman, 2002).Based on this measure, the world’s largest TNCwas ExxonMobil, with an estimated $63 billionin value added in 2000; i t ranked 45th in acombined list of countries and non-financialcompanies (box table IV.1.1). The size of thiscompany equals the size of the economies of Chileor Pakistan in terms of value added. In the top100 of a combined country-company list for 2000,there were 29 TNCs; half of the largest value-added entities ranked between 51 and 100 wereindividual firms (box table IV.1.1).

Box table IV.1.1. How large are the top TNCs vis-à-vis economies in 2000?(Bill ions of dollars)

Valuea Valuea Valuea

Rank Name of TNC/economy added Rank Name of TNC/economy added Rank Name of TNC/economy added

Box IV.1. Are some TNCs bigger than countries?

Source: UNCTAD.

a GDP for countries and value added for TNCs. Value added is defined as the sum of salaries, pre-tax profits anddepreciation and amortisation.

b Value added is estimated by applying the 30 per-cent share of value added in the total sales, 2000, of 66 manufacturersfor which the data were available.

c Value added is estimated by applying the 16 per-cent share of value added in the total sales, 2000, of 7 tradingcompanies for which the data on value added were available.

d Value added is estimated by applying the 37 per-cent share of value added in the total sales, 2000, of 22 othertertiary companies for which the data on value added were available.

/...

1 United States 9 8102 Japan 4 7653 Germany 1 8664 United Kingdom 1 4275 France 1 2946 China 1 0807 Italy 1 0748 Canada 7019 Brazil 595

10 Mexico 57511 Spain 56112 Korea, Republic of 45713 India 45714 Australia 38815 Netherlands 37016 Taiwan Province of China 30917 Argentina 28518 Russian Federation 25119 Switzerland 23920 Sweden 22921 Belgium 22922 Turkey 20023 Austria 18924 Saudi Arabia 17325 Denmark 16326 Hong Kong, China 16327 Norway 16228 Poland 15829 Indonesia 15330 South Africa 12631 Thailand 12232 Finland 12133 Venezuela 120

67 Libyan Arab Jamahiriya 3168 B P 3069 Wal-Mart Stores 30c

70 IBM 27b

71 Volkswagen 2472 Cuba 2473 Hitachi 24b

74 TotalFinaElf 2375 Verizon Communications 23d

76 Matsushita Electric Industrial 22b

77 Mitsui & Company 20c

78 E.On 2079 Oman 2080 Sony 20b

81 Mitsubishi 20c

82 Uruguay 2083 Dominican Republic 2084 Tunis ia 1985 Philip Morris 19b

86 Slovakia 1987 Croatia 1988 Guatemala 1989 Luxembourg 1990 SBC Communications 19d

91 Itochu 18c

92 Kazakhstan 1893 Slovenia 1894 Honda Motor 18b

95 Eni 1896 Nissan Motor 18b

97 Toshiba 17b

98 Syrian Arab Republic 1799 GlaxoSmithKline 17

100 B T 17

34 Greece 11335 Israel 11036 Portugal 10637 Iran, Islamic Republic of 10538 Egypt 9939 Ireland 9540 Singapore 9241 Malaysia 9042 Colombia 8143 Phi l ippines 7544 Chile 7145 ExxonMobil 63b

46 Pakistan 6247 General Motors 56b

48 Peru 5349 Algeria 5350 New Zealand 5151 Czech Republic 5152 United Arab Emirates 4853 Bangladesh 4754 Hungary 4655 Ford Motor 4456 DaimlerChrysler 4257 Nigeria 4158 General Electric 39b

59 Toyota Motor 38b

60 Kuwait 3861 Romania 3762 Royal Dutch/Shell 3663 Morocco 3364 Ukraine 3265 Siemens 3266 Viet Nam 31

��


In total, 22 entries were registered in 2000 (tablesIV.4 and IV.5). The newcomers have a number ofinteresting features:

• They come f rom a wide range ofindustries, although there seems to bea slight concentration in service industries,

in particular in telecommunications andthe media.

• Most of the newcomers are from Europe,especially from the United Kingdom, butalso from smaller countries such as Belgiumand Norway.

Table IV.4. Newcomers to the world’s top 100 TNCs, 2000

Ranking by

Foreign TNIa

assets TNIa Corporation Home country Industry (Per cent)

1 15 Vodafone United Kingdom Telecommunications 81.413 64 ChevronTexaco United States Petroleum expl./ref./distr. 47.219 62 TotalFinaElf France Petroleum expl./ref./distr. 47.623 77 E.On Germany Electricity, gas and water 39.426 8 Anglo American United Kingdom Mining & quarrying 88.443 59 Pfizer United States Pharmaceuticals 51.157 33 Compagnie De Saint-Gobain France Non-metallic mineral products 65.658 100 Verizon Communications United States Telecommunications 4.064 96 Deutsche Post Germany Transport and storage 19.168 21 WPP Group United Kingdom Business services 78.570 53 GlaxoSmithKline United Kingdom Pharmaceuticals 55.478 36 Cable & Wireless United Kingdom Telecommunications 63.279 97 Japan Tobacco Japan Tobacco 18.783 25 Pearson United Kingdom Media 76.285 35 Norsk Hydro Asa Norway Diversified 63.586 7 Interbrew Belgium Food & beverages 90.287 34 Carnival United States Tourism 64.788 29 Alcan Canada Metal and metal products 70.592 63 LG Electronics Korea, Republic of Electrical & electronic equipment 47.595 67 Conoco United States Petroleum expl./ref./distr. 44.599 82 Petronas Malaysia Petroleum expl./ref./distr. 32.8

100 94 Philip Morris United States Diversified 22.4

Source: UNCTAD/Erasmus University database.a The transnationlity index (TNI) is calculated as the average of the following three ratios: foreign assets to total

assets, foreign sales to total sales and foreign employment to total employment.

The value-added activities of the largestTNCs have grown faster than those ofcountries in recent years. Those of the 100largest TNCs accounted for 4.3 per cent ofworld GDP in 2000, compared with 3.5 percent in 1990. This increase – amounting tosome $600 billion – was almost equivalentto the GDP of Spain. The concentration ofvalue added in the 10 to 50 largest TNCs,as measured by the share of their value addedin GDP, however, has declined somewhat overthe past decade (box table IV.1.2). It shouldbe noted that the number of the largest TNCsthat fell within the combined top 100 list ofcompanies and countries was 24 in 1990, fiveless than in 2000. Increases in the share of

value added of the largest 100 TNCs in worldGDP confirm that their size has become evenlarger over the pas t decade.

Box table IV.1.2. The concentration ratio of thelargest 100 TNCs in world GDP, 1990 and 2000

(Per cent)

Value added as a percentage of world GDP

Number of TNCs 1 9 9 0 2 0 0 0

Top 10 TNCs 1 .0 0 .9Top 20 TNCs 1 .8 1 .5Top 50 TNCs 2 .9 2 .8Top 100 TNCs 3 .5 4 .3

Source : UNCTAD, database on the largest TNCs.

Source : UNCTAD.a “The Fortune Global 500”, Fortune, 22 April 1991 and 15 April 2002.

Box IV.1. Are some TNCs bigger than countries? (concluded)

��


• Two of the newcomers are companiesthat ranked high on the l ist of top 50TNCs from developing countries in 1999.

• Almost all newcomers, with the exceptionof Ver izon and, to a lesser degree ,Deutsche Post, Petronas, Philip Morris,Japan Tobacco, E. ON and LG Electronics,are already in advanced stages of theirtransnationalization processes, as is evidentfrom their above-average transnationalityindex figures.

• While most of the new entrants figurein the lower ranks of the top 100 list,three (led by Vodafone) made it immediatelyinto the top quartile, reflecting the dynamicprocess characterized by M&As.

As for the companies exiting fromthe list, 11 of the 22 departures are explainedby M&As. They include four German firms,eight from the United States and two fromFrance. The industry most affected has beenpetroleum and mining (with six companiesdisappearing from the list or being absorbedinto a newly formed company) . Onetelecommunications company also droppedout . Whi le these were cases of fu l lacquisitions, the exit of other companiesresulted from partial acquisitions: For instance,Southern Company, a United States-based utility,

lost its place as the result of a sell-off ofmost of its overseas operations.

A record five firms among the top100 TNCs – Petronas (Malaysia), HutchisonWhampoa (Hong Kong, China) , Cemex(Mexico), Petroleos de Venezuela and LGElect ronics (Republ ic of Korea) – areheadquartered in a developing country. Thesecompanies are involved in a var ie ty ofindustries, both traditional ones like oil andpetroleum, and “new economy” ones liketelecommunications and electronics, suggestingthat firms from developing countries havethe potential to become global players ina range of industries.

In the 1990s, developing-country firmsgained more prominence on the top 100 list,and the composition of developed-countryfirms changed (table IV.6).

• Firms from the EU accounted for morethan half of the total foreign assets ofthe top 100 firms, up from 45 per centat the beginning of the 1990s. This is adirect consequence of a comprehensiverestructuring in the course of the EUintegration process. Thus, while the numberof European firms on the list remained

Table IV.5. Departures from the world's top 100 TNCs, 2000a

Ranking in 1999 by

Foreign TNIassets TNI Corporation Home country Industry (Per cent)

8 21 Total Fina France Petroleum expl./ref./distr. 70.313 11 Nippon Mitsubishi Oil Japan Petroleum expl./ref./distr. 82.418 58 Mannesmann Germany Telecommunications/engineering 48.923 9 Seagram Canada Beverages/media 88.626 84 Mitsubishi Japan Diversified 29.737 78 Chevron United States Petroleum expl./ref./distr. 34.240 53 Elf Aquitaine France Petroleum expl./ref./distr. 51.751 65 Veba Group Germany Diversified 42.453 66 Du Pont (E.I.) de Nemours United States Chemicals 41.358 5 Holcim (ex Holderbank) Switzerland Construction materials 91.864 16 Glaxo Wellcome United Kingdom Pharmaceuticals 76.672 28 Compart Italy Food & beverages 63.876 94 Southern Company United States Utility 19.882 90 Edison International United States Electronics 24.384 29 Montedison Group Italy Chemicals/agrindustry 62.285 64 Viag Germany Diversified 43.389 92 Atlantic Richfield United States Petroleum expl./ref./distr. 23.391 88 Lucent Technologies United States Electronics 25.992 39 Crown Cork & Seal United States Packaging 57.593 75 Metro Germany Retailing 36.494 55 Texaco United States Petroleum expl./ref./distr. 51.296 91 Toshiba Japan Electronics 23.3


a This also includes companies that could not be considered because of their late responses to the UNCTAD questionnaireand for which estimates could not be derived.

��


stable, firms grew larger by merging ortaking over rivals inside and outside theEU. Firms from the United Kingdomwere at the forefront of this process:Their share in the foreign assets of thetop 100 firms increased to more than afifth, and their number grew to 14, thethird largest after the United States andJapan. While a similar development couldbe observed for French firms, the trendthere was less obvious.

• Although the United States is still thehome country for the single largest numberof companies on the list, its importancein this respect has declined somewhatover the past decade. This is becauseUnited States companies have focused

more on M&As within the United States,while their European rivals often havehad no alternative but to expand throughforeign acquisitions. Liberal M&A legislationin the United States facilitates the takeoverof firms in that country, while such dealshave hurdles to pass in Europe.

• Japanese firms fell back in the top 100list. Although their number has increasedfrom 12 to 16 in the past 10 years, theirshare in foreign assets has remained stableor fallen. Thus, fewer Japanese firmsare to be found at the top end of thelist. While at the end of the 1980s andthe beginning of the 1990s many Japanesefirms were engaged in cross-border M&As,the burs t of the s tock market bubble

Table IV.6. Home economies of the world’s top 100 TNCs by transnationality indexand foreign assets, 1990, 1995 and 2000

Share in total of Average TNIa foreign assets of top 100 Number

(Per cent) (Per cent) of entries

Economy 2000 1995 1990 2000 1995 1990 2000 1995 1990

European Union 67.1 66.0 56.7 53.0 43.8 45.5 49 39 48France 63.2 57.6 50.9 12.0 8.9 10.4 13 11 14Germany 45.9 56.0 44.4 9.3 12.2 8.9 10 9 9

United Kingdomb 76.9 64.8 68.5 21.0 12.2 8.9 14 10 12The Netherlandsb 84.4 79.0 68.5 2.0 8.2 8.9 3 4 4Italy 48.6 35.8 38.7 2.9 2.3 3.5 2 2 4Sweden 75.7 80.6 71.7 1.3 1.7 2.7 3 3 5Finland 77.3 - - 0.6 - - 1 - -Spain 41.6 - - 3.4 - - 2 - -Belgium 90.2 70.4 60.4 0.4 0.9 1.0 1 2 1

North America 62.9 46.0 41.2 28.1 35.9 32.5 25 34 30United States 43.0 41.9 38.5 27.2 33.3 31.5 23 30 28Canada 82.9 76.5 79.2 1.0 2.7 1.0 2 4 2

Japan 35.9 31.9 35.5 10.7 15.1 12.0 16 17 12

Other economies 48.9 66.9 73.0 7.6 9.0 10.0 10 10 10Switzerland 89.7 83.6 84.3 3.4 6.6 7.5 3 5 6Australiab 0.8 - 51.8 0.8 - 1.6 1 3 2Venezuela 39.7 44.4 - 0.3 0.4 - 1 1 -New Zealand - - 62.2 - - 0.5 - - 1Republic of Korea 47.5 47.7 - 0.3 0.7 - 1 1 -Norway 63.5 - 58.1 0.4 - 0.4 1 - 1Malaysia 32.8 - - 0.3 - - 1 - -Mexico 60.9 - - 0.4 - - 1 - -Hong Kong, China 55.9 - - 1.6 - - 1 - -

Total/averagefor all economies 57.8 51.5 51.1 100 100 100 100 100 100

Source: UNCTAD and Erasmus University database.

a The transnationality index (TNI) is calculated as the average of the following three ratios: foreign assets to totalassets, foreign sales to total sales and foreign employment to total employment.

b Due to dual nationality, Royal Dutch Shell and Unilever are counted as an entry for both the United Kingdomand The Netherlands. In the aggregate for the European Union and the total of all l isted TNCs, they are countedonce. Rio Tinto Plc is counted as an entry for both the United Kingdom and Australia. In the aggregate for thetotal of all 100 l isted TNCs, it is counted once.

�


in Japan at the beginning of the decadeleft many firms (with some exceptions)without the means for larger M&As (seechapter III).

Foreign assets. Growth in foreignassets held by the 100 largest TNCs continuedin 2000. Total foreign assets increased bymore than 20 per cent, to $2.5 trillion (tableIV.2). The TNCs that registered the threelargest increases in foreign assets were VivendiUniversal, Pfizer and Rio Tinto, as a resultof M&As. Some telecom firms also saw animpressive double-digit increase in their foreignassets. These included Telefonica, Verizon,Cable&Wireless and Hutchinson Whampoa(which is diversified, but has a considerableinterest in telecoms abroad). All these companiestoo were involved in major M&As. Othercompanies that experienced significant increaseshad a diversified industrial and geographicbackground. All in all, the fact that 45 ofthe companies saw a double-digit rate ofincrease in their foreign assets as a resultof M&As underlines the importance of theseactivities during 1999-2000. On the otherhand, an unprecedented number of TNCs(20) in the top 100 suffered declines. Thesecompanies were in a wide range of industries,with the exception of “new economy” onessuch as telecommunications. Firms fromthree industries – electrical and electronicequipment, motor vehicles and pharmaceuticals– accounted for more than half of all thecases experiencing reduced foreign assetsin 2000. In addition to technical reasonsrelated to the definition of foreign assetsand operations (see footnote 3 for an example),there are several other reasons for this:

• Some companies reduced their foreignassets (in the context of changed corporatestrategies) through spin-offs of certainsegments of their businesses followingrestructuring or M&As, as was the casewith Siemens and Infineon.

• The fact that a quarter of the companiesthat exper ienced a reduct ion of thei rforeign assets in 2000 were f rom theelectrical and electronic equipment industriessuggests that these f irms were amongthe f i rs t to be hi t by the economicslowdown, and responded with cost-savingss t ra tegies that included the sa le ofmanufacturing operations abroad to contractmanufacturing (chapter V).

• Finally, given that an economic slowdownhad begun in 2000 in a t leas t some

industries, some of the declines in foreignassets might have been a corporateresponse to dimmer economic prospects.

In sum, the variation in the fortunesof the top 100 with respect to foreign assetsunderlines the importance of the dynamicdevelopments in M&A activities during 2000.

Foreign sales.4 Total foreign salesof the world’s 100 largest TNCs amountedto slightly more than $2.4 trillion in 2000(table IV.2), up by more than 14 per centfrom 1999. This expansion exceeded thatof total sales (11 per cent), pointing to theincreasing importance of foreign sales. Aswith foreign assets, TNCs from the petroleumindustry feature prominently in the list ofthe largest TNCs ranked by foreign sales,with ExxonMobil ($143 billion), BP ($106billion), TotalFinaElf ($83 billion), Royal Dutch/Shell ($81 billion) and ChevronTexaco ($65billion) leading in the list. The top 10 byforeign sales include a number of automobilemanufacturers (Toyota, Volkswagen and Ford,in that order). The only company in anindustry other than petroleum and automobilesamong the top 10 by foreign sales is IBM,which ranks ninth, with just over $51 billionin foreign sales. Interestingly, many telecomcompanies that rank high on the list by foreignassets can be found at the bottom whenit comes to ranking by foreign sales, suggestingthat share price developments, particularlyin these industries, had little to do with theoperational fundamentals of the companiesin that year. The most dynamic increasesin fore ign sa les were recorded for twopetroleum companies from developing countries,Petroleos de Venezuela and Petronas ofMalaysia, followed by Aventis of France.In general, almost half (48) of the top 100companies experienced double-digit growthrates in foreign sales. However, as withforeign assets, 20 per cent recorded lowersales. The reasons for this are the sameas those explaining the reduction in foreignassets . As for the 10 s teepest decl inesin foreign sales, no clear pattern can bediscerned: TNCs experiencing declines camefrom var ious countr ies and indust r ies .DaimlerChrysler (-60 per cent) heads thislist, followed by Siemens (-41 per cent) andUnilever. However, contrary to foreign sales,most declines in foreign assets were no biggerthan 5 per cent.

As for the distribution of foreign salesof the largest 100 TNCs by country of origin,

�


it closely resembles the distribution of foreignassets ( table IV.6).

Foreign employment . There wasa major reversal in foreign employment bythe top 100. While the companies on thelist had reduced their foreign employmentby almost 8 per cent in 1999, this trendwas reversed in 2000. Foreign employmentby the top 100 firms rose by more than17 per cent, to an unprecedented 7 millionout of a to ta l of more than 14 mi l l ionemployees. This is particularly remarkablesince the trend in total employment did notchange. As in the previous year, to ta lemployment increased at a steady rate ofabout 6 per cent (table IV.2). Again, aswith the other parameters for the firms makingup the list of top 100, performance variedconsiderably: but some 20 companies increasedtheir foreign employment by 10 per centor more, but another 35 actually reducedtheir workforce abroad. The companiessignificantly expanding their foreign employmentin 2000 were spread across the top 100list and over all industries, including companiessuch as Vivendi Universal (100 per cent),BP (42 per cent) and Telefonica (75 percent ) . However, there was someconcentration mainly in the industries in whichmost of the M&A action took place duringthat year (i.e. telecommunications, oil andpetroleum, mining and retail). The large numberof companies that reduced their foreignworkforce suggests that, despite the ongoingwave of cross-border M&As, most companiesremained highly cost-sensitive in the aftermathof the Asian crisis and in response to thefirst signs of the global slowdown alreadylooming on the horizon.

The 10 TNCs account ing for thelargest reductions in foreign employmentlargelyoverlapped with the 10 that experiencedthe largest declines in foreign sales. ManyTNCs among those that experienced thelarges t decl ines in fore ign asse ts werecompanies going through a post-mergerrestructuring phase, such as DaimlerChryslerand Aventis.

National origin. The national-origincomposition of the top 100 TNCs continuedto be fairly stable, although the number ofEU companies has increased since 1995and they have regained the position theyhad held at the beginning of the 1990s. Thenumber of Japanese companies on the list

has stabilized at a considerably higher levelthan at the beginning of the 1990s (1990:12, 2000: 16), although their share in foreignassets and sales has remained constant .Japanese companies now mostly occupy thelower end of the list. The increase in thenumber of European and Japanese companieson the l i s t has been a t the expense ofcompanies from the United States, whichnow form little more than a quarter of thetop 100, as against a third 10 years ago.Another interesting feature of the home-country distribution is that, although the numberof companies from non-Triad countries hasbeen stable, at around 10, these companiesnow come from a larger pool of countries,including five developing countries. Theprominence of Switzerland as a home countryfor non-Triad-TNCs on the list has beendrastically reduced. After a number of M&Adeals between Swiss firms as well as betweenSwiss and non-Swiss firms in the first halfof the 1990s, the subsequent absence ofsuch deals led to the gradual departure ofseveral Swiss firms from the list, as theywere overtaken by other firms that continuedto be more active in terms of M&A deals.

Industries . The list of the top 100TNCs in 2000 was dominated by the sameindustries as in previous years: electronicsand electrical equipment, motor vehicles andparts, petroleum exploration and distribution,and food and beverages (table IV.7). Togetherthey account for 47 of the 100 companieson the list. At first sight, this stability isremarkable, given the M&A activity in someof these industries. The explanation is that,while M&As led to the disappearance ofsome companies in these industries, theyalso brought new entrants. In some industries,most notably petroleum, these entrants includedcompanies from developing countries. Theindustries with the most remarkable increasein the number of firms on the list weretelecommunications and utilities. Deregulationand privatization of these industries in thepast decade, especially in Europe, explainthis trend.

2. Transnationality

The Transnationality Index appliedto host countries in chapter I can also beused to capture the foreign dimension ofthe activit ies of the top TNCs. I t is theaverage of three ratios for a firm: foreignassets/total assets, foreign sales/total sales

��


and foreign employment/total employment.Between 1991 and 2000, the averageTransnationality Index value of the world’stop 100 TNCs rose – with some interruptions– from 51 per cent in 1991 to almost 56per cent in 2000 (figure IV.I).5 This meansthat the companies on the list have become

more transnationalized. In recent years, theupward trend of this Index has been drivenmainly by the sales and employmentcomponents. This was also the case in 2000,when foreign sales and employment grewfaster than sales and employment generally,while total assets expanded more rapidly

Table IV.7. Industry composition of the top 100 TNCs, 1990, 1995 and 2000

Average TNI a per industry (Per cent) Number of entries

Industry 2000 1995 1990 2000 1995 1990

Motor vehicle and parts 59.7 42.3 35.8 15 14 13Electronics/electrical equipment/computers 50.5 49.3 47.4 12 18 14Petroleum exploration/refining/distribution and mining 70.8 50.3 47.3 12 14 13Pharmaceuticals 61.8 63.1 66.1 9 6 6Food/beverages/tobacco 70.1 61.0 59.0 8 12 9Telecommunications 45.4 46.3 46.2 7 5 2Diversified 51.1 43.6 29.7 6 2 2Other 60.6 59.4 57.6 6 5 7Trading 26.8 30.5 32.4 5 5 7Utilities 47.8 - - 5 - -Retailing 57.3 - - 4 - -Chemicals 63.4 63.3 60.1 3 11 12Machinery/engineering 75.4 37.9 54.5 3 1 3Media 85.4 83.4 82.6 3 2 2Metals 57.7 27.9 55.1 2 2 6Construction - 67.8 58.8 - 3 4

Total/average 58.9 51.5 51.1 100 100 100

Source: UNCTAD and Erasmus University database.a The transnationality index (TNI) is calculated as the average of the following three ratios: foreign assets to total


Figure IV.1. The transnationalization of the world’s top 100 TNCs, 1990-2000


Note : The ratios represent the averages of the individual ratios of foreign assets/total assets, foreign sales/total sales, foreign employment/total employment of the top 100 expressed in percentages. The averagetransnationality index (TNI) of the top 100 TNCs is the average of their individual transnationality indices.As a result, it is possible that the average TNI in some instances could be higher than any of the foreign/total ratios.

��


than foreign assets. Both the sales and theemployment components of the Index haveincreased significantly, while the foreignassets/total assets ratio actually fell slightlybetween 1990 and 2000. As already mentioned,the valuation of TNCs’ assets was subjectto changes in the stock market at the endof the 1990s and the beginning of this decade.Thus, at least in the so-called “new economy”,the expansion of the value of total assetscounterbalanced the increase in foreign assets.The increase in the Transnationality Indexfor the entire list was driven by a largernumber of companies wi th very hightransnationality indices: in 2000 a quarter(25) of the companies on the list had anindex value of 75 per cent or higher, whilein 1999 there were only 16.

In 2000, as in earlier years, a numberof the largest firms in the top 10 in termsof transnationality were from countries withsmall domestic markets (table IV.8). Theyinclude ABB and Nestlé of Switzerland,Electrolux of Sweden, Interbrew of Belgiumand Phi l ips of the Nether lands . Moreremarkable, however, is the fact that almosthalf of the companies on the top 10 listare from the United Kingdom. All thesecompanies have pursued a s t ra tegy ofconsol idat ing thei r market pos i t ion byacquisitions of competitors in Europe, NorthAmerica or other strategically importantmarkets. Companies from the United Statesand Japan are not on the list. Even thoughthey have expanded internat ional ly, theimportance of their relatively large homemarkets results in relatively low foreign-to-total ratios. As for the industry compositionon the list, a third of the companies in the

top 10 come from the food and beveragesindustry, including British American Tobacco,which is predominantly a tobacco firm buthas a considerable interests in food andbeverages operations, too. Another fifth aremining companies.

This largely mirrors the transnationalityof the top 100 in general. Taking the averageof the five largest companies by foreignassets for each of the major industrial groupson the list, TNCs in food and beverages,together with TNCs from the pharmaceuticalindust ry, have , on average , the h ighes ttransnationality index value (table IV.9).Petroleum has a lower average rank, in partbecause a number of the petroleum companiesare based in the United States with manyof their activities still taking place at home.While the top companies in electronics/electricalequipment and pharmaceutical industries weretransnationalized much less, on average, thanthose in food and beverage, they made stridesin international expansion during the 1990s.In the f i rs t of the two industr ies , manycompanies pursued a rigorous regionalizationstrategy, locating manufacturing and distributioncentres in key regions. Efforts were alsomade to cut costs by reducing the numberof parts and components produced in thehome country and decentra l iz ing thei rproduction to low-cost locations in (or closeto) key markets. At the same time, the drivetowards more efficient production also inspiredcross-border M&As with foreign competitors.This was par t icular ly t rue for thepharmaceut ical industry, in which ever-increas ing f ixed cos ts for R&D drovecompanies to realize economies of scalethrough M&As.

Table IV.8. The world’s top 10 TNCs in terms of transnationality, 2000

Ranking in 2000 Ranking in 1999

Foreign Foreign TNIa

assets TNI assets TNI Corporation Home country Industry (Per cent)

39 1 86 34 Rio Tinto United Kingdom Mining & quarrying 98.249 2 56 1 Thomson Canada Media 95.324 3 21 3 ABB Switzerland Machinery and equipment 94.918 4 11 2 Nestlé Switzerland Food & beverages 94.731 5 35 7 British American Tobacco United Kingdom Tobacco 94.491 6 79 4 Electrolux Sweden Electrical & electronic equipment 93.286 7 - - Interbrew Belgium Food & beverages 90.226 8 - - Anglo American United Kingdom Mining & quarrying 88.452 9 90 20 Astrazeneca United Kingdom Pharmaceuticals 86.925 10 33 35 Philips Electronics Netherlands Electrical & electronic equipment 85.7


a The transnationality index (TNI) is calculated as the average of the following three ratios: foreign assets to totalassets, foreign sales to total sales and foreign employment to total employment.

��


these companies are also newcomers (tableIV.4). The increases in the Index values atthe top are much larger than for companiesthat topped the Index in 1999. Again, thismirrors the leaps in transnationalization as

a result of cross-border M&As.As with the ranking of the topTNCs in the Index, the companieswith the largest increases intransnationality come from Europeand, in particular, from Franceand Germany. For somecompanies, values declinedconsiderably. Toyota Motor andMitsubishi Motors were amongthose that experienced the biggestdecline (figure IV.3). There arealso individual examples of firmson this list, such as Unileveror Roche, for which the valuesdeveloped differently from theaverage for their industries. Thishighlights the importance ofindividual firm strategies fortransnationalization, which candiffer significantly from thoseof their competitors.

Table IV.9. Average transnationality index of the top 5 TNCs in each industry,a

and their shares in the assets, sales and employment of the top 100,1990, 1995 and 2000

(Percentage)

Assets Sales Employment

Industry Year TNI Foreign Total Foreign Total Foreign Total

Petroleum2000 59.8 12.1 8.0 19.6 15.1 3.6 3.51995 64.8 12.9 8.0 13.6 10.0 4.0 3.11990 57.7 15.1 10.6 15.8 11.9 5.5 4.2

Motor vehicles2000 36.9 10.2 12.9 10.4 12.4 7.8 11.01995 38.6 14.0 17.3 9.6 13.4 9.7 13.51990 34.7 11.9 15.3 10.4 11.8 9.7 14.2

Electronics &electrical equipment

2000 52.1 10.9 10.6 8.4 7.6 9.1 7.81995 61.1 11.1 10.4 7.8 6.9 13.2 10.71990 36.1 6.4 7.4 4.7 6.3 6.5 9.6

Pharmaceuticals2000 64.2 3.8 2.6 3.3 2.3 3.8 3.11995 68.0 3.8 2.5 2.4 1.7 3.4 2.51990 47.1 1.5 1.3 1.6 1.4 2.4 2.3

Chemicals2000 60.7 2.6 1.8 2.9 2.1 2.5 2.31995 61.1 6.2 3.9 5.0 4.0 5.5 4.91990 51.6 5.3 4.2 5.9 4.5 4.8 5.4

Food/beverages2000 86.0 3.8 2.0 3.9 2.3 6.0 3.21995 76.9 6.7 4.8 7.4 5.2 12.9 7.11990 60.8 7.2 5.6 5.8 5.0 11.7 7.6

Source: UNCTAD and Erasmus University database.a Only industries that have at least f ive entries in the l ists of the top 100 TNCs of 1990, 1995 and 2000.

Figure IV.2. The 10 biggest increases in transnationalityamong the world’s top 100 TNCs, 1999-2000

(In percentage points)


All in all, the list of companies withthe largest rises in the Transnationality Indexis composed of TNCs from a greater varietyof industries in 2000 (figure IV.2). Many of

��


3. Developments in 2001

Preliminary data suggest that someof the trends observed for 2000 continuedthrough the following year. Thus, the combinedforeign assets of approximately half of thefirms on the top 100 list, for which figuresare already reported for 2001, rose by almost$50 billion in 2001. At the same time, thetotal assets of this group increased by some$88 bi l l ion. This meant that to ta l sa lesexpanded – in relative terms – more modestlythan foreign sales as most companies continuedwith their investments abroad, even thoughthe M&A wave slowed considerably in 2001as a result of the global economic slowdownand the stock market decline (see chapter I).

The economic slowdown that startedin 2000 and continued throughout 2001 alsoled to a decline in sales and employmentfigures for the reporting companies. In 2001,total sales fell by $63 billion as comparedto 2000. Foreign sales accounted for slightlyless than 20 per cent of that line. Foreignemployment continued to grow by 3.7 percent or 102,000, although total employmentvirtually stagnated, with an increase of only0.8 per cent or 43,000. Since all the foreigncomponents grew faster or decreased lessthan the totals, the greater transnationalizationof operations of the top 100 seemed set tocontinue. It is however, clear that the globaleconomic downturn took its toll and has ledto a considerable slowing down of this process.

B. The 50 largest TNCsfrom developing countries

1. Highlights

The t rend towards increasedtransnationalization of the 50 largestTNCs f rom developing countr iescontinued in 2000 (table IV.10). Foreignassets grew by 21 per cent and foreignsales by an impressive 56 per cent.Foreign employment, on the other hand,increased more modestly by 5 per cent.While the top 50 were less affectedby the wave of cross-border M&Asin 2000 than the top 100, many amongthe top 50 benefi ted from the s t i l lpositive economic climate in developed-country markets and the recovery ofdeveloping economies from the effectsof the Asian financial crisis of the late1990s. The increased transnationalization

was not, however, spread evenly among the50. It was driven largely by a handful ofdominant companies.

In 2000, Hutchison Whampoa (HongKong, China) consolidated its top position(table IV.10), won in 1999 in the aftermathof the sale of its interest in the telecomcompany, Orange, to Mannesmann (in turnacquired by Vodafone a few months later).6

It was one of the few companies from adeveloping country to be directly affectedby the M&A battles in developed countries,resulting in an increase in its foreign interests.Together wi th Cemex, LG Elect ronics ,Petroleos de Venezuela and Petronas, i taccounted for just under half of all foreignassets of the top 50. These five companiesa lso made i t to the l i s t of the top 100companies worldwide in 2000. This is a recordnumber of developing-country TNCs on thetop 100 l ist , and stands out part icularlybecause , for years , only Pet ro leos deVenezuela (which now ranks fourth in thetop 50) was large enough to make it to thetop 100. Not only has the growth andeconomic importance of these companiesbeen impressive, they have also significantlyinfluenced the aggregate figures for the wholegroup (table IV.11). If these top five wereto be excluded, the aggregate figures wouldactually drop for the remaining TNCs onthe list from developing countries to levelslower than those in 1999.

Figure IV.3. The 10 biggest decreases intransnationality among the world's

top 100 TNCs, 1999-2000(In percentage points)


��


Ta

ble

IV

.10

. T

he

to

p 5

0 n

on

-fin

an

cia

l T

NC

s f

rom

de

ve

lop

ing

ec

on

om

ies

, ra

nk

ed

by

fo

reig

n a

ss

ets

, 2

00

0(M

illi

on

s o

f d

oll

ars

an

d n

um

be

r o

f e

mp

loye

es)

Ra

nk

ing

by

A

ss

ets

S

ale

s

Em

plo

ym

en

t

Fo

reig

nT

NI a

asse

ts

TN

IaC

orp

ora

tio

nH

om

e e

con

om

yIn

du

stry

bF

ore

ign

To

tal

Fo

reig

n c

To

tal

Fo

reig

nT

ota

l(P

er

cen

t)

11

1H

utc

his

on

Wh

am

po

aH

on

g K

on

g,

Ch

ina

Div

ers

ifie

d 4

1 8

81

56

61

0 2

84

0 7

311

27

16

5 4

9 5

70

50

.32

8C

em

ex

Me

xic

oN

on

-me

tall

ic m

ine

ral

pro

du

cts

10

88

7 1

5 7

59

3 0

28

5 6

21

15

44

8 2

5 8

84

54

.83

15

LG

Ele

ctro

nic

sK

ore

a,

Re

pu

bli

c o

fE

lec

tric

al

& e

lec

tro

nic

eq

uip

me

nt

8 7

50

17

70

9 9

33

1 1

8 5

58

20

07

2 4

6 9

12

42

.74

20

Pe

tró

leo

s d

e V

en

ezu

ela

Ve

ne

zu

ela

Pe

tro

leu

m e

xpl.

/re

f./d

istr

. 8

01

7 5

7 0

89

49

78

0 5

3 2

34

5 4

58

46

92

03

5.8

52

7P

etr

on

as

Ma

lay

sia

Pe

tro

leu

m e

xpl.

/re

f./d

istr

. 7

69

0 3

6 5

94

11

79

0 1

9 3

05

3 8

08

23

45

02

9.5

64

3N

ew

Wo

rld

De

velo

pm

en

tH

on

g K

on

g,

Ch

ina

Div

ers

ifie

d 4

57

8 1

6 4

12

5

65

2 6

33

8

00

23

53

01

5.8

73

9S

am

sun

g C

orp

ora

tio

nK

ore

a,

Re

pu

bli

c o

fD

ive

rsif

ied

/tra

de

3 9

00

10

40

0 8

30

0 4

0 7

00

1

75

4 7

40

18

.58

21

Sa

msu

ng

Ele

ctro

nic

sK

ore

a,

Re

pu

bli

c o

fE

lec

tric

al

& e

lec

tro

nic

eq

uip

me

nt

3 8

98

25

08

5 2

3 0

55

31

56

2 1

6 9

81

60

97

73

4.9

94

Ne

ptu

ne

Ori

en

t L

ine

sS

ing

ap

ore

Tra

nsp

ort

an

d s

tora

ge

3 8

12

4 3

60

4 4

98

4 6

73

6 8

40

8 7

34

78

.61

02

9C

om

pa

nh

ia V

ale

Do

Rio

Do

ceB

raz

ilM

inin

g &

qu

arr

yin

g 3

66

0 1

0 2

69

7

58

4 9

04

6 2

85

17

63

42

8.9

11

7S

ap

pi

So

uth

Afr

ica

Pa

pe

r 3

23

9 4

76

8 3

60

1 4

71

8 9

39

9 1

9 2

76

57

.91

22

6C

OF

CO

Ch

ina

Fo

od

& b

eve

rag

es

2 8

67

4 5

43

4 7

67

12

51

7

35

0 2

6 0

00

30

.81

31

Gu

an

gd

on

g I

nv

es

tme

nt

Ho

ng

Ko

ng

, C

hin

aD

ive

rsif

ied

2 8

52

4 6

05

4

60

6

34

6 8

37

7 8

75

88

.21

41

9C

hin

a N

ati

on

al

Ch

em

ica

ls,

Imp

. &

Exp

.C

hin

aC

he

mic

als

2 6

03

4 7

01

10

75

5 1

8 0

36

6

00

8 6

00

36

.61

54

7H

yun

da

i M

oto

rK

ore

a,

Re

pu

bli

c o

fM

oto

r ve

hic

les

2 4

88

25

39

3 4

41

2 2

5 8

14

6 5

32

84

92

51

0.4

16

42

Ke

pp

el

Sin

ga

po

reD

ive

rsif

ied

2 2

93

22

18

0

33

8 3

65

7 5

91

0 1

6 3

89

16

.71

72

Fir

st P

aci

fic

Ho

ng

Ko

ng

, C

hin

aE

lec

tric

al

& e

lec

tro

nic

eq

uip

me

nt

2 1

16

2 3

22

6

52

8

09

8 5

11 8

56

08

1.4

18

13

Cit

ic P

ac

ific

Ho

ng

Ko

ng

, C

hin

aC

on

stru

ctio

n 2

07

6 4

02

2

98

1 2

05

8 7

11

8 1

1 3

54

48

.61

93

4G

rup

o C

ars

oM

ex

ico

Div

ers

ifie

d 2

04

3 8

82

7 4

00

0 9

31

5 1

9 5

42

89

95

42

6.3

20

24

So

uth

Afr

ica

n B

rew

eri

es

So

uth

Afr

ica

Fo

od

& b

eve

rag

es

1 9

66

4 3

84

1 4

54

5 4

24

15

76

3 4

8 0

79

31

.32

13

Ori

en

t O

vers

ea

s In

tern

ati

on

al

Ho

ng

Ko

ng

, C

hin

aT

ran

spo

rt a

nd

sto

rag

e 1

81

9 2

15

5 2

38

2 2

39

5 3

79

2 4

41

48

0.9

22

46

Sin

gte

lS

ing

ap

ore

Te

lec

om

mu

nic

ati

on

s 1

79

0 8

14

3

.. 2

84

5 2

50

0 1

2 6

40

12

.62

34

5P

osc

oK

ore

a,

Re

pu

bli

c o

fM

eta

l a

nd

me

tal

pro

du

cts

1 7

77

15

90

1 2

311

10

87

3 2

74

1 2

6 2

61

12

.92

43

0S

an

Mig

ue

lP

hil

ipp

ine

sF

oo

d &

be

vera

ge

s 1

73

8 3

06

1

30

0 1

86

1 3

09

1 1

4 8

64

28

.12

51

7Ja

rdin

e M

ath

eso

nH

on

g K

on

g,

Ch

ina

Div

ers

ifie

d 1

64

1 1

0 3

39

7 1

48

10

35

4 5

0 0

00

13

0 0

00

37

.02

63

6P

ere

z C

om

pa

nc

Arg

en

tin

aP

etr

ole

um

exp

l./r

ef.

/dis

tr.

1 6

14

5 4

93

4

20

1 5

46

6

25

3 3

01

22

.62

74

9P

etr

ob

ras

Bra

zil

Pe

tro

leu

m e

xpl.

/re

f./d

istr

. 1

53

5 3

9 1

36

3 7

56

26

95

5

62

7 3

8 9

08

5.8

28

25

Sin

ga

po

re A

irli

ne

sS

ing

ap

ore

Tra

nsp

ort

an

d s

tora

ge

1 4

45

9 4

73

4 0

84

5 3

26

2 9

72

27

51

33

0.8

29

12

Fra

ser

& N

ea

veS

ing

ap

ore

Fo

od

& b

eve

rag

es

1 3

18

4 2

11

94

4 1

55

1 7

82

6 1

0 7

50

49

.53

02

3M

eta

lurg

ica

Ge

rda

uB

raz

ilM

eta

l a

nd

me

tal

pro

du

cts

1 2

59

3 5

32

1 2

67

2 6

58

3 9

58

13

56

53

3.7

31

6S

av

iaM

ex

ico

Div

ers

ifie

d 1

23

3 3

62

5

71

8

81

4 7

39

0 9

78

75

9.3

32

10

Gru

ma

Me

xic

oF

oo

d &

be

vera

ge

s 1

16

9 2

28

0 1

25

3 1

90

1 8

95

9 1

6 8

97

51

.13

31

4A

ce

rTa

iwa

n P

rovi

nce

of

Ch

ina

Ele

ctr

ica

l &

ele

ctr

on

ic e

qu

ipm

en

t 1

14

3 3

95

6 1

44

7 4

76

0 3

55

4 1

2 3

00

26

.5

/...

��


Ta

ble

IV

.10

. T

he

to

p 5

0 n

on

-fin

an

cia

l T

NC

s f

rom

de

ve

lop

ing

ec

on

om

ies

, ra

nk

ed

by

fo

reig

n a

ss

ets

, 2

00

0 (

co

nc

lud

ed

)(M

illi

on

s o

f d

oll

ars

an

d n

um

be

r o

f e

mp

loye

es)

Ra

nk

ing

by

As

se

ts

Sa

les

Em

plo

ym

en

t

Fo

reig

nTN

I aas

sets

T

NIa

Co

rpo

ratio

nH

om

e e

con

om

yIn

dust

ry b

Fo

reig

nTo

tal

For

eign

cT

ota

lF

ore

ign

To

tal

(Per

cen

t)

34

33

Am

ste

el

Ma

lays

iaD

ive

rsifi

ed

1 1

43 3

453

54

4 1

416

37

094

50

218

43

.63

51

6B

arl

ow

orl

dS

outh

Afr

ica

Div

ers

ifie

d 1

110

2 2

60 1

730

3 3

80 9

006

21

966

42

.43

63

7U

nite

d M

icro

elec

tron

ics

Taiw

an P

rovi

nce

of C

hina

Ele

ctri

cal

& e

lect

ron

ic e

qu

ipm

en

t 1

087

9 4

54 1

611

3 4

85

770

9 3

731

9.8

37

44

Co

pe

cC

hile

Pet

role

um e

xpl./

ref.

/dis

tr.

1 0

76 7

121

1 1

02 3

611

61

0 8

856

15

.83

84

1S

wir

e P

acifi

cH

ong

Kon

g, C

hina

Bus

ines

s se

rvic

es 1

026

13

900

83

4 1

929

5 0

00 6

0 00

01

7.7

39

50

CLP

Hol

ding

s -

Chi

na L

ight

& P

ower

Com

pany

Hon

g K

ong,

Chi

naE

lect

ricity

, ga

s an

d w

ater

..

6 2

16

.. 3

135

..

3 8

995

.74

05

WB

LS

ing

ap

ore

Ele

ctri

cal

& e

lect

ron

ic e

qu

ipm

en

t

879

1 1

06

338

53

4 1

2 46

7 1

3 37

47

0.8

41

18

Sim

e D

arby

Ma

lays

iaD

ive

rsifi

ed

87

8 2

417

1 7

51 2

887

6 8

56 2

7 12

63

6.7

42

31

Va

rig

Bra

zil

Tra

nspo

rt a

nd s

tora

ge

863

1 8

72 1

175

2 9

15 1

168

16

710

28

.04

32

8B

erja

ya G

roup

Ma

lays

iaD

ive

rsifi

ed

83

2 3

352

95

4 2

052

5 5

00 2

1 78

32

9.0

44

48

Hon

gkon

g E

lect

ric

Ho

ldin

gs

Hon

g K

ong,

Chi

naE

lect

ricity

, ga

s an

d w

ater

81

1 6

622

..

1 4

56

300

2 3

668

.94

53

2G

reat

Eag

le H

oldi

ngs

Hon

g K

ong,

Chi

naB

usin

ess

serv

ices

75

1 3

755

19

6

372

60

1 3

004

27

.84

63

8S

ab

icS

au

di

Ara

bia

Pet

role

um e

xpl./

ref.

/dis

tr.

70

2 2

3 76

9 4

206

7 1

10

314

14

404

19

.34

74

0C

hina

Met

als

And

Min

eral

sC

hin

aM

etal

and

met

al p

rodu

cts

64

5 2

375

98

4 3

830

58

0 7

524

18

.24

82

2P

epko

rS

outh

Afr

ica

Re

tail

60

8 1

365

1 0

29 4

095

30

000

68

272

34

.14

93

5P

anam

eric

an B

ever

ages

Me

xico

Foo

d &

bev

erag

es

594

2 9

37

960

2 5

60 5

000

26

000

23

.15

09

Hum

e In

dust

ries

Ma

lays

iaC

onst

ruct

ion

59

3 1

178

93

1 1

341

6 5

36 1

2 54

55

1.6

So

urc

e:

UN

CT

AD

/Era

smu

s U

niv

ers

ity

da

tab

ase

.

aT

he

tra

nsn

ati

on

lity

ind

ex

(TN

I) i

s ca

lcu

late

d a

s th

e a

vera

ge

of

the

fo

llow

ing

th

ree

ra

tio

s: f

ore

ign

ass

ets

to

to

tal

ass

ets

, fo

reig

n s

ale

s to

to

tal

sale

s a

nd

fo

reig

n e

mp

loym

en

tto

to

tal

em

plo

ym

en

t.b

Ind

us

try

c

las

sif

ica

tio

n

for

co

mp

an

ies

fo

llo

ws

th

e

Un

ite

d

Sta

tes

S

tan

da

rd

Ind

us

tria

l C

las

sif

ica

tio

n.

c

In

a n

um

be

r o

f c

as

es

co

mp

an

ies

re

po

rte

d o

nly

to

tal

fore

ign

sa

les

wit

ho

ut

dis

tin

gu

ish

ing

be

twe

en

ex

po

rt f

rom

th

e p

are

nt

co

mp

an

y a

nd

sa

les

of

the

ir f

ore

ign

aff

ilia

tes

.S

om

e

fore

ign

s

ale

s

fig

ure

s

mig

ht

the

refo

re

als

o

inc

lud

e

pa

ren

t c

om

pa

ny

e

xp

ort

s.

..D

ata

on

fo

reig

n a

ss

ets

, fo

reig

n s

ale

s a

nd

fo

reig

n e

mp

loy

me

nt

we

re n

ot

ma

de

av

ail

ab

le.

In

ca

se

of

no

n-a

va

ila

bil

ity,

th

ey

are

es

tim

ate

d u

sin

g s

ec

on

da

ry s

ou

rce

s o

fin

form

ati

on

or

on

th

e b

as

is o

f th

e r

ati

os

of

fore

ign

to

to

tal

as

se

ts,

fore

ign

to

to

tal

sa

les

an

d f

ore

ign

to

to

tal

em

plo

ym

en

t.

No

te:

In s

om

e c

om

pa

nie

s, f

ore

ign

in

vest

ors

ma

y h

old

a m

ino

rity

sh

are

of

mo

re t

ha

n 1

0 p

er

cen

t.

��


The list of the 50 largest developing-country TNCs differs strikingly from thelist of the 100 largest TNCs worldwide whenit comes to the relative importance of thetopmost companies in the two lists. In thetop 100 list, the differences between theleading companies and the rest are smallerand more stable. The fact that the dynamicincreases in the aggregate values of foreignassets, sales and employment of the top50 occur in a few companies is also reflectedin the stagnant median value for foreignassets. As in 1999, it stood at $1.6 billion.For the top 100, on the other hand, the medianincreased from $15.3 billion in 1999 to $16.6billion in 2000. Another striking differencebetween the top 50 and the top 100 forthe year 2000 is that the stronger presenceof “new” service industries among the top100, notably telecoms and the media, is notreplicated among the top 50.

Despi te the d ivergent growthtrajectories of individual companies on thelist, the top 50 developing-country TNCscontinued their recovery in the aftermathof the 1997 financial crisis in Asia, althoughforeign employment increased much moremodestly than the values for the other twovariables. While the aggregate figures aresignificantly influenced by those of a handfulof large firms, most firms saw an expansionof their foreign assets and sales, but mixedresults in foreign employment.

The average Transnationality Indexvalue for the top 50 as a whole decreasedby 4 percent in 2000 compared to that for

Table IV.11. Snapshot of top 50 TNCsfrom developing economies, 2000

(Millions of dollars, percentageand number of employees)

Change a

Variable 2000 1999 2000 vs. 1999(Per cent)

AssetsForeign 155 659 129 000 20.7Total 540 489 531 000 1.8

SalesForeign 189 897 122 000 55.7Total 391 429 367 000 6.7

EmploymentForeign 403 473 383 107 5.3Total 1 317 983 1 134 687 16.2

Average TNI 34.6 38.9 -4.3

Source: UNCTAD, FDI/TNC database.a Change is measured in percentage points.

the previous year. Overall, in 2000, 20 TNCsimproved their position on the TransnationalityIndex, while 25 had a lower Index valuethan in 1999. The three increase in theforeign/total ratios and yet, the decreasein average TNI at the same time may seemparadoxical. However, these increases weremainly driven by a handful of large TNCswhose statistical weight tends to be mitigatedwhen consolidated into the average TNIfor the group (figure IV.4).

Traditionally, the most transnationalizeddeveloping-country companies have beenfrom Hong Kong (China) and Singapore (tableIV.12) . This was also the case in 2000.Industry-wise, the diversified GuangdongInvestments and the electronics firm, FirstPacific, followed by two shipping companies,Neptune Orient Lines and Orient OverseasInternational, occupy the top ranks on theIndex. Another electronics firm, Singapore-based WBL, is also at the top of the list;much of its manufacturing is carried outin other low-cost locations across South-East Asia. At the other end of that rankingare the utilities companies, with scores ofless than 10 per cent.

With 11 new firms on the list, thenumber of new entrants was in line withfigures from 1999 (table IV.13). In 2000,a number of Chinese companies, for whichdata were not available in 1999, enteredthe list. Other than that, the newcomerscome from a wide range of countries andindustries. Over the past few years, therehas been no clear trend in terms of eitherindust ry or geographic or ig in of thenewcomers, except for the entry of a limitednumber of telecom companies, which faintlymirrors a trend among the top 100. It isremarkable that, with Sabic, there is now,for the first time, a Saudi Arabian companyon the list. The Transnationality Index valuefor most of the newcomers is low, exceptfor COFCO and China National Chemicalsof China, Hume Industries of Malaysia andPepkor of South Africa. This is no surpriseas most newcomers are relatively small ,making it only to the bottom ranks on thelist by foreign assets. Most of the newcomerson the lower ranks of the list are not entirelynew to the list, as most of them had beenon and off the top 50 for several years.

As for depar tures f rom the l i s t ,four Korean companies had to be dropped(table IV.14) because of a lack of data.

��


Table IV.12. The top 5 TNCs from developing economies in termsof transnationality, 2000

Ranking by

Foreign TNIa

TNIa assets Company Home economy Industry (Per cent)

1 12 Guangdong Investment Hong Kong, China Diversified 88.22 16 First Pacific Hong Kong, China Electrical & electronic equipment 81.43 20 Orient Overseas International Hong Kong, China Transport and storage 80.94 9 Neptune Orient Lines Singapore Transport and storage 78.65 39 WBL Singapore Electrical & electronic equipment 70.8

Source: UNCTAD, FDI/TNC database.a The transnationality index (TNI) is calculated as the average of the following three ratios: foreign assets to total


Table IV.13. Newcomers to the top 50 TNCs from developing economies, 2000

Ranking by

Foreign TNIAssets TNI Corporation Home economy Industry (Per cent)

11 28 COFCO China Food & beverages 34.213 20 China National Chemicals, Imp. & Exp. China Chemicals 40.718 34 Grupo Carso Mexico Diversified 29.236 36 United Microelectronics Taiwan Province of China Electrical & electronic equipment 22.038 40 Swire Pacific Limited Hong Kong, China Real Estate 19.642 31 Varig Brazil Transportation 31.144 48 Hongkong Electric Holdings Hong Kong, China Electricity, gas and water 9.946 37 Sabic Saudi Arabia Oil & petroleum 21.447 39 China Metals And Minerals China Steel & metals 20.248 24 Pepkor South Africa Retail 37.950 9 Hume Industries Malaysia Construction 51.6


Figure IV.4. The transnationalization of the top 50 TNCs from developingeconomies, 1993-2000


Note: Note: The ratios represent the averages of the individual ratios of foreign assets/total assets, foreignsales/total sales, foreign employment/total employment of the top 50 expressed in percentages. Theaverage transnationality index of the top 50 TNCs is the average of the 50 individual company transnationalityindices.

��


Many of the companies dropping off thelist in 2000 had been on and off the listin previous years. The fact that TelekomMalaysia has departed from the list furtherindicates that the dynamic growth trend inthe “new economy” industries in the developedworld has not been fu l ly repl ica ted indeveloping countries. One reason for thiscould be that the liberalization of the telecomindustry has advanced at a slower pace indeveloping countries. In those in which ithas moved fast, domestic firms that beganto transnationalize or possessed an attractiveenough home market , l ike many Lat inAmerican telecom or other utility operators,were taken over by rival competitorsf rom developed countr ies , thusdisappearing from the l is t . Somecompanies spun off a number offoreign operations and business units,with their foreign assets consequentlyreduced so much that they could nolonger make it to the top 50.

Overall, the industry compositionof the top 50 list has remained unchanged(table IV.15). Firms classified as“diversified” represent 11 of the 50companies. They account for 40 percent of the combined foreign assetsof the top 50, and 43 per cent ofthe combined foreign employment.In terms of their share in total foreignsales, however, they rank only fourthafter the petroleum, electronics andindustrial companies, following a drasticdecline in their share from 17 percent in 1999 to only 11 per cent in2000 (figure IV.5). Seven of the 50companies were in electronics, theindustry that saw the largest increasein numbers. Its relative importance

in the top 50 group is second highest interms of its share in foreign assets and itsshare in foreign sales and the third highestin foreign employment. Overall, the top 50are spread over a wide range of industries,just like the top 100.

However, there are some differencesfrom the top 100. In recent years, the top100 have been subject to more structuralchanges. In particular, since the mid-1990s,the top 100 list has seen numerous M&Asleading to the absorption of many of thetop 100 companies. This phenomenon hasbeen almost absent in the case of the top

Table IV.14. Departures from the top 50 TNCs from developing economies, 2000

Ranking in 1999 TNIForeign in 1999assets TNI Corporation Home economy Industry (Per cent)

6 13 Daewoo International Korea, Republic of Diversified 49.48 45 Sunkyong Group Korea, Republic of Oil & petroleum 15.2

18 14 Hyundai Engineering & Construction Korea, Republic of Industrial 48.519 1 Tan Chong International Singapore Automotive 93.333 33 Tatung Taiwan Province of China Electrical & electronic equipment 28.135 36 Samsung Korea, Republic of Electrical & electronic equipment 25.541 47 Reliance Industries India Chemicals 9.647 23 De Beers Consolidated Mines South Africa Steel & metals 38.848 15 Hong Kong And Shanghai Hotels Hong Kong, China Leisure & hospitality 47.449 48 Telekom Malaysia Malaysia Telecommunications 7.5


Table IV.15. Industry composition of the top 50TNCs from developing economies,

1998 1999 and 2000

Average TNIa

Number of per industryentries (Per cent)

Industry 2000 1999 1998 2000 1999 1998

Diversified 11 14 11 40.5 44.3 40.1Electronics 7 6 4 42.1 41.5 39.3Food and beverages 6 5 8 35.6 45.0 47.0Petroleum expl./ref./distr. 6 5 5 21.5 21.6 18.6Other 6 6 5 32.8 28.7 45.8Transportation 4 3 3 54.6 71.2 50.5Steel and iron 3 3 3 21.6 34.2 27.2Electric Utilities or Services 2 2 3 7.3 25.3 20.8Construction 2 3 6 50.1 39.6 30.2Chemicals and pharmaceuticals 1 1 1 36.6 9.6 7.7Automotive 1 1 - 10.4 10.9 -Pulp and paper 1 1 1 57.9 63.7 63.8

Average/totalb 50 50 50 34.2 36.3 35.5


a The transnationality index (TNI) is calculated as the averageof the following three ratios:foreign assets to total assets, foreignsales to total sales and foreign employment to total employment.

b Numbers may not add up exactly due to rounding.

Note : This list does not include countries from Central andEastern Europe.

��


Figure IV.5. Shares of industry groups among the top 50, 1999 and 2000(Percentage)


��


50. As noted earlier, only a few of the top50 were affected by the M&A surge, suchas Hutchison Whampoa, which had interestsin telecom companies in Europe and theUnited States, and companies that eventuallybecame takeover targets for developed-countrycompetitors, such as Argentina’s YPF thatwas taken over by the Spanish company,Repsol, in 1999.

Given the large increases in foreignassets, sales and (to a lesser extent) foreignemployment in 2000, it is remarkable howlittle this has affected the distribution of thedifferent aggregates among the main industrygroups (figure IV.5). The most dramatic changeshave occurred in the petroleum industry, whichincreased its share in total foreign sales ofthe top 50 from 22 to 38 per cent. This wasmainly due to the expansion of Petronas andPetróleos de Venezuela.

As for transationalization trends byindustry, in 6 out of 12 industries, the averageTransnationalization Index value increasedover the period 1998-2000. These were thedivers i f ied , e lec t ronics , t ranspor ta t ion ,construction, petroleum, and chemicals andpharmaceuticals industries. In some of them,these trends are the immediate result ofchanges in individual companies, such asPetronas in petroleum, and China NationalChemicals in chemicals and pharmaceuticals.The most transnationalized industry was pulpand paper, followed by transport, with scoresof 58 and 55 per cent (table IV.15 and figure

IV.6). In the former, however, the high figurerepresents only one company – Sappi ofSouth Africa. Electronics, diversified, andfood and beverages have, on average, alower level of transnationalization, thoughthe value exceeds 40 per cent in all of them.It should be noted that there is not a singleindust ry in which the Index average ofdeveloping-country firms surpasses that oftheir peers from developed countries. Inother words, TNCs from developing countrieshave transnationalized their operations muchless and still depend much more on theirhome-country bus iness . There are ,nonetheless, a few companies from developingcountr ies that aspire to become “globalplayers”, such as South African Breweries(box IV.2).

The degree of transnationality differswidely by home country, with firms fromsmaller Asian economies, such as Hong Kong(China) and Singapore, unsurprisingly rankingmuch higher on the Index than firms fromlarger countries, such as Brazil or China(table IV.16 and figure IV.7). Given this,it is remarkable that Mexican TNCs haveattained a transnationality level as high asthose from Hong Kong (China). Althoughthe Index value for firms from that countryhas decl ined s ince 1998, some Mexicancompanies remain in the small group on thelist that has pursued a real globalizationstrategy. One such example is Cemex, afirm that successfully entered developed-country markets, notably the United States,

Figure IV.6. The top 50: Industry groups and their averagetransnationality index, 1999-2000

(Percentage)


��


/...

Box IV.2. A global player in brewing: South African Breweries

The evolution of South African Breweries(SAB) is an interesting example of the internationalexpansion of a developing-country TNC, bothbecause it highlights motives fortransnationalization that are rarely seen indeveloped-country firms and because it illustratesthe challenges latecomers from developingcountries face when trying to establish themselvesas global market leaders.

SAB owns and operates 108 breweries in24 countries, employs over 31,000 people andhas developed into the world’s fourth largestbrewer by volume, with high profit margins insome countries. Like other South Africanbusinesses during the apartheid years, SABoperated within what is best described as a “siegeeconomy”. Companies were virtually immunefrom foreign competition but, because ofsanctions, unable to expand abroad. Thecompany had created a virtual monopoly, notonly in South Africa but also in much of southernAfrica, acquiring privatized breweries inneighbouring countries. Given the limited percapita income in much of its home region, furthergrowth could only be achieved by venturinginto new markets. In a second step of i tstransnationalization process, the company startedto expand into other developing-country markets,especially into countries with large markets buta low level of penetration by developed-countrycompetitors. From the mid-1990s onwards, SABinvested heavily in countries such as China andbought a number of formerly State-ownedbreweries in Central and Eastern Europe. Thefirm’s international expansion has been drivenby its skill in coping with the demands of anabnormal market – requiring a high degree offlexibili ty to overcome problems such asdeficiencies in basic infrastructure – and itsefficient production, making it one of the mostefficient competitors in the industry.

For one thing, every year for the past twodecades, SAB has reduced its prices in real terms,thus avoiding charges of abusing its monopoly,and it has wooed poor, price-sensitive customers,which is to say most South Africans. Thecompany was able to cut prices because itboosted productivity. Its new bottling planton South Africa’s eastern coast, opened in 2000at a cost of $60 million. It uses computers tocontrol the quantity of hops used to brew beerand robots to load bottles onto trucks, only 13people run a plant that turns out 50,000 hectolitresof beer per week in the standard bottle of 750-mililitre bottle – twice the industry average. SouthAfrica’s patchy infrastructure also deters potentialrivals. In poor and rural areas, the roads arerough and the power supply sporadic. SAB haslong experience in getting crates to remote townsand villages along poor roads, and making surethat distributors have refrigerators and, ifnecessary, generators. It has ties with the truckdrivers who deliver its beer: many are former

employees, whom the company helped to starttheir own small trucking businesses.

Despite these strengths and achievements,SAB’s expansion into other emerging markets,although helping to achieve output and revenuegrowth, did little to solve the problem of ashortage of hard currency. In the past, almosttwo-thirds of the company’s profits were inSouth African rand, now floating freely andweakening steadily. (In 2001, for instance, therand lost 37 per cent against the dollar.) Thiscreates serious difficulties for a companyoperating and competing at the internationallevel. While the lion’s share of its revenuescontinued to be in the form of “weak” currencies,be it in rand or other currencies, the acquisitionof inputs such as machinery or the refinancingof loans had to be in “hard” currencies likethe dollar.

One solution was to list SAB on a majorinternational stock market, which helped it toraise capital for i ts acquisit ions and therefinancing of loans at lower rates. This wouldalso improve SAB’s financial viability and relievethe currency problem. It became apparent,moreover, that the company could use itsbrewing skills in developed-country markets.The company therefore began to consideracquisitions in Europe and the United States.

After considering a number of opportunities(such as Bass Brewery in the United Kingdom),SAB finally announced, in May 2002, i tsacquisition of the Miller Brewing Company inthe United States, making it the world’s secondlargest brewer after world leader Anheuser-Busch. The proposed SAB-Miller deal, worthsome $5 billion, will cut reliance on earningsin rand from around 65 per cent to under 35per cent. Since there is little geographic overlapbetween the two brewers, the benefits mightadd up to $75 million a year from cost-cuttingand from synergies, such as SAB using Miller’sdistribution to market its Pilsner Urquell in theUnited States.

The company pursues a market-seeking,multi-domestic strategy. Some of its brandsare virtually synonymous with the country inwhich they are sold, and Miller would be noexception. Since SAB and its affiliates alreadyenjoy a low-cost structure, the pressure forcost reduction is not so great as to drive themto transfer core competencies in productionand distribution from their high-technologySouth African breweries to their internationalacquisitions. Thus, for the moment, they canconcentrate on market penetration and revenuegrowth. This is in contrast to TNCs fromindustrial countries, which look overseas tooutsource production to reduce costs andincrease distribution channels.

��


Figure IV.7. Foreign assets of the largest TNCs from developing countries,1999 and 2000



Box IV.2. A global player in brewing: South African Breweries (concluded)

Source : UNCTAD, based on “Big lion, small cage”, The Economist, 10 August 2000; “A pilsner’s Bohemianrhapsody”, Financial Times, 24 September 2001; “A niche brewer is making waves”, The New YorkTimes, 4 December 2001; “It’s Miller time in Johannesburg”, Business Week, 22 April 2002; “SAB’sbid to buy Miller raises eyebrows”, Financial Times, 25 May 2002; “SAB aims to wrap up Millerdeal next week”, Reuters, May 23, 2002; “SAB seals deal to buy Miller stake for $5bn”, FinancialTimes, 30 May 2002, and company site (http://www.sabplc.com).

This case also illustrates the emergenceof a second stage of competit ion betweendeveloping-country TNCs; those that survive

Table IV.16. Home countries of the top 50 TNCs from developing economies,by transnationality index and foreign assets, 1998, 1999 and 2000

(Percentage and number)

Average TNIa Share in total foreignper country assets of the top 50 Number of entries

Economy 2000 1999 1998 2000 1999 1998 2000 1999 1998

South, East and South-East Asia 32.4 39.1 35.8 73.3 72.0 65.7 33 36 38China 28.5 - 24.8 3.9 - 8.8 3 - 3Hong Kong, China 42.0 45.4 56.6 38.9 26.4 22.0 11 11 10India - 9.6 7.7 - 0.7 0.8 - 1 1Korea, Republic of 23.9 27.8 31.9 13.4 23.2 16.7 5 9 6Malaysia 38.1 24.1 32.3 7.2 7.0 6.3 5 5 6Philippines 28.1 25.0 30.1 1.1 1.1 1.5 1 1 1Singapore 43.2 58.9 58.9 7.4 11.2 7.2 6 7 9Taiwan Province of China 23.1 43.9 44.2 1.4 2.4 2.4 2 2 2

Latin America 28.2 48.3 27.3 21.8 22.0 28.3 12 10 9Argentina 22.6 24.5 19.8 1.0 1.1 4.1 1 1 1Brazil 24.1 30.2 18.5 4.7 5.6 7.6 4 3 3Chile 15.8 35.4 21.8 0.7 1.8 3.4 1 1 1Mexico 42.9 48.0 52.6 10.2 7.3 5.9 5 4 3Venezuela 35.8 29.8 23.7 5.2 6.2 7.3 1 1 1

West Asia 19.3 - - 0.5 - - 1 - -

Africa 41.4 46.0 45.0 4.4 5.9 6.3 4 4 3

Average/totalb 31.3 34.5 33.4 100 100 100 50 50 50

Source: UNCTAD, FDI/TNC database.a The transnationality index (TNI) is calculated as the average of the following three ratios: foreign assets to total

assets, foreign sales to total sales and foreign employment to total employment.b Numbers may not add up exactly due to rounding.Note: This list does not include countries from Central and Eastern Europe.

the intense competition of developed-countrymarkets find themselves in a world ruled by firmsthat are masters of branding and marketing.

��


facilitated by the North American Free TradeAgreement (NAFTA) (WIR01). South Africancompanies also have a high Index value.In various industries – retail (Pepkor), foodand beverages (South African Breweries),pulp and paper (Sappi), diversified companies(Barloworld) – a handful of the long-isolatedfirms of South Africa undertook restructuring,in the face of increased competition and limitedgrowth potential on the domestic market, spunoff non-core business segments, and strategicallyinvested abroad in core business areas.

Asian firms registered a slight declinein their values on the TransnationalizationIndex in 2000. Falling Index values forcompanies from Taiwan Province of China,Hong Kong (China) and Singapore accountedfor much of this decline. Latin Americanfirms also saw a decline in their Index valuesin 2000 as compared to 1999: except forVenezuela (Petróleos de Venezuela), firmsfrom all other countries experienced a decline.The number of entries for Asia fell modestlyin 2000, but was still high (33). The numberof companies from Latin America rose from10 to 12, including an increase in the numberof Mexican companies. For the first timea company from West Asia was on the list,while the number of South African companiesremained at four. As in previous years, nocompany from any other African countrymade it to the list.

2. The Network Spread Index

For the first time this year, WIR hasalso calculated the Network Spread Indexfor the top 50 TNCs and compares it withthat for the top 100. The Index measuresthe degree of transationalization of a companyby measuring the number of countries inwhich it has foreign affiliates. It is calculatedas the ratio of the number of foreign countries(N) in which a TNC operates wholly-ownedaffiliates to the number of foreign countries(N*) in which it could potentially operate.The la t ter number i s ca lcula ted for thecountries (excluding the home country) whichhad a positive FDI stock in 2001, definingthem as potential locations for FDI. All inall, this covered 187 countries.

The analysis of these results revealssome interesting aspects of the transnationalizationof the top 50 TNCs, complementing thefindings regarding the Transnationality Indexand the other ratios mentioned in the maintext of this section. The main findings are:

• The aggregated Network Spread Indexfor the top 50, is in all cases, very lowand trails the aggregated Network SpreadIndex for the top 100. TNCs from theRepublic of Korea have, on average, thehighest Index value (figure IV.8). Theaggregated Index value for a l l o therdeveloping countries is considerably lower.On first sight, this result is surprising,given the high transnationality values ofTNCs from smaller economies such asSingapore and Hong Kong (China). This,however, is no contradiction, since manyof the companies from these economieshave their foreign operations concentratedin a limited number of locations abroad,a number of them in China. With countriesfrom the different developing regions beingwell represented on the l ist , the levelof the Network Spread Index does notappear to be dependent on the regionin which a company originates. The factthat the Index values for developingcountr ies are wel l be low those fordeveloped countries is not surprising.For one, most developed-country TNCs

Source: UNCTAD, based on information from Dun &Bradstreet, Who Owns Whom 2002 CD-ROM.

Figure IV.8. Average Network SpreadIndex of the top 50,

by home economy, 2000(Percentage points)

��


are s imply much bigger in s ize , andtherefore, often, also in geographical reach;they a lso have a longer h is tory ofinternational expansion; and, finally, whileit is much easier for a developed-countryTNC to explore developing-countrymarkets, the reverse is much more difficult.

• Electronics is the industry in whichcompanies have, on average, the widestspread. All other industries, beginningwith the automotive industry, have muchsmaller Index values. Unsurprisingly, theelectrical and other utilities are the leasttransnationalized industries by this criterion.Investment in these industries is capital-intensive, and the creation of complexproduction networks to explore locationaladvantages is not necessary. The rankingof industries by the Network Spread Indexclosely resembles that of industries bythe Transnationality Index. The NetworkSpread Index in almost all industries ishigher for developed-country TNCs thanfor developing-country TNCs. Also,al though there are s imi-lar i t ies between the two groups whenthe same industry is in quest ion, thedifferences in Index values for indivi-dual industr ies are much wider for

the top 100 than for the top 50(figure IV.9). This, of course, is partiallyexplained by the fact that the individualindustry Index values for developing-country TNCs are much lower, andtherefore, almost by definition, oscillatein a much narrower corridor. However,it might be also related to the fact thatsome industries in developing countriesare a t a more advanced s tage oftransnationalization than others.

The Network Spread Index rankingsfor individual industries show some similaritiesfor developed and developing countries, butthey are by no means identical. The industriesthat rank high on both lists are electronics,chemicals and, to a lesser extent, food andbeverages. There are also industries witha low Index ranking, among developed aswell as developing countries. These includeconstruction as well as electrical and otherutilities. For most other industries, the pictureis unclear: some industries that rank relativelyhigh in the top 100 rank relatively low amongthe top 50 (e .g . o i l and pet ro leum ordiversified companies). On the other hand,there are indust r ies that rank higher indeveloping than in developed countries, suchas transport, and pulp and paper.

Figure IV.9. Comparison of the Network Spread Index by industry,between the top 100 and the top 50 TNCs

(Percentage points)

Source: UNCTAD, based on information from Dun & Bradstreet, Who Owns Whom, 2002 CD-ROM.

��


C. The 25 largest TNCs fromCentral and Eastern Europe

Most of the 25 largest non-financialTNCs based in CEE continued to grow in2000, expanding more abroad than at home(table IV.17). They achieved double digitgrowth rates of their foreign assets, foreignsales and foreign employment. However,their domestic assets and domestic salesincreased only moderately (confirming previoustrends),7 while their domestic employmentcontracted.

Data for the top 25 in 2000 confirmthat Russian TNCs are much larger andmore globally spread than their non-Russiancounterparts. Lukoil Oil, the largest withfore ign asse ts of more than $4 bi l l ion ,compares with the largest 10 TNCs fromdeveloping countries. In foreign assets, foreignsales and foreign employment, the averagefor Russian firms on the list is more than10 times higher than the average for otherfirms (figure IV.10). They are also moretransnationalized and have a higher NetworkSpread Index. These large differences maypartly be due to differences in the industrycomposition. All Russian firms in the sampleare involved either in natural resources orin transport, activities that are more capital-intensive than most manufacturing activities.

However, not all top TNCs in theregion are on a growth path. While mostRussian and Slovene firms (box III.12), forexample, are on an outward expansion path,some Czech, Slovak and Polish firms areundergoing major restructuring, which ofteninvolves withdrawal from foreign activities.As a result of these changes, four firmslef t th is l i s t in 2000: Motokov (CzechRepublic), Slovnaft (Slovakia), Elektrim(Poland) and Croatian Airlines (Croatia).

Of the four newcomers, Novoshipis a fast expanding Russian transport firm.The other three – Mercator, Merkur andIskraemeco – are all from Slovenia. From1999 to 2000, Merkur more than tripled itsforeign assets. Mercator grew even faster:with the opening of large supermarkets inBosnia and Herzegovina and Croat ia , i tincreased its foreign assets from less thanone million to over $60 million in one year.

Preliminary data suggest that changesin the top 25 list will continue in 2001.

For example , Tiszai Vegyi Kombinát(Hungary)8 and KGHM Polska Miedz (Poland)substantially rolled back their foreign presencein 2001. In addition, Skoda Group Plzen (CzechRepublic) underwent a bankruptcy procedure(Kirkland and Kuchar, 2002), resulting ina further shrinking of assets both at homeand abroad. Their place may be taken byfirms fast expanding abroad in 2001, suchas the Russian oi l f i rm, Yukos, and theHungarian pharmaceutical firms, TNC RichterGedeon (Csonka, 2002).

The industry composition of the listremained stable in 2000. Transport (7 firms),petroleum and natural gas (4 firms) andpharmaceut ica ls (3 f i rms) kept the i rprominence. Trade caught up with 3 companieson this list.

Compared with previous years, thecountry concentration of the top 25 rosein 2000. With eight firms, Slovenia is themost represented country on the list, followedby Croat ia , Hungary and the Russ ianFederation (4 firms each). The remainingfive entries are shared among five countries(Czech Republic, Latvia, Poland, Romaniaand Slovakia). This country composition reflectsthe fact that the outward FDI of the RussianFederation and Slovenia was carried outmainly by domestic f irms – hence thesefirms are shown prominently on the list ofthe 25 largest TNCs. In other countries,however, an important part of outward FDIwas carried out by foreign affiliates, whichdo not figure on the top 25 list.

Figure IV.10. The top 25 TNCs of CEE:comparison of Russian and

other firms, 2000(Russian firms = 100 per cent)

Source: UNCTAD survey of the top TNCs inCentral and Eastern Europe.

��


Ta

ble

IV

.17

. T

he

to

p 2

5 n

on

-fin

an

cia

l T

NC

s b

as

ed

in

Ce

ntr

al

an

d E

as

tern

Eu

rop

e,a

ra

nk

ed

by

fo

reig

n a

ss

ets

, 2

00

0(M

illi

on

s o

f d

oll

ars

an

d n

um

be

r o

f e

mp

loye

es)

Ran

kin

g b

yF

ore

ign

A

sset

s

S

ales

Em

plo

ymen

t T

NIb

asse

ts

T

NIb

C

orpo

ratio

n

C

ount

ry

I

ndus

try

For

eign

Tota

lF

ore

ign

T

ota

l F

orei

gn

T

ota

l(P

er c

ent)

111

Lu

koil

Oil

Rus

sian

Fed

erat

ion

Pet

role

um a

nd n

atur

al g

as4

189.

01

2 0

08.0

7 77

8.0d

14

436.

020

000

13

0 0

00

34

.72

6N

ovos

hip

Rus

sian

Fed

erat

ion

Tra

nspo

rt 9

63.8

1 10

7.0

271

.5 3

72.0

88

7 40

65

3.7

31

La

tvia

n S

hip

pin

gcL

atv

iaT

rans

port

45

9.0

47

0.0

19

1.0

19

1.0

1 12

41

748

87

.34

5P

rim

orsk

Shi

ppin

gR

ussi

an F

eder

atio

nT

rans

port

25

6.4

44

4.1

85

.311

6.5

1 30

82

777

59

.45

24

Hrv

atsk

a E

lekt

ropr

ivre

daC

roa

tiaE

ne

rgy

29

6.0

2 52

4.0

10

.07

80

.0..

15 8

774

.36

7G

oren

je G

roup

Slo

ven

iaD

omes

tic a

pplia

nces

23

6.3

42

0.8

46

5.5

615

.55

90

6 69

14

6.9

71

0F

ar E

aste

rn S

hipp

ing

Rus

sian

Fed

erat

ion

Tra

nspo

rt2

36

.05

85

.01

34

.01

83

.02

63

8 87

33

8.8

81

3P

odra

vka

Gro

upC

roa

tiaF

ood

and

beve

rage

s..

44

0.1

13

9.8

31

6.5

51

66

827

31

.69

9P

liva

Gro

upC

roa

tiaP

ha

rma

ceu

tica

ls1

81

.99

15

.93

84

.75

87

.62

645

7 85

73

9.7

10

3A

tlant

ska

Plo

vidb

acC

roa

tiaT

rans

port

13

8.0

15

4.0

46.0

d4

6.0

..5

09

63

.211

8K

rka

Slo

ven

iaP

ha

rma

ceu

tica

ls1

29

.24

62

.42

12

.02

73

.04

83

3 32

24

0.0

12

20

MO

L H

unga

rian

Oil

and

Gas

Hun

gary

Pet

role

um a

nd n

atur

al g

as1

02

.73

281.

67

58

.83

632.

28

70

18 0

169

.61

31

4Ti

sza

i V

eg

yi K

om

bin

át

Hu

ng

ary

Ch

em

ica

ls1

01

.24

81

.82

72

.95

37

.82

08

45

48

25

.41

42

Adr

ia A

irway

scS

love

nia

Tra

nspo

rt11

6.3

12

9.2

10

3.4

10

4.6

19

59

76

4.0

15

19

Pet

rol

Gro

upS

love

nia

Pet

role

um a

nd n

atur

al g

as9

8.8

53

6.1

12

9.0

d1

187.

94

91

943

10

.61

62

2M

erca

tor

Slo

ven

iaR

etai

l tr

ade

65

.1 7

77.9

16

.21

055.

74

87

13 2

084

.51

74

Za

lake

rám

iaH

unga

ryC

lay

prod

uct

and

refr

acto

ry6

0.0

112

.03

9.0

62

.01

958

2 96

66

0.8

18

15

Sko

da G

roup

Plz

enC

zech

Rep

ublic

Div

ersi

fied

....

21

0.4

d 3

58.6

..10

628

26

.21

91

2M

alév

Hun

gari

an A

irlin

esH

unga

ryT

rans

port

41

.41

87

.02

99

.03

83

.44

92

952

33

.92

01

8M

ata

do

rS

lova

kia

Rub

ber

and

plas

tics

..2

06

.74

4.8

23

1.7

..3

775

13

.12

12

1M

erku

rS

love

nia

Tra

de

37

.34

00

.64

5.3

44

9.8

89

2 94

47

.52

22

5K

GH

M P

olsk

a M

iedz

Po

lan

dM

inin

g a

nd

qu

arr

yin

g3

2.3

1 38

9.5

66

.21

146.

72

618

562

2.7

23

23

Pe

tro

mR

om

an

iaP

etro

leum

and

nat

ural

gas

28

.03

151.

03

03

.02

423.

01

49

77 6

304

.52

41

6Is

krae

mec

oS

love

nia

Ele

ctri

cal

ma

chin

ery

25

.89

3.8

42

.01

28

.22

80

2 15

92

4.4

25

17

Inte

reu

rop

aS

love

nia

Tra

de

23

.01

73

.01

9.0

14

4.0

51

32

168

16

.7

Ave

rag

e3

23

.81

230.

84

82

.71

190.

51

400

14 1

593

2.2

Cha

nge

from

199

9 (p

er c

ent)

22

.27

.62

7.9

11.5

38

.4-7

.2-0

.3

So

urc

e:

UN

CT

AD

su

rve

y o

f to

p T

NC

s in

Ce

ntr

al

an

d E

ast

ern

Eu

rop

e.

aB

ase

d o

n s

urv

ey

resp

on

ses.

bT

he

tra

nsn

ati

on

alit

y in

de

x (T

NI)

is

calc

ula

ted

as

the

ave

rag

e o

f th

e f

ollo

win

g t

hre

e r

ati

os:

fo

reig

n a

sse

ts t

o t

ota

l a

sse

ts,

fore

ign

sa

les

to t

ota

l sa

les

an

d f

ore

ign

em

plo

yme

nt

to

tota

l e

mp

loy

me

nt.

c1

99

9

da

ta.

dIn

clu

din

g e

xp

ort

sa

les

by

th

e p

are

nt

firm

...

Da

ta o

n f

ore

ign

ass

ets

, fo

reig

n s

ale

s a

nd

fo

reig

n e

mp

loym

en

t w

ere

no

t a

vail

ab

le.

In c

ase

of

no

n-a

vail

ab

ilit

y, t

he

y a

re e

stim

ate

d u

sin

g s

eco

nd

ary

so

urc

es

of

info

rma

tio

no

r o

n t

he

ba

sis

of

the

ra

tio

s o

f fo

reig

n t

o t

ota

l a

ss

ets

, fo

reig

n t

o t

ota

l s

ale

s a

nd

fo

reig

n t

o t

ota

l e

mp

loy

me

nt.

��


The Network Spread Index of the25 largest TNCs of Central and EasternEurope is significantly lower than that ofthe world’s largest TNCs. At the end of2001, the Network Spread Index of the formerstood at less than 4 per cent. Indeed, mostof the leading TNCs in CEE are at an earlys tage of t ransnat ional expansion. Thei rinvestments abroad are undertaken eitherin neighbouring countries or, in the caseof transport, in key maritime locations. Thereare, however, some differences by originand industry. The Index of Russian, Croatianand Slovene firms, for example, is aboveaverage. In machinery and pharmaceuticalsas well, the network spread is relativelywide.

Even for Russian TNCs, on average,the Index values are only a third of thosefor the top exporters of the country (tableIV.18 and annex table A.IV.1). While theaverage Russian TNC is present in less than10 foreign markets, the average lead exportersells in 27 countries. In petroleum and naturalgas, the spread of markets through exportsis twice as frequent as the spread of firmsthrough outward FDI.9

Table IV.18. The Network Spread Indexof the top 50 Russian exporters,

by industry, 2000(Per cent)

Industry NSI

Petroleum and natural gas 8.57Non-ferrous metallurgy 8.24Iron and steel 24.78Machinery and equipment 9.59Chemical and petrochemical 14.57Wood, timber and pulp 28.47Electrical power 4.08Coal and coke 3.57

Source: UNCTAD, based on Expert (Moscow), No.27 (287), 16 July 2001.

Notes

1 Financial firms are not included because ofthe different economic functions of assetsof financial and non-financial firms and thenon-availability of relevant data for the former.

2 These figures are based on the estimates ofthe 1999 sales, assets and employment offoreign affiliates of TNCs, as shown in tableI.1. However, these ratios, especially thoserelating to sales and assets, should be treatedwith caution, as the data on the foreign assetsand sales of the top 100 TNCs, obtained mainlythrough a questionnaire completed by firms,may not necessarily correspond to thedefinit ion of foreign assets and sales usedin table I.1.

3 The descent of this company from the seventhto the fourteenth place on the list is due tothe fact that both Germany and the UnitedStates are now considered to be i ts homecountries. This resulted in lower figures forforeign assets, sales and employment.

4 It should be noted that foreign sales includesales of foreign affi l iates of TNCs as wellas exports from parent firms. A small numberof the TNCs surveyed – approximately 22 percent – distinguish between the two categoriesin their reporting. As only total foreign salesfigures are available for most companies, thesefigures have been used for all companies citedin this section. If this sample is representative,foreign sales figures, as given here,overestimate the actual sales of foreignaffiliates of the top TNCs by some 10 per cent,especially in the primary and manufacturingsectors. For international production andexports from parent firms of Japanese TNCs,see table III .1.

5 The average Transnationality Index value ofthe world’s top 100 TNCs is the average ofthe 100 individual transnationality indicesof the companies on the l ist .

6 In 1999, the company sold its interest in Orangeto Mannesmann and received Mannesmannshares in return. A few months later, in spring2000, when Vodafone took over Mannesmann,Hutchison Whampoa was offered a 5 per centstake in Vodafone in return for its Mannesmanns h a r e s .

7 See WIR99 , p. 92; WIR00 , p. 90; WIR01 , p.114.

8 In 2002, MOL Hungarian Oil & Gas Plc. tookover Tiszai Vegyi Kombinát.

9 It should be noted that some of the topRussian oil and gas exporters are also leadingoutward investors. In such cases, thedifferences in the network spreads reflectcorporate choices between serving marketsthrough trade or through FDI.

PART TWO

TNCs AND EXPORT COMPETITIVENESS

��


��

Introduction to Part Two

INTRODUCTION

One of the contributions TNCs canmake to host economies in the developingworld i s to enhance thei r expor tcompetitiveness. Export competitivenesshas many facets, the most obvious implyinghigher exports. But it also means diversifyingthe export basket, sustaining higher ratesof export growth over time, upgrading thetechnological and skill content of exportactivity, and expanding the base of domesticf i rms able to compete g lobal ly ; thus ,competitiveness is sustained and it is generallyaccompanied by rising incomes. TNCs canhelp raise competitiveness in developingcountries in some or all of these ways, buttapping their potential is not easy. Attractingexport-oriented TNC activities is itself anintensely competitive business, and even someof the countries that have succeeded mayfind it difficult to sustain competitivenessas their wages rise and market conditionschange. Coherent and consistent policy supportis essential to ensure that attracting export-oriented TNC activities are embedded in abroader national development strategy. Thisis particularly important as there is a possibletension between the principal objective ofGovernments – which is to maximize nationalwelfare – and the principal objective of TNCs– which is to maximize their global corporatecompetitiveness. Export competitivenessis important and challenging, but it shouldbe seen not as an end in itself but as a meansto an end – which is development.

The link between FDI and trade isnot new but well worth revisiting, especiallyin the light of the growing attention to thechallenge posed by competitiveness,1 butalso in the light of the changing nature ofinternational production systems, the growthof supplier networks and new multilaterald isc ip l ines . In WIR99 , as par t of theexamination of FDI and the challenge ofdevelopment, one chapter was devoted tothe link between FDI and trade. The principalconclusions were that TNCs exert a strong

influence on the patterns of world trade,that much of the international flow of goodsis handled within TNCs in the form of intra-firm trade, and that inward FDI has contributedto boosting the export performance of a numberof developing host countries. This year ’sreport builds on the findings of WIR99 bylooking in greater detail at the role of TNCsin increasing export competitiveness and thecorporate strategies that are driving mostof the recent changes in the pat tern ofin ternat ional t rade . These have to beunders tood in order to achieve a bet terunderstanding of the role that policy canplay to foster export competi t iveness inassociation with TNCs.

Accordingly, Par t Two of WIR02explores the changing nature of expor tcompetitiveness and the role that TNCs playin enhancing it in different countries andactivities. Part Three then deals with thepolicies developing countries (and economiesin transition) might consider to attract export-oriented FDI and benefit from it.

That export competitiveness2 is ofgrowing interest to countries at all levelsof development is clear: the sheer volumeof analysis and benchmarking testifies tothe importance that Governments attach toit. Developed countries regard competitivenessas a prerequisite for maintaining high levelsof income and employment.3 Developingcountries find it essential for development.Improved export competi t iveness al lowscountries to earn more foreign exchange andso to import the products , services andtechnologies they need to raise living standardsand productivity. Greater competitivenessallows developing countries to diversify awayfrom dependence on a few primary-commodityexports and move up the skills and technologyladder, which is essential to sustain risingwages. It also permits the realization of greatereconomies of scale and scope by offeringlarger and more diverse markets.

��


New forms of export competitiveness,geared to international systems of production,can al low developing countr ies to entertechnology-intensive activities that they couldnot otherwise undertake. In the process, itallows them to build new productive capacities.Exporting feeds back into the capacities thatunderlie competitiveness: exposure to worldcompetition provides enterprises with greateraccess to information and technology thanexposure to domestic competition alone andleads to more vigorous efforts to acquirenew skills and capacities.4 An export-orientedeconomy also tends to attract more efficientTNC activities, which reinforces the upgrading.

There is ample recent evidence thatexport-oriented development is not only feasiblebut also rewarding. However, raising exportcompetitiveness means more than liberalizingtrade and investment. The most successfulcountries had to make determined effortsto develop new capabilities and to attractforeign capabilities to complement domesticones. All drew heavily on new technologiesfrom TNCs, and many, but not all, reliedon FDI or non-equity forms to spearheadthe process.

This is not to argue that building exportcompetitiveness is a complete strategy foreconomic development. It is only one of anumber of elements needed for development.It has to be complemented by measures toensure that the non-export sectors of aneconomy grow and that the benefits of growthare spread throughout the economy. If theexport sector is de-linked from the rest ofthe economy, it is possible to improve exportcompetitiveness without raising growth ratesor living standards for the population at large.This is, however, rare; a number of exportingeconomies have been able to grow on theback of their export drives, including bymoving up the technological ladder fromlabour-intensive activities towards technologyand skill intensive ones (UNCTAD, 2002a).

TNCs can contribute to the exportcompeti t iveness in host countr ies . Theircontr ibution is important in technology-intensive and internationally branded products,but it goes much further. They have alwaysbeen significant players in primary exportsand the main source of new indust r ia ltechnologies for local exporters (through arm’s-length l icensing and original-equipment-manufacture arrangements). With the spread

of global value chains in many low- andmedium-technology activities, TNCs are nowinvolved in the whole spect rum ofmanufactured exports. In some low-technologysegments, other international players are alsoactive, and TNCs often take the role ofcoordinating local producers in addition toset t ing up their own aff i l ia tes . In manytechnologically complex activities, TNCsare particularly important because a largepart of trade is internal to their internationalproduction systems.

While the growth of internationalproduction systems is well recognized, itis less well known that there is a growingtendency for firms, even large TNCs, tospecialize more narrowly and to contractout more and more functions to independentfirms, spreading them internationally, to takeadvantage of differences in costs and logistics.Some are even opting out of productionaltogether, leaving contract manufacturersto handle it while they focus on innovationand marketing. The main suppliers and contractmanufacturers are themselves often largeTNCs, with global “footprints” matching thoseof the i r pr incipals and wi th the i r ownsubcontractors and suppliers. However, TNCsalso increasingly use national suppliers andcontractors in host economies. Specializationdoes not stop here: leading TNCs are alsoentering into joint innovation arrangementswith other firms – competitors, suppliersor buyers – and with institutions such asresearch laboratories, universities and soon. Thus, the emerging global productionsystem is becoming more multifaceted , butwith tighter coordination by lead playersin each international production system.

What lies behind these trends? Threeforces are driving them. The first is policyliberalization, which opens up national marketsand allows all kinds of FDI and non-equityarrangements . The second is rapidtechnological change, with its rising costsand risks, which makes it imperative forfirms to tap world markets and share thecosts and risks. Technological change – inparticular, falling transport and communicationcosts, the “death” of distance – also makesit economical to integrate distant operationsand ship products and components acrossthe globe in a search for efficiency. Thethird, reflecting both of these, is increasingcompetition, which results in unexpectedforms of relocation to new sites, with new

��

Introduction to Part Two

ownership and contractual arrangements, andinvolving new activities.

All the signs are that the export roleof TNCs in host countries, through both FDIand non-equity arrangements, will grow further.I t wi l l cont inue to take new forms andincorporate new locations. The potentialfor generat ing expor ts f rom developingcountries and economies in transition is thushigh. But, as noted, tapping this potentialis not easy.

Part Two of WIR02 deals with thesethemes. It starts with the characteristics ofinternational production systems, exemplifyingthem for a number of firms. It describeschanges in global competitiveness patterns,the direct role of TNCs in exports (theirindirect contribution is difficult to tracequantitatively) and the main country “winners”in export competitiveness. The main messagesof the analysis are as follows.

Trade patterns are changing rapidly,with technology-intensive activities growingconsistently faster than others. As a group,developing countr ies and economies int rans i t ion have done wel l in expor tcompetitiveness, rapidly raising their marketshares and upgrading into advanced activities.

TNCs have played an important rolein the exports of many countries, directlyby establishing in those countries affiliatesincorporated into the TNCs’ internationalproduction systems, and indirectly by enteringinto contractual arrangements, especially withsuppliers linked to the TNCs’ productionsystems. However, such systems are stilllargely concentrated by country, region andactivity. It is possible that the export dynamismseen in the leading “winners” will spreadto other developing countries and economiesin transition as international production gatherspace and increases in scope. But there arerisks and there are opportunities. First therisks:

• The bulk of TNC-related export activityin developing economies and economiesin transition is concentrated in a handfulof economies, mainly in East and South-East Asia and in regions contiguous toNorth America and the European Union,although TNCs are also significant playersin many countries that are not major globalexporters.

• It is unclear whether some large productionsystems can spread further, for technologicalreasons . Once product ion has beenrationalized to serve regional or worldmarkets, first movers tend to build strongcumulative advantages, reaping economiesof scale and scope and drawing uponclusters of suppliers and institutions.

• The entry-level requirements of competitiveproduct ion are r i s ing. Not only i stechnological progress pushing up skillrequirements, TNCs also increasingly needefficient supplier networks that can operateglobally and at much higher levels oftechnological sophistication than before.

• Even “insiders” to international productionsystems face uncer ta in ty about thei rprospects. A number of low-technologysystems such as texti les, clothing andfootwear, on which many countries haverelied, may have peaked in growth. Themore high-technology systems are imposingmore stringent demands on participants.Host countries that cannot muster newcapabilities may lose their competitive edge:even first-mover advantages may not lastwithout upgrading.

• A concentration of exports from developingcountries on a few manufacturers mightlead to oversupply and a subsequentdeterioration of the terms of trade – oftenreferred to as the “fallacy of composition”di lemma (UNCTAD, 2002a, ch . 4) .

• Some trade arrangements that caused aspreading of international production insome low-technology industries will bephased out or else eroded by further tradel i b e r a l i z a t i o n . T h e M u l t i f i b r eArrangement i s an example .

But there are also opportunities:

• International production is spreading andcan be expected to do so as countr iesfurther l iberalize trade and investmentregimes and improve their infrastructureand ski l l s , and as compet i t ion pushesf i rms to spread the i r ac t iv i t i es morewidely to strengthen their competi t iveadvantages .

• Leading TNCs are increasingly drawingi n d e p e n d e n t e n t e r p r i s e s i n t o t h e i rp roduc t ion sys t ems : inpu t supp l i e r s ,service providers and strategic partners.T h i s o f f e r s c o n s i d e r a b l e s c o p e t oenterprises from host economies that buildthe capabi l i t ies to meet TNCs’ needs .

��


• TNC suppliers and contract manufacturersa r e g o i n g t r a n s n a t i o n a l t o r e t a i ncompetitiveness and to serve lead firmse ff e c t i v e l y, o p e n i n g n e w s o u r c e s o fe x p o r t - o r i e n t e d F D I f o r d e v e l o p i n gcountr ies .

• Rising costs and congestion may at somestage offset first-mover advantages, andactivities then spread to cheaper and lesscongested areas .

• The increased tradability of services aswell as of specialized service functionsassociated with international productionsystems will open entirely new areas foran in ternat ional d ivis ion of labour.

• Advances in transport technology mayopen up new possibilities for high-valueagricultural and other primary products.

• New global ized act ivi t ies wil l emergeas the economic logic of relocation andn e t w o r k i n g s p r e a d s . T h i s i s a l r e a d yevident in the software industry, wherethe “death” of distance is most evident,but it will also affect other service andmanufactur ing act ivi t ies .

It is too early, of course, to forecastthe net outcome of all these trends. The resultsare very likely to be industry- and context-specific. The forces driving internationalproduction systems are strong, but competitionfor export-oriented TNC activities is alsorising. Achieving and sustaining export-compet i t iveness ca l l s for h igher localcapabilities in all activities and all countries.If developing countries and economies intransition are to strengthen competitiveness(with or without direct TNC participation),they will have to strengthen their capabilities,attract and stimulate activities suited to theirendowments, and upgrade them over time.

Notes

1 For a discussion of the broader question ofTNCs and competit iveness, see WIR95 .

2 “Export competitiveness” is taken here in thebroad sense outlined above. Thus, it does notmean raising world market shares by keepingwages low, but sustaining world market shareswhile raising incomes.

3 For instance, the OECD has this to say:“Competitiveness [should] be understood asthe ability of companies, industries, regions,nations and supranational regions to generate,while being and remaining exposed tointernational competition, relatively high factorincome and factor employment levels on asustainable basis” (OECD, 1994, p. 23). TheGovernment of the United Kingdom’s ThirdWhite Paper on competit iveness starts:“Improving competitiveness is central to raisingthe underlying rate of growth of the economyand enhancing living standards… The needto improve our competitiveness is not imposedby Government, but by changes in the worldeconomy. Improving competitiveness is notabout driving down living standards. It is aboutcreating a high skills, high productivity andtherefore high wage economy where enterprisecan flourish and where we can find opportunitiesrather than threats in changes we cannot avoid”(United Kingdom, Cabinet Office, 1996, p.10). For an analysis of the concept ofcompetit iveness, see Lall , 2001.

4 There is a debate on whether exporting leadsto greater enterprise productivity or vice versa.The relationship between the two is probablyinteractive (Westphal, 2002). The technologycapability literature establishes that export-oriented economies enjoy healthier and morecompetitive capabilities than inward-lookingones, though even the former may need a periodof infant-industry protection when buildingadvanced capabilities in local enterprises (Lall,2001b).

CHAPTER V

INTERNATIONAL PRODUCTION SYSTEMS

A. Drivers and features

TNC act iv i t ies af fec t the expor tperformance of host countries through arange of equity and non-equity relationships.What i s common to a l l of them is tha tproduction – and, more broadly, the operationsof a firm – is organized under the commongovernance of TNCs. During the past 15years , fa l l ing barr iers to in ternat ionaltransactions have not only invigorated globalmarkets through arm’s-length transactionsbut given rise to elaborate corporate systemsof organizing the production process. Asa result, international production systemshave emerged within which TNCs locatedifferent parts of the production processes,including various services functions, acrossthe globe, to take advantage of fine differencesin costs, resources, logistics and markets(WIR93) . What is distinct about the riseof international production systems as comparedto ear l ier organizat ional s t ructures andstrategies characterizing TNC operationsis, first, the intensity of integration on regionalor global scales and, second, the emphasison the efficiency of the system as a whole(Kaplinsky, 2000, p. 122). In other words,global markets increasingly involve competitionbetween entire production systems, orchestratedby TNCs, rather than between individualfactories or firms.

The rise of such integrated internationalproduction systems reflects the response ofTNCs to dramatic changes in the globaleconomic environment, and, in particular, theirsearch for enhanced competitive advantagethrough an optimal global configuration ofwhere they produce and how they coordinatetheir production activities. Several forces combineto drive this process:

• The rapid decline in barriers to internationaltrade and investment flows. The creationof a corporate international productionsystem is made possible by the freedom

to move goods, services and knowledgeamong l inked corporate ent i t ies wi thminimal impediments, even when theseare situated in widely dispersed locations.

• The greater ease of the international flowsof goods , services and ideas and theresulting drop in the costs of cross-borderbusiness coordination. Advances in transportand communication technologies havecontinued apace in recent years, and TNCshave deployed new systems to enhancetheir internal and external coordination.The advent of the Internet has dramaticallylowered the costs of information exchangeover great distances. More streamlinedand standardized customs administrationand port operations as well as internationaltelecommunication gateways and satelliteand fibre-optic networks further facilitateinternational production, including thecoordinat ion of knowledge- intensivefunct ions such as design and R&D.

• These two forces have, together, led tostronger competition among leading TNCs.In a growing range of industries, majorproducers must contest all of the marketsin which their competitors operate anddraw on sources of competitive advantagewherever they may be located. No longercan a dynamic firm focus only on familiarmarkets, since its competitors may mobilizeprofi ts or resources across the globe.

All of this has led to profound changesin industrial structures. In some industries(e.g. semiconductors and automobiles), theyhave led to consolidation and oligopolisticcompetition; in others (e.g. garments), toa di ffus ion of market power. Corporatestrategies have evolved too, as TNCs havesought to devise new forms of governanceto manage their dispersed activities.

International production systems arethus evolving as corporations respond toeconomic and technological forces. Giventheir growing importance in shaping investment

��


and t rade pat terns , unders tanding thei rdynamics is essential for any developingcountry that seeks to enhance i ts exportcompetitiveness through the activities ofTNCs.

Three core elements of internationalproduction systems are critical in this context:governance, global value chains and geographicconfiguration.

The first element is governance , orthe structure of control that determines thegeographic and functional distribution ofbusiness ac t iv i t ies and ensures the i rcoordination. International production systemgovernance occurs in forms ranging fromownership (or equity) linkages that providedirect managerial supervision, to variousnon-equi ty l inkages in which formal lyindependent in termediar ies – suppl iers ,producers and marketers – are linked througha variety of relationships such as franchising,licensing, subcontracting, marketing contracts,common technical standards or stable, trust-based business relationships. Intel has createdan international production systems in whichequity – or ownership – links form the basisfor common governance of the membersof the system (section B.1 below), whileLimited Brands has established a systembased on non-equity relationship (sectionB.2 below). Toyota exemplifies a mixtureof both approaches, by combining close linksamong i t s own ful ly-owned assemblysubsidiaries with a multi-tiered network offormally independent subcontractors (sectionB.3 below). The case s tudy of Ericsson(section B.4 below) traces the transitionin control from a largely equity-based systemto an almost fully non-equity-based system(although Ericsson has retained direct controlover manufacturing, i.e. over product linesrelated to its core focus on innovation anddesign). The continuum of internat ionalproduction system governance thus reflectsthe degree of control over corporate activities.Equity-based governance systems internalizecontrol and allow stronger protection of firm-specific advantages like technology, as inthe case of Intel. Where these advantageslie in brand names and marketing – as inthe case of Limi ted Brands – moreexternalized forms of control may suffice.

A re la ted i ssue i s the degree offunctional hierarchy in the system. In someinternational production systems, each stageof production is assigned to specific corporate

affiliates and deployed globally, with eachunit in the system guided by a headquarterscompany (somet imes refer red to as aninternational production system “flagship”– see Rugman and D’Cruz, 2000). In Intel’shierarchical international production system,individual affiliates specialize in particularstages of innovation or production and areclosely integrated into the parent firm’s globalnetwork. At the other end of the spectrumare systems in which an integrated set ofbusiness functions is decentralized to multiplecentres, often regional headquarters, thatwield considerable autonomy. An exampleis the distribution of “global product mandates”to various affiliates. In this case, internationalproduction system governance takes on amore horizontal character. Toyota presentsan intermediate case, in that affiliates inthe United States and Thailand have beengiven “regional product mandates” for certainproduct l ines . These two aspects ofgovernance (equity or internalized vs. non-equity or externalized, and hierarchical vs.horizontal) are related. In general, equity-based international production systems tendto be organized hierarchica l ly, whi leexternalized systems operate more horizontally.Yet the distinction is important, for the twocriteria are not always perfectly correlated.In the garments industry, for example, theinternational division of labour has, overt ime, become vert ical ly special ized andhierarchically integrated under the leadershipof brand-holding flagship companies likeLimited Brands despite the near-absenceof equity links. On the other hand, someTNCs with global networks of wholly-ownedsubsidiar ies have moved towards morehorizontal forms of coordination.

A striking recent governance trendin many manufacturing and service internationalproduction systems is a shift towards thesystematic outsourcing of a greater rangeof activities, including back-office operationslike customer service and even R&D. Thisreflects TNCs’ efforts to focus on their“core competencies”, i .e. those activitiesin which they can deploy propr ie taryadvantages, wield market power or otherwiseenjoy higher returns. The trend suggestsin particular that technological advancesand competitive pressures have altered thebalance between two opposing firm-specificadvantages sought by TNCs – internalizationversus specialization – in favour of the latter.The outsourcing trend has complex implications

��

CHAPTER V INTERNATIONAL PRODUCTION SYSTEMS

for global industry structures, creating entirenew industries. In particular, leading TNCsin a range of industries have begun to exitfrom manufacturing altogether. In response,contract manufacturers have emerged tospecialize exclusively in providing turnkeymanufacturing services (see sect ion B.5below). Contract manufacturing differs fromthe earlier system of original equipmentmanufacturers sub-contracting in that thebrand-holding TNC does not simply drawon subcontractors for extra production capacity,but rather outsources the entire manufacturingfunction for individual product lines or, insome cases like Cisco Systems, the entireproduct range.

Despite the outsourcing trend, directequity and managerial control remain keysources of competitive strength in certainindustries. Even when international productionsystems are highly externalized, TNCs typicallyexert powerful authority through their controlof key functions, such as brand managementand product definition, as well as throughthe setting and enforcing of technical, qualityand delivery standards throughout a networkof formally independent producers.

The second element of an internationalproduction system is the organization anddistribution of production activities and otherfunctions in what is commonly known asthe global value chain . I t extends fromtechnology sourcing and development throughproduction to distribution and marketing (figureV.1). The core competitive advantages ofTNCs can reside anywhere along the valuechain, although, in practice, they tend tocluster in one component. Value chains arebecoming fragmented, as business functionsare differentiated into ever more specializedactivities. Functional specificity allows TNCs

to distinguish activities with widely varyinginputs, capacity requirements and financialreturns, even within the same industry orproduction process. As a result , there isa genera l t rend towards funct ionalspecialization, which contrasts with the typeof ver t ica l ly in tegra ted s t ructures tha tcharacterized many TNCs until quite recently.Intel, for example, focuses on the designand manufacture of microprocessors anda few related products (see sect ion B.1below), rather than combining captive in-house chip production with the productionof computer systems, as was long the strategyof IBM, NEC and Samsung. In manyindustries, TNCs have recently tended tofocus more on the knowledge-intensive, lesstangible, functions of the value-chain suchas product def ini t ion, R&D, managerialservices , and market ing and brandmanagement. This has long been true ofthe garment industry, where leading TNCsfocus a lmost exclusively on design andmarketing (see Limited Brands, 2001). Evenin many “high-technology” industries, however,manufactur ing as wel l as logis t ics anddistribution have become standardized andmore easily tradable. In consequence, contractelectronics manufacturers have grown rapidly(section B.5 below).

In general, international productionsystems may be distinguished by the functionalactivity on which a TNC focuses and whichgives it governance authority over the broaderproduction system. Intel’s core strategy isto establish market dominance through theinnovation and design that differentiate itsproducts. Hence the activities that resultin a finished Intel product are those of a“technology-driven” international productionsystem. Toyota’s core competence is i tsability continuously to improve quality and

Figure V.1. The global value chain of product components

Source : UNCTAD.

��


productivity in the complex automotive industry.Automotive international production systemsare thus “production-driven”. Finally, inmany consumer-product sectors, the abilityto build brand value and capitalize on changingtastes and styles is the key to competitivestrength, as exemplified by Limited Brands’success in the garments industry. Suchinternational production systems are “marketing-driven”.

These two elements of internationalproduction systems – governance and thevalue chain – can be used to analyse avariety of international production systemsinvolved in international investment and exports.Table V.1 provides a matrix of internationalproduction system systems with illustrationstaken from the case studies presented below.

The third element of internationalproduction systems, which holds particularinterest for developing countries, is theirgeographic configuration in an effort toacquire a portfolio of locational assets thatmaximizes the competitiveness of the corporatesystem as a whole. The past 15 years haveseen great changes in the determinants ofthe optimal location of TNC activities, andhence in the geographic d is t r ibut ion oftechnology, production and marketing activitieswithin international production systems.Production has been internationally dispersedfor decades, but the trend towards integrationover ever larger geographic scales is relativelynew. Supply chains have extended to newareas of the globe and integrated formerlydistinct regional production zones. Contractmanufacturing and the production of keycomponents in electronics and other industrieshave witnessed a consolidation trend in thepast few years. The surviving large-scalesupplier firms increasingly seek a globalpresence, particularly by co-locating nearthe key fac i l i t ies of the i r in ternat ional

production system flagship customers (Sturgeonand Lester, 2002). Related to this is therecent trend towards “postponement”, inwhich components are made or assembledas close to the final point of sale as possiblein order to reduce transport costs, whichremain important for a range of products.This may pose great challenges to those“winners” in the global export trade thathave previously thrived as accommodating,but distant, off-shore production platforms.

Perhaps a more striking trend hasbeen the geographic dispersal of other globalvalue chain functions. The internationalizationof business service and support functionshas progressed rapidly in recent years. Eveninnovation, presumably the function mostf i rmly anchored in home countr ies byspecialized skills and strategic motivations,is increasingly being carried out on a globalstage. Developed countries continue to performmost of the research a imed a t radica lbreakthroughs, but the developing world nowcarries out significant R&D.

Simplified, three sorts of drivers areacting simultaneously on the locational decisionsof TNCs and their partners in internationalproduction systems. Cost differentials remaina fundamental fac tor in the locat ion ofproductive activities. Changing governancemodels and functional differentiation (thefirst two elements of an international productionsystem) have subjected a growing rangeof activities to the logic of cost optimization,including R&D and managerial processesl ike account ing, informat ion sys temsdevelopment, and marketing. In locationaldecision-making, however, production costsare always evaluated relative to the efficiencyand productivity of a location. This pointis of ten over looked in d iscuss ions ofcomparative costs, but it is particularly crucialin that a major focus of TNCs’ geographic

Table V.1. Examples of different international production systems

TNCs’ governance Internalized Mixed Externalizedfunctional focus (Equity-based control) (Equity- and non-equity-based control) (Non-equity-based control)

Technology-driven Case 1: semiconductors – Case 4: telecom equipment –Intel Ericsson/Flextronics

Production-driven Case 3: automotive – Toyota

Marketing-driven Case 2: garments –Limited Brands / Li & Fung

Source: UNCTAD.

��


allocation of value-chain activities is to achievesystemic eff ic iencies across their ent i reinternational production systems. A givenlocation, therefore, is judged by how cost-efficiently it performs a given function incoordination with functions located elsewhere,and not merely in isolation.

Asset-seeking motives are also leadingTNCs to tap skills and knowledge in a moresystematic way on the global scale. As notedabove, advances in information processingand telecommunications enhance TNCs’ abilitiesto coordinate complex functions over greatdistances. This not only allows them to deployfunctions in new locations, but also enhancestheir interest in mobilizing a wider rangeof skills and knowledge in a greater varietyof locations.

Finally, clustering has become a keyinfluence on TNCs’ locational decision-making.Earlier studies have described the fortuitousemergence of geographic concentrations ofrelated activities in production, specializedservices, R&D and the like (Schmitz andNadvi, 2000). Increasingly, however, cluster-formation is a global process ref lect ingrecognition by a number of TNCs of thevalue of co-location with suppliers, competitors,service providers , and knowledge-intermediaries. Their intentional efforts tocapture tacit-knowledge spillovers suggeststhat first-mover advantages for nodes ininternational production systems may be durabledespite the increasing mobility of TNC assetsand functions. Alternatively, it might suggestthat countries seeking to enter into internationalproduction systems, or seeking to occupymore complex niches within such systems,might need to reach a critical mass of relatedinvestments before doing so.

These broad structural trends are nowcrucial drivers of the geographic reorganizationof TNC activities. Paradoxically, TNC activitiesof a l l sor ts are becoming increas ingly“footloose”, even as geographic clusters growin importance. While distance might matterless for many transactions, proximity andaccess to tacit or partly tacit knowledgeis increasingly vital for competitive advantage.Nonetheless, it must also be recognized thatthese trends are not the only determinantsof geographic configurations of internationalproduction systems. There are also sectoraland nat ional (or cul tura l ) fac tors . Forexample , compet i t ive s t rength inmicroprocessors depends on design innovation,

and the need to protect technology assetsleads to an internalized, vertically integratedapproach. On the other hand, success inthe garments industry requires knowledgeof fas t -changing market t rends; hence ,externalizing production to a horizontal arrayof independent subcontractors confers costadvantages so long as these are able tomeet design, quality and delivery standards.Then there are the nat ional or ig ins ofinternational production systems (Borrus etal., 2000). For example, electronics TNCsheadquartered in the United States typicallypursue outsourcing strategies while maintainingtight equity control over their verticallyspecialized subsidiaries. Japanese TNCsin the same industry, by contrast, displaya strong preference for integrated production,governed through a mixture of equity controland c lose non-equi ty l inkages wi th keysuppliers (although this is beginning to change).These different structural, sectoral and nationalcharacteristics are combined (as exemplifiedby the case studies provided below) in thecontext of corporate strategies of individualf i rms a iming a t sys temic f i rm-speci f icadvantages.

The dr ivers and fea tures ofinternational production systems signal onepoint of particular interest to developingcountries: Governments that seek export-oriented FDI need to go beyond trade andFDI policies and assess their locat ionaladvantages in the international productionsystem context. More specifically:

“the issue is no longer whether tradeleads to FDI or FDI to trade; whetherFDI substitutes for trade or tradesubstitutes for FDI; or whether theycomplement each other. Rather, it is:how do firms access resources –wherever they are located – in the interestof organizing production as profitablyas possible for the national, regionalor global markets they wish to serve?In other words, the issue becomes: wheredo firms locate their value-added activities?In these circumstances, the decisionwhere to locate is a decision whereto invest and from where to trade. Andit becomes a FDI decision, if a foreignlocation is chosen. It follows that,increasingly, what matters are the factorsthat make particular locationsadvantageous for particular activities,for both, domestic and foreign investors”(WIR96 , p. xxiv).

��


Developing countries need to identify theirlocational strengths and weaknesses in relationto their competitors and in relation to thefactors that influence the configuration ofinternational production systems. Only thencan they properly tailor policies to enhancetheir locational advantages. Moreover, inseeking to a t t rac t expor t -or iented TNCactivities or induce existing affiliates (orlocal companies) to upgrade their nicheswithin given international production systems,Governments need to d iscern wheregovernance authority resides within varioussystems so that their efforts are targeted atthe right decision-makers. Both these issuesare taken up further in Part Three of WIR02.

B. Case studies

1. Control through equityrelations in a technology-driven

international productionsystem: Intel

Semiconductors were the most dynamicproducts in world trade during the period 1985-2000, when their exports grew from $26 billionto $235 billion. The demand for semiconductorscomes mainly from the IT industries (computers,telecommunications and consumer electronics).By 2000, they represented 5 per cent of worldtrade, up from 1.5 per cent in 1985, and theyaccounted for 20 per cent of the trade in high-technology non-resource-based manufactures,the most dynamic category of world trade.

In terms of ownership advantages,c o m p e t i t i o n h a s b e e n f i e r c e i n t h esemiconductor industry, and Intel, the marketleader, has se t the pace ( t ab le V.2) . I tadap t ed be t t e r t o t he evo lu t i on o f t heindustry in which there was a long periodof fast growth (1982-1995), fol lowed byconsolidation (1995-1998), followed by ashor t boom and then a sharp fa l l . 1

Intel jumped from seventh to f irstrank by sales in the semiconductor industrybetween 1983 and 2001, and is today byfar the larges t chipmaker in the wor ld .Its sales increased 42 times between 1983and 2000 before declining in 2001 as theIT marke t f e l l . I t a ccoun t s fo r abou to n e - q u a r t e r o f g l o b a l s a l e s i nsemiconductors , most ly to the computerindustry. It also accounts for one quarterof the R&D under taken by the indust ry,and has been the biggest investor duringthe past decade. Intel’s capital expensesin 2001 were $7.3 bill ion. The companyhas developed s igni f icant technologica land product ion advantages : i t has beenable to squeeze more transistors onto siliconwafers for computers than its competitorsand it has developed larger silicon wafers,reducing fabrication costs by about one third.2

Inte l exploi ted i t s manufactur ingprowess by integrating its production systemand establishing identical plants in numerouslocat ions to obta in the opt imal g lobalconfiguration of its production facilities. Thissys tem al lowed the company to locateparticular activities in the sites most suited

Table V.2. The world’s leading semiconductor manufacturers, 2001(Billions of dollars)

Rank 2001 Rank 1983 Company (Home country/region) Sales 1983 Sales 2000 Sales 2001

1 7 Intel (United States) 0.7 29.7 22.72 5 Toshiba (Japan) 0.9 11.0 7.23 3 NEC (Japan) 1.3 10.9 7.04 2 Texas Instruments (United States) 1.6 10.3 6.75 .. STMicroelectronics (EU) .. 7.8 6.36 .. Samsung Electronics (Republic of Korea) .. 10.6 5.17 1 Motorola (United States) 1.6 7.9 5.08 4 Hitachi (Japan) 1.0 7.4 4.79 .. Infineon (EU) .. 6.8 4.6

10 10 Philips (EU) 0.5 6.3 4.6Total top 10 9.4 108.6 73.6Semiconductor industry 17.4 204.4 139.0

Source: UNCTAD, based on IC Insights, cited by Semiconductor Electronics Resource Centre, www.dir-electronics.comand UNCTC, 1986.

��


for them. It kept the high-value elementsof the semiconductor cost structure (waferproduction and fabrication) predominantlyin the United States and shifted the morelabour-intensive assembly-and-testing activitiesto lower-cost sites (table V.3). Thus, Intelhas kept its production process internalized.More specifically, it has 13 fabrication plantsand 11 assembly-and- tes t ing s i tes in 7countries. About half of its 86,200 employeeswork in its Technical Manufacturing Group.It has expanded internationally with fabricationfacilities in Israel (1985 and 1999) and Ireland3

(1993 and 1998) and concentrated its labour-intensive operations in Malaysia (1988, 1994,1996 and 1997),4 the Philippines (1979, 1995,1997-1998),5 Barbados (1977, later closed),China (1997, 2001) and Costa Rica (1997and 1999).6 Today, about two-thirds ofIntel’s manufacturing workforce is in theUni ted Sta tes , 11 per cent in Malays ia ,8 per cent in the Philippines, 4 per cent inIreland, 3 per cent in Israel, 2 per cent inCosta Rica and 1 per cent in China. It isthe leading national exporter from Ireland,the Philippines and Costa Rica, and ranks

seventeenth among foreign exporters fromChina.

Many of Intel’s competi tors havereorganized their own international productionsystems, following Intel’s lead and on thebasis of the same overall intra-firm divisionof labour.7 In the process, a number offirms have consolidated their activities. Forexample, Motorola has reduced the numberof its plants from 29 to 14 since 1997, andHitachi reduced its plants from 13 to 8, shiftingproduction from Japan to China and Malaysia.

