SG's Ad Hoc Expert Group Meeting
UNLDC IV: Key Development Challenges facing the LDCs
18-19 February 2010
Trends and Issues in FDI Inflows to LDC
By
Mr. Masaka Fujita
OIC, Investment Trends and Issues Branch, Division on Investment and
Enterprise/UNCTAD
The view expressed are those of the author and do not necessarily reflect the views of UNCTAD
Trends and Issues in FDI inflows
to Least Developed Countries
Ad Hoc Expert Group Meeting
UNLDC IV: “Key Development Challenges Facing the LDCs”
18-19 February 2010, Geneva
Masataka Fujita
Officer-in-charge
Investment Trends and Issues Branch
Division on Investment and Enterprise
UNCTAD
1
FDI in LDCs on the rise…
•
Inflows to LDCs: more important source of financing
$0.6 billion in 1990
over $33 billion today
They account for, however, limited shares in overall FDI (2% in 2008)
as well as in inward FDI in the developing world (5%)
•
FDI inflows into the LDCs and their share in world inflows and developing country-inflows, 1986-2008
8.0
35.0
7.0
30.0
6.0
25.0
(%)
20.0
4.0
15.0
3.0
10.0
2.0
5.0
1.0
0.0
0.0
19861990
19911995
19962000
2001
FDI inflows (right s cale)
Source: UNCTAD, FDI/TNC database.
2
2002
2003
Share in world (left s cale)
2004
2005
2006
2007
2008
Share in developing countries (left s cale)
($ billion)
5.0
… but the distribution remains uneven
FDI inflows, top 10 LDCs, 2007-2008
a
(Millions of dollars)
•
•
•
High concentration in
few natural-resourcerich countries, driven
by high global oil and
gas demand
Bulk of FDI is aimed
at extracting activities
in particular in Africa
In Asia, some FDI is
taking place also in
services
(telecommunications also in Africa -,
electricity services)
Sudan
Madagascar
Guinea
Equatorial Guinea
2008
2007
Bangladesh
Congo, Dem. Rep. of
Zambia
Chad
Cambodia
0
1 000
2 000
Source: UNCTAD, FDI/TNC database.
a
3
15,548
9,796
Angola
Ranked on the basis of the magnitude of 2008 FDI inflows.
3 000
The 10 largest cross-border M&A sales in LDCs, 1990-2009
Rank Acquired company
Ultimate acquiring
company
Ultimate home
country
Equatorial Guinea
Sudan
Equatorial Guinea
GEPetrol
MTC Kuwait
Marathon Oil Co
Equatorial Guinea
Kuwait
United States
Sudan
Industry of the acquired company
Host country
Crude petroleumand natural gas
Radiotelephone communications
Crude petroleumand natural gas
Telephone communications, except
radiotelephone
Crude petroleumand natural gas
Sudan
a
1
2
3
Devon Energy Corp.
MobiTel
CMS Energy Corp.
4
5
Bashair TelecomCo Ltd
Greater Nile Petroleum
Operating Co
6
7
8
DRCResources Holdings Ltd
Spacetel Yemen
Banco de Fomento Angola
Ferroalloy ores, except vanadium
Radiotelephone communications
Banks
Congo, Dem. Rep. of
Yemen
b
Angola
9
AES Haripur Pvt Ltd
Electric services
Bangladesh
Investcom
Lebanon
Oil & Natural Gas Corp
Ltd
India
Central African Mining
& Expl
United Kingdom
Investcom
Lebanon
Unitel SA
Angola
CDC Globeleq
Holdings Ltd
United Kingdom
Myanmar
Petronas International
Corp Ltd
Malaysia
10
Yetagun Oil Project
Crude petroleumand natural gas
Source: UNCTAD cross-border M&A database (www.unctad.org/fdistatistics).
4
a
The ultimate host country is the United States.
b
The ultimate host country is Portugal.