With regard to transnationalization,In te l ’s opera t ions and i t s in ternat ionalproduction system are designed to distanceitself from competitors by protecting itstechnological advantages inside subsidiariesstrategically located in its home country,or in I re land and Israel . In the case ofassembly and testing facilities, it has expandedinternationally to incorporate a few carefullyselected sites in low-cost locations but alwaysin fully-owned operations. It is an internationalproduct ion sys tem that i s h ierarchica l ,

Table V.3. Intel’s manufacturing sites, January 2002

Country Faci l i ty Funct ion Year built Current process technology Employees

United States Facility 1 Wafer fabrication 1978, 1992, 1996,1999, 2003a 0.13-, 0.25-, 0.35-micron 16 000

Facility 2 Wafer fabrication 1980, 1993, 2002a 0.13- 0.18-, 0.25-, 0.35-micron 5 500

Facility 3 Wafer fabrication 1988 0.13-, 0.18-micron 8 500

Facility 4 Wafer fabrication 1994 0.28-, 0.35-, 0.50-micron 2 700Facility 5 Wafer fabrication,

assembly and testing 1996, 1999, 2001 0.13-, 0.18-micron 10 000Facility 6 Systems

manufacturing 1996 .. 1 400

Facility 7 Wafer fabrication 2001 0.18-micron 1 845

Ireland Facility Wafer fabrication 1993, 1998, 2004a 0.18-, 0.25-micron 3 400

Israel Facility 1 Wafer fabrication 1985 0.35-, 0.50-, 0.75-, 1.0-micron 800Facility 2 Wafer fabrication 1999 0.18-micron 1 500

Malaysia Facility 1 Board manufacturing,assembly and testing 1996, 1997 .. 7 790

Facility 2 Assembly and testing 1988, 1994, 1997 ..

Philippines Facility 1 Assembly and testing 1997, 1998 .. 5 984Facility 2 Assembly and testing 1979, 1995 ..

China Facility Assembly and testing 1997, 2001 .. 1 227

Costa Rica Facility Assembly and testing 1997, 1999 .. 1 845

Source: www.intel.com, January 2002.

a Estimated construction completion.

��


integrated (with associated intra-firm trade)and based on tightly controlled subsidiaries.The semiconductor industry is thus a goodexample of a global value chain driven bycarefully protected technological advantages.

Locational advantages also play arole. As technology-intensive stages in thesemiconductor production process can beseparated from labour-intensive ones andthe cost of transport is low relative to thevalue of the output, it is economical to pursuea global production strategy. In the caseof Intel, the principal factors that the firmtakes into account in establishing a newsubsidiary for assembly and testing functionsinclude the avai labi l i ty of a technicalworkforce, construction costs, the qualityof infrastructure, logistics, business costsand supplier capabilities (www.intel.com/pressroom/kits.htm). Host country incentivescan be important as well. The selectionprocess for the plant that was located in

Table V.4. Winners and losers in semiconductor exports,a 1985-2000(Per cent)

Market share increase,Economy 1985 2000 1985-2000c Top 10 TNCs presentb in winner economies

Principal winnersChina 0.14 8.82 8.7 Intel, Toshiba, NEC, Texas Instruments,

ST, Motorola, Hitachi, Infineon, Philips, SamsungTaiwan Province of China 2.72 10.64 7.9 Texas Instruments, Hitachi, Infineon, PhilipsMalaysia 0.36 7.81 7.5 Intel, Toshiba, NEC, Texas Instruments, ST,

Motorola, Hitachi, Infineon PhilipsRepublic of Korea 0.76 4.01 3.2 Texas Instruments, SamsungPhilippines 0.23 3.07 2.8 Intel, Texas InstrumentsThailand 0.46 2.54 2.1 Toshiba, PhilipsCosta Rica - 1.41 1.4 IntelIreland 2.37 3.43 1.1 Intel, Motorola, NECTotal 7.04 41.73 34.7

Principal losersUnited States 29.97 15.40 -14.2Germany 8.76 3.39 -5.4France 6.52 1.71 -4.8Japan 13.83 10.27 -3.6Italy 3.28 1.14 -2.2United Kingdom 6.73 4.88 -1.8Hong Kong, China 3.92 2.11 -1.8Total 73.01 38.90 -33.7

Source: UNCTAD, based on the United Nations’ Comtrade database.

a SITC 7599: parts and accessories of data-processing equipment.b As of January 2002. Developing economies with semiconductor affiliates not mentioned here: Singapore (NEC, Texas Instruments,

ST, Hitachi, Infineon, Philips), Hong Kong, China (Motorola, Philips), Indonesia (NEC); Morocco and Malta (ST).c The concept of “market share increase” is based in the import market shares as calculated by the CAN computer

programme on international competitiveness of UN-ECLAC, which is based on the United Nations’ Comtrade database.The data are classified at 3 or 4 digits of the Standard International Trade Classification (Rev.2). The period ofanalysis is 1985-2000, in which the value of individual years represents 3-year rolling averages (two-year averageof the year 2000) to emphasize the structural aspects of change.

Costa Rica exemplifies the interplay of thesefactors.8 Intel’s strategy of locating labour-intensive activities in low-wage areas, mainlyin Asia, and then moving to yet lower-wagelocations, has also been utilized by manyof its competitors. They too have movedthe more labour-intensive stages of theirproduction to developing countries, oftenthe same ones as Intel , thereby creatinga clustering effect. As semiconductors enjoyunencumbered access to most markets ,market-access factors do not play a rolein these locational decisions.

As a result, a handful of East andSouth-East Asian countries have registeredhigh increases in their export-market sharesin semiconductors, while some developedcountries have experienced large declines(table V.4). During the period 1985-2000,a total of eight winners (mainly from Asia)improved their shares by almost 35 percentagepoints , whi le seven, mainly developed,

��


in distorted trade flows. For that reason,no attempt is made here to match the corporatestrategies of the leaders with trade data. Thissection simply presents one example of thekinds of networking relationships being establishedthrough non-equity forms, illustrating the earlierobservation about the importance of suchrelationships for exports. Still, the trade datado capture the international and regional aspectsof garments markets: China and several Asiancountries compete in most major markets,while the North American and West Europeanmarkets have regional suppliers, mainly asa result of trade restrictions (tables V.5 -V.7).

economies lost a similar percentage. Inother words, a very high proportion of thesetrade gains and losses were accounted forby the relocation of the labour-intensivesegments of semiconductor internationalproduction systems. Another factor was thearrival of newcomers in the industry fromeconomies such as Taiwan Province of Chinaand the Republic of Korea.

2. Control through non-equityrelations in a marketing-driven

international production system:Limited Brands

Clothing remains an important componentof world trade, rising from 2.4 to 3.1 percent of world imports (from $41 to $174 billion)during the period 1985-2000. It accountedfor 20 per cent of low-technology non-resource-based manufactures in 2000 (up from 17 percent). North America ($58 billion in 2000)and Western Europe ($72 billion) are the mostimportant markets for garments.

Barr iers to ent ry are low on theproduction side of garments, in comparisonto complex technology-and-scale-intensiveindustries like electronics and automobiles.However, there are high entry barriers inmarketing in the garment industry. Buyerstherefore occupy an important place in globalvalue chains and dominate the industry. Thereis an ample supply of capable garment makers,and it is relatively easy to create new onesby providing design inputs and some technicalassistance. Thus, the fragmentation of theproduction process is very advanced.

In this situation, the key variable forthe location of manufacturing plants is marketaccess. United States rules favour clothingassembled offshore from United States inputs,and they give special market access toassemblers from Central America, the Caribbeanand Africa (see chapter VII). Within NAFTA,Mexico profits from rules of origin that giveit advantages over competitors, especially fromCentral America and the Caribbean, sinceits domestic inputs count as “NAFTA content”and those of its competitors do not. TheEuropean Union uses a similar mechanism(see chapter VII), also granting special accessto a number of countries. Finally, the quotasof the Multifibre Arrangement have also stronglyinfluenced locational decisions. All of theseschemes and mechanisms – quotas, preferentialmarket access and regional integration – result

The characterist ics of demand forgarments in the United States, Europe andJapan differ greatly, and these differenceshave been important in the choice of suppliercountries (Sturgeon, 2002). United Statesbuyers prefer standardized products at lowprices. Europeans prefer high quality productsof greater diversity and are willing to payhigher prices. Japanese buyers prefer highquality finishing. In practice, this meansthat very few suppliers can meet the needsof all three major markets, and so tend tospecialize in one or two.

Take the Uni ted Sta tes market .Competition increasingly takes place not somuch at the level of f irms as networks.

Table V.5. Winners and losers in NorthAmerican garmenta imports, 1985, 2000

(Percentage)

Market shareincrease

Economy 1985 2000 1985-2000

Principal winnersMexico 1.6 14.0 12.4Honduras 0.2 4.0 3.9China 8.3 11.2 2.9Dominican Republic 1.4 4.0 2.6El Salvador 0.1 2.6 2.5Total 11.6 35.8 24.2

Principal losersHong Kong, China 22.7 8.2 -14.5Taiwan Province of China 15.5 3.3 -12.2Republic of Korea 13.7 3.8 -9.9Total 51.9 15.3 -36.5

Source : UNCTAD, based on the United Nations’ Comtradedatabase.

a SITC 842: men’s outwear non-knit; SITC 843: women’soutwear non-knit; STIC 844: undergarments non-knit;SITC 845: outer garments knit non-elastic; SITC 846:undergarments knitted.

��


General retailers like Wal-Mart, Sears Roebuckand J.C. Penney, as well as garment specialtyretailers like Liz Claiborne, The Gap andLimited Brands, both design and marketclothing but do not make the products theysell. These companies are controlling a growingshare of the United States market: in 1977,

the top 50 apparel and accessory retailersheld 28 per cent of the market and the top5 held 9 per cent. By 1992, the share ofthe top 50 had risen to 53 per cent and thatof the top 5 to 18 per cent (Abernathy etal., 1999, p. 76). Continued success forbuyers in the garments industry depends,to a significant degree, on identifying andcontracting the best supplier networks.

An example is Limited Brands. I tis a leading specialty retailer of intimateand other apparel and non-apparel (i.e. beautyand personal care) products. Founded inthe United States in 1963, its net sales doubledbetween 1990 and 1999, from $5 to $10 billion.The dynamism of Limited Brands suffereda bit of a setback thereafter (sales in 2001were $9 billion), but it refocused on “fewerbut better brands” and now seems set fora new expansionary phase (Limited Brands,2001).

Limited Brands influences the globalvalue chain in which it operates throughmarketing, which is based on its two principaladvantages: retail sales outlets and brandmanagement. In 2001 it had 4,614 storesin the United States. The company usesboth in-house and external suppliers in whatit calls its “global network of relationships,resources and support personnel” (http://www.thelimited.com). Its independent division,Mast Industries, is one of the world’s largestcontrac t manufacturers , impor ters anddis t r ibutors of appare l (h t tp : / /www.mastindustries.com). External suppliersinclude a host of firms. Li & Fung has beenone of the most important ones (box V.1).

Mast Industries delivers over 200million garments to Limited Brands per year.It also supplies other retailers. Mast is wellpositioned globally to supply products thatenable its customers to establish and maintaintheir brand identity. It does so through aglobal network of 18 offices in 12 countriesand 400 factories in 37 countries. The latterincludes 53 joint ventures (42 in Asia, mainlySri Lanka) and 600 individual associates(including 400 in Asia and 165 in North America).The key competitive advantage of MastIndustries is “to identify manufacturing partnersin the right place at the right time” (http://www.mastindustries.com). Thus, Mast hasa production migration strategy that constantlysearches for production opportunities. Thisoverarching concern to contain costs istempered by additional factors, such as quality,

Table V.6. Winners and losers in WestEuropean garmenta imports, 1985, 2000

(Percentage)


Economy 1985 2000 1985-2000

Principal winnersChina 1.7 9.4 7.7Turkey 2.4 7.1 4.7Bangladesh 0.1 3.2 3.1Indonesia 0.3 2.4 2.1Morocco 1.3 3.2 2.0Romania 1.4 3.3 1.9Tunisia 1.8 3.7 1.9Poland 0.9 2.8 1.8Total 9.9 35.0 25.1

Principal losersItaly 18.5 7.8 -10.6Germany 10.1 5.9 -4.2Hong Kong, China 9.7 6.3 -3.4Republic of Korea 3.6 1.0 -2.5Total 41.8 21.1 -20.7

Source: UNCTAD, based on the United Nations’ Comtradedatabase.


Table V.7. Winners and losers inJapanese garmenta imports, 1985, 2000

(Per cent)


Economy 1985 2000 1985-2000

Principal winnersChina 25.6 73.2 47.6Viet Nam 0.0 3.1 3.0Total 25.6 86.3 50.7

Principal losersRepublic of Korea 34.2 4.9 -29.3Taiwan Province of China 15.4 0.4 -15.1Hong Kong, China 5.8 0.7 -5.1Total 55.5 6.0 -49.5



��


manufacturing flexibility, capacity and timelydelivery. It coordinates its global networkby way of the Mast Connection, which usesadvanced networking technology and theInternet to create a reliable global networkof Mast associates, manufacturers, customersand shippers.

There are also external “full-packageproviders”. The “full package” involves independentintermediaries supplying products according tothe buyer’s design, assembled by the intermediaries’production network (in which the intermediariesthemselves may have no equity interest). Theproduct carries the name of the buyer and the

Li & Fung Limited is an example of aworldwide trading company that manages a globallogistics chain for its retailer clients and partners.It is a full-package provider that brokers high-volume garments and fashion accessories (Li &Fung Limited, 2001, p. 9). The firm is headquarteredin Hong Kong, China, and is listed on its stockmarket. It has an annual turnover of about $4.2billion, employing about 5,000 people worldwide.In 2001, 72 per cent of the turnover was in thegarments segment; regionally, its orders camemainly from North America (75 per cent) andEurope (21 per cent) (Li & Fung Limited, 2001,p. 6).

The firm’s specialty is supply-chainmanagement within its global supply network.It does not own any production facilities, butmanages the “full package”: product development,product sourcing and product delivery, includingquality control and on-time delivery.

The evolution of Li & Fung into a full-package supplier went through several stages.In the 1960s and 1970s, Li & Fung operated asa regional sourcing agent, with offices in TaiwanProvince of China, the Republic of Korea andSingapore. Activities comprised “assortmentpackaging”: assembling components for a productset from different locations.

In the second stage, during the late 1970s,the business became more sophisticated,functioning, in its own description, as a “managerand deliverer of manufacturing programmes” (http//www.lifung.com). Buyers would indicate the typeof garment they were considering, and Li & Fung,as the agent, would prepare alternative designs.Once a design was agreed upon, the agent wouldsource all components (from yarns and trims topackaging), identify a manufacturing site andarrange the logistics. “Front end” functions(design, engineering and production planning)and “back end” functions (quality control,logistics, testing) remained mostly in Hong Kong,China, while the actual manufacturing wascommissioned from low-cost locations in oneor more countries. During the 1970s and 1980s,manufacturing was located predominantly in China.

The third phase began in the late 1980s:Li & Fung took control of complete garments

programmes for a season for a particular buyer,including the proposing of items and batch mixesand delivery rhythms. The process has sincedeepened. The manufacturing part of the processhas become highly complex and dispersed. Li& Fung “dissect the value chain” (Magretta, 1998).Manufacturing is farmed out to those locationsthat are the most cost-efficient, and the productcomprises components produced in numerouslocations. Out of 15 steps in the manufacturingvalue chain, Li & Fung claims to handle 10(Magretta, 1998).

The firm had about 700 customers in 2000– mainly large retailers in the United States andEurope – and operates through a network of 68offices in 40 countries. Until the mid-1990s, buyerswere mainly from the United States, such as LimitedBrands. In 1995, Li & Fung bought InchcapeBuying Services, a British trader based in HongKong, China, broadening buyer connections intothe EU market and providing itself with anestablished network of offices in Bangladesh,India, Pakistan and Sri Lanka. Li & Fung receivesa commission from the retailer and “the highervalue added lets us charge more for our services”(Magretta, 1998, p. 106). The firm hasmanufacturing contracts with 7,500 suppliers,of whom 2,000 are reportedly active at any giventime. There are estimates that Li & Fung thushas indirect employment links with 1.5 millionworkers (Magretta, 1998, p. 109).

Li & Fung presides over a large networkof contract suppliers in China and other Asiandeveloping countries, notably Bangladesh, India,Pakistan and Sri Lanka, as well as in Egypt,Madagascar, Morocco and South Africa. The firmgenerally takes between 30 to 70 per cent of afactory’s output – less would not give it the cloutto secure orders or reserve production capacityfor incoming orders, and more would make it over-dependent on the supplier (Magretta, 1998, p.106). In sum, the company’s transnationalizationprocess is based not on the possession ofdomestic assets that can be exploited abroad (aswas the case for many conventional TNCs), buton linkages, tapping into the resources of partnersand sharing the risk with them.

Box V.1. Li & Fung: a full-package provider

Source: UNCTAD based on Li & Fung Limited, h t tp : / /www.l i fung.com/about / index.html; Mathews,2001; Magret ta , 1998; Gereff i , 2001.

��


intermediary has no influence over its distribution.East Asian firms were the first to become full-package suppliers to foreign buyers (Gereffi,2001), drawing on their ability to coordinatecomplex production, trade and financial networksefficiently (box V.1).

One might say that there are twodifferent worlds in the garments industry:an expanding world and a shrinking one.The first contains buyer-driven value chainsin which brand owners (à la Limited Brands)can move the production systems of thirdparties based on their design and marketingcompetencies. Instead of establishing theirown production facilities, they can contractthem. This can involve the retailer overseeingsome of the individual e lements of theinternational subcontracting process suchas sourcing inputs, assembly, quality controland delivery from distinct providers, as TheMast Industries division of Limited Brandsdoes. Or i t can involve the contractingof full-package providers that, on the basisof the design received, take it upon themselvesto undertake the whole production process,as Li & Fung does. Both Mast and Li &Fung are skilled intermediaries that excelin organizing supplier networks. FDI is notnecessarily involved in the generation ofexports in this first world of garments.

The second world of the garmentsindustry contains brand-name manufacturersthat maintain FDI-based international productionsystems. These manufacturers have beenforced offshore to low-wage s i tes byheightened competition, and rely on preferentialmarket-access schemes that give them anadvantage unti l the quota system of theMultifibre Arrangement is dismantled. TheSara Lee companies involved in garmentproduction are typical examples. They useforeign aff i l iates based in three or fourdifferent production sites in one region (theCaribbean basin, for example) that producesimilar products. That gives them the flexibilityto adapt to the changing competitive situationof each site by adding assembly lines inthe more convenient ones and dropping themin the rest, without the need to close downany site. These FDI-based production systemsare, however, becoming less representativeof the industry as a whole. This kind ofstrategy appears to rely on production aswell as marketing advantages to drive thevalue chain, but buyer-driven chains dominateinternational trade in the industry.

3. Control through equity andnon-equity relations in a

production-driven internationalproduction system: Toyota

The automobile industry maintainedits large share of world trade at 8.8 percent and grew from $149 billion to $486billion between 1985 and 2000. This industryaccounts for about 30 per cent of medium-technology, non-resource-based manufactures.The exis tence of excess capaci ty in theorder of 25 per cent in North America and30 per cent in Western Europe9 has notstopped auto TNCs from continuing to expandproduction capacity both at home and abroad(PricewaterhouseCoopers, 2000). Despitesurface ca lm, a harsh indust ry-wideres t ructur ing has taken place . St rongcompetitors have swallowed weak ones, andnew plants and equipment have replacedold ones. Both factors have influenced theinternat ional expansion of the pr incipalautomobile TNCs.

Unl ike e lec t ronics , automobi leproduction systems tend to be national orregional, rather than global. The high weight-to-price ratio of motor vehicles and strictgovernment policies to protect domesticmarkets and support local production slowthe pace of globalization in this industry.For example, European manufacturers stillproduce a lmost three-quar ters of the i rpassenger cars in the European Union, UnitedStates manufacturers half their passengercars in Nor th America , and Japanesemanufacturers two-thirds of their passengercars in Japan. In the Republic of Korea– a new entrant with a s t rong domest icindustry – national manufacturers suppliedalmost 90 per cent of the total until the Asianfinancial crisis, after which some of thosecompanies sold their assets to foreign TNCs.In other words, home markets are still centralto automobile manufacturers, even thoughmany producers have large stakes overseas.In most developing countries with substantialautomobile industries, however, TNCs aredominant.

A few firms dominate the world motorindustry. In 2000, the top 10 accountedfor three-quarters of global production (tableV.8). Of these, only one company, Ford,had “transnationalized” a good part of itsproduction (defined as over 40 per cent of

��


production outside the home country) in 1980.By 2000, all but Toyota had passed thatthreshold. Yet it was Toyota that had stimulatedchange in the industry, including the shiftof production facilities to developing countriesand economies in transition.

Toyota used to supply North Americaand Europe mainly by way of exports fromJapan. It moved abroad only when accessto those markets became restricted becauseof voluntary export restraints and quotas.In order to establish itself successfully inthe highly competitive United States market,it relied on a number of strengths intrinsicto the Toyota Production System:

• Integrated single-piece production flowwith low inventories.

• Small batches made just in t ime.• Defects prevented rather than rectified.• Production “pulled” by customer demand

rather than “pushed” to sui t machineloading. Teamwork with flexible multi-skilled operators.

• Product ion l ine j igs wi th ident ica lspecifications worldwide to add/switchmodels easily.

• Active involvement in root-cause diagnosisto eliminate all non-value-adding steps,interruptions and variability.

• Closer integrat ion of the value chain,from raw materials to finished product,through partnerships with suppliers anddealers.

These strengths enabled Toyota (andother Japanese manufacturers that acquiredthem) to make major inroads in wor ldautomobile markets, first through exportsand later through FDI (Mortimore, 1997).In 1990, Toyota’s production was heavilyconcentrated in Japan, accounting for 86 percent of its sales. By 2000, foreign productionaccounted for 30 per cent. This new capacityis critical to Toyota’s plan to raise its globalmarket share by half (from 10 to 15 per cent).At the end of 2001, Toyota had 12 plantsin Japan and 43 plants in 26 other countries(see annex table A.V.1 for the main ones).Its international production system combinesa set of modern, efficient plants with a setof older, less efficient ones supplying domesticmarkets in such developing economies asArgentina, Brazil, India, Indonesia, Malaysia,the Philippines, South Africa, Taiwan Provinceof China, Venezuela and Viet Nam. Thesmall production scale and export volumesof the latter mean that they do not playa significant role in the global expansionof the Toyota Production System.

Toyota’s success as a major automobileTNC stems primarily from its lean productionsystem, its quality circles, its tiered suppliersand timely procurement. Although it wasa latecomer in establishing its corporatesystem, its superiority allowed it to establishits regional networks in the heart of thehome markets of its principal competitors,

Table V.8. The top 10 automobile manufacturers, ranked by vehicle production, 2000

1980 1994 2000 1980 2000units units units foreign foreign

produced produced produced production productionRank Company Home country (Millions) (Millions) (Millions) (Per cent) (Per cent)

1 General Motors United States 6.7 8.0 8.1 29.2 48.12 Ford United States 4.2 6.5 7.3 54.9 48.13 Toyota Japan 3.8 5.2 6.0 .. 30.34 Volkswagen Germany 2.5 3.2 5.1 35.5 60.75 DaimlerChrysler Germany 1.7a 3.7b 4.7 <20 75.56 PSA France 2.0 2.0 2.9 18.4 40.37 Fiat Italy 1.6 2.4 2.6 14.0 40.18 Nissan Japan 3.1 2.8 2.6 .. 48.69 Renault France 2.1 1.9 2.5 19.8 42.410 Honda Japan 1.0 1.7 2.5 .. 51.1Total top 10 28.7 37.4 44.3Total world 34.9 49.7 58.4

Source: UNCTAD, based on UNCTC, 1983; OECD, 1996; Organisation Internationale des Constructeurs d’Automobiles(www.oica.net/htdocs/main.htm).

a Sum of Chrysler (1.0 mill ion) and Daimler Benz (0.7 mill ion).b Sum of Chrysler (2.8 mill ion) and Daimler Benz (0.9 mill ion).

��


driving them to close down less efficientplants and seek out lower-cost productionsites. There are, however, indications thatToyota too will be expanding operations inlower-cost sites – partly as a result of thesuccessful copying of Toyota’s productioninnovations by its competitors.

In the modern and most competitivepart of its international production system,Toyota maintains its ownership advantagein fully-owned assembly plants, with a fewexceptions. Parts are, to a large degree,externalized. Locational criteria relate mainlyto market size in the case of the principalmarkets, and to market access in the older,less compet i t ive par ts of the Toyotainternational production system. Recently,Toyota has indicated that it will extend itsinternational production system around coreregional markets to lower-cost sites, likeMexico for North America, and Turkey andthe Czech Republic (box III.10) for WesternEurope. Production is scheduled to startin 2005.

So far, the developing country thathas gained the most from developments inthe industry is Mexico, which increased itsmarket share by 12 percentage points between1985 and 2000 (table V.9). Volkswagen isone example of how one company reorientedits production in that country (box V.2),Ford is another (box V.3).

Table V.9. Winners and losers in the automobile industrya exports to the NorthAmerican market, 1985, 2000

(Per cent)

Market share increase,Economy 1985 2000 1985-2000 Top 10 TNC presentb

Principal winnersMexico 0.4 12.2 11.8 GM, Ford, DaimlerChrysler, Volkswagen, NissanCanada 23.7 29.0 5.3 GM, Ford, DaimlerChrysler, Toyota, HondaRepublic of Korea 0.6 3.7 3.0Total 24.7 44.9 20.1

Principal losersJapan 41.3 28.1 -13.2 Toyota, Nissan, HondaUnited States 12.0 7.6 -4.4 GM, Ford, DaimlerChrysler, Renault, Toyota,

Nissan, HondaGermany 15.3 12.8 -2.5 GM, Ford, DaimlerChrysler, Volkswagen, FiatTotal 68.7 48.5 -20.2

Source: UNCTAD, based on the United Nations’ Comtrade database.

a SITC 7810: passenger motor cars.b For developing countries with automotive affi l iates not mentioned here, see annex table A.V.2.

4. Control in transition in atechnology-driven international

production system: Ericsson

Telecom equipment was among themost dynamic exports during the period 1985-2000. By 2000, it represented 3.3 per centof world trade (up from 1.3 per cent in 1985)and accounted for 14.3 per cent of high-technology, non-resource-based trade. In2000, the total value of telecom equipmentexports exceeded $173 billion, with the top10 exporting countries accounting for 73per cent of the total .

After the boom of the late 1990s,the industry has faced a sharp downturn,partly because of excessive spending bytelecom operators on licences to operatethird-generation mobile telephony. This hastriggered a dramatic restructuring amongthe leading TNCs, including massive job cuts– at least 500,000 worldwide i f serviceproviders are included (www.FT.com.2 May2002). Over-capacity is driving manufacturersto cut costs and make better use of existingfacilities. At the same time, rapid technologicalchange – including the development of newstandards for mobile telephony and closerintegration of the telecom, consumer electronicsand media industries – is leading to shorterproduct cycles and forcing companies toinvest more in R&D and innovative solutions,precisely at a time when their cash flow

��


In 1967, the first Beetle left the assemblylines of Volkswagen de México in Puebla. Duringthe following 20 years, Volkswagen de Méxicofocused its local production almost exclusivelyon the domestic market, achieving only small-scale exports of the classic Beetle model. In1977, production of the first-generation Golfbegan, followed soon after by the Jetta. Theoperation was typical of the import-substitutinginvestments made in protected markets at thetime, characteristically inefficient by internationals tandards .

In 1989, Volkswagen took a strategicdecision to consolidate i ts North Americanoperations. The two North American plants, inPuebla, Mexico, and in Pennsylvania, UnitedStates, were producing at half their capacitydue to the weakness of both markets. Both plantswere producing the same Golf and Jetta models.Mexico was selected as the sole productioncentre for Volkswagen in the regiona and suitablymodernized and upgraded as a result. Of thetotal production of 380,000 vehicles in 2001,300,000 were exported, four-fifths of these toNorth America. These exports from Pueblaaccounted for 60 per cent of the Volkswagensales in North America, with the remaining beingimported from Germany. For the VolkswagenGroup, the Puebla operation is not only the mainproduct source for its most important growthmarket, which is the United States, but, alsoa supplier of engines and other componentsto most Volkswagen factories in the world. TheMexican operations of Volkswagen have beentransformed into a world-class manufacturingplatform.

As NAFTA was implemented in 1994,Volkswagen decided to upgrade its Mexicanfacilities further. It decided to start productionof the prototype called Concept 1, reminiscentof the traditional Beetle silhouette, but on amodern technology platform. A production sitethat guaranteed both highest quality andcompetit ive costs had to be found. Afterreviewing several alternatives for the production

of this car (which had meanwhile been baptizedthe “New Beetle”), Volkswagen finally decidedin 1995 to allocate it to the plant in Puebla,Mexico.b The decision to locate the New Beetleproduction in Mexico meant investing severalhundred million dollars, increasing capacity inthe Volkswagen plant in Puebla and creating1,500 new jobs, bringing more than 20 auto partsuppliers to Mexico and building new productionfacilities.

The New Beetle project is the mostprominent example of how globalization isdetermining the strategy of the automotiveindustry for Mexico. A new trade agreementwith Europe – eventually signed in December2000 – was already on the agenda, and theGovernment decided to open its borders to theimport of assembled cars in advance of the actualnegotiations. Strategically, this allowed Mexicanautomobile assemblers to reduce the productioncomplexity of their Mexican plants to a fewproduct lines, thus increasing scale effects forimproved cost competitiveness. The low volumesof different models to supply the Mexicandomestic market could now be sourced fromother assembly plants all over the world, notonly from the NAFTA region.

In sum, faced with a decision on how toorganize its production for the North Americanmarket, Volkswagen opted to close its UnitedStates operation in favour of its Mexican one.That decision was ratified when Volkswagenassigned to its Mexican operations the worldwideproduction of the new Beetle model. Volkswagenhas been able to improve its competitive situationin the North American market based solely onits upgraded and modernized plants in Mexico.Its subsidiary has become the third biggestmanufacturing operation among foreign firmsin Latin America and the sixth biggest exportoperation of all firms in the region. At the sametime, Volkswagen’s success provided anotherstrong boost to the international competitivenessof the Mexican automobile industry.

Box V.2. Volkswagen’s strategy in Mexico

Source: UNCTAD, based on mater ia l provided by the Department of Communicat ions , GovernmentAffai rs and Corporate Stra tegy of Volkswagen de México, February, 2002.

a Given comparable quality levels, arguments in favour of the Mexican plant were lower production costs, a broadsupplier base in Mexico and the fact that closing the Mexican plant would have meant abandoning the Mexicanmarket, while the United States market could still be supplied from Mexico after the closing of the Pennsylvaniaplant.

b The main reasons for this decision were the excellent quality levels achieved in the Puebla plant after six yearsof export experience to the United States; the very competitive cost levels both of the plant itself and of theMexican supplier base; and NAFTA providing a clear long-term framework with regard to both market access andthe gradual elimination of performance requirements.

��


long-term growth of the companies is involved,the immediate threat is to survival. Thatmeans that a good part of their energy isdirected at the need to improve efficiency.

The market for telecom equipmentis dominated by a small number of largeTNCs ( table V.10) wi th ra ther s imi larownership-specific advantages. (Cisco Systems,a router specialist, is the principal exception.)Eight companies in 2000 accounted for about54 per cent of worldwide sales of telecomequipment ($381 billion).10 For the mostpart, they drive their value chains throughtechnological advantages in the sense thatnew technologies have led to a surge inthe use of mobile phones and the Internet,and this has resulted in increased demandfor the installation and upgrading of moderntelecom infrastructure. Of significance forthe configuration of international productionsys tems in th is indust ry were d i f fer ingstandards, the timing of the shift to mobilephones, and the timing of the privatizationof incumbent service providers in manycountries, where national or regional prioritiessometimes came to the fore.

In response to the rapid market growthof the late 1990s, most equipment vendorsexpanded their international production systems

Table V.10. The top telecom equipmentmanufacturers, 2000

(Bill ions of dollars)

Rank Company Home country Sales

1 Ericsson Sweden 31.32 Nortel Networks Canada 30.33 Nokia Finland 27.24 Lucent Technologies United States 25.85 Cisco Systems United States 23.96 Siemens Germany 22.87 Motorola United States 22.88 Alcatel France 21.6

Source: Gartner Dataquest, www.cellular.co.za/stats/top_telecoms_infrastructrue_vendors_2000.htm.

and now have to adapt to the crisis in theindustry. The situation of Ericsson exemplifiesthis in many ways.

During the past decade, Ericsson,11

the wor ld’s la rges t suppl ier of te lecomequipment , reduced the number of i t sproduction plants from about 70 to less than10 worldwide and outsourcing productionto contract manufacturers . Er icsson hasmaintained two kinds of foreign affiliates:p lants needed for the development andmanufactur ing of new products whoseproduction is not standardized enough to

Ford was one of the most globalizedautomobile companies in the early 1990s. Itinvested heavily in foreign markets and lower-cost production sites to rectify its loss of marketshare in the United States. In 1980, over halfof Ford’s production capacity was located outsidethe United States, mainly in Europe. It thensought to compete better in the North Americanmarket by producing in Mexico, where it madesizeable investments in assembly operations,making use of the United States production-sharing market-access mechanism and theMexican maquiladora export scheme (see chapterVII). Beginning in 1994, Ford’s operations therebenefited from the NAFTA rules of origin.

The building of Ford’s new productioncapacity in Mexico resulted in dramatic changesin the quality and type of models produced inMexico. Prior to 1987, its products were sold

only in the Mexican market. There were a greatmany models, and production rarely exceeded20,000 units per year. In 1987, Ford began toexport two models from its new plant. By 2000,the company was producing 193,204 vehiclesand exporting 181,099 of them. Ford’ssubsidiaries in Mexico became the third biggestmanufacturing operation among foreign firmsin Latin America and the eighth biggest exportoperation of all firms in the region.

In short, Ford’s response to the loss ofmarket share in the United States to Japanesefirms was to integrate Mexico into i tsinternational production system and to focusits operations there on two compact-sizedvehicles and one engine with state-of-the-arttechnology, both manufactured for export. Itwas helped in this by the United Statesproduction-sharing mechanism and the NAFTArules of origin.

Box V.3. Ford’s strategy in Mexico

Source: UNCTAD, based on ECLAC, 1998; Mortimore, 1998b; Shaiken and Herzenberg, 1987;Carrillo, 1995; and Shaiken, 1995.

��


motivate a shift to low-wage countries; andthe most cost-efficient plants for the morestandardized products. The former producenon-standardized products and need to beclose to the design and development unitsthat can remove “bugs”. The latter engagein high-volume manufacturing concentratedin a few low-cost sites like China, Polandand Estonia. In the case of China, Ericssonexpects exports to grow significantly in thecoming years. Operations in other partsof Asia are l ikely to move there. India,Indonesia and the Russian Federation maybe candidates for future production plants.For site selection, Ericsson takes into accountthe following host-country factors: markets ize , level of bureaucracy, qual i ty ofinfrastructure (including customs clearanceprocedures, the tax system, EPZs), tradepolicies affecting access to internationalmarkets, level of political risk, productioncosts ( inc luding labour cos ts ) , and theavailability of contractors and suppliers.Ericsson protects i ts core technologicaladvantages through i t s fu l ly-control ledsubsidiaries. In choosing locations for itssubsidiaries for equipment manufacture, itfocuses on efficiency factors plus domesticmarket demand, the latter being particularlyrelevant to the telecom industry.

The role of outsourcing has growndramat ica l ly. Much of the none-coreproduction has been externalized to contractelectronic manufacturers for cost-sharingreasons. The firm is disposing of manyplants to contract manufacturers such asFlextronics (see below) and Solectron, whichare willing to purchase them in order tostrengthen their strategic relationships withEricsson. Sourced components are aggregatedat the highest possible assembly and testinglevels, so that a smaller number of strategicpartners or first-tier suppliers are required.In January 2001, Ericsson transferred itscomplete supply chain for mobile phonesto the contract electronics manufacturerFlextronics to improve economies of scaleand volume production flexibility, and to reducecapital exposure as well as risk. Flextronicstook over all related Ericsson facilities inBrazil, Malaysia, Sweden, the United Kingdomand parts of Ericsson’s plant in Lynchburg,Virginia, in the United States. Ericsson nowfocuses on other par ts of the te lecomequipment value chain, such as design, R&D,product development , and sa les andmarketing.12

Ericsson’s competitors have been undersimilar pressures to restructure and adjusttheir international production systems. Anexample is Nokia. It is the world’s leadingmobile phone maker, with a share of 35per cent of the worldwide market of about400 million units in 2001.13 The companyhas production facilities in Finland (the homecountry) and 10 other countries. Telecominfrastructure is produced in China, Finland,Malaysia and the United Kingdom; mobilephone handsets are made in Brazil, China,Finland, Germany, Hungary, Mexico, theRepublic of Korea and the United States.In the case of mobile phones, high-volumeproduct ion of key inputs (engines) i sconcentrated in selected production units,while al l factories are involved in f inalassembly. This type of operation requiresthe ability to adapt quickly to shifting tastesand a very reliable and flexible material-supply system.14 Due to the need for high-volume production, Nokia only adds a newplant if it is clear that there is a marketfor many millions of units per year fromthat plant.15

An analysis of the production systemsof the other main actors in the telecomequipment industry reveals many similaritieswith those of Ericsson and Nokia. Outsidethe EU and the United States, most equipmentmakers have set up production plants inBrazil and China. Other countries that haveattracted telecom manufacturing include somein Central and Eastern Europe (e.g. Estonia,Hungary and Poland), in South-East Asia(Malaysia, Singapore and Thailand), EastAsia (Republ ic of Korea) and Mexico.Siemens has the widest geographical spreadof plants, with a presence also in India,Romania, the Russian Federation, Switzerland,Turkey and Ukraine.

Most of the key players havestreamlined and outsourced considerable partsof their production in reaction to the industrycrisis and the corresponding systemic efficiencyrequirements. Cisco Systems, for example,outsources almost all manufacturing to contractmanufacturers around the globe. Norte lNetworks reduced its overall workforce in2001 from 93,000 to 48,000, mainly bydivesting its non-core activities. Manufacturingand repair operations in Europe, North Americaand Asia were outsourced to the contractelectronics manufacturer, Solectron. Motorolaannounced, in June 2000, a major deal under

��


which Flext ronics was to take over asignificant part of Motorola’s mobile phoneproduction. Lucent Technologies unveileda plan in April 2000 to increase the shareof manufacturing by contract partners from20 per cent to 60 per cent over 18 to 24months .16 Lucent has t ransferred twomanufacturing plants in the United Statesto Celestica.17 Through these and othermeasures, Lucent cut its workforce by almost45,000 in 2001. In China, on the other hand,Lucent announced, at the end of 2001, thatit would expand its manufacturing base inShandong Province.18

This analysis suggests the following:

• Most telecom companies are relocatinghigh-volume manufacturing activities fromhigh-cost to low-cost locations (particularlyin a small number of developing countriesand economies in transition).

• Throughout the industry, there is a growingfocus on core competencies and a greaterreliance on contract manufacturers for morestandardized and less sophisticated products.

• The downsizing of high-cost productionsi tes has not af fected the des ign andR&D activities in these sites.

Thus, telecom equipment TNCs drivetheir value chains by way of their technologicaladvantages in core products and throughinternational production systems based onforeign affiliates for the more standardizedand less technologically sophisticated items,and they rely on others, increasing in thismanner their production efficiency. Theownership advantages of their advancedtechnologies are protected in a similar fashionas Intel’s in the semiconductor industry, byinternalizing them. Ericsson’s principaladvantages are in equipment for ground stations(i.e. for transmission and reception). Ini ts deal ings with telecom operators , thecompany prefers to opera te through i t sinternational production systems.

Facing that competitive situation in mobilephones, Ericsson outsources much of its previousin-house production in order to reduce costs.It should be mentioned that, with regard tolocational advantages (as well as the typicalefficiency-seeking considerations), TNCs intelecom equipment prefer that productionlocations include a strong potential for domesticmarket growth as well as a relatively well-developed supply infrastructure.

The geographical shift in the exportsof telecom equipment has been dramatic(table V.11). Over the period 1985-2000,f ive countr ies had market share gainscorresponding to almost 30 percentage pointsin total, with the Republic of Korea, Mexico,China, Sweden and Finland reporting thelargest increases. Ericsson and Nokia arebehind many of these changes, either directlyor via the manufacturers they contract.

Table V.11. Winners and losers intelecommunications equipmenta

exports, 1985, 2000(Per cent)

Market shareincrease, Top 8 TNCs

Economy 1985 2000 1985, 2000 presentb

Principal winnersRepublic of Korea 3.5 11.2 7.8 NokiaMexico 1.0 7.4 6.4 Nortel, Nokia,

MotorolaChina 0.04 5.7 5.7 Ericsson, Nokia,

Siemens,Motorola

Sweden 2.5 8.1 5.6 EricssonFinland 2.0 7.2 5.2 NokiaTotal 9.1 39.7 30.6

Principal losersJapan 29.1 4.6 -24.5United States 23.5 10.9 -12.7Total 52.6 15.4 -37.2


a SITC 7643: television, radio and related transmittersand receivers.

b As of January 2002. Developing economies with telecomequipment affiliates not mentioned here include: Brazil(Ericsson, Nortel, Nokia, Siemens, Motorola), Singapore(Motorola), Malaysia (Motorola), Thailand (Siemens),India (Siemens) and Egypt (Siemens).

The case of the technologica lleadership of Er icsson in the te lecomequipment value chain demonstrates someof the principal features of internationalproduct ion sys tems in th is indust ry : atechnological leader facing restructuringpressures dur ing a harsh indust ry-widerecession combines with a fast-growing andefficient production specialist (Flextronics– box V.4) to exploi t the compet i t iveadvantages of both. Ericsson and manyof its principal competitors are focused moreon restructuring than on the expansion oftheir in-house production systems. Theybecome, therefore, more selective about wherethey locate manufactur ing opera t ions ,expanding only in countries like China thatoffer both efficiency-enhancing possibilitiesand strong domestic demand. Nonetheless,

��


the s t ronger expansion of in ternat ionalproduction systems within this value chaincurrently comes from contract manufacturersrather than the technological drivers.

5. Outsourcing becomes moregeneralized: the rise of contract

manufacturers

These case studies have served todemonstrate the diversity of internationalproduction systems and suggest a trend towardsless hierarchical international production systemswith more non-equity elements. While non-equity forms linked to supplier networks havebeen around in the garment and electronicsindustries for a while, other new forms arerapidly appearing. Especially impressive arecontract manufacturers that actually establishtheir own international production systemsthrough which they serve their customers(typically other TNCs). In consequence, theirpresence has an immediate impact on trade.

The growth of contract manufacturingcan be exemplified by the electronics segmentof this market. It is expanding not only inNorth America and Europe, but also in Asia.Between 1998 and 2002, the global marketfor contract manufacturers in electronics hadbeen expected to grow by 140 per cent, from$58 billion to $139 billion. Some estimatessuggest that the share of the total marketfor electronics equipment controlled by contractmanufacturers will increase from 8 per centin 1999 to 18 per cent in 2004(www.solectron.com). The largest four contractmanufacturers each had revenues of over$10 billion in 2002 (table V.12). Outside theEU and the United States, the bulk of theirfacilities are located in Brazil, China, Hungary,

Mexico and Malaysia, followed by Singaporeand Thailand and, recently, Japan (chapterIII).

Contract manufacturers offer manyadvantages. They achieve greater efficiencythrough higher capacity use because theycan simultaneously assemble or manufactureproducts for several or iginal equipmentmanufacturers using the same plant. Bybuilding in-house capabilities, they are ableto develop new process technologies andsometimes even help their principals withproduct innovation. As they evolve, theyundertake a host of manufacturing-relatedfunctions such as logistics and procurement.They go global, both to take advantage oflow-cost locations and to support clientsin all their major production sites aroundthe world, introducing new products andproviding aftersales repair services centres.

Important bonuses for the countriesthat attract leading contract manufacturersinclude the increased scope advantages thatcan accompany such an investment; clusteringeffec ts and the associa ted longer- termupgrading of economic activities; and, ofcourse, exports. For example, Flextronicshas become the sixth largest exporter inHungary and one of the top 15 TNC exportersin China. The effects for host countriesmay become even more important if theprocess of outsourcing leads to a concentrationof production and export activities in a smallnumber of clusters, especially industrial parks;the greater the numbers of plants and themore numerous the local l inkages wi thsuppliers, the less likely will TNCs be tomove to other locations (box V.4).

C. Conclusions

The increasing intensity of competitionin all industries, and especially export-orientedindustries means that leading companies arecontinually challenged by competitors andnewcomers. That competition in itself provokesstrategic reactions. TNC responses to thiscompetitive pressure vary according to theircompetitive advantages at different stagesof the global value chain. In the high-technologysector, competitive advantage lies mainly intechnological capacity and speed of innovation.In the medium-technology sector (characterizedby mature technologies), firms tend to focusmore on efficiency through economies ofscale. In the low-technology sector (where

Table V.12. The five largest contractelectronics manufacturers,

1995 and 2002(Bill ions of dollars)

Revenue

Company Headquarters 1995 2002a

Solectron United States 1.7 16.5Flextronics International Singapore 0.4 13.2SCI Systems/Sanmina United States 3.5 12.1Celestica Canada 0.6 11.3Jabil Circuit United States 3.6 4.9

Source: UNCTAD, based on Sturgeon, 2002, p. 14.

a Est imated.

��


A closer look at some aspects of thestrategy of one of the fastest growing companiesin electronic manufacturing services, Flextronics,provides a better understanding of what drivesthe transnationalization strategies of contractmanufacturers. With corporate headquartersin Singapore, Flextronics grew from $448 millionin revenues in 1995 to about $13 billion in 2002.A significant share of Flextronics’ productionis in low-cost economies; in eight locationsin five countries (i.e. Brazil, China, Hungary,Mexico and Poland), Flextronics has developedwhat it calls integrated “Industrial Parks” (boxtable V.4.1). These help the firm to overcomeinfrastructure bottlenecks as they are largeenough to attract suppliers to set up shop closeto them. Each Flextronics’ Industrial Parkprovides the necessary capabilities for thecompany to undertake high-volume productionand provide cost-effective delivery of finishedproducts within a day or two to the productowner’s end-users, greatly reducing the freightcosts of incoming components and outgoingproducts .

The most sophisticated operations,including the manufacture of routers andwireless base stations, are performed in placeslike Silicon Valley (United States) and Sweden,where the right mix of skilled labour is available.The most labour-intensive operations are inDoumen, China, where Flextronics makes, amongother things, PC parts, mouse assemblies andmobile phones.a In Europe, the company hasexpanded rapidly into Central and EasternEurope.

In addition, Flextronics also has regionalmanufacturing operations in multiple locationswithin Brazil, Europe, India, Israel, Malaysiaand North America that complement its Industrial

Box V.4. Flextronics: specializing in the manufacture of others’ products

Parks. In contrast to the latter, which weretypically set up as greenfield investments, mostof the regional manufacturing operations areacquisit ions of existing plants previouslycontrolled by Flextronics’ key customers orcompetitors, and often lack the efficiency-seeking characteristics of its Industrial Parks.Flextronics cements its strategic relationshipswith the former owners in this manner, thenendeavouring to improve efficiency in thoseplants.

Flextronics, l ike most of the moresophisticated contract electronics manufacturers,also provides such services as productintroduction centres and design and engineeringcentres to its strategic partners and buyers.This demonstrates how the boundaries betweencontractee and contractor blur over time asstrategic partners reassign tasks along theglobal value chain.

When investing in the expansion of itsinternational production system, Flextronicsexpects host countries to offer an environmentconducive to manufacturing for the worldmarket. It takes into consideration factorssuch as the productivity of the workforce, thecapabilities of domestic suppliers, the qualityof public utilities and infrastructure, accessto inexpensive and easily accessible land,investment incentives, labour market rules,customs clearance procedures and numerousquality-of-life aspects (Pfaffstaller, 2001).

Since Flextronics specializes in themanufacture of other firms’ products, the valuechain is driven by the owners of the products,not by the contract manufacturer. However,contract manufacturers are obliged toaccompany their clients in different markets

and continually improvetheir process technologyand production efficiency.For both reasons,contract manufacturersmust establish suitableinter-national productionsystems of their own, andhave consequentlybecome leading investorswith a critical influenceon the export-competitiveness of hostcountries.

Box table V.4.1. Flextronics’ selected global facil it ies, 2002

Regional Design andIndustrial manufacturing engineering

Location Park operation centre

North America .. 6 9Western Europe .. 18 14Other developed countries .. 1 2Latin America 2 4 ..East and South-East Asia 2 9 2Central and Eastern Europe 4 2 2Total 8 40 29

Source: http:/ /www.flextronics.com/Globalman.

Source : UNCTAD, based on Pfaffs ta l ler, 2001 and other mater ia ls .a Time, 5 August 2001.

��


barriers to entry are low), cost cutting andmarketing are the most critical. However,despite these general tendencies, it shouldbe noted that firms in the same sector canreact in quite different ways to similar stimuli.In the telecom industry, Nokia focuses moreon in-house production of mobile phones, whileEricsson has completely outsourced it.

Most of the industry leaders reviewedabove are keeping their core competitiveadvantages in-house in their home countries,e i ther in R&D and des ign ( technologydevelopment), or production processes, orsales outlets and brand management. Non-core functions, such as the labour-intensiveparts of the production process, the assemblyof less sophisticated products, or the logisticalorganizat ion of product dis t r ibut ion areoutsourced to low-cost sites. The contractmanufacturing phenomenon epitomizes theseoutsourcing trends as the complete productionprocess is outsourced. It increases the scaleand importance of suppliers’ operations, asglobal value chains are more and more finelys l iced in to specia l ized funct ional andgeographical elements.

The splitting of the global value chainand the multiplication of supplier networksopen up new opportunities for developingcountries and economies in transit ion toparticipate in international production systems.Indeed, TNCs play a critical role in manymanufactured exports. While retaining theircore competencies, TNCs are set t ing upinternational production systems on the basisof corporate strategies that seek to obtainthe optimal configuration of their productionprocess by spreading production to locationsthat offer significant advantages in productioncosts and access to third markets. Thus,labour-intensive activities are moved to siteswith cheap but efficient labour. The slicingof the value chain also means that newopportunities in the export of services openup to countries that can provide these servicesat low cost.

However, g lobal suppl iers mustincreasingly provide independent processdevelopment capabilities and the ability toperform a wide range of value-added functionsassociated with the manufacturing process,including help with product and componentdes ign, component sourc ing, inventorymanagement, testing, packaging and outbound

logistics. The increasing demands put onkey suppliers raise the barriers to marketentry for the smaller and younger suppliersfrom developing countries and economiesin transition.

The spreading of in ternat ionalproduction systems, through either FDI ornon-equity supplier forms, and – equallyimportant – the upgrading of activities offoreign affiliates in specific locations alongthe value chain, depends not only on thestrategies of firms but also on the policiesof host countr ies . The lat ter can play as igni f icant ro le in the conf igura t ion ofinternational production systems if theirgovernments have a clear understanding ofhow they “fit in” with the corporate strategiesthat determine the nature and location ofinternational production systems.

The next chapter looks a t g lobalcompetitiveness patterns.

Notes

1 During the first period, Japanese TNCs mounteda serious challenge to United States producers,winning significant market share (from 32.5 percent to 51.2 per cent during 1982-1988), thenfalling back and reaching a low of 26.4 per centin 1998. The main United States transnationalproducers (Motorola, Texas Instruments, NationalSemiconductor, Intel and AMD) collectivelyreached bottom in 1989 (at 37.3 per cent) beforemaking a strong comeback (peaking with about50 per cent of the global semiconductor marketshare in the late 1990s). While United Statesand Japanese leaders were fighting for marketshares, new producers were making inroads,more than doubling their market shares, from9 per cent to about 20 per cent over the period(based on data from the Semiconductor IndustryAssociat ion) .

2 On Intel’s lead in flash memory designtechnology, lithography and capacity, see http://www.intel .com/intel/f inance/presentations/pdf_files/nichols.pdf.

3 By end 2000, Intel’s investment in Irelandsurpassed $3 billion. A new $2 billion waferfabrication unit was under construction(www. in t e l . com/ in t e l / communi ty / i r e l and /aboutsite.htm).

4 Intel’s investment in Malaysia totalled $1.9 billionin 2000 (www.intel.com/intel/community/malaysia/aboutsite.htm).

5 Intel’s investment in the Philippines surpassed$1 billion by 2000 (www.intel.com/intel/community/philippines/aboutsite.htm).

6 Intel’s investment in Costa Rica was about $450million (www.intel.com/costarica.htm).

7 AMD is Intel’s most direct competitor; however,it is not in the list of the top ten semiconductormakers.

��


8 See Spar, 1998; Rodriguez-Clare, 2001; Shiels,2000; Egloff, 2001b.

9 See “Car manufacturing: incredibly shrinkingplants”, The Economist , 11 April 2002.

10 See http://www3.gartner.com/5_about/press_releases/2002_02/pr20020204b.jsp.

11 This section is based on direct interviews withEricsson executives.

12 In 2001, partly in response to increasedcompetition, a deal was concluded between SonyCorporation and Ericsson to merge their mobilephone businesses worldwide, relying mainlyon contract manufacturers for assembly.

13 See www3.gartner.com/5_about/press_releases/2002_03/pr20020311a.jsp.

14 For example, Nokia’s production of about 140million mobile phones in 2001 implies the handlingof several million components every hour, makingthe efficiency of the overall production networka key competitive factor.

15 For Nokia, every factory needs to be designedto serve a certain well-defined market and tobe adapted accordingly, depending on whetherit will produce engines or assemble mobilehandse t s .

16 http://www.vnunet.com/News/602409.17 http://www.lucent.com/press/0901/010904.coa.html.18 http://www.lucent.com/press/1201/011225.coa.html.

CHAPTER VI

PATTERNS OF EXPORT COMPETITIVENESS

A. Global competitivenesspatterns

Traditionally, trade competitivenessis measured by shares in world exports (Lall,1998; 2000b). By this measure, 20 economiesaccount for over three quarters of the valueof world trade (figure VI.1). The list isdominated by developed countries, led bythe Uni ted Sta tes , Germany and Japan.However, if one focuses on those economiesthat have gained market share during 1985-2000, another list emerges, a list containingmostly developing economies, led by China,and also including a number of economiesin transition (figure VI.1). In other words,significant changes are taking place in worldtrade, and a number of developing countriesand economies in transition are among theprincipal beneficiaries.

Trade pat terns are changingsignificantly. These changes also reflectstructural shifts in production caused bynew technologies, new demand patterns, newlogistical factors, new ways of organizingand locating production, new policies andnew international trade rules and preferences.Perhaps the most important driver of thechanging patterns of exports is technologicalprogress . 1

A broad classification of merchandiseexpor ts d is t inguishes between primaryproducts and manufactures , with the latterfurther divided into four groups: resource-based, low-technology, medium-technologyand high- technology products . 2 Sinceinformation and communication technologyproducts are an important part of the high-technology group, they are shown as a sub-category in some instances. It is assumedthat technological sophistication rises acrossthese categories: primary and resource-basedproducts are at one end, high-technologyproducts at the other. Whether rapid andsweeping technological change affects allcategories equally or favours some categories

over others is still open to question. Services,although growing in importance, are notconsidered in this discussion, because ofthe unavailability of sufficiently detailedstatistics on trade in services at the samelevel of detail as those for trade in goods.

A few words of caution are in orderat the start. All technology categorizationsinvolve aggregation, and this may concealvariat ions at a disaggregated product orprocess level. For instance, the low-technologygroup may have some technology-intensiveproducts, while the high-technology groupmay have products with stable or relativelys imple technologies . Moreover, theclassification is based on the core process,but all products go through a variety ofprocesses, some simpler than others. High-technology semiconductor manufacture needsrelatively simple assembly and testing whilelow-technology apparel manufacture needssophisticated design. And products can moveacross ca tegor ies – the appl ica t ion ofbiotechnology can transform resource-basedproducts into high-technology ones. Theserefinements cannot be incorporated into thisanalysis , which a ims only to provide areasonably accurate general picture of broadtrends.

So what are the structural trends intrade patterns? The most basic trend concernsfundamenta l changes in the to ta l t radecomposition. Primary products and resource-based manufactures have steadily lost sharesover the past several decades, falling below50 per cent in 1984 and reaching 28 percent by 2000 (figure VI.2). Non-resource-based manufactures have been driving exportgrowth, with changing levels of technologyintensity. The share of resource-based productsin total world trade peaked in the early 1980s,and that of low-technology products in theearly 1990s (figure VI.3). If this reflectslong-term trends, it suggests that countriesthat have specialized in these products mayfind it hard to sustain high export growth.It is possible to grow in stagnant markets,

��


Figure VI.1. World export market shares, 2000, and changes, 1985-2000

The 20 economies with the largestexport market shares, 2000

( P e r c e n t a g e )

The 20 winner economies, based on exportmarket share gains, 1985-2000

( P e r c e n t a g e )

Source: UNCTAD, based on the United Nations Comtrade database.

Figure VI.2. Shares of resource-based and non-resource-based productsin world trade, 1976-2000a

(Percentage)


a Three-year moving averages are used. For 2000, a two-year average (1999-2000) is used.

��

CHAPTER VI PATTERNS OF EXPORT COMPETITIVENESS

Figure VI.3. Shares of manufactured products in world exports by technologygroupings, 1976-2000

(Percentage)


but i t has to be at the expense of otherexporters. When entry is easy and competitionintense, as in low-technology products, constanteffort is required to stay ahead of competitors.

Second, and perhaps most striking,exports grow fas ter the more advancedthe level of technology and the less thereliance on natural resources (figure VI.4).3

High- technology products are the mostdynamic export category, not just for industrialcountries but also for developing ones whosecompetitive edge has traditionally been inresource-based exports and labour-intensivemanufactures.

Third , the share of par ts andcomponents in total trade is rising (Feenstra,1998; Hummels, Ishii and Yi, 2001). Thisraises the question as to the precise dimensionof the increase in trade values given that,increasingly, components and parts can beinvolved in numerous cross-border tradeoperations before being incorporated intothe final products. This means that the sameinputs may be counted several times. Thisbeing said, the share of parts and componentsin total machinery exports rose somewhatfor the developed countries as a group, from26 per cent in 1978 to 30 per cent in 1995

(Yeats, 2001). Such trade is particularlyimpor tant in te lecom equipment , of f icemachinery, motor and non-motor vehicles,and electric machinery (Yeats, 2001; Ngand Yeats, 1999). In the telecom industry,for example, trade in parts and componentsaccounted, on average, for half the totalexports, while almost three-quarters of allAsian imports of telecom equipment consistedof components for further assembly (Ngand Yeats, 1999). At the country level, thera t io of par ts and components in to ta lmanufacturing imports in 1996 varied betweena quar ter to a lmost hal f for a group ofcountries that are among the high exportperformers ( the ASEAN-5,4 Mexico andIreland).

Four th , developing countr ies aregrowing faster than industrial countries inexports of more technology-intensive products,while falling behind them in exports of primaryproducts and resource-based manufactures.5

High-technology exports are now the largestforeign-exchange earners for the developingworld. In 2000, exports of high-technologyproducts by developing countries amountedto $450 billion – $64 billion more than primaryexports, $45 billion more than low-technologyexports, $140 billion more than medium-

��


technology exports, and $215 billion morethan resource-based exports. A large proportionof high-technology exports by developingcountries reflects, of course, relatively simplelabour-intensive operations (assembling mainlyimported components) rather than complexmanufacturing or R&D using substantial localphysical and technological inputs (Lall, 2001a,UNCTAD, 2002a, ch. III) . But there areexceptions. Economies such as Singapore,the Republic of Korea and Taiwan Provinceof China have moved into the most complexareas of manufacturing and design. And localcontent is growing in many countries in whichhigh-technology exports have taken root;in China, for instance, backward linkagesare expanding (WIR01; Lemoine, 2000).

So much for structural trends. Whatis changing? More specifically, what arethe most dynamic products in world tradeand which are the up-and-coming countries?

During the period 1985-2000, at thefour-digi t Standard In ternat ional TradeClassification (SITC, Rev. 2) level, the mostdynamic products – defined here as the top40 that accounted for at least 0.3 per centof world trade and that increased their marketshare between 1985 and 2000 – are mainlyfrom the high-technology group, althoughthere are also some from the other technologygroups (box VI.1).

The structural trends also suggestthat sustained export growth tends to involvea move up the technology ladder – from

simple to complex products – in additionto upgrading quality and efficiency in existingexpor ts . In addi t ion , good product ion“positioning”, shifting from slow- to fast-growing segments, is an important part ofany competitiveness strategy. And this iswhat the most dynamic exporters have beenable to do. They started with simple productsand functions and, over time (while upgradingthe quality of the exports they were producing),they moved into more technology-intensiveproducts and more demanding functions.

However, relatively few developingcountries have thus far been able to buildcompetitiveness in this manner. Regionaland national export performance remainsvery uneven, and seems to be becomingmore so over t ime (table VI.1). Withinthe developing world, East and South-EastAsia has been the larges t ga iner in a l lcategories apart from primary products. LatinAmerica has made some gains but on a muchsmaller scale. South Asia, West Asia andNorth Africa have only managed marginalimprovements. Sub-Saharan Africa has lostmarket share, even in the slow-growing primaryand resource-based exports in which it isspecialized.

Moreover, export performance is highlyconcentrated at the country level. And, over1985-2000, this concentration rose for every

Figure VI.4. Average annual growth rates of world exports,by technology intensity, 1985-2000

(Percentage)


��


The 40 most dynamic products in worldexports comprise only 5 per cent of the 786products at the SITC, Rev. 2 four-digit level.But by 2000, they accounted for nearly 40 percent of the value of total exports. As a group,these products grew at 12 per cent annually overthe 15-year period (compared to overall exportgrowth of 8.2 per cent) and raised their marketshares by 15 percentage points.

Three manufacturing industries stand out:electronics, automotive and apparel, accountingfor 19 of the 40 most dynamic products, andfor almost one-quarter of the total import valuein 2000. They also accounted for almost 10percentage points of the growth in world tradein 1985-2000.

The 12 electronics i tems in the l istaccounted for 13 per cent of world exports in2000 and for almost 9 percentage points of exportgrowth between 1985 and 2000. Most of thesehigh-technology products revolve aroundinformation and communication technologies.In medium-technology products, the automotiveindustry (four items) accounted for nearly 9per cent of exports but grew relatively slowly,providing only 0.6 percentage points of theincrease. In low-technology products, the mainproducts were in apparel, which accounted forunder 2 per cent of world trade and provided0.6 percentage points of the increase.

Source: UNCTAD.a The methodology used here is quite similar to that used in UNCTAD’s Trade and Development Report 2002. The

Trade and Development Report selected dynamic products according to the criterion of average annual exportvalue growth (at three digits of the SITC, Rev. 2) between 1980 and 1998. The WIR selects from the universe ofworld imports only those products (at four digits of the SITC, Rev. 2) that accounted for at least 0.33 per cent oftotal world trade in 2000, and ranks them according to the increase in their market shares between 1985 and 2000.The differences are minor. For a full description of the Trade and Development Report methodology, see UNCTAD,2002a; Mayer, Butkevicius and Kadri, 2002.

Box VI.1. Dynamic products in world trade, 1985-2000a

Box table VI.1.1. Dynamic products in world exports,ranked by change in market share, 1985-2000

(Millions of dollars and percentage)

Market Share ValueSITC Annual

Rank code Product 1985 2000 Increment 1985 2000 growth rate

17764Electronic microcircuits 0.82 3.38 2.56 13 976 186 887 18.92 7599 Parts and accessories for data processing machinesa 1.02 2.33 1.30 17 446 128 882 14.33 7524 Digital central storage units, separately consigned 0.02 1.01 0.99 295 55 942 41.94 7643 Television, radio and related transmitters and receivers 0.11 0.91 0.81 1 811 50 614 24.95 5417 Medicaments 0.53 1.24 0.71 8 985 68 452 14.56 7649 Parts and accessories for telecom and recording apparatusa 0.67 1.28 0.61 11 346 70 633 13.07 7641 Telephonic and telegraphic apparatus 0.28 0.83 0.55 4 704 45 962 16.48 7523 Complete digital central processing units 0.30 0.74 0.44 5 160 40 845 14.89 7721 Electrical apparatus for making/breaking electrical circuits 0.64 1.05 0.41 10 919 58 297 11.810 7788 Other electrical machinery and equipmenta 0.48 0.86 0.39 8 132 47 829 12.511 8942 Children’s toys, indoor games 0.40 0.79 0.39 6 804 43 509 13.212 8939 Miscellaneous articles of chemicals 0.40 0.77 0.37 6 815 42 483 13.013 7924 Aircraft, mechanically propelled (other than helicopters) 0.44 0.78 0.34 7 496 43 222 12.414 7525 Peripheral units for data processing equipment 0.66 0.98 0.32 11 248 54 390 11.115 7712 Other electric power machinery and partsa 0.17 0.49 0.32 2 829 26 929 16.216 7731 Insulated electric wire, cable, bars, strip and the like 0.29 0.60 0.30 5 012 33 062 13.417 5148 Other nitrogen-function compounds 0.15 0.45 0.30 2 578 25 009 16.418 8462 Under garments, knitted or crocheted, of cotton 0.16 0.44 0.28 2 714 24 145 15.719 7768 Piezo-electric crystals, parts of transistors and cathode valvesa 0.31 0.58 0.27 5 285 32 259 12.820 7522 Complete digital data processing machines 0.20 0.47 0.27 3 400 26 035 14.521 7810 Passenger motor cars 4.90 5.15 0.25 83 547 285 222 8.522 5839 Other polymerisation and copolymerisation products 0.16 0.40 0.24 2 736 22 087 14.923 8219 Other furniture and partsa 0.32 0.55 0.22 5 495 30 281 12.124 7763 Diodes, transistors and similar semiconductor devices 0.22 0.42 0.20 3 735 23 025 12.925 7149 Parts of non-electrical engines and motorsa 0.28 0.46 0.19 4 712 25 648 12.026 8211 Chairs and other seats 0.26 0.43 0.18 4 366 24 006 12.027 8983 Gramophone records and other sound or similar recordings 0.33 0.50 0.17 5 609 27 880 11.328 8720 Medical instruments and appliancesa 0.24 0.41 0.17 4 122 22 722 12.129 8451 Jerseys, pullovers, twin-sets, cardigans, jumpers etc. 0.39 0.54 0.15 6 594 29 987 10.630 8439 Other outer garments, women’s, girls’, infants’, of textile fabrics 0.30 0.45 0.15 5 161 25 015 11.131 7284 Machinery and parts for specialized industries 0.68 0.82 0.14 11 618 45 617 9.632 7132 Internal combustion piston engines for road vehicles 0.45 0.58 0.14 7 599 32 368 10.133 5989 Chemical products and preparationsa 0.45 0.58 0.13 7 603 31 865 10.034 7611 Television receivers, colour 0.27 0.40 0.13 4 589 21 955 11.035 5156 Heterocyclic compounds; nucleic acids 0.32 0.44 0.12 5 445 24 599 10.636 7849 Other parts and accessories of motor vehiclesa 2.23 2.33 0.10 37 954 129 051 8.537 6672 Diamonds (except sorted industrial diamonds), unworked, cut 0.83 0.92 0.09 14 166 50 741 8.938 7139 Parts of the internal combustion piston enginesa 0.34 0.40 0.06 5 814 22 249 9.439 7492 Taps, cocks, valves etc. for pipes, boiler shells, tanks, vats 0.34 0.40 0.06 5 854 22 168 9.340 7929 Aircraft partsa (except tyres, engines, electrical parts) 0.49 0.53 0.04 8 334 29 475 8.8

Total above products 21.84 36.71 14.87 372 006 2 031 347 12.0

Source: UNCTAD, based on the United Nations’ Comtrade database, 4-digit SITC, Rev. 2.a Not elsewhere specified.

��


Ta

ble

VI.

1.

Th

e s

tru

ctu

re o

f w

orl

d t

rad

e i

n m

ajo

r p

rod

uc

t c

ate

go

rie

s,

by

re

gio

n,

19

85

an

d 2

00

0a

(Pe

rce

nta

ge

)

Of

whi

ch

Dev

elop

edD

evel

opin

gE

ast

and

Sou

th-

Latin

Am

eric

a an

d M

iddl

e E

ast a

ndS

ub-S

ahar

anco

un

trie

sbC

EEb

cou

ntr

iesb

Eas

t A

sia

the

Car

ibbe

anN

orth

Afr

ica

Sou

th A

sia

Afr

ica

Pro

duct

1985

2000

19

85

c20

0019

8520

0019

8520

0019

8520

0019

8520

0019

8520

0019

8520

00

Prim

ary

prod

ucts

38.0

40.4

0.8

3.6

61.2

56.0

10.4

9.5

12.5

13.2

21.4

20.9

1.2

1.2

5.4

4.3

Man

ufac

ture

s ba

sed

onn

atu

ral

reso

urc

es

68.7

68.2

1.4

5.2

29.8

26.6

8.4

11.7

7.0

6.5

4.9

3.9

0.8

1.4

1.7

1.3

Man

ufac

ture

s no

t ba

sed

onn

atu

ral

reso

urc

es

81.9

66.8

0.6

2.4

17.5

30.8

10.8

22.6

2.6

4.6

0.8

1.1

0.6

1.0

0.4

0.2

Lo

w-t

ech

no

log

y66

.449

.71.

23.

632

.446

.622

.933

.43.

25.

31.

62.

71.

93.

40.

50.

4M

ediu

m-t

echn

olog

y89

.278

.60.

52.

610

.418

.84.

711

.72.

55.

00.

50.

80.

20.

30.

30.

3H

igh-

tech

nolo

gy83

.263

.40.

21.

316

.635

.410

.929

.12.

13.

60.

30.

30.

10.

10.

30.

1O

ther

tra

nsac

tions

71.2

58.4

0.2

1.2

28.6

40.4

5.3

8.6

4.2

4.8

0.9

0.9

0.2

0.2

4.1

1.9

Tota

l68

.963

.50.

82.

930

.333

.610

.118

.75.

86.

06.

34.

00.

81.

01.

91.

0

So

urc

e:

UN

CT

AD

, b

ase

d o

n t

he

Un

ite

d N

ati

on

s’ C

om

tra

de

da

tab

ase

.

aB

as

ed

on

th

ree

-ye

ar

av

era

ge

fo

r 1

98

5 (

19

84

-19

86

) a

nd

a t

wo

-ye

ar

av

era

ge

fo

r 2

00

0 (

19

99

-20

00

).b

Th

es

e t

hre

e r

eg

ion

s a

dd

up

to

10

0 p

er

ce

nt

for

ea

ch

ex

po

rt c

ate

go

ry.

cT

he

sh

are

of

CE

E i

n e

xp

ort

s i

s u

nd

ers

tate

d f

or

19

85

be

ca

us

e d

ata

are

la

ck

ing

in

a n

um

be

r o

f c

ou

ntr

ies

. T

his

als

o o

ve

rsta

tes

th

e r

ela

tiv

e g

ain

in

th

e g

rou

p’s

ma

rke

ts

ha

res

ov

er

tim

e.

��


technology category(figure VI.5). In 2000,the 10 leading developing-country exportersaccounted for some 80per cent of totalmanufactured exports bythe developing world, upfrom 57 per cent in1985. The pattern ofcountry concentration in2000 differed from thatin 1985. In 1985, thedegree of concentrationwas highest in the low-technology category,while in 2000 it was thehighest in the high-technology category.This suggests that entry barriers into thehigh-technology category have become higher.

Another measure of concentration,the number of developing countr ies andeconomies in transition with exports of $500million or more in 2000, indicates a highdegree of concentration (figure VI.6). Thereare fewer large exporters the higher thetechnology level.

How have individual countries faredin increasing their market shares during 1985-2000? The “winners” are economies thathave raised their world market shares by

at least 0.1 per cent over the period, rankedfrom the highest to the lowest by rise inmarket share (table VI.2). Growing marketshares show dynamic competitiveness (staticcompetitiveness being shown by market sharesat a point in time) and reveal the abilityof a country to keep up wi th changingtechnologies and trade patterns. (Winnersare analysed in more detail in the annexto this chapter.) Note that winners do notinclude large exporters that have not improvedtheir competitive position during 1985-2000(e.g. Japan in high-technology exports), eventhough they might have the largest marketshares over the whole period.

It needs to be emphasized that exportmarket shares are hard to gain and hardto sus ta in . A genuine improvement ininternational competitiveness can result fromthe upgrading of human resources or theuse of improved technologies. On the otherhand, market shares can also be gainedbecause of temporary advantages such aspreferential market access for labour-intensive,low-technology goods. Thus different factorscan drive an increase in market share, someleading to sustained increases, others not.

Some points of interest to note whenlooking at the export winners in each category:

• China figures at the top of the l ist ina l l ca tegor ies of expor ts , except forresource-based manufactures in whichit ranks third.6

• Of the mature Asian newly industrializingeconomies, Hong Kong, China is a winner

Figure VI.6. Number of developingand CEE countries with exports of

$500 million or more

Source: UNCTAD, based on the United Nations’ Comtradedatabase and UN-ECLAC’s TRADECAN.

Figure VI.5. Shares of the top 10 exporters of manufacturedexports in developing countries

(Percentage)

Source: UNCTAD, based on the United Nations’ Comtrade database and UN-ECLAC’s TRADECAN.

��


only in resource-based manufactures whilethe Republic of Korea, Singapore andTaiwan Province of China appear in thetop 10 of severa l ca tegor ies (exceptresource-based manufactures and low-technology products, in which they havelost market shares). Of the new “tigers”,Malaysia, Thailand and, to a lesser extent,the Philippines are prominently placedon the l is t for al l sectors.

• From South Asia, India appears amongthe winners in resource-based manufacturesand in the low-technology sector, whileother countr ies such as Bangladesh,Pakistan and Sri Lanka appear only inlow technology.

• In Latin America, Mexico is by far thestrongest performer, ranking high virtuallyacross the board, but especially in non-resource-based sectors. Other countriesfrom the region rank far behind Mexicoand fa l l in to two groups: those thatspecialize in resource-based manufactures(Argentina and Chile) and those that doso in low-technology (Dominican Republic,El Salvador, Honduras) and high-technology(Costa Rica) goods.

• Sub-Saharan Africa is conspicuous byits absence, with even South Africa failingto appear among the top 20.

• From the European periphery, Turkeyappears in all categories of non-resource-based manufactures, while Morocco appearsin high-technology and low-technology,and Tunisia in low-technology.

• The leaders among the winners from CEEare Hungary, Poland and the CzechRepubl ic , wi th Hungary showing thestrongest growth in all categories exceptlow-technology products. The RussianFederation appears only once as a winner,in resource-based manufactures, as doesSlovakia in medium-technology products.

• Among developed countries, perhaps themost surprising fact is their prominencein resource-based manufactures, wherethey make up 8 of the 23 top winners.In high-technology products, the pictureis different , with only four industr ialcountry winners. This reflects in largepart the transfer of segments of high-technology operations to low-cost countriesby TNCs.

Table VI.2. The top 20 export winners, by technology category, 1985-2000

Resource-based Non-resource- High-technology Medium-technology Low-technologyRank All sectors manufactures based manufactures manufactures manufactures manufactures

1 China Ireland China China China China 2 United States United States Mexico Malaysia Mexico United States 3 Republic of Korea China Malaysia Taiwan Province

of China United States Mexico 4 Mexico Republic of Korea United States Republic of Korea Republic of Korea Indonesia 5 Malaysia India Thai land Singapore Spain Thai land 6 Ireland Russian Federationa Republic of Korea Mexico Taiwan Province

of China Malaysia 7 Thai land Thai land Singapore Philippines Malaysia Canada 8 Taiwan Province

of China Indonesia Philippines Thai land Thai land Turkey 9 Singapore Israel Indonesia Ireland Hungary India10 Spain Japan Taiwan Province

of China Finland Indonesia Poland11 Philippines Switzerland Ireland Hungary Poland Viet Nam12 Hungary Chile Hungary Indonesia Czech Republica Bangladesh13 Viet Nam Spain Spain Israel Portugal Honduras14 India Australia Poland Costa Rica Singapore DominicanRepublic15 Israel Poland Turkey Poland Turkey Pakistan16 Poland Hong Kong, China India Czech Republica Argentina Tunisia17 Turkey United Arab Emirates Israel Turkey India Sri Lanka18 Czech Republic Mexico Viet Nam Malta Ireland El Salvador19 Chile Iran Czech Republica Spain Slovakiaa Guatemala20 Portugal Argentina Bangladesh Moroccob Australia Morocco

Source: UNCTAD calculations, based on the United Nations’ Comtrade database.

a 1995-2000.b 0.04 per cent.

Note: Only countries with at least a 0.1 per cent increment in market share between 1985 and 2000 are includedin the list.

��


• In non-resource-based products, Ireland,Spain and the Uni ted Sta tes lead thewinners in the developed world. Otherstrong high-technology performers areIsrael and Finland. The United States,the g lobal winner in resource-basedproducts and the runner-up in low-technology, does not appear at all in high-technology products (where it is the largestexporter in absolute terms but has notra ised i t s market share) . Par t of thestrong growth of its medium-technologyand low-technology exports has to dowith its export of components for overseasassembly, driven by i ts own TNCs.

• Japan, the second largest industrializedeconomy, figures among the winners onlyin resource-based products. It is a largeexpor ter in most non-resource-basedcategories but has suffered from stagnantor falling market shares during the periodconsidered. Most other large industrializedcountries are in a similar situation. Thisis not surprising, in that it is difficultto raise shares beyond a certain (high)level. However, the United States didraise i ts high market shares in all buthigh- technology products , making i t sperformance all the more remarkable.

The main conclusions of the analysisin this section are the following:

• The most dynamic products in world tradeare found mainly in three manufacturingindustries: electronics, automotive andapparel.

• Trade in par ts and components hasassumed more importance.

• The distribution of trade among developingcountries is highly concentrated: the 10leading developing-country expor tersaccounted for some four-fifths of totalmanufactured expor ts of developingcountries in 2000.

• A number of developing economies haveachieved important gains in market sharesin technology-intensive industries of non-resource-based manufactures. The mostnoteworthy are China, Malaysia, Mexico,the Philippines, the Republic of Korea,Singapore, Taiwan Province of China andThailand. Of the economies in transition,Hungary registered the greatest advance.

• It is also noteworthy that many smalleconomies – such as Costa Rica, Ireland,Taiwan Province of China and Singapore– are among the most dynamic ones.

• Asian winners have gained market sharesin all major markets (Japanese, Europeanand North American), while the winnersfrom the other regions have advancedonly in the context of regional markets.Western and Eastern European winnershave gained only in European markets,and countries in Latin America and theCaribbean have gained only in NorthAmerican markets (see the annex to thischapter) .

As will be discussed below, TNCs playedan important role in the export performanceof many of the most dynamic products inthe winner countries. However, as discussedbelow export performance in and by itselfneeds to be complemented by sharing onthe benefits of exports. Before discussingthat, however, the role of TNCs in exportsin general needs to be reviewed.

B. TNCs and exports

What role do TNCs play in the tradeperformance of countries?

1. The overall picture

The role of TNCs in expanding exportsof host developing countries derives fromthe addi t ional capi ta l , technology andmanagerial know-how they can bring withthem, along with access to global, regional,and especially home-country, markets. Theresources and market access TNCs can bringcan complement a country’s own resourcesand capabilities and can provide some of themissing elements for greater competitiveness.Host countries can build upon these to enternew export act ivi t ies and improve theirperformance in existing ones.

In some cases, especially those ofcountries in which domestic investment islimited by financial constraints, TNCs canhelp increase exports simply by bringingin additional capital and investing it in theexploitation of natural resources or low-cost labour. In such cases, foreign affiliatescontribute to the export performance of hostcountries by bridging the resource gap andtaking the risk of developing new exports.

��


The provision of capital has been an importantaspect of the historical role of TNCs inbuilding up developing-country exports ofraw mater ia ls and labour- in tens ivemanufacturing exports.

More importantly, TNCs can providehost countries with competitive assets forexport-oriented production in technology-intensive and dynamic products in worldtrade. Such assets are often firm-specific,costly and difficult for firms in developingcountries and economies in transition to acquireindependently. When TNCs are unwillingto part with their ownership-specific advantages(as is the case with many of the newest andmost valuable ones such as state-of-the-arttechnologies), FDI becomes particularly importantfor export competitiveness. Regardless of themode of TNC participation, the transfer ofsuch assets by TNCs to their foreign affiliatesor non-equity partners in host countries throughtraining, skills development and knowledgetransfer opens up prospects for fur therdissemination to other enterprises and theeconomy at large. (On linkages, see WIR01.)This means that a wider group of f i rms(including domestic enterprises) can developtheir exports and the factors underlyingcompetitiveness get rooted in the host economy.

Besides s t rengthening the supplycapacities of export-oriented industries inhost countr ies through the t ransfer ofresources, assets and capabil i t ies, TNCscan enhance the demand conditions facingexports by developing countries and economiesin transition, by facilitating their access tonew and larger markets. This involves foreignaffiliates’ privileged access to TNCs’ intra-firm markets and access at arm’s lengthto TNCs’ customers in global, regional andhome-country markets. It also involves theaccess of non-equi ty par tners to TNCs’international production systems. As in thecase of technology, these links of foreignaffiliates and contractual partners in hostcountries to markets can spill over to suppliersand other domest ic f i rms. The case ofENGTEK, headquartered in Penang, Malaysia,is an example of a local supplier that engagedin closely-knit partnerships with TNCs andthrough this network became a global supplier(WIR01). In addition, host countries mayalso benefit from the lobbying activities ofTNCs in their home countries for favourabletreatment of exports from competitive hostcountries.

Finally, export-oriented affiliates canprovide training for the local workforce andupgrade technical and managerial skills thatbenefit the host economy more broadly thanthe income earned by employees. Evensimple operations need considerable trainingfor new employees, particularly in developingcountries without a strong industrial skillbase. More sophisticated operations – complexmanufacture, design, development and regionalheadquarters functions – entail more skillc rea t ion .7 How much TNCs inves t inemployee training depends, of course, onthe “raw material” the host economy provides– general education and training, technicalskills, institutional support, standards andquality, and the like. This applies especiallyto export-oriented investments in advancedtechnological capabilities. This is the strategicchallenge facing countries that have alreadyattracted significant TNC export activityat low technological levels. Their futurecompet i t iveness depends on the hos tgovernment’s ability to boost the human capitaland technological infrastructure. In turn,TNCs feed benefits back into local skilland technology systems, providing information,assistance and contracts .

On the other hand, depending on TNCsfor all improvements in export competitivenessbrings its own risks for host countries. TNCsmay focus solely on the static comparativeadvantages of a host country. While thismight resolve some of the shor t - termefficiency-related problems of TNCs, it meansthat a number of the benefits that can beassociated with export-oriented foreign affiliatesmay fail to materialize in the host country(UNCTAD, 2002a). In particular, dynamiccomparative advantages may not be developed,local value-added may not be increased andaffiliates may not embed themselves in thelocal economy by building linkages to thedomestic entrepreneurial community, by furtherdeveloping labour skills, or by introducingmore complex technologies.

Moreover, TNCs can leave countrieswhen conditions change and profit prospectsare affected. Export-oriented TNC activityis particularly sensitive to changes in thecost of production, market access, regulatoryconditions or perceptions of risks. If relocationof foreign affiliates occurs with little warning,a host country can face serious problems.In labour-intensive industries, characterized

��


by an investment in capital not importantenough to represent a big loss for investorsin the case of disinvestment, sudden shiftsin production locations – due, for example,to changes in regulat ions, incent ives orpreferential schemes – may occur more often.Over time, there is also a risk of relocationof labour-intensive production to lower-costsites, as the wage level increases with incomegrowth (WIR95, ch. V). Although the abilityof TNCs to switch locations diminishes withthe technology intensity of exports for manyof the poorest host economies, it representsa serious problem requiring policy attention.

Finally, there is also the risk thathost countries attempt to attract FDI – mostparticularly export-oriented FDI for whichinternational competition is particularly strong– through incentives and by lowering labourstandards, environmental standards or othereconomic or social s tandards. This canlead to a race to the top as far as incentivesare concerned and a race to the bot tomin terms of social benefits for workers andthe economy as a whole. In addition, ifa l l countr ies a im at export ing the sameproducts at the same time, most of themmay well be worse of (UNCTAD, 2002a).

All this suggests that countries needto pay attention not only to attracting export-oriented TNC activities, although this is thebasis for benefiting from them. They alsoneed to pursue active policies to increasethe benef i t s f rom expor t -or iented TNCactivities once they have attracted them.The t rade balance i s re levant here , butparticular attention needs to be given toupgrading and the sustainability of export-oriented production.

What role, then, do TNCs play in trade?

There i s no way to ca lcula te theprecise share. To begin with, data simplydo not exist on that part of internationaltrade that firms, under the common governanceof TNCs, undertake via non-equity forms.When it comes to trade associated with foreignaffiliates, an extrapolation from some leadingindustrialized countries that do collect suchdata puts the share of trade involving TNCsat around two-thirds of world trade for thelatter half of the 1990s, including both intra-firm and third-party transactions (WIR99).8

More importantly, an estimated one-third of world trade consists of intra-firmtrade (i .e. trade among the various partsof a single corporate system). The shareof intra-firm exports by parent firms in thetotal exports of their home countries rosefrom 27 per cent in 1990 to 31 per centin 1998 in the case of United States TNCs(United States, Department of Commerce,1993, 2002), while it remained stable in thecase of Japanese TNCs at around 38 percent (Japan, MITI, 1998; Japan, METI, 2001a).This trend towards increasing intra-firm tradeis corroborated by data for United States foreign-affiliate exports. Two-thirds of these exportswere intra-firm in 1998, as compared to 55per cent in 1983.

As noted earlier, trade in parts andcomponents has assumed greater importancein world trade. Such trade also appears tobe gaining in importance within corporatesystems. In particular, the share of exportsin electronic components and accessoriesas a percentage of total exports of electronicequipment was higher in the case of exportsfrom United States foreign aff i l ia tes toaffiliated firms (65 per cent) than in thecase of the affiliates’ exports to non-affiliatedfirms (58 per cent). At the same time, ashif t f rom low- and medium-technologymanufacturing exports towards high-technologymanufactures can be observed since theearly 1980s in intra-firm trade (annex tableA.VI .1) . The share of h igh- technologymanufactures in intra-firm exports of UnitedStates affiliates rose from 29 per cent in1983 to 43 per cent in 1998. All this suggeststhat the international intra-firm division oflabour is intensifying – the hallmark ofinternational production systems.

The significance of exports by foreignaffiliates in total exports of host countriesvaries. Scattered national data on the shareof foreign affiliates (as distinct from domesticfirms) show that their contribution is oftenconsiderable and is growing over time (tableVI.3). The significance of TNCs in host-countryexports is not limited to countries that havebenefited as export winners (as discussedin the preceding section); it can also be observedin other countries, such as Argentina, Brazil,Canada, Estonia, Finland and Slovenia (seetable VI.2 for the list of top 20 exportersin non-resource-based manufacturing), in allof which more than 30 per cent of exportsare accounted for by foreign affiliates.

��


Economy Year All industries Manufacturinga


Austria 1993 23 141999 26 15

Canadab 1994 46c 41c

1995 44c 39c

Finland 1995 8 101999 26 31

Franceb 1996 22 271998 21 26

Irelandb 1991 .. 74d

1999 .. 90d

Japan 1988 4 31998 4 4

Netherlandsb 1996 44 22

Portugalb 1996 23 211999 17 21

Swedenb 1990 21e 21e

1999 39e 36e

United States 1985 19 61999 15 14

Developing economies:Argentinaf 1995 14 ..

2000 29 ..

Boliviaf 1995 11 ..1999 9 ..

Brazilf 1995 18 ..2000 21 ..

Chilef 1995 16 ..2000 28 ..

China 1991 17g 162001 50g 44h

Table VI.3. Shares of foreign affiliates in the exports of selected host economies,all industries and manufacturing,a selected years

(Percentage)

Economy Year All industries Manufacturinga

Colombiaf 1995 6 ..2000 14 ..

Costa Rica 2000 50 ..

Hong Kong, China 1985 .. 101997 .. 5

India 1985 3 31991 3 3

Malaysia 1985 26 181995 45 49

Mexicof 1995 15 ..2000 31 ..

Peruf 1995 25 ..2000 24 ..

Republic of Korea 1999 .. 15i

Singapore 1994 .. 351999 .. 38

Taiwan Province of China1985 17 181994 16 17

Central and Eastern Europe:Czech Republic 1993 .. 15j

1998 .. 47j

Estoniab 1995 .. 26j

2000 60 35j,k

Hungary 1995 58 52j,l

1999 80 86j,k

Polandb 1998 48 35j,l

2000 56 52j,k

Romania 2000 21 ..

Slovenia 1994 .. 21j

1999 26 33j,k

Source: UNCTAD, based on the UNCTAD FDI/TNC database.

a Share of exports of foreign affi l iates in the manufacturing sector in merchandise exports of host economies.b Data for exports of foreign affi l iates refer to exports of majority-owned foreign affi l iates only.c Data for exports of foreign affi l iates from OECD, 2002.d Data refer to local units, from the Central Statistics Office, Census of Industrial production.e Data from Swedish ITPS, 2001. Manufacturing includes mining and quarrying.f Data for exports of foreign affiliates were based on 1998-2000 average and were provided by ECLAC, International

Trade and Integration Division. Based on a sample of 385 foreign-owned firms, 82 in Argentina, 160 in Brazil,20 in Chile, 21 in Colombia, 93 in Mexico and 9 in Peru.

g Data from MOFTEC.h 2000.i Data from Soon (2001), based on exports of 267 exporting companies out of a sample of 305 manufacturing foreign

affi l iates, accounting for 47.5 per cent of the stock of FDI in the Republic of Korea. Total exports generated byforeign affi l iates are thus l ikely to be considerably larger (based on a survey undertaken by the Korea Instituteof Economy and Technology.

j Data on the exports of foreign affi l iates from Andrea Eltetö (2000).k 1998.l 1993.

How does the picture look if each ofthe main economic sectors is consideredseparately?

2. Primary products

In developing countries, the traditionalrole of TNCs has been to extract and exportprimary products . Although the share ofthis sector in world trade is declining (as

it is in world FDI – see WIR01, Part One),the sector and the role of TNCs in it remainsimportant for many countries and can helpthem move into higher-value-added activities(World Bank, 2002b). For many of the poorestcountries, the availability of natural resourcesis their only comparative advantage. In Africa,for example, a good many of the continent’s54 countries depend on a limited numberof primary products for the lion’s share of

��


the i r expor t earnings . To i l lus t ra te , inBotswana, diamonds alone accounted for79 per cent of exports in 1999, while copperand nickel represented an additional 5 percent. In Papua New Guinea, gold and coppertogether accounted for almost half the exportsin 1999 (Ericsson, 2002).

While natural resources are generallynot dynamic in world trade, new resource-based expor ts are emerging, such ashorticulture, often with TNC involvementat one or more points of the value chain.In Kenya, for example, horticulture – withsubstantial TNC involvement (box VI.2) –was the second most important export itemin 2001, accounting for 16 per cent of totalmerchandise exports (Kenya, Central Bureauof Statistics, 2002). In more traditionalagricultural commodities (such as bananasand other tropical fruits), the role of TNCscontinues to be important, although oftenthrough more specialized non-equity formsfocused on market ing and dis t r ibut ion(UNCTAD and Cyclope, 2000, pp. 161-163).In most of these commodities, the valuechains are increasingly led by large retailersthat, in their quest for cost reduction andoptimum distribution, build long-term direct-supply relat ionships with local ly-ownedproducers (Humphries , 2001) . This is adeparture from the historical role of TNCsin food value chains, where they used toown product ion fac i l i t ies as wel l astransportation and distribution facilities (boxVI.3). In fisheries, the quest by developed-country TNCs for new sources of supplyto serve expanded markets has led to anincreased role for export-oriented FDI (boxVI.4). As the value added in the supplychain moves away from catch or breedingtowards freezing and transport, the industryis becoming increasingly knowledge- andskills-intensive (UNCTAD and Cyclope, 2000,p. 199).

In petroleum, a key primary product,new entrants into export markets (such asAngola), rely significantly on FDI, whiletraditional exporter countries are increasingtechnological sophistication and value addedthrough both equi ty and non-equi tyarrangements with TNCs. In other extractiveindustries, the increasing application of newinformation technologies has resulted in ashift of the main value added from simplediscovery and deployment of capital to theapplication of intelligence on known deposits

and improvements in capi ta l e f f ic iency(Humphries, 2001). This shift not only makesmining activities increasingly technology-intensive, but also re-emphasizes the needfor various forms of cooperation with thetechnological leaders, typically TNCs. Inthe Namibian water diamond industry, forexample , De Beers and Namco haveestablished joint ventures with Namibian

Box VI.2 Kenya’s dynamic horticulturalexport industry

Horticulture is a rapidly growing exportitem. Over the four-year period between 1997and 2001, its share in exports increased from12 to 16 per cent (Kenya, Central Bureau ofStatistics, 2002). In the flower segment ofhorticulture alone, the 70 leading Kenyan growerfirms employed more than 50,000 people andexported flowers worth $110 million to theEuropean Union market in 2001 (FPEAK, 2002).By 2001 Kenya had become the leading flowersupplier of the European Union (accountingfor 25 per cent of EU imports), ahead of Colombia(17 per cent) and Israel (16 per cent) (idem).

TNCs play an important role in Kenya’shorticulture, although it varies between segments.Close to 90 per cent of Kenya’s flower production,for example, is controlled by foreign affiliates(FPEAK, 2002). The supply chain is under thecommon governance of TNCs, from breedingthrough flower production to marketing anddistribution. The reason for this close controlis the capital- and technology-intensity of flowerproduction. In contrast, 60 to 70 per cent ofthe exportable fruits and vegetables are grownby small-scale local farmers, either through out-grower schemes or through contract farmingarrangements. TNCs provide farm inputs (seeds,chemicals and fertilizers), technical support andquality control as well as market informationto smallholder farmers, channelled through thefresh produce exporters associations (idem).The fast expansion of flower production is, ofcourse, not without problems, including healthhazards for workers unprotected from chemicalsused in flower growing. These issues have beenrecognized by the Food and AgricultureOrganization and the United NationsEnvironmental Programme, which in 2001 togetherset up a project in Kenya to introducealternatives to toxic chemicals (FAO, 2002). TheGovernment of Kenya has a number of lawslimiting the exposure of workers to chemicals;the effectiveness of the local enforcement ofthese laws, however, needs to be strengthened(ILO, 2001, p. 223).

Source : UNCTAD.

��


To minimize the negative effects ofcommodity dependency, many commodity-dependent countries seek to diversify out ofbasic food commodities into higher-value-addedproducts by moving into food-processing (e.g.the preservation and transformation of rawmaterials into such products as instant coffeeand fruit juice) or by developing new typesof food products. This strategy, however, isnot easy to implement, because:

• Tariff barriers in developed countries arefrequently higher for processed foodproducts than for unprocessed ones.

• The food-processing industry is wellestablished; a small number of TNCs controlsthe worldwide supply and distributionnetworks and brands.

• Many developing countries lack the accessto raw materials, capital and marketsnecessary to achieve economies of scale.

• Demand for preserved products has beenstagnant in developed countries asconsumers’ tastes shift towards freshproduce.

With the growth of international sourcingof fruits and vegetables and the increasingconcentration of retail ing in developedcountries, the role of TNCs in host countriesis changing. In the past, TNCs invested primarilyin plants for the production of processed food(e.g. soluble coffee in many developingcountries). They were also often the largestexporters - and also responsible for thedistribution and transport - of non-traditionalagricultural products in Latin America (e.g.Del Monte in Costa Rica and Dole in Honduras,both in pineapple exports); they produced mostof their exports and contracted the rest tomedium and large domestic growers (Thrupp,1995). More recently, as in the case of theapparel industry, some leading TNCs no longerown factories or logistic facilities in developingcountries; instead, they own retail outlets andbrand names in developed countries. In thiscase, there are no equity links between theretailers and the rest of the value chain.However, the retailers play a decisive role indefining the structure of international tradeand in determining who will be included inor excluded from the network.

Accordingly, the recent patterns of FDIin the food industry show the following

characteristics:

• An increasing number of domestic exporterscontrol land to increase supervision of theproduction process and secure supplies.Some large producers and exporters in Africahave invested in neighbouring countriesto gain access to land. In the value chainof fresh vegetables, for example, many Africanexporters are encouraged by United Kingdomsupermarkets to take on more of theprocessing activities formerly controlledby importers. In the value chains of freshand processed fruit, market requirementsare transmitted from large buyers to exporters,who then take control of production andshipment to meet those requirements. Somelarge, locally-owned exporters control thetransport of their products. One exampleis Kenya’s largest horticultural exporter,Homegrown, which established a jointventure with an airline company.

• Importers in developed countries investdirectly in exporting companies and in farmsin producer countries to ensure continuityof supply and provide the resources neededfor increased local processing. For example,some importers in the United Kingdom haveinvested in production facilities, not onlyin Europe but also in the Middle East andAfrica, to supply supermarkets all year roundfrom their own farms.

• Exporters in developing countries investin importers – or create their own importingcompanies – in developed countries (e.g.Homegrown’s establishment of i ts ownimporter in the United Kingdom) to diminishthe risk of being displaced by exporters fromother countries.

The development of niche markets forhigher-value fresh fruits and vegetables cancreate new opportunities for developing-countryexports. The question arising from thedevelopment of entire-channel marketingsystems, in which a greater emphasis is placedon the closer management and monitoring offood value chains, is how to link with developed-country firms within the chain. Developing-country firms are thus seeking stronger equity(e.g. joint ventures) or non-equity (e.g. strategicalliances) links with international partners whoprovide greater access to markets and resourcesfor upgrading, while improving theircompetitiveness.

Source: UNCTAD, 2000f .

Box VI.3. The food value chain

��


Box VI.4. FDI in the salmon industryin Chile

Fish is the only primary product includedin the 50 most dynamic exports in the period 1985-2000, occupying the forty-ninth spot at the 3-digit level of the SITC, Rev. 2 (using the samecriteria as the box VI.1). Chile and China havebecome two of the major exporters of fresh fish(after Norway, the United States and the RussianFederation), and are the two countries that haveincreased their world market share the most overthe period. Chile’s principal success in this industryhas been in the category of fresh fillets (SITC0343) where Chilean exports accounted for almost20 per cent of world imports in 2000, up from 2per cent in 1985. Most of these exports comefrom salmon farming, an industry that reached$950 million in 2000, or 5.3 per cent of the totalexports of the country (up from 1.8 per cent in1991).

Although local companies (with importantassistance from the Government) developed thesalmon industry, foreign affiliates of TNCs fromEurope, North America and Japan have becomemajor exporters. By 1999, the top three exporterswere all foreign affiliates. Growing internationaldemand encouraged the major companies to seekout new sites for production, and Chile offeredoptimal conditions in the natural environmentand the availability of labour and other inputs.Because salmon rearing in Chile is subject toGovernment concessions, most TNCs have preferredto acquire existing companies that alreadypossessed concessions. In 2000, about 40 percent of total production was in the hands of foreignaffiliates.

The Chilean salmon industry still has thepotential to develop further, and exports are expectedto reach between $2.5 and $3 billion by 2010, basedon estimated future investments of $1.5 billion.But the industry is also subject to the pricefluctuations typical of other primary products:in 2001, a collapse in prices meant that a 50 percent increase in the volume of exports translatedinto only a 1 per cent rise in export revenues.Salmon producers are expected to maintain outputlevels in 2002.

Source : UNCTAD, based on ECLAC, 2001 andEconomist Intel l igence Unit , 2002b.

firms and hired Namibian staff to employfront-line technology (the sweeping of theocean floor outside the coast) in deep-waterextraction. This technology is more knowledge-intensive than traditional on-land mining.Many of these ventures involve non-equityforms of TNC participation, such as contractualarrangements, rather than FDI. In bauxite

mining, for example, the list of the largest15 producers controlling more than four-fifths of world output in 2000 includes notonly TNCs but also State enterprises fromGuinea (fifth), Venezuela (seventh), India(tenth) and Jamaica (twelfth) (Ericsson, 2002).

3. Services

Services are a sector in which thepotential for export-oriented FDI in developingcountries and economies in transit ion isconsiderable, for a number of reasons:

• Services account for more than two-thirdsof the GDP of developed countr ies(UNCTAD, 2001g, pp . 300-315) , theworld’s principal export markets. By 1999,the share of services in GDP had surpassed50 per cent in the developing world, and57 per cent in the economies in transition.These countries are therefore strengtheningtheir abil i ty to produce more servicesfor all markets.

• In 1999, only 12 per cent of serviceproduction entered international trade,compared to 51 per cent of the productionof goods.9 As the tradability of servicesincreases as a result of the use of moderninformation and communication technologies(Sauvant, 1990), it can be expected theproduct ion of a growing number ofservices (or their components) will shiftto developing countries, as manufacturingdid.10

• United States data suggest that services firmsare considerably less transnationalizedthan manufacturing firms – by a factorof three (table VI.4). However, for manycorporations, service exports are ancillaryto their international production activitiesin non-service areas and include R&D,sales and market ing, as wel l asprocurement centres. A number of TNCsrelocate these services to lower-cost sitesor places that make more logistical sense,and expor t them from there . In thedeveloping world, Asia appears to be moreadvanced than other regions in attractingboth types of expor t -or iented FDI inservices: FDI related to service exportsand FDI related to service functions ininternational production systems. All thissuggests that there i s a considerablepotential for firms to transnationalize andfor countries to attract FDI in the servicessector.

��


oriented. And the share of developing countriesand economies in transition in some of thesetypes of projects is on the rise. For example,their share of call centres and shared-servicecentres increased from 22 per cent in 2001to 39 per cent in the first five months of2002.13 In R&D, their share rose from25 per cent to 42 per cent over the sameperiod. In the Indian information technologyand software development industry alone(box VI.5), 63 major investment projects,creating almost 65,000 new jobs, were initiatedduring that period. While the move of export-oriented services FDI to developing countriesis still incipient, it has been gathering pace.

Box VI.5. Indian computer software andservices exports

Software and related services have beenamong India’s fastest-growing export items,averaging 40 per cent growth per annum in 1988-2002, and expanding from $70 million in 1988to a projected $7.6 billion in 2001/2002. Industryexperts estimate that this industry accountedfor 16 per cent of India’s total exports in 2000/2001, employed 5 million people, and received$1.6 billion in investments (NASSCOM, 2002).

The software exports of India are highlyconcentrated in a few large firms (box table VI.4.1).Of the country’s 30,000 software firms, just 20accounted for 28 per cent of the industry’sexports. The export propensity of these top firmsis higher than 92 per cent (http:/ /www.nasscom.org). Most of the leading softwareproducing and exporting firms are Indian-owned.Even in the city of Bangalore, where FDI in theIndian software industry is concentrated, only150 of the 1,001 firms operating in the technologypark were foreign-owned at the end of 2001 (STPI,2002). Moreover, some of the Indian firms arethemselves becoming outward investors(Patibandla and Petersen, forthcoming, p.11).

Nevertheless, foreign companies play animportant role in the industry. Foreign affiliatesalone accounted (in 1998/1999) for some 19 percent of India’s software exports, often to theirparent companies (Kumar, 2001); to that, onewould have to add exports undertaken on thebasis of non-equity links. Almost all major UnitedStates and European information technologyfirms are present in India, despite a limiteddomestic software market. They cluster theirhigh-technology activities largely into a singlelocation, Bangalore, because of limited basicservices elsewhere. Of the 112 new FDI ventures(including both manufacturing and services)established in India between January 2001 andMay 2002,a Bangalore attracted 38 per cent.

/...

In this context, it should also be notedthat trading companies play an importantrole in facilitating exports from host countries.In the case of the United States, wholesaletrading foreign affiliates accounted for onequarter of the total exports of all majority-owned foreign affiliates of United StatesTNCs in 1998 (United States, Departmentof Commerce, 2002). This role is evenstronger for Japanese trading TNCs, thesogo shoshas: in 1998, nearly half the exportsby foreign affiliates of Japanese TNCs werehandled by trading companies (Japan, METI,2001a). The exports of sogo shoshas (manyactually also produced by them) range fromagriculture and mining to manufacturing andservices products.

Services FDI in developing countriesand CEE is, indeed, becoming important.As in the case of developed countries, morethan half of developing countries’ total FDIinward s tock was in the services sectorin 2000, a share nearly double that of adecade ago.11 For example, the majority(58 per cent) of the 3,742 new global FDIprojects monitored between 2001-May 2002involved service functions.12 A number ofthese service projects – including R&D,regional headquarters and call/shared-servicecentres (accounting for nearly one quarterof al l global FDI projects) – are export

Table VI.4. The degree oftransnationality of United Statesfirms, by sector, 1992 and 1997

(Percentage)

Sector 1992 1997

Total 11.6 12.5

Primary 30.9 36.2Secondary 23.6 27.1Tertiary 6.6 7.4


Notes: Data refer to sales of non-bank majority-owned foreign affiliates of United States non-bank TNCs divided by total sales of all UnitedStates firms. Total sales of all United Statesfirms were taken from the 1992 and 1997Economic Census of the United States CensusBureau. Data on the 1997 Census are classifiedaccording to the 1997 North American IndustryClassification, superseding the Standard IndustrialClassification used in prior Censuses. Datarepresent total sales, shipments, receipts,revenue or business done by establishmentsand therefore are not fully comparable tosales by foreign affiliates. Primary sectorrefers to mining.

��


Box VI.5. Indian computer software andservices exports (concluded)

Some key projects – such as Intel’s 1,000-jobtechnology centre – were established inBangalore. The strategies of TNCs in Bangaloreare focused on the exploitation of a single criticalinput available there: skilled human resources.This means that they need to nurture localcapabilities through close collaboration withuniversities and research centres.

To maintain their technological edge, foreignaffiliates in Indian software follow two contrastingstrategies. Some of them (such as HewlettPackard, Oracle and Motorola) opt for fully-controlled affiliates, closely integrated into theircorporate networks. These affil iates thensubcontract product development to localsoftware firms. Others (such as Nortel and Cisco)opt for collaboration and joint ventures withlocal information technology firms. In the lattercases, the establishment of joint ventures andthe conclusion of collaboration agreements havebeen facilitated by the fact that some of thesenior managers of the TNC parent companiesare Indian expatriates.

Source : UNCTAD.a Data provided by PricewaterhouseCoopers.

The location of international servicefunctions appears to be concentrated so farin only a few countries. In the developedworld, Ireland has been highly successfulin attracting international service functions(box VI.6). In the developing world, Indiahas been a successful location, especiallyfor sof tware development and otherinternational service functions. All this suggeststhat countries seeking to explore new frontiersin at tracting export-oriented FDI shouldconsider various service industries as wellas service functions of all sorts of firms.

Box VI.6. Ireland: the growth of servicesexports

The export competitiveness of Irelandimproved, not only by attracting FDI inmanufacturing, but also in services, especiallyIT-based ones, such as telecom, computer andother business services. Since the late 1980s,this has been part of the investment promotionstrategy followed by the Investment andDevelopment Agency (IDA). Results includethe setting up there of Intel’s EU headquarters,the transformation of Ireland into a top locationfor customer-support services (shared-servicescentresa and call centresb), and the successfulpositioning of Ireland as the market leader inEurope for greenfield FDI in software,

/...

Box VI.6. Ireland: the growth of servicesexports (concluded)

healthcare and medical, engineering and financialservices. Its International Financial ServicesCentre attracted increasing inflows of bothFDI and portfolio capital .c Although newinvestment in the electronics and IT-servicesindustries slowed in 2001d, new investment tookplace in healthcare and financial services. Ofthe top 55 of Ireland’s foreign-owned exporters,four were in services in 1998 (IDA, 1999). In2000, foreign services affiliates accounted fora large share of Irish services exports, with theirexport propensity being higher than that offoreign manufacturing affiliates (89 per centcompared to 86 per cent, respectively – Forfás,2002).

Source: UNCTAD.a Such as Whirlpool setting up its European Shared

Services Centre in Dublin in 1995. Ireland is nowthe European financial control centre for Whirlpool,employing over 60 people, servicing the company’ssales network in 16 Western European and Nordiccountr ies . I re land was chosen because of lowoperating costs, language skills, technical skills andthe speed and ease of set up. Furthermore, shared-services centres were set up by Compaq, Allergan,Electrolux, Informix, Microsoft and Apple amongothers (IDA, 2002).

b Call centre operations were established by AmericanAirlines, Hertz, Starwood Hotel & Resorts, BestWestern, UPS, Zomax and Dell (IDA, 2002).

c The IFSC, established in 1987, involves over 400foreign affiliates in such areas as banking, investmentfinance, corporate treasuries and insurance. Aroundi t , a world-class support network of sof twaredevelopment, telecommunications, shared-servicescentres and legal and accountancy services hasemerged. Certification of new IFSC projects hadalready ceased by the end of 1999. Furthermore,certification of expansion of existing entities willcease at end-2002. By 2005, the different legislativeregimes for the IFSC and the domestic financialservices sector will be eliminated, in accordance witha corpora t ion t ax agreement wi th the EU byintroducing a 12.5 per cent corporate tax rate (IFSC,2002).

d Among the measures envisaged by foreign affiliatesto weather the current economic downturn in thein format ion and communica t ion t echno logyindustry (ICT) was the expansion of services in thisindustry, according to a survey by Forfás and IDA(Forfás and IDA, 2001). The survey, conductedbetween May and July 2001, covered 16 major IDA-supported foreign electronics affiliates (Forfás andIDA, 2001) . Whi le some h igh ly spec ia l i zedmanufacturing activities will continue on a smallsca le , expanded se rv ices migh t inc lude : ICToutsourcing, e-commerce, customer support, supplychain management and sales and systems integrationall requiring highly skilled workers. To support thistransition, Forfás and IDA Ireland, in conjunctionwith the Department of Enterprise, Trade andEmployment, have put in place an “Action Plan”to improve the business environment for foreignelectronics affiliates in Ireland. These efforts havebecome all the more necessary in light of Ireland’sdiminishing cost competitiveness in traditionalelectronics manufacturing activities (such as printedcircuit boards, consumer PCs, mobile phones andmost other consumer electronics, such as speakers)in comparison with locations such as the CEE orAsian countries.

��


4. Manufacturing

The most prominent role played byFDI in the exports of developing countriesis in the manufacturing sector. However,this role differs from country to country.In economies for which data are availablefor this sector, the share of foreign affiliatesin total manufacturing exports ranges from4 per cent in the case of Japan to 90 per centin the case of Ireland for developed countries.For developing economies, it ranged from3 per cent in the case of India (1991 – themost recent available year) to 49 per centin the case of Malaysia in 1995 (table VI.3).In CEE, the share was between 33 per cent(Slovenia) and 86 per cent (Hungary) in1999. In many developing countries and CEE,the share appears to be more than one-third and seems to have increased over time,most dramatically in China. In developedcountries, it does not seem to have changedmuch over time.

Two aspects of the role of TNCsin the export of manufactures deserve specialmention. The first concerns the setting upof operations aimed at international marketsfrom the start , sometimes in the contextof specific product mandates given to foreignaffiliates. In the developing world, this hasbeen the most recent form of TNC exportinvolvement and perhaps the most importantquantitatively. In the initial stages – andthis persists in many countries – most suchinvestments were relatively isolated fromthe host economy, they sought essentiallyto tap cheap labour. TNCs operating in exportprocessing zones (EPZs) (to be discussedin chapter VII) exemplify this. In recentyears , however, the dis t inct ion betweendomestic and export-oriented activities hasbeen breaking down, with TNCs being allowedto serve both markets from the same facilities.In liberal trading environments like that ofSingapore, this is the norm. For economiesundergoing liberalization, a good exampleis China. Its large market and competitiveproduction base allow TNCs to mount scale-intensive operations that serve domesticmarkets and move rapidly, or a lmostsimultaneously into exports.

The second concerns the leveragingof the presence o f fore ign af f i l ia tes asa vehicle to facilitate the internationalizationof domestic firms (especially suppliers of

affiliates) through exports and outward FDI,upgrading, in this manner, the internationalcompetitiveness of domestic firms. The impactof foreign affiliates on domestic companies’export activities can be divided into directand indirect effects (Blomström et al., 2000).

• Direct effects occur when exporting foreignaffiliates establish backward linkages withlocal firms, which then become “indirectexporters”. In addition, given the oftenpersonal ized nature of buyer-suppl ierrelationships, foreign affiliates may alsoprovide useful contacts with other affiliatesof the TNC network (Raines, Turok andBrown, 2001) . For example , in theSouthern Common Market (Mercosur)area in Latin America and in China, Nestléactively assisted selected suppliers tobecome regional suppl iers to Nest lé ;Hitachi’s semiconductor affiliate in Malaysiasimilarly assisted its vendors by introducingthem to other Hitachi affiliates (WIR01).Export endeavours of suppliers can alsobe helped by their gaining access to theknowledge and information controlled bya foreign affiliate such as knowledge offoreign market conditions related to design,packaging and product quality (Blomströmet al . , 2000). In the United Kingdom,almost half of the domest ic suppl iersto TNCs had benefi ted in such a wayfrom the l inkages to foreign affi l iates(PACEC, 1995). There are furthermore“reputation effects” to consider. Accordingto some successful suppl iers in Asia ,once their reliability was proven to onelarge fore ign aff i l ia te , reference wasprovided to o ther assemblers ormanufacturers within the same businessnetwork, or to other foreign affiliates,thus generating new opportunities (WIR01).Similar findings were noted in a studyof suppliers to such investors as Sonyand Nissan in the United Kingdom (Morrisand Imrie, 1992) and in other s tudies(Echeverri-Carrol, Hunnicut and Hansen,1998). The internationalization of localsuppliers – by way of either increasedexports or FDI – has been found to bemore likely to occur when domesticcollaboration between suppliers and investorsis not only high, but also involves high-value-added activities. Factors that influencethe likelihood of transnationalization includethe complexity of the production process,the level of local procurement by theforeign affiliate, the autonomy and mandate

��


of the foreign affiliate, and the importanceof geographical proximity between investorsand suppliers (Raines, Turok and Brown,2001).

• Indirect effects of the presence of export-oriented foreign affi l iates occur whenlocal firms manage to copy the operationsof foreign affiliates, employ staff trainedby foreign affiliates, and benefit fromimprovements in infras t ructure andreductions in trade barriers undertakenin response to the demands of foreigncompanies (Blomström et al., 2000). InMexico, for example, one study foundthat the probability of a Mexican-ownedplant engaging in exports was positivelycorrelated with i ts proximity to TNCsbut not correlated with the concentrationof overall exporters (Aitken et al., 1997).

In some instances, on the other hand,links to foreign affiliates may impede theefforts of suppliers to transnationalize. Thismay be the result of purchasing policiesthat indirectly hamper the transationalizationefforts of suppliers through restrictive contractsor intense price competition (Raines, Turokand Brown, 2001).

In sum, TNCs, through equity andnon-equity links, account for a substantialshare of exports in a number of developingcountries, and their role spans all sectors.In the primary sector, besides minerals andpetroleum, TNCs contribute to the developmentof resource-based exports in such areasas food processing and hort iculture. Inmanufacturing, they tend to be the leadersin export-oriented production and marketing,especially for the most dynamic products,for which l inking up to market ing anddis t r ibut ion networks i s crucia l . Thei rinternational production systems can takevarious forms, ranging from production-drivenFDI-based systems involving intra-firm tradeamong affiliates to looser buyer-driven, non-equity-based networks of independent suppliers(as in international subcontracting and contractmanufacturing). The increased tradabilityof services offers new opportunit ies forexports, the best-known example, so far,being the Indian software industry. But theseopportunities also extend to services relatedto international production systems, suchas regional headquarters, procurement centres,shared-services centres and R&D activities.

C. Some winner countries

What ro le d id TNCs play in thesuccess of the winners identified earlierin this chapter that is, countries that hadmade large strides in improving their exportcompetitiveness and consequently increasedtheir market shares in the world’s principalmarkets?

To answer this question, it is necessaryto go beyond an examination of the role ofTNCs in the export performance of countriesin general. It requires country and companylevel data that do not exist for the greatmajority of countries. For a number of significantcases, however, they do exist. It should beemphasized that winner countries come intwo categories: those that gain market sharein all major markets and those whose gainsare concentrated in a specific region. Chinaand Korea are in the first category, whilethe other cases are in the second. This sectionprovides a window, so to speak, on whatis happening in these countries and, in particular,the role of TNCs in their success.15

1. China

China’s impressive export growth, from$26 billion in 1985 to $249 billion in 2000,was accompanied by a substantial growthin FDI inflows, from $2 billion in 1985 to$41 billion in 2000; the bulk of its inwardFDI stock came from other Asian economiesin the earlier period. The country’s strongexpor t growth was underpinned by astrengthening of its export competitivenessin all markets - reflected in an increaseof the country’s market share from lessthan 2 per cent to more than 6 per centduring this period. This increase was evenmore remarkable in technology-intensiveproducts (table VI.5). The structure of China’sexports has also changed: in 1985, exportsof pr imary products and resource-basedmanufactures represented 49 per cent ofall exports, while in 2000 their share hadreceded to 12 per cent and that of non-resource-based manufactures had jumpedto 87 per cent (table VI.5). The share ofhigh-technology exports had jumped from3 per cent in 1985 to 22 per cent in 2000.All of the country’s 10 principal exportproducts in 2000 (accounting for 42 per centof total exports) were dynamic productsin world trade. Three of them were in high-

��


Table VI.5. China’s competitiveness in world trade, 1985-2000

Product Category 1985 1990 1995 2000

I. Market share 1.6 2.8 4.8 6.11. Primary productsa 2.4 2.6 2.5 2.3

2. Manufactures based on natural resourcesb 1.1 1.3 2.1 2.73. Manufactures not based on natural resourcesc 1.5 3.4 6.1 7.8

Low technologyd 4.5 9.1 15.5 18.7Medium technologye 0.4 1.4 2.6 3.6High technologyf 0.4 1.4 3.6 6.0

4. Othersg 0.7 0.7 1.4 1.8

II. Export structure 100.0 100.0 100.0 100.01. Primary productsa 35.0 14.6 7.0 4.72. Manufactures based on natural resourcesb 13.6 8.2 7.4 6.93. Manufactures not based on natural resourcesc 50.0 76.2 84.6 87.1


4. Othersg 1.4 0.8 1.0 1.1

III. 10 Principal exports (SITC Rev.2) Ah Bi 14.2 30.2 38.5 41.5894 Baby carriages, toys, games and sporting goods * + 2.5 7.3 8.4 8.5851 Footwear + 1.2 4.6 7.2 5.5764 Telecommunications equipment * + 0.4 1.9 3.5 4.9752 Automatic data processing machines, units * + - 0.3 1.6 4.1845 Outer garments, knitted or crocheted * + 3.6 4.4 4.1 3.9759 Parts and accessories of computers, etc. * + 0.1 0.3 1.8 3.6843 Outer garments, women’s and girls’, textile fabrics * + 3.8 5.5 4.8 3.5831 Travel goods (trunks, suitcases, etc.) * + 1.8 3.6 3.6 2.8893 Articles n.e.s. of plastic materials (div.58) * + 0.3 1.4 2.3 2.3821 Furniture and parts thereof * + 0.5 0.8 1.3 2.3

Source: UNCTAD, based on the United Nations Comtrade database and the TRADECAN computer software ofECLAC.

a Contains 45 basic products that are simple to process; includes concentrates.b Contains 65 items: 35 agricultural/forestry groups and 30 others (mainly metals, excluding steel, plus petroleum

products, cement, glass, etc.).c Contains 120 groups representing the sum of low, medium and high technology.d Contains 44 items: 20 groups from the texti le and garment category, plus 24 others (paper products, glass and

steel, jewellery).e Contains 58 items: five groups from the automotive industry, 22 from the processing industry and 31 from the engineering

industry.f Contains 18 items: 11 groups from the electronics category, plus another seven (pharmaceutical products, turbines,

aircraft, instruments).g Contains nine unclassified groups (mainly from section 9).h Groups belonging (*) to the 50 most dynamic in world imports, 1985-2000.i Groups in which China gained (+) or lost (-) world import market share, 1985-2000.

technology industries (telecom equipment,automatic data-processing machines, andparts and accessories of computers) thataccounted for 13 per cent of total exports.

What was the role of TNCs in thisexport dynamism? Foreign affiliates accountedfor less than 9 per cent of total Chineseexports in 1989; in 2001 their share hadjumped to 48 per cent16 (figure VI.7). Morethan 90 per cent of exports by foreign affiliateswere manufactured goods, in which machineryand equipment and “other” manufacturingwere prominent.

The share of expor ts by fore ignaffiliates in technology-intensive industriesrose from 59 per cent in 1996 to 81 per

cent in 2000 (figure VI.8). The followingare examples of the share of foreign affiliatesin China’s exports of specific products (tablesVI.6 and VI.7):

• Electronic circuits: these experienced rapidgrowth in exports between 1996 and 2000(a fivefold increase in export value); foreignaffiliates accounted for 91 per cent oftheir exports in 2000. Intel alone exportedproducts worth over $400 million in 2000.Samsung was also a major exporter ofelectronic circuits as well as consumerelectronics.

• Automatic data-processing machines: foreignaffiliates accounted for 85 per cent of

��


exports in 2000. IBM alone exported$1.5 bill ion, while Seagate and Epsoneach exported about $1 bil l ion worth.

• Mobile phones: saw a sixfold increasein exports from China; foreign affiliatesaccounted for 96 per cent of China’s

exports in 2000. The affiliates of Motorola,Nokia, Ericsson and Siemens drove thisexpansion, with Motorola exporting morethan $1 billion in 2000. This was againstthe background of a h ighly dynamicdomestic market .

In contrast, Chinese domestic enterprisespredominate in the low-technology sector,especially in the export of toys, travel bagsand yarns and fabrics.

Export activity by foreign affiliatesin China can be documented at the companylevel for the country’s 100 leading foreignaffiliates in 2000 (table VI.6). Exports fromthese companies alone accounted for 10per cent of total exports from China. Mostof these companies were concentrated inthe electronics and telecom industries.

China undoubtedly has the advantageof the size and growth of its domestic marketand the abundant availability of surplus labour.Another advantage that China offers are rapidlygrowing supply networks, i.e. numerous clustersof domestic and foreign firms which canprovide a wide range of services and suppliesto enable TNCs to perform efficiently, withina single investment location, thereby reducingsignificantly logistic costs.

Figure VI.8. China: exports of high-technology products and shares offoreign affiliates and State-owned

firms, 1996-2000(Billions of dollars and percentage)

Source: UNCTAD, based on China, Ministry of Scienceand Technology.

Figure VI.7. China: share of foreign affiliates in total exports, 1986-2001(Billions of dollars and percentage)

Source: UNCTAD, based on data provided by MOFTEC.

��


Ta

ble

VI.

6.

Ch

ina

: e

xp

ort

s b

y t

he

le

ad

ing

fo

reig

n a

ffil

iate

s,a

20

00

(Mill

ion

s o

f d

olla

rs a

nd

pe

rce

nta

ge

)

Pe

rce

nta

ge

of

Ran

kN

am

e o

f p

are

nt

firm

Na

me

of

aff

ilia

tes

Ho

me

eco

no

my

Ind

ust

ryV

alu

e

to

tal

exp

ort

s

1S

amsu

ng E

lect

roni

csD

ongy

uan

Sam

sung

Ele

ctro

-Mec

hani

csR

epub

lic o

f K

orea

Ele

ctro

nics

1 4

91.0

0.53

5

affil

iate

s b

Tian

jin S

amsu

ng E

lect

ro-M

echa

nics

Sam

sung

Ele

ctro

nics

Hui

zhou

Tian

jin S

amsu

ng E

lect

roni

c M

onito

rTi

anjin

Sam

sung

Ele

ctro

nics

2IB

MS

henz

hen

Kai

fa T

echn

olog

yU

nite

d St

ates

Ele

ctro

nics

1 4

57.8

0.52

4

affil

iate

s b

She

nzhe

n H

ailia

ng S

tora

ge E

quip

men

tG

reat

Wal

l In

tern

atio

nal

Info

rmat

ion

Pro

duct

s (

She

nzhe

n)IB

M S

henz

hen

Tech

nolo

gy C

o.,

Ltd.

3N

okia

Beiji

n N

okia

Mob

ile T

elec

omm

unic

atio

nsFi

nlan

dTe

leco

mm

unic

atio

ns 1

143

.10.

41

2 a

ffilia

tes

bD

ongg

uan

Nok

ia M

obile

Pho

nes

4M

otor

ola

Ele

ctro

nics

Mot

orol

a (C

hina

) E

lect

roni

csU

nite

d St

ates

Ele

ctro

nics

1 1

22.5

0.40

5S

eaga

te T

echn

olog

yS

eaga

te T

echn

olog

y In

tern

atio

nal

Wux

iU

nite

d St

ates

Ele

ctro

nics

1 0

79.2

0.39

2

affil

iate

s b

Sea

gate

Tec

hnol

ogy

(She

nzhe

n)Ja

pan

Ele

ctro

nics

95

9.5

0.34

6Se

iko

Epso

nE

pson

Eng

inee

ring

(She

nzhe

n)

2

affil

iate

s bSu

zhou

Eps

on C

ryst

al P

arts

& C

ompo

nent

s7

Phi

lips

Ele

ctro

nics

Phi

lips

Key

Mod

ule

(Sha

ngha

i)N

ethe

rland

sE

lect

roni

cs

611.

80.

22

2 af

filia

tesb

Phili

ps C

onsu

mer

Ele

ctro

nics

Co.

of S

uzho

u8

AO

C I

nter

natio

nal

Top

Vic

tory

Ele

ctro

nics

(Fu

jian)

Taiw

an P

rovi

nce

of C

hina

Ele

ctro

nics

60

8.8

0.22

9C

LP H

oldi

ngs

Gua

ngdo

ng N

ucle

ar P

ower

Joi

nt V

entu

reH

ong

Kon

g, C

hina

Elec

tric

serv

ices

58

2.2

0.21

10Sa

nyo

Elec

tric

She

nzhe

n S

anyo

Hua

qian

g O

ptic

alTe

chno

logy

Japa

n..

55

8.9

0.20

2 a

ffilia

tesb

Sany

o El

ectri

c (S

heko

u)11

..S

hund

e S

hund

a C

ompu

ter

....

54

7.0

0.20

12..

Dal

ian

Elec

troni

cs P

rodu

cts

(S.Z

)..

..

541.

20.

1913

Flex

tron

ics

Inte

rnat

iona

lFl

extr

onic

s C

ompu

ter

(She

nzhe

n)S

inga

pore

Ele

ctro

nics

52

3.7

0.19

2

affi

liate

s b

Flex

tron

ics

Com

pute

r (Z

uhai

)14

LG E

lect

roni

csLG

Ele

ctro

nics

Pro

duct

s (S

.Z.)

Rep

. of

Kor

eaE

lect

roni

cs

519.

80.

1915

..X

inm

ao T

echn

olog

y (S

henz

hen)

....

51

8.3

0.19

16S

harp

Shar

p O

ffice

Equ

ipm

ents

(C

hang

shu)

Japa

nE

lect

roni

cs

509.

90.

18 2

affi

liate

s b

Wux

i S

harp

Ele

ctro

nic

Com

pone

nts

17U

nide

nU

nide

n E

lect

roni

cs S

henz

hen

Japa

nE

lect

roni

cs

504.

70.

1818

Can

onC

anon

Zhu

hai

Japa

nP

hoto

grap

hic

equi

pmen

t

449.

80.

1619

Inte

lIn

tel

Tech

nolo

gy (

She

nzhe

n)U

nite

d St

ates

Ele

ctro

nics

40

4.8

0.14

20..

She

nzhe

n S

hung

ang

Sto

rage

Ent

erpr

ise

Sha

reho

ldin

g..

..

364.

80.

1321

Mits

umi E

lect

ric2

affil

iate

s b

2

affil

iate

s b

Zhuh

ai M

itsum

i Ele

ctric

22S

ony

Sha

ngha

i S

uogu

ang

Ele

ctro

nics

Japa

nE

lect

roni

cs

351.

10.

1323

..S

hang

hai

Rui

xin

Indu

stry

....

33

2.6

0.12

24..

Amer

tek

(S.Z

.) C

ompu

ter

....

32

6.8

0.12

25S

true

rsS

uzho

u Lo

gite

ch E

lect

roni

cD

enm

ark

Com

pute

r pe

riphe

rals

32

3.3

0.12

26A

cer

Suz

hou

Ace

r P

erip

hera

lsTa

iwan

Pro

vinc

e of

Chi

naC

ompu

ter

perip

hera

ls

320.

20.

1127

..R

enba

o C

ompu

ter

Indu

stry

(C

hina

)..

..

320.

00.

1128

Hyu

ndai

Qin

gpu

Hyu

ndai

Ele

ctro

nics

(S

hang

hai)

Rep

ublic

of

Kor

eaE

lect

roni

cs

303.

60.

1129

..W

eigu

an T

echn

olog

y (S

henz

hen)

Taiw

an P

rovi

nce

of C

hina

..

300.

00.

1130

..Si

amen

Sw

ire A

ircra

ft En

gine

erin

g..

..

283.

20.

1031

Prem

ier

Imag

e Te

chno

logy

Fosh

an P

rem

ier

Cam

era

Taiw

an P

rovi

nce

of C

hina

Pho

togr

aphi

c eq

uipm

ent

26

6.3

0.10

32E

ricss

onBe

ijin

Eric

sson

Mob

ile T

elec

omm

unic

atio

nsS

wed

enTe

leco

mm

unic

atio

ns

263.

70.

0933

Tsan

Kue

n E

nter

pris

eXi

amen

Tsa

nn K

uen

Taiw

an P

rovi

nce

of C

hina

Ele

ctric

al a

ppar

atus

249.

90.

0934

AT&T

Shan

ghai

AT&

T Te

leco

mm

unic

atio

n Eq

uipm

ent

Uni

ted

Stat

esTe

leco

mm

unic

atio

ns24

3.9

0.09

35C

heun

g K

ong

Hol

ding

Yant

ian

Inte

rnat

iona

l C

onta

iner

Wha

rfH

ong

Kon

g, C

hina

Por

t de

velo

pmen

t23

7.6

0.09

36..

Fujin

Pre

cisi

on I

ndus

try (

She

nzhe

n)..

..23

7.2

0.08

37N

ECS

hang

hai

Hua

hong

NE

C E

lect

roni

csJa

pan

Ele

ctro

nics

224.

60.

0838

Min

ebea

Min

ebea

Ele

ctro

nics

& H

i-Tec

h C

ompo

nent

sJa

pan

Ele

ctro

nics

211.

30.

0839

..S

henz

hen

Nan

fang

Zho

ngji

Con

tain

er M

anuf

actu

ring

....

207.

00.

0740

Foun

tain

Set

Hol

ding

sD

ongg

uan

Fuan

Tex

tiles

Ltd

.H

ong

Kon

g, C

hina

Text

ile a

nd k

nitti

ng20

6.9

0.07

41..

Don

ggua

n P

ulse

Ele

ctro

nica

l..

Ele

ctro

nics

202.

10.

07

/---

��


Ta

ble

VI.

6.

Ch

ina

: e

xp

ort

s b

y t

he

le

ad

ing

fo

reig

n a

ffil

iate

s,a

20

00

(Mill

ion

s o

f d

olla

rs a

nd

pe

rce

nta

ge

)

Per

cent

age

ofR

ank

Na

me

of

pa

ren

t fi

rm

N

am

e o

f a

ffili

ate

sH

om

e e

con

om

yIn

du

stry

Va

lue

tota

l e

xpo

rts

42..

Shan

ghai

Da

Ba I

ndus

try..

..17

6.9

0.06

43..

Xia

men

Jin

won

g E

nter

pris

e..

..17

6.0

0.06

44Th

omso

n M

ultim

edia

Thom

son

(Don

ggua

n)Fr

ance

Ele

ctro

nics

175.

30.

0645

..N

PG M

onito

r (D

ong

Gua

n)..

..17

4.0

0.06

46..

Sha

ngha

i X

inka

ng E

lect

roni

csU

nite

d St

ates

Ele

ctro

nics

173.

20.

0647

..R

icho

n A

sia

Indu

stry

(S

henz

hen)

....

172.

30.

0648

..N

idec

(D

alia

ng)

Ltd.

....

171.

80.

0649

Mat

suok

aM

atsu

oka

Gro

upJa

pan

Gar

men

t an

d pr

intin

g16

7.6

0.06

50..

Dan

gong

Fan

shan

Mon

itor

....

164.

30.

0651

Mat

sush

ita E

lect

roni

c In

dust

ryC

hina

Hua

lu M

atsu

shita

Vid

eoJa

pan

Ele

ctro

nics

162.

50.

0652

..G

uang

zhou

Don

gbao

o (P

an A

o) J

ewel

ery

....

156.

70.

0653

Vic

tor

Co.

of

Japa

nJV

C S

hang

hai

Ele

cron

ics

Japa

nE

lect

rical

equ

ipm

ent

151.

90.

0554

..S

henz

hen

Roy

ece

Liqu

id W

areh

ouse

....

151.

90.

0555

Shi

nwa

Shi

nwa

Indu

strie

s (C

hina

) Lt

d.Ja

pan

Ele

ctric

al e

quip

men

t15

0.5

0.05

56To

shib

aD

alia

n To

shib

a Te

levi

sion

Set

Japa

nR

adio

and

TV

rece

ivin

g se

ts14

7.2

0.05

57S

iem

ens

Sha

ngha

i S

iem

ens

Mob

ile C

omm

unic

atio

nG

erm

any

Tele

com

mun

icat

ions

143.

50.

0558

Hita

chi

Hita

chi

Sem

icon

duct

or (

Suz

hou)

Japa

nE

lect

roni

cs14

2.4

0.05

59..

Xin

ui Z

hong

ji C

onta

iner

....

142.

40.

0560

..S

henz

hen

Xia

njin

Mic

ro-E

lect

roni

c Te

chno

logy

....

142.

30.

0561

Oly

mpu

s O

ptic

alO

lym

pus

(She

nzhe

n) I

ndus

trial

Japa

nP

hoto

grap

hic

equi

pmen

t14

1.5

0.05

62G

olde

n Fi

eld

Inte

rnat

iona

l H

oldi

ngs

Gol

den

Fiel

d U

nite

d Te

xtile

s Lt

d.H

ong

Kon

g, C

hina

Text

ile13

6.6

0.05

63N

am T

ai E

lect

roni

csN

am T

ai E

lect

roni

c (S

henz

hen)

Virg

in I

slan

ds,

Uni

ted

King

dom

Ele

ctro

nics

136.

10.

0564

..Q

ingt

ao S

hoes

....

136.

00.

0565

..P

anyu

Chu

ang

Xin

Sho

es..

..13

5.8

0.05

66..

Sha

ngha

i Zh

ongj

i Fr

eeze

r..

..13

5.2

0.05

67..

Sha

ngha

i Fa

r E

ast

Con

tain

er..

..13

4.8

0.05

68W

hirlp

ool

Shun

de W

hirlp

ool

SMC

Mic

row

ave

Prod

ucts

Uni

ted

Stat

esE

lect

rical

app

arat

us13

4.3

0.05

69..

She

nzhe

n S

ayifa

Mic

roel

ectro

nics

....

131.

30.

0570

Mits

uiM

itsub

ishi

Sto

ne I

nteg

rate

d C

ircui

tsJa

pan

Ele

ctro

nics

129.

30.

0571

..C

ongh

ua D

ongl

in D

iam

ond

....

128.

70.

0572

Sol

ectr

onS

olec

tron

(S

uzho

u) T

echn

olog

yU

nite

d S

tate

sP

rinte

d ci

rcui

t bo

ard

128.

30.

0573

Mak

itaM

akita

(C

hina

)Ja

pan

Ele

ctric

al a

ppar

atus

126.

80.

0574

..S

hang

hai

Jind

ao C

onta

iner

....

126.

40.

0575

..S

hang

hai

Zhen

hua

Por

ts M

achi

nery

....

126.

10.

0576

..N

anto

ng C

IMC

-Sm

ooth

Sai

l C

onta

iner

....

124.

90.

0477

..S

uper

-Mic

ro S

emic

ondu

ctor

(S

uzho

u)..

..12

4.8

0.04

78U

max

Dat

a S

yste

mU

max

Com

pute

r (S

uzho

u)Ta

iwan

Pro

vinc

e of

Chi

naE

lect

roni

cs12

40.

0479

Alp

ine

Ele

ctro

nics

Dal

ian

Alp

ine

Ele

ctric

Japa

nE

lect

roni

cs12

1.5

0.04

80G

ener

al E

lect

ric C

ompa

nyG

E Am

eric

a Pl

astic

Chi

na L

td.

Uni

ted

Stat

esPl

astic

s11

9.0

0.04

81..

Zhon

gsha

n D

ongm

ing

Aud

io-V

ideo

Ele

ctro

nics

....

119.

00.

0482

Lege

nd C

ompu

ters

LLC

Hui

yang

Leg

end

Com

pute

rO

man

Ele

ctro

nics

117.

90.

0483

Mab

uchi

Mot

orM

abuc

hi M

otor

Dal

ian

Ltd.

Japa

nA

utom

otiv

e11

7.0

0.04

84Fu

jitsu

Fujit

su (

Sha

ngai

)Ja

pan

Ele

ctro

nics

116.

50.

0485

..S

hang

hai

Xin

ge H

onfrr

ous

Met

al..

..11

6.5

0.04

Tota

l ab

ove

26

500.

49.

48To

tal

expo

rts

of C

hina

279

562

.010

0.00

So

urc

e:

UN

CT

AD

, b

ase

d o

n C

hin

a,

MO

FT

EC

, 2

00

1a

an

d W

ho

Ow

ns

Wh

om

CD

-RO

M 2

00

2 (

Du

n a

nd

Bra

dst

ree

t).

aF

ore

ign

a

ffil

iate

s

as

d

efi

ne

d

an

d

ide

nti

fie

d

by

M

OF

TE

C.

All

a

ffil

iate

s

tha

t a

re

ow

ne

d

by

th

e

sa

me

p

are

nt

firm

a

re

co

ns

oli

da

ted

.b

Co

ns

oli

da

ted

li

st

of

aff

ilia

tes

o

wn

ed

b

y

the

s

am

e

pa

ren

t.

��


Table VI.7. China: shares of domestic companies and foreign affiliates in the exportof selected goods, 1996 and 2000a


Total Domestic companies Foreign affiliatesItem 1996 2000 1996 2000 1996 2000

Yarns and fabricsValue 4 547 5 900 3 441 4 223 1 107 1 677Per cent 100 100 76 72 24 28

ToysValue 5 473 8 293 2 979 4 594 2 494 3 699Per cent 100 100 54 55 46 45

Travel bagsValue 2 653 3 767 1 461 2 361 1 192 1 406Per cent 100 100 55 63 45 37

Electronic circuitsValue 996 4 105 216 288 781 3 817Per cent 100 100 22 7 78 93

Data processing, office machines and related productsValue 5 391 16 547 940 2 551 4 451 13 996Per cent 100 100 17 15 83 85

Mobile phones (transmitter-receiver apparatus)Value 487 2 931 37 108 450 2 823Per cent 100 100 7 4 92 96

Source: UNCTAD, based on China Customs General Administration, 2002.

a This database consists of the 200 largest companies and the 500 principal exports.

There is some evidence to suggest thatlocal content is deepening and industrial upgradingis taking place (China, MOFTEC, 2001b). Localcomponent suppliers in China are growingin number, density and capability, particularlyin industrial clusters along the coastal areas(idem). Thus, many local authorities andentrepreneurs, particularly along the coastalareas (e.g. Guangdong, Fujian, Jiangru andZejiang Provinces) have made special effortsto build clusters of suppliers working withTNC in a specific industry. The share oflocal procurement in total purchases by Japaneseaffiliates in the manufacturing sector increased,from 35 per cent in 1993 to 42 per cent in1999 (Japan, MITI, 1995; Japan, METI, 2002).

The share of high-technology industriesin total FDI has increased rapidly inducingan industrial upgrading of the country (China,MOFTEC, 1997, 1999, 2000, 2001b; Zhanget al., 1997; Xian and Zhang, 1997). High-technology TNCs have set up over 100 R&Dcentres, mostly in Shanghai and Beij ing(WIR01 , p. 26). For example, Motorolahas established 18 R&D centres in the areaof electronics and Microsoft has establishedthree. The availability of a large pool ofhard and soft R&D infrastructure (particularlywell-qualified researchers) has attracted R&D

centres. These R&D centres have playeda significant role in enhancing the innovativecapability of foreign affliates and upgradingtheir activities (Hu, 2002). At the same time,local firms are becoming more export-orientedand are moving up the technology ladder. Infact, a large number of high-tecnology export-oriented foreign affiliates are joint ventureswith local firms, having in this manner asort of ”crowding in” effect.

Since the 1980s, China’s FDI policieshave been quite proactive, both at the centrallevel and at the level of provinces and cities.The main elements comprise a set of industrialguidelines (with three distinct categoriesof industries in which FDI is encouraged,restricted or prohibited), incentives (particularlytargeting high-technology and export-intensiveindustries) and economic and technologydevelopment zones, which target mainly export-oriented manufacturing TNCs, particulary inhigh-technology industries. China now has49 national zones, complemented by literallyhundreds of EPZs, development zones, industrialparks, and science and technology zones atthe sub-national level. They are establishedto attract not only foreign investors but alsodomestic companies.

��


2. Costa Rica

Between 1985 and 2000, Costa Rica’sexports grew five-fold, from $1.1 billion in 1985to $5.5 billion in 2000. FDI inflows have followedthe same trend, rising almost sixfold from $70million to $409 million in 2000. Along with thisgrowth in exports, an upgrading in the compositionof exports has also taken place. In the caseof Costa Rica’s exports to North America, itsmain market - where its market share has doubled- primary products accounted for 65 per centof its exports in 1985, but in 2000 their sharehad decreased to 24 per cent (table VI.8). Onthe other hand, the share of non-resource-basedmanufactures rose from 27 per cent to 68 percent, with a striking gain in high-technologyexports, which jumped from 1 per cent to 35per cent. Of the 10 principal export product

gains, accounting for more than three-quartersof the total, two high-technology exports (partsand accessories for computers, and semiconductors)accounted for one-third of the total exports.Costa Rica gained market share in nine of thetop ten export product groups in the NorthAmerican market, six of which are dynamicproducts.

FDI in general, and a major investmentby Intel in particular, played a central rolein the improvement of Costa Rica’s exportcompetitiveness. About two-thirds of thepresent FDI stock was accumulated duringthe 1990s. About two-thirds of the inflowswent into the manufacturing sector and abouttwo-thirds came from the United States.The 1998-1999 peak in inward FDI had muchto do with the $400-500 million investmentproject undertaken by Intel to establish a

Table VI.8. Costa Rica’s competitiveness in the North American market, 1985-2000


I. Market share 0.2 0.2 0.2 0.31. Primary productsa 0.7 0.7 0.8 0.72. Manufactures based on natural resourcesb 0.1 0.1 0.1 0.13. Manufactures not based on natural resourcesc 0.1 0.1 0.2 0.3


4. Othersg 0.0 0.1 0.1 0.2



4. Othersg 0.9 1.6 2.3 2.8

III. 10 Principal exports (SITC Rev.2) Ah Bi 62.2 64.5 62.6 75.9759 Parts and accessories for computers, etc. * + 0.2 0.0 0.2 29.0057 Fruit and nuts (not oil nuts) fresh or dried + 33.9 27.2 24.1 15.5846 Under garments, knitted or crocheted * + 5.0 9.8 12.1 8.1842 Outer garments, men's and boys' of textile fabrics + 3.7 9.6 10.9 5.7776 Thermionic valves and other semiconductors, n.e.s. * + 0.3 0.1 0.1 3.8071 Coffee and coffee substitutes + 12.5 6.0 4.1 3.6872 Medical instruments and appliances, n.e.s. * + - 0.5 1.9 3.4931 Special transactions and commodities not class. * + 0.8 1.3 1.7 2.6845 Outer garments, other articles, knitted/crocheted * + 0.5 3.1 4.0 2.3843 Outer garments, women's, and girls' of textile fab. - 5.4 6.8 3.5 1.9

Source: UNCTAD, based on the United Nations’ Comtrade database and the TRADECAN computer software ofECLAC.





aircraft, instruments).g Contains nine unclassified groups (mainly from section 9).h Groups belonging (*) to the 50 most dynamic in North American imports, 1985-2000.i Groups in which Costa Rica gained (+) or lost (-) North American import market share, 1985-2000.

��


Table VI.9. Costa Rica: exports by the 20 leading foreign affiliates, 2000(Millions of dollars and percentage)

Percentageof total

Rank Name of affiliates Name of parent firm Home economy Industry Value exports

1 Componentes Intel Costa Rica Intel United States Electronics 1 676 25.12 Standard Fruit Company Fresh fruits and

de Costa Rica Dole Food United States vegetables 155 2.33 Corp. De Desarrollo Agricola

Del Monte Del Monte Foods United States Fruit and tree nuts 138 2.14 Abbott Laboratories Abbott Laboratories United States Medical devices 102 1.55 Ind Textilera del Este S.A.

(Heredia) Sara Lee United States Apparel 94 1.46 Sawtek S.A. Triquint Semiconductor United States Electronics 94 1.47 Baxter Baxter International United States Medical devices 92 1.48 Manufacturera de Cartago S.A Sara Lee Intimate Apparel United States Apparel 76 1.19 Wrangler de Costa Rica S.A V F Northern Europe United Kingdom Apparel 62 0.910 Merck Sharp & Dohme (I.A.) Corp. Merck United States Pharmaceuticals 61 0.911 Babyliss C.R., S.A. Conair United States Electronics 57 0.912 Liga Agricola Industrial de La Cana .. .. Natural resources 50 0.713 Coca Cola Interamerican Coca-Cola Bottled and canned

Corporation United States soft drinks 45 0.714 Conducen, S.A. Phelps Dodge United States Non ferrous wire drawing 43 0.615 Terramix Hultec United States Rubber gaskets 42 0.616 Warners de Costa Rica, Inc. Warnaco Group United States Apparel 40 0.618 Remecinc S.A. REMEC United States Electronics 38 0.619 Trimpot Electronicas S.A. Bourns United States Electronics 38 0.620 Confecciones H.D. Lee, S.A. VF United States Apparel 36 0.5

Total above 2 939 44.0Total exports of Costa Rica 6 682 100.0

Source: UNCTAD, based on Costa Rica, Ministry of Foreign Trade, General Direction of Customs and Who OwnsWhom CD-ROM 2002 (Dun and Bradstreet).

new assembly and tes t ing fac i l i ty formicroprocessors. Intel’s plant in Costa Ricawas the 28th largest manufacturing companyin Latin America by sales in 1999, and theregion’s 27th biggest exporter in 2000.

Costa Rica’s principal export productsare parts and accessories for computers,accounting for 25 per cent of exports in2000; they originate mainly from one foreignaffiliate, that of Intel (table VI.9). AlthoughIntel dominates Costa Rican exports, theseare becoming increasingly diverse, withrestructuring into other dynamic productssuch as medical devices (even though appareland primary products remain important).Foreign affiliates account for a significantproportion of these new exports. Two foreignaffiliates (Abbott and Baxter) account forvirtually all Costa Rican exports of medicaldevices (representing 3 per cent of totalexpor ts ) . TNCs such as Sara Lee andWrangler are among Costa Rica’s principalexporters of garments, and Standard Fruitis the second largest single exporter of fruit.Overall, the country’s top 20 foreign affiliatesaccounted for nearly half of the country’stotal exports in 2000 (table VI.9).

There i s no doubt tha t an ac t iveGovernment has been a central factor inCosta Rica’s success. Efforts to upgradethe level of education, improve infrastructure,provide a friendly investment environment,and encourage the widespread use of Englishare combined with deliberate FDI targetingstrategies. The country’s IPA made carefulefforts to channel FDI into electronics inorder to restructure the country’s comparativeadvantage away from garments (Mortimoreand Zamora, 1998) and primary products(Costa Rica, Ministry of Foreign Trade, 1997).The results of Costa Rica’s targeting havespread beyond the initial areas (electronicsand medical devices) to the services sector;the latest success was the decision by Procter& Gamble to site its global business centrefor the Americas there as of 2001 (González,2002). The IPA has thus put Costa Ricaon a more dynamic development trajectory,through its active role in shaping the country’sdevelopment policy (Rodríguez-Clare, 2001).

Despi te this success in at t ract ingexport-oriented FDI, however, there is asyet little evidence of substantial linkageswith local enterprises and embedding of theexport platforms in the local economy.

��


3. Hungary

Hungary’s high export performancehas been accompanied by a subs tant ia lincrease in FDI inflows. Exports have morethan tripled, from $10 billion in 1990 (theyear of the opening up of the economy)to $28 billion in 2000. At the same time,FDI inflows increased more than fivefold,from $311 million in 1990 to $1.6 billionin 2000. Hungary’s market share in WesternEurope, its principal market, tripled as well(table VI.10). The structure of its exportsto that market also changed dramatically:the share of primary products and resource-based manufactures in total exports declinedfrom 60 per cent in 1985 to 14 per centin 2000, with non-resource-based manufacturesincreasing to 85 per cent in 2000, from 39

per cent in 1985. The share of h igh-technology exports rose substantially, from4 per cent in 1985 to more than 25 percent in 2000. Medium-technology exportsalso increased in importance, moving froma share of nearly 13 per cent in 1985 to45 per cent in 2000. This shi f t incompetitiveness is reflected in the exportcategories included in the list of the top10 expor t products of Hungary. Theyaccounted for half the country’s exports.All of them are dynamic in the WesternEuropean market and eight are in electronicsand the automobile industry.

TNCs have been the main driversof export growth in Hungary, generatingfour-fifths of the country’s exports in 1999.Aff i l ia tes located in EPZs have beenparticularly dynamic, increasing their exports

Table VI.10. Hungary’s competitiveness in the Western European market, 1985-2000




4. Othersg 0.1 0.2 0.2 0.1



4. Othersg 1.0 1.6 1.0 0.6

III. 10 Principal exports (SITC Rev.2) Ah Bi 2.8 4.9 23.9 50.2713 Internal combustion piston engines and parts * + 0.1 0.1 7.2 12.4752 Automatic data processing machines, units thereof * + 0.1 0.0 1.0 10.1781 Passenger motor cars (excl. public service type) * + 0.0 0.1 1.8 6.6763 Sound equipment, dictating machines, etc. * + 0.0 0.0 1.1 3.4764 Telecommunications equipment, n.e.s. * + 0.2 0.9 2.4 3.4773 Equipment for distributing electricity * + 0.1 1.1 3.7 3.3784 Parts and accessories, n.e.s. of the motor vehicles * + 0.3 0.5 2.0 3.1759 Parts, n.e.s., of and accessories for 751 and 752 * + 0.1 0.2 0.9 2.8778 Electrical machinery and apparatus, n.e.s. * + 1.7 1.5 3.1 2.7761 Television receivers * + 0.1 0.5 0.9 2.4






aircraft, instruments).g Contains nine unclassified groups (mainly from section 9).h In column A: groups belonging (*) to the 50 most dynamic in Western European imports, 1985-2000.i In column B: groups in which Hungary gained (+) or lost (-) Western European import market share, 1985-2000.

��


steadily between 1996 and 2000, to accountfor half the exports of foreign affi l iatesand 45 per cent of the total (annex tableA.VI.2). Contract manufacturers also playan important role, especially large ones suchas Flextronics (box VI.7).17

The top 10 Hungarian exports to worldmarkets are produced by TNCs: seven wereproduced by foreign affiliates only, and theother three partly by foreign affiliates in1999 (annex table A.VI.3). The leading50 foreign affiliates (table VI.11) accountedfor 45 per cent of the country’s total exportsin 200018. The industries in which theyare active also contain the most dynamicexport products. More specifically:

• In the automobile industry, Audi/Volkswagen(with over $3 billion in exports), Opel/GM and Suzuki, as well as parts producerssuch as Delphi and ZF, are amongHungary’s principal exporters.

• In electronics, IBM and Philips each exportover $2 billion, followed by GE, Flextronicsand Samsung.

Hungary was one of the f i rs teconomies in transition actively to seek FDI,a policy complemented by an innovative EPZregime (box VII .12) . I t s associa t ionagreement with the EU granted it preferentialaccess to its main market, particularly forlocally assembled products. However, its

Flextronics is the leading contractelectronics manufacturer in CEE, with a nearly40 per cent share of the industry’s totalinvestment there (annex table A.VI.4). Four-fifths of its cumulative regional investment ofmore than $1 billion went to Hungary. Onlyone other contract manufacturer in electronics,the much smaller Finnish-owned Elcoteq, haslarge investments in the region (almost 26 percent) (annex table A.VI.4).

Flextronics has centred its CEE IndustrialPark activities in Hungary because of thecountry’s proximity to the West European market,relatively low wages,a a good supply ofengineers and scientists and an encouraginggovernment policy (Pfaffstaller, 2001). As tothe last of these factors, the regulatoryframework – including simplified customsregulations, duty-free treatment for imports intoEPZs, investment incentives and governmentsupport to EPZs – was particularly appreciatedby Flextronics, as were local efforts to reducethe hassle costs of doing business througha speedy and transparent approval processmanaged within the framework of a “one-stopshop” and the simple, quick and cheap purchaseof land. Finally, the services of investmentpromotion authorities in the form of advice andcontacts, of local labour offices in recruitment,and of local authorities in providing servicesto expatriates (e.g. with regard to schoolingand housing) also helped tilt the balance towardsthis location.

Flextronics has designated Hungary asone of its potential centres of excellence forelectronics development. The strategy is basedon the assumption that a balance between costsand capabilities can be maintained only if, byinvesting more into capabilities, the locationis gradually upgraded to do design work andengage in product development. Recentdevelopments – such as the unsuccessful ventureto produce Microsoft’s X-Boxes in Hungary(the production of which was abandoned andrelocated to China in May 2002) – highlightthe need for upgrading from increasinglyuncompetitive assembly to more value-addedactivities. As the development of skills andaccession to the EU are expected to lead tohigher wages in Hungary, Flextronics is alreadyconsidering subcontracting sub-assembly workto lower-wage countries not previously selectedfor investment. In March 2001, it began a pilotproject in Beregovo, Ukraine, near the Hungarianborder and close to its Nyíregyháza facility inthe north-east of Hungary, to assemble circuitboards for that facility. However, more automatedjobs, such as contact assembly – the solderingof integrated circuits, diodes and other smallcomponents – are not expected to move outof Nyíregyháza to lower-cost locations.

By 2000, Flextronics had become Hungary’ssixth most important direct exporter. Of its salesrevenue of close to $1 billion, about half camefrom products exported directly, while the otherhalf was from products provided to othercustomers that exported the final products.

Box VI.7. Flextronics’ Industrial Parks in Hungary

Source : UNCTAD.a Wages for low-skilled factory workers in Hungary are about $2 an hour, as compared to $15 in Austria. They are

even lower in neighbouring Ukraine, where workers now assemble circuit boards for as little as 40 cents an hour(Pfaffstaller, 2001).

��


Table VI.11. Hungary: exports by the 50 leading foreign affiliates, 2000(Millions of dollars and percentage)

Percentageot total Free

Rank Name of affiliates Name of parent firm Home economy Industry Value exports zone

1 Audi Hungária Motor Kft. Volkswagen Germany Automotive 3 187 11.2 √2 IBM Storage Products Kft. IBM United States Electronics 2 240 7.8 √3 Philips Magyarországa Philips Electronics Netherlands Electronics 2 027 7.1 √4 GE Hungary Rt. General Electric United States Electronics 639 2.25 Opel Magyarország Jármügyártó Kft. General Motors United States Automotive 628 2.2 √6 Flextronics International Kft. Flextronics International Singapore Electronics 430 1.5 √7 Alcoa Köfém Kft. Alcoa United States Aluminium 314 1.18 Suzuki Rt. Suzuki Motor Japan Automotive 300 1.19 NABI Rt. North American Bus Industries United States Automotive 249 0.910 Samsung Electronics Magyar Rt. Samsung Electronics Rep. of Korea Electronics 241 0.8 √11 Electrolux Lehel Hütögépgyár Kft. Electrolux Sweden Machinery 212 0.712 Visteon Hungary Kft. Visteon United States Electronics/

Automotive 187 0.713 Delphi Packard Hungary Kft. Delphi Automotive Systems United States Automotive 169 0.6 √14 Panrusgáz Magyar-Orosz Gázip.Rt. Gazprom Russian Federation Oil and gas/trading 113 0.415 Egis Gyógyszergyár Rt. Servier France Pharmaceutical 102 0.416 Opel Southeast Europe Kft. General Motors United States Automotive 100 0.417 Chinoin Gyógyszer és Vegyészeti

Termékek Gyára Rt. Sanofi Synthélabo Group France Pharmaceutical 99 0.318 Neusiedler-Szolnok Papírgyár Rt. Anglo American United Kingdom/

South Africa Paper 92 0.319 Procter & Gamble Hungary Kkt. Procter & Gamble United States Chemicals 91 0.320 Alcoa Európai Keréktermék Gyártó Kft. Alcoa United States Automotive/tyres 90 0.3 √21 Biogal Gyógyszergyár Rt. Teva Pharma Germany Pharmaceutical 85 0.322 Taurus Mezögazdasági Abroncs Kft. Michelin France Tyres 77 0.323 ZF Hungária Ipari és Kereskedelmi Kft. Zeppelin-Stiftung Germany Automotive 75 0.324 LuK Savaria Kuplunggyártó Kft. Luk Lamellen und Kupplungsbau

Beteiligungs Germany Automotive 70 0.2 √25 Clarion Hungary Kft. Clarion Japan Automotive 69 0.2 √26 Dunastyr Polisztirolgyártó Rt. ECP Italy Plastics 62 0.227 Csepeli Fémmü Rt. CSMV Invest Austria Iron and steel 57 0.228 Dunapack Papír és Csomagolóanyag Rt. W.Hamburger & Mosburger Austria Paper 51 0.229 Henkel Magyarország Kft.a Henkel Beiz und Elektropolier-

technik Austria Chemicals 48 0.230 Taurus Gumiipari Rt. Michelin France Tyres 48 0.231 Unilever Magyarország Kft. Unilever Netherlands Chemicals 47 0.232 Ikarusbus Jármügyártó Rt. Renault France Automotive 44 0.2

Fiat Italy33 Kodak Kft.a Eastman Kodak United States Machinery 43 0.234 Nestlé Hungária Kft. Nestlé Switzerland Food and

beverages 39 0.135 Gabona Rt. André & Cie Switzerland Food and

beverages 39 0.136 Temic Hungary Kft. Continental Germany Automotive 38 0.137 Kometa 99 Kft. Pedrazzini Family Italy Food and

beverages 31 0.138 DWA Dunaferr–Voest Alpine

Hideghengermü Kft. Voestalpine Austria Iron and steel 30 0.139 LG Electronics Magyar Kft. LG Electronics Rep. of Korea Electronics 28 0.1

40 Michelin Magyarország Kft. Michelin France Tyres 27 0.141 Hungerit Rt. .. .. Food and

beverages 26 0.142 Ericsson Magyarország Kft. Ericsson Sweden Electronics 20 0.143 Duna-Dráva Cement Kft. Heidelberg Cement Germany Building materials 20 0.144 Mátra Cukor Rt. Eridania Béghin-Say France Food and

beverages 19 0.145 Nitrogénmüvek Rt. .. .. Chemicals 17 0.146 Donau Brennstoffkontor Kft. Baustofimportkontor Austria Coal 15 0.147 Aral Hungária Kft. Aral Germany Oil and gas 15 0.148 Nutricia Termelöház Rt. Royal Numico Netherlands Food and

beverages 14 0.049 Hungrana Rt. Tate and Lyle United Kingdom Food and

beverages 13 0.050 Siemens Nemzeti Vállalatcsoporta Siemens Germany Electronics 11 0.0

Total above 12 688 44.5Total free zones above 9 337 32.7Total exports of Hungary 28 541 100.0

Source: UNCTAD, based on Figyelö Top 200 database 2001, http://www.fn.hu/hetilap/cikk.cmt?id=101546, andWho Owns Whom CD-ROM 2002 (Dun and Bradstreet)

a Consolidated data.

��


Table VI.12. Ireland’s competitiveness in the Western European market, 1985-2000

Product Category 1985 1990 19952000I. Market share 1.0 1.1 1.4 2.1

1. Primary productsa 0.9 1.2 1.2 1.12. Manufactures based on natural resourcesb 1.0 1.5 2.3 4.23. Manufactures not based on natural resourcesc 1.0 1.0 1.3 1.7


4. Othersg 0.6 0.6 0.4 1.2



4. Othersg 1.5 1.5 0.9 2.5

III. 10 Principal exports (SITC Rev.2) Ah Bi 34.9 42.6 53.2 67.6514 Nitrogen-function compounds * + 0.4 2.1 5.0 16.2752 Automatic data processing machines, units thereof * + 11.0 10.7 13.2 14.8541 Medicinal and pharmaceutical products * + 2.2 3.3 6.3 8.4515 Organo-inorganic and heterocyclic compounds * + 4.0 3.7 5.8 6.4759 Parts, n.e.s., of and accessories for 751 and 752 * + 4.8 6.0 3.2 6.3898 Musical instruments and parts and accessories * + 2.0 4.6 6.9 5.3098 Edible products and preparations, n.e.s. * + 2.5 3.9 5.6 3.1764 Telecommunications equipment, n.e.s. * + 1.1 1.6 2.3 3.0011 Meat and edible meat offals, fresh, chilled or frozen + 6.1 5.3 4.0 2.1551 Essential oils, perfume and flavour materials + 0.9 1.4 0.9 2.0

Source : UNCTAD, based on the United Nations’ Comtrade database and the TRADECAN computer software ofECLAC.

a Contains 45 basic products that are simple to process; includes concentrates.b Contains 65 items: 35 agricultural/forestry groups and 30 others (mainly metals, excluding steel, plus petroleum products,

cement, glass, etc.).c Contains 120 groups representing the sum of low, medium and high technology.d Contains 44 items: 20 groups from the textile and garment category, plus 24 others (paper products, glass and steel, jewellery).e Contains 58 items: five groups from the automotive industry, 22 from the processing industry and 31 from the engineering

industry.f Contains 18 items: 11 groups from the electronics category, plus another seven (pharmaceutical products, turbines, aircraft,

instruments).g Contains nine unclassif ied groups (mainly from section 9).h In column A: groups belonging (*) to the 50 most dynamic in Western European imports, 1985-2000.i In column B: groups in which Ireland gained (+) or lost (-) Western European import market share, 1985-2000.

high dependence on foreign affiliates locatedin EPZs raises the risk that the activitiesare not deeply embedded. The country’snew policy challenge is to improve localcapabilities and attract foreign affiliates withhigher-value-added functions.

4. Ireland

Ireland doubled its share in the WesternEuropean market, with total exports increasingalmost eightfold between 1985 and 2000,from $10 billion in 1985 to $76 billion in2000. FDI inflows rose even faster, from$164 million in 1985 to $24 billion in 2000.This was largely due to the country’supgrading into such dynamic industries aselectronics, pharmaceuticals, medical devicesand IT-related services, as reflected in thechange in the structure of i ts exports toits main market, Western Europe (table VI.12).

The share of primary products fell from21 per cent in 1985 to 6 per cent in 2000.The share of low-technology exports alsofell from 16 per cent in 1985 to 10 percent in 2000, whi le the share of h igh-technology exports increased from 23 percent in 1985 to 36 per cent and is nowthe most important category of exports. The10 principal products, concentrated in chemicals(including pharmaceuticals), electronics andprocessed primary products, accounted fortwo-thirds of total exports. Eight of themare dynamic in Western European importsand Ireland is gaining market share in allof them.

Foreign affiliates accounted for a largeshare of Irish exports, reaching 90 per centin 1999. Two-thirds of Ireland’s top 100exporters are foreign affiliates. They are

��


responsible for a good part of electronicsexports, with Intel and Dell exporting morethan $4 billion each, followed by Gateway,Apple and others (table VI.13). In chemicals,fore ign expor ters are concentra ted inpharmaceuticals, with Janssen and Swordsexporting over $1 billion each. In processedprimary products, foreign affiliates do notplay a role.

Beyond the most dynamic products,the top 55 foreign affiliate exporters – whichaccount for one-third of the country’s exports– are notable in computer-related services;Microsoft leads with exports of over $2billion, followed by Lotus. In medical devices,Baxter is the leader.

Since the 1980s , I re land hasimplemented an industrialization strategy thatrelies on FDI to promote dynamic exportproducts, using various fiscal and financialincentives, and putting most emphasis onthe constant upgrading of the level ofeducation. The linchpin in the implementationof th is s t ra tegy is the Inves tment andDevelopment Agency, which is endowed witha large budget (euro 164 million for grants,euro 27 mi l l ion for promot ion andadministration in 2000 – IDA, 2001b) forthis purpose (Ruane, 2001). The country’smembership in the EU gives it preferentialaccess to the Western European market ,an advantage of particular interest to non-EU investors, especially those from the UnitedStates. High levels of education, low labourcosts, a business-friendly environment andgood infrastructure (especially in IT) arealso conducive to attracting FDI. These factorsplayed a role when, in 1990, Intel openedits first production site in Leixlip to servicethe European market, a decision that gavea strong boost to the country’s electronicsindustry. Intel cited five main reasons whyIreland was chosen as i ts manufacturingand technology centre in Europe: the availabilityof large numbers of skilled workers, includingengineers and technicians; the low tax rateof 10 per cent; clean water; a good supplyof electricity; and business-friendly governmentpolicies (IDA website, http://www.idaireland.com,21 May 2002).

I re land in tends to s t rengthen i t sknowledge-based development , wi th anemphasis on further upgrading of skills andresearch capabilities as key competitive factors(IDA, 2001a)18. FDI is expected to continue

to play an important role in this strategy,which includes deeper embedding of foreignaff i l ia tes in to the local economy andencouraging the internationalization of theirsuppliers (WIR01). Business parks providingworld class business services have beenset up in various regions of the country,while the Investment and Development Agencyintermediates between institutions of higherlearning and foreign affiliates to respondto the needs of technologically advancedindustries.

5. Mexico

Between 1985 and 2000, Mexicodoubled its market share in North America,which takes about 90 per cent of its exports.Over the period, total exports increased almostsixfold: from $19 billion in 1985 to $166billion in 2000. Mexico has entered the topleague of countries in export competitiveness:by 2000, it had the eleventh largest marketshare in global exports. It rose from fifthto third most important source of UnitedStates imports (after Canada and Japan).FDI inflows increased seven times between1985 and 2000, from nearly $2 billion in1985 to $ 15 billion in 2000. The structureof Mexican exports to the North Americanmarket also changed significantly between1985 and 2000. The share of primary productsand resource-based manufactures fell from55 per cent to 16 per cent, while the shareof non-resource based manufactured exportsrose from 42 per cent to nearly 80 per cent(table VI.14). Medium-technology (40 percent) and high-technology (25 per cent)products led the way. The top 10 exportproducts, accounting for slightly over halfof total exports, are concentrated in theautomotive and electronics industries. Sevenof the 10 are dynamic in the North Americanmarket and Mexico gained market sharesin all but one.

TNCs have been critical to Mexico’sentry into the major league of exporters.In the automotive industry, the country’ssuccess is intimately linked with FDI, especiallyUni ted Sta tes FDI induced by NAFTA(Mortimore, 1998a; Dussel, 1999; ECLAC,2000). In particular, the restructuring ofthe United States auto industry led to theexpansion of exports by General Motors,Ford and Chrysler from Mexico, followedby their competitors (Volkswagen and Nissan),which turned Mexico into a world-class

��


Table VI.13. Ireland: exports by the 55 leading foreign affiliates, 1998a


Percentageof total

Rank Name of affiliates Name of parent firm Home economy Industry Value exports

1 Intel Ireland Ltd. Intel United States Electronics 4 804 6.42 Dell Products (Europe) BV Dell Computer United States Electronics 4 313 5.83 Microsoft Ltd Microsoft United States Computer-related services 2 380 3.24 Janssen Pharmaceutical Ltd. Jonson & Johnson United States Pharmaceuticals 1 337 1.85 Swords Laboratories Bristol-Myers Squibb United States Pharmaceuticals 1 026 1.46 Gateway 2000 Europe Gateway United States Electronics 967 1.37 Apple Computer Ltd Apple Computer United States Electronics 892 1.28 EMC EMC United States Electronics 744 1.09 3Com Technologies 3 Com United States Electronics 684 0.910 Motorola BV Motorola United States Electronics 506 0.711 Lotus Development BV IBM United States Computer-related services 409 0.512 Thermo King Europe Ingersoll-Rand United States Electronics 294 0.413 Baxter Healthcare SA Baxter International United States Medical appliances 265 0.414 Allergan Pharmaceuticals Allergan United States Pharmaceuticals 253 0.315 Eli Lilly SA Lilly, Eli and Company United States Pharmaceuticals 245 0.316 American Power Conversion American Power

Corporation (ACP) BV Conversion United States Electronics 232 0.317 NEC Semiconductors Ireland Ltd.NEC Japan Electronics 228 0.318 Cabletron Systems Enterasys Network United States Electronics 223 0.319 Howmedica International Inc. Howmedica International United States Medical appliances 190 0.320 Smithkline Beecham

(Manufacturing) Smithkline Beecham United Kingdom Pharmaceuticals 178 0.221 Yamanouchi Ireland Co. Ltd. Yamanouchi Pharmaceutical Japan Pharmaceuticals 149 0.222 Lufthansa Airmotive Ireland Ltd. Deutsche Lufthansa Germany Aero Engines 135 0.223 Molex Ireland Ltd. Molex United States Electronics 126 0.224 Loctite (Ireland) Ltd. Henkel Germany Pharmaceuticals 122 0.225 Symantec Ltd. Symantec United States Computer-related services 122 0.226 Bausch and Lomb Ireland Bausch & Lomb United States Medical appliances 119 0.227 Power Products Ltd. .. .. Electronics 119 0.228 Braun Ireland Ltd. Gillette Company United States Medical appliances 116 0.229 Procter & Gamble Procter & Gamble United States Chemicals 113 0.2

(Manufacturing) Ireland Ltd30 Fujitsu Microelectronics

Ireland Ltd. Fujitsu Japan Electronics 110 0.131 Rhône Poulenc Rorer

Pharmaceuticals Ltd. Rhône-Poulenc France Pharmaceuticals 109 0.132 Metal Processors Ltd. Calder Holdings United Kingdom Metal products 103 0.133 Eurologic Systems Group Ltd Network Appliance United States Electronics 101 0.134 Celestica Ireland Ltd. Celestica Canada Electronics 94 0.135 Bayer Diagnostics

Manufacturing Ltd. Bayer Germany Medical appliances 92 0.136 Saehan Media Ieland Ltd. Saehan Industries Rep. of Korea Video tapes 92 0.137 Verbatim Mitsubishi Chemical Japan Electronics 91 0.138 Fondermann and Co. (Ireland) Ltd. OPSM Protector Australia Medical appliances 91 0.139 Stafford-Miller (Ireland) Ltd. Block Drug Company United States Medical appliances 89 0.140 Roche Ireland Ltd. Roche Holding Switzerland Chemicals 88 0.141 Norton (Waterford) Ltd. Ivax International United States Pharmaceuticals 65 0.142 Henkel Ireland Ltd. Henkel Germany Chemicals 65 0.143 Elan Pharma Ltd. Capital Group Companies United States Pharmaceuticals 64 0.144 Tellabs Ltd. Tellabs United States Electronics 64 0.145 Jacobs Engineering Inc Jacobs Engineering Group United States Business activities 61 0.146 Pulse Electronics Ltd. Technitrol United States Electronics 59 0.147 Schering Plough (Bray) Ltd. Schering-Plough United States Pharmaceuticals 58 0.148 Sterwin Dungarvan Sanofi-Synthélabo Group France Pharmaceuticals 57 0.149 Krups Engineering Ltd. El. Fi. Elettro Finanziaria Italy Electronics 57 0.150 General Semiconductor Ireland Vishay Intertechnology United States Electronics 55 0.151 Allied Signal Ireland Ltd. Honeywell International United States Diversified 54 0.152 Square D.Co. Ireland Schneider Electric France Electronics 52 0.153 Mallinckrodt Medical Ltd. Mallinckrodt Medical United States Medical appliances 51 0.154 Hollister Plc. Hollister United States Medical appliances 46 0.155 Lucent Technologies Ireland Ltd. Lucent Technologies United States Electronics 46 0.1

Total above 23 205 31.0Total foreign-owned exports b 45 804 61.2Total exports of Ireland 74 878 100.0

Source: UNCTAD, based on IDA, Export Link, edition 3, 1999, and Who Owns Whom CD-ROM 2002 (Dun andBradstreet).

a Does not include primary sector, food and beverages, texti les. Some companies might have been excluded dueto data unavailabil ity.

b Majority-owned foreign affi l iates only.

��


automotive export platform. The exportsof these five firms alone amounted to 27billion in 2000, representing 17 per centof Mexico’s exports. Other leading exportersare components manufacturing TNCs suchas Lear and Visteon – with c lose to $2billion in exports, and the industry has beenupgraded and strengthened as a result .

In the electronics industry, two setsof TNCs drive exports from Mexico. Thefirst consists of United States computer andtelecom manufacturers led by IBM with $10billion in exports in 2000. The second consistsof Asian and European TNCs that launchedand later deepened maquiladora operationsto strengthen their competitiveness in the

United States market and meet NAFTA rules-of-origin requirements for inputs. Leadingthe latter are Sony, LG and Thomson, eachwith over $1 billion in exports.

Nearly two-thirds of the country’smanufactured exports come from foreignaffi l iates. The 35 main exporters aloneaccounted for 30 per cent of al l exportsin 2000 (table VI.15), led by automotiveand e lec t ronics f i rms – prec ise ly thoseindustries with the most dynamic exportproducts.

Local content in assembly operationsis generally low. For example, a very smallproportion of inputs in the television industry

Table VI.14. Mexico’s competitiveness in the North American market, 1985-2000




4. Othersg 3.5 5.6 6.7 8.0



4. Othersg 3.4 4.6 4.0 4.3

III. 10 Principal exports (SITC Rev.2) Ah Bi 49.6 47.8 48.9 51.4781 Passenger motor cars (excl. public service type) * + 1.0 7.0 10.5 11.0333 Petroleum oils, crude, also from bituminous min. - 31.5 14.5 8.7 7.4764 Telecommunications equipment, n.e.s. * + 4.4 3.6 4.1 6.0752 Automatic data processing machines, units * + 0.0 1.7 2.4 4.8773 Equipment for distributing electricity * + 3.2 5.4 5.5 4.5931 Special transactions and commodities not class. * + 2.8 4.2 3.6 4.1784 Parts and accessories, n.e.s. of the motor vehicles * + 3.2 4.9 4.3 3.7761 Television receivers + 0.7 3.0 3.9 3.6782 Motor vehicles for the transport of goods + 0.7 0.6 3.0 3.6772 Elec.apparatus for making/breaking elec. circuits * + 2.0 3.0 2.9 2.7






aircraft, instruments).g Contains nine unclassified groups (mainly from section 9).h Groups belonging (*) to the 50 most dynamic in North American imports, 1985-2000.i Groups in which Mexico gained (+) or lost (-) North American import market share, 1985-2000.

��


(3 per cent) is supplied by locally-ownedfirms (WIR01 , box IV.3), although, in theautomobile industry, local content is higher.Only a few TNCs have set up design anddevelopment facilities in Mexico. Deepeningof TNCs’ roots in the local economy is astrategic priority for Mexican competitiveness,and requires considerable investment inenhancing local skills, suppliers and institutions.

Mexico’s success with export-orientedFDI began with utilizing the United Statesproduction-sharing mechanism in associationwith the Mexican maquiladora scheme (seechapter VII) . In the 1990s, the countrynegotiated 32 free trade and investmentagreements with its principal trading partners,

Table VI.15. Mexico: exports by the 35 leading foreign affiliates, 2000(Millions of dollars and percentage)

Percentageof total

Rank Name of affiliates Name of parent firm Home country Industry Value exports

1 IBM México IBM United States Electronics 9 630 5.32 Daimler Chrysler Mexico DaimlerChrysler Germany Automotive 6 941 3.83 General Motors de Mexico General Motors United States Automotive 6 732 3.74 Volkswagen Mexico Volkswagen Germany Automotive 5 182 2.95 Ford Mexico Ford Motor United States Automotive 3 471 1.96 Nissan Mexico Nissan Motor Japan Automotive 2 720 1.57 Lear Corporation Mexico Lear United States Automotive 1 878 1.08 Visteon Mexico Visteon United States Automotive 1 676 0.99 Panamerican Beverage Inc Coca-Cola United States Beverages 1 624 0.9

10 Sony Mexico Sony Japan Electronics 1 621 0.911 General Electric Mexico General Electric United States Electrical apparatus 1 157 0.612 Alcoa Alcoa United States Metals 1 070 0.613 Thomson Thomson Industries United States Electronics 1 037 0.614 LG Electronics Mexico LG Electronics Rep. of Korea Electronics 1 037 0.615 Sanyo Manufacturing Mexico Sanyo Electric Japan Electronics 837 0.516 Grupo Kodak Mexico Eastman Kodak United States Photographic 739 0.417 Grupo Modelo Anheuser-Busch United States Beverages 694 0.418 Kemet de Mexico Kemet United States Electronics 692 0.419 Favesa Lear United States Automotive 684 0.420 Samsung Mexico Samsung Electronics Rep. of Korea Electronics 678 0.421 United Technologies Mexico United Technologies United States Automotive 655 0.422 SIA Electrónica de Baja CaliforniaSanyo Electric Japan Electronics 622 0.323 Industria John Deere John Deere Australia Machinery 449 0.224 Mabe General Electric United States Machinery 431 0.225 Siemens Siemens Germany Electrical machines 403 0.226 Carplastic Visteon United States Automotive 381 0.227 Black & Decker Mexico Black & Decker United States Tools 351 0.228 Xerox Xerox United States Office machines 295 0.229 BASF Mexico BASF Germany Chemicals 270 0.130 DuPont Mexico Dupont, E.I. De Nemours United States Chemicals 251 0.131 Electrónica Clarion Clarion Japan Electronics 236 0.132 Hewlett-Packard Mexico Hewlett-Packard United States Electronics 228 0.133 Mexinox Mexinox United States United States Metals 208 0.134 Procter & Gamble Procter & Gamble United States Chemical 152 0.135 Nestlé Mexico Nestlé Switzerland Food 122 0.1

Total above 55 154 30.6Total exports of Mexico 180 392 100.0

Source: UNCTAD, based on United Nations-ECLAC, Information Center of the Unit on Investment and CorporateStrategies, and Who Owns Whom CD-ROM 2002 (Dun and Bradstreet).

of which NAFTA is the most important .An agreement with the EU entered into forcein 2001.

6. Republic of Korea

Between 1985 and 2000, the exportsof the Republic of Korea rose sixfold, from$30 billion in 1985 to $172 billion in 2000.FDI inflows rose from $200 million in 1985to $9 billion in 2000. The country is thirdon the list of overall winners, and fourthon that of high-technology manufactures andresource-based manufactures (table VI.2).Its overall market share increased from 1.5to 2.5 during the period 1985-2000 (tableVI.16), with export success based largely

��


on high- and medium-technology manufactures:exports rose from 14 per cent to 38 percent of total exports for high-technologymanufactures and from 22 per cent to 29per cent for medium-technology products.On top of that success, the Republic ofKorea improved i t s market share inmanufactures based on natural resources.Five high-technology exports – semiconductors,computers and parts and accessories, telecomequipment, and electrical machinery andapparatus – alone accounted for over one-third of all exports. Passenger motor carsrepresented another significant export item.The country gained market share in all 10of the principal export products, seven ofwhich are being dynamic in world trade.

The Republic of Korea is distinct fromthe other winner countries covered in thissection because, on the spectrum of linkageswith TNCs, it has relied much less on FDIto achieve that outcome. Its export gainshave come mainly f rom large nat ionalconglomerates, the chaebols,19 often throughlow-equity or non-equity relationships withTNCs, especially with regard to their mainexport items, semiconductors, electronicsand automobiles (Kwon, 2001; Amsden, 1989).Original equipment manufacturing was animportant stepping stone to that success.In the space of 10 years , the countryleapfrogged into the semiconductor industryto advance from being a mere assembler

Table VI.16. The Republic of Korea’s competitiveness in the world market, 1985-2000

Product Category 1985 1990 19952000I. Market shares 1.5 1.9 2.2 2.5

1. Primary productsa 0.3 0.5 0.3 0.42. Manufactures based on natural resourcesb 0.7 0.8 1.2 2.03. Manufactures not based on natural resourcesc 2.3 2.6 2.9 3.2


4. Othersg 0.5 0.7 1.4 1.2



4. Othersg 1.1 1.3 2.2 1.8

III. 10 Principal exports (SITC Rev.2) Ah Bi 21.6 28.0 47.0 54.3776 Thermionic valves and tubes and other semiconductors, n.e.s. * + 4.8 7.3 16.7 16.4752 Automatic data processing machines, units thereof * + 0.9 3.4 3.4 6.8781 Passenger motor cars (excl. public service type) * + 1.4 3.1 5.1 6.8764 Telecommunications equipment, n.e.s. * + 3.2 3.4 3.8 6.6334 Petroleum products, refined + 2.1 0.5 1.8 4.3759 Parts, n.e.s., of and accessories for 751 and 752 * + 0.7 1.1 3.4 3.7583 Polymerization and copolymerization products * + 0.7 1.2 2.9 3.1653 Fabrics, woven, of man-made fibers + 4.0 4.4 5.0 2.5674 Universals, plates and sheets, of iron or steel + 2.7 2.3 2.3 2.5778 Electrical machinery and apparatus, n.e.s. * + 1.2 1.3 2.4 1.7


a Contains 45 basic products that are simple to process, includes concentrates.b Contains 65 items: 35 agricultural/forestry groups and 30 others (mainly metals, excluding steel, plus petroleum




aircraft, optical and measuring instruments).g Contains nine unclassified groups (mainly from section 9).h Groups belonging (*) to the 50 most dynamic in world imports, 1985-2000.i Groups in which the Republic of Korea gained (+) or lost (-) world market share, 1985-2000.

��


of discrete devices under contract to TNCsto become a major player in its own right:the second largest memory chip and thethird largest semiconductor producer in theworld. For the more mature and simplertechnologies, reverse engineering was used,complemented by or ig inal equipmentmanufactur ing ar rangements . Sucharrangements accounted for virtually al lelectronics exports early on, but by 1990their share had fal len to 70-80 per cent(60 per cent for the chaebols). For example,Samsung had reduced that share to about40 per cent of i ts total exports by 1994(Cyhn, 2002). Hyundai’s experience, firstwith an Overseas Assembly Agreement withFord, then with a low equity arrangementwith Mitsubishi, followed by a host of licensingagreements with major automobile TNCs,allowed it to acquire the appropriate technologyto design and develop its own model: thePony. As early as 1975, this export modelhad achieved 90 per cent local content. Thus,Hyundai moved from the assembly of foreignmodels, to the assembly of an indigenousmodel with foreign licences to be able, finally,to manufacture a completely indigenous model.Overall , 40 per cent of the total exportsof the Republic of Korea were estimatedto involve original-equipment-manufacturearrangements in 1985, but over time thatfactor became increasingly less importantas the Korean conglomerates developed theirown brands.

In para l le l wi th the r i se of thechaebols , outward FDI accelerated duringthe 1990s, rising from an annual averageof less than $1 billion in the period 1988-1993 to $3 billion in the period 1994-1997.21

Over half went into manufacturing operationswhile trade-supporting FDI accounted forslightly less than one-fifth in 2001. The Koreanfirms’ principal motives for establishing theirown international production systems werethe desire to gain cost advantages by relocatingindustries, to cope with trade barriers, togain access to new markets and hightechnology and to gain competitiveness overdomestic rivals. Overall, the Republic ofKorea remains one of the few examplesof a developing country that has becomean export winner mainly by way of low-equity or non-equity relationships with TNCs,in combination with strong national policiespromot ing domest ic companies , which

eventually, became TNCs in their own right.The fact that Samsung is one of the principalexporters to China is in itself quite revealing.

But the balance between equity andnon-equity forms is changing. Due to theeconomic crisis of 1997 and the fact thatKorean firms were experiencing increasingdifficulties in accessing foreign technologyled the Republic of Korea to liberalize itsFDI policy. Inflows grew substantially inthe late 1990s, from $2 billion in 1996 to$9 billion in 2000, before falling back to$3 billion in 2001. As a consequence, theshare of foreign affiliates in the country’stotal exports has risen. The five foreigncompanies found in the list of the principalexporters alone accounted for $9 billion ofthe $92 billion exported by the top 27 in2001 ( table VI .17) . S t i l l , the nat ionalconglomerates drive the bulk of Korea’sexports.

The example of the Republic of Koreashows that subs tant ia l expor t ga ins inmanufacturing can be made without equitylinks to TNCs. One of the major benefitsof the country’s national development strategyhas, indeed, been that exporters are moreembedded in the economy. They have driventhe national industrialization process by buildinglinkages, increasing local content and value-added activities, and upgrading to more complexactivities. The experience of Korean chaebolswith low-equity or non-equity relationshipswith TNCs in the semiconductor, consumerelectronics and automobile industries illustrateshow the Government can work with domesticfirms to help them graduate from technologicalimitation to innovation (Kim, 1997). Nevertheless,that strategy ran into difficulties in the late1990s, as access to frontier (as opposed tomature technologies became more difficultand as the financial problems of the chaebolsdeepened. For this reason, the role of FDIin Korean development was reviewed anda new approach was pursued.

* * *In each of these winner countries,

TNCs have played a s ignif icant ro le inimproving export competitiveness, either throughequity or non-equity relationships. But largeas the share of TNC activities is, it variesconsiderably. Of the leading exporters, theRepublic of Korea is an example of a winner

��


with a relatively small FDI presence, althoughnon-equity links have played an importantrole. The other winners, especially

“Winners” are exporting countries thatraised their share in world markets over1985-2000, taking as a cut-off point a 0.3

per cent share in the relevant technologicalcategory (annex figures VI.1 to VI.3).

The winner countries are located infive rings. The central circle (ring 1) containscountries with market-share increases of 5per cent or more during 1985-2000. Each

Table VI.17. Republic of Korea: exports by the leading 50 companies, 2000(Millions of dollars and percentage)

Percentageof total

Rank Name of firms Name of parent firm Home economy Industry Value exports

1 Samsung Electronics Co., Ltd. Citibank a United States Electronics 20 270 13.52 LG Electronics Inc. - Rep. of Korea Electronics 8 135 5.43 Hyundai Motor Co., Ltd. DaimlerChryslerb Germany/

United States Automotive 6 642 4.44 Hyundai Electronics Industries Co., Ltd. - Rep. of Korea Electronics 6 586 4.45 Amkor Technology Korea, Inc. Amkor Technology United States Electronics 4 695 3.16 Kia Motors Co. - Rep. of Korea Automotive 3 859 2.67 Hyundai Heavy Industries Co., Ltd. - Rep. of Korea Ship building and repairing 3 578 2.48 S-Oil Corp. - Rep. of Korea Petroleum refining 3 111 2.19 SK Corp. - Rep. of Korea Petroleum refining 2 996 2.010 Daewoo Motors - Rep. of Korea Automotive 2 838 1.911 Pohang Iron & Steel Co., Ltd. - Rep. of Korea Blast furnace and steel mills 2 701 1.812 Daewoo Heavy Industries Ltd. - Rep. of Korea Chemicals and allied products 2 538 1.713 Nokia TMC Ltd. Nokia Finland Communication equipment 2 383 1.614 Chip PAK Korea Chip PAK United States Electronics 2 364 1.615 TriGem Computer Inc. - Rep. of Korea Electronics 2 042 1.416 Hyundai Oil Refinery Co., Ltd. - Rep. of Korea Petroleum products 1 812 1.217 Anam Semiconductor Amkor Technology United States Electronics 1 808 1.218 Samsung Heavy industries Co., Ltd. - Rep. of Korea Ship building and repairing 1 773 1.219 Samsung SDI Co., Ltd. - Rep. of Korea Storage batteries 1 708 1.120 LG Caltex Oil ChevronTexaco United States Petroleum refining 1 620 1.121 LG Philips LCD Philips Electronics Netherlands Electronics 1 566 1.022 Samsung Electro-Mechanics - Rep. of Korea Electro-mechanics 1 366 0.923 LG Chemical Ltd. - Rep. of Korea Petrochemicals 1 209 0.824 Daewoo Electronics - Rep. of Korea Electronics 1 198 0.825 SK Corp. - Rep. of Korea Petroleum refining 1 120 0.726 Incheon Oil - Rep. of Korea Petroleum refining 976 0.627 Korea Sony Sony Japan Electronics 969 0.628 Hyundai Chemical Co., Ltd. - Rep. of Korea Petrochemicals 891 0.629 Hyosung Textile - Rep. of Korea Textile 689 0.530 Kohap Ltd. - Rep. of Korea Petrochemicals 680 0.531 Kumho - Rep. of Korea Tyres 600 0.432 Samsung Chemical Co., Ltd. - Rep. of Korea Petrochemicals 575 0.433 Hanjin Heavy Industries Co., Ltd. - Rep. of Korea Ship building and repairing 564 0.434 Hankook Tire - Rep. of Korea Tyres 555 0.435 Hanjung (Korea) Heavy Industries

& Construction Co., Ltd. - Rep. of Korea Chemicals and petrochemicals 509 0.336 Korea Zinc Co., Ltd. - Rep. of Korea Metal mining 500 0.337 Orion Electronics - Rep. of Korea Electronics 494 0.338 DongBu Steel - Rep. of Korea Steel sheets and coils 491 0.339 Inchon Iron & Steel Co., Ltd. - Rep. of Korea Steel sheets 490 0.340 Korea BASF BASF Germany Plastic material synthetic resins 474 0.341 Korea Data System - Rep. of Korea Electronics 453 0.342 TaeKwang Industrial Co., Ltd. - Rep. of Korea Textile 431 0.343 Taihan Electric Wire Co., Ltd. - Rep. of Korea Electric wires and cables 414 0.344 LG Cable Ltd. Hitachi Cable Japan Electric wires and cables 404 0.345 Kolon Industries , Inc. - Rep. of Korea Synthetic fibre 393 0.346 Tongkook Corp. - Rep. of Korea Textile 387 0.347 Hansol Paper Co., Ltd. - Rep. of Korea Paper mills 375 0.248 Hanwha Chemical Corp. - Rep. of Korea Plastic material synthetic resins 367 0.249 Fairchild Korea Semiconductor Ltd. Fairchild Semi- Carburettors, pistons,

conductor United States rings, valves 341 0.250 Cheil Industries Inc. - Rep. of Korea Textile 339 0.2

Total above 103 274 68.7Total exports of Rep.of Korea 150 400 100.0

Source: UNCTAD, based on information provided by Republic of Korea, Korea International Trade Association.

a Citibank has a minor participation (13.6 per cent) in Samsung Electronics’ equity.b DaimlerChrysler has a minor participation (10.0 per cent) in Hyundai Motor ’s equity.

��


in non-resource-based manufactures – themost dynamic segment of world trade –have relied on TNCs to boost their exportperformance. China, Costa Rica, Hungary,Ireland and Mexico became export winnersmainly by relying on FDI to generate theirmost dynamic exports. Beyond that, eachcountry had its own specific advantages,enabling it to become linked to internationalproduction systems. China has the advantageor its large economy, which allows economiesof scale and helps expand exports. Hungary,I re land and Mexico have one commonadvantage: preferential access to a majormarket. In Costa Rica and Ireland, nationalpolicy in the form of a proactive approachto attracting high-technology FDI and linkingup to international supplier networks hasbeen an important factor. In all of them,TNCs have played a substant ia l role inexpanding exports.

Notes

1 There are many ways to categorize activitiesby technology levels but most agree on theactivities that fall into the different categories.The dividing line is generally the complexityof the technology and the intensity ofspending on R&D.

2 Primary products cover minerals andagricultural or forest products exported inan unprocessed state. Resource-basedmanufactures include processed foods andtobacco, simple wood products, refinedpetroleum products, dyes, leather (not leatherproducts), precious stones and organicchemicals. Resource-based products can betechnologically simple (food or leatherprocessing) or capital-scale-and skill-intensive(e.g. petroleum refining). Low-technologymanufactures include textiles, garments,footwear, other leather products, toys, simplemetal and plastic products, furniture andglassware. These products tend to have stable,well-diffused technologies largely embodiedin capital equipment, with low R&D and skillrequirements and low economies of scale.Labour costs tend to be a major element ofcost and barriers to entry are relatively low,at least in the segments in which developingcountries specialize. Medium-technologymanufactures are “heavy industry” productssuch as automobiles, industrial chemicals,machinery, and standard electrical andelectronic products. They tend to have complexbut not fast-changing technologies, withmoderate levels of R&D but advancedengineering and design skills and large scalesof production. Barriers to entry tend to behigh because of capital requirements andstrong “learning” effects in operation, design

and product differentiation. High-technologymanufactures are complex electrical andelectronic (including information andcommunication technologies) products,aerospace products, precision instruments,fine chemicals and pharmaceuticals. Most callfor advanced manufacturing capabilities, largeR&D investments, advanced technologyinfrastructures and close interactions betweenfirms, universities and research institutions.However, many activit ies, particularlyelectronics, have final assembly processeswith simple technologies where low wagesare an important competit ive factor. Thecategorization is consistent with that in WIR99,chapter 8. Information and communicationtechnologies comprise SITC, Rev. 2, 764, 776,759, 752.

3 See WIR99 , p. 229. Technology-intensiveproducts are growing faster in both trade andproduction: during 1980-1997, totalmanufacturing production in 68 countries(representing over 95 per cent of globalproductive capacity) grew at 3.0 per cent perannum and manufactured exports at 6.6 percent. High-technology production grew at6.2 per cent and high-technology exports at10.2 per cent (NSF, 2000). While the definitionof “high-technology” products used by theNSF differs slightly from the one used here,the trends are l ikely to be very similar.

4 ASEAN-5: Indonesia, Malaysia, the Philippines,Singapore and Thailand.

5 CEE is not analysed here because 1985 dataon several countries are lacking. As a result,group growth rate figures overstate the realexpans ion .

6 This may not be surprising in view of thecountry’s size. In the developing world, Chinaaccounts for a much larger share ofmanufacturing value-added (about 30 per cent)than exports (18 per cent) (UNIDO, 2002). Inthis sense, China has some way to go beforeits exports “catch up” with i ts productioncapacity. However, large size is no guaranteeof export dynamism – Brazil and India are goodexamples of this. China itself was a fairly smallexporter a decade or so ago; its status nowreflects an abili ty to build and maintainimpressive rates of export growth (see theannex to this chapter).

7 Note that the training that takes place in thelabour-intensive end of high-technologyactivities is generally far more advanced thanin low-technology activities like clothing orfootwear. This is the reason why high-technology export activities are less footloosethan low-technology ones.

8 Third-party trade involves a TNC in onecountry exporting to an independent localfirm and to i ts affi l iated firms in anothercoun t ry.

9 See, World Bank, World DevelopmentIndicators database, http://www.worldbank.org/data/wdi2002/, and UNCTAD, Handbook ofStatist ics online, http:/ /stats.unctad.org/.

10 In 1996-1998, the share of developing countriesin world industrial production reached 20 percent. In world services output, their share

��


was only 14 per cent (World Bank, 2002a).11 In developed countries, the share of services

in total inward FDI stock also rose graduallyover the past decade, to reach 56 per centin 2000, up from 43 per cent in 1980. However,the share of services in the total exports offoreign affiliates remained relatively small,ranging from less than 1 per cent in Franceto 24 per cent in Japan. Furthermore, the shareof the services sector in the total exports offoreign affiliates operating in Japan and theUnited States declined by nearly half duringthe past decade or so, despite the rising shareof services in total FDI. Much service FDIin these countries is not export oriented.

12 Data provided by PricewaterhouseCoopers.13 Data provided by PricewaterhouseCoopers.14 Data provided by PricewaterhouseCoopers.15 In all case studies in this section, the trade

data for 1985 are the average of 1984-1986and those for 2000, are the average for 1999and 2000.

16 The following assessment was made byMOFTEC: “Overall, FIEs (note of the editor:foreign affiliates) already in operation havebeen performing well, with their growth margins

in terms of such leading economic indicatorsas industrial value-added, export value, taxpayments and surplus of foreign exchangeall higher that the national average, and withan obviously higher share in the aggregatenational economy, thus providing a strongboost to the sustained, rapid and healthydevelopment of the national economy” (China,MOFTEC, 2001).

17 On Flextronics’ global strategy, see box V.4.18 The Hungarian surveys of top exporters do

not report data for those firms that do notdisclose relevant information. This leads tothe omission of some large firms, such as Nokiaor Knorr-Bremse, which are probably alsoleading exporters.

19 For a discussion of services export from Ireland,see box VI.6.

20 The most prominent ones are Samsung,Hyundai, LG, Daewoo and SK.

21 The transnationalization of several of the largerKorean TNCs faltered during the 1990s becauseof acquisitions that did not work out (Zenithand AST) and ill-advised expansion projects(Daewoo’s expansion into risky markets andthe failure of Hyundai’s plant in Canada).

��


successive ring represents the previous limitdivided by half: thus, ring 2 contains countrieswith a market share between 2.5 per cent(5 divided by 2) and 4.9 per cent (the limitof the previous ring), and so on. The 2000position is indicated by the name of the country,and its 1985 position, if different, is indicatedby a ball. Arrows show the direction andmagnitude of change over the period. Thisgraphic representation is a useful way of showingthe dynamics of world trade at the nationallevel. Apart from its visual impact, it is usefulin that it provides four kind o informationat a glance: the definition of country winners,an indication of their concentration, the magnitudeof overall and individual changes, and a senseof which countries might become the newentrants.

High technology. The main winnersfrom the developing world are the East Asianeconomies and Mexico. China and TaiwanProvince of China lead the group and nowhave world market shares higher than 5 percent (ring 1). The most remarkable performanceis that of China, which moves from ring 5to ring 1, to become the largest exporter ofhigh-technology products in the developingworld. Another four developing countries havemarket shares of 2.5 to 4.9 per cent (ring2): Singapore, the Republic of Korea, Malaysiaand Mexico. They are followed by Thailandand the Philippines (ring 3), with Indonesiatrailing some distance behind (reaching ring5). Brazil retains a position in ring 5, whileIndia and Costa Rica are just outside thisring.

There are relatively few winners fromthe industrialized world: while there are manylarge exporters of high-technology products,they have not increased their market shares.Ireland is the main winner, reaching ring 3from ring 4. Finland (ring 5 to 4) and Israel(into ring 5) follow. Spain remains in ring4. Turkey is outside ring 5.

In CEE, Hungary is the main winner,the only country to enter ring 5. However,three others (Poland, the Czech Republic andthe Russian Federation) are hovering on thefringes of the ring.

Medium technology. There is onlyone main winner, the United States. Otherindustrial countries that have improved their

positions are Spain, Ireland, Portugal andAustralia. Austria and Finland make gains,but within the same range. Israel lies justoutside. There are four East European entrantswith three just beyond.

The developing world puts up animpressive performance, again dominated byEast Asia. The most dynamic winner is China.Mexico also has an impressive performance.The Republic of Korea and Taiwan Provinceof China lead the other dynamic exporters.Singapore, Malaysia and Thailand move upfrom a lower level, while Indonesia movesinto the figure. The Philippines remainspositioned outside as does the main exporterfrom South Asia, India. In Latin America,apart from Mexico, the only country in thefigure is Brazil, with Argentina and CostaRica lying just outside. In the rest of thedeveloping world, Saudi Arabia and South Africalie a little beyond the limit.

Low technology. This figure is moredensely populated than the previous ones.As expected, there are a larger number ofwinners in activities with low entry barriersand frequent relocation in search of low wages.Interestingly, the United States appears asone of the main winners. The other, notsurprisingly, is China. The largest gains inmarket share are achieved by Mexico andIndonesia.

Most East and South-East Asianexporters are present but the mature “tigers”(Singapore, the Republic of Korea and TaiwanProvince of China) are absent – they arewithdrawing from this technological category.Four South Asian economies appear as winners,led by India and Pakistan. There are severalcountries from Latin America and the Caribbean,most lying outside; Brazil, however, is notpresent. In other regions, Morocco and Tunisiaimprove their position, while Egypt and theUnited Arab Emirates appear just outside.

A number of CEE countries also improvetheir competitive positions inlow-technology products, led by Poland andthe Czech Republic. Other industrialized countriesin the figure include Canada, Ireland, Turkey,Australia and Israel. Major exporters of fashionproducts such as Italy and France are notpresent as they have not increased their marketshares during this period.

Annex to Chapter VI. Winnersa in world trade, 1985-2000

��


Figure VI.9. Winners in the high-technology manufactures trade, 1985-2000

Source: UNCTAD.

Figure VI.10. Winners in the medium-technology manufactures trade, 1985-2000

Source: UNCTAD.

��


Source: UNCTAD.

Figure VI.11. Winners in the low-technology manufactures trade, 1985-2000

a “Winners” are exporting countries that raised their share in world markets over 1985-2000, taking as a cut-off point a 0.3 per cent share in the relevant technological category.

��

Conclusions to Part Two

CONCLUSIONS:

Benefiting from export competitiveness

Improving export competitiveness isimportant and challenging but it is not anend in itself. It is only a means to an end:the promotion of development. This raisesthe question of the benefits resulting fromTNC-associated trade, beginning with improvingthe t rade balance , and cont inuing wi thupgrading export operations and sustainingthem over t ime. In each case, the issueis how host developing countries can mostbenefit from the assets that TNCs command.Much depends on the strategies pursuedby TNCs within their international productionsys tems , on the one hand , and loca linfrastructure and technological, institutionaland supplier capabilities as well as the policiespursued by Governments, on the other.

A first approximation for assessingbenefits and costs – although not the mostimportant one – involves the trade balance.Even though export-oriented FDI helps toincrease exports, foreign affiliates also import,and imports may increase significantly alongwith exports. In such cases, net foreign-exchange earn ings may be negl ig ib le .Moreover, high export values may co-existwith low levels of local value added. Thisis typically the case, for example, whenforeign affiliates mainly assemble importedcomponents , re f lec t ing the re la t ive lyunimportant role assigned to them in productionsystems.

Measuring the trade balance of export-oriented foreign affiliates as well as theirvalue added, is fraught with difficulties.The data typically lump together export-oriented FDI and domestically-oriented FDI,making it difficult to determine the tradebalance of export-oriented foreign affiliatesseparately. (Presumably, the trade balanceof domestic-market-oriented FDI would benegative.) Furthermore, no systematic dataexist on the composition of imports by foreignaffiliates, which is relevant for understandingthe implications for host economies. Scatteredinformation suggests that the imports of

parts and components were high in certainindustries, such as telecommunications, electricmachinery and vehicles (chapter VI), especiallyin countries that hosted labour-intensive activitiesof international production systems. Furthermore,in developing countries, one would expectthat newly established affiliates (or affiliatesthat intend to expand their capacities) wouldtypically need to import capital goods (justas many domestic firms do) in order to expandlocal productive capacities.1 Such importsare of a different nature – more likely tobe indispensable for the production of thegoods or services in question to take place– than imports of components for assemblyor other inputs (for which domestic alternativesmay be available or capable of being developed),yet both types of imports would be countedsimply as affiliate imports. Moreover, importswould be particularly high when productionfacilities are being set up and reliance onhome-country or other foreign suppliers ofinputs tends to be high, and then presumablydecline (partly as a result of the growth oflocal linkages). The imports of foreign affiliatesin China are an instructive example (althoughone that cannot necessarily be generalizedin this respect), in that the data show thata substantial part of imports by foreign affiliatesconsists of capital goods (box VI.8). Althoughthe trade balance effects of foreign affiliates’activities remain the same when the compositionof imports is taken into account, the overalleconomic implications for China are different,as imports of capital goods add significantlyto the capital stock and productive capacityof the country.

In any event, as far as the impacton a country’s balance-of-payments position– of ten a major under lying concern fordeveloping countries (although somewhatd iminished in impor tance as count r ies ’exchange-rate policies have become moreflexible) – is concerned, focussing on thetrade balance captures only a part of theimpact of TNC activities. Additional factorsthat need to be taken into account are capital

��


inflows, the repatriation of earnings andcapital, and other long-term impacts on theforeign-exchange earnings of foreign affiliatesand associated local companies. Such ananalysis of the balance-of-payments impact,which would also have to be weighed againsttheir other (structural) effects on a country’sdevelopment and welfare, falls outside thescope of the present report .2

The question of upgrading exportsrelates to the extent to which FDI involveshigher technological content and domesticvalue added in host-country export productionand a restructuring of exports from thosebased on static comparative advantage tothose based on dynamic compara t iveadvantage . The s ta r t ing poin t i s tha tspec ia l iza t ion in d i f fe ren t segments ofinternational production systems may implydifferent benefits and competitive prospects.There i s therefore some concern tha tspecialization in labour-intensive segments,even of high-technology exports, may in

some ways be undesirable as it may providefew benefits in training or technology andmeagre spil lovers to the local economy.Besides, the competitive edge of low-costlabour may disappear as wages rise. Still,labour-intensive exports are economicallybeneficial as long as local value added isposit ive at world prices, even if i t doesnot rise at the same pace as the total valueof exports. In fact, where surplus labouris unlikely to be used in more remunerativeor economically desirable activities, i t isin the interest of the countries concernedthat i t be used in production for export.Any theory of comparative advantage wouldsuggest that such countries should specializein simple labour-intensive processes at thebeginning of their export drive; the questionis whether they can subsequently upgradeand sustain their exports.

TNCs can contribute to the upgradingof a country’s competit iveness by eitherinvesting in higher-value-added activities

The data on imports and exports by foreignaffiliates in China show a trade deficit until 1997and modest surpluses in more recent years (boxfigure 1). This may suggest that the trade-relatedbenefits of FDI, with its high import content,are quite limited for China. The reality is, however,more complex.

Box figure VI.8.1. The trade balance offoreign affi l iates in China, 1990-2001


S o u r c e : UNCTAD, based on data provided byM O F T E C .

Box VI.8. FDI and the trade balance: the case of China

An examination of the composition offoreign-affiliate imports reveals that a significantproportion consists of capital goods (i.e. machineryand related equipment) to create or expand andup-grade productive capacity in affiliates (includingjoint ventures). Indeed, the share of such importswas high during the 1992-1997 FDI boom (boxfigure 2).

Box figure VI.8.2. The share of imports ofcapital goods in total imports by foreign

affil iates in China, 1990-2001

Source : UNCTAD.

S o u r c e : UNCTAD, based on data provided byM O F T E C .

��


in industries in which they have not investedbefore or by shifting, within an industry,from low-productivity, low-technology, labour-intensive activities to high-productivity, high-technology, knowledge-based ones.3 Thefirst of these processes is i l lustrated bya number of the winners discussed in thisPart, especially those that experienced anotable shift – as a result of substantialnew FDI inflows and new roles in suppliernetworks – from low to medium – to high-technology industries and sectors. Also risingsignificance is the growth of FDI-associatedservice exports from developing countries.

Intra-industry upgrading occurs inseveral ways. There is, first of all, the situationin which TNCs locate production facilitiesaimed at serving highly competitive national,regional and global markets in a developingcountry; many of the dynamic productsidentified in chapter VI fall into this category.TNCs need to upgrade these product ionfacilities continually just to survive, let alonecapture higher market shares for a givenproduct. Intra-industry upgrading also involvesadding or moving into higher-value productswithin the same industry. The success ofcountries such as China, Ireland, Malaysia,the Philippines and Singapore in upgradingthe export competitiveness of their electronicsindustr ies is a case in point . Thus, forexample , Motorola , in i t s own interes t ,substantially upgraded its facilities in China(box VI.9); Ireland convinced Intel to upgradebeyond assembling and test ing to waferfabrication; and Malaysia established long-term relationships with Matsushita Electricand Sony working with them to upgradetheir export operations for colour televisionsinto regional manufacturing operations. Buteven where strong corporate self-interestis involved, government policy (often in closecooperation with TNCs) can play a rolein encouraging upgrading, in particular byensuring that the production environmentallows such upgrading and that it extendsto more value-added functions such as R&D.The case of Motorola in China, is a casein point.

Something similar tends to take placein the case of foreign affi l iates hithertoprotected by import barriers. Under pressurefrom trade liberalization and competition,many TNCs restructure – in their own interest– import-substitution activities into export-oriented operations, at least in countries

in which a competitive base exists, or canbe created. Some outstanding examples arethe automotive industry in Mexico and thecolour television industry in Malaysia andThailand (UNCTAD, 2000e). Here, policiesplayed an important role. In Mexico, it wasthe launch of the maqui ladora scheme,combined with the need of the automobileindustry to find low-cost production sitesand the further l iberalization of NAFTAwith its rules of origin for the automobileindustry that had a profound effect on thecountry’s export competitiveness. The rulesof origin were initially established to helpUnited States automobile TNCs to competebetter in their home market against Asian,specifically Japanese, TNCs. This workedvery much in Mexico’s favour as Ford,Genera l Motors and Chrys le r (nowDaimlerChrysler) and their suppliers setup world-class plants there to export tothe United States market. Then, Volkswagen,a German automobile TNC, established anexport platform in Mexico and was obligedto bring its global suppliers into Mexicoto meet the NAFTA rules of origin. Theoverall result was a complete restructuringof the Mexican automobile industry froma protected and inefficient import-substitutionactivity to a highly competitive export platform.

These are examples from some ofthe most dynamic export products of howthe self-interest of TNCs, combined withappropriate government policy, can producemajor improvements in the expor tcompetitiveness of host countries. In othersituations, however, considerably strongergovernment efforts are required to capitalizeon the assets of TNCs and what , in theabsence of such e f for t s , may only betemporary advantages. The garment industryexemplifies why simply attracting export-oriented activities in and by itself mightnot be enough to move up the value-addedladder and increase national benefits.

Branded manufacturers of garmentslike Sara Lee and Fruit of the Loom madeuse of the United States’ production-sharingmechanism (see chapter VII ) to ga incompet i t ive advantage v i s -à -v is As ianproducers by establishing assembly operationsin the Caribbean basin. In the context ofthe Mult i f ibre Arrangement quotas , thismechanism allowed these assemblers to remaincompeti t ive in the United States marketin spite of the fact that wage levels in the

��


Motorola entered China in 1987. In 1992,it began production, among other things, of beep-pagers, mobile phones, two-way radios andautomobile electronics. Over the past decade,Motorola increased its investments in Chinaseveral times, partly by reinvesting its earnings.By the end of 2001, its total investment in Chinahad reached $3.4 billion. Its business operationsinclude 36 foreign affiliates, including a holdingcompany and a number of joint ventures, with13,000 employees and nearly $5 billion in salesin 2001. Motorola is the biggest foreign electroniccompany, as well as the leading high-technologyproducer and exporter in China. In 2001,Motorola’s exports from China amounted to $1.7billion: 34 per cent of its total sales.

Over the past decade, Motorola hasincreased the sustainability of its operationsin several ways:

· Investment and technology transfer. Motorolahas steadily strengthened its R&D in China.In November 1999, it set up a research institutein Beijing to oversee its 18 R&D centres (witha total of 1,000 employees by 2002). Someof the latest models of mobile phones weredeveloped, designed and produced in China,combining wireless communications withInternet access. These products are nowcompeting in the international market.

· Local sourcing. Motorola assists local suppliersin improving management, efficiency andquality control. It also brings local suppliersinto contact with foreign buyers. In 1997,for example, Motorola provided 5,600 hoursof training to 118 local suppliers. In 2001,Motorola and some of its affiliates outsideChina, purchased $1.8 billion in supplies fromlocal sources. In 2002, the company had over170 first-tier and 700 second-tier suppliersin China.

Motorola has also formed strategic allianceswith Chinese universit ies, insti tutions andenterprises in high-technology R&D projects,

including the Motorola NCIC AdvancedCommunications Technology Lab, the Motorola-DaTang Cooperation Project, the Motorola-JinpengCooperation Project and the Motorola-EastcomCooperation Project.

In November 2001, soon after China’s entryinto WTO, Motorola established a new five-yearstrategy, the “2+3+3 strategy”. The “2” refersto building China into a world-wide manufacturingand R&D base. The first “3” refers to three newgrowth areas, namely semiconductors, broadbandand digital trunking systems, in which Motorolahas been a technology leader in the world market.The second “3” refers to the following three$10-billion goals by 2006: annual output to reach$10 billion, accumulated investment in Chinato reach $10 billion; and accumulated localprocurement to reach $10 billion.

The Motorola manufacturing base in Tianjinis scheduled to be transformed into two parts:a semiconductor production centre and an Asiancommunications production base. Thesemiconductor centre, one of the biggest in theworld, will mainly produce advancedsemiconductors to support wirelesscommunication, automobile electronics andadvanced consumer electronics. The Asiancommunications production base is beingexpanded to produce high-quality, latest-modelmobile phones and related digital technology.Motorola also plans to increase i ts R&Dexpenditures to a cumulative $1.3 billion by 2006and recruit 4,000 researchers.

Located initially in an economic developmentzone in Tianjin, Motorola enjoyed various kindsof preferential treatment, particularly incentivesthat encouraged export oriented and high-technology FDI. Business facilitation by thelocal government has also been instrumentalfor nurturing the required industrial cluster andin building investment infrastructure for Motorola.Motorola Tianjin, in turn, has become an “anchor”to attract sequential and associated FDI to thecountry.

Box VI.9. Upgrading and embedding export-oriented operations in a host economy:the case of Motorola in China

Source : UNCTAD, based on var ious sources of informat ion about Motorola China.

Caribbean basin were higher than many othergarment production sites. Contrary to theexperience of Mexico in respect of the rulesof origin of NAFTA, this mechanism didnot a l low host countr ies to progress byincreasing local content, raising value addedor upgrading the industry. This is becausethe tariffs applied to value added outsidethe United States discourage the use oflocal inputs. For that reason, Costa Rica,

for example, chose to focus on electronicsand other industries. With the impendingimplementation of the WTO Clothing andTexti le Agreement , many host countr iesspecializing in garment exports will havegreat difficulties in facing competition fromAsia, especially from China. In anticipationof this, some of these branded manufacturersare cu t t ing back on the i r in te rna t iona lproduction systems and relying more on

��


fu l l -package suppl ie rs and cont rac tmanufacturers. The nature of the production-shar ing mechanism tha t res t r ic ted theupgrading of the local operations beyondlow-wage assembly has left these exportplatforms in difficult circumstances. Correctivenational policy action is urgent in caseslike this (Mortimore, 2002).

This underlines the importance ofensuring the sustainability of export-orientedforeign affiliates. For such affiliates notto be ephemeral , they need not only toupgrade, but to be progressively embeddedin host economies through strong backwardlinkages.4 This requires policies aimed atfostering local capabilities, and, in particulartechnological capabilities, human resourcesand a competitive domestic enterprise sector.Where these policies are successful, theyare l ikely not only to make the exportsinvolved more sustainable and beneficialfor the host countries involved, but alsoto increase the competitiveness of the domesticenterprise sector, the bedrock of economicdevelopment . In the end, some of thesedomest ic enterprises may become TNCsin their own right and contribute to thedevelopment of their home countries throughtheir own global activities. The success ofa number of (mainly Asian) countries inattracting export-oriented TNC activitiesas part of a broader national industrializationstrategy offers a model for others.

* * *

TNCs play an important role in theexports of many developing countries andeconomies in transition. Indeed, for the mostdynamic products in world trade, TNCs arecentral for enabling these countries to reachworld markets, and they provide some ofthe “miss ing e lements” that developingcountries need to upgrade their competitivenessin export markets. The potential benefitsof TNC export activity are stil l far fromful ly explo i ted and they a re growing .Technologies are changing. Processes and

functions are increasingly divisible, and theboundaries of what is internal and externalto firms are shifting. The “death” of distance– or i ts diminishing cost – is stretchinglocation maps. New activities are likely tojoin the globalization surge, including manyfrom developing economies. The challengefor countries that would like to improvetheir export competitiveness in associationwi th TNCs i s how to l ink up wi th theinternational production systems of thesefirms and how to benefit from them.

The spread of TNC activity offershost countries opportunities to expand exportsand move into higher value-added activities.Capital izing fully on stat ic benefi ts andt ransforming them in to dynamic andsustainable advantages requires pro-activegovernment support. To benefit most fromTNC-associated export competi t iveness ,developing countries must make continuousef for t s to roo t TNC ac t iv i t ies in hos teconomies, raise the level of local content,increase the value added by these activities,upgrade them into more sophisticated areasand make them sustainable. TNCs, in a numberof circumstances, will take initiatives oftheir own, in their own self-interest. Butnational policy efforts – and the policy spaceto pursue them – are critical for both attractingexpor t -or ien ted FDI and ensur ing i t ssustainability in order to advance development.

Notes

1 In the absence of the financing of capital-goods imports by FDI, countries seeking tobuild productive capacities would presumablyhave to spend foreign exchange to acquirethem.

2 For a brief discussion of the balance-of-payments effects of FDI on ASEAN countries,see WIR97 , chapter II .

3 For an analysis of the role of TNCs incompetit iveness in general, see WIR95 ,especially chapter V, focusing on industrialrestructuring in host economies.

4 See WIR01 for an examination of how moreand deeper l inkages can be encouraged bygovernment policies.

��


PART THREE

PROMOTING EXPORT-ORIENTED FDI

��


��

Introduction to Part Three

INTRODUCTION

Part Two highlighted cases of developingcountries and economies in transition that havestrengthened their export competitiveness overthe past decade and a half, increasing theirmarket shares in dynamic export productsas well as moving up the technology ladderfrom exports of natural resources or low-technology products to those embodying highertechnologies. It also drew attention to therole of TNCs in the exports of a numberof other countries, including countries thathave found new niche markets in the exportof services, products or fresh agriculturalproduce. All these countries have, in one wayor another, linked up with TNCs to enhancetheir export competitiveness. While there aredifferent ways to improve the exportcompetitiveness of a country, the pervasiverole of TNCs in world trade makes it importantfor countries to contemplate how to takeadvantage of TNC activities in terms ofenhancing their own development objectives.

What policy challenges face countriesthat want to attract export-oriented FDI andbenefit from it? What lessons can be drawnfrom their experiences and the successes ofcountries that have attracted export-orientedTNC activities? The diversity of the groupof winner countries studied in Part Two, aswell as the experiences of other countrieswith substantial involvement in their exports,shows that there is no simple, universalprescription for the promotion of export-orientedFDI. Some countries have chosen a highlypro-active approach, whereas others havemanaged to expand their exports based onless focused efforts. In general, however,successful experiences have shown that macro-economic stability as well as the availabilityof appropriate skills, technological capabilitiesand a strong domestic supplier base are keyfactors in making a location competitive. Itgoes well beyond the scope of this reportto address the range of broad-based policiesthat are needed to promote development inthese areas.1

Rather, the purpose of Part Three isto review a variety of policy tools with directrelevance to FDI that can be used to attract,upgrade and benefit from export-oriented FDI

to achieve sustained export competitiveness.Although the focus is narrow, it should beunderstood that a successful policy approachhas to be broad-based and in tune with thebroader development strategy of a country.Policy-makers also need a good understandingof the corporate strategies driving exportdecisions and to adjust policies to changingstrategies. While the international restructuringof production activities and the search amongfirms for more cost-efficient configurationsundoubtedly open new opportunities fordeveloping countries, the demands on potentiallocations are also increasing. Even in suchlow-technology activities as apparelmanufacturing, a higher level of productivityand efficiency is now necessary to competewith other exporters. When it comes to moredynamic industries, few locations have theadvantages needed to become an integratedpart of TNC production systems. Policy-makersneed also to take account of the internationalregulatory framework affecting trade andinvestment, as international rules in some casesprohibit the use of instruments applied in thepast.

In general, the challenge is relatedto the need for continuous upgrading of domesticresources. Countries with a strong domesticexport base and substantial technologicalcapabilities seek to upgrade into higher-value-added exports. With rising incomes and labourcosts, efforts to raise productivity are essentialto remain competitive. For those that haveattracted FDI into low-technology exports,the key priority is to diversify into higher-value products, which also requires an upgradingof capabilities. Countries that have built upsizeable industries behind protective barriersbut not made the transition to dynamic exportgrowth need to consider how FDI can supportthe reorientation and upgrading of existingindustries. In countries with weak industrialand export capacity, the question is how to attractFDI that can help create export capacity inany sector with potential (WIR99, pp. 251-252).

Part Three consists of two chapters.The first (chapter VII) considers variouspolicies that have a direct bearing on theability of countries to attract and benefit from

��


export-oriented FDI and thereby strengthentheir export-competitiveness. While most ofthe discussion concentrates on what host-country Governments can do, the chapter startsby looking at an issue that is largely shapedby home-country policies: access to foreignmarkets. The analysis in Part Two showedthat preferential trade arrangements, production-sharing initiatives and regional integration continueto influence the location of export-orientedactivities in some industries. While thesearrangements can facilitate access to majormarkets, some of them are limited in timeand their advantages are being eroded byprogressive liberalization. The recent rise inthe use of certain protectionist measures inmajor markets creates further uncertainty forexport-oriented companies and is a legitimatecause for concern for host developing countries.

With more open markets, host-countryGovernments can consider a range of measuresto improve their long-term attractiveness asa base for export-oriented production by TNCs.In the context of an evolving internationalregulatory framework, a common concern amongdeveloping countries is whether sufficient policyspace will be available for them to pursuetheir development-enhancing policies.

Starting from a clear understandingof how their locational advantages can matchthe requirements of export-oriented TNCs,host-country policies may aim at:

• Improving access to imported inputs andfacilitating trade more generally, throughtrade liberalization and facilitation measures,given that export-oriented activities (especiallyin non-resource-based industries) ofteninvolve a large proportion of imported inputs.

• Inducing more exports by foreign affiliatesthrough export-performance requirements.

• Lowering production costs and risks byoffering incentives to induce new or moreexport-oriented FDI, taking due accountof prevailing WTO and other internationalrules.

• Setting up export-processing zones (EPZs)with a view to providing efficientinfrastructure and removing red tape withinthe confines of a limited area.

• Developing relevant skills, linkages, industrialclusters and the like.

When appropriate, throughout the policyanalysis, lessons are drawn from the experienceof developing countries and economies intransition that have successfully used inwardFDI to enhance their competitiveness. Caremust be taken, however, in applying the lessons:a particular policy may work only in a specificeconomic, historical, geographical, cultural andpolitical context. Policy choices must reflectthe specific circumstances of each locationand the locational determinants of specificactivities.

The last chapter (chapter VIII) turnsto the role of investment promotion. Giventheir position at the interface between businessand government, investment promotion agencies(IPAs) can assume several important rolesin promoting export-oriented FDI. Promotionalstrategies are evolving against the backgroundof a changing global environment for FDI,including increasing competition for such FDI.More and more countries are adopting a focusedapproach to investment promotion, inspiredby the successes of such countries as CostaRica, Ireland and Singapore. In targetedinvestment promotion, the work of IPAs isan integral component of broader developmentstrategies. The goal is to attract FDI thatmaximizes the advantages of a given locationand contributes to carefully defined developmentobjectives. The first part of the chapter discusseswhy, what and how IPAs target their effortsto promote export-oriented FDI, as well assome of the risks and pitfalls that are involvedin the process.

IPAs also assume importantresponsibilities in ensuring that new investmentprojects are handled efficiently. Even thoughFDI may be allowed into most economic sectors,screening, licensing and other time-consumingrequirements can discourage investors, as cancorruption. Investors are not without alternativesand may not be patient. The ongoing restructuringof international production systems underlinesthe need for IPAs to provide after-care servicesto existing investors. Such efforts can beimportant to facilitate retention, expansionor upgrading of current activities and cangenerate important inputs into a longer-termprocess of improving a location’s attractiveness.Given their close links to the private sector,IPAs can be in a unique position to providerelevant information to other branches ofgovernment, so that coordinated action to removeobstacles becomes possible.

��

Introduction to Part Three

The conclusion underlines the needfor an adequate policy response to arrive atthe ultimate objective of attracting export-oriented FDI: to promote development. Thisessentially implies a need for FDI policiesto be well integrated with policies in otherrelated areas. While export-oriented FDI canbring important benefits to a country, it isnonetheless mainly a complement to domesticcapital formation, not a substitute for it. Thus,in countries that have successfully leveragedTNC activities to strengthen exportcompetitiveness in line with long-run developmentobjectives, considerable resources were normallyinvested in strengthening the domestic skillsbase and the enterprise sector. Strong domestic

skills and other capabilities are necessaryto expand or upgrade exports and to benefitfully from the FDI that comes in. It is theinterplay between domest ic and TNCcapabilities that determines how countriesbuild competitiveness and move up the valuechain.

Note

1 WIR99 examined the role of TNCs in enhancingtechnological capacity and strengthening theskills base of host countries, and WIR01 analyzedpolicies to promote linkages between foreignaffiliates and domestic suppliers.

��


CHAPTER VII

POLICY MEASURES

A. Policies related tomarket access

Access to fore ign markets i s aprerequisite for a country to attract export-oriented FDI. The liberalization of tradeand investment is in itself an important factorexplaining the growth of such FDI, withproduction being distributed more in line withthe comparat ive advantages of differentlocations. Liberalization is still continuingat the multilateral, regional and bilateral levelsand offers new opportunities for developingcountr ies . At the same t ime, the recent

slowdown in the world economy and corporatestrategies in favour of relocating productionto lower-cost locations (Part Two) have ledto a rise in protectionism. The growing useof anti-dumping, countervailing and safeguardmeasures, and of other non-tariff barriersis worr isome in th is respect , as i s thewidespread use of investment incentives bydeveloped economies . These and otherinvestment-related trade measures (UNCTAD,1999b) can create obstacles to exports fromdeveloping countries and make it difficultfor them to attract export-oriented FDI (boxVII.1).

There are a number of ways for a countryto protect its market from foreign competitionand to hinder a shift of production to lower-costlocations. The post-Uruguay Round protectionpattern is characterized by a large number of tariffpeaks concerning products of export interest todeveloping countries in agriculture, food, textiles,apparel and some medium-technology products.Tariff escalation too, is a pervasive feature inboth developed and developing countries andconcerns both agricultural and industrial goods(Cernat et al., 2002).

Resistance in a home country to therelocation of labour-intensive activit ies todeveloping countries can slow down therestructuring process and trigger measures thatmay counteract efforts to liberalize trade. Suchtendencies are accentuated by an economicslowdown, which forces firms to search for newways of cutting costs; this may, in turn, leadto various contingent protection measures andthe use of incentives and subsidies to discouragerelocation.

Safeguard measures as well as anti-dumpingand countervailing duties may lead to investmentdiversion, and have the ultimate effect of restrictingaccess to importing markets. Their availabilityin the trade policy arsenal and their increasinguse by a larger number of countries createuncertainties in market-access opportunities inthese countries and may discourage investmentin exporting locations. In many cases, the merethreat of such measures or their initiation (with

Box VII.1. Potential obstacles to market access

the imposition of provisional measures) may beenough to protect the importing country.Conversely, the availability and use of safeguardmeasures as well as of anti-dumping andcountervailing duties may attract investmenttowards the importing country, since exportingfirms may seek to avoid the risk of being hitby such measures through local production.

Business concerns in this area areexacerbated by the unpredictability of the outcomeof trade-remedy law proceedings. Presentpractices appear to put developing countriesand economies in transition, at a disadvantage(Moran, 1998). The number of anti-dumpinginitiations rose from 157 in 1995 to 330 in 2001(with a peak of 356 in 1999). In 2001, the largestnumber of such initiations were related to “basemetals and articles of base metals” (128), followedby “products of chemicals of allied industries”(65). During the period 1995-2001, the developingcountries most affected by anti-dumping initiationswere China and the Republic of Korea, with 255and 138 cases respectively brought against them.a

Home-country incentives and subsidies ,aimed at retaining or hindering the relocationof existing production by domestic or foreigninvestors may similarly reduce the likelihoodof export-oriented FDI flows to developingcountries or economies in transition. In the lightof the weaker economic performance of the worldeconomy, the willingness of developed-countryGovernments to provide new support to theirailing industries may increase.

Source : UNCTAD.a www.wto.org/english/tratop_e/adp_e/adp_e.htm#statistics/.

��


In some industr ies , specia l t radeschemes continue to have an important influenceon the allocation of export-oriented FDI. Theanalysis in Part Two showed that many of the“winners” in export competitiveness havebenefited from trade arrangements that givethem privileged access to key markets, notablyin the United States and the European Union.This applies in different ways to low-technologyindustries (e.g. garments), medium-technologyindustries (e.g. automotive) and high-technologyindustries (e.g. electronics).

The so-cal led product ion-shar ingschemes are important tariff arrangementsthat can affect the location of export-orientedFDI linked to international production systems.These have been adopted by many developedcountr ies for the t reatment of outwardprocessing operations. Production-sharinginitiatives are typically driven by home-countryfirms’ need to respond to increased competition,especially from low-cost locations. Developingcountries have traditionally acted swiftly withcomplementary host-country measures – suchas maquiladora regimes, free trade zones,industrial parks and other incentives (seealso section VII.F) to attract this type ofproduction. These operations invariably involvethe export of various components from thehome country to undergo further processingand/or assembly, and their subsequent re-import into the home country in the formof finished or semi-finished products. Insuch cases, a distinction is made for customspurposes between the value of the originalcomponent produced domestically and thevalue added abroad; only the latter part ofthe value is subject to duty. Both the UnitedStates and the European Community havesuch schemes.1

In some cases, these have encouragedthe establishment of offshore processing bases.In the case of the United States, the principalproducts involved in production-sharing havebeen apparel, television sets, other electronicproducts , autoparts and semiconductors .Economies in which product ion-shar ingoperations take place include Mexico, a numberof Car ibbean countr ies , Malaysia , thePhilippines, the Republic of Korea and TaiwanProvince of China (USITC, 1999). TheEuropean Community system has contributedto the establishment of assembly operationsin a number of developing countries, chieflyin the Mediterranean region and CEE, includingthe Czech Republic, Morocco, Poland, andTunisia (Yeats, 2001). As in the case of

the United States, production-sharing operationsinvolving EU f i rms have tended to beconcentrated in labour-intensive industriessuch as textiles and clothing, footwear, sometypes of machinery and mechanical appliances,vehicles, processed food and leather products(ECE, 1995, p. 113).

Production-sharing is expected toremain of significant interest to developed-country f i rms seeking to mainta in thei rcompetitiveness in industries in which tariffsand labour-intensive assembly continue tobe an important cost element. For example,the majority of United States imports fromCanada and Mexico that incorporate UnitedStates-made parts no longer take advantageof production-sharing provisions as they arealready eligible for duty-free treatment underNAFTA. It should be noted, however, that,f rom a developing-country perspect ive ,production-sharing schemes generally do notallow for the expansion of local inputs otherthan labour. In this sense, such schemesdo not encourage the creation of linkagesbetween foreign investors and domest icsuppliers.

Whereas production-sharing schemesdo not generally give preferential treatmentto specific countries, there are other tradearrangements that do, with implications forthe location of export-oriented activities. ManyLDCs and other developing countries benefitfrom preferential access to developed-countrymarkets in many export-oriented industries(Hughes and Brewster, 2002).2 Any preferentialtrade treatment that a country enjoys in exportmarkets may increase the willingness of TNCsto set up export-oriented production there.Conversely, countries not covered by suchschemes are in effect discriminated against.The benefits have sometimes been big enoughto influence the location of investments.

There are a large number of such non-reciprocal preferential schemes, includingthe Generalized System of Preferences, theEuropean Community’s trade preferences underthe Cotonou Agreement, the Caribbean BasinInitiative, and, more recently, the EuropeanUnion’s Everything-but-Arms Initiative andthe Uni ted Sta tes’ Afr ican Growth andOpportunity Act (AGOA).3 Moreover, thelocation of export-oriented FDI has also beenaffected by a number of regional integrationschemes, such as free trade areas and customsunions. Two of the most important are NAFTA(which was preceded by a bilateral free trade

��

CHAPTER VII POLICY MEASURES

agreement between the United States andCanada) and the European Union and itsassociation agreements. A number of the“winner” countries mentioned in Part Two,including the Czech Republic, Hungary, Ireland,Mexico, Poland and Spain have benefitedfrom such schemes in their efforts to attractexport-oriented FDI.

The impact of trade preferences givento beneficiary countries depends, to a largeextent, on the rules of origin attached to them.Rules of origin arising from regional tradeagreements or other preferential schemesdetermine the national origin of a productfor the purpose (among others) of grantingpreferential treatment. Rules of origin areoften based on the level of domestic valueadded and/or of local content. When suchrules are too stringent in either of these twodimensions, they can limit the investmentpull of the preferential scheme. If affiliatesare constrained in using inputs sourced fromthe international market or are required toundertake activities for which the host countryis not well suited, the benefits of the preferentialscheme may fail to motivate export-orientedFDI.

This aspect is well illustrated by AGOA.One of the key elements of AGOA, unlikeother preferential schemes, is a special provisionthat allows African countries with an annualGNP of under $1,500 (“lesser developedbeneficiary countries”) to use third-countryfabric inputs until 2004. Some preliminaryevidence suggests that a number of beneficiarycountries – notably Lesotho, Madagascarand Malawi – have seen inflows of export-oriented FDI linked to AGOA (Part One, boxIII.4). For example, companies from TaiwanProvince of China are the main foreigninvestors in Lesotho’s garment industry. Thetextiles used are imported primarily from EastAsia. After 2004, however, to benefit frompreferential access under AGOA, the fabricswill have to be of United States or AGOA-beneficiary-country origin.

For some beneficiary countries, AGOAhas led to a rapid increase in their exportsof some products to the United States market.This is partly due to the sudden opening ofthe protected textile and apparel market inthe United States, thus giving beneficiarycountries an edge over competitors. However,benefits from AGOA appear to have beenunevenly distributed so far, with a handfulof countries being the main gainers. Moreover,

as the possibility of sourcing fabric inputsfrom third countries is limited to four years,there is a risk that the beneficiaries’ advantagewill be short lived. The policy challenge forthese countries is to prepare for an eventualityof no trade preferences, either by developingthe domestic capacity to provide the necessaryinputs, by attracting FDI into these stagesof production, or by finding competitive sourcesof inputs in other AGOA beneficiary countries.This situation is similar to that of countriesthat attracted export-oriented FDI – thanksto unused quotas for export to countries thatrestricted access for textiles and clothingproducts – under the Multi-fibre Arrangement.As these quotas are to be completely phasedout by 2005 (box VII.2), there is an obviousrisk of the relocation of existing investmentto countries that offer more competi t iveconditions.

Box VII.2. The phasing out of theMulti-Fibre Arrangement

The textile and clothing industry wasexempted from the general provisions of theGATT and regulated by the ArrangementRegarding International Trade in Textiles,commonly known as the Multi-fibre Arrangement(MFA). This Arrangement allowed importingcountries to establish quantitative restrictionson the imports of textiles and clothing to preventdisruptions in their national markets. In 1995,half of the apparel imports to the United Stateswere subject to quotas (ECLAC, 2000).

The MFA was discontinued as a result ofthe Uruguay Round. International trade in textilesand clothing is now regulated by the Agreementon Textiles and Clothing. This Agreement laysout a process of liberalization of bilateral importquotas in four broad product groups (tops andyarns, fabrics, made-up textile products andclothing) over a 10-year period ending on 1January 2005. The obligation to phase outexisting quantitative restrictions applies to thefour countries or groups of countries thatmaintained such restrictions under the MFA:Canada, the European Union, Norway and theUnited States. Generally, most of the apparelproducts to be liberalized have been left to thelast phase, thereby allowing maximum adjustmenttime to the importers’ apparel firms.

A number of developing countries (e.g.Bangladesh) managed under the MFA to attractexport-oriented FDI, especially from countriesconstrained by the quota allocated to them (e.g.the Republic of Korea). By 2005, the recipientsof such FDI risk losing it unless they becomeinternationally competitive.

Source : UNCTAD.

��


Preferential t rade agreements andoffshore production schemes will play adeclining role as tariffs and quota restrictionsfall but, as long as such barriers exist, theyremain relevant for the location of export-oriented FDI. Thus policy-makers need tobe aware of any opportunities still availablefrom such schemes, while also understandingtheir limitations, particularly with regard tolinkage creation. In addition, in the lightof the continuing erosion of preferential margins,countries may be well advised to preparefor a situation without such privileges. Tradepreferences alone do not provide a sustainablebasis for developing competi t ive exportindustries (with or without FDI), but theydo offer a temporary window of opportunity.Countries that can offer the most competitiveconditions for export production in a givenindustry stand to gain as preferential schemesdisappear, and the beneficiar ies of suchschemes thus need to s t rengthen thei rcapabilities in areas in which they can claimcomparative advantages. This is the focusof the rest of this chapter.

B. Improving access toimported inputs

Foreign affi l iates active in exportmarkets can be significantly affected by thehost country’s trade regime. Efficiency-seekingFDI often involves international trade (internalor external to TNCs), with significant flowsof intermediate and finished goods sourcedin different locations. Export-oriented FDIfalls into this category, especially when itis a part of the international production systemsof TNCs (see Part Two). Trade liberalizationin general can make a host country moreconducive to export production. For export-oriented foreign affiliates, any tariff or other(for instance quantitative) restriction on importedinputs affects efficiency and cost, and schemesto reduce or eliminate barriers to foreigninputs increase the attractiveness of a hostcountry. There are a number of specificmeasures to reduce the costs of accessingforeign inputs, even without general tradeliberalization. Special attention is given inthis section to various ways of relievingexporters of the burden of taxes on importedinputs, notably through duty drawbacks andexemptions.

The duty drawback system is acommonly used method of relieving importduties imposed on goods used for the productionof exports. A “drawback” is a refund of dutiesor taxes paid against cer ta in importedmerchandise upon re-export. Drawbacks thusmake some imported material duty-free, thusencouraging production in the country grantingit. The imported goods eligible for duty-freetreatment can include raw materials and otherinputs consumed in the production processas well as the energy, fuels and oil used forproduction. An important issue for developingcountries is the treatment of indirect exporters,namely domestic suppliers that use importsto produce the inputs they supply to exporters.They should also be able to claim duty-exemptimports to remain competitive vis-à-vis foreignsuppliers so as not to hamper the formationof local linkages (Felker and Jomo, 2000).Kenya, Mexico, Taiwan Province of Chinaand the Republic of Korea are examples ofeconomies that allow drawback refunds forindirect exporters (Jenkins and Kuo, 2000).

One problem with a drawback systemis that its administration is cumbersome andprone to abuse. When goods are first imported,they are not specifically earmarked for usein the product ion of exports , and thisdetermination is all the more difficult asmanufacturers often produce for the localas well as the export market. Only the exporterknows the quantity of materials used in theproduction process. The customs administrationhas either to take the exporters’ calculationsor specify arbitrary (and usually inaccurate)input-output coefficients for each item produced.Furthermore, customs administrations arenaturally reluctant to refund money that hasalready entered their coffers. The ensuingdelays in payments can generate cash-flowproblems for exporters.