Value ($
million)
Year
2 200
1 332
993
2008
2006
2002
806
2006
768
2003
732
716
475
2008
2006
2008
437
2003
400
2003
The 10 largest greenfield FDI projects in LDCs, announced during
2003-2008
Rank Name of company
1
2
3
4
5
5
6
7
8
9
9
9
9
9
9
9
9
9
10
ChevronTexaco
Ayr Logistics
Woodside Petroleum
CITICGroup
Total
ExxonMobil
Sumitomo Group
ExxonMobil
China Union
Roc Oil
ExxonMobil
BP
BP
Petrobras
BP
China Petroleum and
Chemical (Sinopec)
ENI
Chevron Corporation
ArcelorMittal
Estimated
amount ($
million)
Estimated
number of jobs
created
8 300
5 500
4 000
3 535
3 400
3 400
3 300
3 000
2 600
2 338
2 338
2 338
2 338
2 338
2 338
2 338
2 338
2 338
2 200
Year
Home country
Host country
Sector
Key business
function
1 967
1 267
921
3 000
806
806
3 000
711
3 000
215
215
215
215
215
215
2004
2008
2003
2008
2003
2004
2007
2003
2008
2003
2006
2003
2008
2003
2007
United States
United States
Australia
China
France
United States
Japan
United States
China
Australia
United States
United Kingdom
United Kingdom
Brazil
United Kingdom
Angola
Mozambique
Timor-Leste
Angola
Angola
Angola
Madagascar
Angola
Liberia
Angola
Angola
Angola
Angola
Angola
Angola
Coal, oil and natural gas
Coal, oil and natural gas
Coal, oil and natural gas
Real estate
Coal, oil and natural gas
Coal, oil and natural gas
Metals
Coal, oil and natural gas
Metals
Coal, oil and natural gas
Coal, oil and natural gas
Coal, oil and natural gas
Coal, oil and natural gas
Coal, oil and natural gas
Coal, oil and natural gas
Extraction
Manufacturing
Manufacturing
Construction
Extraction
Extraction
Extraction
Extraction
Extraction
Extraction
Extraction
Extraction
Extraction
Extraction
Extraction
215
215
215
3 583
2007
2007
2008
2007
China
Italy
United States
Netherlands
Angola
Angola
Angola
Senegal
Coal, oil and natural gas
Coal, oil and natural gas
Coal, oil and natural gas
Metals
Extraction
Extraction
Extraction
Extraction
Source: UNCTAD, based on information from the Financial Times Ltd, fDi Markets (www.fDimarkets.com).
5
FDI inflows are growing over the years, and from 2004
became the most important resource flows to LDCs.
FDI inflows and ODA flows to LDCs, 1980-2008
(Billions of dollars)
40
35
30
25
20
15
10
5
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Total ODA
Source: UNCTAD FDI/TNC database and OECD.
6
Bilateral ODA
FDI inflows
In 15 LDCs FDI inflows increased while ODA declined
over the last two decades
Growth trends in FDI and bilateral ODA flows to LDCs, 1990-2008
Source: UNCTAD FDI/TNC database and OECD.
7
The importance of FDI is growing!
though many LDCs lack human resources and market access.
In order to maximize
¾ Access to technology and know-how
¾ Possibility to integrate into international markets
by building an investment-export nexus
Need of building domestic capabilities
(Millions of dollars and per cent)
FDI inflows
Millions of dollars
Average
1990-1999
2008
World
Developed countries
Developing countries
LDCs
401 048
278 484
118 169
2 530
1 697 353
962 259
620 733
33 098
Growth
(%)
323
246
425
1 208
Source: UNCTAD, FDI/TNC database.
8
Inward FDI stock
As percentage of
GFCF (%)
Average
1990-1999
2008
6.7
6.1
9.2
9.4
12.3
11.4
12.8
30.2
Millions of dollars
Average
1990-1999
2008
2 985 215
2 071 669
899 095
20 712
14 909 289
10 212 893
4 275 982
136 167
Growth
(%)
399
393
376
557
As percentage of
GDP (%)
Average
1990-1999 2008
10.9
9.7
16.8
13.3
24.5
24.7
24.9
25.7
The relationship between FDI and
domestic investment in LDCs
•
As domestic investment levels are low, LDCs have to harness FDI to achieve
long-term and strategic development objectives.
However, FDI may strengthen the formation of capital by domestically-owned
firms (crowding-in) but also may substitute it (crowding-out).
Empirical evidence suggest that FDI crowd-in domestic investment in Asian
LDCs, but is neutral in Africa as FDI is not diversified
•
•
LDCs: effects of FDI on investment, 1982−2008
Region
Total LDCs (49)
LDCs in Africa (33)
LDCs in Asia (15)
Long term coefficient linking FDI with Investment
7.33
1.28
12.35
Source : UNCTAD based on UNCTAD 1999
Parameter not significantly different from one
Note: Figures in paranthesis after the region's name indicate the number of countries covered.
a
9
Long term effect
Crowding-in
Neutral
Crowding-in
Issues to be examined further in
the run-up to LDCs IV
10
•
How the on-going financial and economic crisis has affected FDI flows to LDCs?
What is the role of economic integration in attracting FDI to LDCs?
•
Given small size of economy, as well as constraints and limited locational
advantages, what policies are most effective in attracting FDI?
•
What are short-term measures to avert further marginalization due to the current
crisis and long-term policy orientation to cope with a new paradigm for
investment which was reinforced by the current crisis?
•
What policies should be considered to increase and maximize benefits from the
South-South FDI under the overall South-South Cooperation and the triangular
cooperation?
•
What are the effective policies to leverage ODA for FDI projects and FDI-led
development strategies?
Thank you
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