An alternative is the duty exemptionor suspension system. Under such a system,the customs administration sets up accountsfor individual importers. Import duties arerecorded in the account and held as liabilities,cancelled upon export. This avoids exportershaving to pay taxes up front only to be refundedat an uncertain later date. The problem ofdetermining what has been imported for whatpurpose and what duties have been assessedis made more transparent through the useof the individual accounts. Sometimes the

��


suspension is granted only if a firm alreadyhas an export order. Furthermore, to makesure that importers pay duties if they do notexport, some customs administrations requireimporters to provide guarantees in the formof bonds, securities, bank drafts or the like.For instance, in Mexico, the original suspensionsystem did not provide for a requirementfor bonds or bank guarantees and was widelyabused. Then in 1999, Customs Bank Accountswere introduced, into which direct and indirectexporters deposit an amount equal to thetaxes under suspension in interest-bearingbank accounts. The customs authority releasesthe funds upon approval of the claim for dutyremission on the inputs used to produce exports(Jenkins and Kuo, 2000).

C. Trade facilitation

Beyond the tariff treatment of importedinputs, countries have engaged in broaderefforts of trade facilitation. Trade facilitationaims at developing a consistent, transparentand predictable environment for internationaltransactions, based on internationally acceptedcustoms and practices that simplify procedures,standardize physical facilities and means,and harmonize trade and transport laws andregulations (box VII.3). Trade facilitationmeasures are in tended to speed up themovement of goods and trade informationacross borders, thus bolstering growth whileenhancing security. They cut across a widerange of areas such as regulations and controls,business efficiency, transport, informationand communication technologies, and thefinancial sector, and involve traders, banks,insurers and other actors engaged ininternat ional t rade, a long with customsauthorities.

The effective implementation of suchmeasures lowers transaction costs and improvesthe capacity of developing countries to supplycompetitive goods and services to globalmarkets. Recent studies show that transactioncosts saved by trade facilitation could rangebetween 2 and 15 per cent of transactionvalues (OECD, 2001a). Owing, to informationtechnology, among other things, it is nowpossible to improve transport eff iciencydramatically at modest costs, given the politicalwill to reform procedures and confront vestedinterests. In particular, simplification measuresby customs and other agencies can make

an important contr ibut ion to real iz ingdevelopment objectives. The introduction ofelectronic customs clearance systems, riskassessment techniques (as against the inspectionof individual consignments) , pre-arr ivalprocessing and post-release audit all cut timeand other costs and reduce the scope forerror. By way of example, Chile, at the March1998 WTO Symposium, estimated savingsof $1 million each month through automationand a greater use of risk assessment. Thus,while some countries are concerned overthe start-up costs involved in introducingcomputerization or training in the use of riskassessment, the experience of Chile and othershas shown that costs can be recovered overtime through greater efficiency and increasedtax collection.

Box VII.3. Trade facilitation: what are theconcerns?

During a WTO symposium on tradefacilitat ion (March 1998), t raders voiced anumber of concerns that can be summarizedunder f ive headings:

• Excessive documentation requirements;• Lack of automation and inadequate use

of information technology;• Lack of transparency, with unclear and

unspec i f ied impor t and expor trequirements ;

• Inadequate procedures, especially a lackof aud i t -based con t ro l s and r i sk-assessment t echniques ; and

• Lack of cooperation among customs andother government agenc ies , whichthwarts efforts to deal effectively withincreased t rade f lows.

Practical recommendations and guidelinesfor a trade facili tation strategy cover threemajor areas of work to foster transparency,predictabil i ty and uniformity:

• Harmonization of laws and regulations;• S impl i f ica t ion of admin is t ra t ive and

commercial formalities, procedures anddocuments ; and

• Standardization of transport means: modalinfrastructure (related to sea, road, railand air) including interfaces betweendifferent modes of transport (e.g unitloads and handl ing equipment ) ,commercial practices and services, andinformat ion technology.

Source : UNCTAD.

��


Trade facilitation was added to theWTO’s agenda a t the f i rs t Minis ter ia lConference in December 1996. The DohaMinisterial introduced a new phase for WTOwork on this issue, by providing for negotiationsafter the Fifth Ministerial in September 2003and by mandating the Council for Trade inGoods to embark on a comprehensive workprogramme.4 The underlying rationale forfuture negot ia t ions is ident i f ied as therecognition of “the case for further expeditingthe movement, release and clearance of goods,including goods in transit, and the need forenhanced technical assistance and capacitybuilding in this area”.5 The Council for Tradein Goods was mandated to “review and, asappropriate, clarify and improve relevant aspects

of Articles V, VIII and X of the GATT 1994”,6

but also to “identify the trade facilitationneeds and priorities of members, in particulardeveloping and least-developed countries”.Ministers also committed themselves “toensuring adequate technical assistance andsupport for capacity building in this area”.

UNCTAD has developed pract icalsolutions to some of these issues, such asthe Advance Cargo Information System (ACIS)(box VII.4). Another initiative to reducethe costs of trading goods is UNCTAD’scustoms reform, modernization and automationprogramme, ASYCUDA (box VII.5).7

Box VII.4. The Advance Cargo InformationSystem

ACIS is a system designed to producemanagement information to address multimodalcargo transit and transport problemsa. It isa real-time proactive system providing transportoperators with reliable, useful and immediatedata on transport operations, includinginformation on the whereabouts of goods andtransport equipment. The resulting performanceindicators enable management to remedyoperational deficiencies and, at the nationaland subregional levels, provide data formacroeconomic planning of the transport sector.As of mid-2002, 14 countries had benefited fromACIS installation.

A comprehensive evaluation undertakenin 1999 by the Tanzania Railway Corporation(UNCTAD, 2001d) shows that improvements inservice and benefits to customers were:

• Wagon movements closely monitored sothat cargo is delivered on schedule;

• Ability to inform customers on status andwhereabouts of their cargo “live”;

• Ability to trace/control wagons so thatthe supply of wagons to customers is morereliable;

• Possibility of detecting wagons not paidfor;

• Possibility of calculating daily revenue;and

• Availabili ty of daily freight-loadingstat is t ics .

Source : UNCTAD.

a For more in fo rmat ion on ACIS , v i s i twww.unctad.org/en/techcop/tran0105.htm.

Box VII.5. UNCTAD’s ASYCUDAProgramme

By mid-2002, the ASYCUDA computersoftware programme had been installed in over80 developing countries and economies intransition (including 31 LDCs)a. It is designedto streamline and reduce customs forms andprocedures. It is based on, and incorporates,recommendations and standards (including thoserelated to the Document Layout Key), codesand other standards of the Economic Commissionfor Europe (ECE) and the World CustomsOrganization (WCO). The basic idea is to ridthe customs system of outdated procedures andpractices and incorporate international practicesand standards, so as to increase a country’scustoms revenue through reduced costs andfaster clearance.

In 1999, a new module of the ASYCUDA++version was developed to manage customs transitprocedures. The implementation of ASYCUDAin the Philippines, funded by a World Bank loan,has been a show case model, with outstandingresults: revenue collection has significantlyincreased, and release time has been reducedfrom four days to four hours (an average forconsignments routed through the green customschannel). The project was part of a largemodernization project that was driven andmonitored by the management of the Philippine’sBureau of Customs. UNCTAD is now phasingout its involvement, as the Bureau of Customshas taken on full ownership and responsibilityfor ASYCUDA operations in the country.

Source : UNCTAD.

a For more in fo rmat ion on ASYCUDA, v i s i twww.asycuda.org.

��


D. Export performancerequirements

One approach taken by someGovernments to promote more exports byforeign aff i l ia tes is to impose exportperformance requirements. The intention ofsuch requirements is to make foreign affiliatesexport a larger share of what they producethan they would otherwise do.8 Exportrequirements are permissible under WTO lawand notably the TRIMs Agreement.9 However,linking these requirements to the receipt ofan advantage, for example in the form ofan incentive, will be prohibited for developedcountries and generally for middle-incomedeveloping countries as of 1 January 2003(for details, see section VII.E). Moreover,some regional and bilateral agreements explicitlyres t r ic t the use of export performancerequirements.10 In addition, under the TRIMsAgreement, WTO members are not allowedto impose trade-balancing requirements thatlimit an enterprise’s imports to an amountrelated to the volume or value of the locallyproduced goods that it exports.

There is limited evidence on the useand impact of export requirements (UNCTC,1991). A recent survey of European businessexecutives indicated that more than half therespondents had encountered exportrequirements when investing abroad, notablyin Brazil, China, India and Mexico, but alsoin other locations (Taylor Nelson SofresConsulting, 2000). The same study concludedthat these requirements were considered anobstructive barrier by companies, particularlyby those in the automotive industry.

Export performance requirements havebeen applied to remedy market-informationfailure and sluggishness on the part of TNCsto seize export opportunities, as well as todeal with restrictive business practices (Moran,1998). Some evidence suggests that exportrequirements have been effective in changingthe investment behaviour of TNCs. By makingmarket access contingent on exporting, forexample , some TNCs appear to havereconsidered the orientation of their activitiesin favour of exporting. Significant impactfrom government intervention of this kindhas been observed in the automotive, electronicsand petrochemical industries in various countries

(Moran, 1998) . Somet imes, d i f ferentcombinat ions of export performancerequirements and incentives have helped toinduce one or more “first mover” firms toreorient their international production systemsand establish new export platforms. The successof the first mover may trigger similar decisionsby other firms in the same industry and leadto additional export-oriented FDI in the samelocation.11 A study analysing the determinantsof export orientation of foreign affiliates ofUnited States and Japanese TNCs in 74countries, in seven branches of manufacturingover the 1980-1994 period, found that exportcommitments imposed at the time of entryhad a significant positive effect (Kumar, 1998;2002) . The s tudy concluded that exportrequirements imposed by host Governmentsmay prompt foreign affiliates to seek productmandates f rom their parent f i rms. Suchrequirements may be particularly effectivein host countries with large domestic marketsthat have the potential to absorb all the output.

This is not to say, however, that theimposition of an export performance requirementis advisable under all circumstances. First,i t i s c lear that TNCs general ly dis l ikeperformance requirements; so there is a riskof losing investment . Second, given thelimitations under WTO law, countries mayfind it increasingly difficult to use this policymeasure (sect ion V.B.3.b) . To mainta inprofitability under a “biting” export-performancerequirement, a firm has to be compensatedin some way to keep the share between exportsand local sa les above the l imi t judgedcommercially justified by the company. Hence,while export requirements can take differentshapes and forms, they have normally beentied to some kind of advantage in order notto deter inward FDI.12 In an increasinglycompetitive environment, and in the light ofWTO rules, the use of mandatory exportperformance requirements is more and morelikely to give way to policy dialogue andinformal persuasion.

Empirical evidence on the use andimpact of export requirements remains toolimited to draw conclusive policy lessons.More analysis is needed to ascertain the extentto which such requirements are currentlyused and the effect they might have on FDIinflows and on the export performance offoreign affiliates.

��


E. Incentives

1. The evolution of incentives

In most countries that have successfullyattracted and benefited from export-orientedFDI, the provision of incentives has beenan integral part of government policy (theIrish experience is presented in box VII.6).Whether in connection with special economiczones or independently of them, Governmentshave offered f inancia l , f i scal and otherincentives to attract firms to certain locations.13

The degree to which incentives actuallyinfluence investment decisions is debatable.Various studies suggest that to the extentthey do, it is mainly in export-oriented projectswith a number of equally plausible locations(UNCTAD, 1996; 2000a; Wells and Allen,2001; Morisset and Pirnia, 2001). In suchcases, incentives may be what tips the balance.They may also help to attract a “first-moverinvestor” who is then followed by competitorsor suppl iers (Moran, 1998) . Obviously,incentives-based competition risks a “raceto the top” in incentives and a “race to thebottom” in regulatory measures, as countriesfeel obliged to keep up with one another.Such a race increases the risk that the costof incentives might exceed the return to society.

In other si tuations, incentives arespecifically targeted to correct market failures.The pr ime example is the presence ofexternalities. In industries characterized byeconomies of scale, rapid innovation andtechnology spillovers, subsidies are tempting(Doraisami and Rasiah, 2001). Incentivesmay also be offered to compensate fordeficiencies and distortions in a host country’sbusiness environment (e.g. poor infrastructureand red tape) . This is one of the mainrationales for setting up EPZs (section VII.F).

The main argument against incentivesis related to the costs involved. These includethe opportunity costs of granting incentivesinstead of using the same resources forimproving the infrastructure or educating theworkforce. While remedying fa i lure , anincentive may create others.14 It is also difficultto assess whether an incentive has been welfareenhancing. First, it is hard to determinewhether an investment was in fact the resultof an incentive; second, even when this can

be ascertained, the quantification of positiveeffects (on exports, technology transfer andemployment) and negative effects (in increasingeconomic distortion and the potential forcorruption) remains difficult.15

The use of incentives in promotingFDI has evolved over time. Developed countriesfrequently employ financial incentives (suchas outright grants), whereas fiscal measuresare more common in developing countries(which cannot afford a direct drain on thegovernment budget) (UNCTAD, 1996;2000a) .16 While comprehensive andcomparative data on the use of subsidiesin developed countries are unavailable forthe most recent years, a rising trend, at leastuntil the mid-1990s, has been documented(UNCTAD, 1996; Moran, 1998; Oman, 2000).There are also more recent examples ofsubsidies involving large sums of money offeredby national or sub-national Governments toforeign investors with export-oriented projects.For example, in 1996 Dow Chemical receiveda subsidy of $6.8 billion for an investmentin the petrochemical industry

Box VII.6. The evolving use of incentives inIreland

In the Irish development strategy,investment incentives have complementedefforts at improving the economic fundamentals.Profits from exports were originally not taxed.Subsequently, in 1981, a corporate incometax rate of 10 per cent was introduced thatapplied to manufacturing and certain serviceindustries, as well as to firms located in theInternational Financial Services Centre or theShannon Free Zone. The 10 per cent tax ratewill apply to existing investors until its expiryin December 2010 when a universal 12.5 percent rate will apply.

As in many other developed countries,the Government has also provided financialgrants. These have not been tied to exportsbut, since the Irish market is very small, projectsin any case, have a high export content. Suchgrants have been negotiated on a project-by-project basis, with larger grants generallygiven to high-value-added and more skill-intensive projects. Projects located in lessdeveloped areas also receive bigger grants.R&D grants have been used to help existingcompanies move up the value chain and becomemore strategically important to the parentcompany.

Source: UNCTAD, based on O’Donovan, 2001.

��


in Germany, amounting to $3,400,000 per jobto be created (table VII.1). In Alabama (UnitedStates), Honda Motor Co. received an incentivepackage in 2000 worth $158 million to helpbuild a $400 million mini-van assembly plant,initially employing 1,500 people; and in March2002, Hyundai received a $118-million bondissue to begin producing vehicles in 2005(www.timesdaily.com, 3 April 2002). Thisevidence suggests that the trend observeduntil the mid-1990s continued thereafter.

Incentives havebeen an importante lement in the FDIst ra tegies of somedeveloping countries aswell, especially thosesuccessful in attractingexport -or iented FDI.These countries haveoften adopted a targetedapproach to attractingFDI. Varia t ions of“pioneer” companystatus or targeted “thrustindustries” are frequentlyused as a basis for thegrant ing of benef i ts .Singapore has usedcareful ly targetedincentives to encouragethe expansion of TNCsin certain industr ies ,notably high-technologyones and thoseperforming specif icexport-oriented activities. The country offersa 10-year tax holiday to “pioneer firms”producing goods and services not currentlyproduced in Singapore , and expandingcompanies may enjoy up to 20 years of taxholidays (FIAS, 2001). In Malaysia, companiesthat meet the requirements for “pioneer status”enjoy a full tax holiday for five years (boxVII.7). Costa Rica similarly uses investmentincentives in its efforts to attract export-oriented FDI.17 In China, foreign affiliates(including export-oriented ones) are offeredvarious tax incentives. The corporate incometax on enterprises is generally 33 per cent.Foreign affiliates with contracts for operatingperiods of 10 years or more are exempt fromincome tax for two years after making profit,and eligible for a further 50 per cent reductionin their tax liability for the three subsequentyears. Moreover, for foreign affiliates in special

economic zones and economic and technologicaldevelopment zones, the income tax rate is15 per cent.18 Technologically advanced foreignaffiliates may, upon the expiration of theenterprise income tax exemption and reductionperiod, enjoy a further 50 per cent reductionin the income tax rate for three years. Similarly,export-oriented foreign affiliates may, uponthe expiration of the enterprise income taxexemption and reduction period, benefit froma 50 per cent reduction of their income taxif the value of their exports exceeds 70 per

cent of the to ta lproduction value.However, if thesecompanies arelocated in a specialeconomic zone or aneconomic andt e c h n o l o g i c a ldevelopment zoneand already pay anincome tax rate of15 per cent, the taxwill be levied at 10per cent.19

S o m edeveloping countriesoffer incentives onlyfor the productionand export of non-traditional goods, toencourage a shifttowards newindustrial activities.In Uganda, the

Government has specified that wholesale andretail commerce, public relations and foodprocessing, insofar as they are aimed solelyat the domestic market, will not receiveincentives. In Bangladesh, export-orientedprojects in the garments and agro-basedindustries are given preferential interest rates,and can obtain tax holidays of 5-7 yearsdepending on their locat ion. Industr ia lundertakings not enjoying a tax holiday canobtain an accelerated depreciation allowance.Bangladesh also offers specific incentivesto export-oriented activities. A large numberof developing countries provide preferentialtreatment to investment projects related tothe export of services, notably in the tourismindustry, and, less frequently, business servicesincluding regional headquarters, internationalprocurement offices, distribution centres andthe like (UNCTAD, 2000a).

Table VII.1. Estimated incentives for selectedFDI projects, 1995-2000

(Dollars)

Year ofincentive Country of project Investor Amount per job

1995 Brazil Volkswagen 54 000-94 0001995 United Kingdom Siemens 51 000-190 0001996 Brazil Renault 133 0001996 Brazil Mercedes-Benz 340 0001996 Germany Dow 3 400 0001996 Israel Intel 300 0001996 United Kingdom Hyundai 190 0001996 United Kingdom LG 48 0001997 India Ford 420 0001997 United States Shintech 500 0001997 United States Daimler Benz 100 0001998 United Kingdom Ford 138 0001998 United Kingdom IMR 63 4001998 United Kingdom Dupont 201 0001998 United States Toyota 69 0002000a Canada Mosel Vitelic 450 0002000a Israel Intel 350 0002000 United States Honda 105 000

Source: Adapted from Loewendahl, 2001b, pp. 108-109.a Planned

��


The Government of Malaysia hascontinuously revised the structure and natureof its incentives in the light of evolving nationaldevelopment objectives. By broadly linkingincentives and the provision of specializedinfrastructure facilities to skills developmentand technology upgrading, the Government wasable to exploit changes in TNC strategies toimprove Malaysia's competitive position. Theevolution of the system of incentives in Malaysiareflects a shift from general investment promotionto a focus on high-technology sectors andindustrial clusters.

• In 1958, the Pioneer Industries Ordinanceprovided tax holidays for periods ranging from2 to 5 years to import-substituting industriesproducing a wide range of consumer andresource-based manufactured goods (suchas food, beverages and tobacco, printing andpublishing, building materials, chemicals andplastics).

• In 1968, the Investment Incentives Act (IIA)replaced the Pioneer Industries Ordinance:additional incentives were introduced toencourage employment creation, dispersalof industries and investment in capital-intensive projects. Incentives provided werePioneer Status, Labour Utilization Relief andLocational Incentives (that offered tax relieffor 2-10 years), and Investment Tax Creditthat offered tax credits ranging from 25-40per cent of capital expenditure.

• In the 1970s, FDI promotion focused on labour-intensive and export-oriented industries. TenEPZs were established by Malaysia's stategovernments to attract FDI seeking low-costsites for the assembly and export of electronicproducts, as well as textiles. These zonesoffered subsidized infrastructure, expeditedcustoms formalities, and freedom from importduties and export taxes. EPZ firms are alsoexempted from equity-sharing guidelines. The1975 Licensed Manufacture Warehouseprogramme extended this treatment toindividual factories set up outside the zones.

• In 1986, the Promotion of Investments Act(PIA), replacing the IIA, introduced a newincentives regime to attract more export-oriented FDI. This included:- A pioneer status (PS) tax holiday of five

years, with an extension of five more yearsfor selected activities, including export-oriented FDI and FDI in the electronicssector;

- An investment tax allowance (ITA);- An abatement of adjusted income for

manufactured exports, small-scalecompanies, compliance with Governmentpolicy on capital participation andemployment in industry, and the use ofdomestically-produced materials in the

manufacture of exports;- An export allowance;- A double deduction of expenses for the

promotion of exports; and- An industrial adjustment allowance.

Other non-fiscal incentives included:- Import-duty exemptions for exporting firms

(outside EPZs and licensed manufacturewarehouse programmes), under the CustomsAct; and

- Foreign equity ownership: 100 per centallowed in projects exporting at least 80per cent of production; majority allowedin projects exporting at least 50 per centof production.

• In the 1980s, a Reinvestment Allowance (RA)was introduced under the Income Tax Actto encourage investors, both foreign and local,to reinvest in the country. Initially, the RAwas in the form of a deduction from statutoryincome of an amount equivalent to 25 percent of qualifying capital expenditure incurredfor purposes of reinvestment (defined asexpansion of production capacity,diversification, upgrading, automation,modernization of production facilities), upto a maximum of 70 per cent of statutoryincome.

• In the 1990s, in response to massive FDIinflows, the Government revised the incentivesregime to place greater emphasis on the qualityof investment, as measured by technologycontent and value added. The goal was totransform assembly-dominated industries intomore locally integrated industrial clusters.

• In 1990, tax incentives were extended to"regional operational headquarters" whichprovided management, logistics andcoordination services to foreign affiliates inthe region.

• In 1991, an overall review of incentives wasundertaken aiming at streamlining incentives,strengthening revenue generation, andencouraging the development of competitiveand resilient industries. The incentive systemwas modified to make its impact more selectiveand effective. Major changes were:- The scope of the PS tax holiday was

reduced: exemption of only 70 per centof statutory income, and a five year taxholiday;

- An investment tax allowance was allowedas a tax deduction up to a maximum of 70per cent of statutory income;

- Special incentives were introduced topromote high-technology projects, strategicprojects, R&D, training, industrial linkagesand the development of the MultimediaSuper Corridor (more targeted and value-added operations); and

Box VII.7. The use of investment incentives in FDI targeting: the Malaysian experience

/...

��


- Various abatement schemes, including exportincentives were abolished as they wereless effective and inconsistent with WTOobligations.

Four performance requirements were used toevaluate applications for PS/ITA: (i) valueadded of 30-50 per cent; (ii) local content levelsof 20-50 per cent; (iii) technology level (asmeasured by the proportion of managerial,technical and supervisory staff); and (iv)industrial l inkages (in the main assessedqualitatively).

• In 1995, labour-intensive projects were de-emphasized and the approval of manufacturingprojects was based on capital investment peremployee. Manufacturing projects havinga capital investment per employee of less than55,000 Malaysian ringgit were categorized aslabour-intensive and would not qualify formanufacturing licences or tax incentives, unlessthey met one of the following criteria: valueadded of more than 30 per cent; 15 per centof workforce in managerial, technical andsupervisory positions; location in promotedareas; or projects undertaking promotedactivities or manufacturing high-technologyproducts .

High-technology projects in areas of new andemerging technologies (with local R&Dexpenditure equal to 1 per cent of sales withinthree years of start-up and 7 per cent of theworkforce comprising scientific and technicalstaff) enjoy a five year tax holiday on 100per cent of statutory income or an ITA of 60per cent on qualifying capital expenditureincurred within five years.Specific activitiesto be promoted under the high-technologydesignation were: advanced electronics;equipment/instrumentation; biotechnology;automation and flexible manufacturing systems;electro-optics and non-linear optics; advancedmaterials; optoelectronics; softwareengineering; alternative energy sources; andaerospace.

• In the late 1990s, the RA was reviewed andmade more attractive: the rate of the allowancewas then increased to 40 per cent, andsubsequently to 60 per cent of qualifyingcapital expenditure to be offset againststatutory income. The period of eligibilityfor the incentive was restricted to five years,and subsequently extended to 15 yearseffective from 2002.

• In the period 2000-2002, new incentives andchanges introduced included the following:- Pre-packaged or customized incentives for

high-quality investments (in the form offiscal as well as non-fiscal incentives);

- Additional incentives to promote targetedsectors such as food production, machineryand equipment, and resource-basedindustries; and

- New incentives to promote keymanufacturing-related services such aslogistics, market support and centralizedutility facilities.

• Other incentives/policies/support facilitiesavailable include:- Tax deductions for expenditure on training,

R&D, environmental protection andinformation and communication technology;

- Duty exemptions on imported materials/components and machinery and equipment;

- Subsidized industrial land or infrastructurefacili t ies in free zones/licensedmanufacturing warehouses/industriales ta tes ;

- Direct funding mechanisms for high-technology industries (inter alia throughventure capital funds and training grants);

- Liberal foreign equity ownership for export-oriented projects;

- Expatriate employment; and- Incentives for business support operations

such as the establishment of operationalheadquarters, international procurementcentres and regional offices/centres.

• In 1993, the Human Resources DevelopmentFund (HRDF), was launched, aimed atencouraging direct private-sector participationin skills development and operating on thebasis of a levy/grant system. Manufacturingcompanies have to contribute 1 per cent ofemployees' monthly wages to the fund.Employers who have paid the levy will qualifyfor training grants from the fund to subsidizetraining costs for their Malaysian employees.

The actual impact of the incentives offeredis hard to assess, although it appears thatincentives have been an important element inattracting TNCs to Malaysia. Some studies,however, suggest that the Government has nothad enough capacity to survey and monitorfirms' actual performance in fulfil l ing thetechnology-related conditions for investmentpromotion (Felker, 2001). Others estimate thepotential revenue foregone in the late 1980sto be in the order of 10 per cent of manufacturingvalue added, or 1.7 per cent of GDP, and arguethat, while the incentives may have helped toattract export-oriented investment and generateemployment, some incentives are likely to havebeen overgenerous, and perhaps even redundantin some cases (Doraisami and Rasiah, 2001).

Box VII.7. The use of investment incentives in FDI targeting: the Malaysian experience (concluded)

Source : UNCTAD, based on information provided by the Malaysian Industrial Development Authority(MIDA); Felker , 2001; Doraisami and Rasiah, 2001.

��


In order to encourage more exportsby existing investors, some tax authoritieshave taken a flexible approach to tax-deductibleexpenses. For example, both Malaysia andSingapore have allowed double deduction fortax purposes of international travel, marketingand related expenses (UNCTAD, 2000a).In addition to fiscal and financial incentives,there are also regulatory incentives, suchas the relaxation of ownership restrictions.In some countries, the acceptable level offoreign equity participation has been linkedto the level of export, as in Malaysia beforeJuly 1998, (since then the policy has beenrelaxed) . 20 In Thai land, in 1987 theGovernment relaxed the requirement of Thaimajority ownership in projects exporting 80per cent of their output, and allowed fullforeign ownership. In 1998, in the aftermathof the Asian financial crisis, equity restrictionswere suspended for all new FDI projects(Felker and Jomo, 2000).

2. WTO rules on export subsidies

There is one important requirementin the WTO system that will have a significantimpact in the immediate future on the useof incentives in promoting export-orientedFDI: to make their domestic regulation conformwith the WTO rules, many developing countrymembers will have to adapt some of theircurrent incentives schemes in the light ofthe prohibition of export subsidies containedin the WTO Agreement on Subsidies andCountervai l ing Measures ( the SCMAgreement).21 While such measures havebeen prohibited in developed-country memberssince the SCM Agreement came into force,the prohibition will apply after 31 December2002 to all developing-country members notreferred to in Annex VII of the SCMAgreement and not granted an extension ofthe transition period.22 The complexity ofthe issue and its relevance for strategiesto attract and upgrade export-oriented FDImake it important to review the rules in somedetail.

Article 1 of the SCM Agreement definesthe concept of “subsidy” and establishesdisciplines on the provision of subsidies. Thedefinition contains three basic elements: (i)a financial contribution (ii) by a Governmentor any public body within the territory ofa WTO member (iii) which confers a benefit.All three of these elements must be satisfied

in order for a subsidy to exist. Fiscal incentivesmay constitute subsidies within the meaningof the SCM Agreement as the concept of“financial contribution” includes “governmentrevenue ... otherwise due [that] is foregoneor not collected (e.g. fiscal incentives suchas tax credits)”. Financial incentives, suchas the direct provision of funds through grantsand subsidized credits, may also constitutesubsidies, as the concept of a “financialcontribution” includes a “government practice[that] involves a direct transfer of funds (e.g.grants, loans and equity infusion ...)”. Finally,the provision of land and infrastructure atless than market prices may constitute asubsidy, as the concept of “f inancia lcontribution” includes “a government provid[ing]goods or services other than generalinfrastructure, or purchas[ing] goods”.

To the extent that subsidies, as definedby the SCM Agreement, are provided on a“specific” basis as defined in Article 2 ofthe Agreement, they are subject to the SCMAgreement’s provisions. There are four typesof “specificity” within the meaning of theSCM Agreement:

• Enterprise-specificity: a Government targetsa particular company or companies forsubsidization;

• Industry-specificity: a Government targetsa par t icular sector or sectors forsubsidization;

• Regional specificity: a Government targetsproducers in specified parts of its territoryfor subsidization; and

• Prohibited subsidies:23 a Government targetsexport goods or goods using domesticinputs for subsidization.

Hence, the two categories of prohibi tedsubsidies are export subsidies and import-substitution subsidies (as defined in Article3).

a. Prohibited and actionablesubsidies

Clearly, investment incentives meetingthe defini t ion of a subsidy and granted,cont ingent upon an investor ’s expor tperformance are export subsidies prohibitedunder the SCM Agreement (subject to thespecial and differential treatment describedbelow). The I l lustrat ive List of Export

��


Subsidies, provided in Annex I to the SCMAgreement , ident i f ies a number of suchmeasures. For example, the full or partialremission of direct taxes (e.g. income taxes)and social welfare charges, specifically relatedto exports, is an export subsidy. While theexemption or remission of indirect taxes onthe export product, such as value-addedtax (VAT) is permitted, the exemption orremission upon export of prior-stage cumulativeindirect taxes on certain items (such as capitalgoods) is also considered an export subsidy.Similar ly, whi le a member may provideremission or drawback of import chargeson goods incorporated into an export product,the provision of duty remission on capitalgoods or on goods not used for the productionof the exported product, contingent upon exportperformance, i s an expor t subsidy.Furthermore, “simplified” drawback schemeswhich are common in developing countries(e.g. providing a “drawback” that is a fixedpercentage of the f.o.b. value of the exportsand not linked to the duty actually paid onimported inputs) would likely also be consideredto constitute export subsidies, as would theprovision by Governments of goods or servicesto exporters on terms more favourable thanthose available to producers for the domesticmarket.

A number of other “specific” investmentincent ives other than those meet ing thedefinition of prohibited subsidies are alsosubject to the disc ipl ines of the SCMAgreement. In other words, even if notprohibited, incentives that meet the definitionof a specific subsidy and that cause “adverseeffects” as defined by the SCM Agreementmay be challenged through the WTO disputesettlement mechanism and potentially subjectto compensatory action (be “actionable”).

Most subsidies, such as productionsubsidies, fall into the “actionable” category.Actionable subsidies are not prohibited, butare subject to challenge in the event thatthey cause adverse effects to the interestsof another WTO member. There are threetypes of adverse effects:

• Injury to a domestic industry caused bysubsidized imports into the territory ofthe complaining WTO member. This isthe sole basis for domestic countervailingaction.

• Serious prejudice. This usually arises asa result of adverse effects (e.g. export

displacement) in the market of thesubsidizing WTO member or in a third-country market. Thus, unlike injury, itcan serve as the basis for a complaintrelated to harm to a WTO member’s exportinterests .

• Nullification or impairment of benefitsaccruing under the GATT 1994.Nullification or impairment arises mosttypically when the improved market accesspresumed to f low from a bound tariffreduction is undercut by subsidization.

Again, however, developing countrymembers are entitled to special and differentialtreatment that shields them from certainchallenges.

I t should be noted that the SCMAgreement is an agreement on trade in goodslisted in Annex 1A of the WTO Agreementand thus only regulates subsidies in the goodssector. (The General Agreement on Tradein Services (GATS) does not deal specificallywith export subsidies – see box VII .8) .Moreover, the disc ipl ines of the SCMAgreement may not be easily applied to allkinds of investment incentives, in particularlocational incentives. The SCM Agreementis concerned with trade in goods, which, bydefinition, occurs only after an investmenthas been made. Two areas – “adverse effects”and remedies – illustrate this point. Underthe SCM Agreement, the adverse effectsof subsidization generally relate to distortionsof trade flows of subsidized goods (i.e. theextent to which subsidies increase the levelof exports from, or reduce the level of importsinto, the subsidizing country member andthereby harm producers of like goods in anothermember). In the context of investment, becausethe granting of an incentive may pre-dateproduction, often by a considerable period,such an after-the-fact measurement of adverseeffects is unlikely to exercise discipline overthe provision of investment incentives. Asimilar issue arises in the context of remedies.By the t ime production and export havecommenced, incentives aimed at attractinginvestment may have ended. In this situation,neither a recommendation to withdraw ormodify a subsidy under the WTO disputesettlement mechanism, nor the applicationof a countervailing duty to the exported goodsin the context of a domestic action, wouldbe likely to “undo” or change an investmentthat has already been made.

��


GATS treats investment as one of the fourmodalities for the provision of services. ArticleI:2 of the GATS defines “trade in services” asencompassing four modes of supply, includingthe supply “by a service supplier of one Member,through commercial presence in the territory ofany other Member” (mode 3). The term“commercial presence” is defined in ArticleXXVIII(d) as “any type of business or professionalestablishment, including through (i) theconstitution, acquisition or maintenance of ajuridical person, or (ii) the creation or maintenanceof a branch or a representative office, within theterritory of a Member for the purpose of supplyinga service”. As a consequence, the GATS coversforms of establishment which correspond to thenotion of FDI.

The only provision of the GATS specificallydealing with subsidies is Article XV. It recognisesthat, “in certain circumstances, subsidies mayhave distortive effects on trade in services”, andnegotiations have begun with the aim ofdeveloping “the necessary multilateral disciplinesto avoid such trade-distortive effects”. “Thenegotiations shall also address the appropriatenessof countervailing procedures.” Any rules ondistortive subsidies would have to be very complexand would present severe practical enforcementdifficulties. And, indeed, subsidies relating tothe supply of services “in the exercise ofgovernmental authority” could not be disciplined(art. I.3 (b)). Furthermore, “such negotiationsshall recognize the role of subsidies in relationto the development programmes of developingcountries and take into account the needs ofMembers, particularly developing country Members,for flexibility in this area”.

As it stands, the GATS does not containany definition of subsidy. If any member “considersthat it is adversely affected by a subsidy” it canrequest consultations which “shall be accordedsympathetic consideration” (art. XV). The GATSthus permits subsidies as such, including subsidies

contingent upon the export of services and otherinvestment incentives. However, the most-favoured-nation obligation applies to subsidiesbecause they are covered by the definition of“measure”. National treatment commitments alsoapply, unless they specifically exclude subsidies.In the service sectors for which commitmentshave been made, and subject to any conditionsor qualifications set out in its Schedule, a WTOmember must therefore administer its subsidyschemes in a manner that accords the servicesand service suppliers of other members treatmentno less favourable than that accorded to its ownlike services and service suppliers.

The Working Party on GATS Rules dealswith this issue. A few examples of potentiallytrade-distortive subsidies have been mentionedin areas such as cultural, educational and healthservices, transport, telecommunications, postaland financial services, construction, softwareand information services, advertising, tourism,export credits and R&D.

In the light of the close interaction betweentrade in goods and services, two further pointsare worth noting. First, the provision of subsidizedservices to producers of goods is disciplinedby the SCM Agreement. In the Illustrative Liston Export Subsidies (Annex I to the SCMAgreement) “internal transport and freight chargeson export shipments” are mentioned, and “theprovision by governments… of services for usein the production of exported goods”. Second,the fact that a subsidy pertains to the servicessector does not necessarily mean that other WTOagreements, and in particular the SCM Agreement,do not apply.a A WTO member cannot circumventthe prohibition of export subsidies, for instance,by casting the subsidies as relating to the servicesprovided by domestic firms in the context of anoutward processing operation. Since the subsidiesare contingent upon the export of the assembledproducts, the SCM Agreement would apply.

Specific subsidies within the meaningof the Agreement can also give rise to theimposition of countervailing duties againstthe subsidized imported goods by WTOmembers according to their own domesticlegislation. Part V of the SCM Agreementsets forth certain substantive requirementsthat must be fulfilled to impose a countervailingmeasure, as well as in-depth procedural

requirements regarding the conduct of acountervailing investigation and the impositionand maintenance in place of countervailingmeasures. The main requirement is that amember may not impose a countervailingmeasure unless it determines that there aresubsidized imports, there is injury to a domesticindustry, and there is a causal link betweenthe subsidized imports and the injury.

Box VII.8. The treatment of subsidies in the GATS

Source : UNCTAD.a The Appellate Body confirmed this in EC-Banana when it stated that: “Certain measures could be found to fall

exclusively within the scope of the GATT 1994, when they affect trade in goods as goods. Certain measures couldbe found to fall exclusively within the scope of the GATS, when they affect the supply of services as services.There is yet a third category of measures that could be found to fall within the scope of both the GATT 1994 andthe GATS. These are measures that involve a service relating to a particular good or a service supplied inconjunction with a particular good. In all such cases in this third category, the measure in question could bescrutinized under both the GATT 1994 and the GATS” (WT/DS2/AB/R, para. 221)

��


b. Special and differential treatment

As mentioned above, the so-calledAnnex VII countries (namely, LDCs and certainother WTO members listed in the Annex untilsuch time as their GNP per capita reaches$1,000) are exempted from the prohibitionof export subsidies. Other developing-countrymembers have an eight-year period (i.e. untilthe end of 2002) to phase out their exportsubsidies (and they cannot increase the levelof their export subsidies during this period).With respect to import-substitution subsidies,LDCs have eight years, and other developing-country members five years, to phase outsuch subsidies. There is also more favourabletreatment with respect to actionable subsidies.24

However, developing countries, other thanAnnex VII countries, that at tain “exportcompetitiveness” for a particular product havetwo years from the date they achieved exportcompetitiveness to phase out export subsidiesfor such a product, while Annex VII countrieshave eight years. “Export competitiveness”is deemed to exist when the export sharein the particular product reaches 3.25 percent of world trade for two consecutive years.

Furthermore, Article 27.4 of the SCMAgreement provides for the possibility of extendingthe eight-year time limit. It states that:

“If a developing country Member deemsit necessary to apply such subsidiesbeyond the 8-year period, it shall notlater than one year before the expiryof this period enter into consultationwith the Committee [on Subsidies], whichwill determine whether an extensionof this period is justified, after examiningall the relevant economic, financial anddevelopment needs of the developingcountry Member in question. If theCommittee determines that the extensionis justified, the developing countryMember concerned shall hold annualconsultations with the Committee todetermine the necessity of maintainingthe subsidies. If no such determinationis made by the Committee, the developingcountry Member shall phase out theremaining export subsidies within twoyears from the end of the last authorisedperiod.”

This conditional possibility of extensionhas created some uncertainty with regardto the future application of many incentiveschemes frequently used, for instance in thecontext of EPZs and similar zones.

c. Doha results

In the context of discussions on theimplementat ion of the Uruguay Roundagreements and the preparation of the WTOMinisterial Conference in Doha in 2001,negotiations took place on the need to putthe extension of the transition period on afirmer basis. The issue was positively resolvedwith the Decision of 14 November 2001 takenat Doha on Implementation-related issuesand concerns25 which: “Having regard tothe particular situation of certain developing-country Members, directs the Committee onSubsidies and Countervailing Measures toextend the transition period, under the rubricof Article 27.4 of the Agreement on Subsidiesand Countervailing Measures, for certain exportsubsidies provided by such Members, pursuantto the procedures set forth in document G/SCM/39.”

The decis ion provides a specif icprocedure for the extension of export subsidiesby certain developing-country members onan annual basis until 31 December 2007 (plustwo further years to complete the phase-out). The implementation procedure set forthin the Decision shows a certain preferencefor small countries and weak exporters byestabl ishing e l ig ible programmes.26

Programmes enjoying an extension shall notbe modified to make them more favourablethan they were as of 1 September 2001.Hence, this standstill provision does not allowdeveloping-country WTO members to introducenew schemes. The Annex VII countrymembers, however, can introduce new schemes,as they enjoy a full exemption from theprohibition relating to export subsidies. Twenty-nine members have requested an extensionof the transition period for their export subsidyprogrammes.27

3. Implications for the future useof incentives

What are the opt ions facing hostcountries that wish to use incentives to attractexport-oriented FDI? As far as the membersreferred to in Annex VII are concerned, theuse of export subsidies remains unrestrictedunder WTO law. Thus these members can,if they so desire, continue to use exportsubsidies, including those provided in EPZs(see below). For other developing-countrymembers with the exception of those that

��


obtain an extension of the transition periodbeyond 1 January 2003, export subsidies(related to goods) will have to be eliminatedas required under the SCM Agreement. Andeven those obtaining an extension of thetransition period cannot increase the levelof their export subsidies, are subject to theprohibition in respect of particular productsif they achieve export competitiveness insuch products, and will need to consider whatto do once the transition period expires.28

The challenge for developing countrieswishing to use incentives as part of theirefforts to promote export-oriented FDI isto weigh carefully the benefits and costsinvolved. Subsidies should not be used asan isolated measure to attract export-orientedFDI, but rather as a part of a broader “policypackage”. In countries in which incentiveshave played a role in efforts to promote inwardFDI, they have typically complemented arange of other measures such as those aimedat enhancing the level of skills, technologyand infrastructure. To compensate for majordeficiencies by offering incentives may notalways be a wise strategy as it increasesthe risk of public funds being spent on projectsthat do not offer the externalities neededto warrant the incentives in the first place.Without efforts to improve the businessenvironment to make it more conducive toinvestment and the upgrading of the productionof existing foreign affiliates, as well as toembed FDI into the local economy throughlinkages, the risk increases that investorswill leave as soon as the incentives expire.

The discrepancy noted between developedand developing countries in the mix of financialand fiscal incentives they use may in effectmake developing-country WTO members moreexposed to countermeasures under the WTOrules. While both forms of subsidy are coveredby the SCM Agreement, there are certainimportant distinguishing features worth noting:

• Financial incentives given as cash grantsup front may be particularly attractivefrom the perspective of a recipient, asthey cut the initial costs of an investmentand thus lower the r i sk of a project .By contrast, a corporate tax holiday ora reduced tax rate will have an impactonly when an investment starts generatingprofi ts . In industries characterized byrapid change and high volatility (as inthe case of the semiconductor industry),

the benefit from tax holidays is muchmore uncertain as compared with an up-front cash grant .

• It may be more diff icult to show thatan outright cash grant given as a locationalincentive to an (export-oriented) activityhas had an adverse effect on the interestsof another WTO member. Since fiscalmeasures, on the other hand, last overan extended period of time, there maybe more opportunit ies for other WTOmembers to assess the impact of a fiscalincentive and seek remedies.

• There is additional uncertainty from thefact that a member may be requestedto wi thdraw a tax hol iday deemedinconsistent with the provisions of theSCM Agreement . By contras t , theAgreement does not, in general, providefor the repayment of subsidies.29

Moreover, while the SCM Agreementconsiders market access problems relevantin meeting the adverse effects test (thus allowingfor a remedy), it does not consider investmentaccess problems equally relevant. A countrymay thus not be able successfully to bring acomplaint about locational incentives that divertinvestment flows away from its market (BevigliaZampetti, 1995; Brewer and Young, 1997). Hencemany of the subsidies offered by countriesfor new investment projects, which come inthe form of locational incentives under theheadings of R&D, regional development orother goals, and which appear to be more widelyused by developed economies, may not be tackledunder the SCM Agreement.

From the perspective of using incentivesto facilitate an upgrading of export activities,there may be a case for making incentivesoffered to foreign affiliates or domestic firms“non-actionable” in the WTO if and whenthey can be shown to have a c leardevelopmental impact in developing countries(WIR01 , p. 171).30 This may involve, forexample, the creation of more and deeperlinkages, the provision of technology, andthe training of local suppliers and theirpersonnel. However, to avoid free riding,firms receiving incentives would have to commitsufficient resources on a long-term basis.In some host countries, TNCs have helpedremove obstacles and facilitated upgrading(e.g. by way of training and the developmentof infrastructure) in collaboration with the relevantlevel of government (WIR01).31

��


In general, an open and transparentprocess, with regular reporting and accountingof the costs of the incent ives used andaccompanied by an assessment of thei reffectiveness, reduces the risk of unwantedeffects (Hughes and Brewster, 2002). In thiscontext, the type of incentive offered canalso be considered. For example, infrastructureimprovements (which also benefit domesticfirms) may be better than fiscal incentives(which only kick in when an investment ison-stream), and these in turn may be betterthan financial incentives (which are offeredup front). Moreover, when granting incentives,Governments can consider including a“clawback” provision stipulating that theincentives awarded are to be returned ifrequirements are not met.

An alternative to the provision of taxincentives may be an overhaul of the taxpackage as a whole, including statutory rates,depreciation and other deduction rules, loss-carry-forward rules, inflation accounting (ifrelevant), fairness and ease of administration,and, finally, any tax credits, allowances, holidaysand other exemptions. Some economies haveabolished specific tax incentives and, instead,chosen to offer a low corporate tax rate acrossthe board. Hong Kong, China, is a classicexample. It offers no tax holidays to export-oriented foreign investors, but its basic taxrate is 16.5 per cent and imports come induty-free. Other examples include Estonia(box VII.9), Lebanon, Mauritius and, morerecently, Ireland (box VII.6, Morisset andPirnia, 2001; O’Donovan, 2001).

Estonia represents an interesting case ofa small economy that has managed to attracta large amount of export-oriented FDI, partlyby pursuing export-friendly policies but withoutthe use of special incentives for targetedindustries.

Soon after regaining its independence, theGovernment of Estonia decided to abolish allcustoms duties and to rely primarily on a uniform,flat tax for both corporate and personal income,and a value-added tax. The elimination of customsduties greatly simplified and speeded up customsprocedures, reducing costs and risks for firmsinvolved in international trade. The Governmenteschewed efforts to target specific industriesthrough either subsidies or investment incentives,which avoided problems of bureaucratic discretionand the distortion of investment decisions. Forestablished companies (foreign or domestic),the Government offers grants and soft loansfor infrastructure development and retrainingof employees (outside the capital city area) andfor R&D activities. These financial supportscan amount to up to 75 per cent of investmentcosts .

The country has developed an open regimefor FDI, abolishing most restrictions and approvalrequirements for FDI, and allowing foreignownership of land. In the latter half of the 1990s,the Foreign Investment Law was repealed andFDI policy relied instead on the Company Law,the Securities Law and related legislation to

govern all investment, without distinctionbetween foreign and domestic investment. Inaddition, the country introduced liberalimmigration procedures for foreign investors,in order to reduce bureaucratic delays anduncertainties. As a result, the FDI regime inEstonia became one of the most open and non-discriminatory in the world.

Estonia has been a very strong performerin both export growth and FDI inflows. Evenafter the completion of Estonia’s privatizationprogramme, the country has been able to maintainhigh levels of inward FDI by attracting export-oriented greenfield investments as well as M&As.In 2001, 9 of the top 10 exporters in Estoniawere foreign affiliates. Other factors contributingto the favourable conditions offered by Estoniainclude relatively low-cost but high-skilled labourand its association agreement with the EuropeanUnion.

While the Estonian Investment Agency(EIA) does not provide targeted incentives, itstill engages in targeting. The Agency is currentlyconcentrating on three industries: machinebuilding (subcontracting mainly for theautomotive industry), electronics (especiallyinformation and communication technology) andservices (in particular shared-service centres).Aftercare of existing investors, by supportingtheir expansion needs and/or helping themdevelop clusters (the whole value chainapproach), is also a priority.

Box VII.9. Estonia: attracting export-oriented FDI byproviding an enabling environment

Source : UNCTAD, based on informat ion provided by the EIA and FIAS.

��


F. Export processing zones

Since the 1950s, EPZs have becameincreasingly popular in both developed anddeveloping countries as a policy instrumentfor the promotion of export-oriented FDI.32

In fact, most of the “winners” identified inPart Two have established at least one (andusually more than one) kind of EPZ and theseaccounted for a large share of non-primarymanufactured exports in a number of them(box VII.10). As of 1997, about 850 zonesof various sorts operated in both developedand developing countries (WEPZA, 1997;ILO, 1998), and the number has increasedsubstantially since. In the developing world,the majority of them are located in Asia.

The concept of “EPZ” encompassesmany different types of zones (e.g. free-trade zones, duty-free zones, free-investmentzones, offshore zones), reflecting the varietyof activities performed in the zones. Theseinclude bonded warehousing, export processing,assembling, border or port trade and financialservices. However, despite these variations,export-oriented manufacturing has been themain focus of most zones. While zone firmscan be domestic, foreign or joint ventures,FDI generally plays a prominent role. Zonescan be publ ic ly or pr ivately owned andmanaged. In the past few years, the numberof private zones has been increasing, thuscontributing to the overall growth in the numberof zones around the world.

In the Philippines, for example, involvingthe private sector in the development ofeconomic zones helped the Governmentovercome obstacles related to inadequatefunding and a lack of qualified personnel.Since 1995, 40 privately-run economic zoneshave been established under the PhilippinesEconomic Zone Authority. All costs for thedevelopment of roads, utilities, standard factorybuildings, waste water facilities and otherinfrastructure development were borne byprivate-sector developers. The PhilippinesEconomic Zone Authority handles the provisionof incentives. In each of the privately-runzones, it assigns personnel to administerincentives for enterprises registered with theAuthority. Between 1994 and 2001, employmentin these zones increased from 229,650 to708,657, and exports expanded from $2.7billion to $19.5 billion.33

One possible definition is to refer toEPZs as fenced-in industrial estates specializingin manufacturing for export and offering theirresident firms free-trade conditions and aliberal regulatory environment (World Bank,1992). Another is to describe them as industrialzones with special incentives set up to attractforeign investors, in which imported materialsundergo some degree of processing beforebeing re-exported (ILO, 1998). In any case,EPZs are clearly delimited and enclosed areasof a national customs territory, often at anadvantageous geographical location (Madani,1999) with an infrastructure appropriate forcarrying out trade and industrial operationsand subject to the principle of customs and

There is evidence suggesting that EPZs haveplayed an important role in the export performanceof many countries. As one expert (Radelet, 1999,p. 14) put it:

“Perhaps the most compelling piece ofevidence in support of platforms is that the vastmajority of manufactured exports in the successfuleconomies utilized at least one of these facilities.Simply put, manufactured exports did not expandrapidly in any country except through one ofthese facilities. In Taiwan [Province of China],and [Republic of] Korea, for example, essentiallyall manufactured exports were either producedin a zone or a bonded warehouse, or used dutyexemption/drawback systems. The vast majorityof China’s manufactured exports come through

Box VII.10. The role of EPZs in exports: evidence from selected countries

the special economic zones. In Malaysia, as muchas 75% (in 1979) of all manufactured exports wereproduced just in EPZs, (and the share still exceeds55%); most other manufactured exports go throughbonded warehouses or use duty exemptions(Sivalingam, 1994). Over 95% of Mauritius’manufactured exports are produced in EPZs. InKenya, 75% of manufactured exports use at leastone facility, with the vast majority dependingon the duty exemption system. Exports fromMexico’s maquiladoras account for over 50% oftotal manufactured exports, and a much largershare of manufactured export growth. In theDominican Republic EPZ exports account for 80%of all exports, and almost all manufactured exports(Warden, 1999a and 1999b).”

Source : Radelet , 1999.

��


fiscal segregation. Typically, customs servicesare streamlined and red tape is kept to aminimum, often through one-stop shoppingfor permits and investment applications.Licensed enterprises within the zones produceexclusively or mainly for foreign markets.Incentives frequently available in EPZs include:

• Duty drawbacks or exemptions from importduties on raw materials, intermediate inputsand capital goods used in the productionof exported products;

• Exemptions from the payment of sales taxon exported products as well as on allgoods and services domestically purchasedand used in their production;

• Tax holidays, tax rebates or reduced taxrates on corporate income or profits, linkedto the export performance of companiesor to the percentage of exports in totalproduction; and

• The provision of subsidized services suchas land, office space, utilit ies (water,electricity, etc.) and other facilities.

Bonded factories or warehouses sharesome of the characteristics of EPZs. Toreduce the likelihood of fraud caused by sellingduty-free imports in the domestic market,firms are required to post some guarantee.As in the case of EPZs, bonded factoriesare now often allowed to sell some of theirproduction for domestic consumption.34 In

that case, they are asked either to pay dutyon the inputs used or duty as applicable onthe final goods. A large number of bondedfactories are found in economies such asHungary, Kenya, Malaysia, Mauritius, Pakistan,Taiwan Province of China, and the Republicof Korea, where they have been qui tesuccessful in promoting exports. In TaiwanProvince of China, for instance, bondedfactories are also common in science-basedindustrial parks (Jenkins and Kuo, 2000).

The nature of EPZs is evolving anddefinitions (unless broad) do not capture thedynamics of the phenomenon. As alreadynoted, in recent years, the export requirementhas been relaxed in many countries, thusallowing for significant domestic sales. Moredomestic companies are now establishedin the zones and efforts are being made byGovernments to encourage more linkagesbetween foreign affiliates and domestic firms,as well as to encourage training of localemployees and development of technical andtechnological infrastructure.

Experience shows that EPZs can besuccessful in earning foreign exchange,increasing employment and developing exportcompetitiveness (boxes VII.11 and VII.12).However, the performance of EPZs dependsvery much on other policies, policies that go

Data on FDI in EPZs exist for only a smallnumber of countries. Judging by the experienceof some ASEAN countries, which had 130 EPZsat the end of 2001 (ASEAN Secretariat, 2002),athe relationship between the location of foreignaffiliates and the location of EPZs seems, in general,to be weak. However, there are some exceptions.In the Philippines, the share of FDI flows to EPZsrose from 30 per cent of the total in 1997 to 81per cent in 2000. In Bangladesh also, EPZs areknown to have attracted considerable FDI in flowsin 2000, $54 million out of the $170 million in totalFDI inflows were registered in the EPZs inChittagong and Dhaka (JETRO, 2002)b.

Box VII.11. FDI in some developing country EPZs

In Latin America, the maquiladoras received31 per cent of the total manufacturing FDI inMexico between 1994 and 2001.c No similar dataare available for other countries in the region.However, in terms of value added, maquila plants(both domestic and foreign) in six Central Americancountries (Costa Rica, El Salvador, Guatemala,Honduras, Nicaragua and Dominican Republic)accounted for between 9 per cent (Guatemala)and 43 per cent (Dominican Republic) of theindustrial GDP in 1996. Foreign firms wereresponsible for between 35 per cent (El Salvador)and 84 per cent (Dominican Republic) of the capitalof maquila plants (Buitelaar and Padilla, 2000).In Costa Rica, some three-quarters of all foreignaffiliates are located in EPZs.d

Source : UNCTAD.a FDI under the auspice of the Philippine Economic Zone Authority, the Subic Bay Metropolitan Authority and

the Clark Development Corporation are considered FDI in EPZs.b Increases in the cumulative value of FDI between August 2000 and August 2001. FDI in the Monla EPZ is also

included but it is still very small.c “Maquila” in Mexico is an administrative status awarded by the Government to companies engaged in an industrial

or service process for merchandise of foreign origin, imported temporarily for transformation or value added,and subsequent re-export.

d Information obtained from the Proyecto de Desarrollo de Proveedores in Costa Rica.

��


beyond incentives and aim at enhancing humanresources and creating the infrastructurenecessary to attract and upgrade export-orientedFDI. There are zones that have been successful,as in China, the Dominican Republic, Mauritiusand Singapore. On the other hand, there aremany that have failed to attract substantialinvestment and where outlays have far exceededsocial benefits. In Kenya, for instance, EPZsestablished at great expense have lain mostlyidle. The small size of the regional CommonMarket for Eastern and Southern Africa,inadequate infrastructure in Kenya, theappreciation of the domestic currency and risinglabour costs have together resulted in muchsmaller volumes of exports than expected (Jenkinsand Kuo, 2000). However, there was animprovement in the performance of KenyanEPZs in 2001, following the introduction ofthe AGOA initiative (Kenya, EPZA, 2001).

A comprehensive cost-benefit analysisof zones is difficult to undertake. In particular,some potential long-term and structuralcontributions to the local economy are moredifficult to appraise as they derive from dynamicgains that can only be realized over time and

through deliberate effort, such as learning andabsorbing foreign technologies and transformingthe pattern of economic growth from an inward-looking to an outward-looking one (Johansson,1994; Ge, 1999a). Furthermore, costs suchas environmental degradation and foregonerevenues are difficult to quantify and may revealtheir extent only over time. An additional costand danger is the risk of “leakage” of duty-free goods into the domestic market. Thishas the potential to undermine the developmentof backward linkages by preventing localenterprises from emerging or it can even destroylocal enterprises.

In terms of human capital, EPZs cancontribute to the domestic economy if foreigninvestors engage in substantial training andif the workplace encourages learning by doing,as in Singapore and the Philippines (Rhee,Katterbach and White, 1990; ILO, 2001). Thisincreases the productivity of the local workforce. Furthermore, learning can also occurat the managerial and supervisory level, thuspotentially fostering local entrepreneurship.This is important since firms in developingcountr ies of ten lack the product ion and

Foreign affiliates account for about 80 percent of the total exports of Hungary. Many ofthe TNCs investing in Hungary have chosen tolocate their export activit ies in one of the“industrial free trade zones” in the country.Unusually, the investing firms, not the nationalauthorities, choose the location for a zone. Asa result, the Hungarian industrial free-trade zonesare more geographically dispersed than EPZs inother countries, although investors have preferredto establish their zones in the most advantageoussites. In 2001, 63 per cent of them were locatedin north-western Hungary, close to the Vienna-Budapest highway, 26 per cent to the south-eastof Budapest, mostly along the M3 motorway, and11 per cent in the metropolitan zone of Budapest.Within four years (1997-2001), the number of suchzones increased by 40 per cent, to 125. Practicallyall firms operating in these zones are affiliatesof electronics, software or automotive TNCs,including Audi, Opel, IBM, Nokia, Philips andFlextronics.

The first legal framework for the industrialfree trade zones was established by the 1988 LawXXIV/1988 on Foreign Investment. Such zonesare separated from the national customs territoryby a licence issued by the authorities. All firmsthat meet the criteria are eligible withoutdiscrimination. Activity in a zone is also subject

to licensing. The zones enjoy a special statusfor customs, trade and foreign-exchangeregulations. In contrast to some other countries,Hungary allows duty- and VAT-free imports tothe zones, not only of materials and parts butalso of equipment and investment goods usedfor manufacturing. Only goods not directly usedin manufacturing are subject to duty. Firms canhold their capital and keep their books in foreigncurrency but are subject to Hungarian taxes,with the exception of VAT. Since January 1993,at least 2000 m2 of territory are required toestablish an industrial free-trade zone andpermission from the Ministry of Finance isnecessary for selling or buying a zone.

The zones have been among the enginesof export growth and modernization in Hungary.Success in attracting some leading TNCs hasrecently been followed by a wave of first-tiersuppliers. The zones usually draw fully foreign-owned greenfield investments. Of the exportingforeign affiliates, those located in the zoneshave shown particularly strong trade dynamism.Between 1996 and 2001, their exports grew morethan five times as compared to a doubling ofHungary’s exports as a whole. In 2001, the zonesaccounted for 44 per cent of the country’s totalexports, more than 90 per cent of which go tothe European Union (annex table A.VI.2).

Source : UNCTAD, based on Antalóczy, 1999.

Box VII.12. EPZs in Hungary

��


marketing know-how required to enter worldmarkets .

However, s ince EPZ product ionprocesses often involve low skills and lowtechnology, particularly in the garment andfootwear industries and in the assembly ofelectronic components and light machinerygoods, training is limited. Countries that haveencouraged low-quality FDI in the hope thathuman capital could be improved once theyhave attracted sufficient productive resources,have found it difficult to escape the low-value-added trap. Low-quality FDI involvesfirms with few linkages with the domesticsector, low potential for technology spilloversand short-term horizons. Such firms investlittle in productivity and skills development(ILO, 2001). Moreover, the learning thatdoes take place may be limited to industrialdiscipl ine and routine. Labour-intensiveprocessing industries generally compete onprice, and labour is often seen more as acost to be contained than as a resource tobe developed. While wages tend to be higher,on average, in the zones than in the restof the economy, there is considerable variance,and conditions of work are at times affectedby lax labour, safety and health regulations.Employers in EPZs generally use pay-incentiveschemes that entail longer hours of moreintensive work than non-EPZ enterprises (boxVII.13). In these zones, trade unions aregenerally barred from organizing to improvethe conditions of workers (ILO, 1998; WIR99,box IX.5). In contrast, zones with coherentand comprehensive pol icy f rameworks ,provisions for human resource development,good working and living conditions, and stablelabour relations attract quality investors (ICFTU,1999).

EPZs may furthermore contribute tothe upgrading of physical capital. Successfulzones are those for which Governments havecreated an efficient and competitive industrialinfrastructure. While this may only be availableto a limited number of firms (foreign ordomestic), it can have important demonstrationand catalytic effects. A successful and well-integrated zone can also be considered alaboratory for, and a spur to, policy reform.As confidence is gained, the zone frameworkcan be replicated in other parts of the countryand the early investors start to move outof the original zone. For instance, the successfuldevelopment of the initial zones in Chinaprompted demands for similar zones elsewhere.

In addition, pressures, not just for spreadingbut also for deepening policy and institutionalreforms, are likely to mount over time. Forinstance, demand for trade-related financialservices may rise, forcing the financial sectorto perform. These forces may in turn leadcountries onto a path towards greater economicefficiency (Ge, 1999a). For instance, inMalaysia, EPZs are thought to have had afavourable impact on the regulatory frameworkand the business environment (Sivalingam,1994).

The industrial composition of producerswithin EPZs and other zones is also evolving.Whereas they used to be dominated by low-technology, labour-intensive, manufacturingactivities, many are now moving into newareas. Among the most advanced of the newkinds of zones is the one in Kaohsiung, TaiwanProvince of China; it began with simple sewingin 1967, expanded to fashion garments, thento electronics assembly and then to electronicdesign, testing and R&D, and is now movinginto the business of host ing corporateheadquarters and global logistics centres(OECD, 2001a). Indeed, among developing-country WTO members, this trend may beaccelerated by the WTO disciplines in thearea of export subsidies.

More specifically, as mentioned above(section VII.E), apart from the developing-country members l is ted in Annex VII ofthe SCM Agreement (namely LDCs andmembers l is ted in Annex VII , unti l theirper capi ta GNP income reaches $1,000),WTO members will have to eliminate exportsubsidies as of 1 January 2003, with theexcept ion of those granted an extensionof the transition period.35 And even thosegranted an extended transition period needto consider what to do once i t expires.36

Subsidies linked to the export of servicesare, in principle, not prohibited and thismay favour a shift towards service-orientedactivities. The possibility of offering otherspecif ic incent ives that do not meet thedefinition of prohibited subsidies remainsbut, as noted above, any “specific” subsidythat causes adverse effects to another WTOm e m b e r ’s i n t e r e s t s i s a c t i o n a b l e a n dpotent ia l ly subject to remedial act ion.37

In particular, subsidized exports to anotherW T O m e m b e r m a y b e s u b j e c t t ocountervailing measures if they cause, orthrea ten to cause , mater ia l in jury to a

��


As EPZs have become an important partof export-oriented industrialization, critics havecharged that competition for export-oriented FDIusing EPZs contributes to a “race to the bottom”,as it involves a deliberate lowering of socialand environmental standards. More specifically,along with incentives such as tax holidays, duty-free imports and good infrastructure, EPZs offerabundant and relatively cheap labour, sometimeswith exemptions from national regulation on labourprotection.

Substandard labour conditions can emergefrom the repression of rights such as freedomof association and collective bargaining, andfrom unregulated terms and conditions ofemployment. These situations in the zones mayresult from a lack of enforcement by Governmentsof labour laws or regulations that, in principle,apply in the zones as well as in the rest of thecountry, or from exemptions or variances in labourlaws or regulations applicable in the zonescompared with those applied elsewhere (ILO,2001, Part I, paras. 151-55). Responses froma sample of 125 Governments, workers andemployers’ organizations reported that manycountries apply the same labour laws in EPZsas elsewhere (ILO, 2001); another report found,however that, in practice there were severerestrictions on rights to organize in EPZs (ILO,2000a).

The issue of practices in EPZs was recentlycovered in the ILO Seventh Survey on the EffectGiven to the Tripartite Declaration of Principlesconcerning Multinational Enterprises and SocialPolicy (ILO, 2001). In one Latin American country,workers reported that enterprises in EPZs havedestroyed ecosystems and lowered relative wages.In general, worker views were that there hasbeen no transfer of skills from foreign affiliates

operating in the country. The ILO’s Committeeon Freedom of Association has also examinedcases involving blacklisting and massivedismissals that highlight the unwrittenunderstanding that unionization is unacceptablein zones.a The country has since set up aspecialized Labour Inspectorate to protectfreedom of association in the zones. In oneAfrican country, government views were thatforeign enterprises have taken advantage ofthe weak enforcement of safety and healthregulations to operate at a much lower levelof standards. EPZs in the country were grantedexemptions from health and safety (which aredue to be removed) and this acted as anincentive to investors. In another Africancountry, government views were that workersin EPZs receive less favourable treatment thanelsewhere and that women working in thesezones had to work overtime and at night (ILO,2001).

By contrast , the views of an AsianGovernment were that foreign investors playeda key role in identifying skills needed so thatthese could be developed through trainingprogrammes. There has also been a skills transferbetween foreign affiliates and domestic industryin that country. Foreign affiliates have initiatedmeasures to improve existing practices in EPZs,for example through a gains-sharing programmethat provides benchmarks for foreign and localcompanies operating in the same industry line(ILO, 2001).

The fact that some countries view limitinglabour and environment standards as anincentive to FDI in EPZs may indicate a needfor collective action involving a variety of actorsto limit the risk of a possible “race to thebottom”.

Box VII.13. EPZs and the “race to the bottom”

Source : UNCTAD, based on informat ion provided by ILO and Chris t ian Aid.a See ILO, CFA No.1658 (1993) and No. 1732 (1994) both available on http://ilolex.ilo.ch:1567/

domestic industry that provides a productin the importing member. The provision ofsuch subsidies therefore remains risky.38

The options available to developing-country members not included in Annex VIIare: ( i ) to mainta in incent ives for EPZcompanies but eliminate the conditionalityof restricting sales in the domestic market;or (ii) to establish for all domestic companiesa new system of incent ives that i s notcontingent upon export performance in eitherlaw or fact (Roessler, 2001, pp. 33-34).

Moreover, WTO rules permit the use of bordertax adjustments. Thus, EPZs can continueto exempt exports by companies in thesezones from indirect taxes (such as sales taxes),border taxes (e.g. consular fees) and importcharges. Duty drawbacks and duty exemptionsare thus permissible. While duty drawbackschemes may not include capital goods usedto produce exported goods, many smallerWTO members may have little or no domesticproduction of such capital goods, and thuscould consider simply lowering or eliminatingimport duties on such goods.

��


Finally, efforts should be made to provideimproved industrial infrastructure and servicesand a skilled labour force. As this involvescost, countries may still see an advantage increating and maintaining special designatedareas – as islands of efficiency and as stepstowards expanding such facilities more widelyin the country as the economy develops.Traditional EPZs can thus become redundantover time and transform themselves into industrialparks or other formations more integrated withthe rest of the economy. Indeed, such zonesmay eventually become parts of industrial clusters(section VII.G), especially when combined withadditional efforts to build institutional capacityand upgrade human skills.

Notes

1 See USITC, 1999 and europa.eu.int/comm/taxation_customs/customs/customs.htm.

2 Some developing countries also extendpreferences to other developing countries andLDCs, for instance, under the Global Systemof Trade Preferences.

3 For more information on these and otherpreferential trade schemes see www.unctad.org/gsp/index.htm; www.agoa.gov; www.ustr.gov/r eg ions /whemisphe re / camer i ca / cb i . sh tml ;europa .eu . in t /comm/development /cotonou/agreement_en.htm.

4 The text agreed on by Ministers in Doha states:“… negotiations will take place after the FifthSession of the Ministerial Conference…on thebasis of a decision to be taken, by explicitconsensus, at that Session on the modalitiesof negotiations” (WTO Document WT/MIN(01)/Dec/17, para. 27).

5 Ibid.6 These articles deal with transparency, public

information, formalities associated with importingand exporting, and goods in transit.

7 ASYCUDA is short for Automated SYstem forCUstoms Data.

8 Obviously, an export performance requirementwould be redundant if a firm were to exportthe same or more without governmentintervention.

9 An important ruling by a panel in a GATT disputesettlement proceeding between the United Statesand Canada clarified this point in 1984. In Canada,a panel considered a complaint by the UnitedStates regarding certain types of undertakingsthat were required from foreign investors bythe Canadian authorities as conditions for theapproval of investment projects. Theseundertakings pertained to the purchase of certainproducts from domestic sources (local contentrequirements) and to the export of a certainquantity or percentage of output (exportperformance requirements). The Panel concludedthat the local content requirements wereinconsistent with the national treatment obligationof Article III:4 of the GATT but that the export

performance requirements were not inconsistentwith GATT obligations.

10 Examples include the United States-Israel FTA(1985); NAFTA (1994); the Canada-Chile FTA(1997); the Mexico-Nicaragua FTA (1997); andthe FTAs between Mexico, El Salvador, Guatemalaand Honduras (2000) (UNCTAD, 2001f)

11 For the case of Taiwan Province of China, seeWade, 1990.

12 Advantages awarded in this context includetariff protection against import competition,duty rebates on imported inputs, fiscal andfinancial incentives.

13 Generally, financial incentives include grants,subsidized credits and insurance at preferentialrates; fiscal incentives are tax holidays, reductionor exemption of taxes on profits, capital, labour,sales, value added, particular expenses, importsand exports; and other incentives range fromsubsidized infrastructure to market preferencesand other preferential treatment (UNCTAD, 1996;2000a).

14 Detailed studies of the use of tax incentivesto promote investment in Brazil, Indonesia,Malaysia, Mexico, Pakistan, Thailand and Turkeyfound that such instruments often led to distortedinvestment decisions, partly because theydiscriminated between firms that showed lossesin early years and those that did not, andbetween relatively capital-intensive activitiesand relatively labour-intensive activities (Moran,1998).

15 A study of the impact of tax incentives inIndonesia found that, although they may havehelped to attract some FDI into the country,that might otherwise not have come, the coststo the taxpayer were far in excess of the benefitsof the additional investment (Wells and Allen,2001).

16 The most commonly used fiscal incentives indeveloping countries are tax holidays andreductions in the standard corporate incometax rate. These are followed by duty exemptionsand drawbacks, accelerated depreciation, specificdeductions from gross earnings for tax purposes,investment and reinvestment allowances, anddeductions from social security contributions(UNCTAD, 2000a).

17 For information on a new incentive scheme inPoland, see box III.10 (chapter III) of this WIR.

18 The same applies to enterprises that are deemedhigh- or new-technology enterprises.

19 Income Tax Law of the People’s Republic ofChina for Enterprises with Foreign Investmentand Foreign Enterprises (effective 1 July 1991);Rules for the Implementation of the Income TaxLaw of the People’s Republic of China forEnterprises with Foreign Investment and ForeignEnterprises (effective 1 July 1991).

20 The old policy stated that companies exporting80 per cent or more of their output were allowedto be fully foreign-owned; companies exporting20-79 per cent of their sales could have up to79 per cent of the equity in foreign hands; andother companies could have up to 30 per centequity. The policy will be reviewed again after31 December 2003 (Cheng, 2001).

��


21 In the WTO context, the term country includesany separate customs territory member of theWTO.

22 The countries referred to in Annex VII are theLDCs and those WTO members listed in AnnexVII(b) until their GNP per capita reaches $1,000.Apart from the LDCs, the list includes Bolivia,Cameroon, Congo, Côte d’Ivoire, DominicanRepublic, Egypt, Ghana, Guatemala, Guyana,India, Indonesia, Kenya, Morocco, Nicaragua,Nigeria, Pakistan, Philippines, Senegal, Sri Lankaand Zimbabwe. In addition, Honduras wasincluded in the list through a rectification in2001. WTO members agreed at Doha “that AnnexVII(b) to the Agreement on Subsidies andCountervailing Measures includes the membersthat are listed therein until their GNP per capitareaches US$1,000 in constant 1990 dollars forthree consecutive years” (see WTO documentWT/MIN(01)/Dec/17, para.10.1).

23 Prohibited subsidies are deemed to be specific(Article 2.3 of the SCM Agreement).

24 For example, certain subsidies related todeveloping-country members’ privatizationprogrammes are not multilaterally actionable.With respect to countervailing measures,developing-country members’ exporters areentitled to more favourable treatment with respectto the termination of investigations where thelevel of subsidization or volume of imports issmall.

25 WTO Document WT/MIN(01)/Dec/17.26 “Programmes eligible for extension pursuant

to these procedures … are export subsidyprogrammes (i) in the form of full or partialexemptions from import duties and internal taxes,(ii) which were in existence not later than 1September 2001, and (iii) which are providedby developing country Members (iv) whoseshare of world merchandise export trade wasnot greater than 0.10 per cent …, (v) whosetotal Gross National Income (“GNI”) for theyear 2000 as published by the World Bank wasat or below US$ 20 billion, …” WTO DocumentG/SCM/39.

27 The following WTO members have made requestson the basis of the procedures in G/SCM/39:Antigua and Barbuda; Barbados; Belize; Bolivia;Costa Rica; Dominica; Dominican Republic; ElSalvador; Fiji; Guatemala; Grenada, Honduras;Jamaica; Jordan; Kenya; Mauritius; Panama;Papua New Guinea; Sri Lanka; St. Kitts andNevis; St. Lucia; St. Vincent and the Grenadines;Suriname; Uruguay. Other requests under Art.27.4 have been made by Colombia; El Salvador;Panama; Thailand and Uruguay (see WTODocument G/SCM/40/rev.2 of 13 March 2002).

28 It should also be recalled that neither the originaltransition period nor its extension will protecta member from the possible application ofcountervailing measures in respect of subsidizedexports.

29 For an interesting, albeit isolated, jurisprudentialdevelopment admitting the possibility ofrepayment, see Australia – Subsidies providedto producers and exporters of automotive leather

– Recourse to Article 21.5 of the DSU by theUnited States, WTO/DS126/RW, 21 January 2000.

30 A proposal to consider subsidies linked to thepursuit of development goals non-actionablehas been noted in the decision on“Implementation-related issues and concerns”adopted at the WTO Doha Ministerial Meeting(WTO Document WT/MIN(01)/Dec/17, para.10.2).

31 Training programmes with the active participationof TNCs to upgrade the product quality andproductivity of domestic companies have beenset up in Indonesia, Ireland, Malaysia, Singaporeand Wales (United Kingdom) (WIR99; WIR01).

32 For a discussion of EPZs, see, Wall (1976), Ping(1979), Pollack (1981), Jayawardena (1983),Spinanger (1984), Sklair (1985) and Rondinelli(1987). More specific studies include Warr (1984)about a zone in the Republic of Korea; Leinbach(1982) and Warr (1987) about the EPZs inMalaysia; Kumar (1987) about the zones in India;and Wideman (1976) about the zones in thePhilippines. Germidis (1980), Basile and Germidis(1984), UNIDO (1980) and UNCTAD (1985)describe EPZs in developing countries, includingin Brazil, Egypt, Mauritius, Mexico, Peru, Tunisiaand Sri Lanka. Jenkins, Esquivel and Larraín(1998) review the experience of EPZs in CentralAmerica. Studies of the special economic zonesin China include Chang (1986), Chu (1985), Crane(1990, 1993), Fewsmith (1986), Harding (1987),Howell (1993), Kleinberg (1990), Li and Zhao(1992), Oborne (1986), Solinger (1984), Stoltenberg(1984), Sit (1986, 1988), Sklair (1985), Wong (1987)and Ge (1999b).

33 Information provided by the Philippines EconomicZone Authority.

34 As early as 1983, maquiladora firms in Mexicowere allowed to sell up to 20 per cent of theirproduction on the domestic market (Buitelaarand Padilla Perez, 2000). In Mauritius, companiesare not located in specified areas and may sellup to 20 per cent of their production duty-free,subject to authorization by the Industry Ministry(WTO, 2001a).

35 Arguably, the last sentence of Article 27.4 ofthe SCM Agreement would allow WTO members,which had requested but been denied anextension two additional years to phase outtheir export subsidies. If this is correct, thensuch members would have until 1 January 2005to phase out their export subsidies.

36 Most of the members that have made a requestfor extension have done so in relation to export-subsidy programmes used in the context of EPZs.

37 Although the only subsidies granted ormaintained by a developing-country memberthat may be subject to a dispute settlementchallenge based upon serious prejudice are exportsubsidies .

38 However, as noted above, in the context oflocational grants not, de jure, contingent uponexport, and when the granting of an incentivepre-dates production and export, it may be moredifficult to prove adverse effects of the incentiveson trading partners.

CHAPTER VIII

TARGETED PROMOTION

A. Targeting export-oriented FDI

Investment promotion can play animportant role in the process of attractingexport-oriented FDI in line with a country’sdevelopment objectives. It covers a rangeof activities, including investment generation(e.g. image-building, general marketing, investortargeting), investment facilitation, aftercareservices and policy advocacy to enhance thecompetitiveness of a location (Wells and Wint,1990; Wells, 1999; Loewendahl, 2001a). Thissection addresses one of the key motives forGovernments to engage in investment promotion:to remedy inefficiencies in the market forinformation. No matter how competitive a hostlocation is, it will not attract export-oriented FDIunless investors are aware of the opportunitiesit offers.

As of today, the majority of countrieshave already moved from the first generationof investment promotion – which mainly involvesthe opening up of an economy to FDI – tothe second generation, in which a Governmentdecides to “market” its location actively, notablyby setting up an investment promotion agency(IPA) (WIR01). The number of IPAs increasedsubstantially in the 1990s: currently there areover 160 national IPAs and well over 250 sub-national ones (UNCTAD, 2002d). To increasethe efficiency of investment generation and,in particular, to enhance the chances of attractingexport-oriented FDI, a number of IPAs go furtherand utilize at least part of their FDI promotionresources for investor targeting. It is this thirdgeneration of more focused promotion strategiesthat is discussed in this section, with specialemphasis on attracting export-oriented FDI.Third-generation promotion can be an effectivepolicy tool, but it is not an easy task and involvescertain risks. These are addressed specificallyat the end of this section. Other aspects ofinvestment promotion, including investmentfacilitation, aftercare services and policy advocacywill be discussed in subsequent sections.

1. Why target?

Targeting can be defined in differentways. In principle, it involves the focusingof promotional resources on attracting a definedsub-set of FDI flows, rather than FDI ingeneral. Targeting is by no means a newphenomenon. Some countries, notably Singapore(box VIII.1), Ireland, the Netherlands andregions of the United Kingdom have practisedi t for some t ime, wi th much success .1

However, it is only recently that targetinghas become a more widely accepted tool amongIPAs. Costa Rica is perhaps the best-knownrecent example in the developing world. AmongLDCs, the IPAs of Bangladesh, the UnitedRepublic of Tanzania and Uganda, for example,have all developed investor-targeting strategies.Why have they done so?

First and foremost, a targeted approachcan help countries achieve strategic objectivesre la ted to such aspects as employment ,technology t ransfer, exports and clusterdevelopment , in l ine wi th thei r overal ldevelopment strategies, especially when theattraction of export-oriented FDI is seen asan integral part of such strategies. Effectivetargeting involves a comprehensive approachto attracting investment that can contributeto development and enhance thecompetitiveness of a location. It also requiresthe adoption of government policies thatunderpin the specific marketing activities anda coordination of the relevant governmentagencies, including the IPA, in order to defineinvestment priorit ies and the package ofadvantages offered in the framework of anoverall development strategy.

A second reason for engaging ininvestor targeting to attract export-orientedFDI (other than resource-seeking FDI) isthe increased competition for this kind ofinvestment. Because TNCs typically consider

��


Box VIII.1. Singapore: an early mover intargeting export-oriented FDI

Singapore’s successful multi-decadeprogramme of targeting export-oriented FDI tracesits origins to the late 1960s. After independencein 1965, Singapore realized that a developmentstrategy of import-substitution industrialization,with FDI attraction focusing on market-seekingFDI, would not be a recipe for success. As partof an investment attraction strategy targetingexport-oriented FDI, the Government set up theEconomic Development Board (EDB) and gaveit significant financial resources (correspondingto more than 4 per cent of GDP) to recruitqualified and well-paid professional staff toimplement a strategy of attracting export-orientedFDI. The EDB became a “one-stop-shop” withthe authority to coordinate all activities relatedto industrial competitiveness and FDI. Thisinvolves, among other things, policy formulation,the provision of incentives, and the creationof industrial estates to guide foreign investorsinto targeted activities.

The breakthrough came when TexasInstruments, after four months of discussionswith the EDB, set up a semiconductor plant inthe country in 1968. Texas Instruments’ decisionsent a signal to other electronics companiesto consider Singapore as an investment location.By the end of the 1990s, there were more than50 companies involved in the Singaporesemiconductor industry, most of which wereforeign-owned, employing some 21,000 staff.As the economy developed and wages increased,the EDB has gradually shifted its focus towardsmore sophisticated activities. More recently,special programmes (including designatedincentive packages) have been launched to makeSingapore an attractive base for regionalmarketing, distribution and service, and forregional headquarters. These targeting effortshave been complemented by various initiativesto enhance the availability of highly skilled labourand technological capabilities.

Sources: UNCTAD, based on Yew, 2000; Te Velde,2001; Lal l , 2000a; Mathews, 1999.

a broader set of potential investment locationsfor export-oriented FDI, the need for a focusedapproach is particularly relevant. Investmentpromotion s t rategies need to ref lect thechanging corporate strategies that are drivingfirms to adopt geographically and functionallymore specialized production systems (chapterII). It is no coincidence that many of thecountries most successful in targeting arerelatively small. Larger economies, such as

Brazil, China, India and Mexico, may benefitboth from being better known to foreigninvestors and from offering a substantialdomestic market, which has the advantageof adding economies of scale to the productionfor export. For smaller and less well-knowneconomies, targeting is more important toattract export-oriented FDI (Wells, 1999).This is not to say that relatively large countriesdo not use targeting too. However, it is oftenthe case, as in the United Kingdom, the UnitedStates and India, for example, that the actualtargeting is undertaken in such countriesprimarily at the sub-national level.

A thi rd reason re la tes to cost -effectiveness. A focused approach to attractexport-oriented investment is likely to be lesscostly, vis-à-vis the results achieved, thanone in which an IPA attempts to attract newinvestment in a more ad hoc fashion. ManyIPAs have realized that general image-building,involving advertising and participation in tradefairs, can be a waste of resources unlessit is done as part of a well-defined strategyto attract a specific kind of FDI. There areof course costs associated with investortargeting. In fact, some of the IPAs thathave been practising targeting for a long time– such as those in Ireland and Singapore– have had very large budgets at their disposal.However, there does not appear to be a closecorrelation between the size of a budget andthe share devoted to targeting. The pointis rather that the more targeted the effort,the greater the chances that the informationprovided is actually relevant to the recipients’decis ion-making. As the exper ience ofKyrgyzstan shows, a targeted effort can leadto results even with limited resources andunder less than attractive conditions (boxVIII .2) .

2. What to target?

Once an IPA has decided to usetargeting as part of its strategy to attractexport-oriented FDI, the next challenge isto determine what industr ies , act ivi t ies ,countries, companies and, ultimately, individualmanagers should be targeted. The startingpoint for the selection process is a carefulassessment of the strengths of a location– a country or a part of it – as a base forexport production.

��

CHAPTER VIII TARGETED PROMOTION

Box VIII.2. Targeting investors in a specificniche: sun-dried tomatoes in Kyrgyzstan

Being a small, poor and land-locked country,Kyrgyzstan has a difficult starting position forattracting export-oriented activit ies. Tocompound the problems in attracting FDI, allinvestment incentives had been eliminated toincrease the tax base. Through technicalassistance projects, Goscominvest, the IPA,developed a first-class website and goodpromotional materials. Despite these initiatives,it was not “on the radar screen” of most foreigninvestors and had insufficient funding foroutbound missions, advertisements in businesspublications and broad-based image-building.In response to these problems, it developedan investor-targeting strategy. Interestingly,even though Kyrgyzstan had a comparativeadvantage in such industries as meat and woolproduction, attracting FDI to these industrieswas deemed to be impractical for various reasons.

Vegetables faced a somewhat differentproblem. Despite limited arable land, vegetablesproduced in the southern valley of Kyrgyzstanare of high quality. An expert from the Foodand Agriculture Organization of the UnitedNations (FAO) had evaluated the country’stomatoes as the most nutritious and best-tastingof all the countries studied by the FAO. Still,exporting to neighbouring Uzbekistan wasimpossible because of trade restrictions anda dual exchange-rate system. Transport costsand long transport routes by land foreclosedmarkets in the Russian Federation and Europefor fresh produce, except by air freight at aconsiderable cost. The use of poor-qualitytinplate for canning, and glass bottles, prohibitedexports of processed vegetable products. Thus,even though high-quality tomatoes sold for 4cents a kilo in the market, this comparativeadvantage could not be translated intocompetitive advantage on export markets.

The project finally identified two agriculturalproducts with investment potential: sun-driedtomatoes and wild mountain herbs that grewin abundance throughout Kyrgyzstan’s mountainranges. Goscominvest staff sent informationon the investment opportunities, such as supplyavailability and comparative costs, to the specificcompanies identified as potential investors inthe Investor Roadmap project via the Internet.Four companies responded favourably and visitedKyrgyzstan. Within six months, investmentcommitments had been secured from twocompanies based in Europe totalling severalhundred thousand dollars.

Source: UNCTAD.

a. Identifying comparative advantages

The purpose of this assessment is tobenchmark a location against competing onesto identify its main relative strengths andweaknesses. This is important to increasethe chance that efforts to promote export-oriented FDI result in development gains,as well as to reduce the risk of promotingareas in which a country is unlikely to besuccessful in attracting FDI. Countries withbetter knowledge of their comparative situationstand a bet ter chance of developing acompetitive “package” that can match theassets controlled by foreign investors. Suchan assessment also helps Governments toidentify areas in which policy changes maybe needed to make the business environmentmore a t t ract ive and more conducive tobenefiting from export-oriented FDI. However,to identify opportunities to attract or upgradeexport-oriented FDI, countries also need totake into account the key factors affectingthe location of production in different industries.This assessment can be undertaken at thenational, sub-national, industry, activity oreven project level . The discuss ion hereconcentrates mainly on the national level.2

A natural starting point for assessing acountry’s strengths as a base for export-orientedproduction is to look at the prevailing patternsof exports and imports and the prevailing industrystructure. Trade analysis can help identify thecomparative advantage of a country. A numberof tools developed by the International TradeCentre (www.intracen.org) allow countries notonly to assess where their revealed comparativeadvantages lie, but also which other countriesare competing in key product areas, where thereis demand for particular products and which productcategories are among the most dynamic in worldtrade (box VIII.3).3

Obviously, trade analysis is primarilyrelated to historical performance rather thanthe potential of a country. Countries alsoneed to consider FDI-re la ted exportopportunities in the areas of services andfor products that are “up-and-coming” buthave not yet been reflected in trade statistics.For the la t ter, t rade analys is can becomplemented with an analysis of industrystructure, as this may indicate areas in whicha country’s export potential has not been

��


The International Trade Centre (ITC) hasrecently developed a number of tools that maybe helpful in identifying industries and marketsto target for export-oriented FDI. Some of theseare available free of charge, whereas others canbe subscribed to. According to a joint study bythe ITC and the Multilateral Investment GuaranteeAgency (MIGA), these tools have recently helpedidentify such opportunities in six Africancountries.a

Country Maps tools provide useful inputsfor assessing comparative and competit iveadvantage. They are available at www.intracen.orgunder “Country approach”. Two of the tools areof particular interest in assessing tradeperformance. The Trade Performance Index helpsto assess trade performance at the country levelby providing a general macroeconomic profileand ranking for each industry; essentially a staticview of a country’s recent export performance.The Index covers 184 countries and 15 differentindustries. The second tool, the National ExportPerformance provides an overview of the exportperformance and specialization of countries interms of the dynamics of international demand.This tool provides a chart divided into fourquadrants, with different interpretations in termsof trade promotion and attractiveness for FDItargeted at international markets (see box figureVIII.3.1 for the case of Mozambique). Of particularinterest is the so-called “champion industries”quadrant, which displays high-growth sectorsin which the country has proven its internationalcompetitiveness. Efforts to attract FDI for theseproducts are less risky, as they are nationalsuccess stories that can serve as reference points.Promotional efforts for these products shouldaim at broadening the supply capacity. Industrieslocated in the “underachievers” quadrant arealso interesting; since the demand side prospectsare good, there may be scope for attracting export-oriented FDI into these industries.

Interactive Trade Maps allow users toanalyse trade flows and patterns of protectionfor over 180 countries and territories. This analysiscan contribute to the identification of thoseindustries that could attract FDI in a given countryand the markets to target. This tool provideson line access to the world’s largest trade databaseand to market-access data obtained from theUNCTAD’s Trade Analysis and Information System(TRAINS) database in an interactive environment.It is available on a subscription basis (see

[email protected]) and is largely used by tradesupport institutions, which can customize theapplication. It covers more than 95 per cent ofworld trade.

Market Access Map is a bilateral databaseof over 30 gigabytes on market-access information.It allows an examination of market-access barriersbetween any pair of countries included in thedatabase at differing levels of aggregation, rangingfrom the national tariff line level to total trade.At present, this database covers about 150countries and territories on the import side andabout 200 countries and territories on the exportside, and was developed by ITC in collaborationwith the Centre d’Etudes Prospectives etd’Informations Internationales (www.cepii.fr) andUNCTAD-TRAINS. It integrates the majorinstruments of protection (ad-valorem and specificduties, prohibitions, tariff quotas and anti-dumpingduties) that are converted into ad-valoremequivalents. For investment targeting, this toolis particularly useful in identifying industriesand markets where target countries benefit froma significant preferential margin over potentialcompetitors. It is presently accessible upon requestand will soon be available to users through theGlobal Trade Analysis Project (www.GTAP.org).

Product Market Analysis Portals is a recentlydeveloped tool that could contribute to identifyingthe major players at both home-country andcompany level. It is a partially subscription-basedwebsite (www.p-maps.org) that offers qualitativeand quantitative insights into global markets forover 5,000 products traded by 180 countries andterritories, providing relevant information foreffective international market research. Of particularinterest for identifying potential investors arethe Business Contacts and Market Intelligencetools. Business Contacts provides links to trade-support institutions, online market places andtrade directories and to companies active in aspecific industry, including importers, exportersand wholesalers for a particular product in a definedcountry. Market Intell igence focuses on thequalitative aspects of market research and consistsof full-text published market studies, as well assmart links to organizations involved in marketresearch, product standards, packaging, salespromotion or trade fairs. Price News is alsoavailable for selected industries. In addition, atrade inquiry service is offered enabling subscribersto seek assistance from ITC on many aspectsof international trade.

Box VIII.3. Trade analysis tools for investment targeting

Source: ITC.a Joint study by ITC and MIGA, in process. The covered countries include Ghana, Mali, Mozambique, Senegal, the

United Republic of Tanzania and Uganda.

��


Box VIII.3. Trade analysis tools for investment targeting (concluded)

Source: ITC calculations based on COMTRADE statistics.

Note: the area of the circles correponds to the export value of the product group for Mozambique. See explanatorysheet for details.

��


fully exploited. Factors such as the size andgrowth of different industries, the numberof firms in specific industries and the presenceof strong supplier capabilities in an industrycan be important assets for attracting someexport-oriented firms. The same applies tothe availability of natural resources (e.g.minerals, forests and energy) and humanresources (e.g. skills at different levels ofeducation, universities and R&D) which couldbe further developed by an inflow of FDI.4

However, strong historical export growthin a given activity and/or the presence ofdomestic capabilities in an industry do notmean that there is necessarily scope for export-oriented FDI. Further analysis is requiredof the extent to which a certain industry oractivity is receptive to additional internationalinvestment. A first crude test is to identifyforeign investors (as wel l as domest iccompanies) that are already exporting fromthe host country. This can be a good indicationof further opportunities for export-orientedFDI, in the form of expansion or newinvestments. For example, foreign competitorsof these affiliates and their suppliers andcustomers may all represent potential investors.Moreover, the presence of foreign exportersin, and export patterns of, similar locations(e.g. neighbouring countries and those withsimilar resource endowments) may also revealopportunities for more export-oriented FDI.

Final ly, as par t of a prel iminaryassessment of a location’s capabilities, attentionshould be given to trends and changes inthe international business environment thatmight pose challenges or offer opportunities.This may relate to the trade policy regimeof destination markets (section VII.A), thebusiness cycle, technological developments(e.g. increased tradability of services; expandeduse of information technology), the businessenvironment in competing locations (taxchanges, new trade policies or rising labourcosts) and changing corporate strategies thatfavour the relocation of various activities.Consultations with export-oriented companies(foreign and domestic) can provide criticalinput into this process.

Obviously, such an assessment canbe undertaken at various levels of sophisticationand detail, depending on the availability ofresources and the importance attached tothe exercise. If resources are scarce, it maysuffice, as a starting point, to adopt a relatively

inexpensive rule-of-thumb approach, involving:

• An analysis of existing trade and industrypatterns;

• Consultations with existing investors(domestic and foreign);

• An analysis of what competing locationsare exporting and what they have attractedin terms of export-oriented FDI; and

• An identification of other factors that mightattract export-oriented FDI, such asmembership of free trade areas, preferentialtrade schemes, clusters of economic activityand industrial parks.

Even such a preliminary evaluationcan provide useful inputs not only into theactive promotion of a location as a base forexport-oriented production, but also into thelonger-term process of making a locationmore receptive to such FDI and benefitingfrom it (chapter VII). (For a concrete exampleof how an assessment of opportunities forexport-oriented FDI was done for Albania,see box VIII.4).

Assessing the capabilities should notbe just a technical exercise; it needs to beundertaken in a pragmatic way with differentweights ass igned to the var ious factorsmentioned above depending on the specificcircumstances. To become even more usefulas an input both to investment promotionactivities and as part of the monitoring ofthe business environment, the assessmentshould go one step further and evaluate inmore detail the “competitiveness” of a locationin specific areas (see annex to this chapterfor more information).

b. Segmenting the market for export-oriented FDI

Once an assessment has been made,a process of segmenting the market for potentialinvestment can be used to sharpen the focusof the targeted promotion. Investor targetingis not unlike the traditional segmentation activitycommonplace in business marketing, in whichpotential markets are segmented using, forexample, economic, geographic, demographicand psychographic cr i ter ia .

An economic segmentation can implyfocusing on firms that operate in a particularindustry or produce goods or services witha particular level of value added, and forwhich there is a good match with the location’s

��


Box table VIII.4.1. Albania’s export products, 1995-1999

Products in which Albania is losing Products in which Albania is gainingmarket shares in world trade market shares in world trade

Underachievers ChampionsProducts for which Beech wood lumber and Men’s cotton pants and shortsexport growth is related articles Footwareabove average Cotton T-shirts

Unprocessed tobaccoWomen’s cotton shirts and blouses

Losers Achievers in adversityProducts for which Ferrochrome containing more than Shoes upper partsexport growth is 4 per cent carbon content Medicinal plantsbelow average Select fruits and seeds

Men’s cotton shirtsWomen’s synthetic dresses

Source : UNCTAD and UNDP, 2001.

As part of i ts technical cooperationprogramme in the area of FDI promotion, UNCTADprepared, in 2001, an Investor Targeting Strategyfor Albania. The study looked at Albania’spotential as an FDI destination and explored waysin which this potential could be further developed.It included an analysis of the potential for export-oriented FDI and offered concrete recommen-dations on ways of identifying and effectivelypromoting foreign investment in Albania.

The starting point was to classify Albania’slargest export products into four groups, basedon their trade dynamics. This approach assumesthat additional FDI could be attracted into productsor industries that are already internationallycompetitive (box table VIII.4.1). It is a useful firststep towards identifying further export potential.In the product areas identified as “champions”and “underachievers”, the Government of Albaniawas advised to implement measures aimed atexpanding the national productive capacity ofthese products by attracting greenfield investment,as well as to continue to privatize relevant State-owned enterprises. For “achievers in adversity”,the study advised targeting brand-nameinternational manufacturers known for their niche-marketing skills. Mature products and maturemarkets required niche-marketing strategies aimedat differentiating products and marketing themto diverse consumer groups. Finally, theGovernment was advised not to target FDI inareas classified as “losers”.

Taking into consideration the package oflocational advantages offered by Albania, theGovernment was also advised to target investors

in industries in which Albania could potentiallydevelop international competitiveness. Theseincluded consumer electronics, electroniccomponents and small non-electric machinery.The potential of these industries was based onthe abundance of low-cost labour in Albania,large numbers of graduates with engineeringdegrees, the country’s industrious work culture,and its short distance from major regional andEuropean markets. In addition, Albania’s potentialfuture role as the Adriatic gateway to the Balkansmay offer opportunities to TNCs searching fora low-cost site for regional manufacturing.

The assessment also yielded some importantinsights into some of the challenges facingAlbania. Despite some success in attracting FDIduring the 1990s, many export-oriented foreigninvestors interviewed for the study voicedconcerns over deteriorating cost differentialsbetween Albania and its neighbours. They pointedto two main areas in which Albania’s costadvantages were diminishing: rising total labourcosts (including wages, taxes and social charges)and high costs of imported capital goods,machinery and raw materials, owing to theprevailing structure of Albania’s duty and valueadded taxes, and ineffective tax-reimbursementmechanisms. Finally, the investors noted thatthe cost of operating in Albania, in terms of thetime and money required to deal withadministrative obstacles and inefficiencies, hadalso risen. The Government was advised to addressthese issues, as they were adversely affectingthe ability of Albania to attract export-orientedFDI, as well as to make further investments inthe country’s infrastructure and education system.

Box VIII.4. Assessing the potential for export-oriented FDI: the case of Albania

Source : UNCTAD and UNDP, 2001.

��


specific assets. This form of segmentationis possibly the most frequently used approachto identify a set of firms. UNCTAD researchshows that the export-oriented industries mostcommonly targeted by developed countriesare high-technology manufacturing and businessservices (such as business and professionalservices, f inancial services, informationtechnology, media, regional headquarters, callcentres and shared-service centres) (UNCTAD,2002d). Such industries are also increasinglytargeted by a number of more advanceddeveloping economies, including Hong Kong(China), Malaysia, Singapore (Low, 2001;Cheng, 2001) and, increasingly, China (WIR01,p. 26). Costa Rica’s IPA concentrates itsefforts on three main areas: electronics, medicaldevices and certain services.5 In both Centraland Eastern Europe and in developing countries,IPAs attach somewhat greater importanceto basic manufacturing, for which competitivelabour costs may represent a locat ionaldeterminant. However, agro-based industriestop the list in developing countries as wellas in LDCs as a group (UNCTAD, 2002d).6

Another example of economic targetingis to identify export-oriented industries andfirms that can benefit from a country’s tradepreference position (section VII.A). SeveralAfrican countries are currently exploring waysto attract export-oriented FDI that could benefitfrom the improved access to the United Statesmarket through AGOA (see also section VII.Aand chapter III). While there are divergentviews on the potential offered by AGOA formany of the beneficiaries, this scheme doesappear to have helped some countries to attractmore export-oriented FDI. For example, sincethe launch of AGOA, Lesotho has attractedmore than 10 new investment projectsgenerat ing more than 10,000 new jobs(Masupha, 2002) . The erosion of t radepreferences over time, however, means thatcountries need to prepare themselves forthe eventuality of no preferential access tokey markets.

Some countries use existing clustersof industrial activity as the basis of theirinvestor targeting. Such efforts tend to focuson attracting firms that can add to the dynamismand competitiveness of existing clusters. Forexample, the EDB of Singapore has madeits investor targeting an integral part of abroader effort to promote the developmentof specific industrial clusters. It has chosento emphasize exis t ing c lus ters in themanufacturing sector and to attract FDI into

new clusters in the services sector (Low,2001). The Investment Promotion Centreof Israel focuses on the strongest industriesin the economy; Invest in Sweden Agencybegins with thorough research on how FDIcan help strengthen the dynamism of existingclusters or competence blocks; and in Finland,investor targeting is determined partly bythe focus of the national innovation systemon the development of selected industries.The Malaysian Industrial Development Authorityhas identified 22 clusters, which are all seenas offering potential for attracting export-oriented FDI (Cheng, 2001).7

Competition makes it increasinglyimportant for IPAs to identify not only whichindustry to target, but also the exact nicheand activity within a particular industry thatis likely to maximize the location’s advantages.The more focused the approach, the easierit is to streamline IPA activities to meet theneeds of investors and the smaller the riskthat a country will focus on exactly the sameinvestors as other countries. For example,within the automotive industry, a country mayneed to examine whether it should targetthe production of certain components (suchas engines, tyres and electronic equipment)or assembly operations; in the area of callcentres, it may aim at attracting low-skilloperations (switchboard functions) or high-skill ones (e.g. technical support centres)for regional or global operations. The focusshould reflect the strengths. The Thai Boardof Investment, for example, has divided varioussegments of the agro- industry and theautomotive, fashion, electronics and selectedservice industries (box VIII.5).

Another, often used, approach to marketsegmentation is geographic. IPAs frequentlyfocus promotional resources on key homecountries for TNCs. United States firms, forexample, have been the most popular targetfor IPAs located in Ireland, the United Kingdom,South-East Asia and the Caribbean. Moreover,it is common among IPAs to target investorsbased in neighbouring countries.8 In China,targeting has involved the development ofindustrial parks (e.g. in the province of Fujian)specifically tailored to attract TNCs fromTaiwan Province of China, and (in the provinceof Guangdong) from Hong Kong (China) andSouth-East Asia. Some of the poorest countriesmay focus special attention on export-orientedTNCs active in the more advanced developingcountries, in which rising labour costs arerender ing low-technology act iv i t ies

��


To make its efforts to promote FDI moreeffective, the Board of Investment (BOI) inThailand is currently in a process of makingits activities more proactive and targeted. Oneof the reasons behind this decision is greatercompetition from lower-cost locations. A moreproactive approach is seen as an important wayto improve both the quality and quantity ofFDI, and to help enhance the sustainable growthof the Thai economy.

Five target industries have been identifiedbased on their long-term growth potential, theirneed to be strengthened to be able to competeeffectively in the global marketplace, or theirneed to be expanded and extended to takeadvantage of their competitiveness.

In agro-industry, Thailand has abundantnatural resources, cost-effective labour, andproven production capabilities. Thailand is theworld’s largest exporter of rice, canned tuna,rubber and canned pineapples. Thesefundamental strengths are seen as a basis forthe industries’ transition into higher-value-added agro-processing by improving productquality, yields and sustainability.

The Thai automotive industry hosts almostevery major auto assembler. They have been attractedby a combination of cost-effective skilled labourand the availability of parts and componentssuppliers, as well as access to the regional market.Assemblers such as Toyota and Fiat have shiftedregional production into Thailand. Thai auto exportsmore than tripled over the past five years. Anexpected continued growth of exports opensopportunities for parts and componentsmanufacturers.

The third industry is fashion, particularlyleather, garments and jewellery. While Thaicraftspersons are well respected for their artisanship,inward FDI is expected to help improve productdesign and to build up Thai products and brands.

Electronics, including information andcommunication technology, is regarded as key toThai competitiveness and to the transition towardsa knowledge-based economy. Thai electronic goodshave long been widely accepted in global markets.The challenge is to move up the ladder from simpleassembly to higher-value-added processing.

Finally, the BOI also targets high-value-added services, which includes software services,

printing and long-stay tourism. For example,Thailand recently developed a tourism programmefor long-stay tourists and designed it specificallywith Japanese retirees in mind. It is expectedthat there will soon be special Japanese “long-stay villages” set up, complete with Japanesemanagement.

For each targeted industry, policies,measures and marketing strategies specific toeach industry will be developed, taking intoconsideration their needs, based on factors suchas competitiveness, market potential and levelsof technology.

The BOI has also adopted a geographicalfocus for its targeting. Three major regions and,within these, a number of home-countries ofFDI have been identified: the regions of Europe(primarily the countries of the EU), Asia(especially Japan, China, Singapore, TaiwanProvince of China and the Republic of Korea),and North America (United States and Canada).These regions will receive more investmentmissions from Thailand. Also, additional overseasoffices will be opened in these regions to providemore individualized service to potential investors.During 2002, new offices will be opened inShanghai and Hong Kong, China; in 2003, officeswill be set up in San Francisco and Osaka. Localagreements with various organizations, suchas other investment agencies, banks andprovincial governments are expected to helpthe BOI better understand what investors arelooking for.

These targeting efforts are complementedby measures to improve overall Thaicompetitiveness, especially with regard to smalland medium-sized enterprises (SMEs). In thiscontext, the BOI is transforming its regionaloffices in Thailand into marketing organizationsto help improve the capabilities of domesticSMEs. Accordingly, the staff in these officeswill be retrained to identify products that offerpotential in international markets and will developappropriate support packages, includingincentives for these ventures. This is beingdone in close cooperation with other branchesof government to ensure that promising SMEsreceive the necessary support. The focus willbe on the most promising enterprises. ForeignSMEs will be encouraged to provide assistancein such areas as technical assistance and marketaccess.

Box VIII.5. The targeted approach of Thailand

Source: Wanapha, 2002.

��


uncompetitive. For example, this targetingstrategy remains popular among a large numberof African countries that have preferentialmarket access to the Uni ted Sta tes andEuropean markets, and also to the South Africanmarket. The Investment Promotion Centrein Kenya targets TNCs from South-East Asiafor similar reasons. Export-oriented companiesattracted to Kenya include Muthama Gemstones(Thailand) and Young Orientals (the Republicof Korea) .9

Obviously, in most cases, investor-targeting strategies involve a combinationof the economic and geographic market-segmentation mechanisms. The geographicalfocus may depend on the industry niche thathas been chosen as a target and should reflectan analysis of where the principal sources ofpotential FDI in the targeted niche are.10

In the end, IPAs need to go beyondthe identification of industries and countriesand should select a set of individual companiesand their management. This task can be moreor less di f f icul t , depending on what i stargeted.11 In industries and activities thatare dominated by a few easily identifiedcompanies, finding the companies is relativelyeasy compared with industries in which themarket structure is less concentrated. However,the more carefully a niche can be defined,the easier it is for an IPA to find the primecandidates for promotional activities. Assuggested in chapter V, to arrive at the rightselect ion of companies requires a goodunderstanding of the industry dynamics. Withthe growing role of contract manufacturingand other forms of outsourcing, for example,IPAs need to decide whether they shouldtarget the final buyer of a product or theactual manufacturer, or both.

There is no standard solution to thisproblem. The strategy chosen has to reflectthe structure that prevails in each type ofactivity and industry. Still, some rules of thumbcan be useful in the process of selectingcompany targets. Important clues as to whereto look for potential investors relate to foreignaffiliates that are already established in thecountry. They are “living proof” of the existenceof investment opportunities, and their presencemay be indicative of where to search foradditional investment. Their competitors, too,may potentially be prime targets, especiallyif the existing foreign affiliates are linkedto leading TNCs. Companies that are partof the value chains of domestic as well asforeign affiliates in the host country (e.g.

as buyers or suppliers) are also potentialtargets. Nurturing close contacts with existingfirms may generate useful insights into theirinvestment strategies and how these “related”firms make their investment decisions.

Moreover, an investor-targeting strategyhas to recognize that companies and countriesdo not make investment decisions – individualsdo. This means that IPAs ultimately needto identify not only companies but also keydecision-makers within them at the levelsof corporate headquarters, division or regionalheadquarters, or individual foreign affiliates.If IPAs do not reach the right people, thereis a risk that much time and resources willbe wasted, no matter how competitive a locationis.

Demographic and psychographiccriteria can sometimes be useful instrumentsto consider in th is process . Some IPAsconcentrate on firms with key decision-makersfrom the country’s diaspora. This la t terapproach has been employed by countriesas diverse as China, Croatia, India, Irelandand Israel, all of which have the commoncharacter is t ic of s ignif icant d iaspor iccommunities (Wells, 1999). For example, Chinahas attracted investments from TNCs controlledby overseas Chinese; Indian executives basedin Silicon Valley have been encouraged toinvest in the Indian information technologyindustry; and active policies by the Governmentof Israel helped to attract investments bymembers of the overseas Jewish community(Aharoni , 1966) . The appl icat ion ofpsychographic criteria involves taking lifestyleconsiderations of executive officers intoaccount. For certain activities (such as head-off ice funct ions) under taken by seniormanagement, the taxation of individual incomesand the general quality of life can play acritical role.12 IPAs in the United Kingdomand Switzerland have tried to attract suchinvestment by leveraging their relatively lowtaxes on individual incomes.13

3. How to target?

There is no universally applicablemethod of targeting export-oriented investors.The best method depends on the kind of activitytargeted and the specific features of eachlocation. Nonetheless, there are a numberof aspects re la ted to the funct ion andorganization of IPAs that are relevant in thiscontext.

��


IPAs use a wide array of promotionaltools in their targeting efforts, ranging fromadvertising and telemarketing to personalcontacts and site visits. The optimal mix ofthese various tools is determined by the kindof investment targeted as well as by theresources available. The main challenge isto provide relevant information through channelsthat will attract the attention of key decision-makers in the targeted firms and generateas many high-qual i ty leads as possible .Effective targeting requires IPAs to be ina position to intervene, through a processof personal relationship-building – often overan extended period of time – at the levelof key decision-makers, especially when acompany gets nearer to making the finaldecision. Moreover, the more informed anIPA is about the plans and circumstancesof a firm, the greater the chances that itwill provide relevant information and makea competitive “offer”.

One implication of this is that IPAs,both in their organizational and functionalstructure, need to be business-oriented andto develop strong links to the private sector.At the same time, they need support fromthe highest political level to perform theirtasks. This orientation is far removed fromthe culture of investment authorities involvedin screening FDI. Consequently, giving aformer screening institution a new mandateto attract FDI can work only if there is aprofound shift in organizational culture andorientation.14

IPAs have responsibilities and functionsthat differ from other government agenciesand, accordingly, need a different organizationalstructure.15 Depending on the specific context,a case can sometimes be made for includingrelevant expertise in the board of directors.Appointing board members with experiencefrom the specific industries or activities thatan IPA is targeting can be a way to ensurethat an IPA is run in a business-like mannerand to widen the network of the IPA in therelevant fields.16 The choice of director ofthe IPA is another aspect to consider (Wells,1999). To run an IPA effectively, this personneeds the ability to interact both with thepolitical leadership at various levels of thegovernment hierarchy and with executivesof domest ic as wel l as fore ign f i rms.Differences in salary levels in the privateand public sectors can make it impossibleto recruit professionals with long experiencein the private sector. Still, a number of countriesat varying stages of development, includingBangladesh, Denmark, Jamaica, Sweden,

Uganda and the Uni ted Kingdom, haveappointed former business executives to headtheir IPAs.

The need to build personal relationshipswith key decision-makers suggests that IPAscan also benefit from recruiting sales peoplewho are comfortable with business operationsand investment decisions. Indeed, professionalswith hands-on experience in the target areasshould be particularly useful to an IPA. Anumber of IPAs do emphasize this factor,including the Investment and DevelopmentAgency ( IDA) in I re land, the WelshDevelopment Agency and One North Eastin the United Kingdom, the Invest in SwedenAgency and Invest Hong Kong.17 Hence thisform of promotion is ass is ted by theimplementation of compensation systems thatreflect the nature of the experience andexpertise required, allows for the recognitionof high-quality performance (box VIII.6),and take account of the market compensationfor such people.

During the investment decision process,many TNCs engage outside expertise to helpevaluate different alternatives. Investmentintermediaries, such as law firms, banks andaccounting firms, may have a self-interestin generating (and alerting their clients to)investment opportunities. They can thereforebe key channels of information for IPAs tofoster. In addition, these intermediaries typicallyhave well-established contacts with the rightdecision-makers that may be difficult for agovernment agency to develop. Organizationsother than the national IPA may well be ina position to assist in the targeted attractionof investments. Examples are agencies incountries involved in extractive industriesor tourism. The national IPAs may not considerpromotional activities in these areas to bewithin their ambit of responsibility. Whenseeking to attract investments in areas oftraditional strength, and when there are nationalagencies with specialized expertise in theseareas, national IPAs can play the role ofcoordinator of the investment promotion activity.In a well-coordinated effort , a country’sdiplomatic service may also play a role, asis the case, for example, for Brazil and Egypt(box VIII.7).

Some countries have chosen to mergethe responsibility for export promotion withthat for FDI promotion, a rational choiceif the aim is to expand export activities withthe help of inward FDI. This may work wellin some situations. Linking the two activitiescould potentially imply some cost-saving,

��


The success of Costa Rica’s IPA, CostaRican Investment Board (CINDE), in attractingIntel to its territory has become legendary ininvestment promotion circles. How did CINDEget to that point of promotional effectiveness?

CINDE was formed in the mid-1980s, withsignificant involvement of the Costa Rican privatesector, and with substantial funding from theUnited States Agency for InternationalDevelopment (USAID). Early in its development,it adopted a targeted approach to its task, withadvice from Ireland’s Investment andDevelopment Agency (IDA). Indeed, a seasonedIDA executive served as a resident adviser toCINDE for two years in the mid-1980s andintroduced the principles of promotion that hadworked well in Ireland.

The Agency’s focus was largely geographic(United States) and industrial (electronics). Itadopted a deliberate strategy to shift away fromthe previous dependence on natural resourcesand garments. Subsequently, business services,medical devices and special projects were addedto electronics as targeted industries. A leanoverseas promotional organization was developedwith highly trained and well-compensated CostaRican nationals engaging in a process of personalmarketing to targeted companies. The Agencyhad a budget of approximately $2 million andjust over 40 employees who were encouragedto build long-term relationships with thecompanies identified. Its compensation systemallowed for bonuses for high-performingexecutives. Benchmarking against salary levelsof the private sector and salary surveys werecarried out with the help of consultants in orderto establish a better fixed and variable incomelevel. Much attention was also paid to thedevelopment of an Agency-wide investor trackingsystem to create an organizational memory forpromotional activity, in addition to providing abasis for personnel evaluation and compensation.

CINDE was successful in attracting mainlysmall electronic firms to invest in Costa Ricaduring the late 1980s and early 1990s. I teventually hit a “hole in one” when it securedIntel’s massive investment in the mid-1990s butthis was preceded by many smaller achievementsin the form of attracting small electronic firmsthat created the beginnings of an electronicscluster in Costa Rica. By 1996, companies suchas Bourns-Trimpot Electronicas (electroniccomponents), Espion (transformers and electronicswitches), Cortek (coils), Suttle (telephoneconnectors), Altor Electronicas (transformers),DSC (circuit boards), Protek (electronic

components) and Sawtek (frequency filters) hadall invested in the country.

Costa Rica finally managed to attract theattention of Intel managers and to win theinvestment in fierce competition with more well-known locations, including Argentina, Brazil,China, Mexico, Singapore and Thailand. Amongthe main factors behind the success was thehighest possible attention given to the electronicsindustry and to the Intel project by CINDE,involving even the President. Throughout theprocess, Intel was impressed by the way CINDEmanaged the project, under strict confidentiality.Moreover, thanks to substantial investment in,and a changed strategy for, its education system,Costa Rica had developed the necessary labourskills. Finally, a comprehensive incentive package,including income and municipal tax exemptionsunder the free zone legislation, helped to tipthe balance in favour of Costa Rica. This wasnot the most critical factor to Intel, but it wasimportant to other investors.

Other notable investments that followedIntel’s include those by Abbott Laboratories(medical devices), Remec, EMC technology andCamtronics (electronic components), Sensortronics(sensors) and Aetec (board contractors). Morerecently, Costa Rica’s targeting efforts have paidoff in the services sector as well. Successesin 2001 include the decision by Procter & Gambleto site its shared-services centre for the Americasin Costa Rica and Western Union’s decision toestablish a financial services centre.

Today, CINDE is a state-of-the-art IPA.On the basis of studies as well as positiveexperiences of foreign affiliates in Costa Rica,CINDE identifies the areas in which Costa Ricaenjoys a comparative advantage at a givenmoment. The identification of target areas isdynamic and subject to change. CINDE doesnot promote mass-market products but ratherniche areas with small production runs andmedium-to-large requirements for a skilledworkforce. With the exception of Intel and Abbott,medium-size investments in high-technologymanufacturing, high-value products and skill-intensive services are the targets. The commonlink among them is Costa Rica’s human resources,which are the basis of the country’s strategyfor development. The country’s comparativeadvantages are regularly reviewed throughbenchmarking with selected competitors forspecific investment projects and the targetingefforts adjusted accordingly. There are importantexpectations with the recent creation of theCAATEC Foundation, a joint effort of individuals

Box VIII.6. Costa Rica’ s CINDE: the “other” story of promotional effectiveness

/...

��


Box VIII.6. Costa Rica’ s CINDE: the“other” story of promotional

effectiveness (concluded)

from the private and academic sectors who worktogether to enhance the country’scompetitiveness for high-technology investments.As part of Costa Rica’s “e-readiness” programme,CAATEC seeks to provide online financialservices to SMEs and to help enhance theirability to participate in the knowledge-basedeconomy (Egloff, 2001b).

In a sense, the success of the CostaRican Investment Board in attracting theIntel project converted its FDI policy intoa concrete manifestation of the newdevelopment policy (Rodriguez-Clare, 2001).Nevertheless, Costa Rica remains weak inembedding export-oriented FDI in the localeconomy. There is as yet little evidenceof linkages, clustering effects or the upgradingof domestic supplier capacities, despite theimplementation of programmes such as CostaRica Provee and Impulso, which have beenset up with this kind of objective in mind.In order to sustain its success, Costa Ricawill have to diversify its exports to othermarkets and improve the links between export-oriented production and domestic enterprises.

Source: UNCTAD, based on information providedby CINDE; Egloff, 2001b; Spar, 1998;Rodriguez-Clare, 2001, www.caatec.org,June 2002.

Box VIII.7. Training diplomats in FDIpromotion

Egyptian diplomats have benefited fromUNCTAD’s training in investment promotionand investor targeting through the organizationof a series of training workshops. They aredesigned for mid-level and senior-leveldiplomats and aim at providing basic, practicalknowledge about investment promotion andinvestor targeting. Typically, a three-dayworkshop includes the presentation of globaland regional FDI trends, an overview ofcorporate decision-making processes, anda discussion of company cultures and ethics(highlighting the differences in companyperceptions and management styles). It alsocovers a number of quantitative techniques usedin investment promotion, such as the strengths,weaknesses, opportunities and threats (SWOT)analysis. The training material is supported byconcrete examples and case studies, and caninclude the latest trends in Internet-basedinvestment promotion.

Source : UNCTAD.

particularly in the cost of overseas offices,and may be an attractive option for agenciesinvolved in cluster development, for which FDIand export promotion can be closely interlinked.On the other hand, there may be good reasonsto keep investment and export promotion apart.First, the skills required for the two activitiestypically differ. Decisions related to thepurchase of a service or product and thoserelated to investment tend to be handled bydifferent parts of a company. Reaching andconvincing top management to invest in acertain location is a very different task fromthat of helping domestic firms to expand theirsales overseas. There is also the risk ofresponsibilities becoming fragmented and theagency’s work becoming less focused, withthe possibil i ty of neither function beingperformed well. Thus, whether the two activitiesshould be merged or kept separate dependson whether government efforts in the twoareas can be made to complement and reinforceeach other.

As the preceding discussion indicates,there are many issues to be considered whenembarking on targeting. IPAs intending todo so can benef i t f rom an exchange ofexperiences with “market” leaders in thisarea, as well as from specific training courses(box VIII.8). A concrete example of howa southern European IPA shif ted from areactive to a proactive approach to investmentpromotion is given in box VIII.9. The pointto emphasize is that successful targeting ina highly competitive world market for FDIrequires a long-term, professional approach.

Box VIII.8. Training courses in investortargeting

An example is UNCTAD’s newly developedtraining product entit led Third GenerationInvestment Promotion: Investor Targeting. Itaims at fostering an understanding of the latestconcepts and trends relating to FDI, sharingbest practices in generating investment and,in particular, providing key tools and skills todevelop a targeted approach to investmentpromotion. Key issues addressed include:

• What factors influence the decision to invest?• How do TNCs shortl ist locations?• What determines which industries and companies

to target?• What do firms consider effective corporate

development support?• Why is investor targeting an efficient way to

promote FDI in a location?

The product consists of a tailor-made workshop(3-8 days) and a master reference manual.

Source : UNCTAD.

��


At the end of the 1990s, an IPA from asouthern European country had a reactive approachto investment promotion. It basically respondedto any investment enquiries that came in frominterested investors. The agency – which combinedtrade, tourism and inward investment functions– also suffered from organizational weaknesses.There were few project officers dedicatedspecifically to attracting investment, and theagency was not mandated to act as a one-stopshop.

Prompted by a sharp decline in inward FDIin 1999, the IPA decided to implement a majorchange in investment promotion policy andorganization. It managed to get better controlover incentives and took steps to improve itsinternal efficiency. For example, a cohesive teamwas put together, also involving project officersabroad; commercial practices were introduced,in particular, in sales (promotion); quarterly salesplans were developed and agreed; twice-yearlysales meetings were introduced to discussopportunities, share best practices and newresearch, and ensure a coordinated approach;and a dynamic leadership was put in place tosupervise the changes. The IPA also decided toshift from a reactive to a proactive investmentstrategy. Targeting was at the heart of thisstrategy. There were several key stages todeveloping and implementing the proactive,targeting strategy:

Identif ication of target industries andmarkets. Four target industries were identifiedaccording to the competitive position of thelocation, opportunities in the FDI market, andthe strategic industry objectives of the nationalGovernment. The target industries consisted ofactivities for which the location had achievedconsiderable success in attracting FDI (electronics,automotive), and which had opportunities forupgrading and attracting higher value-addedactivities. Also, the agency hoped to cash in onthe growth of newly emerging services (frontand back offices and telecommunications) whereother countries had been successful. For eachtarget activity, key sub-activities were identified,based on the specific competencies of the location:for example, in electronics, R&D related toconsumer electronics, R&D and manufacturingrelated to automotive electronics and R&D relatedto semiconductors were prioritized. For eachindustry, target overseas source markets wereidentified.

Development of an FDI database . Aninvestment database was developed with theassistance of external consultants to providecomprehensive, comparative data on the possibleinformation requirements of potential investors.For each target industry, more detailed informationwas provided, together with key selling messagesfor promoting the location. The database is usedfor developing marketing materials and businesspropositions and handling investment enquiries.It is also used as a knowledge tool to updatedata on the country and on competing locationscontinuously. Project officers were trained inthe use of the database.

Company targeting. A three-dimensionaltargeting policy was developed, focusing on newpotential investors, existing investors (aftercare),and intermediaries who influence locationdecisions. For each target source market, potentialinvestors were identified in the target industriesbased on existing market intelligence, businessdatabases and other industry sources.

Roll-out in overseas offices. A project officerin each overseas office was given responsibilityfor implementing the targeting policy. Projectofficers developed initial contacts with potentialinvestors and intermediaries in the source country.The objective was to develop a long-term approachto targeting companies. Techniques used includeddrip-feeding companies with the latest information(quarterly reviews), building contacts with thediaspora community and organizing networkingevents, such as wine tasting, in the embassies.Meetings set up with companies were attendedby senior officials from the IPA.

Coordination and results. There was activemonitoring and evaluation of results. The initialcompany targets were re-evaluated and companieswith weak investment prospects were removedto allow focus on the best opportunities. It tookover one year for the targeting to yield significantresults. Since 2000, 75 per cent of FDI projectsin the country have been in the target industries.Major electronics and automotive investmentshave been secured through the aftercareprogramme and the location has been put firmlyon the map for new service functions. However,the longer-term success of the country will dependon implementing much-needed product developmentinitiatives to attract more knowledge-basedinvestment.

Box VIII.9. Moving from a non-focused to a targeted approach:the case of a southern European IPA

Source : UNCTAD, based on information provided by PricewaterhouseCoopers Consult ing-PLI, Belgium.

��


4. What are the pitfalls and risks?

Adopting an investor targeting strategycan be effective in attracting FDI, but it alsopresents considerable chal lenges forGovernments . To be effect ive, investortargeting has to be well integrated into theoverall development strategy of a country.Attracting export-oriented FDI is not an endin itself; rather, it is a means to speed updevelopment. In this sense, the role of IPAsgoes beyond a purely promotional mission.IPAs need to work closely with other partsof the Government to identify and, indeed,create comparat ive advantages that aresustainable rather than ephemeral.

Targeting therefore should not be aone-off initiative but a continuous learningprocess. IPAs need to recognize the importanceof dynamism in niche market identificationand be aware of the need to revise theirstrategies over time, as competitive conditionsand corporate strategies evolve. Nationaladvantages based upon preferential marketaccess, for example, are valuable, but mustfit into a clear plan for creating sustainedadvantage over time. IPAs can contributeto such plans, but their conceptualization andimplementation involves other agencies ofgovernment and public-private partnerships.In certain situations, IPAs can play a catalyticrole in setting up such constellations aimedat improving the competitiveness of a location(box VIII.10). Their ability to do so is enhancedwhen there is congruence among key nationalinstitutions about the approach to developmentand the role of FDI in the development process.

Of course, the notion of developmentstrategies brings to the fore the industrialpolicy debate on the appropriate role ofgovernment. While this is not the place toreview the extensive literature on this subject,it should be noted that an investor targetingst ra tegy, wi th i t s emphasis on focusingresources – promotional , f i scal andinfrastructural – on a defined subset of allpotential foreign investors is an example ofselective intervention. And, of course, thereare risks attached. Resources may be focusedon seeking investments that do not materialize,or considerable efforts and resources maybe devoted to attracting the wrong types offirms, or firms that would have invested inany event. There is also the risk of assumingthe government’s ability to foresee which

types of FDI are likely to have the greatestability to integrate and link with indigenousinvestment.

These risks are real and efforts needto be made to mitigate them. Such risk-reducingmeasures include, first of all, an appropriatesequencing of promotional activity. Thus,improving the overall policy environment forinvestment – domestic and foreign alike –should not be sacrificed to a selective focuson attracting a few firms. Also, targetingshould respond to market signals as far aspossible, for example, by focusing on firmsthat have already demonstrated an interestin operat ing in the country through theestablishment of affiliates.

Other risk-mitigating measures involveincrementalism and realism in targeting. Itshould be based on a proper understandingof the strengths and weaknesses of a locationas a base for export-oriented production, andit should not be expected to pay off instantly.There is an obvious risk of wishful thinkingin seeking to win “high-status” TNCs (à laIntel) if a country does not have the basicconditions to attract this type of investor(such as an educated and highly ski l ledworkforce and excel lent , low-costinfrastructure). Winning this sort of flagshipinvestment requires a long-term, concertedand coordinated effort among all governmentdepartments at the highest level, an effortthat is difficult and expensive to muster,although the rewards are high, since countriesthat do manage to attract leading TNCs inoligopolistic industries often benefit fromadditional investment by their competitorsand suppliers. It needs to be borne in mindthat competition for high-profile investmentprojects can be intense and, for every winner,there are often several losers that, in theend, will have expended considerable resourcesin a failed attempt to attract a project. Thus,for most developing countries, the investorsto target will not be the top 100 TNCs (chapterIV), but rather, smaller firms within theappropriate industry or activity. As mentionedabove, Costa Rica’s targeting did not beginwith Intel; it was the result of a long processof building the capacity to attract firms likeIntel.

Clear criteria of accountability andperformance evaluation should help mitigatethe r isk of IPAs expending considerableresources without producing substantial results.

��


An important tool in th is regard is theestablishment of realistic targets against whichperformance can be measured.18 IPAs shouldhave monitoring mechanisms in place thatallow for accurate reporting on expenditureand results. In practice, very few IPAs aresystemat ical ly evaluated and moni tored(UNCTAD, 2002d; Wel ls , 1999) . In anUNCTAD survey of more than 100 IPAs,only one-third of the agencies used quantitativemeasures (and an even smaller percentage

performance (UNCTAD, 2002d).

Finally, a targeted approach does noteliminate the need for a certain amount of“general promotion”. An IPA needs to beprepared to respond to enquiries that falloutside the activities and industries explicitlytargeted. Indeed, such spontaneous andunexpected enquiries can often be just asimportant as those generated through proactive

Invest in Sweden Agency (ISA) bases itsmarketing efforts on industrial clusters that offera dynamic environment to potential investors.If ISA finds that there is potential for FDI in anarea of Swedish strength, it invites partners inacademia, the private sector and relevant publicagencies to participate in its effort to build ordevelop a cluster. Together, the partners financeone or more feasibili ty studies to define thepotential Swedish offer more carefully. Thisresearch forms the basis for a proposal to theGovernment. Before any actual promotion takesplace, a long-term political commitment is alsosecured by the ISA.

The “Socware” project is a good exampleof this, even though external factors have thusfar kept its results relatively modest. In 1998,ISA noted a growing interest among leadingsemiconductor makers in concentrating theiractivities in systems design. Such knowledge-intensive centres were expected to emerge in onlya limited number of places around the world, andISA sought to find out whether Sweden couldbecome one of them. To this end, it organizeddiscussions with leading representatives ofacademia, foreign and Swedish companies, andgovernment agencies from the local, regional andnational levels. In addition, feasibility studieswere commissioned on technological requirementsand market opportunities.

Following intense discussions with the partiesinvolved, over an extended period, it was decidedto go ahead with plans to form a cluster aroundthe designing of systems-on-chips. ISAcoordinated the process and was also responsiblefor the international promotion of the cluster.Moreover, three Swedish universities agreed toset up a new Master’s course in Socware designand to expand their PhD programmes to increasethe availability of the skills needed. Special effortswere also init iated to ensure that the legalframework was adequate for the protection ofintellectual property rights. In 2000, a new institutefor industrial research (Acreo) was establishedto strengthen the link between academia andindustry.

Box VIII.10. Building an FDI-based cluster: the case of Socware in Sweden

The annual marketing budget of the Socwareproject is approximately $0.4 million. The agencyrecruited staff with proven experience in therelevant area. ISA has especially sought to employprofessionals with a strong network of businesscontacts and an abili ty to interact with topexecutives in the relevant business segments.

The actual targeting of firms is based oncareful market research of the leading playersin the field. ISA first turned its attention to TaiwanProvince of China. The rationale for this decisionwas that Taiwanese companies offered world-class competence in semiconductor manufacturingbut were not equally strong in the area of systemsdesign, an area in which Sweden has a strongtrack record. The Swedish offer was made evenmore competitive because of the presence ofleading-edge capabilities in telecommunicationsand, especially, wireless technology, two areasfor which systems-on-chip design is of criticalimportance. After an in-depth analysis of thecorporate sector in Taiwan Province of China,ISA has so far visited 15 Taiwanese companies.It has also visited six companies in Japan, fourin the United States and four in the Republic ofKorea.

The dramatic recent slowdown in thesemiconductor industry has meant that the resultshave not so far met expectations. Still, sinceactive marketing began in mid-2000, Sweden hasattracted three significant investments relatedto the project: Atmel and National Semiconductor(United States) and Via Technologies (TaiwanProvince of China). ISA is currently in the processof intense discussions with eight other companiesseriously considering setting up design activitiesin Sweden. Other important positive results ofthe Socware project are an increased flow ofprofessionals to Sweden and a rise in the numberof engineers graduating with the appropriatebackground. Financing for the Socware projecthas been secured for five years to start with,after which period the project will be evaluated.

Source : UNCTAD, based on informat ion provided by Invest in Sweden Agency.

used qual i ta t ive ones) to evaluate thei r

��


promotion. The problem IPAs face is thatit is not possible to target everything without,by definition, ending up by targeting nothing.Hence, there is a need for IPAs to strikea balance between resources spent on proactivetargeting and those spent to respond effectivelyto unexpected enquiries. Equally importantis ensuring that potential investments arenot lost through inefficiencies in the handlingof projects.

B. Investment facilitation

While the trend towards creating amore enabling framework for FDI continues(chapter I), many countries still evaluate andscreen FDI at the point of entry. While suchregulations serve different purposes, the timerequired to obtain the various licences, permits,and approvals needed can sometimes beconsiderable and can negatively influencethe cost-efficiency of a location. The costsin terms of both money and time are especiallyimportant to export-oriented foreign investors,as they cannot pass on these costs to theirbuyers. (They must sell at prevailing worldprices.)

One study of the procedures governingentry regulation in 85 countries and the costsof following these procedures found hugevariation across countries (Djankov et al.,2001). The total number of procedures rangedfrom 2 in Canada to 21 in the DominicanRepublic, and averaged 10.5 for the wholesample. In terms of the minimum numberof business days required to start a newbusiness, there was a range from 2 daysin some developed countries to 152 days inMadagascar. Ironically, low-income countrieswith a lower level of institutional capacitygenerally impose more regulations on theprivate sector than do high-income countrieswith greater institutional capacity. Moreover,a strong correlation was noted between thelevel of corrupt ion and the number ofregistration procedures that an investor hadto go through.

There are usual ly a number ofgovernment institutions involved in the entryand establishment process. A TNC may needto deal with tax authorities, immigration boards,investment boards, customs authorities andothers. In many developing countries, IPAshave been set up partly to facilitate investmententry. However, even when IPAs are granted

one-stop shop status, the involvement of someother institutions is often still necessary. Theefficiency of all these government bodiesinfluences the time and cost associated withmaking an investment.

One way for IPAs to attack regulatoryinefficiencies and red tape is to develop so-called “investor road maps”. This methodologyhas been developed by the Foreign InvestmentAdvisory Service (FIAS) and is a tool foridentifying and reducing the number and scopeof procedural steps, regulatory requirementsand administrative barriers that constitutethe day-to-day interact ions between theGovernment and entrepreneurs. Conceptually,the methodology is based on the assumptionthat creating an enabling environment forprivate-sector activity requires improvementin the implementation of policy.19 It can beused for three purposes:

• To inform investors of the regulatoryhurdles and costs of inves tment andoperations that they face;

• To demonstra te the to ta l i ty of theregulations and the costs they imposeon private investors; and

• To help Governments reduce the regulatoryburden on the private sector.

IPAs can also reduce administrativebarriers by fostering the development ofindustrial and export processing zones (sectionVII.F). In addition to good infrastructureand tax incentives, such zones can constituteislands of administrative efficiency and providea buffer between export-oriented foreigninvestors and the regulatory authorities.

Beyond ensuring that application-processing times are reasonable, given therequirements of investors, IPAs can also helpensure that the relevant laws and regulationsgoverning export-oriented FDI are easilyaccessible by foreign investors and theirrepresentatives. Increased transparency ofthe administrative system and investmentprocedures makes it easier for TNCs to predictcosts for the realization of investment projects.A range of instruments have been appliedto improve public governance in differentparts of the world, including performanceassessments, e-government and codes ofconduct. To assist LDCs in developing goodgovernance in investment promotion, UNCTADlaunched a project in 2002 focusing on

��


encouraging good governance in LDCs inthe area of investment promotion (box VIII.11).

The extent to which IPAs provide theservice necessary to facilitate a smooth handlingof incoming investment projects can beassessed. Such an evaluation can be donein-house or with the help of external expertise.In general, it is useful for IPAs to be ableto offer a single point of reference to foreigninvestors with regard to obtaining permitsand licences to operate in a country. Thisis all the more important in countries thatdo not boast an efficient bureaucracy andhave a high level of corruption.

Box VIII.11. Good governance in investmentpromotion

In 2001, at the LDC-III Conference inBrussels, UNCTAD launched a new initiativeto assist LDCs in their efforts to promote goodgovernance in investment promotion andfacilitation. The first phase of this programmestarted in 2002 and is focused on five countries:Ethiopia, Lesotho, Maldives, Mali and the UnitedRepublic of Tanzania.

For the purposes of UNCTAD’s programme,good governance in investment promotion andfacilitation is measured by the efficiency andtransparency of investment-related proceduresand practices. The first phase of the programmeinvolves advisory work and training carried outin close consultation with other nationalinitiatives to promote good governance. Thisis followed in each country by a national seminarat which results and recommendations arepresented to an audience of stakeholders, andagreement is reached on a plan of action.

Training is provided to officials involvedin investment promotion as well as to thosethat deal with post-investment activities suchas the issuing of permits, customs clearanceand site selection. The project also includesthe training of trainers in order to establishsustainable local training capacities.

The first phase will be concluded with aninternational conference, at which the lessonslearned and international best practices will beshared with Governments from project and non-project countries, the private sector, developmentpartners and non-governmental organizations(NGOs).

Source : UNCTAD.

Greater use of e-government by IPAsand other relevant authorities can increaseefficiency and transparency in governmentservices and reduce costs in the medium andlong run. It involves the use of informationtechnologies (especially the Internet) to enhanceaccess to, and delivery of, government servicesto cit izens, businesses and public-sectoremployees (UNCTAD, 2001e). For example,IPAs may include on their website a listingof all the required permits and licences forinvestment projects, how and where to obtainthem, applicable fees, maximum processingtime and whom to contact in case of problems.

The introduction of codes of conductfor civi l servants can support efforts tointroduce ethical standards on a formal basisin the public sector. There are a number ofcountries that have such codes. Membersof the OECD, for instance, have agreed tomaintain a reference checklist of 12 principlesto support Governments in their review ofethics-management systems. The introductionof a code of ethics is a part of that checklist(OECD, 2000c).

Tasks of IPAs re la ted to that ofinvestment facilitation concern the provisionof services to existing investors and encouragingother branches of government to improvethe investment environment. These two policyareas are addressed next.

C. Aftercare services

With the expansion of internationalproduction systems and the number of export-oriented foreign affiliates, the role of aftercareservices assumes increased importance.Governments can introduce policies thatencourage foreign affiliates to export moreand higher-value-added products and services.

Foreign affiliates that are part of aninternational production system face not onlyexternal, but also internal competition. Whenmaking new investment and expansion plansconcerning export platforms, TNCs considerthe possibility of developing an existing plantbefore buying or establishing a new one. Whenthere are multiple plants within a TNC’sproduction network, the management of aforeign aff i l ia te may have to convinceheadquarters that i ts si te offers the bestconditions for an expansion. IPAs and other

��


host-country actors can sometimes becomeal l ies of the aff i l ia te in such cases andstrengthen its bargaining position vis-à-visthe head office (box VII.12).20 The experienceof Ireland, Singapore and Wales shows thatbuilding a constructive relationship with existingforeign investors can be an important andcost-effective way to promote the expansionand upgrading of exports.

While IPAs generally recognize theimportance of reinvestment and aftercareservices,21 few have adopted a systematicapproach to that end and fewer still haveprogrammes linked specifically to the exportdimension. Among those that have developedstructured programmes of aftercare servicesand relationship-building with existing firms,a “sales account” orientation is typically usedto ensure that their locations will be well-placed for consideration in the next roundof investment decisions (Phelps and Fuller,2001; Kwon, 2001). One approach is to use

Box VIII.12. Helping an affiliate to expandexports: the case of Black & Decker in the

United Kingdom

In 1998, the corporate headquarters of theUnited States firm Black & Decker announcedthat it was planning to close a plant in north-east England. The regional IPA, the NorthernDevelopment Company, which had built up aconstructive relationship with the localmanagement of the Black & Decker affiliate,helped it to prepare a business plan that couldbe submitted to headquarters, outlining howthe company could cut costs through a moreefficient use of the supply chain. The plan alsoenvisaged the creation of a supplier village atthe plant (with the support of local authorities)to attract quality international firms.

Instead of closing the plant, the head officeclosed another European plant, shifted productionto north-east England and set up a design andR&D centre there to develop productsspecifically for the European market. The 1998expansion involved new investment of £17million, which created 350 new jobs andsafeguarded 775 jobs. About 75 per cent of theoutput produced at Black and Decker’s affiliateis exported. Its product development andmanufacturing operations based in Spennymoor,County Durham, are the largest in the Blackand Decker network.

Source : Loewendahl , 2001b, p . 317.

an investor tracking system . A number ofIPAs, often with technical assistance, havedeveloped computerized versions of suchsystems. They track investors from first contact,through the application and approval stages,to facility construction, and ongoing operations.With limited resources, an investor trackingsystem could initially focus on affiliates thatare already exporting. Each affiliate is assignedto a “case officer” who follows them throughthese processes over time and periodicallyvisits them to maintain contact. Once aninvestment is in place, the investor can behanded over from the initial case officer inthe investment generation department to anotherofficer in the monitoring department. An investortracking system can be used to generate reportsof the status of each investor through eachstage of the investment process. During theoperating phase, it can provide “trigger points”at which IPA personnel contact investorsto assess their status, problems, plans forfurther investment, and ways in which theIPA can assist them in their operations. Suchrelationship-building can be an important stepin ident i fying specif ic areas in whichimprovements are needed to facilitate moreand higher-value-added exports from theaffiliate in question.

In Wales, the Welsh DevelopmentAgency set up an accounts system after asuggestion from one major foreign affiliatethat had been frustrated with multiple pointsof contact in its attempts to secure additionalexport-oriented investment from its parentcompany (Phelps and Fuller, 2001). Theexperience of Ireland is also illustrative. TheInvestment and Development Agency focuseson consolidating and building on the valueof the 1,200 companies already in Irelandand supported by the Agency. It seeks toensure that these companies continue toincrease their value and contribute more,both to their own corporate success and tothe Irish economy. Many of these companiesare achieving this particularly by adding high-value research activities to their Irish operations.The Agency actively encourages firms tomove up the value chain. While manufacturingactivities will continue to remain a fundamentalpart of Ireland’s development programme,over time, the investment being sought willbe based more and more on innovation andresearch involving knowledge-intensive projectsthat require high skills and expertise.

��


Aftercare activities should be closelycoordinated with various “product development”efforts. In order for existing foreign affiliatesto be able to upgrade their activities, it isnormally necessary for the location itselfto become more hospitable to such an upgradingof production. Building close relationshipswith existing investors helps an IPA to provideuseful inputs to other branches of governmenton how to enhance the attractiveness of theirhost country to export-oriented investors.An IPA can sometimes act on its own toimprove investment conditions for export-oriented foreign and domestic investors, evenif they remain unchanged in the economyas a whole. For example, if a low level ofinfrastructure development is a deterrent toexport-or iented investment , the IPA canadvocate placing infrastructure projects onthe “promoted industries” list so that investorsin this sector receive investment incentives.Investment in infrastructure is often impededby laws and regulations that restrict FDIin terms of land ownership or in areas suchas telecommunications or electricity generationor transmission. The IPA can advocate relaxingthese restrictions. However, since many ofthe locational determinants are outside thearea of responsibi l i ty of most IPAs (forexample, political instability), these agenciesneed to have constructive relationships withthe topmost levels of the government andbureaucracy, especially with departments whosepolicies and operations have an impact oninvestment flows.

One role of aftercare services is tohelp investors when they encounter problemsthat may hinder or postpone a continuationor expansion of an export-oriented project.A new approach in this context involves theappointment of an investment ombudsperson(Sauvant, 2002). This approach has been used,for example, in the Republic of Korea. In1999, the Korean Trade-Investment PromotionAgency es tabl ished an “Off ice of theInvestment Ombudsman” (box VII.13). Someof the complaints and grievances handledso far have been directly related to exportactivities. When the Office is informed abouta complaint, it is expected to act immediatelyand contact the relevant institution with aview to remedying the situation. It is empoweredto request cooperat ion f rom concernedgovernment authorities, which in turn haveto address the issue without delay and presenta plan for its resolution within seven days of

receiving the request. Within the Ombudsman’sOffice an “Investment Home Doctor” programmehas been established. Each registered foreignaffiliate is assigned a “Home Doctor” to whomit can address any grievances. For example,

Box VIII.13. Office of the InvestmentOmbudsman, Republic of Korea

The Office of the Investment Ombudsmanwas established under Article 15 of the ForeignDirect Investment Promotion Act of 1998 as ameans to resolving difficulties experienced byinvestors in the Republic of Korea and enhancingthe overall business climate.

The Ombudsman is appointed personallyby the President of the country and is a memberof the Foreign Investment Committee, whichis composed of 12 ministers and 16 high-rankingprovincial and metropolitan officials. The Officehas a staff of more than 20 professionals withexpertise in areas such as legal, financial, tradeand labour affairs. From its inception in October1999 to the end of 2001, the Office had receiveda total of 1,084 grievance cases from foreignaffiliates in the Republic of Korea, coveringa variety of issues such as customs, construction,financial affairs, labour, taxation and investmentprocedures. Government agencies are requiredto respond to a request from the Ombudsman’soffice within seven days.

A few examples illustrate the work of theOffice. To protect the trademark rights ofexported and imported goods, the Officesuggested in 2001 that the Customs Officeimplement a computerized system to coverrelevant trademarks and introduce variousscientific measures. As a result, the CustomsOffice signed a contract with a subcontractorfor developing a trademark-rights managementsystem and embarked on implementing a pilotoperating system. Another example concernedthe issue of land usage. One foreign affiliatehad deferred its plans for further investmentbecause it felt that the requirements for beingdesignated an EPZ were too stringent. Afterreviewing the case, the Ombudsman’s officeproposed that the amount of investment andthe number of employees required to qualifyas an EPZ be reduced. Other examples includereform of the operations of bonded factoriesfor raw materials and exemptions from specificadministrative requirements related to importsto facilitate the expansion of exports.

Source : UNCTAD, based on the Off ice of theInvestment Ombudsman, 2001; Kwon,2001 and www.i-ombudsman.or.kr/history/miss ion_fs .h tml .

��


in response to a complaint from a companythat exported 95 per cent of its products,the Office initiated a process that led to theabolition of a distinction between domesticand exporting bonded factories (Office ofthe Investment Ombudsman, 2001). Thiseffectively enhanced the competitiveness ofbonded factories in the Republic of Koreaand is expected to have a positive impacton the country’s exports.

* * * * *

In sum, the role of IPAs is evolving.In countries in which FDI is seen as animportant policy area, IPAs can play aninstrumental role not only in attracting export-oriented FDI, but also in encouraging foreignaffiliates to move into higher-value-addedexports. Throughout, the success of an IPAin helping a country meet i t s specif icdevelopment objectives rests largely on howwell its activities are integrated into broadereconomic and industrial policies. Given theoverriding objective of matching the firm-specif ic capabi l i t ies of TNCs with thedevelopment objectives of host countries,IPAs need to interact efficiently with boththe private and the public sector. Targetedpromotion is not easy but it is an approachthat has generated significant results in anumber of countries. If properly implemented,targeting can make the entire process ofattracting and benefiting from export-orientedFDI more effective.

Notes

1 See, for example, Watzke and Mindak, 1987;Wells and Wint, 1990; Young and Hood, 1994;Loewendahl, 2001a; UNCTAD, 2002d.

2 In principle, the approach outlined below canbe applied at sub-national levels too, withthe main constraint being the limited availabilityof data on some aspects.

3 Another useful tool is the software developedby the Economic Commission for Latin Americaand the Caribbean, called CANalysis, whichprovides world market shares in global andregional markets by product and by technologyclassification. These are the data used in theanalysis of export winners in the precedingchapte r.

4 The most convenient source of data oneducational enrolments and R&D spendingis the Annual Statistical Yearbook publishedby the United Nations Educational Scientificand Cultural Organisation (UNESCO), largeparts of which are now on the Internet

(www.unesco.org). The Human DevelopmentReport of the United Nations DevelopmentProgramme (UNDP) has data on educationand other aspects of well-being(www.undp.org). UNIDO provides compositemeasures of skills, technological effort andtechnology imports for 87 countries in i tsIndustrial Development Report 2002(www.unido.org). The OECD also publishesinnovation and R&D data for i ts membercountries, generally available on the Internet(www.oecd.org).

5 UNCTAD’s survey on investor targeting,February, 2002.

6 For example, the Commission for the Promotionof Peru has identified tourism, fisheries, agro-industry, mining and infrastructure as its targetindustries. Uganda’s focus on attracting foreigninvestment into i ts f ish industry is anothercase in point.

7 The internationally linked clusters encompasselectrical and electronics; petrochemicals;pharmaceuticals; textiles and apparel. Thepolicy-driven clusters are automotive; marine;motorcycles; aerospace; polymers; metals;composites; ceramics; machinery andequipment. Finally, the resource-based clustersinclude wood-based products; rubber-basedproducts; palm-oil-based products (food andnon-food); cocoa-based products; f ish andfish products; livestock and livestock products;fruits and vegetables; and floriculture.

8 UNCTAD’s survey on investor targeting,February, 2002.

9 Communication from the Investment PromotionCentre in Kenya.

10 For example, Puerto Rico’s IndustrialDevelopment Company decided to target thepharmaceutical industry (economic criterion)partly because the country already hosteda number of foreign affiliates in the industry.There was also a geographic element involved:beyond targeting firms from the United States,which has historically been the main sourceof FDI and represents the primary exportmarket, other potential countries with largepharmaceutical exports to the United Stateswere identified (by analysing United Statesimport data) for targeting, and companies wereidentified within those countries.

11 Some IPAs focus only on firms of a particularsize. In China, for example, some provincesspecifically target the Fortune 500 companies.In the early 1990s, China started targetingthe largest TNCs in the world. The abili tyto attract such TNCs has become an importantperformance indicator for many sub-nationalIPAs. So far, China has succeeded in attractingabout 400 of the Fortune 500 companies toinvest, a large number of which have multi-projects under a holding company in Beijingor Shanghai that reports directly to theheadquarters in the home country (WIR01 ,box I.3).

12 When executives of Swedish TNCs were askedabout the most important factors determining

��


the location of head-office functions, taxationof individuals was reported to be the secondmost important criterion after access to efficientair transportation (Braunerhjelm and Lindqvist,1999; ISA Economic Council, 1999).

13 The rate of individual taxation is emphasizedby London First Centre and LocationSwitzerland.

14 Given the difficulties in transforming screeninginsti tutions into IPAs, some countries l ikeMexico and Venezuela have chosen to startafresh and create completely new organizationsfor investment promotion (Wells, 1999).

15 At the same time, IPAs need to be able tointeract efficiently with other parts of thebureaucracy, not least to facil i tate theinvestment process (section VIII.B).

16 Copenhagen Capacity, a Danish sub-nationalIPA, is a good illustration of this point. ThisIPA targets regional headquarters (for whichair transport is key), R&D laboratories (forwhich skilled labour may be the main attraction)and TNCs in industries represented by boardmembers. Consequently, i ts board includesrepresentatives of the local government, theCEO of Copenhagen Airport , the Presidentof the Copenhagen Business School, and anumber of CEOs of Danish and foreigncompanies .

17 WIR01 and UNCTAD’s survey on investortargeting, February, 2002.

18 Targets may be related to inputs (number ofenquiries, visits , etc.) , outputs (number of

projects, jobs and value of investment), qualityof investments (type of investment, mode ofentry, R&D intensity) and agency impact (levelof investor support and customer satisfaction).

19 Procedures at the municipal, provincial andnational levels can be related to: employment(e.g. visas, residency permits and work permitsfor foreign investors and expatriates workers,and procedures for hiring local employees);locating (e.g. site acquisition and developmentprocedures, utility hook-ups, and environmentalcompliance); reporting to the Government(e.g. business registration, tax registration,special licenses and permits, and privatizationprocedures); and operating in the host country(e.g. product certif ication, regulatoryinspections, tax payment, and import/exportcont ro l s ) .

20 There is a growing li terature on how themandate and functions of foreign affi l iatescan be affected through bargaining betweencorporate headquarters and the localmanagement of the affiliates (see Birkinshaw,2001, for a review).

21 Young and Hood (1995, p. 293) define “aftercare” as that “which comprises all potentialservices offered at the company level bygovernment and its agencies to facilitate boththe successful start-up and the continuingdevelopment of a multinational affi l iate ina host country or region, with a view tomaximising the local economic developmentcontribution of that affi l iate”.

REFERENCES

Abernathy, Frederick H., John T. Dunlop, Janice H.Hammond and David Weil (1999). A Stitch in Time:Lean Retail ing and the Transformation ofManufacturing – Lessons from the Textiles andApparel Industries (New York: Oxford UniversityPress).

Aharoni, Yair (1966). The Foreign Investment DecisionProcess (Boston: Division of Research, HarvardBusiness School).

Aitken, Brian, Gordon H. Hanson and Ann E. Harrison(1997). “Spillovers, foreign investment, and exportbehavior”, Journal of International Economics ,43 (1-2): 103-132.

Alvarez, C. (2002). “El programa de atracción deinversiones de alta tecnología”. Presentation atthe UNCTAD-ECLAC regional seminar on FDIPolicies in Latin America, 7-9 January (Santiago,Chile), mimeo.

Amirahmadi, Hooshang and Weiping Wu (1995). “Exportprocessing zones in Asia”, Asian Survey, 35 (9):828-849.

Amsden, Alice H. (1989). Asia’s Next Giant: SouthKorea and Late Industrialization (New York: OxfordUniversity Press).

Anderson, Robert (2002). “Now they are motoring” ,in Investing in Central and Eastern Europe, FinancialTimes Survey, supplement IV, 17 May.

Anderson, Sarah and John Cavanagh (2000). “Top 200:The rise of corporate global power” (Washington,D.C.: Institute for Policy Studies), mimeo.

Antalóczy, Katalin (1999). “Vámszabad területek ésMagyarország Európai Unióhoz történöcsatlakozása” [Customs free zones and Hungary’saccession to the European Union], Európai TükörMühelytanulmányok , No.64.

�� and Magdolna Sass (2001). “Greenfieldinvestments in Hungary: are they different fromprivatization FDI?”, Transnational Corporations,10 (3): 39-59.

Arndt, Sven W. and Henryk Kierzkowski, eds. (2001).Fragmentation: New Production Patterns in theWorld Economy (Oxford: Oxford University Press).

ASEAN Secretariat (2002). “Industrial estates, exportprocessing zones, free trade zones, science andtechnology parks in ASEAN”, ASEAN InvestmentArea, Facilitation Series, No.1 (Bali, Indonesia).

Audet, D. (1996). “Globalisation in the clothingindustry”, in OECD, Globalisation of Industry:Overview and Sector Reports (Paris: OECD).

Bach, Christopher L. (2002). “U.S. internationaltransactions, fourth quarter and year 2001”, Surveyof Current Business (Washington, D.C.: United

States Department of Commerce, Bureau ofEconomic Analysis), April 2001.

Baden, Sally and Myriam Velia (2001). “Trade policy,retail markets and value chain restructuring inthe EU clothing sector”. Research report for theInternational Development Research Centre (IDRC)(Canada), mimeo.

Bair, Jennifer and Gary Gereffi (2001). “Local clustersin global chains: the causes and consequencesof export dynamism in Torreon’s blue jeansindustry”, World Development, 29 (11): 1885-1903.

Banamex Citigroup (2002). Examen de la situacióneconómica de México (México: Banamex Citigroup),78 (3).

Barnes, Julius and Raphael M. Kaplinsky (2000).“Globalisation and the death of the local firm?The automobile components sector in South Africa”,Regional Studies , 34 (9): 797-812.

Basile, Antoine and Dimitri Germidis (1984). Investingin Free Export Processing Zones (Paris: OECDDevelopment Centre).

Battat, Joseph, Isaiah Frank and Xiaofang Shen (1996).“Suppliers to multinationals: linkage programsto strengthen local companies in developingcountries” , FIAS Occasional Paper , No. 6(Washington D.C.: World Bank).

Belitz, Heike, Karl Brenke and Frank Fleischer (2000).“Der Beitrag ausländischer Investoren zum Aufbauwettbewerbsfähiger Wirtschaftsstrukturen in denneuen Bundesländern”, Deutsches Insti tut fürWirtschaftsforschung (DIW), Sonderheft No. 169(Berlin: Duncker & Humblot).

Beviglia Zampetti, Americo (1995). “The UruguayRound Agreement on Subsidies: A forward-lookingassessment”, Journal of World Trade, 29(6): 5-29.

Birkinshaw, Julian (2001). “Strategy and managementin MNE subsidiaries”, in Alan M. Rugman andThomas Brewer, eds. , Oxford Handbook ofInternational Business (Oxford: Oxford UniversityPress).

Blomström, Magnus, Ari Kokko and Mario Zejan (2000).Foreign Direct Investment: Firm and Host CountryStrategies (London: Macmillan Press, and NewYork: St. Martin’s Press).

Borrus, Michael, Dieter Ernst and Stephan Haggard,eds. (2000). Rivalry or Riches: InternationalProduction Networks in Asia (London: Routledge).

Braunerhjelm, Pontus and Tobias Lindqvist (1999).“Utvandrarna: effekter och drivkrafter bakomhuvudkontorsflytten”, Ekonomisk Debatt, 27: 483-497.

��


Brewer, Thomas L., and Stephen Young (1997).“Investment incentives and the international agenda”,The World Economy, 20 (2): 175-198.

Buitelaar, Rudolf M. and Ramón Padilla Pérez (2000).“Maquila, economic reform and corporatestrategies”, World Development, 28 (9): 1627-1642.

Büttner J . (2001). “Fusionen: neuer Markt vorUebernahmefieber”, Frankfurter Allgemeine Zeitung,13 November.

Calderón, Alvaro (2002). “La inversión extranjera directaen Chile: cerca de un punto de inflexión?”.Presentation at the UNCTAD-ECLAC regionalseminar on FDI Policies in Latin America, 7-9January (Santiago, Chile), mimeo.

�� Michael Mortimore, and Wilson Peres (1996).“Mexico: foreign investment as a source ofinternational competitiveness”, in J. Dunning andR. Narula, eds., Foreign Direct Investment andGovernments: Catalysts for Economic Restructuring(London: Routledge).

Cantwell, John and Odile Janne (1998). “Globalisationof innovatory capacity”, Discussion Papers inInternational Investment and Management , No.253 (Reading: University of Reading, Departmentof Economics).

Carey, Nick (2002). “PSA/Toyota may benefit onlylow-cost suppliers”, Prague Business Journal ,Internet edition, 28 January, www.pbj.cz.

Carrillo Jorge (1995). “Flexible production in the autosector: the industrial reorganization at Ford-Mexico”,World Development, 23 (1): 87-101.

��and Michael Mortimore (1998). “Competitividadde la industria de televisores en México”, RevistaLatino-americana de Estudios do Trabalho (SaoPaulo), 4 (6).

��, J.A. Estrada and Michael Mortimore (1999).Competitividad y Mercado de Trabajo: Empresasde Autopartes y Televisores en México (MexicoCity: Plaza y Valdez Editores).

Cernat, Lucian, Sam Laird and Alessandro Turrini (2002).Back to Basics: Market Access Issues in the DohaAgenda (New York and Geneva: UNCTAD),forthcoming.

Chang, C.Y. (1986). “Bureaucracy and modernization:a case study of the special economic zone”, inC.K. Leung and Y.C. Jao, eds., China’s SpecialEconomic Zones: Politics, Problems, and Prospects(Oxford: Oxford University Press).

Cheng, Kee-Kerng (2001). “FDI and exportcompetitiveness in Malaysia”. Presentation at theAsian Regional Seminar on Export Competitivenessand the Role of Foreign Direct Investment, organizedby UNCTAD and the Center on Transnationals’Studies, Nankai University, 11-13 December (Tianjin,China), mimeo.

China, Ministry of Foreign Trade and EconomicCooperation (MOFTEC) (1997). "Achievementsin FDI utilization and the role of FDI in China",in White Paper of China Foreign Trade andEconomic Cooperation (Beijing: China ForeignEconomies and Trade Publishing House) (in

Chinese).

��(1999). "An overview of China's absorptionof FDI in 1998", in Statistics on FDI in China1999 (Beijing: MOFTEC) (in Chinese).

��(2000). "An overview of China's absorptionof FDI in 1999", in Statistics on FDI in China2000 (Beijing: MOFTEC) (in Chinese).

________ (2001a). Foreign Trade Statistics (Beijing:MOFTEC).

�� (2001b). "An overview of China's absorptionof FDI in 2000", in Statistics on FDI in China2001 (Beijing: MOFTEC) (in Chinese).

Chu, D.K. (1985). “The politico-economic backgroundto the development of the special economic zones”,in K.A. Wong and D.K. Chu, eds., Modernizationin China: The Case of the Shenzhen SpecialEconomic Zone (Oxford: Oxford University Press).

Costa Rica, Ministry of Foreign Trade (1997). “Laestrategia nacional de atracción de inversiones”,(San José: Unidad de Estudios Especiales), February,mimeo.

Cowley, Mike (2001). “National Linkage Programme”.Final evaluation report (Dublin: Industry EvaluationUnit), mimeo.

Crane, G.T. (1990). The Political Economy of China’sSpecial Economic Zones (Armonk, NY: M.E. Shape).

�� (1993). “Reform and retrenchment in China’sspecial economic zones”, in Joint EconomicCommittee, Congress of the United States, ed.,China’s Economic Dilemmas in the 1990s: TheProblems of Reforms, Modernization, andInterdependence (Armonk, NY: M.E. Shape).

Csonka, Agnes (2002). “Hungary’s pharma-ceuticalseye regional expansion”, Budapest Business Journal,Internet edition, 17 June, www.bbj.hu.

Cyhn, J. (2002). Technology Transfer and InternationalProduction: The Development of the ElectronicsIndustry in Korea (Cheltenham: Edward Elgar).

CzechInvest (2002). “The PSA PEUGEOT CITROËN/TOYOTA joint venture plant in Kolin, CzechRepublic”, CzechInvest News, 4 March.

Daily Mail and Guardian (1999). “Botswana lendsDe Beers R455m”, Daily Mail and Guardian,Business, http://www.mg.co.za/mg/za/archive/99jul/08julpm-business.html, 8 July.

De Grauwe, Paul and Filip Camerman (2002). “Howbig are the big multinationalc o m p a n i e s ” ( w w w 2 0 2 . p a i r . c o m /ste...p3?pub=globalisering/multinationals.htm),mimeo.

Dedrick, Jason and Kenneth L. Kraemer (1998). Asia’sComputer Challenge: Threat or Opportunity forthe United States and the World? (Oxford: OxfordUniversity Press).

DeloitteToucheTohmatsu (2002). “USA-RSA businessspotlight”, Newsletter, 27 February.

��

REFERENCES

Dicken, Peter (1998). Global Shift: Transforming theWorld Economy, third edit ion (London: PaulChapman Publishing Company).

Dickmann, N. and J. Ritter (2002). “Chip industrycontinues to be drawn strongly to ‘Saxony Valley’”,Frankfurter Allgemeine Zeitung, 4 June.

Djankov, Simeon, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer (2001). “Theregulation of entry”, Policy Research WorkingPaper, No. 2661 (Washington D.C.: World Bank).

Dolan, K. C. and J. Humphrey (2000). “Value chainsand upgrading: the impact of UK retailers on thefresh fruit and vegetables industry in Africa”,Journal of Development Studies, 37 (2): 147-176.

Dolven, Ben and David Kruger (2002). “Chip-making:silicon rush”, Far Eastern Economic Review, 14February: 30-34.

Doraisami, Anita and Rajah Rasiah (2001). “Fiscalincentives for promotion of manufactured exportsin Malaysia”, in K.S. Jomo, ed., Southeast Asia’sIndustrialization: Industrial Policy, Capabilitiesand Sustainabili ty (Houndmills, Basingstoke,Hampshire and New York: Palgrave): 247-262.

Dunning, John H. (1993). Multinational Enterprisesand the Global Economy (Harrow: Addison-Wesley).

Dussel Peters, Enrique (1999). “La subcontratacióncomo proceso de aprendizaje: el caso de laelectrónica en Jalisco (México) en la década delos noventa”, Serie Desarrollo Productivo , No.55 (Santiago, Chile: ECLAC), LC/L.1183-P.

�� (2000). “La inversión extranjera en México”,Serie Desarrollo Productivo , No. 80 (Santiago,Chile: ECLAC), LC/L.1414-P.

Echeverri-Carroll, E., L. Hunnicutt and N. Hansen(1998). “Do asymmetric networks help or hindersmall firms’ ability to export?”, Regional Studies,32 (8): 721-733.

Economic Commission for Europe (ECE) (1995).Economic Bulletin for Europe, volume 47 (Geneva:United Nations), United Nations publication, SalesNo. E.95.II.E.24.

Economic Commission for Latin America and theCaribbean (ECLAC) (1998). Foreign Investmentin Latin America and the Caribbean: 1998 Report(Santiago, Chile: United Nations), United Nationspublication, Sales Nr. E.98.II.G.14.

��(2000). Foreign Investment in Latin Americaand the Caribbean: 1999 Report (Santiago, Chile:United Nations), United Nations publication, SalesNo. E.00.II.G.4.

�� (2001). Foreign Investment in Latin Americaand the Caribbean: 2000 Report (Santiago, Chile:United Nations), United Nations publication, SalesNo. E.01.II.G.12.

�� (2002). La Inversión Extranjera Directa en AméricaLatina y el Caribe: Informe 2001 (Santiago, Chile:United Nations), United Nations publication, SalesNo. S.02.II.G.47.

Economist Intelligence Unit (EIU) (2001a). BusinessLatin America (London: EIU), 4 February.

________ (2001b). Business Latin America (London: EIU),24 September.

�� (2002a). Country Reports: Hong Kong, 12 January;South Korea, 2 February; Singapore, 1 February;Taiwan, 2 February; Thailand, 2 February (London:EIU).

��(2002b). Country Report: Chile, 15 January(London: EIU).

�� (2002c). Country Forecast: United Statesof America , Main report, May (London: EIU).

Egloff, Enrique (2001a). “La inversión de Intel y políticasmicro para fortalecer la competitividad en CostaRica”. Presentation at the ECLAC/IDB seminaron Camino a la competitividad : el nivel mesoy microeconómico, 15-16 March (Santiago, Chile),mimeo.

��(2001b). “CINDE: Costa Rican Investment andDevelopment Board”. Presentation at the UNCTADExpert Meeting on the Impact of FDI policies onIndustrialization, Local Entrepreneurship and theDevelopment of Supply Capatiy, 5-7 November(Geneva), mimeo.

Éltetö, Andrea (2000). “FDI and changes in foreigntrade structure and intra-industrial trade in fiveCEECs”. Paper prepared in the framework of thePhare ACE project no. P97-8112-R, and presentedat the 6th Conference of the European Associationfor Comparative Economic Studies, 7-9 September(Barcelona), mimeo.

Embassy of France in Angola (2001). “Angola:investissements directs étrangers (IDE) et présencefrançaise en 2000”, Le Conseiller Economiqueet Commercial, 25 September (Luanda), mimeo.

Erdal, Fuat and Ekren Tatoglu (2002). “Locationaldeterminants of foreign direct investment in anemerging market economy: evidence from Turkey”,Multinational Business Review , 10 (1): 21-27.

Ericsson, Magnus (2002). “Mining M&A reaches recordlevels in 2001” (Stockholm, Sweden: Raw MaterialsGroup), mimeo.

Ernst & Young (2002). European Investment Monitor:2002 Report. A Comprehensive Analysis ofCompanies’ Location Decisions in 2001 (London:Ernst & Young).

Ernst , Dieter (1997). “From partial to systemicglobalization: international production networksin the electronics industry”, BRIE Working PaperNo. 98, (Berkeley, CA: Berkeley Roundtable onthe International Economy, University of CaliforniaBerkeley).

Esty, D. and B. Gentry (1997). “Foreign investment,globalisation and environment”, in OECD,Globalisation and Environment: PreliminaryPerspectives (Paris: OECD).

European Bank for Reconstruction and Development(EBRD) (2000). Transit ion Report 2000:Employment, Skills and Transition (London: EBRD).

��


European Central Bank (ECB) (2002). “Euro area balanceof payments: monthly developments in December2001 and overall results for 2001”, ECB StatisticalPress Release (Frankfurt: ECB), 22 February.

European Commission (2000). “Commission proposes‘Everything but Arms’ access to EU markets forLeast Developed Countries (LDCs)”, EuropeanCommission Directorate General of Trade , 20September (Brussels), http//europa.eu.int/comm/trade/miti/devel/eba1.htm.

Feenstra, Robert C. (1998). “Integration of trade anddisintegration of production in the global economy”,Journal of Economic Perspectives , 12 (4): 31-50.

Felker, Greg (2001). “The poli t ics of industrialinvestment policy reform in Malaysia and Thailand”,in K.S. Jomo, ed., Southeast Asia’s Industrialization:Industrial Policy, Capabilities and Sustainability(Houndmills, Basingstoke, Hampshire and NewYork: Palgrave): 129-182.

�� (2002). “Southeast Asian industrialism and thechanging global production system” (Hong Kong,China: The Hong Kong University of Science andTechnology), mimeo.

�� and K.S. Jomo (2000). “New approaches toinvestment policy in the ASEAN 4”, AsianDevelopment Bank Institute; available on the Internetat: http://www.adbi.org/para2000/papers/Jomo.pdf.

Fewsmith, J. (1986). “Special economic zones of thePRC”, Problems of Communism , 35 (6): 78-85.

Food and Agriculture Organization of the United Nations(FAO) (2002). “A thorn on every rose for Kenya’sflower industry”, FAO News Stories (Rome: FAO),No. 2002/09, 18 April, http://www.fao.org/english/newsroom/news/2002/3789-en.html.

Foreign Investment Advisory Service (FIAS) (2001).“Costa Rica: business taxation and investmentincentives” (Washington D.C.: Foreign InvestmentAdvisory Service, International Finance Corporationand World Bank), mimeo.

Foreign Investment Committee of Chile (2001). “Chile,your best bet” (Santiago: Government of Chile),December, mimeo.

Forfás (2002). International Trade and InvestmentReport 2001 (Dublin: Forfás), January.

�� and Investment and Development Agency (IDA)(2001). “Impact of the United States Technologydownturn on Overseas ICT Investment in Ireland”.A briefing paper for the Boards of IDA Irelandand Forfás (Dublin), mimeo.

Frankfurter Allgemeine Zeitung (2001). “Biotechnologie:Konsolidierungswelle beflügelt Branche”, 12December.

Fresh Produce Exporters Association of Kenya (FPEAK)(2002). Horticultural News Journal (Nairobi: AgromCommunications), February-March.

Fujita, Masataka (2001a). “Significance of the AsianFDI in Africa”. Paper prepared for round tableon The Role of Asian FDI in African Development:

How to Make it Work”, organized by UNCTADin Durban, South Africa, 10-11 July, mimeo.

�� (2001b). “FDI flows in the League of Arab States:some recent statistics and a brief overview of thecurrent legal framework for investment”, ArabBank Review , 3 (2): 16-20.

Ge, Wei (1999a). “The dynamics of export-processingzones”, UNCTAD Discussion paper No. 144(Geneva: UNCTAD).

�� (1999b). “Special economic zones and the openingof the Chinese economy: some lessons for economicliberalization”, World Development, 27 (7): 1267-1285.

Gereffi, Gary (1996). “Commodity chains and regionaldivision of labour in East Asia”, Journal of AsianBusiness, 12 (1).

�� (1999). “International trade and industrial upgradingin the apparel commodity chain”, Journal ofInternational Economics, 48 (1): 37-70.

�� (2001). “Prospects for industrial upgrading bydeveloping countries in the global apparelcommodity chain”. Background paper for UNIDO,World Industrial Development Report 2001 (Vienna:UNIDO), 21 February.

�� and M. Korzeniewicz, eds. (1994). CommodityChains and Global Capitalism (London, Westport:Praeger).

�� and Raphael Kaplinsky, eds. (2001). “The valueof value chains”, IDS Bulletin (Brighton: Instituteof Development Studies, University of Sussex),32 (3).

��, ed. (2002). Who Gets Ahead in the GlobalEconomy? Industrial Upgrading, Theory andPractice (New York: Johns Hopkins UniversityPress).

��, John Humphrey and Timothy Sturgeon (2002).“Developing a theory of global value chains: aframework document”. Paper presented at theGlobal Value Chains Conference, Rockport ,Massachusetts, 15 April, mimeo.

��, John Humphrey, Raphael Kaplinksy and TimothySturgeon (2001). “Globalisation, value chains anddevelopment”, Introduction, IDS Bulletin (Brighton:Institute of Development Studies, University ofSussex), 32 (3): 1-8.

Germidis, Dimitri (1981). International Subcontracting:A New Form of Investment (Paris: OECDDevelopment Centre).

Gibbon, P. (2001). “Upgrading primary production:a global commodity chain approach”, WorldDevelopment , 29 (2): 345-364.

González, Anabel (2002). “Casos de países que hanmejorado su competitividad internacional vía IEDen manufacturas: Costa Rica”. Presentation at theUNCTAD-ECLAC regional seminar on FDI Policiesin Latin America, 7-9 January (Santiago, Chile),mimeo.

��

REFERENCES

Görg, Holger and David Greenaway (2001). “Foreigndirect investment and intra-industry spillovers”.Paper prepared for the UNECE/EBRD ExpertMeeting on Financing for Development: Enhancingthe Benefits of FDI and Improving the Flow ofCorporate Finance in the Transition Economies,3 December (Geneva), mimeo.

�� and E. Sobl (1999). “Multinational companiesand the entry of indigenous firms: panel dataevidence for Ireland”, Centre for Economic ResearchWorking Paper, No. WP99/8 (Dublin: Universityof Dublin).

�� and Frances Ruane (2000). “An analysis of backwardlinkages in the Irish electronics sector”, Economicand Social Review , Volume 31.

�� and Frances Ruane (2001). “Multi-nationalcompanies and linkages: panel data evidence forthe Irish electronics sector”, International Journalof the Economics of Business, 8 (1): 1-18.

Graciela Romer & Associates (2002). “Los Argentinosy la actual crisis económica: sus causas”, GracielaRomer & Asociados, Monthly Report , March.

Graziani, Giovanni (2001). “International subcontractingin the textile and clothing industry”, in Sven Arndtand Henryk Kierzkowski, eds., Fragmentation:New Production Patterns in the World Economy(Oxford: Oxford University Press): 209-230.

Haisley, Tracy (2002). “How H&M cooks up success”,Bobbin Magazine , February, www.bobbin.com.

Harding, H. (1987). China’s Second Revolution: ReformAfter Mao (Washington D.C.: Brookings Institution).

Hines, J.R. (1988). “Tax sparing and direct investmentin developing countries”, NBER Working PaperSeries, No. 6728 (Cambridge, MA: National Bureauof Economic Research).

Hong Kong Census and Statistics Department (2002).Report on 2001 Annual Survey of Regional Officesand Representing Overseas Companies in HongKong (Kowloon: Census and Statistics Department).

Howell, J. (1993). China Opens Its Doors: The Politicsof Economic Transition (Boulder, CO: Lynne RiennerPublishers).

Hu, Jingyan (2002). FDI: Interpretation to the RecentRegulatory Changes (London: CommonwealthSecretariat, Economic Affairs Division).

Hughes, Anthony and Havelock Brewster (2002).Lowering the Threshold: Reducing the cost andrisk of private direct investment in least developed,small and vulnerable economies (London:Commonwealth Secretariat , Economic AffairsDivision).

Hummels, D., Jun Ishii and Kei-Mu Yi (2001). “Thenature and growth of vertical specialization inworld trade”, Journal of International Economics,54 (1): 75-96.

Humphrey, John and Hubert Schmitz (2001).“Governance in global value chains”, IDS Bulletin(Brighton: Insti tute of Development Studies,University of Sussex), 32 (3).

Humphries, Davis (2001). “Mining in the knowledge-basedeconomy”, Minerals and Energy, 16 (3): 3-8.

Industrial Investment Council (IIC) (2001a). “Investmentincentives in eastern Germany for large companies”(Berlin: IIC), September, mimeo.

�� (2001b). “United States Chamber of Commercesurvey underlines strengths of eastern Germany” (Berlin:IIC), Focal Point: Eastern Germany, December: 2.

Institute of International Finance (IIF) (2002). “Capitalflows to emerging market economies” (Washington,D.C.: IIF), 30 January, mimeo.

International Confederation of Free Trade Unions(ICFTU) (1999). “Behind the wire: anti-unionrepression in the export processing zones”, http://www.icftu.org/English/tncs.

International Financial Services Centre (IFSC) (2002).“Short profile of the IFSC”, www.ifsc.ie.

International Labour Office (ILO) (1996). “Globalizationof the footwear, textiles and clothing industries”.Report for discussion at the Tripartite Meetingon the Globalization of the Footwear, Textilesand Clothing Industries Effects on Employmentand Working Conditions (Geneva: ILO), TMFTCI/1996.

�� (1998). “Labour and social issues relatingto export processing zones”. Report for discussionat the Tripartite Meeting of Export ProcessingZone-Operating Countries (Geneva: ILO), alsoat: http://www.ilo.org/public/english/employment/multi/download/epz.pdf.

�� (2000a). “Your voice at work”. Global reportunder the follow-up to the ILO Declaration onFundamental Principles and Rights at Work (Geneva:ILO), also at: http://www.ilo.org/voice@work.

�� (2000b). “Organization, bargaining anddevelopment in a globalizing world” (Geneva:ILO), also at: http://www.ilo.org/public/english/standards/relm/gb/docs/gb279/pdf/sdg-2.pdf.

�� (ILO) (2001). Seventh Survey On The Effect GivenTo The Triparti te Declaration Of PrinciplesConcerning Multinational Enterprises and SocialPolicy , Parts I and II (Geneva: ILO), GB.280/MNE/1/2.

International Monetary Fund (IMF) (2002). WorldEconomic Outlook 2002 (Washington, D.C.: IMF).

Invest in Sweden Agency (ISA) Economic Council(1999). I huvudet på ett företag – om huvudkontoretsroll och lokalisering (Stockholm: Invest in SwedenAgency).

Investment and Development Agency (IDA) (1999).“Ireland’s top 100 exporters 1999”, Export Link,third edition (Dublin: IDA).

�� (2001a). "Locational strategy for inward investment:Sean Dorgan, CEO, IDA Ireland addressing the AnnualConference of Institution of Engineers of Ireland",Press Release (Dublin: IDA), 5 October, http://www.idaireland.com/news/showRelease.asp?storyid=74.

�� (2001b). Annual Report 2000 (Dublin: IDA).

��


�� (IDA) (2002). “Industry”, www.idaireland.com/industry.

Jaklic, Andreja and Marjan Svetlicic, eds. (2002).Enhanced Transit ion through OutwardInternationalization: Outward FDI by SloveniaFirms (Aldershot, Hampshire: Ashgate), forthcoming.

Japan Bank for International Cooperation (JBIC) (2000).“JBIC FY1999 survey: the outlook of foreign direct

investment by Japanese manufacturing companies”,JBIC Review , No. 1, May: 3-50.

�� (2002). “JBIC FY2001 survey: the outlook ofJapanese foreign direct investment”, Journal ofthe Research Institute for Development and Finance,No. 9, January: 4-38.

Japan External Trade Organization (JETRO) (2001).17th Survey on Japanese Manufacturing Affiliatesin Europe/Turkey (Tokyo: JETRO).

�� (2002). JETRO Toshi Hakusho 2002 (Tokyo:JETRO).

Japan, Institute for International Trade and Investment(2000). Kaigai Jigyo Katsudo Chosa Data nadoniMotozuku Bunseki Kenkyu (Tokyo: IITI).

�� (2001). “Japanese manufacturing companies showintention to expand overseas business operationsas they continue domestic and internationalmanagement reformation at brisk pace: JBIC FY2000survey: the outlook of Japanese foreign directinvestment”, JBIC Review, No. 5, June: 1-76.

�� (2002). “JBIC FY2001 survey: the outlook ofJapanese foreign direct investment”, Journal ofthe Research Institute for Development and Finance,No. 9, January: 4-38.

Japan, Ministry of Economy, Trade and Industry (METI)(2001a). Dai 29-kai Wagakuni Kigyo no KaigaiJigyo Katsudo (Tokyo: Ministry of Finance PrintingBureau).

�� (2001b). Dai 33-kai Gaishikei Kigyo no Doko(Tokyo: Ministry of Finance Printing Bureau).

�� (2002). Dai 30-kai Wagakuni Kigyo no KaigaiJigyo Katsudo (Tokyo: Ministry of Finance PrintingBureau).

Japan, Ministry of International Trade and Industry(MITI) (1995). Dai 24-kai Wagakuni Kigyo noKaigai Jigyo Katsudo (Tokyo: Ministry of FinancePrinting Bureau).

�� (1998). Dai 26-kai Wagakuni Kigyo no KaigaiJigyo Katsudo (Tokyo: Ministry of Finance PrintingBureau).

Jayawardena, D.L.U. (1983). “Free trade zones”, Journalof World Trade Law , 17 (5): 427-444.

Jenkins, Mauricio, Gerardo Esquivel and Felipe B.Larraín (1998). “Export processing zones in CentralAmerica” (Cambridge, MA: Harvard Institute forInternational Development, Harvard University),mimeo.

Jenkins, P. Glenn and Chun-Yan Kuo (2000). “Promotingexport-oriented foreign direct investment indeveloping countries: tax and customs”, CAERII Discussion Paper , No.65, May.

Johansson, Helena (1994). “The economics of exportprocessing zones revisited”, Development PolicyReview, 12 (4): 388-402.

Kagami, Mitsuhiro and Akifumi Kuchuki (2000). “SiliconValley in the south: new management networksemerging in Guadalajara”. Prepared for theinternational workshop on Industrial Networksin Asia organized by the Institute of DevelopingEconomies, JETRO, January 26-27, Chiba, Japan,mimeo.

Kaminski, Bartlomiej and Francis Ng (2001). “Tradeand production fragmentation: Central EuropeanEconomies in EU networks of production andmarketing”, Policy Research Working Paper, No.2611 (Washington D.C.: World Bank).

Kaplinsky, Raphael (2000). “Spreading the gains fromglobalisation: what can be learned from value chainanalysis?”, Journal of Development Studies , 37(2): 117-146.

�� and Jeff Readman (2000). “Globalisation andupgrading: what can (and cannot) be learnt frominternational trade statistics in the wood furnituresector?” (Brighton: Centre for Research inInnovation Management, University of Brightonand Institute of Development Studies, Universityof Sussex), mimeo.

�� and Jeff Readman (2001). “How can SME producersserve global markets and sustain income growth?”(Brighton: Insti tute of Development Studies,University of Sussex and Centre for Research inInnovation Management, University of Brighton),mimeo.

Kearney, A.T. (2001). FDI Confidence Index (Alexandria,VA: Global Business Policy Council), Volume 4,February.

Kenya, Central Bureau of Statistics (2002). EconomicSurvey 2002 (Nairobi: Government Printer).

Kenya, Export Processing Zone Authority (EPZA) (2001).“EPZs performance review and analysis, 2001”(Nairobi: Export Processing Zones Authority),mimeo.

Kim, Linsu (1997). Imitation to Innovation: TheDynamics of Korea’s Technological Learning(Cambridge, MA: Harvard Business School Press).

Kirkland, Joel and Vladimir Kuchar (2002). “U.S. firmto make bid for Skoda Holding”, Prague BusinessJournal, Internet edition, 10 June, www.pbj.cz.

Kleinberg, R. (1990). China’s ‘Opening’ to the OutsideWorld: The Experiment with Foreign Capitalism(Boulder, CO: Westview Press).

Kosacoff, Bernardo, ed. (1999). “Hacia un mayor entornocompetit ivo de la producción automotriz enArgentina”, Working Paper No. 82 (Buenos Aires:ECLAC, Buenos Aires Office), July.

��

REFERENCES

KPMG (2002). “Tekjuskattar fyrirtaekja - Könnun KPMGí janúar 2002”, KPMG’s corporate tax rates survey,January, www.kpmg.is.

�� and Costa Rican Investment Board (CINDE).“Investment in Costa Rica”, available at: http://www.cinde.org.

�� “KMPG Consulting” (2001). “Foreign directinvestment in Korea”. Summary Report, September,mimeo.

Krause, Daniel and Robert Handfield (1999). Developinga World Class Supply Base (Tempe, Arizona: Centerfor Advanced Purchasing Studies, NationalAssociation of Purchasing Management).

Kulfas, M., F. Porta and A. Ramos (2002). “La inversiónextranjera en la Argentina a fines del siglo XX”.Contribution to the chapter on Argentina in ECLAC,La Inversión Extranjera Directa en América Latinay el Caribe: Informe 2001 (Santiago, Chile, UnitedNations), United Nations publication, Sales No.S.02.II.G.47.

Kumar, Nagesh (1998). “Multinational enterprises,regional economic integration, and export-platformproduction in the host countries: an empiricalanalysis for the US and Japanese corporations”,Weltwirtschaftliches Archiv , 134 (3): 450-483.

�� (2001). “Indian software industry development:international and national perspective”, Economicand Political Weekly , 36 (45): 4278-4290.

�� (2002). Globalization and the Quality of ForeignDirect Investment (New Delhi: Oxford UniversityPress).

Kumar, Rajiv (1987). “Performance of foreign anddomestic firms in export processing zones”, WorldDevelopment , 15 (10/11): 1309–1319.

Kwon, Soon Hyung (2001). “The effects of outwarddirect investment and inward foreign directinvestment”. Presented at the Regional Seminaron Export Competitiveness and the Role of ForeignDirect Investment organized by UNCTAD and theCenter on Transnationals’ Studies, Nankai University,11-13 December, (Tianjin, China), mimeo.

Lall , Sanjaya (1998). “Export of manufactures bydeveloping countries: emerging patterns of tradeand location”, Oxford Review of Economic Policy,14 (2): 54-73.

�� (2000a). “Export performance, technologicalupgrading and foreign direct investment strategiesin the Asian newly industrializing economies: withspecial reference to Singapore”, Serie DesarrolloProductivo , No. 88 (Santiago, Chile: ECLAC),LC/L.1421-P/E.

�� (2000b). “The technological structure andperformance of developing country manufacturedexports”, Oxford Development Studies, 28 (3):337-369.

�� (2001a). Competitiveness, Technology and Exports(Cheltenham: Edward Elgar).

�� (2001b). “Competitiveness indices and developingcountries: an economic evaluation of the GlobalCompetitiveness Report”, World Development, 29

(3): 1501-1525.

�� (2002). “Asian success stories: improving industrialcompetitiveness with and without FDI”. Presentationat the UNCTAD-ECLAC regional seminar on FDIPolicies in Latin America 7-9 January (Santiago,Chile), mimeo.

Lederman, D., W. Maloney and W. Martin (2002). “Tradefor development in Latin America and theCaribbean”. Presentation at the ECLAC-WorldBank Conference on Globalization, 6-8 March(Santiago, Chile), mimeo.

Leinbach, T.R. (1982). “Industry strategy in Malaysia:the role of export processing zones”, Geo Journal,6 (5): 459-468.

Lemoine, Françoise (2000). “FDI and the opening upof China’s economy”, CEPII Working Paper, No.00-11 (Paris: CEPII Research Center).

Li & Fung Limited (2001). Annual Report 2001 ,available on the Internet at http://202.66.146.82/listco/hk/lifung/annual/2001/ar2001.pdf.

Li, S.M. and L.X. Zhao (1992). “Xiamen: regionalcenter and hometown of overseas Chinese”, inY.M. Yeung and X.W. Hu, eds., China’s CoastalCities: Catalysts for Modernization (Honolulu,Hawaii: University of Hawaii Press).

Limited Brands (2001). “The Power of Brands: AnnualReport 2001” (Columbus, OH), http:/ /www.limitedbrands.com/2001ar/pdf/ltd2001ar.pdf.

Lipsey, E. Robert and Eric D. Ramstetter (2001).“Affil iate activity in Japanese and U.S.multinationals and Japanese exports, 1986-1995”,NBER Working Paper Series, No. 8581 (New York:National Bureau of Economic Research).

Loewendahl, Henry (2001a). “A framework for FDIpromotion”, Transnational Corporations, 10 (1):1-41.

�� (2001b). Bargaining with Multinationals: theInvestment of Siemens and Nissan in North-eastEngland (Houndmills, Basingstoke, Hampshireand New York: Palgrave).

�� (2002). “Comparative FDI trends in Latin America& Caribbean: evidence from FDI project data”.Presentation at the UNCTAD-ECLAC regionalseminar on FDI Policies in Latin America, 7-9January (Santiago, Chile), mimeo.

Lopeandía, Felipe (2001). “Informe marco jurídiconacional e internacional sobre inversión extranjeradirecta en Chile”, Serie Desarrollo Productivo ,No. 113 (Santiago, Chile: ECLAC), LC/L.1623-P/E.

Low, Linda (2001). “The role of the government inSingapore’s industrialization”, in K.S. Jomo, ed.,Southeast Asia’s Industrialization: Industrial Policy,Capabili t ies and Sustainabili ty (Houndmills,Basingstoke, Hampshire; New York: Palgrave):113-128.

Madani, Dorsati (1999). “A review of the role andimpact of export processing zones”, Policy ResearchWorking Paper, No. WPS2238 (Washington, D.C.:World Bank).

��


Magretta, Joan (1998). “Fast, global and entrepreneurial:supply chain management, Hong Kong style”,Harvard Business Review, 76 (5): 102-114.

Malaysian Industrial Development Authority (MIDA)(2001). Investment in the Manufacturing Sector:Policies, Incentives and Facilities (Kuala Lumpur:MIDA).

Masupha, Mastory (2002). “Investment promotionpractices in small developing economies”.Presentation at the UNCTAD Workshop on Efficientand Transparent Investment Promotion Practices,6-7 June (Geneva), mimeo.

Mathews, John A. (1999). “A silicon island of theeast: creating a semiconductor industry inSingapore”, California Management Review, 41(2): 55-78.

�� (2001). Dragon Multinational: A New Modelfor Global Growth (New York: Oxford UniversityPress).

�� and D. S. Cho (1999). “Combinative capabilitiesand organizational learning in latecomer firms:the case of the Korean semiconductor industry,Journal of World Business , 34 (2): 139-156.

�� and D. S. Cho (2000). Tiger Technology:The Creation of a Semiconductor Industry in EastAsia (Cambridge: Cambridge University Press).

Mayer, Jörg, Arunas Butkevicius and Ali Kadri (2002).“Dynamic products in world exports”, UNCTADDiscussion Paper, No. 159 (Geneva: UNCTAD).

Mexico, Secretaría de Economía (2001). “Informaciónoportuna de comercio exterior”, December, mimeo.

Mingpao (1999, 2000, 2001, 2002). “Yazhou Zhoukan”,Asia Weekly (Hong Kong, China).

Moran, Theodore H. (1998). Foreign Direct Investmentand Development: The New Policy Agenda forDeveloping Countries and Economies in Transition(Washington D.C.: Insti tute for InternationalEconomics).

Morisset, Jacques and Neda Pirnia (2001). “How taxpolicy and incentives affect foreign directinvestment: a review”, in T. Louis Wells, Jr., NancyJ. Allen, Jacques Morisset and Neda Pirnia, “UsingTax Incentives to Compete for Foreign Investment:Are They Worth the Costs?”, FIAS OccasionalPaper , No. 15 (Washington D.C.: World Bank):69-103.

Morris, J. and R. Imrie (1992). Transforming Buyer-Supplier Relations (London: Macmillan).

Mortimore, Michael (1997). “The Asian challenge tothe world automotive industry”, EconomiaContemporanea (Rio de Janeiro, Brazil: FederalUniversity of Rio de Janeiro), No.2, July-December.

�� (1998a). “Mexico’s TNC-centric industriali-zation process”, in Richard Kozul-Wright and RobertRowthorn, eds., Transnational Corporations andthe Global Economy (London: Macmillan Press).

�� (1998b). “Corporate strategies and regionalintegration schemes involving developing countries:the NAFTA and MERCOSUR automobile industries”,Science, Technology and Development , 16 (2)(Glasgow: University of Strathclyde), August.

�� (1999). “Apparel-based industrialization inthe Caribbean Basin: a thread bare garment, CEPALReview (Santiago, Chile: ECLAC), No. 67, April:119-136.

�� (2000). “Corporate strategies for FDI in thecontext of the new economic model”, WorldDevelopment, 28 (9): 1611-1626.

�� (2001). “Corporate competitiveness in Latin Americaand the Caribbean”, CEPAL Review (Santiago, Chile:ECLAC), No. 74.

�� (2002). “When does apparel become a peril?On the nature of industrialization in the CaribbeanBasin”, in Gary Gereffi, David Spencer and JenniferBair, eds., Free Trade and Uneven Development:the North American Apparel Industry after NAFTA(Philadelphia, PA: Temple University Press).

�� and Ronny Zamora (1998). “The internationalcompetit iveness of the Costa Rican apparelindustry”, Serie Desarrollo Productivo, No. 46(Santiago, Chile: ECLAC), LC/G.1979.

��, Henk Duthoo and José Alfredo Guerrero (1995).“Informe sobre la competitividad internacionalde las zonas francas en la República Dominicana”,Serie Desarrollo Productivo , No. 22 (Santiago,Chile: ECLAC), LC/G.1866.

��, Lorenzo Vicens and Eddy Martínez (1998). “Lacompetitividad internacional de la industria deprendas de vestir de la República Dominicana”,Serie Desarrollo Productivo, No. 45 (Santiago,Chile: ECLAC), LC/G.1973.

��, Sanjaya Lall, Henny Romijn, Karim Laraki,Eddy Martinez, Lorenzo J. Vicens and RonneyZamora (2000). “The garment industry”, inUNCTAD, The Competit iveness Challenge:Transnational Corporations and IndustrialRestructuring in Developing Countries (New Yorkand Geneva: United Nations). United Nationspublication, Sales No. E.00.II.D.35, pp. 81-116.

Multilateral Investment Guarantee Agency (MIGA)(2002). “Foreign direct investment survey”. A studyconducted by MIGA with the assistance of Deloitte& Touche LLP (Washington, D.C.: MIGA), February.

National Association of Software and Service Companies(NASSCOM) (2002). “Indian software exports touchRs. 9,100 crore in the third quarter of 2001-02”(Mumbai, India), 4 February, http:/ /www.nasscom.org/articles/.

National Science Foundation (NSF) (2000). Scienceand Engineering Indicators 2000 (Washington D.C.:National Science Foundation, United StatesGovernment).

Navaretti, G. B., J. I. Haaland and A.Venables (2002).“Multinational corporations and global productionnetworks: the implications for trade policy”. Reportfor the EU Directorate General for Trade (London:Centre for Economic Policy Research), mimeo.

��

REFERENCES

Netherlands Foreign Investment Agency (NFIA) (2002).The Year in Review: Annual Report 2001 (TheHague: Ministry of Economic Affairs).

Ng, Francis and Alexander J. Yeats (1999). “Productionsharing in East Asia: who does what for whom,and why?”, Policy Research Working Paper, No.2197 (Washington D.C.: World Bank).

O’Donovan, David (2001). “Foreign investment – theIrish experience”. Presentation at Conference onThe Changing Face of International Investments:New Opportunities for Turkey, organized by theForeign Investors Association of Turkey, 7-8December (Istanbul, Turkey), mimeo.

Oborne, Michael (1986). China’s Special EconomicZones (Paris: OECD).

Office of the Investment Ombudsman (2001). 2001Report on Foreign Investor Grievances andResolutions in Korea (Seoul: Office of theInvestment Ombudsman).

Oman, Charles P. (2000). Policy Competition for ForeignDirect Investment: A Study of Competition AmongGovernments to Attract FDI (Paris: OECDDevelopment Centre).

Organisation for Economic Co-operation andDevelopment (OECD) (1994). Globalisation andCompetitiveness: Relevant Indicators (Paris: OECDDirectorate for Science, Technology and Industry),DSTI/EAS/IND/WP9(94)19.

�� (1996). Trade, Employment and Labour Standards:A Study of Core Workers’ Rights and InternationalTrade (Paris: OECD).

�� (1997). Foreign Direct Investment and theEnvironment: An Overview of the Literature (Paris:OECD).

�� (2000a). International Trade and Core LabourStandards (Paris: OECD).

�� (2000b). Main Science and Technology Indicators(Paris: OECD).

�� (2000c). No Longer Business as Usual (Paris:OECD).

�� (2001a). Strengthening Trade Capacity forDevelopment (Paris: OECD).

�� (2001b). “Business benefits of trade facilitation”,Working Party of the Trade Committee (Paris:OECD), TD/TC/WP(2001)/FINAL, Unclassified.

�� (2002). Measuring Globalization: The Role ofMultinationals in OECD Economies (Paris: OECD).

PA Cambridge Economic Consultants (PACEC) (1995).Assessment of the Wider Effects of Foreign DirectInvestment in Manufacturing in the UK (London:Department of Trade and Industry).

Patibandla, M. and J. Petersen (forthcoming). “Roleof transnational corporations in the evolution ofa high-tech industry: the case of India’s softwareindustry”, World Development, 30 (9) (forthcoming).

Peters, Ewen and Neil Hood (2000). “Implementingthe cluster approach: some lessons from the Scottishexperience”, International Studies of Management

& Organization , 30 (2): 68-92.

��, Neil Hood and Stephen Young (2000). “Policypartnership in the development of knowledgeindustries in Scotland”, in John H. Dunning, ed.,Regions, Globalization and the Knowledge BasedEconomy (Oxford: Oxford University Press): 259-285.

Pfaffstaller, Richard (2001). “Flextronics”. Presentationprepared for the UNCTAD Expert Meeting on TheImpact of FDI Policies on Industrialization, LocalEntrepreneurship and the Development of SupplyCapacity, 5-7 November (Geneva), mimeo.

Phelps, Nicholas and Cris Fuller (2001). “Taking careof business: aftercare and the state – multinational

enterprise nexus in Wales”, Environment andPlanning C: Government and Policy, 19 (6): 817-832.

Ping, H.K. (1979). “Birth of the second generationof free trade zones”, Far Eastern Economic Review,18, May.

Pinto, A. (1973). Chile, un caso de desarrollo frustrado,third edition (Santiago: Editorial Universitaria).

Pollack, E.E. (1981). “Free ports, free trade zones,export processing zones and economic development”,in B.S. Hoyle and D.A. Pinder, eds., CityportIndustrialization and Regional Development(London: Pergamon): 37-45.

Porta, F. (2002). “La IED en Argentina en los 90:un caso (no solamente) de mejoras de competitividaden ventajas naturales”. Presentation at the UNCTAD-ECLAC regional seminar on FDI Policies in LatinAmerica, Santiago, Chile, 7-9 January, mimeo.

Porter, Michael (1998). The Competitive Advantageof Nations (London: Macmillan Business).

PricewaterhouseCoopers (2000). “2000 GlobalAutomotive Financial Review”, http:/ /www.pwcglobal.com/extweb/pwcpublications.nsf/docidE4088E0242C9D51B85256ACC006EDADF?OpenDocument.

Qu, Tao and Milford Green (1997). Chinese ForeignDirect Investment: A Subnational Perspective onLocation (Aldershot, Brookfield, Singapore, Sydney:Ashgate).

Quezada Bonilla, David (2002). “La experienciaMexicana”. Presentation at the UNCTAD-ECLACregional seminar on FDI Policies in Latin America7-9 January (Santiago, Chile), mimeo.

Radelet, Steven (1999). ”Manufactured exports, exportplatforms, and economic growth” (Cambridge, MA:Harvard Institute for International Development),mimeo.

Raines, Phil ip and Ross Brown (2001). “From‘international’ to ‘global’: the Scottish EnterpriseGlobal Companies Strategy and new approachesto overseas expansion”, Regional Studies, 35 (7):657-662.

��, Ivan Turok and Ross Brown (2001). “Growingglobal: FDI and the internationalisation of localsuppliers in Scotland”, European Planning Studies,

��


9 (8): 965-978.

Rasiah, Rajah (1994). “Flexible production systemsand local machine tool subcontracting: electronicscomponents transnationals in Malaysia”, CambridgeJournal of Economics , 18 (3): 279-298.

Rhee, Y.W., K. Katterbach and J. White (1990). “Freetrade zones in export strategies”, Industry SeriesPaper , No. 36 (Washington D.C.: World Bank,Industry Development Division).

Rodríguez-Clare, Andrés (2001). “Costa Rica’sdevelopment strategy based on human capital andtechnology: how it got there, the impact of Intel,and lessons for other countries”. Draft preparedfor UNDP, Human Development Report, February,mimeo.

Roessler, Frieder (2001). “Costa Rica’s free zone systemand the law of the World Trade Organisation”(Geneva: Advisory Centre on WTO Law), mimeo.

Rondinelli, D.A. (1987). “Export processing zonesand economic development in Asia: a review andreassessment of a means of promoting growth andjobs”, American Journal of Economics andSociology , 46 (1): 89-105.

Ruane, Frances (2001). “Reflections on linkage policyin Irish manufacturing: policy chasing a movingtarget?”. Presentation made at the ECE/EBRD ExpertMeeting on Finance for Development: Enhancingthe Benefits of FDI and Improving the Flow ofCorporate Finance in Transition Economies, 3December (Geneva), mimeo.

Rugman, Alan M. and Joseph R. D’Cruz (2000).Multinationals as Flagships: Regional BusinessNetworks (Oxford: Oxford University Press).

Sachs, Jeffrey, Felipe Larrain B. and Andrew Warner(1999). “A structural analysis of Chile’s long-term growth: history, prospects and policyimplications”. Prepared for the Government ofChile as part of the Project “Development Strategiesin the Context of Natural Resource Abundanceand Global Integration: the Case of Chile”,September 1999.

Sadik, Ali T. and Ali T. Bolbol (2001). “Capital flows,FDI and technology spillovers: evidence from Arabcountries”, World Development , 29 (12): 2111-2125.

Sauvant, Karl P. (1990). “The tradability of services”,in Patrick A. Messerlin and Karl P. Sauvant, eds.,The Uruguay Round: Services in the World Economy(Washington, D.C. and New York: World Bankand the United Nations Centre on TransnationalCorporations): 114-122.

�� (2002). “Mediation is the key for future investment”,FT Business Magazine FDI , April/May: 10.

Schmitz, Hubert and Khalid Nadvi (2000). “Clusteringand industrialization: introduction”, WorldDevelopment , 27 (9): 1503-1514.

�� and P. Knorringa (2000). “Learning from globalbuyers”, Journal of Development Studies, 32 (7):177-205.

Scottish Enterprise Network (2001). Annual Report1999-2000, available on the Internet at: http://www.scottish-enterprise.com/dblink/.

SDA/AFP (2002). “Levi Strauss streicht 3300 StellenVerlagerung der Produktion ins Ausland”, 9 April.

Servan-Schreiber, Jean-Jacques (1968). The AmericanChallenge (London: Hamish Hamilton).

Shaiken, H. (1995). “Technology and work organizationin Latin American motor vehicle industries”(Santiago, Chile: ECLAC), LC/R.1517.

��and S. Herzenberg (1987). “Automation and globalproduction: automobile engine production in Mexico,the United States and Canada”, Monograph Series,No. 26 (San Diego: Center for United States-Mexican Studies, University of California).

Shanghai Foreign Investment Development Board (2001).Guide to Investment in Shanghai (Shanghai: ForeignInvestment Commission, Foreign InvestmentDevelopment Board).

Shiels, Damien (2000). “Site selection for Intel’sassembly and test plant #6”. Presentation at theMIGA meeting on South America InvestmentPromotion Strategy Forum for Heads of InvestmentPromotion Agencies, 6-7 May (Rio de Janeiro),mimeo.

Sit, V.F.S. (1986). “Industries in Shenzhen: an attemptat open-door industrialization”, in C.K. Leungand Y.C. Jao, eds., China’s Special Economic Zones:Politics, Problems, and Prospects (Oxford: OxfordUniversity Press).

�� (1988). “China’s export-oriented open areas:the export processing zone concept”, Asian Survey,28 (6): 661-675.

Sivalingam, G. (1994). “The economic and social impactof export processing zones: the case of Malaysia”,International Labour Office Working Paper , No.66 (Geneva: ILO).

Sklair, L. (1985). “Shenzhen: a Chinese developmentzone in global perspective”, Development andChange, 16.

�� (1986). “Free zones, development and the newinternational division of labour”, Journal ofDevelopment Studies , 22 (4): 753-759.

Software Technology Parks of India (STPI) (2002).“Growth of Indian software export industry —role of STPI”. Presentation prepared by the SoftwareTechnology Parks of India, Ministry of InformationTechnology, Government of India, New Delhi, May,http://www.soft.net/about_stpi/stpi-b_files/May2002/v3_document.htm.

Solinger, D. (1984). Chinese Business Under Socialism(Berkeley, CA.: University of California Berkeley).

Soon Hyung Kwon (2001). “The effects of outwarddirect investment and inward foreign directinvestment”. Background paper for the Asian

��

REFERENCES

Regional Seminar on Export Competitiveness andthe Role of Foreign Direct Investment organizedby UNCTAD and the Center on Tranationals’Studies, Nankai University, 11-13 December (Tianjin,China), mimeo.

South African Reserve Bank (SARB) (2001). QuarterlyBulletin , September: 23.

Spar, Debora (1998). “Attracting high technologyinvestment: Intel’s Costa Rican plan” , FIASOccasional Paper, No. 11 (Washington D.C.: WorldBank).

Spinanger, D. (1984). “Objectives and impact ofeconomic activity zone: some evidence from Asia”,Weltwirtschaftliches Archiv , 120: 64-89.

Stoltenberg, C.D. (1984). “China’s special economiczones: their development and prospects”, AsianSurvey, 24 (6): 637-654.

Strategic Direct Investor (2001).”Flextronics leadsthe pack into eastern Europe”, Strategic DirectInvestor, November/December: 38-40.

Sturgeon, Timothy J. (1997). “Turnkey productionnetworks”, BRIE Working Paper, No. 92A (Berkeley,CA: Berkeley Roundtable on the InternationalEconomy University of California Berkeley).

�� (2001). “How do we define value chains andproduction networks”, IDS Bulletin (Brighton:Institute of Development Studies, University ofSussex) , 32 (3): 9-18.

�� (2002). “Modular production networks: a newAmerican model of industrial organization”,Industrial and Corporate Change , 11 (3): 451-496.

�� and R. Florida (1999). “Globalization and jobsin the automotive industry”. Final report to the AlfredP. Sloan Foundation, International Motor VehicleProgram, Center for Technology, Policy andIndustrial Development (Cambridge, MA:Massachusetts Institute of Technology), mimeo.

�� and R. K. Lester (2002). “Upgrading East Asianindustries: new challenges for local suppliers”.Paper prepared for the World Bank’s project onEast Asia’s Economic Future (Cambridge, MA:Industrial Performance Center, MIT).

Svetlicic, Marjan, Matija Rojec and Simona Lebar(1994). “Internationalization strategies of Slovenianfirms: the German market case”, in Karol Oblój,ed., High Speed Competition in a New Europe:Proceedings of the 20th Annual Conference ofthe European International Business Academy ,Vol. I (Warsaw: International Management Centre,University of Warsaw): 361-383.

Swedish Institute for Growth Policy Studies (ITPS)(2001). Foreign-owned Enterprises: EconomicFigures 1999 (Oestersund: Swedish Institute forGrowth Policy Studies), S2001: 12.

Tanzania, Planning Commission (1996). “The nationalinvestment promotion policy” (Dar-es-Salaam:President’s Office, Planning Commission), October:16-17.

Taylor Nelson Sofres Consulting (2000). “Survey ofthe attitudes of the European business communityto international rules”. Report prepared for theEuropean Commission, Directorate General of Trade,Brussels, mimeo.

Te Velde, Willem Dirk (2001). “Policies towards foreigndirect investment in developing countries: emergingbest-practices and outstanding issues” (London:Overseas Development Institute), mimeo.

Thrupp, L. A. (1995). Bittersweet Harvests for GlobalSupermarkets: Challenges in Latin America’sAgricultural Export Boom (Washington, D.C.: WorldResources Institute).

Toyo Keizai (1996). Kaigai Shinshutsu Kigyo Soran1996 (Tokyo: Toyo Keizai Shimposha).

�� (2001). Kaigai Shinshutsu Kigyo Soran 2001(Tokyo: Toyo Keizai Shimposha).

United Kingdom, Cabinet Office (1996). Competitiveness:Creating the Enterprise Centre of Europe (London:HMSO).

United Kingdom, National Statistics (2002). “Acquisitionsand mergers involving UK companies: 4th quarter2001” (London: National Statistics), Press release,5 February.

United Nations Centre on Transnational Corporations(UNCTC) (1983). Transnational Corporations inthe International Auto Industry (New York: UnitedNations), United Nations publication, Sales No.E.83.II.A.6.

�� (1986). Transnational Corporations in theSemiconductor Industry (New York: United Nations),United Nations publication, Sales No. E.86.II.A.1.

�� (1991). The Impact of Trade-Related InvestmentMeasures on Trade and Development: Theory,Evidence and Policy Implications (New York: UnitedNations), United Nations publication, Sales No.E.91.II.A.19.

United Nations Conference on Trade and Development(UNCTAD) (1985). “Export Processing Zones inDeveloping Countries: Implications for Free Tradeand Industrialization Policies”, Report No. TD/B/C.2/211 (1983) and Rev.1, (Geneva: UnitedNations).

�� (1993 – WIR93). World Investment Report 1993:Transnational Corporations and IntegratedInternational Production (Geneva and New York:United Nations), United Nations publication, SalesNo. E.93.II.A.14.

�� (1994 – WIR94). World Investment Report 1994:Transnational Corporations, Employment and theWorkplace (Geneva and New York: United Nations),United Nations publication, Sales No. E.94.II.A.14.

�� (1995 – WIR95). World Investment Report 1995:Transnational Corporations and Competitiveness(Geneva and New York: United Nations), UnitedNations publication, Sales No. E.95.II.A.9.

�� (1996 – WIR96). World Investment Report 1996:Investment, Trade and International PolicyArrangements (Geneva and New York: United

��


Nations), United Nations publication, Sales No.E.96.II.A.14.

�� (1996). Incentives and Foreign Direct Investment(Geneva and New York: United Nations), UnitedNations publication, Sales No. E.96.II.A.6.

�� (1997 – WIR97). World Investment Report 1997:Transnational Corporations, Market Structure andCompetition Policy (Geneva and New York: UnitedNations), United Nations publication, Sales No.E.97.II.D.10.

�� (1998 – WIR98). World Investment Report 1998:Trends and Determinants (Geneva and New York:United Nations), United Nations Sales publication,Sales No. E.98.II.D.5.

�� (1998a). Handbook on Foreign Direct Investmentby Small and Medium-sized Enterprises: Lessonsfrom Asia (Geneva and New York: United Nations),United Nations publication, Sales No. E.98.II.D.4.

�� (1998b). Bilateral Investment Treaties in themid-1990s (Geneva and New York: United Nations),United Nations publication, Sales No. E.98.II.D.8.

�� (1998c). The Financial Crisis in Asia and ForeignDirect Investment: An Assessment (Geneva andNew York: United Nations), United Nationspublication, Sales No. GV.E.98.0.29.

�� (1999 – WIR99). World Investment Report 1999:Foreign Direct Investment and the Challenge forDevelopment (Geneva and New York: UnitedNations), United Nations publication, Sales No.E.99.II.D.3 and Corr.1.

�� (1999a). Foreign Direct Investment in Africa:Performance and Potential (Geneva and New York:United Nations), UNCTAD/ITE/IIT/MISC.15.

�� (1999b). Investment-related Trade Measures.UNCTAD Series on Issues in International InvestmentAgreements (Geneva and New York: United Nations),United Nations publication, Sales No. E.99.II.D.12.

�� (2000 – WIR00). World Investment Report 2000:Cross-border Mergers and Acquisit ions andDevelopment (Geneva and New York: UnitedNations), United Nations publication, Sales No.E.00.II.D.20.

�� (2000a). Tax Incentives and Foreign DirectInvestment: A Global Survey (Geneva and NewYork: United Nations), United Nations publication,Sales No. E.01.II.D.5.

�� (2000b). World Investment Directory: Asia andthe Pacific (Geneva and New York: United Nations),United Nations publication, Sales No. E.00.II.D.11.

�� (2000c). Investment Policy Review of Uganda(Geneva and New York: United Nations), UnitedNations publication, Sales No. E.99.II.D.24.

�� (2000d). International Investment Agreements:Flexibility for Development. UNCTAD Series onIssues in International Investment Agreements(Geneva and New York: United Nations). UnitedNations publication, Sales No. E.00.II.D.6.

�� (2000e). The Competitiveness Challenge:Transnational Corporations and IndustrialRestructuring in Developing Countries (New York

and Geneva: United Nations). United Nationspublication, Sales No. E.00.II.D.35.

�� (2000f). “Strategies for diversification and addingvalue to food exports: a value chain perspective”(Geneva: United Nations), UNCTAD/DITC/COM/TM/1; UNCTAD/ITE/MISC.23.

�� (2001 – WIR01). World Investment Report 2001:Promoting Linkages (Geneva and New York: UnitedNations), United Nations publication, Sales No.E.01.II.D.12.

�� (2001a). “Transnational corporations expectedto continue worldwide expansion, but full impactof economic slowdown still unknown”, UNCTADNote to Correspondents, No. 27 (TAD/INF/NC27/Rev.1), 8 December.

�� (2001b). Investment Policy Review of Ecuador(Geneva and New York: United Nations), UnitedNations publication, Sales No. Sales No.E.01.II.D.31.

�� (2001c). FDI in Least Developed Countries ata Glance (Geneva and New York: United Nations),United Nations publication, UNCTADS/ITE/IIA/3.

�� (2001d). “A simplified customer-orientedinformation technology for railways in developingcountries: the experience of Tanzania RailwaysCorporation” (Geneva: UNCTAD), UNCTAD/SDTE/TIB/4.

�� (2001e). Electronic Commerce and DevelopmentReport 2001 (Geneva and New York: UnitedNations), United Nations publication, Sales No.E.01.II.D.30.

�� (2001f). Host Country Operational Measures.UNCTAD Series on Issues in International InvestmentAgreements (New York and Geneva: United Nations),United Nations publication, Sales No. E.01.II.D.19.

�� (2001g). UNCTAD Handbook of Statistics 2001(Geneva and New York: United Nations), UnitedNations publication, Sales No. E/F.01.II.D.24.

�� (2002a). Trade and Development Report 2002:Developing Countries in World Trade (Genevaand New York: United Nations), United Nationspublication, Sales No. E.02.II.D.2.

�� (2002b). The Least Developed Countries Report:Escaping the Poverty Trap (Geneva and New York:United Nations), United Nations publication, SalesNo. E.02.II.D.13.

�� (2002c). Investment Policy Review: The UnitedRepublic of Tanzania (Geneva and New York: UnitedNations), United Nations publication Sales No.E.02.II.D.6.

�� (2002d). The World of Investment Promotionat a Glance: A Survey of Investment PromotionPractices. Advisory Services on Investment andTraining, Study 17 (Geneva and New York: UnitedNations), UNCTAD/ITE/IPC/3.

�� (forthcoming a). Investment Policy Reviewof Botswana (Geneva and New York: UnitedNations), United Nations publication.

��

REFERENCES

�� (forthcoming b). World Investment Directory:Developed Countries (Geneva and New York: UnitedNations), United Nations publication.

�� and the Commonwealth Secretariat (2001).Duty-and-Quota Free Market Access for LDCs:An Analysis of Quad Initiatives (Geneva and London:UNCTAD and the Commonwealth Secretariat),UNCTAD/DITC/TAB/Misc.7.

�� and Cyclope (2000): World Commodity Survey2000-2001: Markets, Trends and World EconomicDevelopment (Geneva and New York: United Nationsand Cyclope), United Nations Publication, SalesNo. GV.E.00.0.16.

�� and International Chamber of Commerce (ICC)(2001). An Investment Guide to Uganda:Opportunities and Conditions (Geneva and NewYork: UNCTAD), UNCTAD/ITE/IIT/Misc.30.

�� and UNDP (2001). “Investor Targeting Strategyfor Albania”, Advisory Report (Geneva: UNCTADand UNDP), mimeo.

United Nations Department of Economic and SocialAffairs (UNDESA) and UNCTAD (2002). WorldEconomic Situation and Prospects 2002 (Genevaand New York: United Nations), United Nationspublication, Sales No. E.02.II.C.2.

United Nations Educational, Scientific and CulturalOrganization (UNESCO) (1999). Statistical Yearbook1999 (Paris: UNESCO Publishing and Bernan Press).

United Nations Industrial Development Organization(UNIDO) (1980). “Export processing zones indeveloping countries”, UNIDO Working Paperson Structural Changes , No. 10, UNIDO/ICIS(Vienna: UNIDO).

�� (2002). Industrial Development Report 2002(Vienna: UNIDO).

United States International Trade Commission (USITC)(1999). “Production sharing: use of U.S. componentsand materials in foreign assembly operations, 1995-1998”, USITC publication, No. 3265, April, InvestigationNo. 332-237 (Washington, D.C.: USITC).

�� (2001). The Impact of the Caribbean BasinEconomic Recovery Act. Fifteenth Report, 1999-2000 (Washington, D.C.: USITC), InvestigationNo. 332-227, September 2001, www.usitc.gov/pubs/reports/studies.

United States National Science Foundation (2000).Science and Engineering Indicators 2000(Washington, D.C.: National Science Foundation,United States Government).

United States, Commercial Services (1999). TanzaniaCountry Commercial Guide FY 1999 . ht tp:/ /w w w 1 . u s a t r a d e . g o v / w e b s i t e / c c g . n s f /ShowCCG?OpenForm&Country=TANZANIA.

�� (2001a). Mauritania Country Commercial GuideFY 2001. http://www1.usatrade.gov/website/ccg.nsf/ShowCCG?OpenForm& Country=MAURITANIA.

�� (2001b). Nepal Country Commercial GuideFY 2001. http://www1.usatrade.gov/website/ccg.nsf/ShowCCG? OpenForm&Country=NEPAL.

�� (2001c). Zambia Country Commercial GuideFY 2001. http://www1.usatrade.gov/website/ccg.nsf/ShowCCG?OpenForm&Country=ZAMBIA.

United States, Department of Commerce, Bureau ofEconomic Analysis (1986). U.S. Direct InvestmentAbroad. Operations of U.S. Parent Companies andTheir Foreign Affiliates. Revised 1983 Estimates.(Washington, D.C.: United States GovernmentPrinting Office).

�� (1993). U.S. Direct Investment Abroad. Operationsof U.S. Parent Companies and Their ForeignAffi l iates. Revised 1990 Estimates. Bureau ofEconomic Analysis (Washington, D.C.: United StatesGovernment Printing Office).

�� (2002). U.S. Direct Investment Abroad. Operationsof U.S. Parent Companies and Their ForeignAffi l iates. Revised 1998 Estimates. Bureau ofEconomic Analysis. (Washington, D.C.: UnitedStates Government Printing Office).

United States, Trade Representative (USTR) (2001a).Fourth Report to Congress on the Operation ofthe Caribbean Basin Economic Recovery Act(Washington D.C.: United States GovernmentPrinting Office), 31 December.

�� (2001b). Comprehensive Report on U.S. Tradeand Investment Policy Toward Sub-Saharan Africaand Implementation of the African Growth andOpportunity Act - The first of eight annual reportsof the President of the United States to the UnitedStates Congress (Washington, D.C.: United StatesGovernment Printing Office), May.

�� (2002). Comprehensive Report on U.S. Tradeand Investment Policy Toward Sub-Saharan Africaand Implementation of the African Growth andOpportunity Act - The second of eight annual reportsof the President of the United States to the UnitedStates Congress (Washington, D.C.: United StatesGovernment Printing Office), May.

Wade, Robert (1990). Governing the Market: EconomicTheory and the Role of Government in East AsianIndustrialization (Princeton, NJ: Princeton UniversityPress).

Wall, D. (1976). “Export-processing zones”, Journalof World Trade Law , 10: 478-489.

Wanapha, Somphong (2002). Speech at the TokyoInvestment Seminar, organized by the SecretaryGeneral, Board of Investment of Thailand (Tokyo,Japan), 24 April, mimeo.

Warden, Staci (1999a). “A profile of the Maquiladorasector in Mexico”, (Cambridge, MA: HarvardInstitute for International Development) , June,mimeo.

�� (1999b). “A profile of free trade zones in theDominican Republic”, (Cambridge, MA: HarvardInstitute for International Development), May,mimeo.

��


Warr, P.G. (1984). “Korea’s Masan free trade zone:benefits and costs”, Developing Economies, 22(2): 169-184.

�� (1987). “Malaysia’s industrial enclaves: benefitsand costs”, Developing Economies , 25 (1): 30-55.

Watson, Peter (2001). “Export processing zones: hasAfrica missed the boat? Not yet!”, Africa RegionWorking Paper Series, No. 17 (Washington D.C.:World Bank).

Watzke, Gerard E. and W.A. Mindak (1987). “Marketing-oriented planning in public administration: thecase of the State Development Agency”,International Journal of Public Administration,9 (2): 80-92.

Wells, Louis T., Jr. (1999). “Revisiting marketing acountry: promotion as a tool for attracting foreigninvestment” (Washington D.C.: Foreign InvestmentAdvisory Service, International Finance Corporationand World Bank), mimeo.

�� and Alvin G. Wint (1990). “Marketing a country:promotion as a tool for attracting foreigninvestment”, FIAS Occasional Paper , No. 1(Washington D.C: World Bank).

�� and Nancy J. Allen (2001). “Tax holidays toattract foreign direct investment: lessons from twoexperiments”, in T. Louis Wells, Jr., Nancy J. Allen,Jacques Morisset and Neda Pirnia, “Using taxincentives to compete for foreign investment: arethey worth the costs?”, FIAS Occasional Paper,No. 15 (Washington D.C.: World Bank): 1-68.

Westphal, L. E. (2002). “Technology strategies foreconomic development in a fast changing globaleconomy” in, Economics of Innovation and NewTechnology, forthcoming.

Wideman, B. (1976). “Bataan zone taking shape”, FarEastern Economic Review , 39 (34): 37-38.

WIR (…) See United Nations Conference on Tradeand Development (UNCTAD).

Wong, E.L. (1987). “Recent developments in China’sspecial economic zones: problems and prognosis”,Developing Economies , 25 (1): 73-86.

World Association of Investment Promotion Agencies(WAIPA) (2001). Annual Report 2001-2002 (Geneva:WAIPA Secretariat).

World Bank (1992). “Export processing zones”, Policyand Research Series Paper, No. 20 (Washington,D.C.: World Bank, Industry and DevelopmentDivision).

�� (1993). The East Asian Miracle: Economic Growthand Public Policy (New York: Oxford UniversityPress).

�� (1999). Philippines: The Challenge of EconomicRecovery (Washington, D.C.: World Bank).

�� (2001b). World Development Indicators 2001(Washington, D.C.: World Bank).

�� (2002a). World Development Finance 2002(Washington, D.C.: World Bank).

�� (2002b). From Natural Resources to the KnowledgeEconomy: Trade and Job Quality (Washington,D.C.: World Bank).

World Economic Forum (2000). The GlobalCompetitiveness Report 2000 (New York and Oxford:Oxford University Press).

�� (2002). The Global Competitiveness Report 2001-2002 (New York and Oxford: Oxford UniversityPress).

World Export Processing Zones Association (WEPZA)(1997). International Directory of Export ProcessingZones and Free Trade Zones, third Edition (Flagstaff,AR: The Flagstaff Institution).

World Trade Organization (WTO) (1994). Agreementon the Implementation of Article VI of the GATT1994 (Geneva: WTO), http://www.wto.org/docsc/19-adp.pdf.

�� (1998). “Report of the Working Group on theRelationship between Trade and Investment to theGeneral Council” (Geneva: WTO), WT/WGT/2.

�� (2001a). “Trade policy review, Mauritius”.Report by the Secretariat, Trade Policy ReviewBody (Geneva: WTO), WT/TPR/S/90, 5 October.

�� (2001b). “Ministerial Declaration”, MinisterialConference, Fourth Session, Doha, Qatar, WT/MIN(01)/DEC/W/1, 14 November.

Xia Youfu (2001). “China auto industry”. Draft preparedfor WIR 2001 , mimeo.

Xiaojuan, Jiang (2001). “FIE’s contribution to exportincrease and restructuring in China”. Backgroundpaper for the Asian Regional Seminar on ExportCompetitiveness and the Role of Foreign DirectInvestment, organized by UNCTAD and the Centeron Transnationals’ Studies, Nankai University,11-13 December (Tianjin, China), mimeo.

Xian, Guoming and Yangui Zhang, eds. (1997). TNCsand National Industries (Beijing: Economic SciencePublishing House) (in Chinese).

Yeats, Alexander J. (2001). “How big is globalproduction sharing?” in Sven W. Arndt and HenrykKierzkowski, eds., Fragmentation: New ProductionPatterns in the World Economy (Oxford: OxfordUniversity Press):108-143.

Yew, Lee Quan (2000). From Third World to FirstWorld: The Singapore Story, 1965-2000 (New York:Harper Collins).

��

��

Annex A

Annex table A.I.1. Distribution of world FDI flows by absolute amounts, FDI flows

per $1,000 GDP and FDI flows per capita, by region/country, 1990-2001

(a) Region/country as a percentage of world total

Inflows Outflows

Region/country 1990-1994 1995-1999 2000 2001 1990-1994 1995-1999 2000 2001

Developed countries 65.3 67.5 82.3 68.4 87.8 89.1 92.2 93.5Western Europe 39.8 38.7 55.8 45.7 50.6 61.4 73.8 61.3

European Union 38.2 37.0 54.2 43.9 46.8 57.4 70.2 58.8Other Western Europe 1.5 1.7 1.6 1.8 3.8 4.0 3.7 2.5

Japan 0.7 0.7 0.6 0.8 11.0 4.0 2.3 6.1United States 18.2 23.6 20.2 16.9 22.1 19.6 12.0 18.4

Developing countries 32.6 29.3 15.9 27.9 12.1 10.6 7.6 5.9Africa 2.0 1.5 0.6 2.3 0.8 0.4 0.1 -0.4Latin America and the Caribbean 10.1 11.7 6.4 11.6 2.0 3.0 1.6 1.2Asia and the Pacific 20.6 16.1 9.0 13.9 9.3 7.1 5.9 5.1

Asia 20.4 16.1 9.0 13.9 9.3 7.1 5.9 5.1West Asia 1.2 0.5 - 0.6 - 0.1 0.1 0.2Central Asia 0.2 0.5 0.1 0.5 - - - -South, East and South-East Asia 18.9 15.1 8.8 12.8 9.2 7.0 5.8 4.9

The Pacific 0.2 0.1 - - - - - -Central and Eastern Europe 2.1 3.2 1.8 3.7 0.1 0.4 0.3 0.6

World 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

(b) FDI flows per $1,000 GDP

Inflows Outflows

Region/country 1990-1994 1995-1999 2000 2001 1990-1994 1995-1999 2000 2001

Developed countries 7.1 17.4 50.9 .. 10.9 22.7 52.8 ..Western Europe 10.7 25.7 100.6 .. 15.4 40.4 123.2 ..

European Union 10.8 25.8 102.9 .. 15.0 39.7 123.2 ..Other Western Europe 8.3 23.8 57.0 .. 24.1 54.1 121.9 ..

Japan 0.4 0.9 1.7 .. 7.2 5.3 6.6 ..United States 5.9 16.4 30.7 .. 8.0 13.8 16.8 ..

Developing countries 14.7 29.1 36.7 .. 6.5 10.7 16.5 ..Africa 8.8 16.4 15.6 .. 4.3 5.2 2.9 ..Latin America and the Caribbean 15.1 37.0 48.1 .. 3.5 9.5 11.1 ..Asia and the Pacific 15.8 26.8 33.9 .. 8.5 12.1 21.2 ..

Asia 15.7 26.8 33.9 .. 8.5 12.1 21.2 ..West Asia 4.3 5.1 1.0 .. -0.4 0.6 1.9 ..Central Asia 20.7 58.7 44.3 .. - 3.8 0.8 ..South, East and South-East Asia 19.4 30.7 40.8 .. 11.0 14.5 25.4 ..

The Pacific 35.4 37.1 9.5 .. 13.5 9.6 6.1 ..Central and Eastern Europe 8.4 25.0 38.1 .. 0.4 2.9 5.9 ..

World 8.6 20.0 47.7 .. 10.0 19.9 44.4 ..

(c) FDI flows per capita

Inflows Outflows

Region/country 1990-1994 1995-1999 2000 2001 1990-1994 1995-1999 2000 2001

Developed countries 162.9 474.4 1 429.2 583.1 249.6 619.9 1 480.2 672.9Western Europe 213.7 595.8 2 139.9 863.5 310.0 936.2 2 619.3 977.2

European Union 212.2 588.0 2 147.5 856.7 295.7 904.0 2 571.1 968.7Other Western Europe 260.6 833.5 1 909.0 1 072.7 759.8 1 921.9 4 092.4 1 236.9

Japan 11.0 30.7 65.5 48.7 205.7 188.6 248.3 299.1United States 143.0 509.0 1 062.4 435.2 196.4 419.3 582.5 398.6

Developing countries 15.6 37.5 48.8 41.4 7.4 14.8 23.4 8.1Africa 6.2 11.9 11.0 21.1 3.9 4.4 2.3 -3.7Latin America and the Caribbean 45.1 141.3 185.6 163.7 10.7 36.5 43.3 14.2Asia and the Pacific 13.3 28.1 37.5 28.3 7.5 13.5 24.7 9.6

Asia 13.2 28.1 37.5 28.3 7.4 13.5 24.8 9.6West Asia 13.0 14.1 2.9 17.2 0.1 2.0 6.6 5.6Central Asia 9.5 37.5 25.6 47.9 - 3.0 0.6 4.0South, East and South-East Asia 13.3 28.8 40.3 28.6 7.8 14.3 26.2 9.9

The Pacific 56.9 64.3 12.9 28.4 17.3 10.9 5.7 10.7Central and Eastern Europe 17.3 55.9 78.6 80.8 1.0 6.8 12.4 10.9

World 38.5 101.5 245.7 119.6 49.1 108.7 244.6 108.7

Source : UNCTAD, based on UNCTAD FDI/TNC database (for FDI), UNCTAD secretariat (for GDP) and UnitedNations Pouplation Division (for population).

��


An

ne

x t

ab

le A

.I.2

. C

ros

s-b

ord

er

M&

A d

ea

ls w

ith

va

lue

s o

f o

ve

r $

1 b

illi

on

co

mp

lete

d i

n 2

00

1

Va

lue

Ind

ust

ry o

f th

eR

ank

($ b

illio

n)A

cqu

ire

d c

om

pa

ny

Ho

st e

con

om

yIn

du

stry

of

the

acq

uir

ed

co

mp

an

yA

cqu

irin

g c

om

pa

ny

Ho

me

eco

no

my

acq

uir

ing

co

mp

an

y

1 2

9.4

Vo

ice

Str

ea

m W

ire

less

Co

rpU

nite

d S

tate

sR

ad

iote

lep

ho

ne

co

mm

un

ica

tion

sD

eu

tsch

e T

ele

kom

AG

Ge

rma

ny

Ra

dio

tele

ph

on

e c

om

mu

nic

atio

ns

2 1

3.8

Via

g I

nte

rko

m G

mb

H &

Co

Ge

rma

ny

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

eB

ritis

h T

ele

com

mu

nic

atio

ns

PL

CU

nite

d K

ing

do

mTe

lep

ho

ne

co

mm

un

ica

tion

s,e

xce

pt

rad

iote

lep

ho

ne

3 1

2.5

Ba

na

cci

Me

xico

Co

mm

erc

ial b

an

ksC

itig

rou

p I

nc

Un

ited

Sta

tes

Co

mm

erc

ial b

an

ks4

12

.5F

ort

is(N

L)N

VN

eth

erl

an

ds

Life

insu

ran

ceF

ort

is (

B)

Be

lgiu

mL

ife in

sura

nce

5 1

1.5

Bill

iton

PL

CU

nite

d K

ing

do

mM

isce

llan

eo

us

me

tal o

res

BH

P L

tdA

ust

ralia

Ste

el

wo

rks,

bla

st f

urn

ace

sa

nd

ro

llin

g m

ills

6 1

1.2

AX

A F

ina

nci

al

Inc

Un

ited

Sta

tes

Life

insu

ran

ceA

XA

Gro

up

(AX

A-U

AP

)F

ran

ceL

ife in

sura

nce

7 1

1.1

De

Be

ers

Co

nso

lida

ted

Min

es

So

uth

Afr

ica

Mis

cella

ne

ou

s n

on

me

talli

c m

ine

rals

, e

xce

pt

fue

lsD

B I

nve

stm

en

tsU

nite

d K

ing

do

mIn

vest

ors

8 1

0.5

Ra

lsto

n P

uri

na

Co

Un

ited

Sta

tes

Do

g,

cat,

an

d p

et

foo

dN

est

le S

AS

witz

erl

an

dF

oo

d a

nd

be

vera

ge

s9

9.8

AT

&T

Wir

ele

ss G

rou

pU

nite

d S

tate

sR

ad

iote

lep

ho

ne

co

mm

un

ica

tion

sN

TT

Do

Co

Mo

In

cJa

pa

nTe

lep

ho

ne

co

mm

un

ica

tion

s,e

xce

pt

rad

iote

lep

ho

ne

10 9

.3C

IT G

rou

p I

nc

Un

ited

Sta

tes

Sh

ort

-te

rm b

usi

ne

ss c

red

it in

stitu

tion

sT

yco

In

tern

atio

na

l L

tdB

erm

ud

aG

en

era

l in

du

stri

al m

ach

ine

rya

nd

eq

uip

me

nt

11 8

.5C

ab

le &

Wir

ele

ss O

ptu

s L

t(C

&W

)A

ust

ralia

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

eS

ing

Tel(

Sin

ga

po

re)

Sin

ga

po

reR

ad

iote

lep

ho

ne

co

mm

un

ica

tion

s12

8.2

Se

ag

ram

Co

-Alc

oh

ol

& S

pir

itC

an

ad

aW

ine

s, b

ran

dy,

an

d b

ran

dy

spir

itsIn

vest

or

Gro

up

Un

ited

Kin

gd

om

Inve

sto

rs13

7.3

Ba

nk

Au

stri

a A

GA

ust

ria

Co

mm

erc

ial b

an

ksH

ypo

Ve

rein

sba

nk

AG

Ge

rma

ny

Co

mm

erc

ial b

an

ks14

6.9

Kn

oll

AG

(BA

SF

AG

)G

erm

an

yP

ha

rma

ceu

tica

l pre

pa

ratio

ns

Ab

bo

tt L

ab

ora

tori

es

Un

ited

Sta

tes

Ph

arm

ace

utic

al p

rep

ara

tion

s15

6.3

Gu

lf C

an

ad

a R

eso

urc

es

Ltd

Ca

na

da

Cru

de

pe

tro

leu

m a

nd

na

tura

l g

as

Co

no

co N

ort

he

rn I

nc

Ca

na

da

Pe

tro

leu

m r

efin

ing

16 5

.8G

KN

PL

C-S

up

po

rt S

erv

ice

sU

nite

d K

ing

do

mIn

du

stri

al s

up

plie

sB

ram

ble

s In

du

stri

es

Ltd

Au

stra

liaE

qu

ipm

en

t re

nta

l a

nd

le

asi

ng

17 5

.7D

ao

He

ng

Ba

nk

Gro

up

(Gu

oco

)H

on

g K

on

g,

Ch

ina

Co

mm

erc

ial b

an

ksD

BS

Gro

up

Ho

ldin

gs

Ltd

Sin

ga

po

reC

om

me

rcia

l ba

nks

18 5

.6H

arc

ou

rt G

en

era

l In

cU

nite

d S

tate

sB

oo

ks:

pu

blis

hin

g,

or

pu

blis

hin

g &

pri

ntin

gR

ee

d E

lse

vie

r P

LC

Un

ited

Kin

gd

om

Pe

rio

dic

als

: p

ub

lish

ing

, o

rp

ub

lish

ing

& p

rin

ting

19 5

.5Ja

pan

Te

leco

m,J

-Ph

on

eJa

pa

nTe

lep

ho

ne

co

mm

un

ica

tion

s, e

xce

pt

rad

iote

lep

ho

ne

Vo

da

fon

e G

rou

p P

LC

Un

ited

Kin

gd

om

Ra

dio

tele

ph

on

e c

om

mu

nic

atio

ns

20 5

.3S

em

a P

LC

Un

ited

Kin

gd

om

Co

mp

ute

r re

late

d s

erv

ice

s,n

ec

Sch

lum

be

rge

r In

vest

me

nts

Un

ited

Kin

gd

om

Inve

sto

rs21

4.6

An

de

rso

n E

xplo

ratio

n L

tdC

an

ad

aC

rud

e p

etr

ole

um

an

d n

atu

ral

ga

sD

evo

n E

ne

rgy

Co

rpU

nite

d S

tate

sC

rud

e p

etr

ole

um

& n

atu

ral

ga

s22

4.3

GE

Am

eri

com

Co

mm

un

ica

tion

sU

nite

d S

tate

sR

ad

iote

lep

ho

ne

co

mm

un

ica

tion

sS

ES

Glo

ba

l S

AL

uxe

mb

ou

rgC

ab

le a

nd

oth

er

pa

y te

levi

sio

nse

rvic

es

23 4

.2E

irce

ll L

tdIr

ela

nd

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

eV

od

afo

ne

Gro

up

PL

CU

nite

d K

ing

do

mR

ad

iote

lep

ho

ne

co

mm

un

ica

tion

s24

4.0

LA

SM

O P

LC

Un

ited

Kin

gd

om

Dri

llin

g o

il a

nd

ga

s w

ells

EN

I S

pA

Ita

lyP

etr

ole

um

re

finin

g25

3.7

Bio

Ch

em

Ph

arm

a I

nc

Ca

na

da

Ph

arm

ace

utic

al p

rep

ara

tion

sS

hir

e P

ha

rma

ceu

tica

ls G

rou

pU

nite

d K

ing

do

mP

ha

rma

ceu

tica

l pre

pa

ratio

ns

26 3

.7B

lue

Cir

cle

In

du

stri

es

PL

CU

nite

d K

ing

do

mC

em

en

t, h

ydra

ulic

La

farg

e S

AF

ran

ceC

em

en

t, h

ydra

ulic

27 3

.3D

eu

tsch

e B

ah

n A

GG

erm

an

yO

pe

rato

rs o

f a

pa

rtm

en

t b

uild

ing

sIn

vest

or

Gro

up

Un

ited

Kin

gd

om

Inve

sto

rs28

3.3

Ha

ind

l’sch

e P

ap

ierf

ab

rike

n K

Ga

Ge

rma

ny

Pa

pe

r m

ills

UP

M-K

ymm

en

eF

inla

nd

Lo

gg

ing

29 3

.2E

lett

rog

en

Sp

AIt

aly

Ele

ctri

c a

nd

oth

er

serv

ice

s co

mb

ine

dIn

vest

or

Gro

up

Sp

ain

Inve

sto

rs30

3.0

JDS

Un

iph

ase

-La

ser

Ch

ip M

nfr

Sw

itze

rla

nd

Se

mic

on

du

cto

rs a

nd

re

late

d d

evi

ces

No

rte

l N

etw

ork

s C

orp

Ca

na

da

Tele

ph

on

e&

tele

gra

ph

ap

para

tus

��

Annex A

/...

An

ne

x t

ab

le A

.I.2

. C

ros

s-b

ord

er

M&

A d

ea

ls w

ith

va

lue

s o

f o

ve

r $

1 b

illi

on

co

mp

lete

d i

n 2

00

1 (

co

nti

nu

ed

)

Va

lue

Ind

ust

ry o

f th

eR

ank

($ b

illio

n)A

cqu

ire

d c

om

pa

ny

Ho

st e

con

om

yIn

du

stry

of

the

acq

uir

ed

co

mp

an

yA

cqu

irin

g c

om

pa

ny

Ho

me

eco

no

my

acq

uir

ing

co

mp

an

y

31 3

.0C

hri

s-C

raft

In

du

stri

es

Inc

Un

ited

Sta

tes

Tele

visi

on

bro

ad

cast

ing

sta

tion

sN

ew

s C

orp

Ltd

Au

stra

liaN

ew

spa

pe

rs:

pu

blis

hin

g,

or

pu

blis

hin

g &

pri

ntin

g32

2.8

Eq

ua

nt

NV

Ne

the

rla

nd

sC

om

pu

ter

inte

gra

ted

sys

tem

s d

esi

gn

Fra

nce

Te

leco

m S

A(F

ran

ce)

Fra

nce

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

e33

2.8

Mic

hig

an

Na

tion

al

Co

rpU

nite

d S

tate

sN

atio

na

l co

mm

erc

ial

ba

nks

AB

N-A

MR

O H

old

ing

NV

Ne

the

rla

nd

sC

om

me

rcia

l ba

nks

34 2

.7A

MS

-Mis

sile

s S

yste

ms

Div

Un

ited

Kin

gd

om

Gu

ide

d m

issi

les

an

d s

pa

ce v

eh

icle

sM

atr

a B

Ae

Dyn

am

ics

Fra

nce

Gu

ide

d m

issi

les

an

d s

pa

ceve

hic

les

35 2

.7Ja

pan

Te

leco

m C

o L

tdJa

pa

nTe

lep

ho

ne

co

mm

un

ica

tion

s, e

xce

pt

rad

iote

lep

ho

ne

Vo

da

fon

e G

rou

p P

LC

Un

ited

Kin

gd

om

Ra

dio

tele

ph

on

e c

om

mu

nic

atio

ns

36 2

.7L

e M

eri

die

n H

ote

ls(C

om

pa

ss)

Un

ited

Kin

gd

om

Ho

tels

an

d m

ote

lsG

ran

d H

ote

ls(M

)Acq

uis

itio

n C

oU

nite

d K

ing

do

mIn

vest

ors

37 2

.6C

-Ma

c In

du

stri

es

Inc

Ca

na

da

Co

mp

ute

r p

rog

ram

min

g s

erv

ice

sS

ole

ctro

n C

orp

Un

ited

Sta

tes

Pri

nte

d c

ircu

it b

oa

rds

38 2

.6G

alil

eo

Te

chn

olo

gy

Ltd

Isra

el

Se

mic

on

du

cto

rs a

nd

re

late

d d

evi

ces

Ma

rve

ll Te

chn

olo

gy

Gro

up

Ltd

Be

rmu

da

Se

mic

on

du

cto

rs a

nd

re

late

dd

evi

ces

39 2

.6G

lob

al

On

e C

o-D

ata

Bu

sin

ess

Be

lgiu

mTe

lep

ho

ne

co

mm

un

ica

tion

s, e

xce

pt

rad

iote

lep

ho

ne

Eq

ua

nt

NV

Ne

the

rla

nd

sC

om

pu

ter

inte

gra

ted

sys

tem

sd

esi

gn

40 2

.6C

GU

In

sura

nce

Gro

up

(CG

NU

Plc

)U

nite

d S

tate

sF

ire

, m

ari

ne

, a

nd

ca

sua

lty i

nsu

ran

ceW

hite

Mo

un

tain

s In

sura

nce

Be

rmu

da

Mo

rtg

ag

e b

an

kers

an

d l

oa

nco

rre

spo

nd

en

ts41

2.5

Sw

issc

om

Mo

bile

(Sw

issc

om

AG

)S

witz

erl

an

dTe

lep

ho

ne

co

mm

un

ica

tion

s, e

xce

pt

rad

iote

lep

ho

ne

Vo

da

fon

e G

rou

p P

LC

Un

ited

Kin

gd

om

Ra

dio

tele

ph

on

e c

om

mu

nic

atio

ns

42 2

.5E

ne

rgie

Ba

de

n-W

ue

rtte

mb

erg

AG

Ge

rma

ny

Ele

ctri

c se

rvic

es

ED

FF

ran

ceE

lect

ric

serv

ice

s43

2.5

Ba

ncW

est

Co

rp,H

on

olu

lu,H

IU

nite

d S

tate

sS

tate

ba

nks

,me

mb

er

fed

re

serv

eB

NP

Pa

rib

as

SA

Fra

nce

Co

mm

erc

ial b

an

ks44

2.4

Na

tSte

el

Ele

ctro

nic

s P

te L

tdS

ing

ap

ore

Co

mp

ute

r st

ora

ge

de

vice

sS

ole

ctro

n C

orp

Un

ited

Sta

tes

Pri

nte

d c

ircu

it b

oa

rds

45 2

.3A

CN

iels

en C

orp

Uni

ted

Sta

tes

Man

agem

ent c

onsu

lting

ser

vice

sV

eren

igd

Bez

it V

NU

Net

herla

nds

New

spap

ers:

pub

lishi

ng, o

rpu

blis

hing

& p

rintin

g46

2.3

Cen

tura

Ban

k In

c,N

CU

nite

d S

tate

sN

atio

nal c

omm

erci

al b

anks

Roy

al B

ank

of C

anad

aC

anad

aC

omm

erci

al b

anks

47 2

.3F

rees

erve

PLC

(Dix

ons

Gro

up)

Uni

ted

Kin

gdom

Info

rmat

ion

retr

ieva

l ser

vice

sW

anad

oo(F

ranc

e Te

leco

m S

A)

Fra

nce

Info

rmat

ion

retr

ieva

l ser

vice

s48

2.3

Hom

esta

ke M

inin

g C

oU

nite

d S

tate

sG

old

ores

Bar

rick

Gol

d C

orp

Can

ada

Gol

d or

es49

2.3

Hou

ghto

n M

ifflin

Co

Uni

ted

Sta

tes

Boo

ks: p

ublis

hing

, or

publ

ishi

ng &

prin

ting

Viv

endi

Uni

vers

al S

AF

ranc

eM

otio

n pi

ctur

e an

d vi

deo

tape

prod

uctio

n50

2.3

Cog

nis

BV

(Hen

kel K

GaA

)N

ethe

rland

sIn

dust

rial i

norg

anic

che

mic

als

Inve

stor

Gro

upG

erm

any

Inve

stor

s51

2.3

DiA

x A

GS

witz

erla

ndTe

leph

one

com

mun

icat

ions

, exc

ept r

adio

tele

phon

eTe

leD

anm

ark

A/S

Den

mar

kTe

leph

one

com

mun

icat

ions

,ex

cept

radi

otel

epho

ne52

2.2

Nic

hola

s-A

pple

gate

Cap

t Mgm

tU

nite

d S

tate

sIn

vest

men

t adv

ice

Alli

anz

AG

Ger

man

yLi

fe in

sura

nce

53 2

.2Ja

pan

Tele

com

Co

Ltd

Japa

nTe

leph

one

com

mun

icat

ions

, exc

ept r

adio

tele

phon

eV

odaf

one

Gro

up P

LCU

nite

d K

ingd

omR

adio

tele

phon

e co

mm

unic

atio

ns54

2.2

Sen

sorm

atic

Ele

ctro

nics

Cor

pU

nite

d S

tate

sS

ecur

ity s

yste

ms

serv

ices

Tyco

Inte

rnat

iona

l Ltd

Ber

mud

aG

ener

al in

dust

rial m

achi

nery

and

equi

pmen

t55

2.2

Alli

ant E

xcha

nge

Inc(

Cla

yton

)U

nite

d S

tate

sG

roce

ries,

gen

eral

line

Kon

inkl

ijke

Aho

ld N

VN

ethe

rland

sG

roce

ry s

tore

s56

2.2

Mar

oc T

elec

omM

oroc

coTe

leph

one

com

mun

icat

ions

, exc

ept r

adio

tele

phon

eV

iven

di U

nive

rsal

SA

Fra

nce

Mot

ion

pict

ure

and

vide

o ta

pepr

oduc

tion

57 2

.1Lu

cent

Tec

h-O

ptic

al F

ibre

Uni

tU

nite

d S

tate

sD

raw

ing

and

insu

latin

g of

non

ferr

ous

wire

Fur

ukaw

a E

lect

ric C

o Lt

dJa

pan

Ele

ctric

al a

ppar

atus

and

equ

ip58

2.1

Mel

lon

Fin

-Ret

ail B

anki

ng B

usU

nite

d S

tate

sC

omm

erci

al b

anks

Citi

zens

Fin

anci

al G

roup

,RI

Uni

ted

Sta

tes

Sav

ings

inst

itutio

ns, n

ot fe

dera

llych

arte

red

59 2

.1H

arco

urt G

ener

al-H

ighe

r Ed

Bus

Uni

ted

Sta

tes

Boo

ks: p

ublis

hing

, or

publ

ishi

ng &

prin

ting

Tho

mso

n C

orp

Can

ada

New

spap

ers:

pub

lishi

ng, o

rpu

blis

hing

& p

rintin

g60

2.1

Tech

nico

lor H

oldi

ngs

Inc

Uni

ted

Sta

tes

Pho

togr

aphi

c eq

uipm

ent a

nd s

uppl

ies

Tho

mso

n M

ultim

edia

(Tho

mso

n)F

ranc

eH

ouse

hold

aud

io a

nd v

ideo

/...

��


An

ne

x t

ab

le A

.I.2

. C

ros

s-b

ord

er

M&

A d

ea

ls w

ith

va

lue

s o

f o

ve

r $

1 b

illi

on

co

mp

lete

d i

n 2

00

1 (

co

nti

nu

ed

)

Va

lue

Ind

ust

ry o

f th

eR

ank

($ b

illio

n)A

cqu

ire

d c

om

pa

ny

Ho

st e

con

om

yIn

du

stry

of

the

acq

uir

ed

co

mp

an

yA

cqu

irin

g c

om

pa

ny

Ho

me

eco

no

my

acq

uir

ing

co

mp

an

y

61 2

.0C

anad

ian

Hun

ter E

xplo

ratio

nC

anad

aC

rude

pet

role

um a

nd n

atur

al g

asB

urlin

gton

Res

ourc

es In

cU

nite

d S

tate

sC

rude

pet

role

um a

nd n

atur

al g

as62

2.0

Lapo

rte

PLC

Uni

ted

Kin

gdom

Indu

stria

l org

anic

che

mic

als

Deg

ussa

SK

W C

oG

erm

any

Inve

stor

s63

2.0

Linc

oln

Re(

Linc

oln

Nat

iona

l)U

nite

d S

tate

sLi

fe in

sura

nce

Sw

iss

Rei

nsur

ance

Co

Sw

itzer

land

Life

insu

ranc

e64

1.8

Del

haiz

e A

mer

ica

Inc

Uni

ted

Sta

tes

Gro

cery

sto

res

Eta

blis

sem

ents

Del

haiz

e F

rere

sB

elgi

umD

epar

tmen

t sto

res

65 1

.8B

estfo

ods

Bak

ing(

Bes

tfood

s)U

nite

d S

tate

sB

read

and

oth

er b

aker

y pr

oduc

ts, e

xcep

t coo

kies

Geo

rge

Wes

ton

Ltd

Can

ada

Bre

ad a

nd o

ther

bak

ery

prod

ucts

,ex

cept

coo

kies

66 1

.7S

akha

lin-1

Rus

sian

Fed

erat

ion

Cru

de p

etro

leum

and

nat

ural

gas

ON

GC

Vid

esh(

Oil

& N

atur

al G

as)

Indi

aC

rude

pet

role

um a

nd n

atur

al g

as67

1.7

Ag

ilen

t Te

ch-H

ea

lthca

re S

olu

tU

nite

d S

tate

sS

urg

ica

l an

d m

ed

ica

l in

stru

me

nts

an

d a

pp

ara

tus

Ko

nin

klijk

e P

hili

ps

Ele

ctro

nic

Ne

the

rla

nd

sH

ou

seh

old

au

dio

an

d v

ide

oe

qu

ipm

en

t68

1.7

Ke

ypo

rt L

ife,I

nd

ep

en

de

nt F

inl

Un

ited

Sta

tes

Life

insu

ran

ceS

un

Life

Fin

l Svc

s o

f C

A I

nc

Ca

na

da

Life

insu

ran

ce69

1.7

Pa

cific

Ce

ntu

ry C

ybe

r-W

ire

less

Ho

ng

Ko

ng

, C

hin

aR

ad

iote

lep

ho

ne

co

mm

un

ica

tion

sTe

lstr

a C

orp

Ltd

(Au

stra

lia)

Au

stra

liaTe

lep

ho

ne

co

mm

un

ica

tion

s,e

xce

pt r

ad

iote

lep

ho

ne

70 1

.7G

eo

rgia

-Pa

cific

Co

rp-M

ills

(4)

Un

ited

Sta

tes

Pa

pe

r m

ills

Do

mta

r In

cC

an

ad

aP

ap

er

mill

s71

1.6

IPC

Gro

up

Ltd

(Cin

ven

)U

nite

d K

ing

do

mP

eri

od

ica

ls:

pu

blis

hin

g,

or

pu

blis

hin

g &

pri

ntin

gA

OL

Tim

e W

arn

er

Inc

Un

ited

Sta

tes

Tele

visi

on

bro

ad

cast

ing

sta

tion

s72

1.6

Mo

toro

la In

c-N

orc

el,C

ed

ete

l,M

exi

coTe

lep

ho

ne

co

mm

un

ica

tion

s, e

xce

pt r

ad

iote

lep

ho

ne

Tele

fon

ica

Se

rvic

ios

Mo

vile

sS

pa

inTe

lep

ho

ne

co

mm

un

ica

tion

s,e

xce

pt r

ad

iote

lep

ho

ne

73 1

.6JC

Pe

nn

ey

Co

-Dir

ect

Ma

rke

ting

Un

ited

Sta

tes

Insu

ran

ce a

ge

nts

, b

roke

rs,

an

d s

erv

ice

Ae

go

n N

VN

eth

erl

an

ds

Life

insu

ran

ce74

1.6

me

dia

Wa

ys G

mb

H(B

ert

els

ma

nn

)G

erm

an

yIn

form

atio

n r

etr

ieva

l se

rvic

es

Tele

fon

ica

SA

Sp

ain

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

e75

1.6

Air

tel S

A(V

od

afo

ne

Air

tou

ch)

Sp

ain

Ra

dio

tele

ph

on

e c

om

mu

nic

atio

ns

Vo

da

fon

e G

rou

p P

LC

Un

ited

Kin

gd

om

Ra

dio

tele

ph

on

e c

om

mu

nic

atio

ns

76 1

.6S

ilico

n V

alle

y G

rou

p I

nc

Un

ited

Sta

tes

Se

mic

on

du

cto

rs a

nd

re

late

d d

evi

ces

AS

M L

itho

gra

ph

y H

old

ing

NV

Ne

the

rla

nd

sS

em

ico

nd

uct

ors

an

d r

ela

ted

de

vice

s77

1.5

Re

yno

lds

Au

stra

lia A

lum

ina

Au

stra

liaA

lum

inu

m fo

un

dri

es

Bill

iton

PL

CU

nite

d K

ing

do

mM

isce

llan

eo

us

me

tal o

res

78 1

.5E

ffic

ien

t N

etw

ork

s In

cU

nite

d S

tate

sTe

lep

ho

ne

&te

leg

rap

h a

ppa

ratu

sS

iem

en

s In

fo &

Co

mm

un

Grp

Un

ited

Sta

tes

Tele

ph

on

e&

tele

gra

ph

ap

para

tus

79 1

.4Im

mo

& B

au

Ba

nkg

es

Be

rlin

Gm

bH

Ge

rma

ny

Re

al e

sta

te a

ge

nts

an

d m

an

ag

ers

Gre

ico

In

cC

aym

an

Isla

nd

sIn

vest

ors

80 1

.4In

no

gy-

Yo

rksh

ire

Ele

ctri

c D

ist

Un

ited

Kin

gd

om

Ele

ctri

c se

rvic

es

No

rth

ern

Ele

ctri

c(C

E E

lect

ric)

Un

ited

Kin

gd

om

Ele

ctri

c se

rvic

es

81 1

.4A

vest

a S

he

ffie

ld A

B(B

ritis

h)

Sw

ed

en

Ste

el w

ork

s, b

last

fu

rna

ces,

an

d r

olli

ng

mill

sO

utok

umpu

Ste

el O

yj(O

utok

umpu

)F

inla

nd

Ste

el w

ork

s, b

last

furn

ace

s, a

nd

ro

llin

g m

ills

82 1

.4D

ain

Ra

usc

he

r C

orp

Un

ited

Sta

tes

Se

curi

ty b

roke

rs,

de

ale

rs,

an

d f

lota

tion

co

mp

an

ies

Ro

yal B

an

k o

f C

an

ad

aC

an

ad

aC

om

me

rcia

l ba

nks

83 1

.3S

ky C

he

fs I

nc

Un

ited

Sta

tes

Ea

ting

pla

ces

LS

G L

uft

ha

nsa

Se

rvic

e H

old

ing

Ge

rma

ny

Ea

ting

pla

ces

84 1

.3K

yoe

i Life

In

sura

nce

Co

Jap

an

Life

insu

ran

ceP

rud

en

tial I

nsu

ran

ce C

oU

nite

d S

tate

sL

ife in

sura

nce

85 1

.3C

oca

-Co

la B

ott

lers

Ph

ilip

pin

es

Ph

ilip

pin

es

Bo

ttle

d &

ca

nn

ed

so

ft d

rin

ks &

ca

rbo

na

ted

wa

ters

Inve

sto

r G

rou

pU

nsp

eci

fied

Inve

sto

rs86

1.3

Wa

sse

rste

in P

ere

lla G

rou

p I

nc

Un

ited

Sta

tes

Se

curi

ty b

roke

rs,

de

ale

rs,

an

d f

lota

tion

co

mp

an

ies

Dre

sdn

er

Ba

nk

AG

Ge

rma

ny

Co

mm

erc

ial b

an

ks87

1.3

VN

U N

V-C

on

sum

er

Un

itN

eth

erl

an

ds

Pe

rio

dic

als

: p

ub

lish

ing

, o

r p

ub

lish

ing

& p

rin

ting

Sa

no

ma

-WS

OY

Oyj

Fin

lan

dN

ew

spa

pe

rs: p

ub

lish

ing

, or

pu

blis

hin

g &

pri

ntin

g88

1.2

Esa

t Dig

ifon

e(E

sat,

Tele

no

r)Ir

ela

nd

Tele

ph

on

e&

tele

gra

ph

ap

para

tus

Bri

tish

Te

leco

mm

un

ica

tion

s P

LC

Un

ited

Kin

gd

om

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

e89

1.2

Blo

ck D

rug

Co

Un

ited

Sta

tes

De

nta

l eq

uip

me

nt

an

d s

up

plie

sS

mith

Klin

e B

ee

cha

m P

LC

Un

ited

Kin

gd

om

Me

dic

ina

l ch

em

ica

ls a

nd

bo

tan

ica

l pro

du

cts

90 1

.2F

letc

he

r C

ha

llen

ge

En

erg

yN

ew

Ze

ala

nd

Cru

de

pe

tro

leu

m a

nd

na

tura

l ga

sS

he

ll O

vers

ea

s H

old

ing

s L

tdU

nite

d K

ing

do

mP

etr

ole

um

bu

lk s

tatio

ns

an

dte

rmin

als

��

Annex A

/...

An

ne

x t

ab

le A

.I.2

. C

ros

s-b

ord

er

M&

A d

ea

ls w

ith

va

lue

s o

f o

ve

r $

1 b

illi

on

co

mp

lete

d i

n 2

00

1 (

co

nc

lud

ed

)

Va

lue

Ind

ust

ry o

f th

eR

ank

($ b

illio

n)A

cqu

ire

d c

om

pa

ny

Ho

st e

con

om

yIn

du

stry

of

the

acq

uir

ed

co

mp

an

yA

cqu

irin

g c

om

pa

ny

Ho

me

eco

no

my

acq

uir

ing

co

mp

an

y

91 1

.2S

ide

l SA

Fra

nce

Sp

eci

al i

nd

ust

ry m

ach

ine

ryTe

tra

La

val S

AF

ran

ceP

ack

ag

ing

ma

chin

ery

92 1

.2W

isco

nsi

n C

en

tra

l Tra

nsp

ort

Un

ited

Sta

tes

Ra

ilro

ad

s, li

ne

-ha

ul o

pe

ratin

gC

an

ad

ian

Na

tion

al R

ailw

ay

Co

Ca

na

da

Ra

ilro

ad

s, li

ne

-ha

ul o

pe

ratin

g

93 1

.2L

G E

lect

ron

ics-

Ca

tho

de

Ra

yR

ep

ub

lic o

f K

ore

aE

lect

ron

tub

es

Ph

ilips

-Ca

tho

de

Ra

y T

ub

e O

ps

Ne

the

rla

nd

sE

lect

ron

tub

es

94 1

.2B

an

co d

o E

sta

do

de

Sa

o P

au

loB

razi

lC

om

me

rcia

l ba

nks

Ba

nco

Sa

nta

nd

er

Ce

ntr

al H

isp

an

Sp

ain

Co

mm

erc

ial b

an

ks95

1.2

Sim

ple

x T

ime

Re

cord

er

Co

Un

ited

Sta

tes

Co

mm

un

ica

tion

s e

qu

ipm

en

tT

yco

In

tern

atio

na

l Ltd

Be

rmu

da

Ge

ne

ral i

nd

ust

ria

l ma

chin

ery

an

d e

qu

ipm

en

t96

1.1

Gly

nw

ed

In

tl-P

ipe

Sys

tem

sU

nite

d K

ing

do

mP

last

ics

pip

eE

tex

Gro

up

SA

(Fin

ete

r S

A)

Be

lgiu

mP

last

ics

pip

e97

1.1

So

de

xho

Ma

rrio

tt S

erv

ice

s In

cU

nite

d S

tate

sE

atin

g p

lace

sS

od

exh

o A

llia

nce

SA

Fra

nce

Ho

tels

an

d m

ote

ls98

1.1

Co

nd

ea

Ch

em

ie G

mb

H(R

WE

)G

erm

an

yIn

du

stri

al o

rga

nic

ch

em

ica

lsS

aso

l Ltd

So

uth

Afr

ica

Pe

tro

leu

m r

efin

ing

99 1

.1G

lob

al T

ele

com

SA

Bra

zil

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

eTe

lesp

Ce

lula

r P

art

icip

aco

es

Bra

zil

Tele

ph

on

e c

om

mu

nic

atio

ns,

exc

ep

t ra

dio

tele

ph

on

e1

00

1.1

Ma

rco

ni p

lc-M

ed

ica

l Op

era

tion

sU

nite

d K

ing

do

mS

urg

ica

l an

d m

ed

ica

l in

stru

me

nts

an

d a

pp

ara

tus

Ko

nin

klijk

e P

hili

ps

Ele

ctro

nic

Ne

the

rla

nd

sH

ou

seh

old

au

dio

an

d v

ide

oe

qu

ipm

en

t1

01

1.1

En

cal E

ne

rgy

Ltd

Ca

na

da

Cru

de

pe

tro

leu

m a

nd

na

tura

l ga

sC

alp

ine

Co

rpU

nite

d S

tate

sE

lect

ric

serv

ice

s1

02

1.1

Su

pe

rdip

lo S

AS

pa

inG

roce

ry s

tore

sK

on

inkl

ijke

Ah

old

NV

Ne

the

rla

nd

sG

roce

ry s

tore

s1

03

1.1

De

gu

ssa

Me

tals

Ca

taly

sts

AG

Ge

rma

ny

Jew

elr

y, p

reci

ou

s m

eta

lO

M G

rou

p I

nc

Un

ited

Sta

tes

Ind

ust

ria

l in

org

an

ic c

he

mic

als

10

4 1

.1N

oo

sF

ran

ceC

ab

le a

nd

oth

er

pa

y te

levi

sio

n s

erv

ice

sIn

vest

or

Gro

up

Un

ited

Sta

tes

Inve

sto

rs1

05

1.1

Ass

iDo

ma

n A

B-C

orr

ug

ate

d B

oa

rdS

we

de

nP

ap

erb

oa

rd m

ills

Ka

pp

a A

lph

a H

old

ing

sN

eth

erl

an

ds

Inve

sto

rs1

06

1.1

Eu

ralu

x S

A(E

ura

fra

nce

/La

zard

)L

uxe

mb

ou

rgO

ffic

es

of

ho

ldin

g c

om

pan

ies

Me

dio

ba

nca

Sp

AIt

aly

Co

mm

erc

ial b

an

ks1

07

1.1

We

stfie

ld A

me

rica

In

cU

nite

d S

tate

sR

ea

l est

ate

inve

stm

en

t tr

ust

sW

est

field

Am

eri

ca T

rust

Au

stra

liaR

ea

l est

ate

inve

stm

en

t tr

ust

s

10

8 1

.0B

alo

ise

Ho

ldin

g A

GS

witz

erl

an

dL

ife in

sura

nce

Str

ate

gic

Mo

ne

y M

an

ag

em

en

t C

oN

eth

erl

an

ds

Inve

stm

en

t off

ice

s1

09

1.0

Gu

cci G

rou

p N

VN

eth

erl

an

ds

Wo

me

n’s

ha

nd

ba

gs

an

d p

urs

es

Cre

dit

Lyo

nn

ais

SA

Fra

nce

Co

mm

erc

ial b

an

ks11

0 1

.0H

ep

wo

rth

PL

CU

nite

d K

ing

do

mF

ab

rica

ted

pla

te w

ork

(b

oile

r sh

op

s)V

aill

an

t G

mb

HG

erm

an

yH

ea

ting

eq

uip

me

nt

111

1.0

Ko

me

rcn

i Ba

nka

Cze

ch R

ep

ub

licC

om

me

rcia

l ba

nks

So

cie

te G

en

era

le S

AF

ran

ceC

om

me

rcia

l ba

nks

112

1.0

Be

rkle

y P

etr

ole

um

Co

rpC

an

ad

aC

rud

e p

etr

ole

um

an

d n

atu

ral g

as

An

ad

ark

o P

etr

ole

um

Co

rpU

nite

d S

tate

sC

rud

e p

etr

ole

um

& n

atu

ral g

as

113

1.0

Ca

mb

rid

ge

Pro

tect

ion

-Se

curi

tyU

nite

d S

tate

sS

ecu

rity

sys

tem

s se

rvic

es

Tyc

o I

nte

rna

tion

al L

tdB

erm

ud

aG

en

era

l in

du

stri

al m

ach

ine

rya

nd

eq

uip

me

nt

So

urc

e:

UN

CT

AD

, c

ros

s-b

ord

er

M&

A d

ata

ba

se

.

No

te:

Ho

st

an

d h

om

e e

co

no

mie

s r

ep

res

en

t th

e i

mm

ed

iate

pa

rtn

er

ec

on

om

y o

f th

e t

ran

sa

cti

on

. T

hu

s,

for

the

M&

A d

ea

ls w

ho

se

ho

me

ec

on

om

y i

s i

de

nti

ca

l to

the

ho

st

ec

on

om

y, t

he

ult

ima

te p

are

nt

ec

on

om

y i

s d

iffe

ren

t. T

he

refo

re,

the

y a

re c

on

sid

ere

d a

s c

ros

s-b

ord

er

M&

As

. T

he

da

ta c

ov

er

the

de

als

in

vo

lvin

g t

he

ac

qu

isit

ion

of

an

eq

uit

y s

tak

e o

f m

ore

th

an

10

pe

r c

en

t.

��


Annex table A.I.3. Number of parent corporations and foreign affiliates,by region and economy, latest available year

(Number)

Parent corporations Foreign affiliatesRegion/economy Year based in economy a located in economy a

Developed economies 50 250 b 100 825 b

Western Europe 40 580 70 710

European Union 35 096 b 61 685 b

Austria 2000 917 2 588 c

Belgium/Luxembourg 1997 988 d 1 504 d

Denmark 1998 9 356 2 305 e

Finland 2000 900 f 1 936 c, e

France 2000 1 922 9 473Germany 2000 8 522 13 267 g

Greece 1991 .. 798Ireland 2001 39 h 1 183 i

Italy 1999 1 017 j 1 843 j

Netherlands 1993 1 608 k 3 132 c, l

Portugal 2000 1 100 m 3 000 m

Spain 1998 857 n 7 465Sweden o 2001 4 662 4 582United Kingdom p 2001 3 208 8 609

Other Western Europe 5 484 b 9 025 b

Gibraltar 2001 .. 22Iceland 1999 78 47Malta 1999 .. 82Norway 2000 900 q, r 3 100 q

Switzerland 1995 4 506 5 774

North America 4 985 b 23 200 b

Canada 1997 1 722 7 501 c, l

United States 1999 3 263 s 15 699 t

Other developed countries 4 685 b 6 915 b

Australia 2001 682 2 352Israel 2001 .. 98Japan 2000 3 786 u 3 359 v

New Zealand 1998 217 1 106

Developing economies 13 492 b 494 900 b

Africa 1 156 b 6 100 b

Algeria 2001 .. 14Angola 2001 2 23Benin 2001 .. 10Botswana 2001 .. 9Burkina Faso 2001 1 10Burundi 2001 .. 3Cameroon 2001 .. 58Central African Republic 2001 .. 5Chad 2001 .. 4Congo 2001 .. 24Cote d’Ivoire 2001 .. 117Democratic Republic of the Congo 2001 4 4Djibouti 2001 1 7Egypt 1999 .. 99Equatorial Guinea 2001 .. 2Ethiopia 2001 4 16Gabon 2001 .. 39Gambia 2001 .. 5Ghana 2001 .. 67Guinea-Bissau 2001 .. 1Kenya 2001 .. 114Lesotho 2001 .. 411Liberia 2001 .. 11Madagascar 2001 .. 28Malawi 2001 .. 1Mali 2001 1 33Mauritania 2001 2 2Mauritius 1999 .. 20Morocco 2001 .. 206Mozambique 2001 5 22Namibia 2001 .. 6Niger 2001 1 6Nigeria 2001 .. 69Rwanda 2001 .. 2Senegal 2001 6 38

��

Annex A

/...


(Number)


Seychelles 1998 - 30Sierra Leone 2001 1 3Somalia 2001 1 ..South Africa 1998 941 2 044Sudan 2001 2 5Swaziland 2001 12 53Togo 2001 3 9Tunisia 2001 142 f 2 339United Republic of Tanzania 2001 15 34Uganda 2001 .. 30Zambia 2001 4 31Zimbabwe 1998 8 36

Latin America and the Caribbean 2 022 b 27 577 b

Antigua and Barbuda 2001 .. 7Argentina 2001 .. 1 058Aruba 2001 .. 25Bahamas 2001 .. 100Barbados 2001 .. 83Belize 2001 .. 6Bermuda 2001 .. 217Bolivia 1996 .. 257Brazil 1998 1 225 8 050British Virgin Islands 2001 .. 74Cayman Islands 2001 .. 236Chile 1998 478 w 3 173 x

Colombia 1995 302 2 220Costa Rica 2001 .. 137Dominica 2001 .. 2Dominican Republic 2001 .. 105Ecuador 1999 .. 121El Salvador 1990 .. 225Grenada 2001 .. 8Guatemala 1985 .. 287Guyana 2000 4 f 59Haiti 2001 3 7Honduras 2001 .. 45Jamaica 1998 .. 177Mexico 1993 .. 8 420Netherlands Antilles 2001 .. 143Nicaragua 2001 .. 31Panama 2001 .. 386Paraguay 1995 .. 109Peru 1997 10 y 1 183 z

St. Kitts and Nevis 2001 .. 3Saint Lucia 2001 .. 13Saint Vincent and the Grenadines 2001 .. 6Suriname 2001 .. 10Trinidad & Tobago 1999 .. 65 aa

Uruguay 1997 .. 123Venezuela 1999 .. 406

Asia 10 289 b 460 668 b

South, East and South-East Asia 9 834 b 450 607 b

Afghanistan 2001 .. 3Bangladesh 2001 10 13Bhutan 1997 .. 2Brunei 2001 .. 17Cambodia 1997 .. 598 ab

China 2000 379 ac 363 885 ad

Hong Kong, China 1998 819 ae 6 247 af

India 1995 187 ag 1 416Indonesia 1995 313 2 241 af

Lao People’s Democratic Republic 1997 .. 669 ah

Macau 2001 .. 53Malaysia 1999 .. 15 567 ai

Maldives 2001 .. 2Mongolia 1998 .. 1 400Myanmar 2001 .. 5Nepal 2001 1 3Pakistan 2000 59 r 644Philippines 1995 .. 14 802 aj

Republic of Korea 2001 7 460 ak 11 515

��


/...


(Number)


Singapore 1999 .. 24 114Sri Lanka 1998 .. 305 al

Taiwan Province of China 2001 606 am 2 841Thailand 1998 .. 2 721 an

Viet Nam 1996 .. 1 544

West Asia 455 b 2 373 b

Bahrain 2001 .. 50Cyprus 2001 .. 169Iran 2001 .. 29Jordan 2001 .. 14Kuwait 2001 .. 16Lebanon 2001 .. 58Oman 1995 92 ao 351 ao

Qatar 2001 .. 15Saudi Arabia 1989 .. 1 461Syrian Arab Republic 2001 .. 8Turkey 1995 357 136United Arab Emirates 1999 .. 59Yemen 2001 6 7

Central Asia - 7 688 b

Armenia 1999 .. 1 604 ap

Azerbaijan 2001 .. 11Georgia 1998 .. 190 aq

Kazakhstan 1999 .. 1 865 ar

Kyrgzstan 1998 .. 4 004 as

Uzbekistan 2001 .. 14The Pacific 25 b 555 b

Fiji 1997 .. 151Kiribati 2001 .. 1New Caledonia 2001 .. 3Papua New Guinea 1998 .. 345 at

Samoa 2001 7 10Solomon Islands 2001 7 17Tonga 2001 .. 5Vanuatu 2001 11 23

Central and Eastern Europe 850 b 255 442 b

Albania 1995 .. 2 422 au

Belarus 1994 .. 393Bosnia & Herzegovina 1999 .. 7Bulgaria 2000 26 h 7 153 av

Croatia 1997 70 353Czech Republic 1999 660 aw 71 385 ax

Estonia 1999 .. 3 066 ay

Hungary 1999 .. 26 433 az

Latvia 2001 .. 193Lithuania 1999 16 ad 1 893Poland 1998 58 ba 35 840 bb

Romania 2001 20 ba 83 934 bc

Russian Federation 1994 .. 7 793Slovakia 1997 .. 5 560 bd

Slovenia 2000 .. 1 655 be

Ukraine 1999 .. 7 362

World 64 592 851 167

Source: UNCTAD, based on national sources and Who Owns Whom CD-ROM 2002 (Dun & Bradstreet).

a Represents the number of parent companies/foreign affi l iates in the economy shown, as defined by that economy.Deviations from the definit ion adopted in the World Investment Report (see section on definit ions and sources inthe annex B) are noted below. The data for Afghanistan, Algeria, Angola, Antigua and Barbuda, Argentina, Aruba,Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belize, Benin, Bermuda, Bosnia and Herzegovina, Botswana,Brit ish Virgin Islands, Brunei, Burkina Faso, Burundi, Cameroon, Cayman Islands, Central African Republic, Chad,Congo, Costa Rica, Cote d’Ivoire, Cyprus, Democratic Republic of the Congo, Djibouti, Dominica, Dominican Republic,Ecuador, Equatorial Guinea, Ethiopia, Gabon, Gambia, Ghana, Gibraltar, Grenada, Guinea-Bissau, Haiti, Honduras,Iran, Israel, Jordan, Kenya, Kiribati, Kuwait, Latvia, Lebanon, Lesotho, Liberia, Macau, Madagascar, Malawi, Maldives,Mali, Malta, Mauritania, Maurit ius, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands Anti l les, NewCaledonia, Nicaragua, Niger, Nigeria, Panama, Qatar, Rwanda, Senegal, Sierra Leone, Solomon Islands, Somalia,St. Lucia, St. Kitts and Nevis, St. Vincent and the Grenadin, Sudan, Suriname, Syria, Togo, Tonga, Uganda, UnitedArab Emirates, United Republic of Tanzania, Uzbekistan, Vanuatu, Venezuela, Western Samoa, Yemen, and Zambia

��

Annex A

are from Who Owns Whom CD-Rom 2002 ( London, Dun & Bradstreet).b Includes data for only the countries shown below.c Majority-owned foreign aff i l iates.d Provisional f igures by Banque Nationale de Belgique.e Directly and indirectly owned foreign aff i l iates (subsidiaries and associates), excluding branches.f As of 1999.g Does not include the number of foreign-owned holding companies in Germany which, in turn, hold participating

interests in Germany (indirect foreign part icipating interests).h As of 1994.i Refers to the number of foreign-owned aff i l iates in Ireland in manufacturing and services activit ies which receive

assistance from the Investment and Development Authority (IDA).j Relates to parent companies and foreign affi l iates industrial activities (based on Consiglio Nazionale dell’Economia

e del Lavoro, “ I tal ia Mult inazionale, 2000, inward and outward FDI in the Ital ian industry in 1998 and 1999” Apri l2002.

k As of October 1993.l Source: OECD, 2002.m Preliminary estimate. The number of parent TNCs in Portugal as of 1999.n Includes those Spanish parent enterprises which, at the same time, are control led by a direct investor.o Data provided by Sveriges Riksbank. Includes those Swedish parent companies which, at the same time, are controlled

by a direct investor.p Data on the number of parent companies based in the United Kingdom, and the number of foreign affi l iates in the

United Kingdom are based on the register of companies held for inquiries on the United Kingdom FDI abroad, andFDI into the United Kingdom conducted by the Central Statist ical Office. On that basis, the numbers are probablyunderstated because of the lags in identifying investment in greenfield sites and because some companies withsmall presence in the United Kingdom and abroad have not yet been identif ied.

q Approximation by Norges Bank.r As of 1998.s Represents a total of 2,494 non-bank parent companies in 1999 and 60 bank parent companies in 1994 with at least

one foreign affiliate whose assets, sales or net income exceeded $3 million, and 709 non-bank and bank parent companiesin 1994 whose affiliate(s) had assets, sales and net income under $3 million. Each parent company represents a fullyconsolidated United States business enterprise, which may consist of a number of individual companies.

t Represents a total of 438 bank aff i l iates in 1997 and 9,355 non-bank aff i l iates in 1999 whose assets, sales ornet income exceeded $3 mil l ion, and 5,906 bank and non-bank aff i l iates in 1996 with assets, sales, net incomeless than or equal to $3 mil l ion. Each affi l iate represents a fully consolidated United States business entreprise,which may consist of a number of individual companies.

u Japanese firms with at least two foreign affiliates that have a more than 20 per cent equity share. Source: Toyokeizai,Kaigai Shinshutsu Kigyo Soran 2001 (Tokyo: Toyokeizai Shinposha, 2001).

v Only foreign affi l iates with a more than 20 per cent foreign equity share. Source: Toyokeizai, Gaishikei Kigto Soran2001 (Tokyo: Toyokeizai Shinposha, 2001).

w Estimated by the Comité de Inversiones Extranjeras.x Number of foreign companies registred under DL600.y Less than 10.z Out of this number, 811 are majority-owned foreign affi l iates, while 159 affi l iates have less than 10 per cent equity

share.aa An equity stake of 25 per cent or more of the ordinary shares or voting power.ab Number of projects approved, both domestic and foreign, since August 1994.ac As of 1989.ad Cumulative number of registered industrial enterprises with foreign capital.ae Number of regional headquarters as at 1 June 1998.af As of 1996.ag As of 1991.ah Number of projects l icensed since 1988 up to end 1997.ai May 1999. Refers to companies with foreign equity stakes of 51 per cent and above. Of this, 3,787 are fully owned

foreign aff i l iates.aj This f igure refers to directly and indirectly owned foreign aff i l iates.ak As of 1999. Data refer to the number of investment projects abroad.al Number of projects approved under section 17 of the BOI law which provides for incentives.am Number of approved new investment projects abroad in 1998.an Data refer to the number of BOI-promoted companies which have been issued promotion cert i f icates during the

period 1960-1998, having at least 10 per cent of foreign equity part icipation.ao As of May 1995.ap Accumulated number of joint ventures and foreign enterprises registered as of 1 November 1999.aq Number of cases of approved investments of more than 100,000 dollars registered during the period of January

1996 up to March 1998.ar Joint ventures and foreign f irms operating in the country.as Joint venture companies established in the economy.at Number of applications received since 1993.au 1,532 joint ventures and 890 wholly-owned foreign aff i l iates.av The number refers to registered investment projects between 1992 and 2000, Bulgarian Foreign Investment Agency,

January 2002.aw As of 1997.ax Out of this number 53,775 are ful ly-owned foreign aff i l iates. Includes joint ventures.ay As of 15 March 1999. Only registered aff i l iates with the Estonian Commercial Register.az Source: Hungary Statist ics Off ice.ba As of 1994.bb Number of f irms with foreign capital.bc As of March 2002, Chamber of Commerce and Industry of Romania.bd Includes joint ventures with local f irms.be Source: Bank of Slovenia.

Note: The data can vary significantly from preceding years, as data become available for countries that hadnot been covered before, as definit ions change, or as older data are updated.

��


Annex table A.I.4. Comparison between FDI inward stock and assets offoreign affiliates in selected host economies, latest available year

(Bil l ions of dollars)

Ratio of assetsHost economy Year FDI inward stock Assets to FDI stock

Developed countriesAustria 1999 23.4 91.1a 3.9Finland 1999 16.5 67.9 4.1Germany 1999 251.2 614.4 2.4Japan 1998 26.1 116.5b 4.5Norway 1998 25.9 88.2 3.4United States 1999 1 087.3 4 135.2c 3.8

Developing economiesChina 1997 221.9 220.9 1.0Brazil 1995 42.5 152.4 3.6Hong Kong, China 1997 94.6 7.0d 0.1India 1995 5.6 4.1 0.7Malaysia 1997 42.5 7.3e 0.2Singapore 1999 79.4 16.0 0.2Taiwan Province of China 1994 14.2 24.4f 1.7Viet Nam 1996 8.8 5.9g 0.7

Source : UNCTAD FDI/TNC database.a The value of assets was estimated by applying the percentage share of the foreign investor's participation

in equity capital of al l f irms to total assets of al l f irms.b Not including the banking and f inancial sectors. Data refer to f irms with foreign part icipation of

more than one third of the shares.c Non-bank al l aff i l iates.d Data refer to the secondary sector only.e Data are on an approval basis. The f igure represents f ixed assets in the secondary sector only.f Data represents f ixed assets only.g As of end June.

Annex table A.I.5. Labour productivitya of foreign affiliates and domestic firms inmanufacturing in selected host economies, latest available year

(Thousands of employees, mil l ions of dollars for value added and dollars for labour productivity)

Foreign affiliates Domestic firms

Value Labour Value LabourEconomy Year Employment added productivitya Employment added productivitya

Developed countries

Finland 1998 52.8 3 696.5 70 005 361.1 24 345.6 67 414Francec 1996 807.0 61 307.4 75 970 2 982.2 303 385.6 101 732Irelandc 1998 115.2 30 916.5 268 272 130.5 3 205.7 24 571Japan 1998 177.5 12 300.4 69 284 12 433.5 669 858.8 53 875Netherlandsc 1996 160.5 16 978.5 105 793 506.3 35 176.4 69 477Norway 1992 18.0 1 080.5 59 911 227.1 12 513.6 55 100Portugalc 1998 79.0 2 783.7 35 234 926.9 19 155.0 20 665Swedenb, c 1999 397.7 27 377.1 68 845 176.5 13 661.7 77 417United Kingdom 1997 745.8 59 221.3 79 402 3 389.2 175 846.7 51 885United Statesd 1999 2 274.8 236 165.0 103 818 17 795.2 1 264 635.0 71 066

Developing economies

Chinab 1997 5 987.9 43 105.6 7 199 55 594.1 146 372.5 2 633Hong Kong, China 1994 67.5 2 422.0 35 881 355.5 9 335.0 26 259Malaysia 1995 526.7 12 082.7 22 940 842.3 11 727.0 13 923Singapore 1999 168.1 19 904.9 118 411 178.7 3 883.6 21 734Taiwan Province of China 1994 258.6 25 131.7 97 193 2 180.1 44 763.5 20 533

Source : UNCTAD, based on FDI/TNC database (data for foreign affiliates) and UNIDO Industrial Statistics Database(data for al l f irms).

a Defined as value added divided by the number of employees; expressed as value added in dollars per employee.b All industries.c Majority-owned foreign aff i l iates.d Data for value added and employment in the manufacturing sector for al l f irms were taken from the United States

Census Bureau, Statist ical Abstract of the United States: 2001 (tables no. 971 and no. 596, respectively). Datafor foreign affi l iates were taken from the United States Bureau of Economic Analysis, Survey of Current Business,August 2001 (tables 3 and 5).

Note : The data related to domestic f irms are calculated as the difference between those of foreign affi l iatesand those of al l f irms in the manufacturing sector.

��

Annex A

Annex table A.I.6. Data for the transnationality index of host economies, 1999

FDI inflows as a FDI inward stock Value added of Employment of foreignpercentage of GDCF, as a percentage foreign affiliates as a affiliates as a percentage Transnationality

Economy average 1997-1999 of GDP percentage of GDP of total employment index

Developed economies:Australia 7.1 30.2 17.4 12.2 16.7Austria 6.9 11.2 10.2 10.5 9.7Belgium / Luxembourg 90.9 105.3 43.3 24.6 66.0Canada 16.1 26.5 15.0 12.8 17.6Denmark 19.9 20.7 14.9 16.3 17.9Finland 26.3 14.3 9.5 10.1 15.0France 12.7 16.7 4.1 4.2 9.4Germany 6.8 13.5 16.4 5.7 10.6Greece 2.2 17.6 27.8 10.6 14.5Ireland 47.5 45.4 40.2 9.8 35.7Israel 9.1 17.9 8.7 10.2 11.5Italy 2.0 9.2 3.4 3.7 4.6Japan 0.6 1.0 0.4 0.5 0.6Netherlands 37.9 48.4 10.1 4.3 25.2New Zealand 14.4 59.9 22.4 15.8 28.1Norway 12.4 20.0 19.2 2.0 13.4Portugal 8.2 19.8 6.2 3.8 9.5Spain 9.5 19.2 15.5 14.6 14.7Sweden 78.9 30.5 11.5 10.9 33.0Switzerland 17.3 30.1 5.3 4.8 14.4United Kingdom 25.6 25.2 4.1 3.0 14.5United States 12.8 10.5 4.9 4.5 8.2

Developing economies:Argentina 25.3 22.0 11.2 8.0 16.6Bahamas 26.3 29.5 9.2 1.6 16.6Barbados 3.9 11.6 13.1 0.2 7.2Brazil 18.3 31.0 14.6 5.0 17.2Chile 38.0 58.0 13.9 3.7 28.4China 12.9 30.9 4.3 9.5 14.4Colombia 18.1 22.9 13.8 6.3 15.3Costa Rica 19.6 30.6 8.5 8.5 16.8Dominican Republic 21.9 24.6 19.8 2.8 17.2Ecuador 24.1 32.7 11.6 1.9 17.5Egypt 9.2 22.0 13.8 1.8 11.7Guatemala 9.6 17.5 9.0 7.9 11.0Honduras 10.6 22.2 70.7 6.3 27.5Hong Kong, China 36.7 256.1 98.5 2.5 98.4India 3.0 3.7 0.8 4.1 2.9Indonesia -0.9 46.1 23.3 0.9 17.3Jamaica 18.6 39.7 4.4 0.6 15.8Malaysia 17.1 62.2 26.8 16.6 30.7Mexico 14.2 16.3 8.8 7.0 11.6Nigeria 22.0 55.4 86.8 1.0 41.3Panama 43.0 70.2 -0.7 0.4 28.2Peru 15.4 17.2 7.6 2.4 10.6Philippines 8.0 14.7 12.8 2.4 9.5Republic of Korea 5.2 7.9 3.1 2.2 4.6Saudi Arabia 8.1 19.5 4.1 3.2 8.7Singapore 27.3 98.8 23.7 10.4 40.1South Africa 8.6 39.8 22.5 23.0 23.5Taiwan Province of China 2.7 8.0 15.0 4.1 7.4Thailand 20.8 21.7 8.4 2.1 13.2Trinidad and Tobago 52.3 94.7 29.4 3.8 45.1Turkey 1.8 4.5 6.2 3.9 4.1United Arab Emirates -1.4 3.3 4.7 1.1 1.9Venezuela 26.1 21.0 9.1 2.2 14.6

Countries of Central and Eastern Europe :Albania 9.6 11.5 0.9 1.4 5.8Belarus 9.6 9.5 0.6 0.3 5.0Bosnia and Herzegovina 2.5 3.6 0.2 0.2 1.6Bulgaria 41.1 19.4 1.7 5.4 16.9Croatia 22.1 20.1 5.2 8.1 13.9Czech Republic 24.0 32.1 10.2 4.2 17.6Estonia 27.5 47.6 8.4 9.4 23.2Hungary 18.9 40.2 24.0 27.4 27.6Latvia 30.5 27.0 5.5 10.4 18.3Lithuania 23.7 19.3 3.8 5.9 13.2Macedonia, TFYR 9.7 6.2 0.8 2.8 4.8Moldova, Republic 19.1 26.8 0.6 0.9 11.9Poland 16.3 17.1 5.0 7.8 11.5Romania 19.7 15.5 1.6 0.9 9.4Russian Federation 7.5 8.6 0.8 1.6 4.6Slovakia 5.9 14.3 4.4 3.6 7.1Slovenia 5.8 13.4 3.5 8.8 7.9Ukraine 7.8 10.3 0.5 0.7 4.8Yugoslavia 14.2 13.2 1.1 1.7 7.5

Source : UNCTAD estimates.

��


An

ne

x t

ab

le A

.II.

1.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

Po

ten

tia

l In

de

x,

19

98

-20

00

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

Re

al

GD

P g

row

th

G

DP

pe

r ca

pita

Tota

l e

xpo

rts

ma

inlin

es

e

ne

rgy

use

e

xpe

nd

iture

s

t

ert

iary

ed

uca

tion

C

ou

ntr

y ri

sk

(

Ave

rag

e

(A

vera

ge

(As

of

19

90

-20

00

)(A

vera

ge

19

98

-20

00

)

1

99

9

19

97

-19

99

)

(La

test

ye

ar

ava

ilab

le)

F

eb

rua

ry 2

00

1)

Sco

reS

core

As

%S

core

Pe

r 1

,00

0S

core

Pe

rS

core

As

%S

core

As

% o

f to

tal

Sco

reC

om

po

site

Sco

reE

con

om

y%

0-1

Do

llars

0-1

of

GD

P0

-1in

ha

bita

nts

0-1

cap

ita0

-1 o

f G

NIa

0-1

po

pu

latio

n0

-1ri

sk r

atin

g0

-1

Alb

an

ia

3.3

0.6

99

1 1

15

.60

.02

9

14

.40

.05

4

35

.30

.05

03

11.0

0.0

06

....

1.1

0.1

83

62

.80

.42

8A

lge

ria

1

.90

.63

8 1

65

9.8

0.0

44

2

5.1

0.1

20

5

3.3

0.0

75

94

4.2

0.0

29

....

1.2

0.1

98

61

.80

.40

8A

ng

ola

1

.30

.61

5

55

9.3

0.0

13

6

3.3

0.3

56

5

.30

.00

75

94

.80

.01

6..

..0

.10

.00

44

8.8

0.1

49

Arg

en

tina

4

.30

.74

4 7

90

5.0

0.2

21

1

0.3

0.0

29

2

05

.60

.29

11

72

7.2

0.0

56

0.4

0.1

17

3.0

0.5

12

69

.50

.56

2A

rme

nia

-1.9

0.4

76

4

97

.50

.011

2

1.1

0.0

95

1

54

.70

.21

94

85

.40

.01

20

.20

.04

81

.00

.16

75

7.8

0.3

29

Au

stra

lia

4.1

0.7

32

20

52

9.2

0.5

80

1

9.6

0.0

86

5

16

.40

.73

15

69

0.4

0.1

97

1.7

0.4

64

5.7

0.9

75

80

.80

.78

7A

ust

ria

2

.10

.64

8 2

5 1

22

.50

.71

0

45

.90

.24

8

47

6.7

0.6

75

3 5

13

.50

.12

01

.60

.43

73

.00

.50

78

3.8

0.8

47

Aze

rba

ijan

-6.3

0.2

90

5

95

.80

.01

4

30

.40

.15

2

95

.60

.13

51

57

5.1

0.0

51

0.2

0.0

60

1.5

0.2

54

63

.00

.43

2B

ah

am

as

1

.90

.64

1 1

5 0

18

.00

.42

3

49

.00

.26

8

36

7.4

0.5

20

....

....

1.6

0.2

63

74

.30

.65

7B

ah

rain

4

.80

.76

3 1

1 0

23

.60

.31

0

73

.50

.41

8

24

7.9

0.3

51

9 0

00

.10

.31

5..

..1

.30

.22

27

3.0

0.6

31

Ba

ng

lad

esh

4

.80

.76

4

33

9.6

0.0

07

1

3.1

0.0

46

3

.40

.00

41

39

.30

.00

00

.00

.00

30

.40

.05

56

2.3

0.4

18

Be

laru

s-1

.60

.48

7 1

23

1.6

0.0

32

6

2.0

0.3

48

2

56

.00

.36

22

38

1.2

0.0

80

0.8

0.2

23

3.2

0.5

42

59

.50

.36

3B

elg

ium

an

d L

uxe

mb

ou

rg

2.2

0.6

54

24

64

1.9

0.6

96

8

3.1

0.4

78

6

08

.20

.86

16

90

9.0

0.2

41

1.6

0.4

20

3.5

0.6

05

85

.50

.88

0B

en

in

4.7

0.7

61

3

69

.40

.00

7

28

.00

.13

8

7.4

0.0

10

32

2.9

0.0

07

....

0.2

0.0

37

....

Bo

livia

4

.00

.72

9 1

02

2.5

0.0

26

1

8.7

0.0

80

5

9.7

0.0

84

56

1.8

0.0

15

1.5

0.4

02

1.4

0.2

37

69

.00

.55

2B

ots

wa

na

4

.70

.75

9 3

34

1.1

0.0

92

5

0.0

0.2

74

7

8.1

0.1

10

....

....

0.6

0.0

93

79

.00

.75

1B

razi

l

2.9

0.6

83

3 7

93

.10

.10

5

9.7

0.0

25

1

50

.30

.21

21

06

8.2

0.0

33

0.8

0.2

25

1.1

0.1

91

64

.00

.45

2B

run

ei

Da

russ

ala

m

2.2

0.6

52

15

37

6.5

0.4

33

....

2

45

.90

.34

84

34

1.0

0.1

49

....

0.4

0.0

65

86

.30

.89

6B

ulg

ari

a-2

.10

.46

8 1

51

9.6

0.0

40

4

9.3

0.2

69

3

41

.10

.48

32

21

7.7

0.0

74

0.6

0.1

48

3.1

0.5

35

69

.00

.55

2B

urk

ina

Fa

so

4.9

0.7

68

2

11.8

0.0

03

1

2.4

0.0

41

4

.00

.00

5..

..0

.10

.03

50

.10

.00

86

3.0

0.4

32

Ca

me

roo

n

1.7

0.6

32

6

13

.20

.01

4

25

.50

.12

3

6.1

0.0

08

41

9.2

0.0

10

....

0.2

0.0

35

63

.50

.44

2C

an

ad

a

2.9

0.6

82

21

35

8.7

0.6

03

4

3.7

0.2

35

6

57

.30

.93

07

92

8.9

0.2

77

1.7

0.4

51

5.8

1.0

00

84

.30

.85

7C

hile

6

.80

.84

8 4

68

8.4

0.1

30

2

9.2

0.1

45

2

10

.40

.29

71

68

7.9

0.0

55

0.6

0.1

48

2.6

0.4

43

74

.80

.66

7C

hin

a

10

.31

.00

0

79

5.1

0.0

20

2

3.4

0.1

09

8

9.1

0.1

26

86

8.2

0.0

26

0.1

0.0

110

.50

.07

97

3.5

0.6

41

Co

lom

bia

3

.00

.68

7 2

13

6.1

0.0

58

1

8.3

0.0

78

1

61

.70

.22

96

76

.00

.01

9..

..1

.60

.27

25

9.0

0.3

53

Co

ng

o-0

.40

.54

0

85

1.3

0.0

21

7

4.7

0.4

26

7

.60

.01

02

45

.40

.00

4..

..0

.50

.08

25

9.5

0.3

63

Co

ng

o,

De

m.

Re

p.

-5.2

0.3

35

11

5.4

0.0

00

2

6.6

0.1

29

0

.30

.00

02

93

.00

.00

5..

..0

.20

.02

84

6.3

0.1

00

Co

sta

Ric

a

5.3

0.7

84

3 8

67

.30

.10

7

47

.10

.25

6

21

5.5

0.3

05

81

8.0

0.0

24

0.1

0.0

112

.10

.35

77

5.5

0.6

81

Cô

te d

’Ivo

ire

3

.50

.70

7

68

0.0

0.0

16

4

6.6

0.2

53

1

4.9

0.0

21

38

8.3

0.0

09

....

0.4

0.0

58

56

.50

.30

3C

roa

tia

0.6

0.5

86

4 3

49

.80

.12

0

41

.70

.22

3

34

8.0

0.4

92

1 8

64

.40

.06

11

.20

.31

91

.90

.32

47

2.5

0.6

22

Cyp

rus

4

.10

.73

5 1

1 5

91

.30

.32

6

44

.80

.24

1

62

8.3

0.8

89

3 0

57

.00

.10

40

.20

.06

01

.30

.22

07

8.3

0.7

37

Cze

ch R

ep

ub

lic

0.9

0.5

97

5 2

58

.90

.14

6

63

.60

.35

8

37

0.8

0.5

25

3 7

54

.00

.12

91

.20

.31

52

.00

.34

27

3.0

0.6

31

De

nm

ark

2

.50

.66

5 3

2 2

70

.90

.91

3

38

.40

.20

2

68

7.9

0.9

74

3 7

73

.30

.12

91

.90

.52

13

.30

.56

98

9.0

0.9

50

Do

min

ica

n R

ep

ub

lic

6.0

0.8

16

2 1

37

.60

.05

8

46

.10

.25

0

99

.30

.14

09

04

.40

.02

7..

..2

.20

.37

27

3.0

0.6

31

Ecu

ad

or

1

.80

.63

6 1

40

8.7

0.0

37

3

1.5

0.1

59

9

0.8

0.1

28

70

5.0

0.0

20

0.0

0.0

00

1.7

0.2

93

57

.30

.31

9E

gyp

t

4.6

0.7

54

1 3

51

.50

.03

5

16

.60

.06

8

75

.30

.10

67

08

.80

.02

01

.90

.52

71

.30

.22

16

9.5

0.5

62

El

Sa

lva

do

r

4.7

0.7

60

2 0

38

.90

.05

5

25

.70

.12

4

81

.30

.11

56

50

.80

.01

82

.20

.59

91

.90

.32

27

4.5

0.6

61

Est

on

ia-0

.50

.53

8 3

61

6.7

0.1

00

8

4.3

0.4

85

3

54

.80

.50

23

28

6.3

0.1

12

0.7

0.1

77

3.0

0.5

13

76

.50

.70

1E

thio

pia

4

.70

.75

9

10

5.3

0.0

00

1

4.9

0.0

57

3

.10

.00

42

90

.30

.00

5..

..0

.10

.00

75

9.5

0.3

63

/...

��

Annex A

An

ne

x t

ab

le A

.II.

1.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

Po

ten

tia

l in

de

x,

19

98

-20

00

(c

on

tin

ue

d)

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

Re

al

GD

P g

row

th

G

DP

pe

r ca

pita

Tota

l e

xpo

rts

ma

inlin

es

e

ne

rgy

use

e

xpe

nd

iture

s

te

rtia

ry e

du

catio

n

Co

un

try

risk

(A

vera

ge

(Ave

rag

e

(A

s o

f

1

99

0-2

00

0)

(Ave

rag

e 1

99

8-2

00

0)

19

99

1

99

7-1

99

9)

(L

ate

st y

ea

r a

vaila

ble

)

Fe

bru

ary

20

01

)S

core

Sco

reA

s %

Sco

reP

er

1,0

00

Sco

reP

er

Sco

reA

s %

Sco

reA

s %

of

tota

lS

core

Co

mp

osi

teS

core

Eco

no

my

%0

-1D

olla

rs0

-1 o

f G

DP

0-1

inh

ab

itan

ts0

-1ca

pita

0-1

of

GN

Ia0

-1 p

op

ula

tion

0-1

risk

ra

ting

0-1

Fin

lan

d

2.8

0.6

78

24

45

1.0

0.6

91

3

9.8

0.2

11

55

0.9

0.7

80

6 4

61

.20

.22

52

.60

.72

24

.40

.75

58

9.0

0.9

50

Fra

nce

1

.70

.63

1 2

3 6

34

.70

.66

8

26

.90

.13

1

58

1.6

0.8

23

4 3

50

.80

.15

02

.30

.62

03

.50

.60

38

1.3

0.7

97

Ga

bo

n

2.8

0.6

79

3 8

64

.30

.10

7

55

.10

.30

5

32

.20

.04

51

34

1.9

0.0

43

....

0.4

0.0

65

67

.80

.52

8G

am

bia

3

.10

.69

1

33

4.5

0.0

07

4

9.2

0.2

69

2

3.1

0.0

32

....

....

0.1

0.0

17

65

.50

.48

2G

eo

rgia

-13

.00

.00

0

59

6.6

0.0

14

1

9.9

0.0

88

1

25

.60

.17

75

12

.10

.01

3..

..3

.20

.54

5..

..G

erm

an

y

1.5

0.6

22

24

84

6.2

0.7

02

3

0.6

0.1

54

5

88

.10

.83

24

10

7.8

0.1

41

2.3

0.6

25

2.6

0.4

43

84

.50

.86

1G

ha

na

4

.30

.74

1

36

1.5

0.0

07

3

7.3

0.1

95

9

.10

.01

23

76

.70

.00

8..

..0

.10

.00

35

5.8

0.2

89

Gre

ece

2

.10

.64

9 1

1 2

96

.30

.31

8

21

.90

.10

0

52

7.3

0.7

46

2 5

52

.10

.08

60

.50

.12

23

.40

.58

77

6.5

0.7

01

Gu

ate

ma

la

4.1

0.7

35

1 6

99

.50

.04

5

19

.20

.08

3

52

.90

.07

45

47

.80

.01

5..

..0

.80

.12

66

9.5

0.5

62

Gu

ine

a

4.3

0.7

40

4

17

.60

.00

9

23

.80

.11

2

6.1

0.0

08

....

....

0.1

0.0

13

58

.00

.33

3G

uya

na

5

.40

.79

0

92

8.3

0.0

23

9

5.5

0.5

54

7

4.9

0.1

06

....

....

1.1

0.1

78

64

.30

.45

8H

aiti

-0.6

0.5

30

4

99

.20

.011

11

.10

.03

4

8.6

0.0

12

26

4.9

0.0

04

....

0.1

0.0

08

58

.00

.33

3H

on

du

ras

3

.20

.69

4

88

4.7

0.0

22

4

3.1

0.2

31

4

3.4

0.0

61

52

2.0

0.0

14

....

0.9

0.1

50

64

.00

.45

2H

on

g K

on

g,

Ch

ina

4

.00

.72

7 2

3 9

22

.00

.67

6

13

7.6

0.8

14

5

76

.00

.81

52

66

1.3

0.0

90

....

1.5

0.2

52

78

.80

.74

7H

un

ga

ry

1.5

0.6

23

4 6

81

.40

.13

0

55

.40

.30

7

35

9.7

0.5

09

2 5

11.8

0.0

84

0.7

0.1

90

1.9

0.3

25

75

.80

.68

7Ic

ela

nd

2

.80

.67

6 3

0 5

00

.10

.86

3

34

.40

.17

7

67

5.5

0.9

56

11 4

34

.20

.40

22

.00

.53

82

.90

.49

27

8.0

0.7

31

Ind

ia

6.0

0.8

13

4

41

.80

.01

0

12

.20

.04

0

26

.80

.03

74

81

.60

.01

20

.60

.16

80

.60

.10

36

3.8

0.4

48

Ind

on

esi

a

4.2

0.7

36

6

20

.00

.01

5

42

.20

.22

6

29

.10

.04

16

57

.50

.01

80

.10

.01

41

.10

.19

05

4.8

0.2

69

Ira

n,

Isla

mic

Re

p.

3

.50

.71

0 1

47

6.7

0.0

39

6

2.4

0.3

50

1

33

.80

.18

9 1

65

1.2

0.0

54

0.5

0.1

29

0.9

0.1

49

71

.80

.60

8Ir

ela

nd

7

.30

.87

3 2

4 5

03

.60

.69

2

90

.10

.52

1

44

1.4

0.6

25

3 7

25

.80

.12

81

.50

.41

33

.70

.62

98

7.0

0.9

10

Isra

el

5

.10

.77

5 1

7 5

89

.20

.49

6

36

.40

.19

0

47

4.7

0.6

72

3 0

29

.20

.10

33

.40

.93

03

.40

.58

06

6.3

0.4

98

Ita

ly

1.6

0.6

25

19

99

6.2

0.5

64

2

6.8

0.1

30

4

63

.00

.65

52

93

2.4

0.0

99

1.1

0.2

87

3.3

0.5

64

81

.00

.79

1Ja

ma

ica

0

.50

.57

9 2

85

1.4

0.0

78

4

3.6

0.2

34

1

90

.40

.26

91

59

6.9

0.0

52

....

0.3

0.0

52

70

.80

.58

8Ja

pa

n

1.3

0.6

16

34

69

1.1

0.9

81

1

0.5

0.0

30

5

58

.80

.79

14

06

9.8

0.1

40

2.8

0.7

65

3.1

0.5

31

83

.30

.83

7Jo

rda

n

5.0

0.7

71

1 6

96

.80

.04

5

43

.60

.23

4

87

.80

.12

41

02

7.7

0.0

32

....

1.8

0.3

13

70

.80

.58

8K

aza

khst

an

-4.1

0.3

82

1 1

73

.00

.03

0

43

.50

.23

4

10

9.9

0.1

55

2 3

74

.20

.07

90

.30

.08

52

.90

.50

37

2.0

0.6

12

Ke

nya

2

.10

.64

6

35

9.3

0.0

07

2

5.6

0.1

23

1

0.2

0.0

14

49

9.4

0.0

13

....

0.1

0.0

16

59

.30

.35

9R

ep

ub

lic o

f K

ore

a

5.7

0.8

04

8 4

72

.40

.23

7

45

.70

.24

7

44

4.7

0.6

29

3 8

70

.50

.13

32

.60

.711

5.6

0.9

54

79

.00

.75

1K

uw

ait

8

.50

.92

2 1

6 7

29

.00

.47

2

49

.50

.27

0

24

0.0

0.3

39

8 9

84

.10

.31

50

.20

.04

11

.70

.28

87

9.0

0.7

51

Kyr

gyz

sta

n-4

.10

.38

4

28

9.2

0.0

05

4

0.8

0.2

17

7

7.3

0.1

09

50

3.8

0.0

13

0.3

0.0

63

1.1

0.1

80

....

La

tvia

-3.4

0.4

11 2

72

4.0

0.0

74

4

7.0

0.2

55

3

01

.60

.42

71

58

5.9

0.0

51

0.4

0.1

10

2.3

0.3

88

71

.30

.59

8L

eb

an

on

6

.00

.81

6 4

77

8.8

0.1

33

1

0.4

0.0

29

1

96

.60

.27

81

28

0.4

0.0

41

....

2.6

0.4

42

58

.50

.34

3L

ibya

n A

rab

Ja

ma

hir

iya

....

5 9

49

.60

.16

6

23

.10

.10

8

99

.70

.14

12

36

9.5

0.0

79

....

1.4

0.2

36

70

.30

.57

8L

ithu

an

ia-3

.10

.42

7 2

94

7.8

0.0

81

4

4.0

0.2

37

3

11.1

0.4

40

2 1

38

.20

.07

10

.70

.18

72

.30

.38

47

1.8

0.6

08

Ma

da

ga

sca

r

2.0

0.6

45

2

43

.60

.00

4

24

.70

.11

7

3.2

0.0

04

....

0.2

0.0

44

0.2

0.0

26

63

.80

.44

8M

ala

wi

3

.80

.71

9

15

8.6

0.0

02

2

8.3

0.1

40

4

.00

.00

5..

....

..0

.10

.00

45

8.8

0.3

49

Ma

lays

ia

7.0

0.8

57

3 6

80

.90

.10

1

12

0.4

0.7

08

2

01

.20

.28

41

87

8.0

0.0

62

0.3

0.0

84

1.0

0.1

68

75

.30

.67

7M

ali

3

.80

.72

2

22

5.7

0.0

03

2

4.4

0.1

16

3

.00

.00

4..

....

..0

.10

.01

76

3.0

0.4

32

/...

��


An

ne

x t

ab

le A

.II.

1.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

Po

ten

tia

l in

de

x,

19

98

-20

00

(c

on

tin

ue

d)

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

Re

al

GD

P g

row

th

G

DP

pe

r ca

pita

Tota

l e

xpo

rts

ma

inlin

es

e

ne

rgy

use

e

xpe

nd

iture

s

te

rtia

ry e

du

cta

ion

C

ou

ntr

y ri

sk

(

Ave

rag

e

(A

vera

ge

(As

of

19

90

-20

00

)(A

vera

ge

19

98

-20

00

)

1

99

9

19

97

-19

99

)

(La

test

ye

ar

ava

ilab

le)

F

eb

rua

ry 2

00

1)

Sco

reS

core

As

%S

core

Pe

r 1

,00

0S

core

Pe

rS

core

As

%S

core

As

% o

f to

tal

Sco

reC

om

po

site

Sco

reE

con

om

y%

0-1

Do

llars

0-1

of

GD

P0

-1in

ha

bita

nts

0-1

cap

ita0

-1 o

f G

NIa

0-1

po

pu

latio

n0

-1ri

sk r

atin

g0

-1

Ma

lta

4.8

0.7

64

9 2

11.9

0.2

58

9

3.8

0.5

44

5

10

.90

.72

32

54

3.8

0.0

86

....

2.2

0.3

68

79

.30

.75

7M

exi

co

3.1

0.6

90

5 0

26

.50

.14

0

31

.10

.15

7

113

.50

.16

01

54

3.0

0.0

50

0.3

0.0

86

1.7

0.2

89

74

.00

.65

1M

old

ova

, R

ep

ub

lic o

f-9

.70

.14

3

32

1.9

0.0

06

4

9.5

0.2

71

1

36

.70

.19

36

55

.70

.01

80

.90

.24

82

.10

.36

45

6.8

0.3

09

Mo

ng

olia

1

.00

.60

3

37

8.1

0.0

08

5

7.4

0.3

19

4

8.1

0.0

68

....

0.1

0.0

12

2.0

0.3

41

67

.00

.51

2M

oro

cco

2

.30

.65

8 1

18

7.5

0.0

31

2

4.4

0.1

16

5

1.1

0.0

72

35

1.7

0.0

08

....

1.2

0.1

94

70

.30

.57

8M

oza

mb

iqu

e

6.4

0.8

30

2

15

.90

.00

3

13

.20

.04

6

4.1

0.0

05

40

3.8

0.0

09

....

0.0

0.0

01

58

.80

.34

9M

yan

ma

r..

..

27

0.3

0.0

05

1

2.7

0.0

43

5

.40

.00

72

73

.40

.00

5..

..0

.60

.09

15

8.8

0.3

49

Na

mib

ia

4.1

0.7

35

2 0

04

.20

.05

4

46

.50

.25

2

63

.40

.08

96

44

.80

.01

8..

..0

.70

.11

57

5.8

0.6

87

Ne

pa

l

4.9

0.7

68

2

27

.70

.00

3

23

.30

.10

9

10

.80

.01

53

57

.90

.00

8..

..0

.50

.07

6..

..N

eth

erl

an

ds

2

.80

.67

8 2

4 5

11.8

0.6

93

6

0.3

0.3

37

6

05

.30

.85

74

68

6.4

0.1

62

2.0

0.5

41

3.0

0.5

13

89

.30

.95

6N

ew

Ze

ala

nd

3

.00

.68

6 1

4 3

20

.40

.40

3

32

.70

.16

7

49

6.0

0.7

02

4 7

69

.70

.16

51

.10

.30

44

.50

.77

37

8.3

0.7

37

Nic

ara

gu

a

3.5

0.7

08

4

50

.30

.01

0

36

.00

.18

7

30

.50

.04

35

39

.20

.01

4..

..1

.20

.20

35

5.3

0.2

79

Nig

er

2

.40

.66

2

18

9.1

0.0

02

1

6.6

0.0

67

1

.80

.00

2..

....

..0

.00

.00

26

0.0

0.3

73

Nig

eri

a

2.4

0.6

62

3

24

.20

.00

6

58

.70

.32

8

3.9

0.0

05

70

4.5

0.0

20

....

0.2

0.0

29

60

.30

.37

8N

orw

ay

3

.60

.71

4 3

4 6

92

.80

.98

2

40

.50

.21

5

54

5.0

0.7

71

5 9

65

.50

.20

71

.70

.46

34

.20

.72

29

1.5

1.0

00

Om

an

4

.80

.76

3 6

70

8.5

0.1

87

4

8.0

0.2

61

9

0.2

0.1

27

3 6

06

.90

.12

3..

..0

.70

.11

48

0.0

0.7

71

Pa

kist

an

3

.70

.71

7

44

2.4

0.0

10

1

5.8

0.0

63

2

1.6

0.0

30

44

3.9

0.0

11..

..0

.20

.02

65

4.3

0.2

59

Pa

na

ma

4

.10

.73

2 3

41

2.9

0.0

94

8

1.3

0.4

67

1

55

.50

.22

08

34

.90

.02

5..

..3

.00

.50

87

3.5

0.6

41

Pa

pu

a N

ew

Gu

ine

a

4.0

0.7

30

7

96

.10

.02

0

48

.70

.26

6

12

.90

.01

8..

....

..0

.30

.04

76

6.3

0.4

98

Pa

rag

ua

y

2.2

0.6

53

1 4

86

.50

.03

9

23

.80

.11

2

47

.60

.06

77

72

.60

.02

3..

..0

.80

.13

86

4.3

0.4

58

Pe

ru

4.7

0.7

57

2 1

40

.20

.05

8

14

.70

.05

6

63

.60

.09

05

19

.30

.01

4..

..2

.70

.46

06

8.5

0.5

42

Ph

ilip

pin

es

3

.30

.69

7

97

0.2

0.0

25

5

3.3

0.2

94

3

7.6

0.0

53

54

8.9

0.0

15

0.2

0.0

52

2.8

0.4

83

66

.50

.50

2P

ola

nd

4

.60

.75

5 4

07

4.1

0.1

13

2

7.9

0.1

37

2

57

.50

.36

42

41

5.8

0.0

81

0.7

0.1

93

1.9

0.3

16

75

.00

.67

1P

ort

ug

al

2

.70

.67

3 1

1 1

48

.10

.31

3

28

.90

.14

3

42

1.9

0.5

97

2 3

65

.30

.07

90

.60

.15

93

.20

.55

38

0.0

0.7

71

Qa

tar

3

.90

.72

5 2

2 1

26

.90

.62

5

32

.60

.16

7

26

3.5

0.3

73

28

26

1.8

1.0

00

....

1.5

0.2

51

70

.00

.57

2R

om

an

ia-0

.70

.52

8 1

68

6.4

0.0

45

2

8.8

0.1

43

1

67

.20

.23

61

62

2.2

0.0

53

0.8

0.2

12

1.8

0.3

09

64

.30

.45

8R

uss

ian

Fe

de

ratio

n-4

.80

.35

3 1

65

7.0

0.0

44

3

9.6

0.2

10

2

09

.00

.29

54

12

1.1

0.1

42

1.0

0.2

74

3.0

0.5

15

66

.00

.49

2R

wa

nd

a-0

.20

.55

0

27

4.7

0.0

05

5

.70

.00

0

1.8

0.0

02

....

0.0

0.0

05

0.0

0.0

00

....

Sa

ud

i Ara

bia

1

.50

.62

2 7

52

5.7

0.2

11

41

.90

.22

4

12

4.6

0.1

76

4 2

03

.70

.14

5..

..1

.40

.23

77

6.8

0.7

07

Se

ne

ga

l

3.6

0.7

13

5

00

.10

.011

3

3.5

0.1

72

1

8.3

0.0

25

31

8.4

0.0

06

0.0

0.0

00

0.3

0.0

42

64

.80

.46

8S

ierr

a L

eo

ne

-4.3

0.3

73

1

55

.90

.00

1

18

.20

.07

8

3.8

0.0

05

....

....

0.1

0.0

13

41

.30

.00

0S

ing

ap

ore

7

.80

.89

1 2

2 0

26

.60

.62

2

16

7.7

1.0

00

4

75

.40

.67

35

74

2.2

0.1

99

1.1

0.3

05

2.7

0.4

58

90

.50

.98

0S

lova

kia

2

.10

.64

8 3

71

6.4

0.1

02

6

5.6

0.3

70

3

02

.00

.42

73

33

4.7

0.1

14

1.0

0.2

64

1.9

0.3

21

73

.50

.64

1S

love

nia

2

.70

.67

5 9

67

5.2

0.2

72

5

6.1

0.3

11

37

4.2

0.5

29

3 2

76

.80

.11

21

.40

.39

02

.60

.43

67

6.8

0.7

07

So

uth

Afr

ica

2

.00

.64

3 3

03

6.2

0.0

83

2

6.9

0.1

31

1

20

.50

.17

02

59

6.6

0.0

87

0.7

0.1

98

1.6

0.2

69

68

.50

.54

2S

pa

in

2.5

0.6

65

14

63

5.0

0.4

12

2

7.9

0.1

38

4

14

.90

.58

73

00

5.4

0.1

02

0.8

0.2

24

4.3

0.7

28

80

.50

.78

1S

ri L

an

ka

5.3

0.7

83

8

49

.10

.02

1

36

.90

.19

3

34

.90

.04

94

05

.80

.00

90

.20

.04

70

.30

.05

45

8.5

0.3

43

Su

da

n

8.1

0.9

06

3

49

.00

.00

7

10

.10

.02

8

8.9

0.0

12

50

3.0

0.0

13

....

0.2

0.0

32

49

.50

.16

3S

uri

na

me

3

.30

.69

9 2

23

1.3

0.0

60

4

8.6

0.2

65

1

65

.40

.23

4..

....

..0

.70

.11

06

7.5

0.5

22

/...

��

Annex A

An

ne

x t

ab

le A

.II.

1.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

Po

ten

tia

l in

de

x,

19

98

-20

00

(c

on

clu

de

d)

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

Re

al

GD

P g

row

th

G

DP

pe

r ca

pita

Tota

l e

xpo

rts

m

ain

line

s

en

erg

y u

se

exp

en

ditu

res

tert

iary

ed

uca

tion

C

ou

ntr

y ri

sk

(

Ave

rag

e

(A

vera

ge

(As

of

19

90

-20

00

)(A

vera

ge

19

98

-20

00

)

1

99

9

19

97

-19

99

)

(La

test

ye

ar

ava

ilab

le)

F

eb

rua

ry 2

00

1)

Sco

reS

core

As

%S

core

Pe

r 1

,00

0S

core

Pe

rS

core

As

%S

core

As

a %

of

tota

lS

core

Co

mp

osi

teS

core

Eco

no

my

%0

-1D

olla

rs0

-1 o

f G

DP

0-1

inh

ab

itan

ts0

-1ca

pita

0-1

of

GN

Ia0

-1 p

op

ula

tion

0-1

risk

ra

ting

0-1

Sw

ed

en

1

.90

.64

0 2

6 7

91

.80

.75

7

44

.50

.24

0

68

1.1

0.9

64

5 7

68

.50

.20

03

.71

.00

03

.10

.53

18

5.0

0.8

71

Sw

itze

rla

nd

0

.80

.59

3 3

5 3

43

.41

.00

0

42

.90

.23

0

70

6.4

1.0

00

3 7

38

.00

.12

82

.60

.69

52

.00

.34

78

8.5

0.9

40

Syr

ian

Ara

b R

ep

ub

lic

5.8

0.8

08

1 0

15

.50

.02

6

115

.70

.67

9

99

.10

.14

01

14

2.9

0.0

36

0.2

0.0

49

1.4

0.2

43

70

.50

.58

2Ta

iwa

n P

rovi

nce

of

Ch

ina

6

.40

.83

2 1

3 0

33

.30

.36

7

50

.20

.27

5

54

5.7

0.7

72

3 7

71

.80

.12

92

.00

.53

64

.90

.84

18

1.8

0.8

07

Tajik

ista

n-1

0.4

0.1

12

1

86

.60

.00

2

98

.10

.57

0

35

.70

.05

05

43

.20

.01

4..

..1

.80

.30

9..

..M

ace

do

nia

, T

FY

R-0

.80

.52

3 1

78

4.1

0.0

48

4

3.0

0.2

31

2

36

.10

.33

4..

..0

.40

.10

21

.50

.26

1..

..T

ha

ilan

d

4.2

0.7

36

1 9

14

.10

.05

1

61

.40

.34

4

88

.00

.12

41

16

8.8

0.0

37

0.1

0.0

33

2.5

0.4

34

72

.80

.62

7To

go

2.3

0.6

56

3

09

.00

.00

6

32

.70

.16

7

8.2

0.0

113

12

.90

.00

60

.50

.11

80

.30

.04

76

1.5

0.4

02

Tri

nid

ad

an

d T

ob

ag

o

3.0

0.6

87

5 2

13

.10

.14

5

47

.10

.25

6

21

7.5

0.3

08

6 2

05

.40

.21

60

.10

.03

30

.50

.07

57

3.5

0.6

41

Tu

nis

ia

4.7

0.7

57

2 1

46

.70

.05

8

43

.10

.23

1

80

.40

.11

38

11.5

0.0

24

0.3

0.0

77

1.3

0.2

22

74

.50

.66

1T

urke

y

3.7

0.7

16

2 9

79

.70

.08

2

23

.70

.111

2

74

.50

.38

81

09

3.1

0.0

34

0.4

0.1

14

2.3

0.3

85

60

.00

.37

3U

ga

nd

a

7.0

0.8

59

2

85

.60

.00

5

10

.80

.03

1

2.7

0.0

03

....

0.7

0.1

86

0.2

0.0

24

65

.80

.48

8U

kra

ine

-9.3

0.1

59

7

00

.90

.01

7

51

.50

.28

3

19

1.3

0.2

70

2 9

73

.40

.10

11

.00

.27

53

.00

.51

56

4.8

0.4

68

Un

ited

Ara

b E

mir

ate

s

2.8

0.6

78

18

51

9.7

0.5

23

6

9.1

0.3

91

3

95

.60

.56

09

97

6.9

0.3

50

....

0.7

0.1

16

81

.50

.80

1U

nite

d K

ing

do

m

2.5

0.6

66

24

23

5.8

0.6

85

2

6.7

0.1

30

5

72

.40

.81

03

87

0.9

0.1

33

2.5

0.6

90

3.1

0.5

31

82

.80

.82

7U

nite

d R

ep

ub

lic o

f Ta

nza

nia

2

.90

.68

4

25

3.6

0.0

04

1

3.9

0.0

51

4

.40

.00

64

56

.60

.011

....

0.1

0.0

04

59

.80

.36

9U

nite

d S

tate

s

3.5

0.7

07

32

96

2.0

0.9

32

11

.00

.03

3

67

9.3

0.9

62

8 1

58

.70

.28

52

.50

.69

05

.20

.90

08

2.3

0.8

17

Uru

gu

ay

3

.40

.70

3 6

28

7.2

0.1

75

1

9.3

0.0

84

2

66

.40

.37

79

75

.60

.03

0..

..2

.40

.41

67

4.0

0.6

51

Uzb

eki

sta

n-0

.50

.53

6

36

9.1

0.0

07

4

2.6

0.2

28

6

5.6

0.0

92

2 0

23

.90

.06

7..

..2

.70

.46

9..

..V

en

ezu

ela

1

.60

.62

6 4

48

8.9

0.1

24

2

3.6

0.1

11

10

8.9

0.1

54

2 2

52

.80

.07

50

.30

.08

92

.40

.41

26

9.3

0.5

58

Vie

t N

am

7

.90

.89

4

37

6.7

0.0

08

4

9.7

0.2

72

2

7.0

0.0

38

45

4.2

0.0

11..

..0

.70

.10

97

1.8

0.6

08

Ye

me

n

5.8

0.8

08

4

15

.70

.00

9

29

.30

.14

6

16

.60

.02

31

84

.10

.00

2..

..0

.40

.06

46

4.3

0.4

58

Za

mb

ia

0.5

0.5

78

3

03

.20

.00

6

26

.90

.13

1

8.6

0.0

12

62

6.4

0.0

17

....

0.2

0.0

25

58

.80

.34

9Z

imb

ab

we

2

.50

.66

4

51

6.3

0.0

12

4

3.7

0.2

35

2

0.0

0.0

28

82

0.9

0.0

24

....

0.4

0.0

66

41

.30

.00

0

So

urc

e:

UN

CT

AD

, b

as

ed

on

da

ta f

rom

th

e W

orl

d B

an

k a

nd

IM

F (

GD

P p

er

ca

pit

a);

UN

CT

AD

, 2

00

1a

(re

al

GD

P g

row

th,

ex

po

rts

); W

orl

d B

an

k,

WD

I o

nli

ne

(re

al

GD

Pg

row

th,

tele

ph

on

e m

ain

lin

es

, c

om

me

rcia

l e

ne

rgy

us

e,

R&

D e

xp

en

dit

ure

s);

U

NE

SC

O,

19

99

(s

tud

en

ts i

n t

he

te

rtia

ry l

ev

el,

R&

D e

xp

en

dit

ure

s);

an

d t

he

PR

SG

rou

p/I

nte

rna

tio

na

l c

ou

ntr

y r

isk

gu

ide

(c

ou

ntr

y r

isk

).

aG

ros

s n

ati

on

al

inc

om

e.

��


An

ne

x t

ab

le A

.II.

2.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

po

ten

tia

l in

de

x,

19

88

-19

90

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

th

e

R

eal G

DP

gro

wth

GD

P p

er

cap

ita

To

tal

exp

ort

s

m

ain

line

s

en

erg

y u

se

exp

en

ditu

res

tert

iary

le

vel

Co

un

try

risk

(A

vera

ge

(As

of

19

80

-19

89

)

(A

vera

ge

19

88

-19

90

)

19

99

J

an

ua

ry 1

99

1)

Sco

reS

core

As

%S

core

Pe

r 1

,00

0S

core

Pe

rS

core

As

%S

core

As

% o

f to

tal

Sco

reC

om

po

site

Sco

reE

con

om

y%

0-1

Do

llars

0-1

of

GD

P0

-1in

ha

bita

nts

0-1

cap

ita0

-1 o

f G

NIa

0-1

po

pu

latio

n0

-1ri

sk r

atin

g0

-1

Alb

an

ia

1.9

0.3

62

6

74

.40

.02

0

17

.70

.03

6

12

.00

.01

78

86

.60

.05

5..

..

0.7

0.0

93

62

.50

.57

0A

lge

ria

3

.10

.44

5 2

30

0.2

0.0

76

1

9.7

0.0

42

3

0.8

0.0

45

92

8.1

0.0

58

.. .

.1

.10

.16

36

1.5

0.5

56

An

go

la

3.7

0.4

92

9

83

.80

.03

0

35

.30

.08

4

7.5

0.0

10

66

8.8

0.0

39

.. .

.0

.10

.00

65

0.5

0.3

93

Arg

en

tina

-0.2

0.2

10

3 5

81

.70

.12

0

11.0

0.0

18

9

6.4

0.1

42

1 4

26

.80

.09

60

.40

.12

23

.10

.44

75

6.0

0.4

74

Arm

en

ia

3.3

0.4

63

7

75

.90

.02

3

38

.50

.09

3

15

4.0

0.2

28

71

6.9

0.0

43

..-0

.00

41

.90

.26

85

9.0

0.5

19

Au

stra

lia

3.6

0.4

81

17

14

0.8

0.5

85

1

6.1

0.0

32

4

42

.30

.65

74

99

4.5

0.3

60

1.4

0.4

48

2.9

0.4

14

79

.50

.82

2A

ust

ria

2

.00

.37

0 1

7 9

07

.40

.611

3

9.3

0.0

95

4

06

.70

.60

43

25

9.6

0.2

32

1.3

0.4

43

2.7

0.3

85

86

.50

.92

6A

zerb

aija

n

3.3

0.4

63

1 1

66

.20

.03

7

27

.20

.06

2

83

.40

.12

32

15

4.3

0.1

50

0.4

0.1

13

2.3

0.3

29

59

.00

.51

9B

ah

am

as

3

.50

.47

3 1

1 8

37

.00

.40

3

60

.30

.15

2

25

2.0

0.3

74

.. .

...

-0.0

04

2.1

0.2

99

71

.00

.69

6B

ah

rain

1

.60

.33

9 8

29

0.8

0.2

81

1

03

.20

.26

9

18

6.0

0.2

76

9 5

42

.60

.69

8..

-0.0

04

1.4

0.2

00

60

.00

.53

3B

an

gla

de

sh

4.1

0.5

19

2

53

.20

.00

5

5.8

0.0

04

1

.90

.00

21

40

.90

.00

00

.00

.00

40

.40

.05

43

7.0

0.1

93

Be

laru

s

3.3

0.4

63

3 3

00

.40

.11

0

54

.30

.13

6

14

3.3

0.2

12

3 1

55

.60

.22

41

.10

.35

83

.30

.47

25

9.0

0.5

19

Be

lgiu

m a

nd

Lu

xem

bo

urg

2

.10

.37

7 1

7 3

93

.90

.59

4

71

.80

.18

3

41

9.5

0.6

23

6 9

11.7

0.5

03

1.7

0.5

55

2.7

0.3

85

85

.50

.911

Be

nin

2

.70

.41

9

36

7.0

0.0

09

1

9.3

0.0

41

3

.10

.00

33

60

.50

.01

6..

..

0.2

0.0

30

.. .

.B

oliv

ia-0

.80

.17

2

73

5.6

0.0

22

2

1.3

0.0

46

2

6.5

0.0

38

42

7.3

0.0

21

0.5

0.1

62

2.0

0.2

81

57

.00

.48

9B

ots

wa

na

1

0.8

1.0

00

2 2

90

.00

.07

5

69

.60

.17

7

17

.90

.02

5..

..

..-0

.00

40

.40

.05

77

4.5

0.7

48

Bra

zil

3

.10

.45

0 2

70

7.2

0.0

90

9

.50

.01

4

61

.90

.09

19

25

.40

.05

80

.80

.27

21

.00

.14

76

1.0

0.5

48

Bru

ne

i Da

russ

ala

m-1

.00

.15

5 1

2 3

48

.60

.42

1..

..

12

3.3

0.1

82

6 4

05

.00

.46

5..

-0.0

04

0.5

0.0

74

85

.50

.911

Bu

lga

ria

4

.10

.51

6 2

48

5.7

0.0

82

4

0.9

0.0

99

2

24

.70

.33

33

37

9.3

0.2

41

1.3

0.4

12

2.2

0.3

115

2.0

0.4

15

Bu

rkin

a F

aso

3

.90

.50

5

29

5.4

0.0

07

11

.00

.01

8

1.6

0.0

01

.. .

.0

.10

.02

70

.10

.00

45

1.0

0.4

00

Ca

me

roo

n

4.2

0.5

28

1 0

32

.90

.03

2

19

.80

.04

2

3.4

0.0

04

44

2.8

0.0

22

.. .

.0

.30

.03

85

6.5

0.4

81

Ca

na

da

3

.40

.46

7 1

9 7

01

.10

.67

3

25

.60

.05

8

54

5.0

0.8

10

7 7

89

.10

.56

81

.40

.47

36

.91

.00

08

4.5

0.8

96

Ch

ile

2.8

0.4

23

2 1

20

.30

.06

9

35

.00

.08

3

54

.80

.08

01

01

8.3

0.0

65

0.8

0.2

62

2.0

0.2

87

67

.50

.64

4C

hin

a

10

.81

.00

0

35

5.8

0.0

09

1

2.5

0.0

22

5

.00

.00

67

49

.50

.04

50

.70

.22

00

.30

.04

45

9.5

0.5

26

Co

lom

bia

3

.50

.47

5 1

15

7.1

0.0

36

1

8.3

0.0

38

6

9.9

0.1

03

70

4.3

0.0

42

.. .

.1

.40

.19

96

4.5

0.6

00

Co

ng

o

3.7

0.4

94

1 1

35

.60

.03

6

46

.50

.11

4

7.1

0.0

09

63

8.0

0.0

37

.. .

.0

.50

.06

65

4.0

0.4

44

Co

ng

o,

De

m.

Re

p.

2

.10

.37

8

25

4.1

0.0

05

2

6.3

0.0

60

0

.80

.00

03

18

.00

.01

3..

..

0.2

0.0

27

37

.00

.19

3C

ost

a R

ica

2

.80

.42

5 1

74

7.8

0.0

57

3

4.4

0.0

82

9

4.7

0.1

40

65

8.9

0.0

38

0.2

0.0

58

2.4

0.3

52

66

.50

.63

0C

ote

d’Iv

oir

e

0.7

0.2

74

8

42

.70

.02

6

27

.30

.06

3

6.1

0.0

08

.. .

...

..

0.3

0.0

33

57

.50

.49

6C

roa

tia

0.5

0.2

59

2 4

01

.00

.07

9

72

.60

.18

5

16

5.3

0.2

45

1 4

46

.50

.09

71

.00

.31

91

.60

.22

94

6.5

0.3

33

Cyp

rus

6

.10

.66

4 7

13

6.1

0.2

42

5

0.4

0.1

25

3

98

.00

.59

12

18

7.5

0.1

52

0.2

0.0

55

1.0

0.1

36

70

.00

.68

1C

zech

Re

pu

blic

2

.20

.38

4 2

91

7.7

0.0

97

5

0.9

0.1

27

1

51

.30

.22

44

74

4.6

0.3

42

1.8

0.5

86

1.1

0.1

63

69

.50

.67

4D

en

ma

rk

2.5

0.4

09

22

89

3.7

0.7

83

3

4.7

0.0

83

5

55

.30

.82

53

61

2.3

0.2

58

1.6

0.5

35

2.8

0.4

01

81

.00

.84

4D

om

inic

an

Re

pu

blic

3

.00

.44

2

91

7.8

0.0

28

3

1.9

0.0

75

4

0.3

0.0

59

57

8.4

0.0

32

.. .

.1

.90

.27

85

2.5

0.4

22

Ecu

ad

or

1

.90

.36

0 1

01

4.3

0.0

31

3

0.2

0.0

70

4

4.0

0.0

64

62

3.1

0.0

36

....

2.0

0.2

89

59

.00

.51

9E

gyp

t

5.5

0.6

16

7

13

.80

.02

1

37

.60

.09

0

26

.70

.03

96

08

.30

.03

50

.20

.06

41

.10

.15

84

8.0

0.3

56

El S

alv

ad

or

0

.30

.25

1

91

9.9

0.0

28

1

9.6

0.0

41

2

2.9

0.0

33

49

5.3

0.0

26

.. .

.1

.50

.21

94

3.5

0.2

89

Est

on

ia

3.3

0.4

63

1 0

73

.40

.03

3

94

.60

.24

5

19

7.7

0.2

93

3 5

50

.90

.25

30

.60

.211

1.6

0.2

36

59

.00

.51

9E

thio

pia

2

.90

.43

1

16

3.3

0.0

02

8

.40

.011

2

.50

.00

22

96

.90

.01

2..

..

0.1

0.0

06

33

.00

.13

3

/...

��

Annex A

An

ne

x t

ab

le A

.II.

2.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

po

ten

tia

l in

de

x,

19

88

-19

90

(c

on

tin

ue

d)

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

th

e

R

eal G

DP

gro

wth

GD

P p

er

cap

ita

To

tal

exp

ort

s

m

ain

line

s

en

erg

y u

se

exp

en

ditu

res

tert

iary

le

vel

Co

un

try

risk

(A

vera

ge

(As

of

19

80

-19

89

)

(Ave

rag

e 1

98

8-1

99

0)

1

99

9

Ja

nu

ary

19

91

)S

core

Sco

reA

s %

Sco

reP

er

1,0

00

Sco

reP

er

Sco

reA

s %

Sco

reA

s %

of

tota

lS

core

Co

mp

osi

teS

core

Eco

no

my

%0

-1D

olla

rs0

-1 o

f G

DP

0-1

inh

ab

itan

ts0

-1ca

pita

0-1

of

GN

Ia0

-1 p

op

ula

tion

0-1

risk

ra

ting

0-1

Fin

lan

d

3.4

0.4

67

24

05

3.2

0.8

22

2

3.6

0.0

52

5

17

.30

.76

95

80

4.7

0.4

21

1.9

0.6

25

3.3

0.4

80

80

.50

.83

7F

ran

ce

2.2

0.3

81

18

77

2.0

0.6

41

2

1.3

0.0

46

4

77

.70

.71

03

90

3.3

0.2

79

2.4

0.7

78

3.0

0.4

32

79

.00

.81

5G

ab

on

0

.50

.26

0 4

91

5.5

0.1

65

4

4.3

0.1

09

2

0.0

0.0

28

1 5

22

.80

.10

3..

..

0.4

0.0

58

64

.00

.59

3G

am

bia

3

.50

.47

6

32

4.3

0.0

08

5

5.3

0.1

39

6

.40

.00

8..

..

.. .

.0

.20

.02

16

0.5

0.5

41

Ge

org

ia

3.3

0.4

63

1 5

59

.30

.05

0

12

.70

.02

3

93

.90

.13

99

31

.20

.05

9..

..

2.7

0.3

91

59

.00

.51

9G

erm

an

y

2.2

0.3

80

18

13

1.8

0.6

19

2

8.0

0.0

64

4

31

.30

.64

14

58

2.8

0.3

30

2.5

0.8

26

2.6

0.3

72

86

.50

.92

6G

ha

na

2

.60

.41

5

36

9.2

0.0

09

1

9.2

0.0

40

2

.90

.00

33

53

.20

.01

6..

..

0.1

0.0

05

57

.00

.48

9G

ree

ce

1.8

0.3

53

7 0

72

.70

.23

9

17

.80

.03

7

37

4.7

0.5

56

2 1

15

.10

.14

70

.30

.11

02

.80

.40

06

2.0

0.5

63

Gu

ate

ma

la

0.4

0.2

54

9

34

.10

.02

9

17

.70

.03

6

18

.50

.02

64

88

.80

.02

60

.20

.04

90

.80

.11

34

7.5

0.3

48

Gu

ine

a

1.6

0.3

40

4

27

.10

.011

2

7.3

0.0

62

1

.90

.00

2..

..

.. .

.0

.10

.00

94

7.5

0.3

48

Gu

yan

a-3

.20

.00

0

54

0.0

0.0

15

5

6.3

0.1

41

2

0.1

0.0

29

.. .

...

..

0.6

0.0

81

50

.50

.39

3H

aiti

-0.3

0.2

05

3

62

.00

.00

9

19

.70

.04

2

6.6

0.0

09

25

1.6

0.0

08

.. .

.0

.10

.011

35

.50

.17

0H

on

du

ras

2

.70

.41

8

90

9.2

0.0

28

3

1.5

0.0

74

1

5.6

0.0

22

50

1.3

0.0

27

.. .

.0

.90

.12

45

0.5

0.3

93

Ho

ng

Ko

ng

, C

hin

a

7.1

0.7

34

11

81

0.8

0.4

02

1

33

.40

.35

1

42

7.0

0.6

34

1 8

90

.50

.13

0..

..

1.5

0.2

13

66

.00

.62

2H

un

ga

ry

1.6

0.3

43

2 9

09

.30

.09

6

34

.70

.08

2

88

.70

.13

12

85

9.7

0.2

02

2.0

0.6

66

1.0

0.1

40

60

.00

.53

3Ic

ela

nd

3

.20

.45

6 2

3 3

84

.20

.79

9

33

.40

.07

9

49

9.7

0.7

42

8 0

02

.30

.58

41

.10

.36

32

.10

.29

47

8.5

0.8

07

Ind

ia

5.7

0.6

30

3

74

.00

.00

9

6.8

0.0

07

5

.50

.00

74

18

.50

.02

10

.80

.27

20

.60

.08

04

4.0

0.2

96

Ind

on

esi

a

5.8

0.6

42

5

65

.30

.01

6

25

.50

.05

7

5.2

0.0

06

51

9.7

0.0

28

0.2

0.0

59

1.0

0.1

37

69

.50

.67

4Ir

an

, Is

lam

ic R

ep

.

0.5

0.2

65

1 6

47

.80

.05

3

54

.60

.13

7

37

.80

.05

51

27

9.4

0.0

85

0.5

0.1

55

0.6

0.0

76

51

.50

.40

7Ir

ela

nd

2

.80

.42

5 1

1 1

73

.80

.38

0

60

.20

.15

2

26

0.0

0.3

86

2 8

17

.70

.19

90

.90

.31

02

.60

.37

17

7.5

0.7

93

Isra

el

3

.40

.46

9 1

0 6

52

.10

.36

2

35

.50

.08

5

33

4.3

0.4

96

2 5

89

.30

.18

22

.20

.72

42

.90

.41

74

9.0

0.3

70

Ita

ly

2.4

0.3

96

16

55

3.4

0.5

65

1

9.4

0.0

41

3

69

.30

.54

82

65

8.0

0.1

87

1.3

0.4

18

2.5

0.3

67

76

.50

.77

8Ja

ma

ica

1

.50

.33

7 1

71

4.3

0.0

55

4

7.8

0.1

18

3

9.5

0.0

58

1 0

45

.00

.06

7..

..

0.7

0.0

94

62

.50

.57

0Ja

pa

n

3.8

0.4

98

24

37

2.6

0.8

33

1

0.2

0.0

16

4

26

.00

.63

33

40

5.0

0.2

42

2.9

0.9

71

2.3

0.3

37

86

.50

.92

6Jo

rda

n

3.3

0.4

66

1 5

28

.70

.04

9

54

.80

.13

7

56

.70

.08

31

06

9.4

0.0

69

0.3

0.0

82

1.7

0.2

49

44

.00

.29

6K

aza

khst

an

3

.30

.46

3 1

97

6.8

0.0

64

4

7.1

0.1

16

7

4.1

0.1

09

4 2

76

.20

.30

70

.30

.11

03

.20

.46

35

9.0

0.5

19

Ke

nya

4

.10

.51

6

37

1.5

0.0

09

2

3.7

0.0

53

7

.40

.01

05

39

.60

.03

0-0

.00

40

.10

.01

55

0.0

0.3

85

Re

pu

blic

of

Ko

rea

8

.90

.86

3 5

12

7.6

0.1

73

3

3.0

0.0

78

2

77

.70

.41

21

92

5.2

0.1

33

1.9

0.6

26

3.9

0.5

70

74

.00

.74

1K

uw

ait

1

.10

.30

7 1

0 0

24

.10

.34

1

48

.20

.11

9

23

5.7

0.3

50

6 7

72

.40

.49

30

.20

.07

31

.00

.14

02

4.5

0.0

07

Kyr

gyz

sta

n

3.3

0.4

63

3

04

.20

.00

7

32

.00

.07

5

67

.20

.09

98

82

.20

.05

50

.30

.08

31

.30

.18

65

9.0

0.5

19

La

tvia

3

.30

.46

3

40

8.0

0.0

11

37

2.5

1.0

00

2

26

.70

.33

61

99

2.0

0.1

37

0.5

0.1

56

1.7

0.2

45

59

.00

.51

9L

eb

an

on

.. .

. 1

10

3.2

0.0

34

1

6.5

0.0

33

11

7.7

0.1

74

64

6.8

0.0

38

.. .

.3

.30

.48

32

9.5

0.0

81

Lib

yan

Ara

b J

am

ah

iriy

a-2

.40

.05

5 6

11

9.5

0.2

07

3

1.3

0.0

73

4

8.2

0.0

71

2 5

68

.20

.18

0..

..

1.7

0.2

36

54

.50

.45

2L

ithu

an

ia

3.3

0.4

63

5

29

.40

.01

5

23

1.9

0.6

18

1

99

.30

.29

52

54

4.0

0.1

78

0.7

0.2

28

2.4

0.3

41

59

.00

.51

9M

ad

ag

asc

ar

0

.80

.28

2

22

9.5

0.0

04

1

7.1

0.0

35

2

.20

.00

2..

..

0.2

0.0

55

0.3

0.0

41

53

.00

.43

0M

ala

wi

2

.40

.40

0

17

3.0

0.0

03

2

2.6

0.0

50

3

.00

.00

3..

..

.. .

.0

.10

.00

35

4.0

0.4

44

Ma

lays

ia

4.9

0.5

74

2 2

59

.20

.07

4

70

.80

.18

0

80

.90

.11

91

16

4.9

0.0

76

0.3

0.1

05

0.7

0.0

95

77

.50

.79

3M

ali

2

.60

.41

6

25

1.7

0.0

05

1

6.5

0.0

33

1

.10

.00

0..

..

.. .

.0

.10

.00

44

6.5

0.3

33

/...

��


An

ne

x t

ab

le A

.II.

2.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CTA

D I

nw

ard

FD

I p

ote

nti

al

ind

ex

, 1

98

8-1

99

0 (

co

nti

nu

ed

)

Te

lep

ho

ne

C

om

me

rcia

l

R

&D

Stu

de

nts

in

th

e

R

eal G

DP

gro

wth

GD

P p

er

cap

ita

To

tal

exp

ort

s

m

ain

line

s

en

erg

y u

se

exp

en

ditu

res

tert

iary

le

vel

Co

un

try

risk

(A

vera

ge

(As

of

19

80

-19

89

)

(Ave

rag

e 1

98

8-1

99

0)

1

99

9

Ja

nu

ary

19

91

)S

core

Sco

reA

s %

Sco

reP

er

1,0

00

Sco

reP

er

Sco

reA

s %

Sco

reA

s %

of

tota

lS

core

Co

mp

osi

teS

core

Eco

no

my

%0

-1D

olla

rs0

-1 o

f G

DP

0-1

inh

ab

itan

ts0

-1ca

pita

0-1

of

GN

Ia0

-1 p

op

ula

tion

0-1

risk

ra

ting

0-1

Ma

lta

3.2

0.4

53

5 6

62

.70

.19

1

81

.80

.211

3

46

.70

.51

52

16

5.3

0.1

50

.. .

.0

.90

.12

46

6.0

0.6

22

Me

xico

0

.80

.28

3 2

72

4.5

0.0

90

1

9.2

0.0

40

5

8.4

0.0

86

1 4

70

.30

.09

90

.20

.06

91

.60

.22

56

9.5

0.6

74

Mo

ldo

va,

Re

pu

blic

of

3

.30

.46

3 1

13

0.1

0.0

35

1

30

.40

.34

2

98

.70

.14

61

34

2.7

0.0

89

1.0

0.3

39

2.4

0.3

45

59

.00

.51

9M

on

go

lia

6.2

0.6

72

1 4

28

.50

.04

6

24

.20

.05

4

28

.90

.04

2..

..

.. .

.1

.40

.20

25

8.5

0.5

11M

oro

cco

4

.20

.52

8

97

9.3

0.0

30

2

2.0

0.0

48

1

4.2

0.0

20

27

3.0

0.0

10

.. .

.1

.10

.15

15

5.0

0.4

59

Mo

zam

biq

ue

-0.9

0.1

62

1

71

.30

.00

2

8.9

0.0

13

3

.00

.00

35

23

.60

.02

8..

..

0.0

0.0

00

42

.00

.26

7M

yan

ma

r

0.9

0.2

88

2

06

.70

.00

4

5.0

0.0

02

1

.60

.00

12

72

.20

.01

0..

..

0.5

0.0

66

30

.50

.09

6N

am

ibia

0

.90

.29

2 1

61

5.8

0.0

52

5

7.1

0.1

43

3

8.6

0.0

56

.. .

...

..

0.3

0.0

41

51

.00

.40

0N

ep

al

4

.60

.55

3

19

0.0

0.0

03

11

.00

.01

8

2.6

0.0

03

32

3.4

0.0

14

.. .

.0

.50

.06

8..

..

Ne

the

rla

nd

s

2.1

0.3

77

16

67

8.5

0.5

69

5

4.0

0.1

35

4

51

.00

.67

04

41

3.9

0.3

17

2.1

0.7

04

3.2

0.4

62

86

.50

.92

6N

ew

Ze

ala

nd

2

.00

.36

7 1

3 1

25

.90

.44

7

26

.50

.06

0

43

1.0

0.6

40

3 9

55

.90

.28

31

.00

.33

73

.30

.47

97

9.0

0.8

15

Nic

ara

gu

a-1

.70

.10

6 1

14

1.4

0.0

36

2

5.3

0.0

57

1

2.8

0.0

18

55

4.1

0.0

31

.. .

.0

.80

.11

34

1.0

0.2

52

Nig

er

-0.4

0.2

00

3

09

.80

.00

7

20

.40

.04

4

1.2

0.0

00

.. .

...

..

0.1

0.0

04

48

.00

.35

6N

ige

ria

0

.80

.28

2

29

9.7

0.0

07

4

7.2

0.1

17

2

.70

.00

37

39

.30

.04

4..

..

0.4

0.0

52

53

.50

.43

7N

orw

ay

3

.00

.43

8 2

4 6

62

.90

.84

3

37

.50

.09

0

49

0.7

0.7

29

5 0

32

.00

.36

31

.70

.57

43

.40

.48

58

8.5

0.9

56

Om

an

9

.10

.87

5 5

71

7.2

0.1

93

4

3.6

0.1

07

5

5.0

0.0

81

2 0

97

.20

.14

5..

..

0.3

0.0

46

71

.00

.69

6P

aki

sta

n

6.4

0.6

86

3

58

.00

.00

9

14

.30

.02

7

6.9

0.0

09

39

3.6

0.0

19

.. .

.0

.20

.02

33

8.5

0.2

15

Pa

na

ma

2

.10

.37

7 2

13

6.9

0.0

70

8

0.3

0.2

06

8

8.0

0.1

30

61

6.1

0.0

35

.. .

.2

.20

.31

95

3.5

0.4

37

Pa

pu

a N

ew

Gu

ine

a

2.2

0.3

84

9

47

.80

.02

9

41

.50

.10

1

8.4

0.0

11..

..

.. .

.0

.10

.01

75

2.0

0.4

15

Pa

rag

ua

y

2.2

0.3

83

1 2

78

.00

.04

0

34

.50

.08

2

25

.20

.03

67

53

.40

.04

5..

..

0.8

0.1

09

63

.00

.57

8P

eru

0

.40

.25

2 1

23

4.5

0.0

39

1

9.7

0.0

42

2

4.9

0.0

36

54

5.0

0.0

30

.. .

.3

.10

.45

44

8.5

0.3

63

Ph

ilip

pin

es

0

.50

.26

2

69

6.8

0.0

20

2

8.0

0.0

64

9

.90

.01

34

58

.00

.02

40

.20

.06

92

.80

.40

64

1.0

0.2

52

Po

lan

d

2.2

0.3

87

1 8

44

.10

.06

0

23

.50

.05

2

82

.20

.12

13

07

3.7

0.2

18

1.4

0.4

56

1.4

0.2

04

61

.00

.54

8P

ort

ug

al

2

.80

.42

7 5

76

2.7

0.1

94

2

7.9

0.0

64

2

18

.70

.32

41

55

8.8

0.1

05

0.5

0.1

62

1.9

0.2

70

75

.00

.75

6Q

ata

r

3.5

0.4

76

15

14

1.8

0.5

16

4

4.4

0.1

09

1

93

.00

.28

61

3 6

05

.01

.00

0..

..

1.3

0.1

90

63

.00

.57

8R

om

an

ia

1.3

0.3

18

2 1

86

.40

.07

2

21

.00

.04

5

10

0.3

0.1

48

2 8

81

.40

.20

40

.80

.25

80

.80

.11

75

4.0

0.4

44

Ru

ssia

n F

ed

era

tion

3

.30

.46

3 3

50

7.2

0.1

17

2

9.0

0.0

67

1

31

.30

.19

44

87

2.5

0.3

51

0.8

0.2

73

3.4

0.4

96

59

.00

.51

9R

wa

nd

a

2.5

0.4

02

3

57

.80

.00

9

7.8

0.0

10

1

.40

.00

1..

..

0.0

0.0

09

0.0

0.0

03

.. .

.S

au

di A

rab

ia-0

.70

.18

0 5

90

6.6

0.1

99

4

0.1

0.0

97

7

4.5

0.1

10

4 2

94

.60

.30

8..

..

1.0

0.1

35

59

.50

.52

6S

en

eg

al

3

.20

.45

2

71

4.6

0.0

21

2

5.0

0.0

56

5

.00

.00

63

05

.60

.01

20

.00

.00

20

.30

.03

35

6.5

0.4

81

Sie

rra

Le

on

e

0.0

0.2

30

2

82

.00

.00

6

19

.60

.04

1

3.2

0.0

03

.. .

...

..

0.1

0.0

13

45

.00

.311

Sin

ga

po

re

6.3

0.6

78

10

34

3.4

0.3

52

1

87

.00

.49

6

34

0.0

0.5

05

3 7

43

.20

.26

80

.90

.30

81

.80

.26

48

4.0

0.8

89

Slo

vaki

a

2.2

0.3

84

2 4

05

.70

.07

9

60

.00

.15

1

12

8.0

0.1

89

4 1

64

.10

.29

91

.00

.34

51

.30

.17

96

9.5

0.6

74

Slo

ven

ia

0.5

0.2

59

7 3

41

.40

.24

9

68

.50

.17

4

22

9.3

0.3

40

2 6

33

.10

.18

51

.60

.53

31

.80

.25

14

6.5

0.3

33

So

uth

Afr

ica

1

.40

.32

3 2

80

3.3

0.0

93

2

6.4

0.0

60

8

3.2

0.1

23

2 7

28

.10

.19

20

.80

.25

21

.30

.18

46

0.0

0.5

33

Sp

ain

2

.80

.42

8 1

0 3

57

.70

.35

2

18

.00

.03

7

29

8.0

0.4

42

2 2

42

.30

.15

60

.80

.25

63

.10

.44

87

1.5

0.7

04

Sri

La

nka

4

.00

.51

4

43

7.0

0.0

12

2

7.8

0.0

64

6

.50

.00

83

25

.70

.01

4..

..

0.3

0.0

43

43

.50

.28

9S

ud

an

0

.40

.25

5

60

3.1

0.0

17

4

.30

.00

0

2.5

0.0

02

43

5.9

0.0

22

.. .

.0

.20

.03

22

4.0

0.0

00

Su

rin

am

e-1

.10

.14

8 3

76

1.7

0.1

26

3

2.0

0.0

75

8

6.4

0.1

27

.. .

...

..

1.1

0.1

52

49

.00

.37

0

/...

��

Annex A

An

ne

x t

ab

le A

.II.

2.

Ra

w d

ata

an

d s

co

res

fo

r th

e v

ari

ab

les

in

clu

de

d i

n t

he

UN

CT

AD

In

wa

rd F

DI

po

ten

tia

l in

de

x,

19

88

-19

90

(co

nc

lud

ed

)

Tele

ph

on

e

Co

mm

erc

ial

R&

D

S

tud

en

ts i

n t

he

Rea

l GD

P g

row

th

G

DP

pe

r ca

pita

Tota

l e

xpo

rts

ma

inlin

es

e

ne

rgy

use

e

xpe

nd

iture

s

te

rtia

ry l

eve

l

C

ou

ntr

y ri

sk

(

Ave

rag

e

(A

s o

f

1

98

0-1

98

9)

(A

vera

ge

19

88

-19

90

)

19

99

Jan

ua

ry 1

99

1)

Sco

reS

core

As

%S

core

Pe

r 1

,00

0S

core

Pe

rS

core

As

%S

core

As

% o

f to

tal

Sco

reC

om

po

site

Sco

reE

con

om

y%

0-1

Do

llars

0-1

of

GD

P0

-1in

ha

bita

nts

0-1

cap

ita0

-1 o

f G

NIa

0-1

po

pu

latio

n0

-1ri

sk r

atin

g0

-1

Sw

ed

en

2

.30

.38

9 2

3 6

11.0

0.8

07

3

1.4

0.0

74

6

72

.71

.00

05

71

4.4

0.4

14

3.0

1.0

00

2.3

0.3

23

82

.00

.85

9S

witz

erl

an

d

1.8

0.3

57

29

22

6.1

1.0

00

3

6.6

0.0

88

5

59

.30

.83

13

61

7.3

0.2

58

2.8

0.9

27

2.0

0.2

89

91

.51

.00

0S

yria

n A

rab

Re

pu

blic

1

.40

.32

5 1

63

7.2

0.0

53

2

5.1

0.0

56

4

0.9

0.0

60

94

2.3

0.0

60

.. .

.1

.80

.25

65

0.0

0.3

85

Taiw

an

Pro

vin

ce o

f C

hin

a

8.5

0.8

35

7 2

00

.00

.24

4

49

.70

.12

3

28

8.3

0.4

28

2 6

75

.90

.18

81

.40

.47

12

.80

.40

78

1.5

0.8

52

Tajik

ista

n

3.3

0.4

63

7

54

.00

.02

2..

..

44

.40

.06

51

11

2.4

0.0

72

.. .

.2

.10

.29

75

9.0

0.5

19

Ma

ced

on

ia,

TF

YR

0

.50

.25

9 1

11

2.5

0.0

35

5

1.6

0.1

28

1

41

.00

.20

9..

..

.. .

.1

.40

.19

84

6.5

0.3

33

Th

aila

nd

7

.00

.72

8 1

35

3.6

0.0

43

3

4.0

0.0

81

2

1.2

0.0

30

70

6.2

0.0

42

0.2

0.0

51

1.7

0.2

45

68

.50

.65

9To

go

1.5

0.3

34

4

31

.30

.011

3

9.0

0.0

94

2

.80

.00

3..

..

0.8

0.2

58

0.3

0.0

33

53

.00

.43

0T

rin

ida

d a

nd

To

ba

go

-0.7

0.1

76

3 8

26

.90

.12

8

43

.10

.10

5

13

7.7

0.2

04

4 6

59

.00

.33

6..

..

0.6

0.0

83

61

.50

.55

6T

un

isia

3

.20

.45

8 1

35

4.3

0.0

43

4

3.7

0.1

07

3

5.0

0.0

51

66

4.7

0.0

39

0.3

0.0

98

0.8

0.1

18

59

.00

.51

9T

urke

y

5.3

0.6

03

2 0

71

.10

.06

8

16

.40

.03

3

10

6.5

0.1

57

89

8.0

0.0

56

0.5

0.1

46

1.3

0.1

90

43

.00

.28

1U

ga

nd

a

2.6

0.4

13

3

22

.70

.00

8

6.9

0.0

07

1

.60

.00

1..

..

0.6

0.2

00

0.1

0.0

113

5.0

0.1

63

Ukr

ain

e

3.3

0.4

63

1 6

95

.90

.05

5

25

.90

.05

9

12

9.0

0.1

91

3 7

01

.80

.26

4..

..

3.2

0.4

59

59

.00

.51

9U

nite

d A

rab

Em

ira

tes

-2.9

0.0

21

14

55

6.7

0.4

96

5

9.9

0.1

51

1

87

.00

.27

79

71

2.8

0.7

11..

..

0.5

0.0

73

60

.50

.54

1U

nite

d K

ing

do

m

3.3

0.4

62

15

46

6.7

0.5

28

2

3.5

0.0

52

4

29

.30

.63

83

69

7.0

0.2

64

2.2

0.7

20

2.2

0.3

14

81

.00

.84

4U

nite

d R

ep

ub

lic o

f Ta

nza

nia

2

.40

.39

8

18

2.8

0.0

03

11

.20

.01

9

2.8

0.0

03

49

6.2

0.0

26

.. .

.0

.00

.00

05

0.5

0.3

93

Un

ited

Sta

tes

3

.60

.48

6 2

1 6

64

.90

.74

0

9.2

0.0

13

5

32

.00

.79

17

85

7.1

0.5

73

2.8

0.9

19

5.4

0.7

81

84

.00

.88

9U

rug

ua

y

0.9

0.2

88

2 8

06

.40

.09

3

23

.00

.05

1

12

3.0

0.1

82

76

1.8

0.0

46

.. .

.2

.30

.33

16

7.0

0.6

37

Uzb

eki

sta

n

3.3

0.4

63

1 0

57

.30

.03

3

34

.30

.08

1

65

.60

.09

62

08

3.3

0.1

44

.. .

.2

.90

.42

35

9.0

0.5

19

Ve

ne

zue

la

0.7

0.2

79

2 6

67

.10

.08

8

31

.30

.07

3

79

.60

.11

72

13

2.2

0.1

48

0.4

0.1

29

2.8

0.4

06

73

.00

.72

6V

iet

Na

m

4.9

0.5

76

9

9.8

0.0

00

2

1.8

0.0

47

1

.30

.00

13

73

.10

.01

7..

..

0.2

0.0

24

42

.50

.27

4Y

em

en

..

..

5

33

.50

.01

5

20

.30

.04

3

9.2

0.0

12

24

1.5

0.0

07

.. .

.0

.50

.06

25

1.0

0.4

00

Za

mb

ia

1.0

0.2

96

4

85

.10

.01

3

32

.80

.07

7

8.6

0.0

12

70

0.5

0.0

42

.. .

.0

.20

.02

74

5.0

0.3

11Z

imb

ab

we

3

.30

.46

3

83

3.3

0.0

25

2

3.3

0.0

52

1

2.5

0.0

17

93

7.6

0.0

59

.. .

.0

.50

.06

94

9.5

0.3

78

So

urc

e:

UN

CT

AD

, b

as

ed

on

da

ta f

rom

th

e W

orl

d B

an

k a

nd

IM

F (

GD

P p

er

ca

pit

a);

UN

CT

AD

, 2

00

1a

(re

al

GD

P g

row

th,

ex

po

rts

); W

orl

d B

an

k,

Wo

rld

De

ve

lop

me

nt

Ind

ica

tors

20

01

(te

lep

ho

ne

ma

inli

ne

s,

co

mm

erc

ial

en

erg

y u

se

, R

&D

ex

pe

nd

itu

res

);

UN

ES

CO

, 1

99

9 (

stu

de

nts

in

th

e t

ert

iary

le

ve

l);

an

d t

he

PR

S G

rou

p/I

nte

rna

tio

na

l c

ou

ntr

yri

sk

gu

ide

(c

ou

ntr

y r

isk

).N

ote

s:

Fo

r Q

ata

r a

nd

Vie

t N

am

, re

al

GD

P g

row

th r

efe

rs t

o t

he

pe

rio

d 1

98

5-1

99

0.

Fo

r th

e C

ze

ch

Re

pu

bli

c a

nd

Slo

va

kia

, re

al

GD

P g

row

th a

nd

th

e c

ou

ntr

y c

om

po

sit

e r

isk

rati

ng

re

fer

to t

ha

t o

f th

e f

orm

er

Cz

ec

ho

slo

va

kia

. F

or

the

co

un

trie

s o

f th

e f

orm

er

Yu

go

sla

via

(C

roa

tia

, S

lov

en

ia,

the

fo

rme

r Y

ug

os

lav

Re

pu

bli

c o

f M

ac

ed

on

ia)

an

dth

e f

orm

er

US

SR

(A

rme

nia

, A

ze

rba

ija

n,

Be

laru

s,

Ge

org

ia,

Ka

za

kh

sta

n,

Ky

rgy

zs

tan

, L

atv

ia,

Lit

hu

an

ia,

Re

pu

bli

c o

f M

old

ov

a,

Ru

ss

ian

Fe

de

rati

on

, T

aji

kis

tan

, U

kra

ine

,U

zb

ek

ista

n),

th

e r

ea

l G

DP

gro

wth

ra

tes

an

d c

ou

ntr

y c

om

po

sit

e r

isk

ra

tin

gs

fo

r Y

ug

os

lav

ia (

form

er)

an

d U

SS

R (

form

er)

we

re u

se

d r

es

pe

cti

ve

ly.

Da

ta f

or

GD

P p

er

ca

pit

a r

efe

r to

th

e p

eri

od

19

90

-19

92

fo

r th

e f

oll

ow

ing

co

un

trie

s :

Arm

en

ia,

Az

erb

aij

an

, B

ela

rus

, C

roa

tia

, C

ze

ch

Re

pu

bli

c,

Es

ton

ia,

Ge

org

ia,

Ka

za

kh

sta

n,

Ky

rgy

zs

tan

,L

atv

ia,

Lit

hu

an

ia,

Re

pu

bli

c o

f M

old

ov

a,

Ru

ss

ian

Fe

de

rati

on

, S

lov

ak

ia,

Slo

ve

nia

, T

aji

kis

tan

, th

e f

orm

er

Yu

go

sla

v R

ep

ub

lic

of

Ma

ce

do

nia

, U

kra

ine

an

d U

zb

ek

ista

n.

Da

ta f

or

ex

po

rts

as

a s

ha

re i

n G

DP

re

fer

to p

eri

od

s o

the

r th

an

19

88

-19

90

as

fo

llo

ws

: 1

99

0-1

99

2 f

or

Arm

en

ia,

Cz

ec

h R

ep

ub

lic

, L

atv

ia,

Lit

hu

an

ia,

Ru

ss

ian

Fe

de

rati

on

an

d U

kra

ine

; 1

99

1-1

99

3 f

or

Be

laru

s,

Cro

ati

a,

Re

pu

bli

c o

f M

old

ov

a,

Slo

ve

nia

an

d U

zb

ek

ista

n;

19

92

-19

94

fo

r E

sto

nia

an

d K

az

ak

hs

tan

; 1

99

3-1

99

5 f

or

Ky

rgy

zs

tan

an

dS

lov

ak

ia;

19

94

-19

96

fo

r A

ze

rba

ija

n a

nd

th

e f

orm

er

Yu

go

sla

v R

ep

ub

lic

of

Ma

ce

do

nia

. D

ata

fo

r te

lep

ho

ne

ma

inli

ne

s p

er

1,0

00

in

ha

bit

an

ts f

or

Slo

ve

nia

re

fer

to t

he

pe

rio

d 1

99

0-1

99

2.

Da

ta f

or

com

me

rcia

l e

ne

rgy

use

pe

r ca

pit

a r

efe

r to

th

e p

eri

od

19

92

-19

94

fo

r th

e f

oll

ow

ing

co

un

trie

s: A

rme

nia

, A

zerb

aij

an

, B

ela

rus,

Cro

ati

a,

Est

on

ia,

Ge

org

ia,

Ka

zakh

sta

n,

Kyr

gyz

sta

n,

La

tvia

, L

ith

ua

nia

, R

ep

ub

lic

of

Mo

ldo

va,

Ru

ssia

n F

ed

era

tio

n,

Slo

ven

ia,

Taji

kist

an

, U

kra

ine

an

d U

zbe

kist

an

. D

ata

fo

r R

&D

exp

en

dit

ure

sa

s a

pe

rce

nta

ge

of

GN

I re

fer

to t

he

pe

rio

d 1

98

8-1

99

0 o

r c

los

e t

o t

his

pe

rio

d;

for

stu

de

nts

in

te

rtia

ry e

du

ca

tio

n a

s a

% o

f to

tal

po

pu

lati

on

, d

ata

re

fer

to 1

99

0 o

re

arl

ies

t y

ea

r a

va

ila

ble

clo

se

to

19

90

.a

Gro

ss

na

tio

na

l in

co

me

.

��


An

ne

x t

ab

le A

.III

.1.

Th

e l

arg

es

t 3

0 c

ros

s-b

ord

er

M&

A s

ale

s i

n L

DC

s,

19

87

-20

01

Va

lue

Ra

nk

Acq

uir

ed

co

mp

an

yIn

du

stry

Ho

st e

con

om

yA

cqu

irin

g c

om

pa

ny

Ho

me

eco

no

my

($ m

illio

n)

Ye

ar

1G

eita

Min

e(A

sha

nti

Go

ldfie

lds)

aG

old

ore

sU

nite

d R

ep

. o

f Ta

nza

nia

An

glo

go

ld L

td (

An

glo

Am

eri

can

)U

nite

d K

ing

do

m b

27

0.0

20

00

2Te

xaco

In

c-Y

eta

gu

n N

atu

ral

cO

il a

nd

ga

s fie

ld e

xplo

ratio

n s

erv

ice

sM

yan

ma

rP

rem

ier

Oil

PL

CU

nite

d K

ing

do

m2

59

.91

99

73

Ho

ua

y H

o P

ow

er

Co

dE

lect

ric

serv

ice

sL

ao

Pe

op

le’s

De

mo

cra

tic R

ep

.In

vest

or

Gro

up

Be

lgiu

m1

40

.02

00

14

Ra

nd

go

ld R

eso

urc

es(

Mo

rila

)Ltd

eG

old

ore

sM

ali

An

glo

go

ld L

td(A

ng

lo A

me

rica

n)

Un

ited

Kin

gd

om

b1

32

.02

00

05

Tan

zan

ia T

ele

com

mu

nic

atio

n C

o f

Tele

com

mu

nic

atio

ns

Un

ited

Re

pu

blic

of

Tan

zan

iaIn

vest

or

Gro

up

Ge

rma

ny

12

0.0

20

00

7S

on

ate

l (S

en

eg

al)

Tele

com

mu

nic

atio

ns

Se

ne

ga

lF

ran

ce C

ab

les

et

Ra

dio

Fra

nce

10

7.4

19

97

8H

ou

ay

Ho

Po

we

r C

o-R

ece

iva

ble

s g

Ele

ctri

c se

rvic

es

La

o P

eo

ple

’s D

em

ocr

atic

Re

p.

Tra

cte

be

l S

AB

elg

ium

h9

8.7

20

01

9E

van

de

r G

old

Min

es

Ltd

Min

ing

Za

mb

iaH

arm

on

y G

old

Min

ing

Co

Ltd

So

uth

Afr

ica

96

.41

99

81

0Z

CC

M-K

on

kola

,Nka

na

,Nch

an

ga

,Na

mC

op

pe

r o

res

Za

mb

iaIn

vest

or

Gro

up

Be

rmu

da

90

.02

00

011

UN

IBR

A-Z

air

e B

rew

eri

es(

5)

an

d i

Ma

lt b

eve

rag

es

De

mo

cra

tic R

ep

ub

lic o

f th

e C

on

go

So

cie

te d

’Inve

stis

sem

en

tF

ran

ce8

9.1

19

96

12

Ele

ctra

Ele

ctri

c, g

as,

an

d w

ate

r d

istr

ibu

tion

Ca

pe

Ve

rde

Inve

sto

r G

rou

pP

ort

ug

al

83

.01

99

91

3S

oci

été

Na

tion

ale

d’E

lect

rici

té f

Ele

ctri

c, g

as,

an

d w

ate

r d

istr

ibu

tion

Se

ne

ga

lIn

vest

or

Gro

up

Fra

nce

66

.01

99

91

4Z

am

bia

Oxy

ge

n (

Za

mb

ia)

fB

usi

ne

ss s

erv

ice

sZ

am

bia

Afr

ica

n O

xyg

en

Ltd

So

uth

Afr

ica

60

.01

99

71

5C

ia A

gri

cole

et

Ind

ust

rie

lle d

Insu

ran

ceM

ad

ag

asc

ar

Inve

sto

r G

rou

pB

run

ei

58

.41

99

61

6B

HP

Min

era

ls M

ali

Inc

(Bro

ken

) j

Min

ing

Ma

law

iR

an

dg

old

& E

xplo

ratio

n C

o L

tdU

nite

d S

tate

s b

53

.01

99

61

7C

ypru

s A

ma

x K

an

san

shi

Ho

ldin

gs

cG

old

ore

sZ

am

bia

Fir

st Q

ua

ntu

m M

ine

rals

Ltd

Ca

na

da

52

.52

00

11

8S

ote

lgu

i (G

uin

ea

) f

Tele

com

mu

nic

atio

ns

Gu

ine

aTe

leko

m M

ala

ysia

Bh

dM

ala

ysia

50

.01

99

61

8Z

am

bia

-Ch

am

bis

hi

Co

ba

lt f

Min

ing

Za

mb

iaA

ng

lova

al

Ltd

So

uth

Afr

ica

50

.01

99

81

8Z

am

bia

Co

nso

lida

ted

-Ele

c f

Ele

ctro

nic

an

d e

lect

rica

l e

qu

ipm

en

tZ

am

bia

Co

pp

erb

elt

En

erg

y C

on

sort

ium

Un

ited

Kin

gd

om

50

.01

99

72

1L

a S

ou

rce

Gro

up

-Ka

sese

Co

ba

ltIn

vest

me

nt

& c

om

mo

dity

fir

ms,

de

ale

rsU

ga

nd

aB

an

ff R

eso

urc

es

Ca

na

da

48

.91

99

62

2M

au

rite

l f

Tele

com

mu

nic

atio

ns

Ma

uri

tan

iaM

oro

cco

Te

leco

mM

oro

cco

48

.02

00

12

3Z

CC

M-N

kan

a,M

ufu

lira

Min

es

fC

op

pe

r o

res

Za

mb

iaG

len

core

In

tern

atio

na

l A

GS

witz

erl

an

d k

43

.02

00

02

4U

nite

d M

eri

dia

n C

orp

-Blo

ck B

cO

il a

nd

ga

s; p

etr

ole

um

re

finin

gG

uin

ea

Mo

bil

Co

rpU

nite

d S

tate

s3

8.9

19

95

25

Na

tion

al

Tob

acc

o o

f E

thio

pia

Tob

acc

o p

rod

uct

sE

thio

pia

Sh

ah

er

Gro

up

Ye

me

n3

6.0

19

99

26

Sie

rra

Ru

tile

Ltd

cK

ao

lin a

nd

ba

ll cl

ay

Sie

rra

Le

on

eC

on

solid

ate

d R

util

e(C

ud

ge

n R

Z)

Au

stra

lia3

4.0

19

93

27

Ba

rge

-Mo

un

ted

Po

we

r P

lan

tW

ho

lesa

le t

rad

e-d

ura

ble

go

od

sB

an

gla

de

shC

oa

sta

l P

ow

er

Co

(C

oa

sta

l C

orp

)U

nite

d S

tate

s3

3.0

19

98

28

Ug

an

da

Te

leco

m.

Ltd

(U

TL

) f

Co

mm

un

ica

tion

s se

rvic

es,

ne

cU

ga

nd

aIn

vest

or

Gro

up

Ge

rma

ny

32

.02

00

02

9H

ou

ay

Ho

Po

we

r C

o g

Ele

ctri

c se

rvic

es

La

o P

eo

ple

’s D

em

ocr

atic

Re

p.

Be

lge

lect

ric

Fin

an

ce B

VN

eth

erl

an

ds

l3

0.0

20

01

30

Nile

Bre

we

rie

sF

oo

d a

nd

kin

dre

d p

rod

uct

sU

ga

nd

aS

ou

th A

fric

an

Bre

we

rie

s L

tdU

nite

d K

ing

do

m2

9.0

19

97

So

urc

e:

UN

CT

AD

, U

NC

TA

D’s

cro

ss

-bo

rde

r M

&A

da

tab

as

e.

aT

he

ult

ima

te p

are

nt

co

mp

an

y i

s b

as

ed

in

Gh

an

a.

bIm

me

dia

te e

co

no

my

is

So

uth

Afr

ica

.c

Th

e u

ltim

ate

pa

ren

t c

om

pa

ny

is

ba

se

d i

n t

he

Un

ite

d S

tate

s.

dT

he

ult

ima

te p

are

nt

co

mp

an

y i

s b

as

ed

in

Fra

nc

e.

eT

he

ult

ima

te p

are

nt

co

mp

an

y i

s b

as

ed

in

So

uth

Afr

ica

.f

Pri

va

tiz

ati

on

.g

Th

e u

ltim

ate

pa

ren

t c

om

pa

ny

is

ba

se

d i

n T

ha

ila

nd

.h

Imm

ed

iate

ec

on

om

y i

s B

elg

ium

.i

Th

e u

ltim

ate

pa

ren

t c

om

pa

ny

is

ba

se

d i

n B

elg

ium

.j

Th

e u

ltim

ate

pa

ren

t c

om

pa

ny

is

ba

se

d i

n A

us

tra

lia

.k

Imm

ed

iate

ec

on

om

y i

s S

wit

ze

rla

nd

.l

Imm

ed

iate

ec

on

om

y i

s t

he

Ne

the

rla

nd

s.

No

te:

Inc

lud

es

on

ly t

he

aff

ilia

tes

wh

os

e s

ale

s o

r e

mp

loy

me

nt

is k

no

wn

. T

he

refo

re,

it i

s l

ike

ly t

ha

t o

the

r la

rge

fo

reig

n a

ffil

iate

s a

re m

iss

ing

fro

m t

his

lis

t.

��

Annex A

An

ne

x t

ab

le A

.III

.2.

Th

e l

arg

es

t 3

0 f

ore

ign

aff

ilia

tes

in

LD

Cs

, 2

00

1

Sa

les

Ye

ar

of

Ra

nk

Ne

me

of

fore

ign

aff

ilia

teH

ost

eco

no

my

Ho

me

eco

no

my

Ind

ust

ry

($

mill

ion

)E

mp

loym

en

te

sta

blis

hm

en

t

1C

olg

ate

Pa

lmo

live

Mo

cam

biq

ue

L D

AM

oza

mb

iqu

eU

nite

d S

tate

sS

oa

p a

nd

oth

er

de

terg

en

ts9

11

8.2

95

..2

Du

nlo

p Z

am

bia

Lim

ited

Za

mb

iaU

nite

d K

ing

do

mT

ire

s a

nd

inn

er

tub

es

8 7

70

.74

48

19

64

3B

rass

eri

es

Et

Lim

on

ad

eri

es

Du

Rw

an

da

S A

Rw

an

da

Ne

the

rla

nd

s/U

KM

alt

be

vera

ge

s6

06

3.1

1 0

00

..4

Sh

ell

Exp

lora

tion

An

d D

eve

lop

me

nt

Ma

da

ga

sca

r B

VM

ad

ag

asc

ar

Ne

the

rla

nd

sO

il &

ga

s e

xplo

ratio

n4

28

6.1

66

..5

Sh

orn

cliff

e (

So

lom

on

Isl

an

ds)

Ltd

So

lom

on

Isl

an

ds

Un

ited

Kin

gd

om

1 3

63

.2..

..6

Bo

ral G

as

So

lom

on

s L

tdS

olo

mo

n I

sla

nd

sA

ust

ralia

Ga

s e

xpo

ratio

n1

29

7.8

....

7O

sel O

de

bre

cht

Se

rvic

os

No

Ext

eri

or

Ltd

aA

ng

ola

Bra

zil

No

nre

sid

en

tial c

on

stru

ctio

n 7

85

.34

00

0..

8A

sha

nti

Go

ldfie

lds

(T)

Ltd

Un

ited

Re

p.

of

Tan

zan

iaG

ha

na

Go

ld o

res

28

4.1

20

..9

Cre

dit

Lyo

nn

ais

Se

ne

ga

lS

en

eg

al

Fra

nce

Oth

er

com

me

rcia

l ba

nks

11

0.9

....

10

Mya

nm

ar

Toyo

ta T

sush

o C

o.,

Ltd

.M

yan

ma

rJa

pa

nT

rad

ing

84

.6 a

91

99

511

So

cié

té O

ue

st A

fric

ain

e D

es

Cim

en

ts S

AS

en

eg

al

Fra

nce

Cru

she

d a

nd

bro

ken

lim

est

on

e 7

2.6

30

1..

12

Nile

Bre

we

rie

s L

tdU

ga

nd

aU

nite

d K

ing

do

mM

alt

be

vera

ge

s 7

2.0

63

4..

13

La

Co

mp

ag

nie

Min

ière

d’A

kou

taN

ige

rJa

pa

nM

inin

g7

1.8

b1

20

01

97

81

4T

rave

l In

du

stry

Se

rvic

es

Ltd

So

lom

on

Isl

an

ds

Fiji

Tra

nsp

ort

63

.8..

..1

5S

olo

mo

n K

itan

o M

en

da

na

Ho

tel L

td.

So

lom

on

Isl

an

ds

Jap

an

Ho

tel a

nd

mo

tels

54

.6 c

10

71

98

91

6Ta

nza

nia

Cig

are

tte

Co

Ltd

.U

nite

d R

ep

. o

f Ta

nza

nia

Sw

itze

rla

nd

Cig

are

tte

s 5

4.4

770

..1

7C

om

pa

gn

ie S

he

ll D

e G

uin

ee

Gu

ine

aN

eth

erl

an

ds/

UK

Pe

tro

leu

m p

rod

uct

s e

xce

pt

bu

lk t

erm

ina

ls 5

0.0

33

..1

8M

an

ufa

ctu

re d

e T

ab

acs

de

l’O

ue

st A

fric

ain

eS

en

eg

al

Fra

nce

Tob

acc

o 4

8.8

41

0..

19

So

cié

té D

es

Cim

en

ts D

u T

og

o S

ATo

goG

erm

an

yR

ea

dy

mix

ed

co

ncr

ea

t 4

8.7

24

0..

20

Ga

s D

ian

a T

ran

spo

rt I

nc.

Lib

eri

aJa

pa

nS

ee

fre

igh

t tr

an

spo

rt4

8.6

c..

19

76

21

Bra

sse

rie

s E

t L

imo

na

de

rie

s D

u B

uru

nd

i Sa

rlB

uru

nd

iN

eth

erl

an

ds

Bo

ttle

d &

ca

nn

ed

so

ft d

rin

ks 4

6.2

1 3

50

19

97

22

Joh

n W

alk

de

n A

nd

Cie

Be

nin

Un

ited

Kin

gd

om

Pie

ce g

oo

ds

39

.2 7

4..

23

Th

e G

en

era

l Ele

ctri

c C

o O

f B

an

gla

de

sh L

tdB

an

gla

de

shU

nite

d K

ing

do

mM

oto

rs a

nd

ge

ne

rato

rs 3

7.7

1 2

00

19

62

24

Ya

zaki

ED

S S

am

oa

Ltd

.S

am

oa

Jap

an

Mo

tor

veh

icle

pa

rts

31

.8 d

1 8

31

19

95

25

Ne

stle

Se

ne

ga

l S A

Se

ne

ga

lS

witz

erl

an

dF

luid

milk

27

.223

0..

26

Tog

o E

t S

he

ll S

ATo

goN

eth

erl

an

ds/

UK

Pe

tro

leu

m p

rod

uct

s e

xce

pt

bu

lk t

erm

ina

ls 2

5.2

96

..2

6To

tal T

exa

co N

ige

r S

AN

ige

rF

ran

ceP

etr

ole

um

pro

du

cts

exc

ep

t b

ulk

te

rmin

als

25

.24

5..

28

Sp

ie B

atig

no

lles

Ltd

Le

soth

oF

ran

ceE

ng

ine

eri

ng

se

rvic

es

21

.91

40

01

98

72

9C

ica

Bu

rkin

aB

urk

ina

Fa

soF

ran

ceC

ars

an

d o

the

r m

oto

r ve

hic

les

21

.015

01

99

13

0D

ia M

ari

time

In

c.L

ibe

ria

Jap

an

20

.8 c

..1

98

9

So

urc

e:

UN

CT

AD

, o

n t

he

ba

sis

of

the

co

un

try

ta

ble

on

la

rge

st

fore

ign

aff

ilia

tes

an

d U

NC

TA

D F

DI/

TN

C d

ata

ba

se

.

aD

ata

re

fer

to M

arc

h 1

99

9.

bD

ata

re

fer

to 1

99

8.

cD

ata

re

fer

to 1

99

9.

No

te:

Inc

lud

es

on

ly t

he

aff

ilia

tes

wh

os

e s

ale

s o

r e

mp

loy

me

nt

is k

no

wn

. T

he

refo

re,

it i

s l

ike

ly t

ha

t o

the

r la

rge

fo

reig

n a

ffil

iate

s a

re m

iss

ing

fro

m t

his

lis

t.

��


Annex table A.V.1. Toyota’s international production system, 2001(Number)

Region/economy Affiliate (Year of establishment) Vehicles assembled Production Exports

North America (Sales: 1 893 600a) 1 088 463 156 045Canada Toyota Motor Manufacturing Canada Inc. TMMC (1988) Camry, Solara, Corolla, Lexusb 166 131 127 489United States New United Motor Manufacturing Inc. NUMMI (1984) Corolla, Tacoma 305 691 2 703United States Toyota Motor Manufacturing Kentucky Inc. TMMK (1988) Avalon, Camry, Sienna 446 199 17 831United States Toyota Motor Manufacturing Indiana Inc. TMMI (1988) Tundra 170 442 8 022

Europe (Sales: 666 000a) 219 542 168 113Czech Republic Toyota Peugeot Citroen Auto Czech TPCA (2005) New small car for 2005 – –France Toyota Motor Manufacturing TMMF (2001) Yaris 61 904 47 390Portugal Salvador Caetano (1968) Dyna, Hiace, Optimo 1 633 87Turkey Toyota Motor Manufacturing Turkey Inc. TMMT (2000)c Corolla 2 590 –United Kingdom Toyota Motor Manufacturing U.K. Ltd. TMUK (1992) Avensis, Corolla 153 415 120 636

Asia (excl. Japan) (Sales: 721 000a) 374 096 71 053Australia Toyota Motor Corp. Australia (1963) Camry, Corolla, Avalon 94 589 59 231China Tianjin Toyota Motor Co. Ltd. TTMC (2002) .. –d –d

India Toyota Kirloskar Motor Ltd. (1999) Qualis 28 440 –Indonesia PT Toyota-Astra Motor (1970) Camry, Corolla, TUV, Dyna, etc. 73 260 22Malaysia Assembly Services Sbn. Bhd. (1968) Camry, Corolla, Dyna, Hiace, etc. 17 067 –Philippines Toyota Motor Philippines Corp. (1989) Camry, Corolla, TUV 13 529 –Taiwan Province of China Kuozui Motors Ltd. (1986) Tercel, TUV, Hiace, Corolla 67 495 –Thailand Toyota Motor Thailand TMT (1964) Camry, Corolla, Hilux, Soluna, etc. 77 415 11 800Viet Nam Toyota Motor Vietnam Co. (1996) Corolla, Hiace, Camry, TUV 2 301 –

Africa (Sales: 126 500a) 77 479 2 224South Africa Toyota South Africa Motors (Pty) (1962) Camry, Corolla, Dyna, Hiace, etc. 77 479 2 224

Latin America (Sales: 107 500a) 17 838 16 899Argentina Toyota Argentina S.A. (1997) Hilux 16 200 7 904Brazil Toyota do Brasil S.A. (1959)e (2002) Bandeirante, Corolla, new Corolla 1 638 1 350Venezuela Toyota de Venezuela C.A. (1981) (2002) Corolla, Land Cruiser, new Corolla 738

Japan (Sales: 2 291 503f) 4 046 637 1 749 041

Source: Toyota Motor Company.

a Local production and imports from Japan.b As of 2002.c Established in 1994 as Toyotasa, a joint venture between Toyota and Sabanci.d Start-up in 2002.e Production of the Bandeirante ended in 2001.f Domestic sales only.

��

Annex A

Annex table A.V.2. World motor vehicle production by top 10 TNCs, 2000(Thousands)

United States Germany France Italy JapanGeneral Daimler

Region/economy Total Motors Ford Chrysler Volkswagen PSA Renault Fiat Toyota Nissan Honda

All countries 44 283.5 8 133.4 7 323.0 4 666.5 5 106.7 2 879.4 2 444.3 2 641.4 5 954.7 2 628.8 2 505.3European Union 15 769.5 1 858.4 2 229.0 1 432.7 3 183.2 2 660.0 1 997.1 1 696.5 177.9 460.0 74.8Austria 98.5 – – 98.5 – – – – – – –Belgium 1 031.3 329.3a 417.7d – 284.3i – – – – – –Finland 19.0 19.0b – – – – – – – – –France 3 325.7 – – 101.1g – 1 720.4 1 452.1o 52.1r –* – –Germany 4 393.7 652.9a 577.4 1 143.7 2 006.2k – – 13.5s – – –Italy 1 684.1 – – – 0.3k 98.9 – 1 583.0t 2.0aa – –Netherlands 158.2 – 158.2e – – – – – – – –Portugal 234.7 52.5 52.1 – 75.9 49.7 – – 4.5 – –Spain 2 949.5 373.6 343.8 89.4 814.5i 603.6 545.0p 47.2u – 132.3 –Sweden 265.0 114.0b 151.0e – – – – – – – –United Kingdom 1 609.8 317.2c 528.9f 1.9l 187.4 – 0.6v 17 1.3 327.7 74.8North America 14 856.7 5 186.4 4 429.5 2 722.1 0.0 0.0 34.6 – 1 103.0 377.3 1 003.9Canada 2 829.5 963.4 629.6 726.0 – – – – 183.7 326.8United States 12 027.2 4 223.0 3 799.9 1 996.1h – – 34.6q – 919.3 377.3 677.1Asia-Pacific 8 168.1 171.7 161.8 1.4 315.7 106.7 0.9 46.5 4 546.0 1 444.0 1 373.4Australia 311.0 133.2 85.0 – – – – 0.9w 92.0 – –China 458.9 30.1 26.8 – 315.7 53.9 0.4 – – – 32.0India 78.1 – – – – – – 45.6x 21.0 – 11.5Indonesia 119.6 – – 1.4 – 0.2 – – 109.0bb 9.0Iran 51.7 – – – – 51.7 – – – – –Japan 6 726.0 – – – – – – – 4 152.0b 1 350.0 1 223.9Malaysia 18.1 – – – – – 0.5 – 11.6cc 6.0Pakistan 6.9 – – – – – – – 0.9dd 6.0Philippines 25.4 – – – – – – – 13.4cc 12.0Taiwan Province of China 243.0 – 50.0 – – – – – 81.0 75.0 37.0Thailand 127.4 8.5 – – – 0.9 – – 63.0c 19.0 36.0Viet Nam 2.1 – – – – – – – 2.1bb –Latin America 3 807.9 819.5 441.5 484.1 979.5 77.9 142.9 469.0 36.1 316.0 41.4Argentina 337.4 41.2 56.3 15.9 44.5 69.4 57.6 35.2y 17.3 – –Brazil 1 551.2 334.8 120.8 53.9 509.3j – 59.0 433.8 18.8 – 20.6Chile 5.2 – – – – 5.2 – – – – –Colombia 15.2 – – – – – 15.2 – – – –Mexico 1 882.6 443.4 264.4 414.3 425.7 – – – – 316.0 18.8Uruguay 14.4 – – – – 3.3 11.1 – – – –Venezuela 2.0 – – – – – – – – – 2.0European periphery 1 463.8 97.4 61.1 6.5 585.8 21.1 262.5 405.0 14.7 0.0 9.8Czech Republic 450.9 – – – 450.9 – – – – – –Hungary 57.1 – – – 57.1n – – – – – –Poland 403.5 97.4a 20.0 – – 4.7 – 281.5 – – –Russian Federation – – – – 0.8 – – – – –Slovakia 77.8 – – – 77.8 – – – – – –Slovenia 122.9 – – – – – 122.9 – – – –Turkey 350.7 – 41.1 6.5 – 15.6 139.5 123.5z 14.7 – 9.8Africa 217.4 0.0 0.0 19.6 42.6 13.8 6.4 24.5 77.0 31.5 2.0Egypt 5.0 – – – – 1.8 – 3.2 – – –Kenya 0.3 – – – – 0.3 – – – – –Morocco 19.4 – – – – 3.8 6.4 9.2 – – –Nigeria 7.8 – – – – 7.1 – 0.8 – – –South Africa 184.1 – – 19.6 42.6 – – 11.3 77.0 31.5 2.0Zimbabwe 0.8 – – – – 0.8 – – – – –

Source: UNCTAD, based on Organisation Internationale des Constructeurs d’Automobiles (OICA).

a Opel.b Saab.c Vauxhall and IBC.d Ford and Volvo.e Volvo.f Ford, Jaguar, Aston Martin and Land Rover.g Smart.h Mercedes-FL-Western Star and Chrysler.i VW-Seat.j Audi and VW.k Lamborghini.l Rolls “Royce.m Skoda.n Audi.o Renault, Sovab and RVI.p Renault and RVI.q Mack-USA.

r Fiat-Sevel and Lancia-Sevel.s Iveco-Magirus.t Fiat, Alfa Romeo, Lancia, Ferrari-Maserati, Fiat Sevel

and Ivevo-Astra.u Iveco Pegaso.v Seddon Atkinson.w Iveco.x Iveco Ashok Leyland and Fiat.y Fiat and Iveco.z Fiat-Tofas and Iveco-Otoyol.aa Daihatsu.bb Toyota, Daihatsu and Hino.cc Hino and Toyota.dd Hino.* Toyota opened a new plant for the production of the

Yaris in 2001.

��


Annex table A.VI.2. The trade performance of foreign affiliates andEPZs in Hungary, 1995-2000

(Mil l ions of dollars and percentage)

Item / year 1995 1996 1997 1998 1999 2000

Total national exports, all firms 12 810 14 183 19 100 23 005 25 013 28 092Total national imports, all firms 15 252 16 828 21 234 25 706 28 008 32 080Trade balance -2 442 -2 645 -2 134 -2 701 -2 996 -3 988

Total exports of foreign affiliates 7 456 8 188 14 185 17 748 20 013 ..Total imports of foreign affiliates 9 683 10 783 15 427 19 061 21 421 ..Trade balance of foreign affiliates -2 227 -2 594 -1 242 -1 313 -1 408 ..

EPZ exports .. 2 846 5 034 8 272 10 752 12 570EPZ imports .. 2 527 4 202 6 471 8 561 10 058Trade balance of EPZs .. 319 832 1 802 2 192 2 512

Shares:Foreign affiliates in exports 58.2 57.7 74.3 77.1 80.0 ..Foreign affiliates in imports 63.5 64.1 72.7 74.2 76.5 ..

EPZs in exports .. 20.1 26.4 36.0 43.0 44.7EPZs in imports .. 15.0 19.8 25.2 30.6 31.4

Source: Hungarian Central Statist ical Office, unpublished data.

Annex table A.VI.1. Distribution of total exports and intra-firm exports of foreignaffiliates of United States TNCs in the manufacturing sector, by category, 1983 and 1998

(Percentage)

1983 1998

Industry Total exports Intra-firm exports Total exports Intra-firm exports

Low technology 30.9 22.9 21.4 13.9Food, beverages and tobacco 5.4 3.4 7.7 5.1Textiles, clothing and leather 1.1 0.7 0.9 0.8Wood and wood products 2.2 1.0 2.3 1.6Publishing, printing and reproduction

of recorded media 0.3 0.1 0.3 0.1Coke, petroleum products and nuclear fuel 14.7 14.0 2.8 2.3Non-metallic mineral products 1.0 0.5 0.7 0.4Metal and metal products 6.3 3.2 6.7 3.6

Medium technology 45.1 48.6 39.3 43.0Chemicals and chemical products

(excl. pharmaceuticals) 13.5 11.0 8.5 6.7Rubber and plastic products 1.9 1.5 2.2 1.7Machinery and equipment 4.2 3.6 3.8 4.0Motor vehicles and other transport equipment 25.5 32.6 24.7 30.5

High technology 24.0 28.5 39.3 43.1Electrical and electronic equipment 17.4 21.5 28.8 30.6Precision instruments 3.6 4.1 4.0 4.6Pharmaceuticals 3.0 2.9 6.5 8.0

Manufacturing total 100.0 100.0 100.0 100.0

Source: UNCTAD, FDI/TNC database, based on United States, Department of Commerce, 1986 and 2002.

Note: Motor vehicles include building and repairing of ships and boats (low technology) and manufacturingof aircraft and spacecraft (high technology). Data refer to non-bank majority-owned affi l iates of UnitedStates non-bank TNCs.

��

Annex A

Annex table VI.3. The top ten Hungarian export products, 1999(Mil l ions of dollars and percentage)

Value of Share in Produced by Export

SITC Product exports exports foreign affiliates EPZ share in 1992

71322 Reciprocating piston engines 2 183 8.7 Fully Fully 0.0

7527 Storage units (computers) 1 544 6.2 Fully Fully 0.0

7812 Motor vehicles for the transport of persons 1 343 5.4 Fully Partly 0.2

75997 Parts, accessories for automatic data processing machines 1 094 4.4 Partly Fully 0.1

76381 Video recording or reproducing apparatus 680 2.7 Fully Fully 0.1

7526 Input or output units 669 2.7 Partly Fully 0.0

7611 Television receivers 378 1.5 Fully Partly 0.2

82119 Parts of seats for motor vehicles for the transport of persons 357 1.4 Fully Fully 0.1

71323 Compression-ignition engines 316 1.3 Fully Fully 0.1

78439 Other parts for motor vehicles for the transport of persons 315 1.3 Partly Partly 0.1

Total 10 products 8 879 35.6 - - 0.9

Source : UNCTAD, based on Antalóczy and Sass, 2001, pp. 52-53.

Annex table A.VI.4. The largest contract electronics manufacturers in

Central and Eastern Europe, November 2001(Cumulative investment, mil l ions of dollars)

Central and Eastern European host locations

Czech Russian Other Total ShareFirm Home country Hungary Estonia Republic Romania Poland Federation countries CEE (Per cent)

Flextronics Singapore 1 023 - 256 - 75 - - 1 354 37.4Elcoteq Finland 414 470 - - 27 29 - 940 25.9Solectron United States 77 - - 210 - - - 287 7.9Videoton Hungary 250 - - - - - 16 266 7.3Sanmina-SCI United States 260 - - - - - - 260 7.2Zollner Germany 168 - - - - - - 168 4.6Celestica Canada - - 134 - - - - 134 3.7Other firms 27 - 25 32 101 - 31 216 6.0Total firms 2 219 470 415 242 203 29 47 3 625 100.0

Source: UNCTAD, based on Strategic Direct Investor, 2001.

��


303

Annex B

Annex table B.1. FDI inflows, by host region and economy, 1990-2001


1990-1995 1996 1997 1998 1999 2000 2001Host region/economy (Annual average)

World 225 321 386 140 478 082 694 457 1 088 263 1 491 934 735 146

Developed economies 145 019 219 908 267 947 484 239 837 761 1 227 476 503 144

Western Europe 87 383 115 863 137 890 274 739 507 222 832 067 336 210

European Union 84 165 110 376 127 919 262 216 487 898 808 519 322 954Austria 1 265 4 426 2 654 4 533 2 975 8 840 5 909Belgium and Luxembourg 9 775 14 064 11 998 22 691 133 059 245 561 50 996Denmark 2 433 776 2 801 7 730 15 911 32 289 6 969Finland 742 1 109 2 119 12 138 4 613 8 834 3 615France 16 293 21 960 23 174 30 984 47 070 42 930 52 623Germany 4 188 6 573 12 244 24 593 54 754 195 122 31 833Greece 1 049 1 058 984 85 571 1 089 1 560Ireland 1 139 2 618 2 743 11 035 14 929 24 117 9 775Italy 3 784 3 546 3 700 2 635 6 911 13 377 14 873Netherlands 8 061 16 663 11 132 36 964 41 289 52 453 50 471h

Portugal 1 737 1 488 2 477 3 144 1 234 6 464a 6 017a

Spain 10 745 6 585 7 697 11 797 15 758 37 523 21 781Sweden 5 488 5 077 10 968 19 564 60 850 23 367 12 734United Kingdom 17 467 24 434 33 229 74 324 87 973 116 552 53 799

Other Western Europe 3 218 5 487 9 971 12 523 19 324 23 549 13 256Gibraltar 34 -22a 126a -162a 17a 141a -1a

Iceland 3 84 149 148 66 159 146Malta 84 277 81 267 822 652 314Norway 756 2 070 2 979 3 329 6 701 6 312 2 811Switzerland 2 341 3 079 6 636 8 941 11 718 16 285 9 986

North America 47 058 94 089 114 925 197 243 307 811 367 529 151 900Canada 6 230 9 634 11 527 22 809 24 435 66 617 27 465United States 40 829 84 455 103 398 174 434 283 376 300 912 124 435

Other developed economies 10 578 9 955 15 132 12 257 22 728 27 880 15 034Australia 6 575 6 110 7 657 6 112 5 686 11 957 4 090Israel 580 1 387 1 628 1 760 2 889 4 392 3 044Japan 1 144 228 3 224 3 193 12 741 8 322 6 202New Zealand 2 279 2 231 2 624 1 191 1 412 3 209 1 699

Developing economies 74 288 152 685 191 022 187 611 225 140 237 894 204 801

Africa 4 320 5 835 10 744 9 021 12 821 8 694 17 165

North Africa 1 543 1 479 2 607 2 788 4 896 2 904 5 323Algeria 25 270 260 501 507 438 1 196Egypt 632 636 887 1 065 2 919 1 235 510Libyan Arab Jamahiriya 37 -136 -82 -150 -118 -142 -101Morocco 428 357 1 079 333 850 201 2 658Sudan 13 - 98 371 371 392 574Tunisia 408 351 365 668 368 779 486

Other Africa 2 777 4 356 8 137 6 233 7 925 5 790 11 841Angola 260 181 412 1 114 2 471 879 1 119Benin 47 25 26 35 61 97 131Botswana -24 70 100 96 37 57 57Burkina Faso 6 17 13 10 13 23 26Burundi 1 - - 2 - 12 -Cameroon -16 35a 45a 50a 40a 31a 75a

Cape Verde 6 29 12 9 53 21 1Central African Republic -3 5a 6a 5a 13a 5a 8a

Chad 12 18a 15a 16a 15a 15a 80Comoros - 1a -a 3a -a 1a 1a

Congo 18 20a -12a 118a 135a -75a 59a

Congo, Dem. Rep. of - 3 25a -44a 61a 11a 23a 32a

Côte d’Ivoire 116 302 450 416 381 255 258a

Djibouti 2 3 2 3 4 3 3Equatorial Guinea 37 376 20a 24a 120a 120a 88a

Eritrea .. 37a 39a 32a 36a 35a 34a

Ethiopia 9 22 288 261 70 135 20a

Gabon -64 -489 -311 147 -157 252a 200a

Gambia 12 18 21 24 49 44 35Ghana 87 120 82 56 63 115 89Guinea 13 24 17 18 63 33a 38a

Guinea-Bissau 2 1a 11 4 9 23 30a

Kenya 20 13 40 42 42 127 50Lesotho 213 286 269 262 163 119 118

/....

304


Annex table B.1. FDI inflows, by host region and economy, 1990-2001 (continued)



Liberia 32 -132a 15a 16a 10a 12a 13a

Madagascar 15 10 14 16 58 70 108Malawi 15 44 22 70 60a 45a 58a

Mali 22 47 74 36 51 106 103a

Mauritania 7 4a 1a - 1a 9a 30a

Mauritius 21 37 55 12 49 277 12Mozambique 28 73 64 235 382 139 255Namibia 96 129 84 77 111 153 99Niger 20 20 25 9 - 19 13a

Nigeria 1 097 1 593 1 539 1 051 1 005 930 1 104Rwanda 4 2 3 7 2 9 9São Tomé and Principe -b -a -a -a 1a 2a 1a

Senegal 29 7 176 71 136 88 125a

Seychelles 23 30 54 55 60 56 34Sierra Leone 4 19a 10a -1a 6a 5a 4a

Somalia 2 1a 1a -a -1a -a -a

South Africa 301 818 3 817 561 1 502 888 6 653Swaziland 63 22 - 15 152 100 - 19 69Togo 10 27 23 42 70 57 67a

Uganda 44 121 175 210 222 254 229United Republic of Tanzania 39 149 158 172 183 193 224Zambia 122 117 207 198 163 122 72Zimbabwe 34 81 135 444 59 23 5

Latin America and the Caribbean 22 259 52 856 74 299 82 203 109 311 95 405 85 373

South America 10 357 32 232 48 166 51 886 70 880 56 837 40 111Argentina 3 458 6 951 9 156 6 848 24 134 11 152 3 181Bolivia 152 426 879 952 985 693 647Brazil 2 000 10 792 18 993 28 856 28 578 32 779 22 457Chile 1 499 4 633 5 219 4 638 9 221 3 674 5 508Colombia 843 3 112 5 562 2 828 1 468 2 374 2 018Ecuador 330 500 724 870 648 720 1 330Guyana 70 93 53 47 48 67 56a

Paraguay 93 144 230 336 66 96 152Peru 1 004 3 242 1 697 1 842 2 263 681 1 100Suriname -35 19 - 9 9 -62 -148 -67a

Uruguay 83 137 126 164 239 285 320Venezuela 861 2 183 5 536 4 495 3 290 4 464 3 409

Other Latin America and the Caribbean 11 901 20 624 26 133 30 318 38 431 38 568 45 261

Anguilla 11 33 21 28 38 39 28Antigua and Barbuda 34 19 23 27 37 33 54Aruba 34 84 196 84 392 -226 -324Bahamas 23 88 210 147 149 250 101Barbados 11 13 15 16 17 19 18a

Belize 16 17 12 19 56 28 34a

Bermuda 1 828 3 971a 2 928a 5 399a 9 470a 10 980a 9 859a

Cayman Islands 174 1 232a 3 151a 4 354a 6 569a 6 858a 3 086a

Costa Rica 241 427 407 612 620 409 448Cuba 7 19a 1a 15a 9a -10a 5a

Dominica 23 18 21 7 18 11 14Dominican Republic 211 97 421 700 1 338 953 1 198El Salvador 17 -5 59 1 104 216 173 268Grenada 18 17 34 49 42 36 34Guatemala 88 77 85 673 155 230 456Haiti 2 4 4 11 30 13 3a

Honduras 52 90 128 99 237 282 195Jamaica 159 184 203 369 524 471 722Mexico 8 080 9 938 14 044 11 933 12 534 14 706 24 731Montserrat 6 - 3 3 8 4 4Netherlands Antilles 21 2 826a 1 038a 892a 532a 777a 734a

Nicaragua 40 97 173 184 300 265 132Panama 197 416 1 299 1 296 652 603 513Saint Kitts and Nevis 22 35 20 32 58 96 83Saint Lucia 41 18 48 83 83 49 51Saint Vincent and the Grenadines 23 43 93 89 56 28 36Trinidad and Tobago 269 356 1 000 732 643 662 835Virgin Islands (United Kingdom) 252 510 500a 1 362a 3 648a 830a 1 947a

Asia and the Pacific 47 710 93 994 105 978 96 386 103 008 133 795 102 264

Asia 47 321 93 331 105 828 96 109 102 779 133 707 102 066

West Asia 2 096 2 898 5 645 6 705 324 688 4 133Bahrain 278 2 048 329 180 454 358 92Cyprus 93 54 76 69 121 163 163

/...

305

Annex B

Annex table B.1. FDI inflows, by host region and economy, 1990-2001 (continued)(Millions of dollars)


Iran, Islamic Republic of -17 26 53 24 35 39 33a

Iraq 1 1a 1a 7a -7a -3a -1a

Jordan 8 16 361 310 158 39a 169a

Kuwait -3 347 20 59 72 16 -40Lebanon 10 80a 150a 200a 250a 298a 249 a

Oman 105 60 65 101 21 23 49 a

Occupied Palestinian Territory .. 4a 149 58 19 76a 51 a

Qatar 64 339a 418a 347a 113a 252a 237 a

Saudi Arabia 298 -1 129 3 044 4 289 -780 -1 884 20Syrian Arab Republic 102 89 80 82 263 270 205 a

Turkey 745 722 805 940 783 982 3 266United Arab Emirates 151 301a 232a 258a -985a 260a -156 a

Yemen 262 -60 -139 -219 -194 -201 -205 a

Central Asia 662 2 590 3 844 3 152 2 466 1 895 3 569Armenia 10 18 52 232 130 133a 140a

Azerbaijan 89c 591 1 067 1 085 510 130 227Georgia 6c 45 243 265 82 131 160a

Kazakhstan 754d 1 674 2 107 1 233 1 468 1 278 2 760Kyrgyzstan 48e 47 83 109 44 -2 40a

Tajikistan 10d 18a 18a 25a 21a 22a 22a

Turkmenistan 138e 108a 108a 62a 89a 131a 150a

Uzbekistan 27d 90a 167a 140a 121a 73a 71a

South, East and South-East Asia 44 564 87 843 96 338 86 252 99 990 131 123 94 365Afghanistan -f 1 - 1a -a 6a -a 2a

Bangladesh 6 14 139 190 178 280 78Bhutan -b 1a - 1a -a -a -a -a

Brunei Darussalam 102 654g 702g 573g 596g 600g 244g, h

Cambodia 80d 586 - 15 230 214 179 113China 19 360 40 180 44 237 43 751 40 319 40 772 46 846Hong Kong, China 4 859 10 460a 11 368a 14 770 24 596 61 938 22 834India 703 2 525 3 619 2 633 2 168 2 319 3 403Indonesia 2 135 6 194 4 677 -356 -2 745 -4 550 -3 277Korea, Dem. People’s Rep. of 14 2a 307a 31a -15a 5a 7a

Korea, Republic of 978 2 325 2 844 5 412 9 333 9 283 3 198Lao People’s Democratic Republic 33 128 86 45 52 34 24h

Macao, China - 1 6a 2a -18a 9a -7a -5a

Malaysia 4 655 7 296 6 324 2 714 3 895 3 788 554Maldives 7 9 11 12 12 13 12a

Mongolia 8f 16 25 19 30 54 63Myanmar 180 310 387 314 253 255 123h

Nepal 6 19 23 12 4 - 19a

Pakistan 389 918 713 507 530 305 385Philippines 1 028 1 520 1 249 1 752 578 1 241 1 792Singapore 5 782 8 608 10 746 6 389 11 803 5 407 8 609Sri Lanka 110 133 433 206 201 178 172Taiwan Province of China 1 222 1 864 2 248 222 2 926 4 928 4 109Thailand 1 990 2 271 3 626 5 143 3 561 2 813 3 759Viet Nam 947 1 803 2 587 1 700 1 484 1 289 1 300a

The Pacific 388 663 150 277 229 88 198Fiji 83 - 33 -11 140 -79 -69 -3a

Kiribati - 1a 1a 1a 1a 1a 1a

New Caledonia 11 - 1a 10a -a 4a 5a 3a

Papua New Guinea 253 654 88 110 296 130a 179a

Samoa 4 1a 20a 3a 2a -2a 1a

Solomon Islands 11 6 9 2 -19 1 -5a

Tonga 1 2a 3a 2a 2a 2a 2a

Tuvalu -c -a -a -a -a -a -a

Vanuatu 25 33 30 20 20 20 20a

Central and Eastern Europe 6 014 13 547 19 113 22 608 25 363 26 563 27 200Albania 42f 90 48 45 41 143 181Belarus 12d 105 352 203 444 90 169Bosnia and Herzegovina -b - 2 1 55 149 131 164Bulgaria 57 109 505 537 819 1 002 689Croatia 120e 516 551 1 014 1 635 1 127 1 442Czech Republic 947 1 428 1 300 3 718 6 324 4 986 4 916Estonia 165 150 267 581 305 387 538Hungary 1 863 2 275 2 173 2 036 1 944 1 643 2 414Latvia 116d 382 521 357 348 408 201Lithuania 36d 152 355 926 486 379 446Moldova, Republic of 31d 24 79 74 37 138 150Poland 1 396 4 498 4 908 6 365 7 270 9 342 8 830Romania 162 263 1 215 2 031 1 041 1 025 1 137Russian Federation 1 167d 2 579 4 865 2 761 3 309 2 714 2 540

/...

306


Annex table B.1. FDI inflows, by host region and economy, 1990-2001 (concluded)



Slovakia 147 251 220 684 390 2 075 1 475Slovenia 100 194 375 248 181 176 442TFYR Macedonia 17c 12 16 118 32 178 530Ukraine 206d 521 624 743 496 595 772Yugoslavia 82d - 740 113 112 25 165

Memorandum

Least developed countries j 1 607 2 630 2 728 3 948 5 428 3 704 3 838

Oil-exporting countries k 6 048 13 406 18 687 14 442 5 461 3 510 6 557

All developing countries,excluding China 54 928 112 505 146 785 143 860 184 821 197 122 157 955


a Estimates. For details, see “Definitions and Sources” in annex B.b 1995.c Annual average from 1994 to 1995.d Annual average from 1992 to 1995.e Annual average from 1993 to 1995.f Annual average from 1991 to 1995.g Balance-of-payments basis, based on the International Transaction Reporting System (ITRS).h Preliminary data.i Annual average from 1990 to 1991.j Least developed countries include: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia,

Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea,Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia,Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tomeand Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic ofTanzania, Vanuatu, Yemen and Zambia.

k Oil-exporting countries include: Cameroon, Algeria, Angola, Bahrain, Brunei Darussalam, Congo, Ecuador, Gabon, Indonesia,Islamic Republic of Iran, Iraq, Kuwait, Libyan Arab Jamahiriya, Nigeria, Oman, Qatar, Saudi Arabia, Syrian Arab Republic,Trinidad and Tobago, United Arab Emirates and Venezuela.

307

Annex B

Annex table B.2. FDI outflows, by home region and economy, 1990-2001 (Millions of dollars)

1990-1995 1996 1997 1998 1999 2000 2001Home region/economy (Annual average)

World 253 302 394 996 474 010 684 039 1 042 051 1 379 493 620 713

Developed economies 221 005 332 395 394 999 631 291 965 977 1 271 273 580 624

Western Europe 127 149 204 850 242 971 436 413 754 443 1 018 392 380 434

European Union 117 308 183 708 220 946 415 365 715 741 968 019 365 182Austria 1 378 1 934 1 987 2 745 3 301 5 740 2 961Belgium and Luxembourg 6 978 8 026 7 252 28 845 121 719 241 997 67 307Denmark 2 363 2 518 4 209 4 477 16 155 24 359 8 951Finland 1 506 3 595 5 278 18 647 6 616 24 030 7 272France 23 749 30 421 35 584 48 611 120 618 175 504 82 814Germany 23 479 50 804 41 797 88 823 109 450 49 793 43 257Greece 11 - 25a 156a 262 539a 2 102a - 607a

Ireland 375 727 1 008 3 906 4 267 3 973 5 396Italy 6 444 8 697 10 414 12 407 6 722 12 319 21 476h

Netherlands 14 496 32 119 24 494 36 669 57 738 71 346 44 020Portugal 406 785 1 903 3 847 3 170 7 674 7 898

a

Spain 3 559 5 397 12 626 18 936 42 084 54 675 27 805Sweden 6 914 4 665 12 648 24 369 21 927 40 578 7 170United Kingdom 25 648 34 045 61 590 122 820 201 437 253 929 39 462

Other Western Europe 9 841 21 142 22 025 21 048 38 702 50 373 15 252Iceland 17 63 55 74 106 362 331Malta 2b 6 17 15 45 29 6Norway 1 312 4 922 4 221 2 192 5 276 7 332 - 1 405Switzerland 8 512 16 152 17 732 18 767 33 275 42 650 16 320

North America 65 003 97 522 118 838 165 362 190 179 212 468 149 449Canada 6 853 13 096 23 069 34 358 15 603 47 499 35 472United States 58 150 84 426 95 769 131 004 174 576 164 969 113 977

Other developed economies 28 853 30 023 33 190 29 516 21 356 40 414 50 741Australia 2 587 7 086 6 448 3 372 - 2 997 5 091 11 165Israel 533 1 042 795 1 063 806 2 802 1 188Japan 25 042 23 428 25 993 24 153 22 743 31 558 38 088New Zealand 690 - 1 533 - 45 928 803 963 301


Africa 1 979 1 463 3 826 2 054 2 707 1 481 - 2 544

North Africa 40 103 475 360 351 228 197Algeria 15 2a 8a 1 47 18 9Egypt 40 5 166 38 81 51 12Libyan Arab Jamahiriya - 40 63 284 299 208 98 84Morocco 22 30 9 20 12 59 92Tunisia 4 2 9 2 3 2 -

Other Africa 1 939 1 360 3 351 1 694 2 356 1 253 - 2 741Angola - -a -a -a -a -a - aBenin .. 12 12 2 23 41 22a

Botswana 14 - 1 4 4 1 2 2Burkina Faso 1 - 1 5 5 - 3 a

Burundi - - - - - - -Cameroon 15 13 7a -a 3a 4a 3 a

Cape Verde - - -a -a -a -a -a

Central African Republic 4 - - 1a 1a -a -a -a

Chad 9 4 4a 5a 4a 5a 5a

Comoros -c .. .. .. .. .. ..Congo 1 4 4a -a 13a 3a 5a

Côte d’Ivoire 86 33 34 36 57 20 38a

Equatorial Guinea -c -a 1a -a 1a -a -a

Ethiopia .. .. 228a 254a - 46a - 1a 69a

Gabon 20 2 21 33 74 43a 50a

Gambia 4 5 5 6 4 5 5Ghana .. 150a 50a 30a 77a 52a 53a

Guinea .. - 1a -a 3a 2a 2a

Kenya 3 25 5 14 30 40 77Liberia 85 - 59 501a - 731a 310a 608a 62a

Madagascar - - - 2a 1a -a 1a -a

Malawi .. 2 -a 6a 3a 3a 4a

Mali - 4 5 27 50 28 35a

Mauritius 15 3 3 14 6 13 2Mozambique -d -a -a -a -a -a -a

Namibia - - 22 - - 1 - 2 9 - 1

/...

308


Annex table B.2. FDI outflows, by home region and economy, 1990-2001 (continued) (Millions of dollars)


Niger 9 18 8 10 - 10 7a

Nigeria 535 42 58 107 92 85 94Rwanda - 1 1a -a -a -a -a

Senegal 6 2 - 10 6 26 14a

Seychelles 6 13 10 3 9 7 11Sierra Leone - - -a -a -a -a -a

South Africa 1 034 1 044 2 351 1 779 1 580 271 - 3 334Swaziland 30 - 11 - 10 24 10 - 19 4Togo 5 13 4 22 41 16 26a

Uganda 39 11a 15a 20a - 8a - 28a - 5a

United Republic of Tanzania -a -a -a -a -a -a -a

Zimbabwe 11 51 28 9 9 8 4

Latin America and the Caribbean 5 169 7 591 21 392 18 944 32 798 21 748 7 217

South America 2 334 3 168 8 307 9 000 8 604 8 437 1 787Argentina 741 1 600 3 654 2 323 1 249 912 - 123Bolivia 2 2 2 3 3 14 6a

Brazil 676 - 469 1 116 2 854 1 690 2 282 - 2 258Chile 438 1 188 1 866 2 797 4 855 4 778 3 791Colombia 102 328 809 796 116 250 - 57Ecuador 21 23 257a - 84a 19a - 13a - 26a

Guyana -a - 1 -a -a - 2a 2 -a

Paraguay 7 5 6 6 6 6 6a

Peru 4 - 16 84 64 128 92a 95a

Uruguay - -a 13 9 40a 9 19a

Venezuela 342 507 500 233 501 107 333

Other Latin America and the Caribbean 2 836 4 423 13 085 9 943 24 194 13 311 5 430Anguilla .. .. 1a 1a 1a 1a ..Antigua and Barbuda 1a - - 3a - 1a -a 1a -a

Aruba 2a - - 2 1 - 8 12 13Bahamas - - - 1 - - -Barbados 2 4 1 1 1 1 1a

Belize 2 6 4 6 10 10 8a

Bermuda 296 88 4 220a 2 980a 18 137a 9 075a - 2 809a

Cayman Islands 277 958 4 871a 4 452a 2 187a 1 795a 2 811a

Costa Rica 4 6 4 5 5 5 5Dominican Republic 9a 14 2a 2a 6a 3a 4a

El Salvador -f 2 -a 1 23 - 5 - 10Grenada - -a -a -a -a -a -a

Guatemala - 4 3 7a 8a - 3a 37a 14a

Haiti - 6 1 1a 1a - 1a 1a -a

Honduras - -a -a -a -a -a -a

Jamaica 51 93 57 82 95 74 89Mexico 288 38 1 108 1 363 1 475a 984a 3 708Netherlands Antilles - - 329 - 2 685a - 1 426a 145a 755a - 175a

Nicaragua .. - 8 2a 7a 3a 4a 5a

Panama 465 1 909 2 068a 3 289a 356a - 839a 935a

Saint Kitts and Nevis - -a -a -a -a -a -a

Saint Lucia - -a -a -a -a -a -a

Trinidad and Tobago - -a - 18a 1a 264 25 150Virgin Islands (United Kingdom) 2 901b 1 639a 3 444a - 830a 1 500a 1 371a 680a


Asia 24 801 52 190 49 499 29 195 38 044 80 942 31 836

West Asia - 84 2 533 - 173 - 1 262 1 660 1 262 1 090Bahrain 58 305 48 181 163 10 216Cyprus 12 35 33 69 146 202 218Iran, Islamic Republic of - 5g 77 78a 10a 738a 472a 406a

Jordan - 21 - 43 2a 2a 5a 10a 6a

Kuwait - 103 1 740 - 969 - 1 867 23 - 303 323Lebanon 5 6 19a - 1a 5a - 13a - 3a

Oman 3 2 1a - 5a 3a - 2a - 1a

Qatar 30h 40a 20a 20a 30a 23a 24a

Saudi Arabia - 54 243 215a 74a 50a 99a - 323a

Turkey 42 110 251 367 645 870 497Yemen .. .. .. .. .. .. ..

Central Asia - - 1 179 360 23 152Armenia .. .. .. 12 13 8a 11a

Azerbaijan .. .. .. 137 336 - 158a

Georgia .. .. .. .. 1 - -a

/...

309

Annex B

Annex table B.2. FDI outflows, by home region and economy, 1990-2001 (concluded) (Millions of dollars)


Kazakhstan - - 1 8 4 10a - 28a

Kyrgyzstan .. .. .. 23 6 5 11a

Turkmenistan .. .. .. .. .. .. ..South, East and South-East Asia 24 885 49 658 49 671 30 278 36 023 79 657 30 593

Bangladesh - 13 5 30 24 20a 25a

Brunei Darussalam .. 40a 10a 10a 20a - 3 9a

Cambodia .. .. .. .. .. .. ..China 2 357 2 114 2 563 2 634 1 775 916 1 775a

Hong Kong, China 12 946 26 531 24 407a 16 978 19 336 59 374 8 977India 37 240 113 47 80 336 757Indonesia 967 600 178 44 72 150 125Korea, Republic of 1 842 4 670 4 449 4 740 4 198 4 999 2 600Lao People’s Democratic Republic -g -a -a -a -a -a -a

Malaysia 1 050 3 768 2 675 863 1 422 2 026 267Maldives - - .. .. .. .. ..Pakistan - 2 7 - 25 5 1 11 31Philippines 64 182 136 160 30 107 161Singapore 2 341 6 827 9 465 795 4 277 4 966 10 216Sri Lanka 5 7 5 13 24 2 -Taiwan Province of China 2 917 3 843 5 243 3 836 4 420 6 701 5 480Thailand 349 816 447 123 344 52 171

The Pacific 72 64 79 63 88 36 62Fiji 10 10 30 63 53 6 41a

Kiribati .. .. .. .. .. .. ..New Caledonia .. .. .. .. .. .. ..Papua New Guinea 63 54a 49a -a 35a 28a 21a

Samoa .. .. .. .. .. - ..Solomon Islands -d .. .. .. .. - ..Tonga -f .. .. .. .. 1 ..

Central and Eastern Europe 275 1 292 4 215 2 492 2 437 4 012 3 518Albania 12a 10 10 1 7 6 -Belarus 8h 3 2 2 - 1 -Bosnia and Herzegovina 3a 29 - 2 .. .. .. ..Bulgaria - 8h - 29 - 2 - 17 3 10Croatia 10b 55 186 97 35 29 119Czech Republic 67a 153 25 127 90 43 96Estonia 3a 40 137 6 83 63 184Hungary 26g - 3 431 481 249 555 337Latvia - 33a 3 6 54 17 10 7Lithuania 1h - 27 4 9 4 7Moldova, Republic of 9 - - - - - -Poland 19 53 45 316 31 17 14Romania 6 - - 9 - 9 16 - 11 - 17Russian Federation 343b 923 3 184 1 270 2 208 3 208 2 618Slovakia 12a 52 95 147 - 371 17 15Slovenia - 2a 6 36 - 2 38 66 104TFYR Macedonia .. - 1 1 1 - 1Ukraine 9 - 5 42 - 4 7 1 23

Memorandum

Least developed countries j 161 28 792 - 327 421 738 277

Oil-exporting countries k 1 752 3 710 823 - 1 053 2 168 704 1 206

All developing countries, excluding China 29 664 59 195 72 234 47 622 71 861 103 291 34 796

Source: UNCTAD, FDI/TNC database.a Estimates. For details, see “Definitions and Sources” in annex B.b Annual average from 1993 to 1995.c Annual average from 1990 to 1991.d Annual average from 1990 to 1992.e Annual average from 1992 to 1995.f Annual average from 1990 to 1993.g Annual average from 1991 to 1995.h 1995.i Annual average from 1994 to 1995.j Least developed countries include: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape

Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia,Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Maldives,Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, SolomonIslands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania, Vanuatu, Yemen and Zambia.

k Oil-exporting countries include: Cameroon, Algeria, Angola, Bahrain, Brunei Darussalam, Congo, Ecuador, Gabon, Indonesia,Islamic Republic of Iran, Iraq, Kuwait, Libyan Arab Jamahiriya, Nigeria, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Trinidadand Tobago, United Arab Emirates and Venezuela.

310


Annex table B.3. FDI inward stock, by host region and economy,1980, 1985, 1990, 1995, 2000 and 2001a


Host region/economy 1980 1985 1990 1995 2000 2001

World 635 534 913 182 1 871 594 2 911 725 6 258 263 6 845 723

Developed economies 389 715 568 670 1 382 978 2 021 303 4 124 261 4 504 122

Western Europe 232 081 285 544 780 813 1 192 427 2 498 247 2 776 627

European Union 216 840 267 618 733 303 1 115 081 2 381 954 2 648 651Austria 3 163 3 762 9 884 17 532 30 431 34 400a

Belgium and Luxembourg 7 306 18 447 58 388 120 211 431 111b 482 107b

Denmark 4 193 3 613 9 192 23 801 64 397 64 397a

Finland 540 1 339 5 132 8 465 24 272 26 267France 56 096c 66 870c 100 043 191 434 257 806 310 430d

Germany 36 630 36 926 119 618 192 898 449 066 480 899d

Greece 4 524 8 309 7 902e 13 192e 12 499 14 059d

Ireland f 1 657 2 557 3 410 9 614 65 056 74 831Italy 8 892 18 976 57 985 63 456 113 046 107 921h

Netherlands 19 167 24 921 68 731 116 049 243 430 284 212d

Portugal 3 665g 4 599g 10 571 18 381 28 161a 32 671a

Spain 5 141 8 939 65 916 109 200 144 508 158 405Sweden 2 852h 4 333 12 636 31 089 82 748 81 275a

United Kingdom 63 014 64 028 203 894 199 760 435 422 496 776

Other Western Europe 15 241 17 926 47 511 77 346 116 292 127 976Gibraltar f 33 98 263 432 532 531Iceland ..i, j 71i 147 129 491 626Malta f 156 286 465 922 3 020 3 334Norway 6 577k 7 412k 12 391 18 800 30 367 33 178d

Switzerland 8 506 10 058 34 245 57 063 81 882 90 308

North America 137 209 249 272 507 793 658 843 1 415 854 1 522 552Canada 54 163 64 657 112 882 123 290 201 600 201 489United States 83 046 184 615 394 911 535 553 1 214 254 1 321 063

Other developed economies 20 425 33 855 94 372 170 033 210 161 204 943Australia 13 173 25 049 73 644 104 074 113 320 111 127Israel 1 619l 2 023l 2 940l 6 269l 21 450 23 089Japan 3 270 4 740 9 850 33 508 50 323 50 319New Zealand 2 363 2 043 7 938 26 182 25 069 20 408


Africa 34 326 35 473 50 291 77 863 142 379 158 840

North Africa 5 887 9 272 15 655 24 751 37 379 42 436Algeria f 1 320 1 281 1 355 1 465 3 441 4 637Egypt f 2 260 5 703 11 043 14 102 20 845 21 355Libyan Arab Jamahiriya f ..j ..j ..j ..j ..j ..j

Morocco f 189 440 917 3 320 6 141 8 798Sudan f 28 76 54 164 1 396 1 970Tunisia 6 155g 7 196g 7 615 10 967 11 451 11 672

Other Africa 28 439 26 201 34 637 53 112 105 000 116 405Angola f 61 675 1 024 2 921 7 977 9 096Benin f 32 34 159 381 625 756Botswana 698g 947g 1 309 1 126 1 920 1 734Burkina Faso f 18 24 39 74 149 175Burundi f 7 24 30 34 48 48Cameroon f 330 1 125 1 044 1 062 1 263 1 338Cape Verde .. .. 4m 38m 161m 162m

Central African Republic f 50 77 95 76 110 118Chad f 150 223 289 351 430 510Comoros n 2 2 17 19 24 26Congo f 314 484 569 671 856 915Congo, Democratic Republic of f 709 620 546 541 617 649Côte d’Ivoire f 530 699 975 1 624 3 427 3 685Djibouti o 4 4 6 17 34 37Equatorial Guinea .. 6p 25p 239p 899p 987p

Eritrea .. .. .. .. 141q 176q

Ethiopia f 110 114 124 165 941 961Gabon f 512 833 1 208 753 194 394Gambia 127g 127g 157 185 216 221Ghana f 229 272 315 822 1 257 1 347Guinea o 1 2 69 131 286 324

/...

311

Annex B

Annex table B.3. FDI inward stock, by host region and economy,1980, 1985, 1990, 1995, 2000 and 2001a (continued)



Guinea-Bissau r - 4 8 20 68 98Kenya f 386 476 668 731 995 1 045Lesotho s 5 25 154 1 342 2 441 2 559Liberia f 868 1 260 2 454 2 419 2 340 2 352Madagascar f 37 48 104 169 338 446Malawi f 100 137 185 250 491 549Mali t 12 33 38 162 477 580Mauritania f ..j 39 57 92 108 138Mauritius f 20 37 163 251 681 693Mozambique f 15 17 42 202 1 094 1 350Namibia 2 651u 2 667u 2 704u 2 594 1 807 1 906d

Niger f 188 203 284 361 435 448Nigeria f 2 405 4 417 8 072 14 065 20 184 21 289Rwanda f 54 133 213 231 253 262São Tomé and Principe .. .. -m -m 4m 5m

Senegal f 150 188 258 374 852 977Seychelles f 54 105 204 321 577 611Sierra Leone f 77 66 ..j ..j 17 21Somalia f 29 4 ..j ..j ..j ..j

South Africa 16 519 9 024 9 221 15 016 43 462 50 115d

Swaziland 243v 104 336 535 432 338Togo f 176 210 268 307 526 593Uganda f 9 7 4 272 1 255 1 484United Republic of Tanzania f 47 91 93 325 1 180 1 404Zambia f 330 425 987 1 518 2 325 2 397Zimbabwe f 186 187 124 342 1 085 1 090

Latin America and the Caribbean 50 297 80 019 117 001 201 426 613 094 692 978

South America 29 238 42 131 66 665 111 666 377 008 417 580Argentina 5 344 6 563 9 085w 27 991 73 088 76 269d

Bolivia 420 592 1 026 1 564 5 052 5 699d

Brazil 17 480 25 664 37 143 42 530 196 884b 219 342b

Chile 886 2 321 10 067 15 547 42 933x 48 441x

Colombia 1 061 2 231 3 500 6 407 12 299 14 777y

Ecuador 719 982 1 626 3 479z 6 941z 8 271z

Guyana f ..j ..j ..j 357 664 720Paraguay 212aa 301aa 399aa 643 1 237 1 389d

Peru 898 1 152 1 302 5 541 9 900 11 000d

Suriname f ..j 40 ..j ..j ..j ..j

Uruguay 727ab 794ab 1 007ab 1 464ab 2 088 2 408d

Venezuela 1 604 1 548 2 260 6 975 26 943 30 352

Other Latin America and the Caribbean 21 059 37 889 50 335 89 760 236 086 275 398Anguilla .. .. 11ac 68ac 227ac 255ac

Antigua and Barbuda s 23 94 292 438 577 631Aruba .. .. 132ad 204ad 733ad 409ad

Bahamas f 547 543 586 742 1 587 1 687Barbados f 102 124 170 225 306 323Belize f 12 10 73 153 284 318Bermuda f 5 131 8 053 13 849 23 997 56 746 66 604Cayman Islands ae 222 1 479 1 749 2 745 24 910 27 996Costa Rica 672 957 1 447 2 733z 5 206z 5 654z

Cuba f - - 2 40 74 79Dominica s - 11 71 197 271 285Dominican Republic 239 265 572 1 707z 5 214z 6 413z

El Salvador 154 181 212 293 1 973 2 241Grenada s 1 13 70 168 344 378Guatemala f 701 1 050 1 734 2 202 3 420 3 875Haiti f 79 112 149 153 215 218Honduras f 92 172 383 652 1 489 1 684Jamaica f 564 522 791 1 568 3 318 4 040Mexico 8 105af 18 802af 22 424 41 130 97 170 115 952Montserrat .. .. 40ag 68ag 84ag 88ag

Netherlands Antilles f 770 257 408 523 6 589 7 322Nicaragua f 109 109 115 354 1 373 1 505Panama 2 461ah 3 142ah 2 198ah 3 245 6 744 7 257Saint Kitts and Nevis ai 1 32 160 244 484 567Saint Lucia aj 94 197 319 517 798 849Saint Vincent and the Grenadines n 1 9 48 179 488 523Trinidad and Tobago 976 1 719 2 093 3 597z 6 990z 7 825z

Virgin Islands aj (United Kingdom) 1 39 240 1 622 8 472 10 419

/...

312


Annex table B.3. FDI inward stock, by host region and economy,1980, 1985, 1990, 1995, 2000 and 2001a (continued)




Asia 160 000 227 764 315 412 567 631 1 243 202 1 325 735

West Asia ..j 28 764 31 322 41 757 57 835 61 968Bahrain 61c 399c 552 2 403 5 772 5 864d

Cyprus f 460 789 1 146 1 579 2 062 2 226Iran, Islamic Republic of f 2 962 2 780 2 039 2 297 2 474 2 507Iraq f ..j ..j ..j ..j ..j ..j

Jordan ak 155 493 615 627 1 510 1 679Kuwait f 30 33 26 12 527 487Lebanon f 20 34 53 107 1 084 1 334Oman f 483 1 201 1 723 2 210 2 480 2 529Occupied Palestinian Territory .. .. .. .. 306al 357al

Qatar f 83 93 71 451 1 920 2 158Saudi Arabia f ..j 21 828 22 500 22 423 25 963 25 983Syrian Arab Republic f - 37 374 915 1 699 1 904Turkey 107 360 1 320 5 103z 9 335z 12 601z

United Arab Emirates f 409 482 751 1 770 1 836 1 681Yemen 195g 283g 180 1 882 888 683d

Central Asia .. .. .. 3 864 16 898 20 362Armenia .. .. .. 34l 574b 714b

Azerbaijan .. .. .. 177am 3 735 3 962Georgia .. .. .. 32 423an 583n

Kazakhstan .. .. .. 2 915 9 992 12 647Kyrgyzstan .. .. .. 144 419 459d

Tajikistan .. .. .. 40ao 144ao 166ao

Turkmenistan .. .. .. 415ap 913ap 1 063ap

Uzbekistan .. .. .. 106ao 697ao 768o

South, East and South-East Asia 161 170 199 000 284 090 522 011 1 168 470 1 243 405Afghanistan f 11 11 12 12 17 19Bangladesh 63 112 147aq 180aq 980aq 1 059aq

Bhutan .. .. 2ac 2ac 3ac 4c

Brunei Darussalam f 19 28 23 631 3 756 3 999Cambodia 38ar 38ar 38ar 356 1 551 1 664d

China 6 251l 10 499l 24 762l 137 435l 348 346 395 192d

Hong Kong, China 124 286as 129 750as 148 183as 174 063as 429 036 451 870d

India 1 177 1 075 1 668aq 5 652aq 18 916aq 22 319aq

Indonesia 10 274 24 971 38 883 50 601 60 638b 57 361b

Korea, Democratic People’s Republic of .. .. 572m 716m 1 046m 1 053m

Korea, Republic of 1 327 2 160 5 864 9 991 62 786 47 228Lao People’s Democratic Republic f 2 1 13 205 550 574Macao, China t 2 10 10 4 ..j ..j

Malaysia 5 169 7 388 10 318 28 732at 52 748at 53 302ar

Maldives o 5 3 25 61 118 131Mongolia .. .. -ag 38ag 182ag 245ag

Myanmar 746au 746au 913au 1 831au 3 191 3 314d

Nepal 1av 2av 12av 39av 97av 116Pakistan 691 1 079 1 928 5 552 6 896 6 608Philippines 1 281 2 601 3 268 6 086 12 440b 14 232b

Singapore 6 203 13 016 28 565 59 582 95 714b 104 323b

Sri Lanka 231 517 681aq 1 297aq 2 448aq 2 620aq

Taiwan Province of China 2 405 2 930 9 735aq 15 736aq 27 924aq 32 033aq

Thailand 981 1 999 8 209 17 452 24 468 28 227d

Viet Nam f 9 64 260 5 760 14 623 15 923

The Pacific 1 196 1 207 2 250 2 994 3 498 3 696Fiji 358 393 402aw 805aw 754aw 751aw

Kiribati ..- 1ax -ax 1ax 5ax 5ax

New Caledonia ak 28 35 76 110 129 132Papua New Guinea 748 683 1 582 1 667 2 041ay 2 219ay

Samoa f 1 2 9 29 53 55Solomon Islands t 28 32 70 126 126 120Tonga .. -az 1az 7az 18az 20z

Tuvalu .. .. .. -ba 1ba 1ba

Vanuatu t 33 62 110 249 372 393

/...

313

Annex B

Annex table B.3. FDI inward stock, by host region and economy,1980, 1985, 1990, 1995, 2000 and 2001a (concluded)



Central and Eastern Europe .. 49 3 661 40 508 131 829 160 352

Albania .. .. .. 211ao 578ao 759ao

Belarus .. .. .. 50ao 1 243ao 1 412ao

Bosnia and Herzegovina .. .. .. 21as 355an 519an

Bulgaria .. .. 108as 445as 3 162 3 850d

Croatia .. .. .. 473bb 5 155b 6 597b

Czech Republic .. .. 1 363bc 7 350 21 644 26 764Estonia .. .. .. 674bb 2 645 3 155Hungary .. 49g 569 11 919 19 804 23 562Latvia .. .. .. 615 2 081 2 216Lithuania .. .. .. 352 2 334 2 665Moldova, Republic of .. .. .. 93 459 609d

Poland .. .. 109 7 843 33 603 42 433d

Romania .. .. 766 1 150 6 517 7 636Russian Federation .. .. .. 5 465 19 255b 21 795b

Slovakia .. .. 81 810 4 634 6 109d

Slovenia .. .. 665bd 1 763 2 809 3 250d

TFYR Macedonia .. .. .. 33ba 389ba 919ba

Ukraine .. .. .. 910 3 843b 4 615b

Yugoslavia .. .. .. 329ao 1 319ao 1 484ao

Memorandum

Least developed countries be 4 590 6 303 9 457 18 487 36 423 40 230

Oil-exporting countries bf 12 032 58 318 79 792 112 351 174 674 181 231

All developing countries, excluding China 239 568 333 964 460 193 712 480 1 653 827 1 786 057


a Estimates. For details, see “Definitions and Sources” in annex B. For the countries for which the stock data are estimatedby either cumulating FDI flows or adding or subtracting flows to FDI stock in a particular year, notes are given below.

b Stock data after 1999 are estimated by adding flows.c Stock data prior to 1989 are estimated by subtracting flows.d Stock data for 2001 are estimated by adding flows.e Stock data from 1990 to 1998 are estimated by subtracting flows from the stock of 1999.f Stock data are estimated by accumulating flows since 1970.g Stock data prior to 1990 are estimated by subtracting flows.h Stock data prior to 1982 are estimated by subtracting flows.i Stock data prior to 1988 are estimated by subtracting flows.j Negative stock value. However, this value is included in the regional and global total.k Stock data prior to 1987 are estimated by subtracting flows.l Stock data prior to 1997 are estimated by subtracting flows.m Stock data are estimated by accumulating flows since 1987.n Stock data are estimated by accumulating flows since 1978.o Stock data are estimated by accumulating flows since 1973.p Stock data are estimated by accumulating flows since 1982.q Stock data are estimated by accumulating flows since 1997.r Stock data are estimated by accumulating flows since 1975.s Stock data are estimated by accumulating flows since 1977.t Stock data are estimated by accumulating flows since 1971.u Stock data prior to 1991 are estimated by subtracting flows.v Stock data prior to 1981 are estimated by subtracting flows.w Stock data for 1990 are estimated by subtracting flows from the stock of 1991.x Stock data are estimated by adding flows to the stock of 1995.y Stock for 2001 represent the value until June of 2001.z Stock data after 1990 are estimated by adding flows.aa Stock data up to 1993 are estimated by accumulating flows since 1970.ab Stock data up to 1999 are estimated by accumulating flows since 1970.ac Stock data are estimated by accumulating flows since 1990.ad Stock data are estimated by accumulating flows since 1989.ae Stock data are estimated by accumulating flows since 1974.af Stock data up to 1989 are estimated by accumulating flows since 1970.ag Stock data are estimated by accumulating flows since 1986.ah Stock data prior to 1995 are estimated by subtracting flows.ai Stock data are estimated by accumulating flows since 1980.aj Stock data are estimated by accumulating flows since 1976.ak Stock data are estimated by accumulating flows since 1972.

314


al Stock data are estimated by accumulating flows since 1996.am Stock data up to 1998 are estimated by accumulating flows since 1994.an Stock data after 1998 are estimated by adding flows.ao Stock data are estimated by accumulating flows since 1992.ap Stock data are estimated by accumulating flows since 1993.aq Stock data after 1988 are estimated by adding flows.ar Stock data prior to 1994 are estimated by subtracting flows.as Stock data prior to 1998 are estimated by subtracting flows.at Stock data after 1994 are estimated by adding flows.au Stock data prior to 1999 are estimated by subtracting flows.av Stock data up to 2000 are estimated by accumulating flows since 1972.aw Stock data after 1989 are estimated by adding flows.ax Stock data are estimated by accumulating flows since 1983.ay Stock data after 1997 are estimated by adding flows.az Stock data are estimated by accumulating flows since 1984.ba Stock data are estimated by accumulating flows since 1994.bb Stock data prior to 1996 are estimated by subtracting flows.bc Stock data prior to 1992 are estimated by subtracting flows.bd Stock data prior to 1993 are estimated by subtracting flows.be Least developed countries include: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia,

Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea,Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia,Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome andPrincipe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania,Vanuatu, Yemen and Zambia.

bf Oil-exporting countries include: Cameroon, Algeria, Angola, Bahrain, Brunei Darussalam, Congo, Ecuador, Gabon, Indonesia,Islamic Republic of Iran, Iraq, Kuwait, Libyan Arab Jamahiriya, Nigeria, Oman, Qatar, Saudi Arabia, Syrian Arab Republic,Trinidad and Tobago, United Arab Emirates and Venezuela.

Note: For data on FDI stock which are calculated as an accumulation of flows, price changes are not taken into account.

315

Annex B

Annex table B.4. FDI outward stock, by home region and economy,1980, 1985, 1990, 1995, 2000 and 2001a


Home region/economy 1980 1985 1990 1995 2000 2001

World 521 486 691 745 1 721 462 2 854 853 6 086 428 6 552 011

Developed economies 499 428 656 276 1 630 443 2 577 550 5 316 292 5 751 947

Western Europe 237 694 321 972 875 571 1 457 253 3 421 542 3 721 228

European Union 215 582 295 727 798 525 1 292 043 3 148 830 3 440 890Austria 530 1 343 4 273 11 702 24 820 26 300a

Belgium and Luxembourg 6 037 9 551 40 636 83 325 381 737b 449 044b

Denmark 2 065 1 801 7 342 24 703 64 048 64 048a

Finland 737 1 829 11 227 14 993 52 109 56 055France 24 281c 37 753c 120 179 204 431 432 662 515 475d

Germany 43 127 59 909 148 456 258 142 470 578 513 835d

Greece 2 923e 2 923e 2 948e 3 004e 5 744 5 137d

Ireland .. - 2 736f 4 624f 18 504f 23 900f

Italy 7 319 16 600 57 261 97 042 180 276 182 375 Netherlands 42 116 47 898 106 899 172 672 309 485 328 422a

Portugal 512g 583g 900 3 173 17 781 24 881a

Spain 1 931 4 455 15 652 36 243 165 873 185 954 Sweden 3 572h 10 768 50 720 73 143 123 125 122 615a

United Kingdom 80 434 100 313 229 294 304 847 902 087 942 848

Other Western Europe 22 112 26 245 77 047 165 210 272 712 280 338Gibraltar .. .. .. .. .. ..Iceland 59i 59i 75 179 663 922Malta .. .. .. 32 214b 221b

Norway 561 1 093 10 884 22 519 44 174j 42 769j

Switzerland 21 491k 25 093 66 087 142 479 227 660h 236 426h

North America 239 158 281 512 515 358 817 224 1 520 417 1 626 165Canada 23 783 43 143 84 837 118 209 226 986 244 491United States 215 375 238 369 430 521 699 015 1 293 431 1 381 674

Other developed economies 22 577 52 792 239 514 303 073 374 333 404 553

Australia 2 260 6 653 30 507 53 009 81 009 88 013Israel 179g 661g 1 169 3 937 9 395 9 789Japan 19 610 43 970 201 440 238 452 278 445 300 115New Zealand 529l 1 508l 6 398l 7 675 5 484 6 637

Developing economies 22 058 35 469 90 404 270 925 751 632 776 065

Africa 6 878 10 961 23 202 35 606 47 249 44 583North Africa 466 873 1 475 1 572 3 074 3 271

Algeria m 98 156 183 266 343 352Egypt n 39 91 163 391 732 744Libyan Arab Jamahiriya 162 287 624 279 1 230 1 314Morocco 155 333 490 607 736 828Tunisia 12g 7g 15 30 33 33

Other Africa 6 412 10 088 21 727 34 033 44 175 41 312Benin p - 2 2 2 92 114Botswana 438g 439g 447 650 543 479Burkina Faso q 3 3 4 13 24 28Burundi .. .. -r 1r 2r 2r

Cameroon s 23 53 150 227 255 257Cape Verde .. .. 1t 5t 5t 5t

Central African Republic u - 1 17 40 40 41Chad v 1 1 48 92 114 119Comoros .. .. 1w 2w 2w 2w

Côte d’Ivoire .. .. 31w 517w 697w 735w

Equatorial Guinea .. .. -r -r 4r 4r

Ethiopia .. .. .. .. 435x 504x

Gabon q 78 103 164 256 429 479Gambia .. .. 22 36 44 42Ghana .. .. .. .. 359y 412y

Guinea .. .. .. .. 8y 9y

Kenya u 18 60 99 117 231 308Lesotho .. .. -t -t -t -t

Liberia z 48 361 453 1 113 1 524 1 586d

Madagascar .. .. .. 3aa 3aa 4aa

Malawi .. .. .. .. 15j 18j

Mali u 22 22 22 23 136 171Mauritania .. .. 3ab 3ab 3ab 3ab

Mauritius .. -ac 2ac 94ac 133ac 135ac

Mozambique .. .. .. -aa 1aa 1aa

Namibia .. .. 2 342g 2 693 1 213 1 212d

Niger q 2 8 54 109 156 163Nigeria v 9 ..ad 2 586 3 975 4 358 4 452

/...

316


Annex table B.4. FDI outward stock, by home region and economy,1980, 1985, 1990, 1995, 2000 and 2001a (continued)



Rwanda .. .. -w ..w, ad 3w 4 w

Senegal o 7 43 49 96 141 155Seychelles ae 14 44 61 94 136 147South Africa 5 722 8 963 15 027 23 305 32 333 28 999 d

Swaziland 19af 9 38 136 90 52Togo ag 10 10 16 44 140 167Uganda .. .. .. 255ah 265ah 259ah

Zimbabwe .. 10ai 88ai 137ai 241ai 245ai

Latin America and the Caribbean 8 974 12 809 19 389 49 388 120 859 128 191

South America 6 983 8 072 11 560 25 147 62 284 64 186Argentina 5 997aj 5 945aj 6 106aj 10 696 20 859 20 736d

Bolivia 1ak 1ak 9 18 30 36 d

Brazil 652 1 361 2 397 5 826al 13 299al 11 041al

Chile 42 102 178 2 809am 18 293am 22 084am

Colombia 136 301 402 1 027 2 989 3 047an

Ecuador .. .. .. 73ao 275ao 249ao

Guyana .. .. .. 2ap -ap -ap

Paraguay 113aq 128aq 137aq 179 214 220 d

Peru 3 38 63 567 505 600 d

Uruguay 16ar 32as 30as 32as 54 73 d

Venezuela 23 165 2 239 3 918 5 766 6 099

Other Latin America and the Caribbean 1 991 4 736 7 828 24 240 58 575 64 006Aruba .. .. .. 10ap 14ap 27ap

Bahamas at 285 154 614 1 286 1 385 1 385 d

Barbados m 5 12 23 32 40 41Belize .. .. .. 12aa 47aa 55aa

Bermuda z 727 1 691 1 550 2 626 14 942 12 133 d

Cayman Islands au 5 85 694 1 984 16 247 19 059Costa Rica v 7 27 44 67 91 96Dominica .. .. .. .. -x - x

Dominican Republic .. .. .. 38ap 65ap 68ap

El Salvador .. .. 54av 53av 74 64Grenada .. .. -w -w 1w 1 w

Guatemala .. .. .. .. 51y 65 y

Haiti .. .. .. 1ao 4ao 4 o

Jamaica m 5 5 42 308 709 798Mexico 136aw 533aw 575aw 4 132 8 284j 11 992 j

Netherlands Antilles ae 9 10 21 23 ..ad ..ad

Nicaragua .. .. .. -ap 8ap 13ap

Panama z 811 2 204 4 188 4 939 4 004 4 939 d

Saint Kitts and Nevis .. .. -w -w -w - w

Saint Lucia .. .. -w 1w 1w - w

Saint Vincent and the Grenadines .. .. 1ax 1ax 1ax 1ax

Trinidad and Tobago .. 15ai 22ai 24ai 297ai 447ai

Virgin Islands (United Kingdom) .. .. .. 8 704ap 15 828ap 16 509ap

Asia and the Pacific 6 206 11 699 47 813 185 931 583 524 603 290

Asia 6 193 11 662 47 711 185 417 582 681 602 385

West Asia 1 447 2 143 6 452 5 955 10 172 11 467Bahrain 600ay 599ay 719 1 044 1 740 1 956 d

Cyprus .. -ac 9ac 78ac 563ac 781ac

Iran, Islamic Republic of .. .. .. ..ad, ah 1 331ah 1 737ah

Jordan o 35 38 28 ..ad ..ad ..ad

Kuwait u 568 930 3 662 2 804 1 428 1 751Lebanon .. 42az 49az 94az 110az 107az

Oman .. 2ac 7ac 23ac 23ac 22ac

Qatar .. .. .. 30ao 163ao 188ao

Saudi Arabia ba 239 508 1 873 1 621 2 064 1 741Turkey .. .. .. 268aa 2 511aa 3 008aa

United Arab Emirates bb 5 19 99 98 323bc 256bc

Yemen .. 4az 5az 5az 5az 5az

Central Asia .. .. .. - 553 705Armenia .. .. .. .. 33bd 44bd

Azerbaijan .. .. .. .. 474bd 632bd

Kazakhstan .. .. .. - 13 ..ad

Kyrgyzstan .. .. .. .. 33bd 44bd

South, East and South-East Asia 4 746 9 519 41 259 179 462 571 956 590 213Bangladesh .. .. 6ab 9ab 100ab 125ab

Brunei Darussalam .. .. .. 71aa 148aa 156aa

Cambodia .. .. .. 2ap 2ap 2ap

China .. 131 2 489be 15 802be 25 804be 27 579be

/...

317

Annex B

Annex table B.4. FDI outward stock, by home region and economy,1980, 1985, 1990, 1995, 2000 and 2001a (concluded)



Hong Kong, China 148bf 2 344bf 11 920bf 78 833bf 365 803 374 780 d

India bg 235 250 281 495 1 311 2 068Indonesia .. 55bh 77bh 1 295 2 339b 2 464b

Korea, Republic of 127 461 2 301 7 787 50 552 40 825Lao People’s Democratic Republic .. .. .. 1aa 1aa 1aa

Malaysia 197 1 374 2 671 11 143 18 688bd 18 955bd

Maldives .. .. -w -w -w -w

Mongolia .. .. .. -ao -ao -ao

Myanmar .. .. .. -bi -bi -bi

Pakistan 40 127 250 403 521 542Philippines 171 171 155 1 220 1 965b 2 126b

Singapore 3 718g 4 387g 7 808 35 050 53 009 63 225 d

Sri Lanka .. 1ac 8ac 35ac 86ac 86ac

Taiwan Province of China 97 204 12 888bj 25 144bj 49 187bj 54 667 bj

Thailand 13 14 404 2 173 2 439 2 610 d

The Pacific 13 37 101 514 843 905Fiji au 2au 15au 87au 132au 293au 334au

Kiribati .. .. .. -bi -bi -bi

Papua New Guinea 10 22 15be 383be 549be 570be

Solomon Islands .. .. -w -w -w - w

Tonga .. .. -ab -ab 1ab 1ab

Central and Eastern Europe .. .. 616 6 378 18 505 23 999Albania .. .. .. 48ah 82ah 82ah

Belarus .. .. .. 8ap 17ap 18ap

Bosnia and Herzegovina .. .. .. 13ap 40ap 40ap

Bulgaria .. .. .. 105bk 86 96 d

Croatia .. .. .. 703 734 853d

Czech Republic .. .. .. 345 738 832Estonia .. .. .. 68av 259 429Hungary .. .. 197 489 2 068 4 377Latvia .. .. .. 231 241 248d

Lithuania .. .. .. 1 29 48Moldova, Republic of .. .. .. 18 19 19 d

Poland .. .. 95 539 1 025 1 039 d

Romania .. .. 66 121 101 93 d

Russian Federation .. .. .. 3 015 11 794b 14 412 b

Slovakia .. .. .. 87 367 382 d

Slovenia .. .. 258 490 794 898 d

TFYR Macedonia .. .. .. .. 4y 5 y

Ukraine .. .. .. 97 106b 129 b

Memorandum

Least developed countries bl 92 456 703 1 851 3 268 3 538

Oil-exporting countries bm 1 782 2 794 12 256 15 733 22 258 23 663

All developing countries minus China 22 058 35 338 87 915 255 123 725 828 748 486

Source: UNCTAD, FDI/TNC database.aEstimates. For details, see “Definitions and Sources” in annex B. For the countries for which the stock data are estimated by eithercumulating FDI flows or adding or subtracting flows to FDI stock in a particular year, notes are given below.bStock data after 1999 are estimated by adding flows.cStock data prior to 1987 are estimated by subtracting flows.

d Stock data for 2001 are estimated by adding flows.e Stock data prior to 1999 are estimated by subtracting flows.f Stock data are estimated by accumulating flows since 1984.g Stock data prior to 1990 are estimated by subtracting flows.h Stock data prior to 1982 are estimated by subtracting flows.i Stock data prior to 1988 are estimated by subtracting flows.j Stock data after 1998 are estimated by adding flows.k Stock data prior to 1984 are estimated by subtracting flows.l Stock data prior to 1992 are estimated by subtracting flows.m Stock data are estimated by accumulating flows since 1970.n Stock data are estimated by accumulating flows since 1977.o Stock data are estimated by accumulating flows since 1972.p Stock data are estimated by accumulating flows since 1979.q Stock data are estimated by accumulating flows since 1974.r Stock data are estimated by accumulating flows since 1989.s Stock data are estimated by accumulating flows since 1973.t Stock data are estimated by accumulating flows since 1988.u Stock data are estimated by accumulating flows since 1975.v Stock data are estimated by accumulating flows since 1978.w Stock data are estimated by accumulating flows since 1990.x Stock data are estimated by accumulating flows since 1997.y Stock data are estimated by accumulating flows since 1996.z Stock data are estimated by using the inward stock of the United States from 1980 to 2000 as a proxy.

318


aa Stock data are estimated by accumulating flows since 1991.ab Stock data are estimated by accumulating flows since 1986.ac Stock data are estimated by accumulating flows since 1985.ad Negative stock value. However, this value is included in the regional and global total.ae Stock data are estimated by accumulating flows since 1976.af Stock data prior to 1981 are estimated by subtracting flows.ag Stock data are estimated by accumulating flows since 1971.ah Stock data are estimated by accumulating flows since 1992.ai Stock data are estimated by accumulating flows since 1983.aj Stock data prior to 1991 are estimated by subtracting flows.ak Stock data from 1980 to 1985 are estimated by accumulating flows since 1980.al Stock data after 1990 are estimated by adding flows.am Stock data after 1992 are estimated by adding flows.an Stock for 2001 represent the value until June of 2001.ao Stock data are estimated by accumulating flows since 1995.ap Stock data are estimated by accumulating flows since 1993.aq Stock data prior to 1995 are estimated by subtracting flows.ar Stock data prior to 1983 are estimated by subtracting flows.as Stock data from 1988 to 1999 are estimated by adding flows to the stock of 1987.at Stock data are estimated by using the inward stock of the United States from 1980 to 2000 as a proxy. Stock data from 1988

to 1991 are estimated by subtracting flows from the stock of 1992au Stock data are estimated by accumulating flows since 1980.av Stock data prior to 1996 are estimated by subtracting flows.aw Stock data are estimated by using the inward stock of the United States from 1980 to 1991 as a proxy.ax Stock data are estimated by accumulating flows since 1987.ay Stock data prior to 1989 are estimated by subtracting flows.az Stock data are estimated by accumulating flows since 1982.ba Stock data are estimated by using the inward stock of Canada and the United States from 1980 to 1991 and France, Netherlands

and the United States from 1995 to 1997as a proxy.bb Stock data are estimated by using the inward stock of the United States from 1980 to 1997 as a proxy.bc Stock data after 1997 are estimated by adding flows.bd Stock data are estimated by accumulating flows since 1998.be Stock data after 1989 are estimated by adding flows.bf Stock data are estimated by using the inward stock of the United States from 1980 to 1983, and by using the inward stock of

the United States and China as a proxy from 1984 to 1997 as a proxy.bg Only the stock data for 1992 is available. Stock data prior to 1992 are estimated by subtracting flows, whereas stock data

after 1992 are estimated by adding flows.bh Stock data are estimated by using the inward stock of Germany and the United States from 1984 to 1992 as a proxy.bi Stock data are estimated by accumulating flows since 1994.bj Stock data after 1988 are estimated by adding flows.bk Stock data prior to 1998 are estimated by subtracting flows.bl Least developed countries include: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cape

Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia,Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Maldives,Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, SolomonIslands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania, Vanuatu, Yemen and Zambia.

bm Oil-exporting countries include: Cameroon, Algeria, Angola, Bahrain, Brunei Darussalam, Congo, Ecuador, Gabon, Indonesia,Islamic Republic of Iran, Iraq, Kuwait, Libyan Arab Jamahiriya, Nigeria, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Trinidadand Tobago, United Arab Emirates and Venezuela.

Note: For data on FDI stock which are calculated as an accumulation of flows, price changes are not taken into account.

319

Annex B

Annex table B.5. Inward and outward FDI flows as a percentage of gross fixed capitalformation, by region and economy, 1990-2000

(Per cent)

Region/economy 1990-1995 1996 1997 1998 1999 2000 (Annual average)

Worldinward 4.1 5.9 7.4 11.0 16.5 22.0outward 4.8 6.2 7.4 11.0 15.9 20.6

Developed economiesinward 3.6 4.8 6.0 10.7 17.4 25.0outward 5.5 7.3 8.9 13.9 20.1 25.9

Western Europeinward 5.4 6.5 8.3 15.6 28.2 49.0outward 7.9 11.4 14.6 24.7 41.9 59.9

European Unioninward 5.5 6.5 8.1 15.7 28.5 50.1outward 7.7 10.8 14.0 24.8 41.8 60.0

Austriainward 2.9 8.2 5.5 9.1 6.1 19.8outward 3.4 3.6 4.1 5.5 6.8 12.8

Belgium and Luxembourginward 19.7 24.5 22.3 40.7 233.2 468.8outward 13.7 14.0 13.5 51.7 213.4 462.0

Denmarkinward 8.7 2.3 8.4 21.5 44.4 90.8outward 8.6 7.4 12.6 12.4 45.1 68.5

Finlandinward 4.1 5.1 9.6 50.3 19.0 37.7outward 8.0 16.6 24.0 77.3 27.2 102.6

Franceinward 6.0 7.6 9.2 11.6 17.2 16.9outward 8.8 10.6 14.1 18.2 44.1 69.1

Germanyinward 0.9 1.3 2.7 5.4 12.4 48.7outward 5.3 9.8 9.2 19.6 24.8 12.4

Greeceinward 5.3 4.4 4.1 0.3 2.1 4.2outward 0.1 -0.1 0.6 1.0 2.0 8.2

Irelandinward 12.8 19.2 17.0 58.4 67.0 107.1outward 4.0 5.3 6.2 20.7 19.2 17.6

Italyinward 1.8 1.6 1.7 1.2 3.1 6.3outward 3.0 3.8 4.9 5.6 3.0 5.8

Netherlandsinward 12.4 21.3 15.3 48.9 46.6 63.8outward 22.4 41.1 33.6 48.5 65.1 86.7

Portugalinward 8.4 5.7 9.6 11.3 4.0 21.9outward 1.8 3.0 7.4 13.9 10.2 25.9

Spaininward 9.5 5.6 7.0 8.9 10.9 26.3outward 3.2 4.6 11.5 14.3 29.0 38.3

Swedeninward 15.2 12.3 31.1 52.0 153.8 60.2outward 17.1 11.3 35.8 64.8 55.4 104.5

United Kingdominward 9.7 12.5 15.1 30.2 34.9 46.4outward 14.7 17.4 28.0 49.9 80.0 101.0

Other Western Europeinward 3.6 5.8 11.2 13.8 21.6 27.8outward 11.4 22.1 25.0 22.9 43.4 59.8

Icelandinward 0.2 5.7 9.6 7.6 3.5 8.0outward 1.4 4.3 3.5 3.8 5.7 18.2

Maltainward 10.2 28.9 9.6 31.1 96.5 69.5outward 0.2a 0.6 2.0 1.7 5.3 3.1

Norwayinward 2.9 6.2 8.4 9.1 19.7 20.5outward 5.0 14.7 11.8 6.0 15.5 23.8

Switzerlandinward 3.9 5.2 13.2 17.1 22.3 32.3outward 14.5 27.0 35.3 35.8 63.4 84.5

North Americainward 4.5 7.1 7.9 12.5 18.0 19.8outward 6.1 7.4 8.2 10.4 11.1 11.4

/...

320


Annex table B.5. Inward and outward FDI flows as a percentage of gross fixed capitalformation, by region and economy, 1990-2000 (continued)

(Per cent)


Canadainward 5.9 9.2 9.7 19.4 18.7 47.3outward 6.6 12.5 19.3 29.3 12.0 33.7

United Statesinward 4.3 7.0 7.8 11.9 18.0 17.5outward 6.1 7.0 7.2 8.9 11.1 9.6

Other developed economiesinward 0.8 0.7 1.1 1.0 1.7 2.1outward 2.3 2.0 2.5 2.5 1.6 3.0

Australiainward 9.0 6.7 8.1 7.1 6.2 14.1outward 3.7 7.8 6.8 3.9 -3.2 6.0

Israelinward 3.4 5.6 6.7 7.8 12.9 19.3outward 3.3 4.2 3.3 4.7 3.6 12.3

Japaninward 0.1 - 0.3 0.3 1.1 0.7outward 2.2 1.8 2.1 2.3 1.9 2.6

New Zealandinward 25.2 15.4 19.2 11.1 12.8 33.2outward 7.7 -10.6 -0.3 8.7 7.3 10.0

Developing economiesinward 5.7 9.1 11.1 11.4 13.4 13.4outward 2.5 3.8 4.0 3.1 3.5 5.8

Africainward 4.9 5.9 10.0 8.3 11.9 8.1outward 2.3 1.6 3.2 2.7 2.3 0.8

North Africainward 3.9 3.5 5.9 5.6 9.6 5.5outward 0.1 0.3 1.1 0.7 0.7 0.4

Algeriainward 0.2 2.3 2.4 4.0 4.1 3.8outward 0.1 - 0.1 - 0.4 0.2

Egyptinward 5.8 5.1 6.1 6.1 15.4 5.8outward 0.4 - 1.1 0.2 0.4 0.2

Libyan Arab Jamahiriyainward 1.1 -2.7 -1.5 -2.8 -2.5 -2.8outward -0.7 1.3 5.3 5.5 4.4 1.9

Moroccoinward 6.7 5.0 15.6 4.2 10.2 2.5outward 0.3 0.4 0.1 0.3 0.1 0.7

Sudaninward 0.6 - 6.8 22.6 25.6 23.8outward .. .. .. .. .. ..

Tunisiainward 10.1 7.7 7.8 13.6 6.9 15.2outward 0.1 0.1 0.2 - - -

Other Africainward 5.8 7.7 12.8 10.6 14.1 10.5outward 4.4 2.6 4.7 4.3 3.8 1.2

Angolainward 39.3 9.0 21.1 71.8 104.5 35.2outward - - - - - -

Benininward 17.6 6.6 6.8 8.5 13.9 22.4outward .. 3.1 3.2 0.5 5.3 9.4

Botswanainward -2.4 6.4 8.6 7.8 2.7 4.4outward 1.3 -0.1 0.4 0.3 0.1 0.2

Burkina Fasoinward 1.3 2.6 1.9 1.3 2.0 3.9outward 0.3 0.1 0.2 0.7 0.7 -

Burundiinward 0.6 - - 3.7 0.3 21.8outward 0.1 - 0.1 0.7 1.3 -

Camerooninward -0.7 2.5 3.1 3.1 2.3 2.1outward 0.8 0.9 0.4 0.1 0.2 0.2

Cape Verdeinward 3.1 23.6 10.4 8.2 43.4 19.5outward 0.5 0.2 - - 0.3 -

/...

321

Annex B


(Per cent)


Central African Republicinward -1.8 10.8 5.6 3.5 8.5 4.8outward 3.3 1.4 -1.3 0.8 0.1 -

Chadinward 9.0 11.9 7.9 6.6 5.9 5.2outward 8.0 2.5 2.2 2.3 1.8 1.6

Comorosinward 1.2 1.6 0.1 10.0 1.3 5.9outward 2.4b .. .. .. .. ..

Congoinward 4.2 2.4 -2.4 24.8 28.8 -8.1outward 0.3 0.5 0.7 0.2 2.7 0.3

Congo, Democratic Republic ofinward -0.3 5.9 -10.8 13.4 2.6 5.3outward .. .. .. .. .. ..

Côte d’Ivoireinward 12.3 22.4 29.6 22.1 20.4 21.3outward 10.3 2.4 2.3 1.9 3.1 1.7

Djiboutiinward 7.7c 7.4 5.1 4.4 8.9 4.7outward .. .. .. .. .. ..

Equatorial Guineainward 52.9 109.3 5.9 5.7 25.2 23.9outward - -0.1 0.3 0.2 0.2 0.2

Eritreainward .. 19.9 14.4 9.9 11.7 15.2outward .. .. .. .. .. ..

Ethiopiainward 1.0 1.9 27.5 23.4 6.7 14.9outward .. .. 21.7 22.8 -4.4 -0.1

Gaboninward -6.2 -37.8 -23.9 10.3 -12.8 19.5outward 1.7 0.2 1.6 2.3 6.1 3.3

Gambiainward 15.9 21.7 29.2 30.9 64.4 59.7outward 5.8 6.4 7.7 7.3 5.8 6.5

Ghanainward 7.1 8.4 5.0 3.3 3.7 9.2outward .. 10.5 3.1 1.8 4.6 4.2

Guineainward 2.6 3.5 2.6 2.8 8.7 5.1outward .. 0.1 0.2 0.2 0.4 0.3

Guinea-Bissauinward 2.7 1.7 17.7 16.6 22.8 60.0outward .. .. .. .. .. ..

Kenyainward 1.2 0.7 2.1 2.2 2.6 10.3outward 0.2 1.4 0.2 0.8 1.9 3.2

Lesothoinward 44.4 52.0 47.8 60.2 37.7 31.1outward 0.1d .. .. .. .. ..

Madagascarinward 4.2 2.2 3.3 3.3 12.4 13.6outward 0.2 -0.2 -0.4 0.2 - 0.2

Malawiinward 5.5 19.6 8.9 36.1 26.8 19.8outward .. 0.9 0.4 2.9 1.3 1.4

Maliinward 3.8 7.6 12.5 6.9 10.1 23.8outward - 0.6 0.8 5.2 9.8 6.3

Mauritaniainward 4.1 3.3 0.5 0.1 0.5 3.3outward 0.1e .. .. .. .. ..

Mauritiusinward 2.4 3.3 5.0 1.3 4.2 25.9outward 1.7 0.2 0.3 1.4 0.5 1.2

Mozambiqueinward 6.3 13.1 10.5 27.4 30.0 11.0outward -f 0.1 -0.1 - - -

Namibiainward 16.7 15.7 11.7 9.9 14.3 24.7outward 0.3 -2.6 0.1 -0.2 -0.2 1.5

Nigerinward 8.0 8.4 11.1 3.5 0.1 10.2outward 3.9 7.4 3.6 4.0 0.1 5.4

Nigeriainward 28.1 20.2 13.5 11.9 12.4 10.0outward 14.1 0.5 0.5 1.2 1.1 0.9

Rwandainward 1.4 1.1 1.0 2.4 0.5 2.9outward -0.2 0.6 0.5 0.1 0.3 0.3

/...

322



(Per cent)


São Tomé and Principeinward 0.1c 1.3 0.6 2.7 4.2 12.0outward .. .. .. .. .. ..

Senegalinward 4.5 1.0 22.3 7.5 15.1 10.2outward 0.8 0.3 0.1 1.1 0.6 3.0

Seychellesinward 20.4 18.0 31.7 26.3 26.4 31.3outward 4.2 7.9 5.8 1.4 4.0 4.1

Sierra Leoneinward 4.8 22.4 22.6 -25.9 21.0 12.2outward 0.4 - - -0.1 - -

Somaliainward 4.1e .. .. .. .. ..outward .. .. .. .. .. ..

South Africainward 1.3 3.5 15.8 2.5 7.6 4.7outward 4.8 4.5 9.7 8.0 8.0 1.4

Swazilandinward 26.6 6.1 -3.5 34.6 20.5 -5.0outward 11.4 -3.1 -2.3 5.5 1.9 -5.0

Togoinward 5.5 14.2 11.3 19.3 34.9 28.5outward 3.1 6.7 2.2 10.3 20.5 7.8

Ugandainward 5.6 11.5 15.5 18.5 21.1 22.7outward 4.7 1.0 1.3 1.8 -0.8 -2.5

United Republic of Tanzaniainward 3.7 13.9 14.0 12.8 13.8 12.2outward -g - - - - -

Zambiainward 26.9 8.2 14.1 37.3 29.3 22.9outward .. .. .. .. .. ..

Zimbabweinward 2.1 4.2 8.0 44.0 7.2 2.5outward 0.7 2.7 1.7 0.9 1.1 0.8

Latin America and the Caribbeaninward 7.4 12.6 16.6 17.1 25.9 20.7outward 1.2 1.5 2.9 3.4 3.2 2.4

South America - - - - - -inward 5.4 11.8 15.9 17.4 32.9 25.4outward 1.2 1.2 2.7 3.0 4.0 3.8

Argentinainward 9.2 14.1 16.1 11.5 47.2 24.2outward 1.7 3.3 6.4 3.9 2.4 2.0

Boliviainward 16.7 35.6 58.4 48.4 62.3 47.0outward 0.2 0.2 0.1 0.1 0.2 0.9

Brazilinward 2.0 7.2 11.8 18.6 28.2 28.4outward 0.7 -0.3 0.7 1.8 1.7 2.0

Chileinward 13.6 23.2 23.2 22.4 59.9 23.1outward 3.8 5.9 8.3 13.5 31.5 30.1

Colombiainward 8.0 14.8 25.8 15.2 12.8 22.4outward 0.8 1.6 3.8 4.3 1.0 2.4

Ecuadorinward 11.6 14.8 19.2 21.0 31.9 32.7outward 0.7 0.7 6.8 -2.0 0.9 -0.6

Guyanainward 31.0 30.0 15.9 22.6 29.0 42.3outward -g -0.3 -0.1 -0.2 -1.2 1.3

Paraguayinward 6.0 6.6 10.6 17.7 3.9 5.9outward 0.4 0.2 0.3 0.3 0.3 0.4

Peruinward 10.4 25.9 12.1 13.8 20.2 6.3outward 0.1 -0.1 0.6 0.5 1.1 0.9

Surinameinward -8.4 6.6 -2.9 4.8 -45.1 -159.2outward .. .. .. .. .. ..

Uruguayinward 3.9 4.8 4.0 4.8 7.9 10.8outward - - 0.4 0.3 1.3 0.3

Venezuelainward 8.3 19.6 33.3 24.6 20.2 25.9outward 3.4 4.6 3.0 1.3 3.1 0.6

/...

323

Annex B


(Per cent)


Other Latin America and the Caribbeaninward 12.4 15.6 18.6 16.4 14.1 13.4outward 1.1 2.7 3.3 4.3 1.8 0.2

Anguillainward 68.9h 144.0 95.3 101.6 109.3 113.5outward .. .. 4.5 3.6 2.9 2.9

Antigua and Barbudainward 23.3 9.0 10.1 10.3 12.4 10.4outward 0.9g 0.2 -1.3 -0.4 -0.3 0.3

Bahamasinward 3.6 14.3 32.7 22.6 23.5 38.8outward - - 0.1 0.2 - -

Barbadosinward 5.0 5.3 4.4 3.6 3.6 4.1outward 0.7 1.4 0.4 0.2 0.3 0.2

Belizeinward 12.7 12.1 8.2 12.4 27.5 10.7outward 1.7 4.1 2.7 3.6 4.8 3.8

Costa Ricainward 13.8 20.9 17.3 21.0 20.6 14.8outward 0.2 0.3 0.2 0.2 0.2 0.2

Cubainward .. .. .. .. .. ..outward .. .. .. .. .. ..

Dominicainward 38.1 26.2 27.5 9.2 24.3 12.9outward .. .. .. .. .. ..

Dominican Republicinward 10.8 3.9 14.3 19.1 32.2 20.6outward 0.4g 0.6 0.1 0.1 0.1 0.1

El Salvadorinward 1.4 -0.3 3.3 55.2 10.8 7.8outward -f 0.1 - 0.1 1.1 -0.2

Grenadainward 22.1 16.4 29.1 38.2 27.5 21.2outward - -0.1 0.4 0.2 0.3 -0.2

Guatemalainward 5.7 3.7 3.1 20.8 4.7 7.4outward -0.2 0.1 0.3 0.2 -0.1 1.2

Haitiinward -0.1 0.5 0.5 1.1 2.6 1.3outward -2.9 0.1 0.1 0.1 -0.1 0.1

Hondurasinward 6.6 9.2 10.6 6.7 14.7 18.1outward - - - - - -

Jamaicainward 13.3 9.8 9.4 18.6 27.8 22.3outward 4.0 4.9 2.6 4.1 5.0 3.5

Mexicoinward 12.7 16.7 18.0 13.6 12.3 12.2outward 0.4 0.1 1.4 1.5 1.4 0.8

Montserratinward 21.2h -1.5 12.8 10.4 37.7 19.9outward .. .. .. .. .. ..

Nicaraguainward 10.3 19.1 28.3 26.6 31.5 31.8outward 0.1i -1.6 0.2 1.0 0.3 0.5

Panamainward 16.2 20.2 56.6 49.4 22.4 22.9outward 53.1 92.7 90.1 125.3 12.2 -31.8

Saint Kitts and Nevisinward 26.8 31.2 16.3 25.9 53.1 63.3outward -0.1 -0.2 0.3 0.1 0.2 -0.1

Saint Luciainward 33.9 13.0 30.9 52.0 44.8 27.8outward 0.2 -0.3 0.1 -0.2 - -

Saint Vincent and the Grenadinesinward 34.8 54.1 106.2 88.4 52.4 32.0outward 0.6e .. .. .. .. ..

Trinidad and Tobagoinward 33.8 37.4 65.2 46.9 44.7 47.4outward 0.1 0.1 -1.2 0.1 18.3 1.8

Asia and the Pacificinward 5.3 8.3 9.2 9.5 9.6 11.6outward 3.0 4.8 4.5 3.0 3.8 7.4

Asiainward 5.2 8.2 9.2 9.5 9.6 11.6outward 3.0 4.8 4.5 3.0 3.8 7.4

/...

324



(Per cent)


West Asiainward 0.9 1.8 3.3 3.6 0.2 0.3outward -0.3 1.6 -0.1 -0.7 0.9 0.6

Bahraininward 28.0 271.1 43.3 20.7 50.4 33.3outward 5.5 40.4 6.3 20.8 18.1 0.9

Cyprusinward 6.1 3.1 4.9 4.4 8.2 10.6outward 0.8 2.0 2.1 4.4 9.8 13.2

Iran, Islamic Republic ofinward 0.2 0.1 0.1 - - -outward -0.1j 0.2 0.2 - 0.9 0.5

Iraqinward -f .. .. .. .. ..outward .. .. .. .. .. ..

Jordaninward 0.7 0.8 19.3 18.5 10.3 2.3outward -1.2 -2.1 0.1 0.1 0.3 0.6

Kuwaitinward -0.1 7.9 0.5 1.1 1.5 0.4outward -2.8 39.5 -23.7 -35.7 0.5 -7.2

Lebanoninward 0.5 2.1 3.8 4.2 7.0 10.0outward -0.1 0.2 0.5 - 0.1 -0.4

Omaninward 5.8 2.9 2.3 3.0 0.9 1.0outward 0.1 0.1 - -0.1 0.1 -0.1

Occupied Palestinian Territoryinward .. 0.4 9.6 3.9 1.1 5.3outward .. .. .. .. .. ..

Qatarinward 3.9 10.7 12.1 11.5 3.5 7.8outward 1.2c 1.3 0.6 0.7 0.9 0.7

Saudi Arabia - - - - - -inward 1.5 -4.7 11.1 16.3 -3.1 -6.9outward -0.3 1.0 0.8 0.3 0.2 0.4

Syrian Arab Republicinward 1.2 0.6 0.6 0.6 1.9 1.9outward -0.7c -0.6 -0.6 -0.6 -1.9 -1.9

Turkeyinward 2.0 1.6 1.6 1.9 1.9 2.2outward 0.1 0.2 0.5 0.7 1.6 2.0

United Arab Emiratesinward 1.4 2.7 1.8 1.9 -7.8 2.0outward -0.1 1.0 1.6 -0.2 0.9 1.3

Yemeninward 5.8 -4.0 -12.0 -13.4 -14.4 -12.9outward .. .. .. .. .. ..

Central Asia - - - - - -inward 6.5 25.9 39.7 32.2 29.2 22.9outward -h - - 3.2 6.9 0.4

Armeniainward 3.7 6.2 19.5 75.7 43.0 39.3outward .. .. .. 3.8 4.3 2.4

Azerbaijaninward 19.3h 72.0 74.8 65.9 32.1 9.2outward .. .. .. 8.3 21.2 0.1

Georgiainward 12.0h 18.4 43.4 30.0 20.1 29.8outward .. .. .. .. 0.2 -0.1

Kazakhstaninward 16.4g 46.2 58.5 35.4 53.8 41.0outward -h - - 0.2 0.1 0.3

Kyrgyzstaninward 20.2a 11.3 37.2 50.6 22.2 -1.0outward .. .. .. 10.5 3.0 1.9

Tajikistaninward 2.4g 12.8 11.0 14.4 11.3 12.3outward .. .. .. .. .. ..

Turkmenistaninward .. .. 10.7 4.9 5.9 7.7outward .. .. .. .. .. ..

Uzbekistaninward 0.7g 2.2 6.8 7.7 7.9 8.6outward .. .. .. .. .. ..

/...

325

Annex B


(Per cent)


South, East and South-East Asiainward 6.7 9.1 10.0 10.5 11.5 14.0outward 3.8 5.3 5.4 3.9 4.4 9.0

Bangladeshinward 0.1 0.2 1.6 2.1 1.8 2.7outward - 0.2 0.1 0.3 0.2 0.2

Bhutaninward 0.8 1.0 -0.5 0.2 0.2 -outward .. .. .. .. .. ..

Cambodia - - - - - -inward 19.1g 71.9 -2.5 53.5 44.8 37.6outward 0.7i .. .. .. .. ..

Chinainward 9.8 14.3 14.6 12.9 11.3 10.5outward 1.4 0.8 0.8 0.8 0.5 0.2

Hong Kong, Chinainward 15.3 21.7 19.8 30.0 60.2 144.9outward 37.4 55.1 42.5 34.5 47.3 138.9

Indiainward 0.9 2.9 4.0 2.9 2.2 2.3outward - 0.3 0.1 0.1 0.1 0.3

Indonesiainward 4.8 9.2 7.7 -1.5 -9.0 -12.2outward 2.0 0.9 0.3 0.2 0.2 0.4

Korea, Republic ofinward 0.8 1.2 1.7 5.7 8.3 7.1outward 1.4 2.4 2.7 5.0 3.7 3.8

Lao People’s Democratic Republicinward 19.3c 23.6 18.2 14.4 15.6 9.7outward 0.1c - - - - -

Macao, Chinainward - 0.4 0.2 -1.5 0.9 -0.9outward .. .. .. .. .. ..

Malaysiainward 19.4 17.0 14.7 14.0 22.2 16.5outward 3.4 8.8 6.2 4.4 8.1 8.8

Maldivesinward 8.6 6.6 6.5 6.6 5.8 8.9outward .. .. .. .. .. ..

Mongoliainward 4.4a 6.1 10.3 7.3 12.0 18.7outward .. .. .. .. .. ..

Myanmarinward 3.1 1.6 1.6 1.0 0.7 0.8outward .. .. .. .. .. ..

Nepalinward 0.7 1.9 2.2 1.2 0.5 -outward .. .. .. .. .. ..

Pakistaninward 4.4 9.0 7.4 5.7 6.7 3.9outward - 0.1 -0.3 0.1 - 0.1

Philippinesinward 7.9 7.8 6.2 12.7 4.0 9.2outward 0.5 0.9 0.7 1.2 0.2 0.8

Singaporeinward 30.5 24.6 29.4 20.8 42.4 19.8outward 11.7 19.5 25.9 2.6 15.4 18.2

Sri Lankainward 4.3 4.0 11.8 5.2 4.7 3.9outward 0.2 0.2 0.1 0.3 0.6 -

Taiwan Province of Chinainward 2.5 3.0 3.4 0.4 4.4 6.8outward 6.2 6.1 7.9 6.1 6.7 9.2

Thailandinward 4.4 3.0 7.1 20.5 13.9 10.4outward 0.6 1.1 0.9 0.5 1.3 0.2

Viet Naminward 33.5 29.5 37.3 23.9 20.1 15.0outward .. .. .. .. .. ..

The Pacificinward 29.1 52.6 10.6 29.6 28.9 9.1outward 6.0 5.8 8.2 8.2 14.3 4.1

Fijiinward 39.1 -15.6 -5.0 57.2 -39.6 -34.8outward 4.8 4.6 14.1 25.6 26.8 3.1

Kiribatiinward 0.9 3.3 4.8 2.4 2.4 3.2outward 0.1k .. .. .. .. ..

/...

326



(Per cent)


Papua New Guineainward 28.2 72.8 11.7 20.9 71.7 23.1outward 6.5 6.1 6.5 0.1 8.4 5.0

Solomon Islandsinward 17.2 9.1 14.0 2.8 -28.5 2.1outward -0.1l .. .. .. .. 0.3

Tongainward 2.8l .. .. .. .. ..outward 0.1m .. .. .. .. ..

Tuvaluinward .. .. .. .. .. ..outward .. .. .. .. .. ..

Vanuatuinward 45.9 54.8 48.0 31.3 32.1 32.0outward .. .. .. .. .. ..

Central and Eastern Europeinward 4.8 7.1 9.7 13.7 18.6 18.2outward 0.2 0.7 2.2 1.5 1.8 2.8

Albaniainward 25.2j 21.6 12.9 9.2 6.7 20.5outward 15.9g 2.4 2.7 0.2 1.1 0.9

Belarusinward 0.3g 3.4 9.9 5.1 13.9 3.8outward 0.3c 0.1 0.1 0.1 - -

Bosnia and Herzegovinainward -c -0.2 0.1 4.1 15.9 14.6outward 3.5c 3.1 -0.2 .. .. ..

Bulgariainward 3.8 8.1 46.1 33.2 41.4 51.7outward -0.2g -2.1 -0.2 - 0.9 0.2

Croatiainward 5.7a 12.7 11.2 19.6 35.2 28.2outward 0.5a 1.4 3.8 1.9 0.8 0.7

Czech Republicinward 8.4 -7.7 8.0 22.6 41.5 34.7outward 0.6g 0.8 0.2 0.8 0.6 0.3

Estoniainward 26.6g 12.9 20.6 37.6 23.5 32.9outward 0.6g 3.4 10.6 0.4 6.4 5.4

Hungaryinward 23.5 23.5 21.4 18.3 16.9 14.6outward 0.3j - 4.2 4.3 2.2 4.9

Latviainward 24.9g 41.0 49.3 21.5 20.7 21.5outward -5.4g 0.3 0.6 3.3 1.0 0.5

Lithuaniainward 3.9g 8.4 15.2 35.4 20.7 18.0outward 0.1c - 1.2 0.2 0.4 0.2

Moldova, Republic ofinward 10.0g 7.1 20.5 19.8 17.0 69.3outward 1.8h 0.2 0.1 -0.2 - 0.1

Polandinward 7.7 15.1 14.5 15.9 18.4 23.4outward 0.1 0.2 0.1 0.8 0.1 -

Romania - - - - - -inward 2.7 3.2 16.3 26.5 16.5 14.7outward 0.1 - -0.1 -0.1 0.3 -0.2

Russian Federationinward 1.5g 2.9 5.8 5.7 11.9 6.7outward 0.5a 1.0 3.8 2.6 8.0 7.9

Slovakiainward 3.6 3.7 3.0 8.4 6.4 35.9outward 0.3g 0.8 1.3 1.8 -6.1 0.3

Sloveniainward 4.2j 4.6 8.8 5.1 3.3 3.6outward -0.1g 0.1 0.8 - 0.7 1.4

TFYR Macedoniainward 2.9h 1.6 2.5 18.9 5.2 36.7outward .. 0.1 0.2 0.2 0.2 -

Ukraineinward 2.0g 5.6 6.2 9.0 8.1 9.9outward 0.1h -0.1 0.4 - 0.1 -

Memorandum

Least developed countries n

inward 5.2 5.6 5.1 6.3 7.8 5.8outward 0.6 0.4 1.4 1.8 0.5 0.5

/...

327

Annex B

Annex table B.5. Inward and outward FDI flows as a percentage of gross fixed capitalformation, by region and economy, 1990-2000 (concluded)

(Per cent)


Oil-exporting countries o

inward 2.5 6.0 7.9 6.9 2.1 1.2outward 1.1 1.7 0.4 -0.5 0.9 0.3

All developing countries, excluding Chinainward 4.9 7.9 10.3 11.0 14.1 14.3outward 2.8 4.5 4.8 3.8 4.5 7.6


a Annual average from 1993 to 1995.b Annual average from 1990 to 1991.c 1995.d 1992.e 1990.f Annual average from 1990 to 1993.g Annual average from 1992 to 1995.h Annual average from 1994 to 1995.i 1993.j Annual average from 1991 to 1995.k 1994.l Annual average from 1990 to 1992.m 1991.n Least developed countries include: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia,

Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea,Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia,Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome andPrincipe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania,Vanuatu, Yemen and Zambia.

o Oil-exporting countries include: Cameroon, Algeria, Angola, Bahrain, Brunei Darussalam, Congo, Ecuador, Gabon, Indonesia,Islamic Republic of Iran, Iraq, Kuwait, Libyan Arab Jamahiriya, Nigeria, Oman, Qatar, Saudi Arabia, Syrian Arab Republic,Trinidad and Tobago, United Arab Emirates and Venezuela.

328


Annex table B.6. Inward and outward FDI stocks as a percentage of gross domesticproduct, by region and economy, 1980, 1985, 1990, 1995 and 2000

(Per cent)

Region/economy 1980 1985 1990 1995 2000

Worldinward 6.1 7.8 8.9 10.0 20.0outward 5.4 6.2 8.4 9.9 19.6

Developed economiesinward 4.8 6.2 8.1 8.9 17.1outward 6.2 7.2 9.6 11.3 22.1

Western Europeinward 6.2 9.3 10.8 13.1 30.2outward 6.4 10.5 12.1 16.1 41.4

European Unioninward 6.1 9.2 10.6 12.9 30.3outward 6.1 10.2 11.6 15.0 40.1

Austriainward 4.0 5.6 6.1 7.5 16.1outward 0.7 2.0 2.6 5.0 13.2

Belgium and Luxembourginward 5.8 21.2 27.8 40.8 174.0outward 4.8 11.0 19.4 28.3 154.1

Denmarkinward 6.1 6.0 6.9 13.2 39.6outward 3.0 3.0 5.5 13.7 39.4

Finlandinward 1.0 2.5 3.8 6.5 20.0outward 1.4 3.4 8.2 11.6 43.0

Franceinward 8.2 12.6 8.2 12.3 19.9outward 3.6 7.1 9.9 13.2 33.4

Germanyinward 3.9 5.1 7.1 7.8 24.1outward 4.6 8.4 8.8 10.5 25.2

Greeceinward 9.3 20.2 9.4 11.2 11.1outward 6.0 7.1 3.5 2.6 5.1

Irelandinward 7.9 12.5 7.2 14.4 68.2outward .. - 5.8 6.9 19.4

Italyinward 2.0 4.5 5.3 5.8 10.5outward 1.6 3.9 5.2 8.8 16.8

Netherlandsinward 10.8 18.8 23.3 28.0 65.9outward 23.7 36.1 36.3 41.6 83.8

Portugalinward 12.3 18.7 14.8 17.1 26.5outward 1.7 2.4 1.3 3.0 16.7

Spaininward 2.3 5.2 12.8 18.7 25.8outward 0.9 2.6 3.0 6.2 29.6

Swedeninward 2.2 4.2 5.3 12.9 36.1outward 2.8 10.4 21.3 30.5 53.8

United Kingdominward 11.8 14.1 20.6 17.6 30.5outward 15.0 22.0 23.2 26.9 63.2

Other Western Europeinward 8.7 10.9 13.4 16.6 28.1outward 12.7 16.1 22.0 35.6 66.0

Icelandinward ..a 2.4 2.3 1.8 5.7outward 1.7 2.0 1.2 2.6 7.7

Maltainward 13.8 28.1 20.1 28.4 84.7outward .. .. .. 1.0 6.0

Norwayinward 10.4 11.7 10.7 12.8 18.8outward 0.9 1.7 9.4 15.4 27.3

Switzerlandinward 7.9 10.4 15.0 18.6 34.2outward 20.0 26.0 28.9 46.4 95.1

North Americainward 4.5 5.5 8.0 8.3 13.5outward 7.9 6.2 8.1 10.3 14.5

/...

329

Annex B

Annex table B.6. Inward and outward FDI stocks as a percentage of gross domesticproduct, by region and economy, 1980, 1985, 1990, 1995 and 2000 (continued)

(Per cent)

Region/economy 1980 1985 1990 1995 2000

Canadainward 20.4 18.4 19.6 21.1 28.8outward 8.9 12.3 14.7 20.3 32.4

United Statesinward 3.0 4.4 6.9 7.3 12.4outward 7.8 5.7 7.5 9.5 13.2

Other developed economiesinward 1.6 2.1 2.7 2.9 4.0outward 1.8 3.3 6.9 5.2 7.0

Australiainward 7.9 14.5 23.7 27.9 29.2outward 1.4 3.8 9.8 14.2 20.9

Israelinward 7.4 8.4 5.6 7.1 19.4outward 0.8 2.7 2.2 4.5 8.5

Japaninward 0.3 0.3 0.3 0.6 1.1outward 1.8 3.2 6.6 4.5 5.8

New Zealandinward 10.3 8.9 18.2 43.1 49.4outward 2.3 6.6 14.7 12.6 10.8

Developing economiesinward 10.2 13.9 13.0 15.3 30.9outward 1.3 1.7 2.8 5.1 11.9

Africainward 8.8 10.3 10.7 15.6 25.5outward 2.2 4.1 5.9 7.9 9.2

North Africainward 4.3 6.0 8.5 13.0 15.1outward 0.4 0.6 0.9 0.9 1.3

Algeriainward 3.1 2.2 2.2 3.5 6.5outward 0.2 0.3 0.3 0.6 0.6

Egyptinward 9.9 16.4 25.6 23.4 21.1outward 0.2 0.3 0.4 0.6 0.7

Libyan Arab Jamahiriyainward ..a ..a ..a ..a ..aoutward 0.4 1.0 2.2 0.9 4.0

Moroccoinward 1.0 3.4 3.6 10.1 18.4outward 0.8 2.6 1.9 1.8 2.2

Sudaninward 0.4 0.6 0.4 2.3 12.1outward .. .. .. .. ..

Tunisiainward 70.4 85.6 62.0 61.0 58.8outward 0.1 0.1 0.1 0.2 0.2

Other Africainward 11.2 13.8 12.2 17.2 33.8outward 3.6 8.2 9.7 12.8 15.9

Angolainward 1.8 9.9 10.0 58.0 90.4outward .. .. .. .. ..

Benininward 2.2 3.2 8.6 18.9 28.8outward - 0.2 0.1 0.1 4.2

Botswanainward 61.8 79.5 34.8 23.0 36.3outward 38.7 36.8 11.9 13.3 10.3

Burkina Fasoinward 1.0 1.7 1.4 3.4 6.8outward 0.2 0.2 0.1 0.6 1.1

Burundiinward 0.7 2.1 2.7 3.4 6.9outward .. .. - 0.1 0.3

Camerooninward 4.9 13.8 9.4 13.3 14.2outward 0.3 0.6 1.3 2.9 2.9

Cape Verdeinward .. .. 1.1 7.7 28.9outward .. .. 0.4 0.9 1.0

Central African Republicinward 6.2 8.9 6.4 6.8 11.4outward ..a 0.1 1.2 3.5 4.2

/...

330



(Per cent)

Region/economy 1980 1985 1990 1995 2000

Chadinward 14.6 21.6 16.6 24.4 30.5outward 0.1 0.1 2.7 6.4 8.1

Comorosinward 1.6 1.8 6.8 8.4 12.1outward .. .. 0.4 0.7 0.8

Congoinward 18.4 22.4 20.3 26.7 26.6outward .. .. .. .. ..

Congo, Democratic Republic ofinward 4.9 8.6 5.8 9.6 10.5outward .. .. .. .. ..

Côte d’Ivoireinward 5.2 10.0 9.0 16.2 36.6outward .. .. 0.3 5.2 7.4

Djiboutiinward 1.2 1.1 1.5 3.4 6.1outward .. .. .. .. ..

Equatorial Guineainward .. 7.0 19.2 145.7 67.0outward .. .. 0.2 ..a 0.3

Eritreainward .. .. .. .. 23.3outward .. .. .. .. ..

Ethiopiainward 2.7 1.7 1.8 2.9 14.7outward .. .. .. .. 6.8

Gaboninward 12.0 24.9 20.3 15.2 3.9outward 1.8 3.1 2.7 5.2 8.7

Gambiainward 52.7 56.3 49.4 48.4 51.2outward .. .. 6.9 9.4 10.4

Ghanainward 5.2 6.0 5.4 12.7 24.2outward .. .. .. .. 6.9

Guineainward 0.1 0.1 2.4 3.5 9.5outward .. .. .. .. 0.3

Guinea-Bissauinward 0.1 2.7 3.3 7.8 31.6outward .. .. .. .. ..

Kenyainward 5.3 7.8 7.8 8.1 9.6outward 0.2 1.0 1.2 1.3 2.2

Lesothoinward 1.2 8.5 25.0 143.8 271.6outward .. .. - - -

Liberiainward 77.7 115.1 194.9 379.3 264.9outward 4.3 33.0 36.0 174.5 172.5

Madagascarinward 0.9 1.7 3.4 5.4 8.7outward .. .. .. 0.1 0.1

Malawiinward 8.1 12.1 9.8 17.5 28.9outward .. .. .. .. 0.9

Maliinward 0.7 2.5 1.6 6.6 20.8outward 1.2 1.7 0.9 0.9 5.9

Mauritaniainward ..a 5.7 5.6 8.6 11.5outward .. .. 0.3 0.3 0.3

Mauritiusinward 1.8 3.5 6.2 6.3 15.5outward .. - 0.1 2.4 3.0

Mozambiqueinward 0.4 0.4 1.7 8.7 29.1outward .. .. .. - -

Namibiainward 114.8 178.0 106.9 74.0 51.9outward .. .. 92.6 76.9 34.9

Nigerinward 7.5 14.1 11.5 19.2 23.8outward 0.1 0.6 2.2 5.8 8.5

Nigeriainward 3.7 15.5 28.3 50.0 49.1outward - ..a 9.1 14.1 10.6

Rwandainward 4.6 7.8 8.2 17.9 14.1outward .. .. - ..a 0.2

/...

331

Annex B


(Per cent)

Region/economy 1980 1985 1990 1995 2000

São Tomé and Principeinward .. .. 0.7 ..a 8.2outward .. .. .. .. ..

Senegalinward 5.0 7.3 4.5 8.3 19.5outward 0.2 1.7 0.9 2.1 3.2

Seychellesinward 36.8 62.1 55.4 63.3 94.0outward 9.4 25.9 16.6 18.5 22.2

Sierra Leoneinward 6.6 5.5 ..a ..a 2.6outward .. .. .. .. ..

Somaliainward 4.8 0.5 ..a ..a ..aoutward .. .. .. .. ..

South Africainward 20.5 15.8 8.2 9.9 34.5outward 7.1 15.7 13.4 15.4 25.7

Swazilandinward 41.8 29.1 39.9 41.1 29.2outward 3.3 2.4 4.5 10.4 6.1

Togoinward 15.5 27.5 16.5 23.4 43.1outward 0.9 1.3 1.0 3.4 11.5

Ugandainward 0.7 0.2 0.1 4.7 20.3outward .. .. .. 4.4 4.3

United Republic of Tanzaniainward 0.9 1.4 2.2 6.2 13.1outward .. .. .. .. ..

Zambiainward 8.5 18.9 30.0 43.7 79.9outward .. .. .. .. ..

Zimbabweinward 2.8 3.3 1.4 4.8 14.7outward .. 0.2 1.0 1.9 3.3

Latin America and the Caribbeaninward 6.5 11.0 10.4 11.8 30.9outward 1.2 1.9 1.8 3.0 6.2

South Americainward 5.9 8.9 8.5 8.6 30.0outward 1.5 1.8 1.5 1.9 5.0

Argentinainward 6.9 7.4 6.4 10.8 25.6outward 7.8 6.7 4.3 4.1 7.3

Boliviainward 15.1 19.0 21.1 23.4 61.0outward - - 0.2 0.3 0.4

Brazilinward 7.4 11.5 8.0 6.0 33.1outward 0.3 0.6 0.5 0.8 2.2

Chileinward 3.2 14.1 33.2 23.8 60.9outward 0.2 0.6 0.6 4.3 25.9

Colombiainward 3.2 6.4 8.7 6.9 15.1outward 0.4 0.9 1.0 1.1 3.7

Ecuadorinward 6.1 6.2 15.2 19.4 51.0outward .. .. .. 0.4 2.0

Guyanainward ..a ..a ..a 57.4 93.3outward .. .. .. 0.3 -

Paraguayinward 4.6 9.5 7.6 7.1 16.4outward 2.5 4.0 2.6 2.0 2.8

Peruinward 4.3 6.1 5.0 10.3 18.5outward - 0.2 0.2 1.1 0.9

Surinameinward ..a 4.0 ..a ..a ..aoutward .. .. .. .. ..

Uruguayinward 7.2 16.8 10.8 8.0 10.6outward 0.2 0.7 0.3 0.2 0.3

Venezuelainward 2.3 2.5 4.7 9.0 22.4outward - 0.3 4.6 5.1 4.8

/...

332



(Per cent)

Region/economy 1980 1985 1990 1995 2000

Other Latin America and the Caribbeaninward 7.4 14.7 14.7 22.5 32.6outward 0.8 2.3 2.6 6.8 8.4

Anguillainward .. .. 19.8 90.0 227.4outward .. .. .. .. ..

Antigua and Barbudainward 21.3 46.5 74.5 88.6 83.8outward .. .. .. .. ..

Arubainward .. .. 15.2 15.8 39.6outward .. .. .. 0.8 0.7

Bahamasinward 41.0 23.4 18.9 21.5 32.9outward 21.3 6.6 19.8 37.2 28.7

Barbadosinward 11.8 10.3 9.9 12.1 11.8outward 0.6 1.0 1.3 1.7 1.5

Belizeinward 6.4 5.0 18.2 25.8 34.6outward .. .. .. 2.0 5.7

Bermudainward 836.7 774.7 869.7 1181.7 2280.0outward 118.5 162.7 97.3 129.3 600.4

Cayman Islandsinward 242.8 680.1 353.3 357.5 2392.4outward 5.6 39.0 140.3 258.4 1560.5

Costa Ricainward 13.9 24.4 25.3 23.3 32.8outward 0.1 0.7 0.8 0.6 0.6

Cubainward ..a - - 0.2 0.3outward .. .. .. .. ..

Dominicainward 0.1 10.7 42.9 87.9 100.4outward .. .. .. .. -

Dominican Republicinward 3.6 5.2 8.1 14.3 26.5outward .. .. .. 0.3 0.3

El Salvadorinward 4.3 4.8 4.4 3.1 14.9outward .. .. 1.1 0.6 0.6

Grenadainward 1.5 9.8 31.7 60.6 83.8outward .. .. 0.1 - 0.2

Guatemalainward 8.9 10.8 22.7 15.0 18.0outward .. .. .. .. 0.3

Haitiinward 5.4 5.6 5.0 5.8 5.3outward .. .. .. - 0.1

Hondurasinward 3.6 4.7 12.6 16.5 25.1outward .. .. .. .. ..

Jamaicainward 21.3 25.0 18.7 32.3 44.8outward 0.2 0.2 1.0 6.3 9.6

Mexicoinward 3.6 10.2 8.5 14.4 16.9outward 0.1 0.3 0.2 1.4 1.4

Montserratinward .. .. 55.7 105.2 359.6outward .. .. .. .. ..

Netherlands Antillesinward 88.9 24.1 22.4 20.8 220.3outward 1.1 0.9 1.2 0.9 ..a

Nicaraguainward 5.1 4.1 11.4 19.2 57.3outward .. .. .. - 0.3

Panamainward 64.6 58.2 41.4 41.0 68.2outward 21.3 40.8 78.8 62.5 40.5

Saint Kitts and Nevisinward 2.1 40.5 100.6 105.7 154.2outward .. .. 0.1 ..a ..a

Saint Luciainward 70.1 104.2 80.2 92.1 112.9outward .. .. 0.1 0.2 0.1

/...

333

Annex B


(Per cent)

Region/economy 1980 1985 1990 1995 2000

Saint Vincent and the Grenadinesinward 2.0 7.5 24.3 67.9 146.5outward .. .. 0.3 0.2 0.2

Trinidad and Tobagoinward 15.7 23.3 41.3 67.5 95.6outward .. 0.2 0.4 0.5 4.1

Virgin Islandsinward 0.2 3.9 15.3 87.2 454.5outward .. .. .. 468.0 849.1

Asia and the Pacificinward 13.0 16.3 14.8 17.0 31.6outward 0.9 1.0 2.7 5.7 15.2

Asiainward 13.0 16.3 14.8 17.0 31.6outward 0.9 1.0 2.7 5.7 15.2

West Asiainward ..a 7.7 6.2 7.7 8.5outward 0.7 1.3 3.4 1.2 1.6

Bahraininward 2.0 10.9 13.0 41.1 72.4outward 19.5 16.4 17.0 17.8 21.8

Cyprusinward 21.4 32.6 20.5 17.8 23.7outward .. - 0.2 0.9 6.5

Iran, Islamic Republic ofinward 3.2 3.7 2.2 2.6 2.4outward .. .. .. ..a 1.3

Iraqinward ..a ..a ..a ..a ..aoutward .. .. .. .. ..

Jordaninward 3.9 9.6 15.3 9.2 18.1outward 0.9 0.7 0.7 ..a ..a

Kuwaitinward 0.1 0.2 0.1 - 1.4outward 2.0 4.3 19.9 10.6 3.8

Lebanoninward 0.5 1.5 1.9 1.0 6.6outward .. 2.0 1.7 0.8 0.7

Omaninward 8.1 12.0 16.4 18.3 12.5outward .. - 0.1 0.2 0.1

Occupied Palestinian Territoryinward .. .. .. .. 7.0outward .. .. .. .. ..

Qatarinward 1.1 1.5 1.0 5.5 13.3outward .. .. .. 0.4 1.1

Saudi Arabiainward ..a 25.2 21.5 17.5 15.0outward 0.2 0.6 1.8 1.3 1.2

Syrian Arab Republicinward - 0.2 3.0 8.0 10.0outward .. .. .. .. ..

Turkeyinward 0.2 0.5 0.9 3.0 4.7outward .. .. .. 0.2 1.3

United Arab Emiratesinward 1.4 1.8 2.2 4.1 3.8outward - 0.1 0.3 0.2 0.7

Yemeninward 3.7 4.5 3.7 44.8 10.4outward .. 0.1 0.1 0.1 0.1

Central Asiainward .. .. .. 8.5 39.5outward .. .. .. - 2.1

Armeniainward .. .. .. 1.2 30.0outward .. .. .. .. 1.7

Azerbaijaninward .. .. .. 6.1 70.9outward .. .. .. .. 9.0

Georgiainward .. .. .. 1.7 14.0outward .. .. .. .. ..

/...

334



(Per cent)

Region/economy 1980 1985 1990 1995 2000

Kazakhstaninward .. .. .. 14.6 54.8outward .. .. .. - 0.1

Kyrgyzstaninward .. .. .. 9.7 32.2outward .. .. .. .. 2.5

Tajikistaninward .. .. .. 7.0 14.5outward .. .. .. .. ..

Turkmenistaninward .. .. .. 7.1 20.7outward .. .. .. .. ..

Uzbekistaninward .. .. .. 1.0 9.1outward .. .. .. .. ..

South, East and South-East Asiainward 21.1 19.5 17.4 18.9 36.4outward 1.1 1.0 2.6 6.7 18.2

Afghanistaninward 0.3 0.2 0.1 0.1 0.1outward .. .. .. .. ..

Bangladeshinward 0.4 0.5 0.5 0.5 2.1outward .. .. - - 0.2

Bhutaninward .. .. 0.6 0.7 0.7outward .. .. .. .. ..

Brunei Darussalaminward 0.4 0.8 0.7 12.1 74.4outward .. .. .. 1.4 2.9

Cambodiainward 2.4 2.0 3.4 12.1 48.7outward .. .. .. 0.1 0.1

Chinainward 3.1 3.4 7.0 19.6 32.3outward .. - 0.7 2.3 2.4

Hong Kong, Chinainward 436.2 372.1 198.1 125.0 263.8outward 0.5 6.7 15.9 56.6 224.9

Indiainward 0.6 0.5 0.5 1.6 4.1outward 0.1 0.1 0.1 0.1 0.3

Indonesiainward 13.2 28.2 34.0 25.0 39.6outward .. 0.1 0.1 0.6 1.5

Korea, Democratic People’s Republic ofinward .. .. 3.4 13.7 10.0outward .. .. .. .. ..

Korea, Republic ofinward 2.1 2.3 2.3 2.0 13.7outward 0.2 0.5 0.9 1.6 11.1

Lao People’s Democratic Republicinward 0.3 - 1.5 11.6 32.2outward .. .. .. - 0.1

Macao, Chinainward .. 0.7 0.3 0.1 ..aoutward .. .. .. .. ..

Malaysiainward 20.7 23.3 23.4 32.3 58.8outward 0.8 4.3 6.1 12.5 20.8

Maldivesinward 11.4 2.8 12.6 16.7 21.3outward .. .. - - -

Mongoliainward .. .. - 4.2 18.7outward .. .. .. - -

Myanmarinward 12.7 11.3 11.1 17.2 24.7outward .. .. .. - -

Nepalinward 0.1 0.1 0.3 0.9 1.8outward .. .. .. .. ..

Pakistaninward 2.9 3.5 4.8 9.1 11.2outward 0.2 0.4 0.6 0.7 0.8

Philippinesinward 3.9 8.5 7.4 8.2 16.6outward 0.5 0.6 0.3 1.6 2.6

/...

335

Annex B


(Per cent)

Region/economy 1980 1985 1990 1995 2000

Singaporeinward 52.9 73.6 77.9 71.5 103.8outward 31.7 24.8 21.3 42.0 57.5

Sri Lankainward 5.7 8.6 8.5 10.0 15.0outward .. - 0.1 0.3 0.5

Taiwan Province of Chinainward 5.8 4.7 6.1 5.9 9.0outward 0.2 0.3 8.0 9.5 15.9

Thailandinward 3.0 5.1 9.6 10.4 20.0outward - - 0.5 1.3 2.0

Viet Nam - - - - -inward 0.2 1.1 4.0 28.5 46.7outward .. .. .. .. ..

The Pacific - - - - -inward 22.7 24.8 29.0 26.9 37.6outward 0.3 1.0 2.1 7.3 14.6

Fijiinward 29.7 34.4 29.1 41.2 50.4outward 0.2 1.3 6.3 6.7 19.6

Kiribatiinward .. ..a 1.2 2.6 10.6outward .. .. .. 0.1 0.1

New Caledoniainward 2.4 4.1 3.0 3.0 4.2outward .. .. .. .. ..

Papua New Guineainward 29.4 28.2 49.1 36.1 53.5outward 0.4 0.9 0.5 8.3 14.4

Samoainward 1.1 2.2 8.1 14.9 22.6outward .. .. .. .. ..

Solomon Islandsinward 24.2 20.3 33.0 38.5 45.7outward .. .. ..a ..a -

Tongainward .. 0.2 0.7 4.8 12.0outward .. .. 0.1 0.1 0.8

Tuvaluinward .. .. .. 2.7 4.4outward .. .. .. .. ..

Vanuatuinward 29.0 52.3 71.8 114.4 175.9outward .. .. .. .. ..

Central and Eastern Europeinward .. 0.2 1.7 5.4 18.9outward .. .. 0.4 0.9 2.7

Albaniainward .. .. .. 8.7 15.4outward .. .. .. 2.0 2.2

Belarusinward .. .. .. 0.5 11.9outward .. .. .. 0.1 0.2

Bosnia and Herzegovinainward .. .. .. 1.1 8.1outward .. .. .. 0.7 0.9

Bulgariainward .. .. 0.5 3.4 26.4outward .. .. .. 0.8 0.7

Croatiainward .. .. .. 2.5 27.1outward .. .. .. 3.7 3.9

Czech Republicinward .. .. 3.9 14.1 42.6outward .. .. .. 0.7 1.5

Estoniainward .. .. .. 14.1 53.2outward .. .. .. 1.4 5.2

Hungaryinward .. 0.2 1.7 26.7 43.4outward .. .. 0.6 1.1 4.5

Latviainward .. .. .. 12.5 29.1outward .. .. .. 4.7 3.4

/...

336


Annex table B.6. Inward and outward FDI stocks as a percentage of gross domesticproduct, by region and economy, 1980, 1985, 1990, 1995 and 2000 (concluded)

(Per cent)

Region/economy 1980 1985 1990 1995 2000

Lithuaniainward .. .. .. 5.8 20.6outward .. .. .. - 0.3

Moldova, Republic ofinward .. .. .. 6.5 35.7outward .. .. .. 1.3 1.5

Polandinward .. .. 0.2 6.2 21.3outward .. .. 0.2 0.4 0.6

Romaniainward .. .. 2.0 3.2 17.7outward .. .. 0.2 0.3 0.3

Russian Federationinward .. .. .. 1.6 7.7outward .. .. .. 0.9 4.7

Slovakiainward .. .. 0.5 4.4 24.2outward .. .. .. 0.5 1.9

Sloveniainward .. .. 3.8 9.4 15.5outward .. .. 1.5 2.6 4.4

TFYR Macedoniainward .. .. .. 0.7 10.9outward .. .. .. .. 0.1

Ukraineinward .. .. .. 2.5 12.1outward .. .. .. 0.3 0.3

Yugoslaviainward .. .. .. 2.7 15.6outward .. .. .. .. ..

Memorandum

Least developed countries b

inward 4.2 5.1 5.7 11.3 19.4outward 0.6 2.6 1.1 1.9 2.6

Oil-exporting countries c

inward 1.7 9.8 12.2 14.7 19.9outward 0.4 0.7 2.6 2.2 2.7

All developing countries minus Chinainward 10.9 15.4 13.6 14.7 30.6outward .. 2.0 3.1 5.5 13.9


a Negative stock value. Stock data are estimated by accumulation or subtraction of flows. However, this value is includedin the regional and global total.

b Least developed countries include: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia,Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea,Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia,Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome andPrincipe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania,Vanuatu, Yemen and Zambia.

c Oil-exporting countries include: Cameroon, Algeria, Angola, Bahrain, Brunei Darussalam, Congo, Ecuador, Gabon, Indonesia,Islamic Republic of Iran, Iraq, Kuwait, Libyan Arab Jamahiriya, Nigeria, Oman, Qatar, Saudi Arabia, Syrian Arab Republic,Trinidad and Tobago, United Arab Emirates and Venezuela.

337

Annex BA

nn

ex

ta

ble

B.7

. C

ros

s-b

ord

er

M&

A s

ale

s,

by

re

gio

n/e

co

no

my

of

se

lle

r, 1

98

7-2

00

1 (

Mill

ion

s o

f d

olla

rs)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

TO

TAL

WO

RL

D7

4 5

09

115

62

31

40

38

91

50

57

68

0 7

13

79

28

08

3 0

64

12

7 1

10

18

6 5

93

22

7 0

23

30

4 8

48

53

1 6

48

76

6 0

44

1 1

43

81

6 5

93

96

0

De

ve

lop

ed

ec

on

om

ies

72

78

711

2 7

49

13

5 3

05

13

4 2

39

74

04

86

8 3

49

67

62

211

0 6

32

16

3 9

50

18

7 6

16

23

2 0

85

44

3 2

00

67

9 4

81

10

56

05

94

96

15

9

We

ste

rn E

uro

pe

13

20

93

4 2

74

48

94

96

7 3

70

38

52

04

5 8

31

40

59

85

7 2

62

79

11

48

8 5

12

12

1 5

48

19

4 3

91

37

0 7

18

61

0 6

47

22

8 9

95

Eu

rop

ea

n U

nio

n1

2 7

61

31

01

24

7 3

58

62

13

33

6 6

76

44

76

13

8 5

37

55

28

07

5 1

43

81

89

511

4 5

91

18

7 8

53

35

7 3

115

86

52

12

12

96

0A

ust

ria

8 2

53

32

18

9 2

44

10

7 4

17

54

0 6

09

85

62

25

93

55

1 3

80

57

49

17

5B

elg

ium

91

9 7

93

80

54

46

9 8

14

49

32

20

11

02

61

71

08

46

95

94

56

86

52

4 9

84

7 3

18

6 8

97

De

nm

ark

- 2

18

22

5 4

96

27

2 9

9 5

90

57

0 1

99

45

9 5

66

3 8

02

4 6

15

9 1

22

2 4

61

Fin

lan

d 2

0 8

0 2

29

51

46

3 2

09

39

1 5

50

1 7

26

1 1

99

73

54

78

03

14

46

89

6 4

90

Fra

nce

1 4

26

3 0

18

3 3

38

8 1

83

2 6

23

9 1

50

8 4

97

16

29

07

53

31

3 5

75

17

75

11

6 8

85

23

83

43

5 0

18

14

42

4G

erm

an

y1

06

91

30

04

30

16

22

03

40

75

52

12

28

54

46

87

49

611

92

411

85

61

9 0

47

39

55

52

46

99

04

8 6

41

Gre

ece

- 2

2-

11

5 7

0 4

13

52

15

50

49

3 9

9 2

1 1

91

24

51

85

4Ir

ela

nd

36

20

5 7

35

59

5 2

82

81

1 4

53

24

2 5

87

72

42

28

2 7

29

4 7

39

5 2

46

6 1

51

Ita

ly6

21

3 0

95

3 0

03

2 1

65

3 8

65

3 6

72

3 7

54

6 9

09

4 1

02

2 7

64

3 3

62

4 4

80

11 2

37

18

87

79

10

4L

uxe

mb

ou

rg 5

0 5

- 5

31

82

- 2

54

38

0 2

80

50

63

49

2 3

57

36

04

21

02

68

1N

eth

erl

an

ds

1 2

56

1 1

82

3 9

65

1 4

84

3 4

90

9 3

62

4 7

79

2 7

89

3 6

07

3 5

38

19

05

21

9 3

59

39

01

03

3 6

56

27

62

8P

ort

ug

al

9 1

1 7

68

21

3 1

94

66

8 3

56

63

14

4 7

93

86

42

7 2

112

98

0 4

09

Sp

ain

93

8 7

23

1 5

93

3 8

32

5 3

73

4 6

68

1 9

67

3 6

15

1 2

57

1 4

63

4 0

74

5 7

00

5 8

41

22

24

88

71

3S

we

de

n 8

75

19

21

84

94

48

92

47

82

45

51

84

46

01

69

45

13

86

33

32

711

09

35

9 6

76

13

11

25

77

4U

nit

ed

Kin

gd

om

5 5

34

19

91

72

6 5

15

29

10

21

3 0

20

7 8

63

9 6

99

11 8

07

36

39

23

1 2

71

39

70

69

1 0

81

13

2 5

34

18

0 0

29

68

55

8

Oth

er

We

ste

rn E

uro

pe

44

83

26

21

59

15

23

71

84

41

07

02

06

11

98

23

97

16

61

76

95

86

53

81

3 4

07

24

12

61

6 0

35

An

do

rra

--

--

--

--

--

--

6-

Gib

ralt

ar

--

--

4-

--

- 9

--

8 1

6 2

Gu

ern

sey

--

--

--

--

--

--

26

88

15

7Ic

ela

nd

--

--

1-

--

- 4

--

--

-Is

le o

f M

an

--

--

--

--

--

--

36

85

Jers

ey

--

--

--

--

--

--

31

14

18

1L

iech

ten

ste

in-

--

--

--

--

--

9-

--

Ma

lta

--

--

--

--

--

- 3

25

0-

-M

on

aco

- 6

69

21

--

--

- 8

- 7

52

- 2

76

19

22

No

rwa

y 1

0 2

39

60

1 6

68

84

3 4

87

1 8

87

39

7 2

71

2 1

98

2 6

60

1 1

82

8 7

03

10

61

33

08

0S

wit

zerl

an

d 4

38

2 3

53

96

94

56

9 9

97

58

2 1

74

1 5

85

3 6

92

4 4

07

3 5

45

5 3

44

4 1

13

13

33

41

2 5

08

No

rth

Am

eri

ca

57

91

87

2 6

41

79

23

36

0 4

27

31

88

41

8 3

93

22

29

14

9 0

93

64

80

47

8 9

07

90

21

72

25

98

02

75

88

44

01

42

92

26

79

8C

an

ad

a6

15

38

73

71

0 4

12

5 7

31

3 6

58

2 5

54

2 3

13

4 3

64

11 5

67

10

83

98

51

01

6 4

32

23

95

07

7 0

79

41

91

8U

nit

ed

Sta

tes

51

76

56

3 9

04

68

82

15

4 6

97

28

22

61

5 8

39

19

97

84

4 7

30

53

23

76

8 0

69

81

70

72

09

54

82

51

93

43

24

35

01

84

88

0

Oth

er d

evel

op

ed e

con

om

ies

1 6

60

5 8

34

7 1

23

6 4

42

3 6

44

4 1

25

4 7

32

4 2

77

20

03

22

0 1

97

20

32

02

2 8

29

32

87

94

3 9

83

40

36

5A

ust

ralia

1 5

45

4 3

80

4 7

04

2 5

45

2 5

92

2 4

46

3 1

91

2 9

75

17

36

01

3 0

99

14

79

41

4 7

37

11 9

96

21

69

91

6 8

79

Isra

el

- 1

06

13

4 4

4 5

8 2

93

18

23

5 3

03

54

11

09

71

75

42

85

42

34

64

45

2Ja

pa

n 2

7 2

91

61

2 1

48

17

8 2

30

93

75

0 5

41

1 7

19

3 0

83

4 0

22

16

43

11

5 5

41

15

18

3N

ew

Ze

ala

nd

89

1 3

20

67

43

70

4 8

15

1 1

57

1 4

30

31

71

82

84

83

91

34

62

31

61

59

84

39

73

85

1

De

ve

lop

ing

ec

on

om

ies

1 7

21

2 8

75

5 0

57

16

05

25

78

68

19

81

4 2

65

15

03

01

6 4

93

35

72

76

6 9

99

82

66

87

4 0

03

70

61

08

5 8

13

Afr

ica

16

0-

1 0

39

48

5 4

7 3

88

1 8

06

34

2 8

40

1 8

05

4 3

46

2 6

07

3 0

90

3 1

99

15

52

4N

ort

h A

fric

a 1

43

- 2

4-

1 1

39

24

2 1

00

10

211

68

0 4

56

91

4 9

56

2 9

16

Alg

eri

a-

--

- 1

--

--

--

- 4

2 1

27

-E

gyp

t 1

43

- 2

4-

- 1

31

17

7 1

7 1

0 1

71

10

2 4

8 7

38

52

8 6

60

Mo

rocc

o-

--

--

- 6

4 8

3-

40

57

8 5

12

3-

2 2

11S

ud

an

--

--

- 8

--

--

--

--

-T

un

isia

--

--

--

--

--

- 4

02

11

30

1 4

5O

the

r A

fric

a 1

7-

1 0

15

48

5 4

6 2

49

1 5

65

24

1 8

30

1 5

95

3 6

66

2 1

51

2 1

76

2 2

43

12

60

8A

ng

ola

--

--

--

--

--

-1

9 /...

338


An

ne

x t

ab

le B

.7.

Cro

ss

-bo

rde

r M

&A

sa

les

, b

y r

eg

ion

/ec

on

om

y o

f s

ell

er,

19

87

-20

01

(c

on

tin

ue

d)

(M

illio

ns

of

do

llars

)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Bo

tsw

an

a-

--

--

--

- 4

11

4-

--

-C

am

ero

on

--

--

--

--

4 -

--

--

70

Ca

pe

Ve

rde

--

--

--

--

--

--

83

--

Ce

ntr

al

Afr

ica

n R

ep

ub

lic-

--

--

- 4

- 2

1-

- 1

--

Ch

ad

--

--

--

--

--

--

21

-C

on

go

--

--

--

--

61

14

--

--

-C

ôte

d’I

voir

e-

--

--

--

- 2

3 1

5 1

94

--

8-

De

m.

Re

p.

of

the

Co

ng

o-

--

--

--

--

89

--

--

-E

thio

pia

--

--

--

--

--

--

36

--

Ga

bo

n-

--

44

8-

--

--

- 3

9-

- 2

2-

Gh

an

a-

--

--

--

1 4

48

52

- 3

8 4

1G

uin

ea

--

--

--

--

39

50

--

--

-K

en

ya-

- 1

5-

--

--

- 2

5-

--

18

30

0M

ad

ag

asc

ar

--

--

--

--

- 5

8 -

- 4

--

Ma

law

i-

--

--

--

--

60

- 1

0-

- 1

4M

ali

--

--

--

--

18

1-

--

13

2-

Ma

uri

tan

ia-

--

--

--

--

--

--

- 4

8M

au

riti

us

--

--

--

--

--

10

--

26

1 3

0M

oza

mb

iqu

e-

--

--

--

40

14

11

- 1

3 1

- 1

0N

am

ibia

--

--

36

--

--

- 3

--

- 8

Nig

eri

a-

-1

00

0-

--

--

--

- 1

2 1

8 1

5 1

Rw

an

da

--

--

--

--

--

--

- 2

Se

ne

ga

l-

--

--

--

--

- 1

07

- 6

6 6

-S

ierr

a L

eo

ne

--

--

--

34

--

--

--

- 1

3S

ou

th A

fric

a 1

7-

--

10

211

1 5

06

18

7 6

40

1 1

06

2 6

64

1 9

32

1 9

02

1 1

71

11 9

16

Sw

azi

lan

d-

--

37

--

--

--

38

7-

--

4U

ga

nd

a-

--

--

--

--

55

29

11

- 3

2-

Un

ite

d R

ep

. o

f Ta

nza

nia

--

--

--

21

12

2 1

7 1

23

- 4

15

12

0Z

am

bia

--

--

--

--

18

27

17

3 1

50

1 1

33

53

Zim

ba

bw

e-

--

--

38

- 1

1 7

2-

24

5-

La

tin

Am

eri

ca

an

d

th

e C

ari

bb

ea

n1

30

51

30

51

92

911

49

43

52

94

19

65

11

09

95

08

63

62

0 5

08

41

10

36

3 9

23

41

96

44

5 2

24

35

83

7

So

uth

Am

eri

ca

19

61

14

8 3

22

7 3

19

2 9

01

2 1

09

2 8

40

7 3

24

6 5

09

16

91

02

5 4

39

46

83

43

9 0

33

35

58

41

6 1

74

Arg

en

tin

a-

60

27

6 2

74

30

21

16

41

80

31

31

51

86

93

611

4 6

35

10

39

61

9 4

07

5 2

73

5 4

31

Bo

livia

--

15

26

--

--

82

1 2

73

911

18

0 2

32

19

-B

razi

l 1

96

28

7 2

21

7 1

58

17

4 6

24

36

71

76

16

53

61

2 0

64

29

37

69

35

72

3 0

13

7 0

03

Ch

ile-

38

26

0 4

34

33

8 5

17

27

6 8

91

71

72

04

42

42

71

59

58

36

12

92

92

83

0C

olo

mb

ia-

76

4-

34

1 4

9 3

1 8

1 2

48

67

2 3

99

2 5

16

1 7

80

30

21

58

9 1

70

Ecu

ad

or

--

--

- 4

9-

44

35

10

5 2

7 7

9 2

14

15

3 6

Gu

yan

a-

--

17

7-

--

--

1-

23

--

Pa

rag

ua

y-

--

--

--

--

27

2 1

1-

65

67

Pe

ru-

--

- 1

5 1

74

62

3 0

82

94

5 8

44

911

16

2 8

61

10

7 5

55

Su

rin

am

e-

--

--

--

--

--

--

- 3

Uru

gu

ay

--

18

--

- 5

40

19

--

36

- 2

7 3

6V

en

ezu

ela

--

- 1

12

03

2-

62

33

7 2

78

1 0

72

1 9

46

3 2

20

27

62

40

9 7

3

Oth

er

La

tin

Am

eri

ca

an

d C

ari

bb

ea

n1

11

0 1

57

1 6

07

4 1

76

62

82

08

82

27

02

62

72

12

73

59

81

5 6

63

17

08

92

93

19

64

01

9 6

63

An

tig

ua

an

d B

arb

ud

a-

--

--

--

--

--

24

- 5

13

Aru

ba

--

--

- 3

--

--

23

--

--

Ba

ha

ma

s 3

0 8

3 2

7 1

20

21

0 9

15

79

21

4 2

10

4 3

2 2

8-

25

19

8B

arb

ad

os

--

--

18

9-

- 4

6 6

4-

--

- 1

Be

lize

--

--

--

--

--

- 6

2-

3 6

2 /...

339

Annex BA

nn

ex

ta

ble

B.7

. C

ros

s-b

ord

er

M&

A s

ale

s,

by

re

gio

n/e

co

no

my

of

se

lle

r, 1

98

7-2

00

1 (

co

nti

nu

ed

) (

Mill

ion

s o

f d

olla

rs)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Be

rmu

da

1 0

79

- 2

14

1 2

96

50

4 5

2 5

0 2

51

1 2

77

5 6

01

11 6

35

92

43

59

6 6

83

Ca

yma

n I

sla

nd

s-

5 3

74

17

0 1

38

41

--

- 2

45

--

12

2 5

4 8

Co

sta

Ric

a-

- 6

4 3

--

1 1

7 9

6 2

7 2

8 2

71

21

-C

ub

a-

--

--

--

- 2

99

- 3

00

38

- 4

77

8D

om

inic

an

Re

pu

blic

--

--

--

--

- 4

6-

28

67

3 4

64

-E

l S

alv

ad

or

--

--

--

--

40

- 4

1 9

78

--

16

8G

ren

ad

a-

--

--

--

--

- 5

--

--

Gu

ate

ma

la-

--

3 3

- 2

9-

- 2

6 3

0 5

82

10

1 1

3 1

21

Ha

iti

--

--

--

--

--

- 2

--

-H

on

du

ras

--

--

5-

- 1

--

- 3

67

- 3

14

53

7Ja

ma

ica

--

- 1

08

--

62

26

2 -

12

- 3

4-

- 5

25

Me

xico

1 5

4 3

95

2 3

26

10

96

11

86

41

91

3 7

19

1 4

28

7 9

27

3 0

01

85

93

96

51

7 0

17

Ne

the

rla

nd

s A

nti

lles

--

53

3 8

--

- 2

29

1-

- 8

6-

- 8

9N

ica

rag

ua

--

--

--

--

- 2

3 4

2-

11

11

5 8

3P

an

am

a-

15

--

--

6 7

3 9

14

65

2 2

16

15

1 1

30

8S

ain

t K

itts

an

d N

evi

s-

--

--

--

--

78

--

--

-P

ue

rto

Ric

o-

--

--

14

2-

--

--

- 6

17

4 1

08

Tri

nid

ad

an

d T

ob

ag

o-

--

- 1

7 2

2 1

77

2-

- 2

05

--

--

Virg

in Is

land

s (U

nite

d K

ingd

om)

--

- 1

43

6-

- 8

9 4

12

25

4 1

9 4

13

28

4 3

4

As

ia 2

56

1 5

69

2 0

89

4 0

73

2 1

82

3 6

14

7 3

47

4 7

01

6 9

50

13

36

82

1 2

93

16

09

72

8 8

39

22

18

23

4 4

52

We

st

As

ia-

59

60

11

3 1

31

20

3 7

1 4

9 2

22

40

3 3

68

82

33

5 9

70

1 3

23

Ab

u D

ha

bi

--

--

- 5

8-

--

--

--

--

Ba

hra

in-

--

--

- 4

--

--

- 3

6 1

61

2C

ypru

s-

--

--

--

--

--

--

43

Jord

an

--

--

--

--

26

--

--

56

7 2

0K

uw

ait

--

--

--

6-

--

--

--

16

3L

eb

an

on

--

--

--

--

--

16

8 1

1-

54

-O

ma

n-

--

- 7

8-

15

--

7-

- 2

8-

-Q

ata

r-

--

- 4

3-

12

--

--

--

--

Sa

ud

i Ara

bia

--

2-

- 2

4-

- 8

26

--

- 2

-S

yria

n A

rab

Re

pu

blic

--

--

--

--

--

--

3-

-T

urk

ey

- 5

9 5

8 1

13

9 1

16

35

49

18

8 3

70

14

4 7

1 6

8 1

82

1 0

19

Un

ite

d A

rab

Em

ira

tes

--

--

--

--

--

56

- 2

00

4 7

6Y

em

en

--

--

- 5

--

--

--

--

-

Ce

ntr

al

As

ia-

--

--

- 9

- 4

50

3 2

21

2 3

40

17

4 7

3 1

07

15

Arm

en

ia-

--

--

--

--

--

17

3 2

9-

-A

zerb

aija

n-

--

--

--

--

1-

--

36

-G

eo

rgia

--

--

--

--

--

3 1

40

1-

Ka

zakh

sta

n-

--

--

--

- 4

50

3 2

16

2 3

37

--

70

13

Uzb

eki

sta

n-

--

--

- 9

--

4-

- 4

- 2

So

uth

, E

as

t a

nd

So

uth

-E

as

t A

sia

25

61

51

02

02

93

96

02

05

13

411

7 2

67

4 6

52

6 2

78

9 7

45

18

58

61

5 8

42

28

43

12

1 1

05

33

11

4B

an

gla

de

sh-

--

--

--

--

--

33

--

-B

run

ei

Da

russ

ala

m-

--

--

- 2

--

--

--

--

Ca

mb

od

ia-

--

--

--

--

0 1

--

--

Ch

ina

--

- 8

12

5 2

21

56

1 7

15

40

31

90

61

85

6 7

98

2 3

95

2 2

47

2 3

25

Ho

ng

Ko

ng

, C

hin

a 1

81

1 0

46

82

62

62

0 5

68

1 6

74

5 3

08

1 6

02

1 7

03

3 2

67

7 3

30

93

84

18

14

79

31

0 3

62

Ind

ia-

--

5-

35

96

38

5 2

76

20

61

52

0 3

61

1 0

44

1 2

19

1 0

37

Ind

on

esi

a 2

9 1

00

15

0-

14

9 2

33

16

9 2

06

80

9 5

30

33

2 6

83

1 1

64

81

93

52

9K

ore

a,

De

mo

cra

tic

P

eo

ple

’s R

ep

ub

lic o

f-

--

--

--

--

--

- 2

--

Ko

rea

, R

ep

ub

lic o

f-

- 6

8-

67

3 -

2 1

19

2 5

64

83

63

97

31

0 0

62

6 4

48

3 6

48 /...

340


An

ne

x t

ab

le B

.7.

Cro

ss

-bo

rde

r M

&A

sa

les

, b

y r

eg

ion

/ec

on

om

y o

f s

ell

er,

19

87

-20

01

(c

on

clu

de

d)

(M

illio

ns

of

do

llars

)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

La

o P

eo

ple

’s D

em

. R

ep

.-

--

--

- 1

0-

--

--

--

26

9M

aca

o,

Ch

ina

--

--

29

--

--

--

--

--

Ma

lays

ia-

20

70

1 8

6 1

28

46

51

8 4

43

98

76

8 3

51

1 0

96

1 1

66

44

11

44

9M

on

go

lia-

--

--

--

1-

--

- 1

--

Mya

nm

ar

--

--

--

10

- 9

- 2

60

--

--

Ne

pa

l-

--

--

- 2

- 1

3-

--

--

-P

aki

sta

n-

--

1-

22

5-

-1

12

4 8

02

25

9 6

6 1

07

Ph

ilip

pin

es

25

45

16

1 1

5 6

3 4

04

13

6 8

28

1 2

08

46

24

15

71

90

51

52

3 3

66

2 0

63

Sin

ga

po

re 2

1 2

62

11

41

14

3 2

37

27

6 3

62

35

51

23

8 5

93

29

4 4

68

2 9

58

1 5

32

4 8

71

Sri

La

nka

--

- 1

--

30

10

12

6 3

5 2

75

96

22

2-

Taiw

an

Pro

vin

ce o

f C

hin

a-

38

9 1

1-

3 1

6 1

6 4

2 5

0 6

01

24

1 8

37

64

42

49

3T

ha

ilan

d-

--

70

79

49

8 4

2 8

9 1

61

23

4 6

33

3 2

09

2 0

112

56

9 9

57

Vie

t N

am

--

--

--

- 2

1 6

63

- 5

9 1

9 4

Th

e P

ac

ific

--

--

28

- 2

37

67

46

25

7 4

1 1

10

5-

Co

ok

Isla

nd

s-

--

--

--

--

--

--

1-

Fiji

--

--

--

--

- 5

--

4-

-F

ren

ch P

oly

ne

sia

--

--

--

--

- 2

--

--

-M

ars

ha

ll Is

lan

ds

--

--

--

--

16

--

--

--

Pa

pu

a N

ew

Gu

ine

a-

--

- 2

8-

2 3

6 5

1 3

9 2

57

41

10

6-

-S

olo

mo

n I

sla

nd

s-

--

--

--

1-

--

--

--

Va

nu

atu

--

--

--

--

--

--

4-

Ce

ntr

al

an

d E

as

tern

Eu

rop

e -

- 2

7 2

85

88

02

73

31

17

81

37

86

03

23

64

95

63

15

11

61

0 3

57

17

14

711

60

7A

lba

nia

--

--

--

--

1-

--

4 1

6-

Bo

snia

an

d H

erz

eg

ovi

na

--

--

--

--

--

--

45

25

Bu

lga

ria

--

--

--

20

90

32

71

49

7 6

11

13

3 5

82

11

Cro

ati

a-

--

--

43

23

45

94

48

61

16

1 1

64

14

6 6

76

Cze

ch R

ep

ub

lic-

--

--

- 2

26

40

82

36

6 5

07

67

1 3

62

2 4

02

1 9

24

1 9

68

Fo

rme

r C

zech

osl

ova

kia

--

--

47

7 7

80

--

--

--

--

-E

sto

nia

--

--

--

--

28

23

64

14

9 1

14

13

1 8

8H

un

ga

ry-

- 2

4 2

26

26

7 3

92

38

2 1

39

2 1

06

1 5

94

29

8 6

12

53

71

11

71

37

0L

atv

ia-

--

--

--

3 2

3 5

7 6

3 1

1 2

0 3

42

39

Lit

hu

an

ia-

--

--

--

9-

- 1

2 6

32

42

7 1

73

19

3M

old

ova

, R

ep

ub

lic o

f-

--

--

--

--

- 2

--

27

-P

ola

nd

--

4-

74

1 3

96

19

7 3

57

98

3 9

93

80

81

78

93

70

79

31

63

49

3R

om

an

ia-

--

--

--

18

1 2

29

94

39

11

28

4 4

47

53

6 6

6R

uss

ian

Fe

de

rati

on

--

- 5

9-

33

30

9 6

3 1

00

95

2 6

81

14

7 1

80

75

82

03

9S

lova

kia

--

--

--

21

83

4 1

38

38

54

41

1 8

49

1 1

94

Slo

ven

ia-

--

--

- -

41

18

30

13

3-

14

- 3

81

TF

YR

of

Ma

ced

on

ia-

--

--

--

--

--

- 4

5 3

4 3

28

Ukr

ain

e-

--

--

--

- 6

6 3

0 1

- 1

36

15

1 1

16

Yu

go

sla

via

--

--

62

88

--

--

45

--

- 2

Mu

ltin

ati

on

ala

--

--

--

- 3

0 1

00

--

66

52

16

2-

-

So

urc

e:

UN

CT

AD

, cr

oss

-bo

rde

r M

&A

da

tab

ase

.

aIn

volv

ing

se

llers

in

mo

re t

ha

n t

wo

eco

no

mie

s.N

ote

:T

he

da

ta c

ove

r d

ea

ls i

nvo

lvin

g t

he

acq

uis

itio

n o

f a

n e

qu

ity

sta

ke o

f m

ore

th

an

10

pe

r ce

nt.

341

Annex BA

nn

ex

ta

ble

B.8

. C

ros

s-b

ord

er

M&

A p

urc

ha

se

s,

by

re

gio

n/e

co

no

my

of

pu

rch

as

er,

19

87

-20

01

(Mill

ion

s o

f d

olla

rs)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

TO

TAL

WO

RL

D7

4 5

09

115

62

31

40

38

91

50

57

68

0 7

13

79

28

08

3 0

64

12

7 1

10

18

6 5

93

22

7 0

23

30

4 8

48

53

1 6

48

76

6 0

44

1 1

43

81

65

93

96

0

De

ve

lop

ed

ec

on

om

ies

71

56

011

3 3

89

13

5 7

81

14

3 0

70

77

43

57

2 9

95

72

15

311

2 4

01

17

3 1

39

19

6 7

35

26

9 2

76

50

8 9

16

70

0 8

08

10

87

63

85

34

15

1

We

ste

rn E

uro

pe

33

06

84

9 6

90

74

26

59

2 5

67

42

47

34

9 7

53

43

01

67

5 9

43

92

53

911

0 6

28

15

4 0

36

32

4 6

58

53

9 2

46

85

2 7

35

34

8 7

38

Eu

rop

ea

n U

nio

n3

2 6

17

40

14

17

1 3

65

86

52

53

9 6

76

44

39

14

0 5

31

63

85

78

1 4

17

96

67

41

42

10

82

84

37

35

17

15

58

01

74

63

27

25

2A

ust

ria

--

21

23

6 2

08

62

16

9 2

3 1

57

4 2

42

30

21

77

12

25

41

17

1B

elg

ium

20

18

8 3

09

81

3 2

22

62

5 1

81

3 1

07

4 6

113

02

92

05

32

22

51

3 3

57

16

33

41

6 9

51

De

nm

ark

16

63

26

1 7

67

57

3 2

58

37

2 1

72

15

2 6

38

1 4

92

1 2

50

5 6

54

4 5

90

4 1

63

Fin

lan

d 5

8 1

72

97

91

13

6 5

68

8 9

8 4

17

47

11

46

41

84

77

33

32

23

62

0 1

92

7 5

73

Fra

nce

3 2

44

5 4

86

17

59

42

1 8

28

10

38

01

2 3

89

6 5

96

6 7

17

8 9

39

14

75

52

1 1

53

30

92

68

8 6

56

16

8 7

10

59

16

9G

erm

an

y1

63

41

85

73

46

86

79

56

89

44

40

94

41

27

60

81

8 5

09

17

98

41

3 1

90

66

72

88

5 5

30

58

67

15

7 0

11G

ree

ce-

- 1

00

3 1

6 1

9 1

27

21

- 2

2 0

18

1 4

39

28

73

93

71

26

7Ir

ela

nd

67

54

81

17

4 7

30

39

0 3

58

45

71

44

71

16

62

26

51

82

63

19

64

19

85

57

52

06

3It

aly

3 3

27

1 3

73

1 9

61

5 3

14

81

65

16

7 8

16

1 6

22

4 6

89

1 6

27

4 1

96

15

20

01

2 8

01

16

93

211

13

5L

uxe

mb

ou

rg 5

9 8

0-

73

41

02

3 4

15

1 5

55

24

4 5

11

03

7 9

73

89

12

84

76

04

04

53

7N

eth

erl

an

ds

2 7

16

2 3

50

3 2

92

5 6

19

4 2

51

5 3

04

2 8

48

8 7

14

6 8

111

2 1

48

18

47

22

4 2

80

48

90

95

2 4

30

31

16

0P

ort

ug

al

--

14

17

18

1 5

02

14

14

4 3

29

96

61

24

52

21

43

42

65

7 6

68

Sp

ain

21

2 5

82

1 3

18

4 0

87

2 7

73

98

31

05

33

82

8 4

60

3 4

58

8 0

38

15

03

12

5 4

52

39

44

311

25

3S

we

de

n1

64

53

10

42

64

51

2 5

72

2 8

82

1 8

13

1 9

23

3 1

18

5 4

32

2 0

58

7 6

25

15

95

29

91

42

1 5

59

7 3

65

Un

ite

d K

ing

do

m1

9 6

21

24

33

93

8 2

29

25

87

38

50

11

2 0

80

19

911

26

67

52

9 6

41

36

10

95

8 3

71

95

09

92

14

10

93

82

42

211

1 7

64

Oth

er

We

ste

rn E

uro

pe

45

29

54

92

90

06

04

32

79

75

36

22

48

51

2 0

86

11 1

22

13

95

411

92

84

0 2

85

22

09

15

0 9

89

21

48

6G

ibra

lta

r-

--

- 3

--

--

--

--

18

Ice

lan

d-

--

--

7-

--

--

--

49

16

0Is

le o

f M

an

--

--

--

--

--

--

- 5

0Je

rse

y-

--

--

--

--

--

- 6

- 7

30

Lie

chte

nst

ein

--

- 1

60

--

- 6

2 1

0-

14

2-

8-

-M

alt

a-

--

--

- 7

--

- -

- 4

- 4

3M

on

aco

--

--

35

11

3-

4-

--

--

31

8 1

02

No

rwa

y 5

3 1

9 1

26

1 3

80

1 3

01

27

0 1

43

64

31

27

63

95

61

21

21

17

01

38

27

37

61

51

0S

wit

zerl

an

d 3

99

9 5

30

2 7

74

4 5

03

1 4

58

4 9

73

2 3

36

11 3

78

9 8

36

9 9

98

10

57

43

9 1

15

20

69

14

3 2

28

18

89

2

No

rth

Am

eri

ca

32

13

83

8 5

77

47

86

23

0 7

66

20

70

21

7 1

90

25

53

43

3 6

10

69

83

36

9 5

01

99

70

91

73

03

91

38

88

11

98

91

51

35

01

9C

an

ad

a3

72

71

4 3

97

9 0

02

3 1

39

4 1

06

2 1

55

4 1

29

5 0

79

12

49

18

75

71

8 8

40

35

61

81

8 5

71

39

64

63

8 9

80

Un

ite

d S

tate

s2

8 4

12

24

18

13

8 8

60

27

62

71

6 5

96

15

03

52

1 4

05

28

53

15

7 3

43

60

74

48

0 8

69

13

7 4

21

12

0 3

10

15

9 2

69

96

03

9

O

ther

dev

elo

ped

eco

no

mie

s6

35

32

5 1

22

13

65

51

9 7

36

14

26

06

05

23

60

32

84

81

0 7

67

16

60

61

5 5

31

11 2

19

22

68

13

5 9

88

50

39

5A

ust

ralia

2 5

13

9 3

55

5 5

61

3 8

06

1 4

72

67

61

85

21

60

26

14

59

28

311

74

58

14

71

0 1

38

10

85

63

2 5

06

Isra

el

--

- 2

8 2

8 6

1 3

93

14

3 1

06

48

4 2

54

79

1 6

05

2 3

61

78

1Ja

pa

n3

15

61

3 5

14

7 5

25

14

04

811

87

74

39

21

10

61

05

83

94

35

66

02

74

71

28

41

0 5

17

20

85

81

6 1

31

Ne

w Z

ea

lan

d 6

85

2 2

53

56

91

85

4 8

83

92

3 2

52

44

57

31

18

0 7

85

99

71

42

11

91

3 9

76

De

ve

lop

ing

ec

on

om

ies

2 9

28

2 2

04

3 9

95

7 1

81

3 2

58

6 2

64

10

78

41

4 3

60

13

37

22

9 6

46

35

21

02

1 7

17

63

40

64

8 4

96

55

71

9

Afr

ica

41

5 2

4 5

14

6 4

30

1 7

46

40

64

22

1 6

45

2 1

48

2 8

00

2 6

78

5 7

62

6 6

59

3 0

41

No

rth

Afr

ica

--

--

- 3

09

54

9 1

1 8

- 3

40

21

3 1

17

Eg

ypt

--

--

--

18

--

--

- 7

21

3-

Lib

yan

Ara

b J

am

ah

iriy

a-

--

--

30

9-

5-

--

3-

- 4

5M

oro

cco

--

--

--

36

4-

8-

- 1

0-

72

Tu

nis

ia-

--

--

--

- 1

1-

--

23

--

Oth

er

Afr

ica

41

5 2

4 5

14

6 4

30

1 4

36

35

24

21

2 6

34

2 1

40

2 8

00

2 6

75

5 7

22

6 4

46

2 9

24

Bo

tsw

an

a-

--

--

--

- 4

--

--

--

Ce

ntr

al A

fric

an

Re

pu

blic

--

--

--

--

- 6

3-

--

-- /...

342


An

ne

x t

ab

le B

.8.

Cro

ss

-bo

rde

r M

&A

pu

rch

as

es

, b

y r

eg

ion

/ec

on

om

y o

f p

urc

ha

se

r, 1

98

7-2

00

1 (

co

nti

nu

ed

)(M

illio

ns

of

do

llars

)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Ga

bo

n-

--

- 2

29

--

--

--

--

--

Gh

an

a-

--

--

--

- 3

5 5

06

- 1

37

- 4

-K

en

ya 1

00

--

--

--

--

--

--

3 9

Lib

eri

a-

--

--

--

--

15

--

--

-M

au

riti

us

--

--

--

--

- 4

34

7 7

- 4

Na

mib

ia-

--

--

--

--

11

--

--

8N

ige

ria

--

--

--

--

2-

--

--

6S

ou

th A

fric

a 3

15

24

5 1

46

20

11

43

6 3

52

4 1

96

59

31

52

22

76

62

51

45

71

56

39

32

59

4U

nit

ed

Re

pu

blic

of

Tan

zan

ia-

--

--

--

--

--

--

3-

Ug

an

da

--

--

--

--

--

--

--

-Z

am

bia

--

--

--

--

- 1

5-

--

43

-Z

imb

ab

we

--

--

--

- 1

6-

4-

16

--

30

4

La

tin

Am

eri

ca

an

d t

he

Ca

rib

be

an

14

2 1

00

99

21

59

7 3

87

1 8

95

2 5

07

3 6

53

3 9

51

8 3

54

10

72

01

2 6

40

44

76

71

8 6

14

27

38

0

So

uth

Am

eri

ca

- 1

0 9

1 1

30

26

9 5

94

1 7

95

68

23

40

55

93

96

03

89

51

03

87

42

19

13

411

Arg

en

tin

a-

--

10

18

1-

71

62

1 9

84

32

11

17

03

54

51

31

3 6

75

34

3B

oliv

ia-

--

--

--

--

--

--

-B

razi

l-

2 2

- 4

5 6

3 4

39

15

8 3

79

1 1

67

2 3

57

3 5

17

1 9

08

42

92

77

4C

hile

--

--

- 4

43

82

8 2

93

79

43

82

71

49

7 5

91

32

2 5

07

13

3C

olo

mb

ia-

--

--

- 1

1 1

0 9

1 2

72

15

7 4

36

10

2 2

03

19

Ecu

ad

or

--

--

--

- 2

2 5

0 4

5-

--

--

Pe

ru-

--

--

--

7 6

2 2

37

44

47

22

0 6

22

8S

uri

na

me

--

--

2-

--

--

--

--

-U

rug

ua

y-

--

--

8-

12

0 3

--

25

- 1

-V

en

ezu

ela

- 7

89

12

0 4

1 8

0 4

46

10

42

71

81

31

34

8 9

31

411

5

Oth

er

La

tin

Am

eri

ca

an

d C

ari

bb

ea

n 1

42

91

90

11

46

7 1

18

1 3

00

71

22

97

1 5

46

2 4

15

4 6

82

3 1

30

40

89

31

6 4

23

23

96

9B

ah

am

as

- 8

3-

1-

17

- 9

14

2 3

44

23

51

45

9-

74

8B

arb

ad

os

--

--

--

--

--

15

2-

49

-B

eliz

e-

--

--

- 5

5 1

25

--

63

31

8-

13

Be

rmu

da

9-

24

48

3 1

15

13

0 1

12

18

9 1

7 7

03

1 1

89

2 1

39

35

15

111

49

22

0 7

92

Ca

yma

n I

sla

nd

s-

--

--

- 2

4 5

30

- 2

07

99

99

77

24

1 5

39

Co

sta

Ric

a-

--

--

--

- 2

7 3

--

- -

Cu

ba

--

--

--

- 8

--

--

--

-D

om

inic

an

Re

pu

blic

--

--

--

--

--

--

10

9-

8E

l S

alv

ad

or

- 1

-G

ua

tem

ala

--

--

--

--

--

48

--

- -

Jam

aic

a-

--

16

- 1

0-

- 4

--

--

- -

Me

xico

--

83

7 6

80

3 8

88

30

92

19

0 1

96

86

73

15

4 6

73

2 2

16

4 2

31

36

3N

eth

erl

an

ds

An

tille

s 1

32

8 1

6 2

88

- 1

1 3

3-

99

7 7

- 3

08

2 -

Pa

na

ma

--

--

--

--

- 1

7 8

9 1

00

2 2

15

5 3

3P

ue

rto

Ric

o-

--

--

--

--

--

--

12

5 -

Tri

nid

ad

an

d T

ob

ag

o-

- 2

4-

- 2

45

17

5-

--

- 5

- 5

-V

irg

in I

sla

nd

s (U

nite

d K

ing

do

m)

2-

--

--

4 4

4 6

2 2

60

56

- 4

0 4

89

47

3

As

ia2

37

22

08

02

99

85

43

82

44

12

62

47

84

36

48

68

75

51

9 1

36

21

69

06

39

91

2 8

73

22

89

52

5 2

98

We

st

As

ia 1

70

12

4 2

53

2 1

12

11

3 1

05

1 0

13

1 1

99

1 6

97

1 5

89

3 7

97

39

91

53

81

75

0 4

54

Ab

u D

ha

bi

--

- 5

28

--

--

--

--

--

-B

ah

rain

--

16

81

53

7-

- 8

11 3

00

--

1 4

72

45

56

3 7

9 2

74

Cyp

rus

--

--

--

--

- 4

11

88

1-

73

15

32

Ira

n,

Isla

mic

Re

pu

blic

of

--

--

--

--

--

--

--

-Jo

rda

n-

--

--

--

--

--

--

22

-K

uw

ait

17

0-

83

- 1

12

--

- 4

64

8-

- 1

19

32

10

5L

eb

an

on

--

--

--

21

- 3

- 5

8-

--

-O

ma

n-

--

--

--

--

- 8

55

--

-Q

ata

r-

--

--

--

--

42

--

- 2

- /...

343

Annex BA

nn

ex

ta

ble

B.8

. C

ros

s-b

ord

er

M&

A p

urc

ha

se

s,

by

re

gio

n/e

co

no

my

of

pu

rch

as

er,

19

87

-20

01

(c

on

clu

de

d)

(Mill

ion

s o

f d

olla

rs)

Re

gio

n/e

co

no

my

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Sa

ud

i Ara

bia

--

--

- 1

00

18

2 6

30

1 6

71

35

0 3

34

21

7 3

1 5

50

39

Tu

rke

y-

- 2

--

--

11

19

35

6 4

3 4

88

48

-U

nit

ed

Ara

b E

mir

ate

s-

12

4-

48

1-

- 2

57

- 1

53

2 7

7 6

55

2 4

Ye

me

n-

--

--

5-

--

--

- 3

7-

-

Ce

ntr

al

As

ia-

--

--

--

- 4

50

--

--

6 -

Ka

zakh

sta

n-

--

--

--

- 4

50

--

--

6 -

So

uth

, E

as

t a

nd

S

ou

th-E

as

t A

sia

2 2

02

1 9

56

2 7

45

3 3

25

2 3

29

2 5

18

6 8

30

5 2

87

6 6

08

17

54

71

7 8

93

6 0

01

11 3

35

21

13

92

4 8

44

Afg

ha

nis

tan

--

--

- 1

3-

--

--

--

- -

Ba

ng

lad

esh

--

--

--

--

12

--

--

- -

Bru

ne

i D

aru

ssa

lam

--

--

--

20

2-

31

18

9-

--

-C

hin

a-

17

20

2 6

0 3

57

3 4

85

30

7 2

49

45

1 7

99

1 2

76

10

1 4

70

45

2H

on

g K

on

g,

Ch

ina

2 1

66

1 6

49

77

31

19

81

34

21

26

34

11

32

26

72

29

92

91

28

40

22

20

12

32

15

76

83

01

2In

dia

- 2

2 1

1-

1 3

21

9 1

09

29

80

1 2

87

11

12

6 9

10

2 1

95

Ind

on

esi

a-

26

0-

49

3 1

6 5

0 3

2 1

63

21

8 6

76

39

24

31

44

5 -

Ko

rea

, D

em

. P

eo

ple

’s R

ep

ub

lic o

f-

--

--

--

--

--

--

2 -

Ko

rea

, R

ep

ub

lic o

f-

- 2

35

33

18

7 7

2 7

4 5

00

1 3

92

1 6

59

2 3

79

18

71

09

71

71

2 1

75

Ma

lays

ia-

- 2

7 1

44

14

9 1

48

77

4 8

12

1 1

22

9 6

35

89

41

05

91

37

7 7

61

1 3

75

Ma

cao

, C

hin

a-

--

--

--

--

--

- 4

50

- -

Ph

ilip

pin

es

--

--

14

- 2

5 4

2 1

53

19

0 5

4 1

33

0 7

5 2

54

Pa

kist

an

--

--

--

--

--

--

- 6

4S

ing

ap

ore

7 8

76

4 4

38

57

0 2

94

84

91

17

4 8

92

2 0

18

2 8

88

53

04

72

08

84

71

6 5

16

Sri

La

nka

--

--

--

- 2

--

- 2

6 8

- -

Taiw

an

Pro

vin

ce o

f C

hin

a 2

9-

46

41

38

5-

13

1-

30

12

2 4

43

3 6

28

40

81

13

8 1

61

Th

aila

nd

--

26

9 1

8 5

9 1

38

12

14

4 1

80

55

43

15

4 5

69

9V

iet

Na

m-

--

--

6-

1-

11

27

--

- -

Th

e P

ac

ific

--

--

--

28

- 2

2 8

--

4 3

28

-F

iji-

--

--

--

--

--

- 4

- -

Na

uru

--

--

--

28

--

--

--

- -

Pa

pu

a N

ew

Gu

ine

a-

--

--

--

- 1

3 8

--

- 3

28

-V

an

ua

tu-

--

--

--

- 9

--

--

- -

Ce

ntr

al

an

d E

as

tern

Eu

rop

e 8

- 6

- 1

4 2

2 1

13

32

9 5

9 5

04

27

51

00

81

54

91

69

42

22

5B

ulg

ari

a 8

--

--

--

--

3 6

0-

79

7 8

-C

roa

tia

--

--

--

--

- 1

10

0 1

3 2

2 4

3C

zech

Re

pu

blic

--

6-

--

19

51

48

17

6 6

0 1

42

13

77

5 -

Fo

rme

r C

zech

osl

ova

kia

--

--

- 4

--

--

--

--

-E

sto

nia

--

--

--

- 2

2-

15

1 1

2 5

2 4

1H

un

ga

ry-

--

--

- 6

2-

2-

6 6

4 1

18

37

91

33

1L

atv

ia-

--

--

- 1

8-

--

--

--

-L

ith

ua

nia

--

--

--

--

--

--

1-

-P

ola

nd

--

--

14

- 8

11

8 2

3 4

5 4

65

13

2 1

18

32

4R

om

an

ia-

--

--

--

--

- -

--

- 1

0R

uss

ian

Fe

de

rati

on

--

--

- 1

8 6

24

5-

24

2 2

30

1 5

2 2

25

37

1S

lova

kia

--

--

--

- 1

2 4

2 1

- 4

24

24

91

Slo

ven

ia-

--

--

--

--

--

- 4

10

14

TF

YR

of

Ma

ced

on

ia-

--

--

--

--

2-

--

- -

Ukr

ain

e-

--

--

--

--

--

23

- 1

30

1U

ns

pe

cif

ied

13

30

60

6 3

25

4-

- 1

0-

- 4

--

7 -

Mu

ltin

ati

on

ala

--

--

3-

14

10

23

13

9 8

3 8

28

15

98

21

86

4

So

urc

e:

UN

CT

AD

, cr

oss

-bo

rde

r M

&A

da

tab

ase

.a

Inv

olv

ing

pu

rch

as

ers

fro

m m

ore

th

an

tw

o e

co

no

mie

s.

No

te:

Th

e d

ata

co

ve

r th

e d

ea

ls i

nv

olv

ing

th

e a

cq

uis

itio

n o

f a

n e

qu

ity

sta

ke

of

mo

re t

ha

n 1

0 p

er

ce

nt.

344


An

ne

x t

ab

le B

.9.

Cro

ss

-bo

rde

r M

&A

s,

by

se

cto

r a

nd

in

du

str

y o

f s

ell

er,

1

98

7-2

00

1(M

illio

ns

of

do

llars

)

Se

cto

r/in

du

str

y1

98

71

98

81

98

91

99

01

99

11

99

21

99

31

99

41

99

51

99

61

99

71

99

81

99

92

00

02

00

1

Tota

l7

4 5

09

115

62

31

40

38

91

50

57

68

0 7

13

79

28

08

3 0

64

12

7 1

10

18

6 5

93

22

7 0

23

30

4 8

48

53

1 6

48

76

6 0

44

1 1

43

81

65

93

96

0

Pri

ma

ry1

0 7

95

3 9

111

94

15

17

01

16

43

63

74

20

15

51

78

49

97

93

58

72

51

0 5

99

10

00

09

81

52

8 2

80

Ag

ricu

ltu

re,

hu

nti

ng

, fo

rest

ry a

nd

fis

hin

g 3

43

1 8

09

22

5 2

21

54

8 3

01

40

6 9

50

1 0

19

49

82

09

86

67

3 6

56

1 1

10

31

6M

inin

g,

qu

arr

yin

g a

nd

pe

tro

leu

m1

0 4

52

2 1

02

1 7

17

4 9

49

61

73

33

63

79

54

56

87

48

07

43

76

62

83

92

69

34

48

70

52

7 9

64

Ma

nu

fac

turi

ng

42

39

37

3 7

27

89

59

67

5 4

95

36

17

64

3 2

22

43

20

46

9 3

21

84

46

28

8 5

22

12

1 3

79

26

3 2

06

28

8 0

90

29

1 6

54

19

7 1

74

Fo

od

, b

eve

rag

es

an

d t

ob

acc

o3

80

31

4 4

62

8 7

19

12

67

65

12

79

39

87

75

11

3 5

28

18

10

86

55

82

2 0

53

17

00

12

8 2

42

50

24

73

4 6

28

Text

iles,

clo

thin

g a

nd

le

ath

er

61

7 8

12

1 7

20

1 2

81

73

1 7

60

1 1

73

1 4

31

2 0

39

84

91

73

21

63

25

27

62

52

63

51

0W

oo

d a

nd

wo

od

pro

du

cts

2 0

13

1 7

93

9 1

76

7 7

65

2 7

14

1 5

88

2 0

31

4 2

62

4 8

55

5 7

25

6 8

54

7 2

37

9 4

56

23

56

21

3 8

78

Pu

blis

hin

g,

pri

nti

ng

, a

nd

re

pro

du

ctio

n

o

f re

cord

ed

me

dia

1 1

96

11 7

41

6 5

44

2 3

05

35

35

19

21

18

32

74

71

34

11

0 8

53

2 6

07

12

79

81

0 2

48

4 8

75

16

76

7C

oke

, p

etr

ole

um

an

d n

ucl

ea

r fu

el

3 9

80

17

86

89

15

16

48

05

67

61

59

61

47

94

21

65

64

41

3 9

65

11 3

15

67

28

02

2 6

37

45

01

53

1 1

67

Ch

em

ica

ls a

nd

ch

em

ica

l p

rod

uct

s1

6 8

36

5 0

08

18

36

81

2 2

75

5 7

73

5 5

81

11 3

93

20

06

12

6 9

84

15

43

03

5 3

95

31

80

68

6 3

89

30

44

62

6 4

62

Ru

bb

er

an

d p

last

ic p

rod

uct

s1

69

63

62

01

38

72

74

5 5

74

22

8 2

65

99

74

31

33

94

32

30

62

26

43

78

64

72

32

40

6N

on

-me

talli

c m

ine

ral

pro

du

cts

1 2

49

2 4

52

3 8

87

5 6

30

1 1

13

5 4

10

2 2

04

5 2

01

2 7

26

2 8

40

6 1

53

8 1

00

12

12

911

66

38

35

9M

eta

l a

nd

me

tal

pro

du

cts

1 4

59

1 6

06

6 3

99

4 4

26

2 2

46

2 5

34

2 2

52

2 7

43

2 5

15

8 7

28

9 8

53

8 3

76

10

82

51

6 7

82

12

89

0M

ach

ine

ry a

nd

eq

uip

me

nt

83

22

87

82

07

81

75

01

14

01

08

71

66

13

31

25

10

34

30

17

54

68

91

82

0 8

50

8 9

80

4 0

73

Ele

ctri

cal

an

d e

lect

ron

ic e

qu

ipm

en

t7

13

56

99

81

2 7

71

6 1

14

8 3

61

6 1

98

3 8

95

3 4

32

5 5

81

7 5

73

7 8

97

35

81

95

1 7

70

53

85

92

5 7

32

Pre

cisi

on

in

stru

me

nts

1 0

56

3 5

96

2 6

26

3 9

92

1 1

12

1 0

80

4 4

95

1 8

82

2 0

23

3 3

00

3 3

22

9 2

51

7 2

69

13

51

81

0 3

75

Mo

tor

veh

icle

s a

nd

oth

er

tra

nsp

ort

e

qu

ipm

en

t 3

15

88

95

21

57

39

0 9

95

2 2

112

74

34

98

82

65

74

15

04

18

95

0 7

67

18

51

72

5 2

72

5 6

62

Oth

er

ma

nu

fact

uri

ng

20

8 4

1 5

56

66

6 2

61

36

0 6

80

52

2 5

75

30

8 1

58

1 9

58

69

6 1

86

1 2

66

Tert

iary

21

32

13

7 9

86

48

85

16

9 9

114

3 2

97

32

38

43

5 6

49

52

27

09

3 6

32

13

0 2

32

17

4 7

44

25

7 8

43

46

7 8

53

84

2 3

42

36

8 5

06

Ele

ctri

city

, g

as,

an

d w

ate

r 6

1 1

16

1 0

28

60

91

07

21

84

71

78

32

51

01

2 2

40

21

27

42

9 6

20

32

24

94

0 8

43

46

711

21

04

7C

on

stru

ctio

n 4

16

29

5 8

13

53

3 2

79

65

1 3

31

83

81

73

84

41

0 6

02

1 4

34

3 2

05

5 1

70

2 1

67

Tra

de

4 3

19

10

01

31

2 3

77

9 0

95

7 9

04

5 7

03

7 5

37

8 7

53

10

15

92

7 9

28

21

66

42

7 3

32

55

46

33

4 9

18

27

66

8H

ote

ls a

nd

re

sta

ura

nts

2 3

04

6 8

29

3 3

16

7 2

63

1 2

93

1 4

08

1 4

12

2 3

35

3 2

47

2 4

16

4 4

45

10

33

24

83

62

88

36

16

9T

ran

spo

rt,

sto

rag

e a

nd

co

mm

un

ica

tio

ns

30

92

18

23

57

81

4 4

60

3 7

57

3 0

35

6 5

59

13

54

08

22

51

7 5

23

17

73

65

1 4

45

16

7 7

23

36

5 6

73

12

1 4

90

Fin

an

ce7

36

01

4 4

71

14

61

62

1 7

22

14

18

81

3 1

78

12

16

81

0 5

68

31

05

93

6 6

93

50

83

68

3 4

32

12

6 7

10

18

3 6

65

12

2 0

05

Bu

sin

ess

se

rvic

es

6 2

37

3 0

09

5 2

64

11 8

31

5 1

00

3 8

08

3 6

64

8 4

06

9 7

15

13

15

42

6 4

80

42

49

75

2 7

48

13

7 4

16

54

31

9P

ub

lic a

dm

inis

tra

tio

n a

nd

de

fen

ce-

--

--

--

- 6

05

- 1

11 3

95

1 7

69

8 3

29

Ed

uca

tio

n-

- 7

5 3

3-

42

1 1

8-

4 1

79

42

66

21

9 4

38

He

alt

h a

nd

so

cia

l se

rvic

es

- 8

6 4

60

46

9 8

4 2

37

26

12

46

3 9

46

33

63

39

6 6

41

72

4 7

51

1 8

75

Co

mm

un

ity,

so

cia

l a

nd

pe

rso

na

l

se

rvic

e a

ctiv

itie

s 3

15

98

47

36

33

85

89

55

42

47

41

40

42

31

91

2 1

10

6 4

94

19

65

67

97

61

3 7

24

64

85

51

0 8

62

Oth

er

serv

ice

s-

3 3

0 6

6 3

3 4

4 1

10

52

03

58

8-

19

69

42

73

13

6

Un

kn

ow

na

--

--

76

37

10

1-

33

4-

- 1

01

5-

So

urc

e:

UN

CT

AD

, cr

oss

-bo

rde

r M

&A

da

tab

ase

.

aIn

clu

de

s n

on

-cla

ssif

ied

est

ab

lish

me

nts

.

No

te:

Th

e d

ata

co

ver

the

de

als

in

volv

ing

th

e a

cqu

isit

ion

of

an

eq

uit

y st

ake

of

mo

re t

ha

n 1

0 p

er

cen

t.

345

Annex B

An

ne

x t

ab

le B

.10

. C

ros

s-b

ord

er

M&

As

, b

y s

ec

tor

an

d i

nd

us

try

of

pu

rch

as

er,

19

87

-20

01

(Mill

ion

s o

f d

olla

rs)

Se

cto

r/in

du

str

y1

98

71

98

81

98

91

99

01

99

11

99

21

99

31

99

41

99

51

99

61

99

71

99

81

99

92

00

02

00

1

Tota

l7

4 5

09

115

62

31

40

38

91

50

57

68

0 7

13

79

28

08

3 0

64

12

7 1

10

18

6 5

93

22

7 0

23

30

4 8

48

53

1 6

48

76

6 0

44

1 1

43

81

65

93

96

0

Pri

ma

ry1

42

54

39

82

97

62

13

11

55

62

97

84

15

55

03

27

95

15

68

47

15

05

45

57

39

78

96

86

53

7A

gri

cult

ure

, h

un

tin

g,

fore

stry

an

d f

ish

ing

84

62

07

81

46

6 4

7 4

71

20

4 6

5 1

54

18

2 9

62

1 5

41

1 4

97

24

11

47

2 7

84

Min

ing

, q

ua

rryi

ng

an

d p

etr

ole

um

57

92

32

01

511

2 0

84

1 0

85

2 7

75

4 0

90

4 8

78

7 7

69

4 7

23

5 6

09

3 9

58

7 1

56

7 4

96

5 7

53

Ma

nu

fac

turi

ng

50

30

87

1 7

47

95

14

97

9 9

08

44

98

53

5 2

87

36

83

77

2 5

49

93

78

48

8 8

21

13

3 2

02

25

7 2

20

28

7 1

26

30

2 5

07

19

9 8

87

Fo

od

, b

eve

rag

es

an

d t

ob

acc

o4

45

41

9 7

74

15

48

41

3 5

23

5 2

12

6 3

83

7 6

68

7 8

72

22

54

69

68

42

1 4

39

16

92

23

3 0

14

60

18

92

3 2

38

Text

iles,

clo

thin

g a

nd

le

ath

er

25

9 6

08

1 6

36

3 3

63

1 4

01

40

63

76

7 3

32

1 5

69

77

81

25

43

06

22

12

23

74

11

12

9W

oo

d a

nd

wo

od

pro

du

cts

1 3

74

3 1

15

5 6

37

6 7

17

2 2

44

1 7

43

2 9

33

2 4

83

6 4

66

3 1

43

6 1

57

13

13

17

13

81

8 3

42

12

49

8P

ub

lish

ing

, p

rin

tin

g,

an

d r

ep

rod

uct

ion

o

f re

cord

ed

me

dia

1 4

26

8 9

51

6 5

18

2 3

63

68

95

02

21

99

84

86

62

33

27

82

96

77

41

2 0

50

13

24

59

36

51

8 6

16

Co

ke,

pe

tro

leu

m a

nd

nu

cle

ar

fue

l1

2 6

24

15

36

09

38

47

05

16

19

91

44

22

24

33

49

96

67

91

2 9

94

11 8

60

67

66

53

6 9

39

40

70

13

0 9

71

Ch

em

ica

ls a

nd

ch

em

ica

l p

rod

uct

s1

5 4

05

4 3

32

19

33

51

5 2

60

4 0

43

5 1

42

4 6

05

31

47

32

8 1

86

18

55

53

8 6

64

34

82

28

0 8

65

24

08

52

2 9

35

Ru

bb

er

an

d p

last

ic p

rod

uct

s1

16

93

52

82

60

91

90

4 4

11 7

10

38

7 1

76

4 8

52

65

92

36

32

79

01

10

51

21

41

53

5N

on

-me

talli

c m

ine

ral

pro

du

cts

2 1

26

1 8

65

2 9

83

6 1

83

911

3 9

39

2 4

04

5 2

32

2 7

40

4 5

85

6 9

65

8 8

23

12

49

41

2 8

81

8 3

92

Me

tal

an

d m

eta

l p

rod

uct

s1

65

42

72

95

99

23

07

61

87

42

30

82

04

62

47

51

47

21

3 3

95

8 5

12

7 9

47

10

97

41

2 7

13

20

08

1M

ach

ine

ry a

nd

eq

uip

me

nt

2 4

51

2 2

88

2 5

67

1 9

06

1 1

71

67

11

23

92

41

63

76

02

46

34

76

74

55

32

6 3

25

12

93

82

0 1

30

Ele

ctri

cal

an

d e

lect

ron

ic e

qu

ipm

en

t5

73

76

47

41

7 0

62

7 1

90

19

34

65

05

74

60

84

82

27

57

66

66

09

09

32

9 0

62

40

89

36

8 2

84

29

09

7P

reci

sio

n i

nst

rum

en

ts 9

20

1 2

51

1 5

112

86

1 4

45

61

91

41

51

13

52

80

93

03

34

75

77

20

94

30

26

19

55

87

5M

oto

r ve

hic

les

an

d o

the

r tr

an

spo

rt

eq

uip

me

nt

49

61

47

04

35

78

36

9 9

28

1 6

33

1 4

37

5 2

71

2 2

67

4 4

115

07

24

8 9

04

17

03

83

0 8

52

5 1

27

Oth

er

ma

nu

fact

uri

ng

21

4 3

74

14

3 1

13

21

4 8

8 4

97

52

8 6

33

5 5

27

28

0 6

72

1 0

07

26

3

Tert

iary

22

77

63

9 2

21

42

26

46

8 4

23

33

98

54

0 9

65

42

02

84

9 5

19

84

82

41

32

41

41

64

45

72

68

48

64

71

49

78

32

30

33

87

42

5E

lect

rici

ty,

ga

s, a

nd

wa

ter

66

1 0

34

77

1 3

32

1 0

72

1 0

12

1 2

50

83

01

0 4

66

16

61

61

8 7

87

27

52

75

5 1

118

4 4

09

17

95

3C

on

stru

ctio

n 8

82

2 7

40

1 1

81

25

7 6

95

31

6 1

77

1 3

50

1 1

60

6 9

55

2 5

46

1 3

36

1 7

87

2 9

21

1 3

97

Tra

de

3 1

23

4 1

09

4 3

56

6 2

05

3 7

39

2 8

70

6 1

86

5 6

36

8 8

54

15

17

61

6 5

15

19

62

42

9 5

24

19

39

92

0 2

38

Ho

tels

an

d r

est

au

ran

ts 3

31

3 5

61

1 5

34

3 0

66

34

0 3

23

56

9 9

97

3 4

02

1 7

13

2 4

82

2 7

99

3 5

93

2 1

20

2 8

95

Tra

nsp

ort

, st

ora

ge

an

d c

om

mu

nic

ati

on

s 5

60

1 0

62

5 0

04

4 7

85

1 3

67

1 5

96

4 0

48

10

48

06

08

511

42

41

4 7

35

30

16

51

63

92

83

68

95

411

2 4

98

Fin

an

ce11

18

31

3 2

18

23

40

24

3 6

71

22

39

53

0 4

06

24

58

92

4 2

68

45

36

86

1 3

04

82

61

61

42

06

61

74

23

82

41

28

21

81

23

4B

usi

ne

ss s

erv

ice

s5

60

09

88

84

94

96

37

73

10

03

29

83

53

23

97

24

84

31

7 0

84

14

72

12

2 8

89

35

69

58

2 7

90

33

111

Pu

blic

ad

min

istr

ati

on

an

d d

efe

nce

10

31

95

2 1

3 6

67

--

81

- 3

1-

10

2-

31

0 1

7 1

3E

du

cati

on

--

21

6-

4-

42

0-

- 1

98

30

54

10

7 1

10

He

alt

h a

nd

so

cia

l se

rvic

es

- 1

4 1

55

53

0 4

1 2

21

20

3 1

54

26

3 2

65

32

1 7

38

35

51

31

47

2C

om

mu

nit

y, s

oci

al

an

d p

ers

on

al

s

erv

ice

act

ivit

ies

92

81

64

0 6

78

2 4

69

1 2

06

83

5 9

06

1 3

32

3 3

66

1 8

57

11 0

00

19

88

77

21

42

9 7

84

16

46

7O

the

r se

rvic

es

- 3

5 6

6 2

7 8

8 6

9 5

00

98

6 2

0 5

34

1 4

26

8 7

37

Un

kn

ow

na

- 2

58

- 1

14

18

7 5

0 4

5 1

0 3

4 1

04

38

48

8 2

4 3

8 1

10

So

urc

e:

UN

CT

AD

, cr

oss

-bo

rde

r M

&A

da

tab

ase

.

aIn

clu

de

s n

on

-cla

ssif

ied

est

ab

lish

me

nts

.

No

te:

Th

e d

ata

co

ver

the

de

als

in

volv

ing

th

e a

cqu

isit

ion

of

an

eq

uit

y st

ake

of

mo

re t

ha

n 1

0 p

er

cen

t.

346


Selected UNCTAD publications on transnationalcorporations and foreign direct investment(For more information, please vis i t www.unctad.org/en/pub)

A. Serial publications

World Investment Reports

World Investment Report 2001: Promoting Linkages.356 p. Sales No. E.01.II.D.12 $49. http://www.unctad.org/wir/contents/wir01content.en.htm.

World Investment Report 2001: Promoting Linkages.An Overview. 67 p. Free of charge. http://www.unctad.org/wir/contents/wir01content.en.htm.

Ten Years of World Investment Reports: The ChallengesAhead. Proceedings of an UNCTAD special event onfuture challenges in the area of FDI. UNCTAD/ITE/Misc.45. Free of charge. http://www.unctad.org/wir.

World Investment Report 2000: Cross-border Mergersand Acquisitions and Development. 368 p. Sales No.E.99.II.D.20. $49. http://www.unctad.org/wir/contents/wir00content.en.htm.

World Investment Report 2000: Cross-border Mergersand Acquisitions and Development. An Overview. 75p. Free of charge. http://www.unctad.org/wir/contents/wir00content.en.htm.

World Investment Report 1999: Foreign Direct Investmentand the Challenge of Development. 543 p. Sales No.E.99.II.D.3. $49. http://www.unctad.org/wir/contents/wir99content.en.htm.

World Investment Report 1999: Foreign Direct Investmentand the Challenge of Development. An Overview. 75p. Free of charge. http://www.unctad.org/wir/contents/wir99content.en.htm.

World Investment Report 1998: Trends and Determinants.432 p. Sales No. E.98.II.D.5. $45. http://www.unctad.org/wir/contents/wir98content.en.htm.

World Investment Report 1998: Trends and Determinants.An Overview. 67 p. Free of charge. http://www.unctad.org/wir/contents/wir98content.en.htm.

World Investment Report 1997: TransnationalCorporations, Market Structure and Competition Policy.384 p. Sales No. E.97.II.D.10. $45. http://www.unctad.org/wir/contents/wir97 content.en.htm.

World Investment Report 1997: TransnationalCorporations, Market Structure and Competition Policy.An Overview. 70 p. Free of charge. http://www.unctad.org/wir/contents/wir97 content.en.htm.

World Investment Report 1996: Investment, Trade andInternational Policy Arrangements. 332 p. Sales No.E.96.II.A.14. $45. http://www.unctad.org/wir/contents/wir96content.en.htm.

World Investment Report 1996: Investment, Trade andInternational Policy Arrangements . An Overview.

51 p. Free of charge. http://www.unctad.org/wir/contents/wir96content.en.htm.

World Investment Report 1995: Transnational Corporationsand Competitiveness. 491 p. Sales No. E.95.II.A.9. $45.http://www.unctad.org/wir/contents/wir95content.en.htm.

World Investment Report 1995: Transnational Corporationsand Competitiveness. An Overview. 51 p. Free of charge.http://www.unctad.org/wir/contents/wir95content.en.htm.

World Investment Report 1994: TransnationalCorporations, Employment and the Workplace. 482p. Sales No. E.94.II.A.14. $45. http://www.unctad.org/wir/contents/wir94content.en.htm.

World Investment Report 1994: TransnationalCorporations, Employment and the Workplace. AnExecutive Summary. 34 p. http://www.unctad.org/wir/contents/wir94content.en.htm.

World Investment Report 1993: Transnational Corporationsand Integrated International Production. 290 p. SalesNo. E.93.II.A.14. $45. http://www.unctad.org/wir/contents/wir93 content.en.htm.

World Investment Report 1993: Transnational Corporationsand Integrated International Production. An ExecutiveSummary. 31 p. ST/CTC/159. Free of charge. http://www.unctad.org/wir/contents/wir93content.en.htm.

World Investment Report 1992: Transnational Corporationsas Engines of Growth. 356 p. Sales No. E.92.II.A.19.$45. http://www.unctad.org/wir/contents/wir92content.en.htm.

World Investment Report 1992: Transnational Corporationsas Engines of Growth. An Executive Summary. 30 p.Sales No. E.92.II.A.24. Free of charge. http://www.unctad.org/wir/contents/wir92content.en.htm.

World Investment Report 1991: The Triad in ForeignDirect Investment. 108 p. Sales No.E.91.II.A.12. $25.http://www.unctad. org/wir/contents/wir91content.en.htm.

World Investment Directories

World Investment Directory 1999: Asia and the Pacific.Vol. VII (Parts I and II). 332+638 p. Sales No.E.00.II.D.21. $80.

World Investment Directory 1996: West Asia. Vol. VI.138 p. Sales No. E.97.II.A.2. $35.

World Investment Directory 1996: Africa. Vol. V. 461p. Sales No. E.97.II.A.1. $75.

World Investment Directory 1994: Latin America andthe Caribbean. Vol. IV. 478 p. Sales No. E.94.II.A.10.$65.

World Investment Directory 1992: Developed Countries.Vol. III . 532 p. Sales No. E.93.II.A.9. $75.

348


World Investment Directory 1992: Central and EasternEurope. Vol. II. 432 p. Sales No. E.93.II.A.1. $65. (Jointpublication with the United Nations Economic Commissionfor Europe.)

World Investment Directory 1992: Asia and the Pacific.Vol. I. 356 p. Sales No. E.92.II.A.11. $65.

Investment Policy Reviews

Investment Policy Review United Republic of Tanzania.98 p. Sales No. 02.E.II.D.6 $ 20. http://www.unctad.org/en/docs/poiteipcm9.en.pdf.

Investment Policy Review Ecuador. 117 p. Sales No.E.01.II D.31. $ 25. Summary available from http://www.unctad.org/en/docs/poiteipcm2sum.en.pdf.

Investment and Innovation Policy Review Ethiopia.115 p. UNCTAD/ITE/IPC/Misc.4. Free of charge. http://www.unctad.org/en/docs/poiteipcm4.en.pdf .

Investment Policy Review Mauritius. 84 p. Sales No.E.01.II.D.11. $22. Summary available from http://www.unctad.org/en/pub/investpolicy.en.htm

Investment Policy Review Peru. 108 p. Sales No. E.00.II.D.7. $22. Summary available from http://www.unctad.org/en/docs/poiteiipm19sum.en.pdf.

Investment Policy Review Uganda. 75 p. Sales No.E.99.II.D.24. $15. Summary available from http://www.unctad.org/en/docs/poiteiipm17sum.en.Pdf.

Investment Policy Review Egypt . 113 p. Sales No.E.99.II.D.20. $19. Summary available from http://www.unctad.org/en/docs/poiteiipm11sum.en.Pdf.

Investment Policy Review Uzbekistan. 64 p. UNCTAD/ITE/IIP/Misc.13. Free of charge. http://www.unctad.org/en/docs/poiteiipm13.en.pdf.

International Investment InstrumentsInternational Investment Instruments: A Compendium.Vol. IX. 353 p. Sales No. E.02.II.D.16. $60. http://www.unctad.org/en/docs/psdited3v9.en.pdf.

International Investment Instruments: A Compendium.Vol. VIII. 335 p. Sales No. E.02.II.D.15. $60. http://www.unctad.org/en/docs/psdited3v8.en.pdf.

International Investment Instruments: A Compendium.Vol. VII. 339 p. Sales No. E.02.II.D.14. $60. http://www.unctad.org/en/docs/psdited3v7.en.pdf.

International Investment Instruments: A Compendium.Vol. VI. 568 p. Sales No. E.01.II.D.34. $60. http://www.unctad.org/en/docs/ps1dited2v6_p1. en.pdf (partone).

International Investment Instruments: A Compendium.Vol. V. 505 p. Sales No. E.00.II.D.14. $55.

International Investment Instruments: A Compendium.Vol. IV. 319 p. Sales No. E.00.II.D.13. $55.

International Investment Instruments: A Compendium.Vol. I. 371 p. Sales No. E.96.II.A.9; Vol. II. 577 p.Sales No. E.96.II.A.10; Vol. III. 389 p. Sales No.E.96.II.A.11; the 3-volume set, Sales No. E.96.II.A.12.$125.

Bilateral Investment Treaties, 1959-1999. 143 p. UNCTAD/ITE/IIA/2, Free of charge. Available only in electronicversion from http://www.unctad.org/en/pub/poiteiiad2.en.htm.

Bilateral Investment Treaties in the Mid-1990s. 314p. Sales No. E.98.II.D.8. $46.

LDC Investment Guides

An Investment Guide to Mozambique: Opportunitiesand Conditions. 72 p. UNCTAD/ITE/IIA/4. http://www.unctad.org/en/pub/investguide.en.htm

An Investment Guide to Uganda: Opportunities andConditions. 76 p. UNCTAD/ITE/IIT/Misc.30. http://www.unctad.org/en/docs/poiteiitm30.en.pdf.

An Investment Guide to Bangladesh: Opportunitiesand Conditions. 66 p. UNCTAD/ITE/IIT/Misc.29.http://www.unctad.org/en/docs/poiteiitm29.en.pdf.

Guide d’investissement au Mali. 108 p. UNCTAD/ITE/IIT/Misc.24. http://www.unctad.org/fr/docs/poiteiitm24.fr.pdf. (Joint publication with the InternationalChamber of Commerce, in association withPricewaterhouseCoopers.)

An Investment Guide to Ethiopia: Opportunities andConditions. 69 p. UNCTAD/ITE/IIT/Misc.19. http://www.unctad.org/en/docs/poiteiitm19.en.pdf. (Jointpublication with the International Chamber of Commerce,in association with PricewaterhouseCoopers.)

Issues in InternationalInvestment Agreements

(Execut ive summaries are avai lable f rom

http:/ /www.unctad.org/ i ia . )

Transfer of Technology. 138p. Sales No. E.01.II.D.33.$18.

Illicit Payments. 108 p. Sales No. E.01.II.D.20. $13.

Home Country Measures.96 p. Sales No.E.01.II.D.19.$12.

Host Country Operational Measures. 109 p. Sales NoE.01.II.D.18. $15.

Social Responsibility. 91 p. Sales No. E.01.II.D.4. $15.

Environment. 105 p. Sales No. E.01.II.D.3. $15.

Transfer of Funds. 68 p. Sales No. E.00.II.D.27. $12.

Employment. 69 p. Sales No. E.00.II.D.15. $12.

Taxation. 111 p. Sales No. E.00.II.D.5. $12.

International Investment Agreements: Flexibility forDevelopment. 185 p. Sales No. E.00.II.D.6. $12.

Taking of Property. 83 p. Sales No. E.00.II.D.4. $12.

Trends in International Investment Agreements: AnOverview. 112 p. Sales No. E.99.II.D.23. $ 12.

349

Selected UNCTAD publications on transnationalcorporations and foreign direct investment

Lessons from the MAI. 31 p. Sales No. E.99.II.D.26. $12.

National Treatment. 104 p. Sales No. E.99.II.D.16. $12.

Fair and Equitable Treatment. 64 p. Sales No.E.99.II.D.15. $12.

Investment-Related Trade Measures. 64 p. Sales No.E.99.II.D.12. $12.

Most-Favoured-Nation Treatment. 72 p. Sales No.E.99.II.D.11. $12.

Admission and Establishment. 72 p. Sales No. E.99.II.D.10.$12.

Scope and Definition. 96 p. Sales No. E.99.II.D.9. $12.

Transfer Pricing. 72 p. Sales No. E.99.II.D.8. $12.

Foreign Direct Investment and Development. 88 p.Sales No. E.98.II.D.15. $12.

B. Current Studies

Series A

No. 30. Incentives and Foreign Direct Investment.98 p. Sales No. E.96.II.A.6. $30. [Out of print.]

No. 29. Foreign Direct Investment, Trade, Aidand Migration. 100 p. Sales No. E.96.II.A.8. $25.(Joint publication with the International Organizationfor Migration.)

No. 28. Foreign Direct Investment in Africa. 119p. Sales No. E.95.II.A.6. $20.

ASIT Advisory Studies(Formerly Current Studies, Series B)

No. 17. The World of Investment Promotion at a Glance:A survey of investment promotion practices. UNCTAD/ITE/IPC/3. Free of charge.

No. 16. Tax Incentives and Foreign Direct Investment:A Global Survey. 180 p. Sales No. E.01.II.D.5. $23.Summary available from http://www.unctad.org/asit/resumé.htm.

No. 15. Investment Regimes in the Arab World: Issuesand Policies. 232 p. Sales No. E/F.00.II.D.32.

No. 14. Handbook on Outward Investment PromotionAgencies and Institutions. 50 p. Sales No.E.99.II.D.22. $ 15.

No. 13. Survey of Best Practices in Investment Promotion.71 p. Sales No. E.97.II.D.11. $ 35.

No. 12. Comparative Analysis of Petroleum ExplorationContracts. 80 p. Sales No. E.96.II.A.7. $35.

No. 11. Administration of Fiscal Regimes for PetroleumExploration and Development. 45 p. SalesNo. E.95.II.A.8.

C. Individual Studies

The Tradability of Consulting Services. 189 p. UNCTAD/ITE/IPC/Misc.8. http://www.unctad.org/en/docs/poiteipcm8.en.pdf.

Compendium of International Arrangements on Transferof Technology: Selected Instruments. 308 p. Sales No.E.01.II.D.28. $45.

FDI in Least Developed Countries at a Glance. 150p. UNCTAD/ITE/IIA/3. Free of charge. Also availablefrom http://www.unctad.org/en/pub/poiteiiad3.en.htm.

Foreign Direct Investment in Africa: Performance andPotential. 89 p. UNCTAD/ITE/IIT/Misc.15. Free ofcharge. Also available from http://www.unctad.org/en/docs/poiteiitm15.pdf.

TNC-SME Linkages for Development: Issues–Experiences–Best Practices. Proceedings of the Special Round Tableon TNCs, SMEs and Development, UNCTAD X, 15February 2000, Bangkok, Thailand.113 p. UNCTAD/ITE/TEB1. Free of charge.

Handbook on Foreign Direct Investment by Small andMedium-sized Enterprises: Lessons from Asia. 200 p.Sales No. E.98.II.D.4. $48.

Handbook on Foreign Direct Investment by Small andMedium-sized Enterprises: Lessons from Asia. ExecutiveSummary and Report of the Kunming Conference. 74p. Free of charge.

Small and Medium-sized Transnational Corporations.Executive Summary and Report of the Osaka Conference.60 p. Free of charge.

Small and Medium-sized Transnational Corporations:Role, Impact and Policy Implications .242 p. Sales No. E.93.II.A.15. $35.

Measures of the Transnationalization of EconomicActivity . 93 p. Sales No. E.01.II.D.2. $20.

The Competitiveness Challenge: TransnationalCorporations and Industrial Restructuring in DevelopingCountries . 283p. Sales No. E.00.II.D.35. $42.

Integrating International and Financial Performanceat the Enterprise Level. 116 p. Sales No. E.00.II.D.28.$18.

FDI Determinants and TNC Strategies: The Case ofBrazil. 195 p. Sales No. E.00.II.D.2. $35. Summaryavailable from http://www.unctad.org/en/pub/psiteiitd14.en.htm.

The Social Responsibility of Transnational Corporations.75 p. UNCTAD/ITE/IIT/Misc. 21. Free-ofcharge. [Outof stock.] Available from http://www.unctad.org/en/docs/poiteiitm21.en.pdf.

Conclusions on Accounting and Reporting byTransnational Corporations. 47 p. Sales No. E.94.II.A.9.$25.

Accounting, Valuation and Privatization. 190 p. SalesNo. E.94.II.A.3. $25.

350


Environmental Management in TransnationalCorporations: Report on the Benchmark CorporateEnvironment Survey. 278 p. Sales No. E.94.II.A.2. $29.95.

Management Consulting: A Survey of the Industry andIts Largest Firms. 100 p. Sales No. E.93.II.A.17. $25.

Transnational Corporations: A Selective Bibliography,1991-1992. 736 p. Sales No. E.93.II.A.16. $75.

Foreign Investment and Trade Linkages in DevelopingCountries. 108 p. Sales No. E.93.II.A.12. $18.

Transnational Corporations from Developing Countries:Impact on Their Home Countries . 116 p. Sales No.E.93.II.A.8. $15.

Debt-Equity Swaps and Development. 150 p. Sales No.E.93.II.A.7. $35.

From the Common Market to EC 92: Regional EconomicIntegration in the European Community andTransnational Corporations. 134 p. Sales No. E.93.II.A.2.$25.

The East-West Business Directory 1991/1992. 570 p.Sales No. E.92.II.A.20. $65.

Climate Change and Transnational Corporations: Analysisand Trends. 110 p. Sales No. E.92.II.A.7. $16.50.

Foreign Direct Investment and Transfer of Technologyin India. 150 p. Sales No. E.92.II.A.3. $20.

The Determinants of Foreign Direct Investment: A Surveyof the Evidence. 84 p. Sales No. E.92.II.A.2. $12.50.

Transnational Corporations and Industrial HazardsDisclosure . 98 p. Sales No. E.91.II.A.18. $17.50.

Transnational Business Information: A Manual of Needsand Sources. 216 p. Sales No. E.91.II.A.13. $45.

The Financial Crisis in Asia and Foreign DirectInvestment: An Assessment. 101 p. Sales No. GV.E.98.0.29.$20.

Sharing Asia’s Dynamism: Asian Direct Investmentin the European Union. 192 p. Sales No. E.97.II.D.1.$26.

Investing in Asia’s Dynamism: European Union DirectInvestment in Asia. 124 p. ISBN 92-827-7675-1. ECU14. (Joint publication with the European Commission.)

International Investment Towards the Year 2002. 166p. Sales No. GV.E.98.0.15. $29. (Joint publication withInvest in France Mission and Arthur Andersen, incollaboration with DATAR.)

International Investment towards the Year 2001. 81p. Sales No. GV.E.97.0.5. $35. (Joint publication withInvest in France Mission and Arthur Andersen, incollaboration with DATAR.)

D. Journals

Transnational Corporations Journal. Published threetimes a year. Annual subscription price: $45; individualissues $20. http://www.unctad.org/en/subsites/dite/1_itncs/1_tncs.htm

United Nations publications may be obtained frombookstores and distributors throughout the world. Pleaseconsult your bookstore or write,

For Africa and Europe to:

Sales SectionUnited Nations Office at Geneva

Palais des NationsCH-1211 Geneva 10

SwitzerlandTel: (41-22) 917-1234Fax: (41-22) 917-0123

E-mail: [email protected]

For Asia, the Caribbean, Latin America, North Americaand the Pacific to:

Sales SectionRoom DC2-0853

United Nations SecretariatNew York, NY 10017

United StatesTel: (1-212) 963-8302 or (800) 253-9646

Fax: (1-212) 963-3489E-mail: [email protected]

All prices are quoted in United States dollars.

For further information on the work of the Divisionon Investment, Technology and Enterprise Development,UNCTAD, please address inquiries to:

United Nations Conference onTrade and Development

Division on Investment, Technologyand Enterprise Development

Palais des Nations, Room E-10054CH-1211 Geneva 10, Switzerland

Telephone: (41-22) 907-5651Telefax: (41-22) 907-0498

E-mail: [email protected]://www.unctad.org

QUESTIONNAIRE

World Investment Report 2002:Transnational Corporations and

Export Competitiveness

In order to improve the quality and relevance of the work of the UNCTAD Division on Investment,Technology and Enterprise Development, it would be useful to receive the views of readers on this andother similar publications. It would therefore be greatly appreciated if you could complete the followingquestionnaire and return it to:

Readership SurveyUNCTAD, Division on Investment,Technology and Enterprise DevelopmentPalais des NationsRoom E-10054CH-1211 Geneva 10SwitzerlandOr by Fax to: (+41 22) 907.04.98

1. Name and professional address of respondent (optional):

2. Which of the following best describes your area of work?

Government Public enterprisePrivate enterprise institution Academic or researchInternational organization MediaOther (specify) Not-for-profit organization

3. In which country do you work?

4. What is your assessment of the contents of this publication?

Excellent AdequateGood Poor

5. How useful is this publication to your work?

Very useful Of some use Irrelevant

6. Please indicate the three things you liked best about this publication and how are they useful foryour work:

7. Please indicate the three things you liked least about this publication:

This questionnaire is alsoavailable to be filled out online at: www.unctad.org/wir.

8. On the average, how useful are these publications to you in your work?

Very useful Of some use Irrelevant

9. Are you a regular recipient of Transnational Corporations, UNCTAD’s tri-annual refereed journal?

Yes No

If not, please check here if you would like to receive a sample copy sent to the name and addressyou have given above. Other title you would like to receive instead (see list of publications):

10. How and where did you obtain this publication:

I bought it In a seminar/workshopI requested a courtesy copy Direct mailingOther

11. Would you like to receive information on UNCTAD’s work in the area of Investment Technology andEnterprise Development through e-mail? If yes, please provide us with your e-mail address:

world investment report 2002 transnational corporations ...intel's manufacturing sites, january...

Documents