Eurostat produces this paper, which analyses intra-EU foreign direct investments and trade in services. Based on data for the period 2004-2008, it analyses the importance of the Internal Market in direct investments and trade in services in the
Member States. Services are increasingly important in the Internal Market. They account for about 70% of gross value
added and 69% of employment in the EU-27. In recent decades their importance to the EU economy has risen steadily. The dismantling of non-tariff barriers and the establishment of free market entry in service sectors such as banking, financial services, telecommunications, etc. have made it the largest target sector for FDI as well.

For more information: http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-09-056/EN/KS-SF-09-056-EN.PDF

The Swiss bank UBS edits each year the global ranking of cities based on a comparaison of purchasing power. The 2009 edition (http://www.ubs.com/1/e/investors/releases.html?newsId=170250)  contains important changes compared to last year’s. Indeed, London suddenly appears only far behind Oslo, Copenhagen, Zürich or Paris. So, if you need to set up in Europe, and you want to be in a capital city, go to London right now! But watch out: this low ranking is almost only due to the pound’s devaluation, so you have to bet on minor changes in exchange rates…

The Ernst & Young’s 2009 European attractiveness survey shows European Inward investment stalls as recession looms. This is the title of their press release (http://www.ey.com/FR/fr/Newsroom/News-releases/Communique-Presse_European-attractiveness-2009), which starts with multitudes of negative messages. However, I’ll keep for the last the positive thought that you should retain from this story…

The negative quotes: « Five years of growth comes to a halt as investors flee risk.The 7th annual report, which examines figures for international investments into Europe, new projects or expansions, revealed that in 2008 Europe secured 3,718 investment announcements, six more projects than in 2007. The number of projects remained steady but the impact of the impending recession on new employment was severe. The number of jobs created fell 16% to 148,333, accelerating a downward trend underway since 2004.  »

And the negative news continues: « But, the true picture of how the global recession has hit inward investment has yet to emerge. Investment decisions for 2008 will have been made many months before the downturn hit, which explains why in 2008 Europe secured as many FDI projects as the year before. We expect 2009 to tell a very different story.”

The positive news: « The uncertain climate has resulted in a temporary mood-shift amongst investors to more familiar markets. For the immediate future, businesses see Europe as the safer option to make their investment. »

Countered by the negative preview of: « The recession will impact European FDI even more in 2009. Provisional data from the first quarter already indicates an 8% drop in project announcements compared with the first quarter of 2008. For the rest of the year, 53% of business leaders interviewed in the study say they have no green field or expansion plans for 2009. »

But finally, the positive thought that we should keep in mind: Mark Otty, Area Managing Partner of Ernst & Young EMEIA, explains why even at the bottom of a global recession it is important for investors and authorities to work together to encourage cross border investment. “Although the natural reaction on one level is for investors to act in a protective way, open borders and free trade have had major benefits for the global economy in the last 20 years. We should do all we can to continue to promote it. »

And that is our job!!! Keep on smiling…

Global foreign direct investment is still prevalent despite economic woes but is undergoing a major transition in
response to the global crisis with an expected drop of up to 25% in the next twelve months, according to a new report by the foreign investment advisory firm OCO Global (OCO). OCO’s report entitled, « A New Investment Paradigm » ( http://www.ocoglobal.com/review/ ) reviews key issues around foreign investment and explores some of the fundamental issues such as:

- the decreasing role of greenfield investment in favour of lower risk expansion modes such as M&A and Joint Ventures

- the growing importance and impact of FDI from Sovereign Wealth Funds, often originating from developing countries in the Middle East and Asia

- the rise of co-location and re-location from overheated capital cities in Europe to tier 2 cities such as Lyon, Nantes, Antwerp, Bologna, Liverpool, Leeds and Belfast. A similar trend is unfolding in the US.

To start with the bad news: whilst analysts disagree on the severity of the impact on global FDI in the short term, the report indicates a consensus that there will be a downturn this year anywhere up to 30% in the worst affected sectors.

The good news is good news only for tier 2 cities, such as Nantes (where we are!), that will overtake FDI from the large cities, far too expensive in these times of crisis.

Google Books. Really unmissable if you want to read the most important chapters of a book on FDI, that you do not have in your office. Or, if you are doing research on a particular subject, and before buying the book you would like to know if you will find what you need, have a look on the content page of the book, which is almost always online on Google Books, or Google Scholar.

Links: http://books.google.com/books?q=foreign+direct+investment&hl=fr and http://scholar.google.fr/scholar?q=foreign+direct+investment&hl=en

The results of the UNCTAD World Investment Prospects Survey 2009-2011 show that the global economic and financial crisis has had a major negative impact on foreign direct investment plans by transnational corporations (TNCs) in the short-term. Recovery is expected to begin slowly in 2010 and gather momentum in 2011. The persistent trend towards internationalization by TNCs – measured by production, employment, investment and sales abroad – is expected to provide the catalyst for a full rebound in FDI expenditures by 2011. Even, half of TNC respondents forecast that their FDI expenditures in 2011 will be above their 2008 levels.
An analysis of TNCs by their home countries shows the differing impacts of the economic and financial crisis. TNCs from the developing world, especially Asia, were the most optimistic regarding FDI in 2011. In the developed world, sentiment was mixed; companies in Japan and Europe were less optimistic than those in the United States.
In terms of the geographical locations for potential FDI, responses to the survey show that the five most attractive destinations are China, the United States, India, Brazil, and the Russian Federation (figure 4). While the members of the top five are the same as in last year´s survey, the United States and Brazil have improved their rankings slightly.

The annual survey seeks to ascertain the FDI plans of the world´s largest TNCs. This year´s results are based on 241 responses from TNTs that were sent the survey.
You can read the resume and download the complete report here: http://unctad.org/Templates/webflyer.asp?docid=11802&intItemID=1634&lang=1

Good news for FDI fans: the financial crises underlines the importance of FDI for economic recovery AND national governments seems to understand as they undertake policy developments encouraging the attraction of FDI. Now is time for all the national investment agencies to ask for a budget increase…!

Before going there, read the report published by UNCTAD which comes to these conclusions. In fact, it published a review of national and international investment policy developments, that shows that in response to the crisis, G 20 countries have mostly refrained from taking policy measures that are restrictive towards foreign inward and domestic outward investment. In fact, a substantial number of the policy changes surveyed were in the direction of facilitating investment.

The report notes the importance of foreign investment for financing a recovery from the global crisis and re-achieving growth and stability, both in developed and developing countries. It stresses that any in-depth efforts at institutional reform of the global financial system must also address that system´s interaction with the 5.700 plus international investment treaties between countries.
UNCTAD states that this report, coming at a time of rapidly declining foreign direct investment (FDI) flows around the world,  also means to contribute to a joint effort by WTO, UNCTAD, OECD and IMF to respond to the 2 April 2009 G-20 Leaders´ request for quarterly reporting on their adherence to maintain an open trade and investment regime and to avoid a retreat into protectionism.

You can read the summary and download the report here: http://unctad.org/Templates/webflyer.asp?docid=11743&intItemID=1634&lang=1

Continuing my post of May 4th http://www.western-france.info/sophie/?p=119 , one of the important questions to ask is, which countries suffer from brain leakage and which countries benefit from it. Some very interesting articles on this subject are published by the OECD, and a Policy Brief from February this year explains the flows in the member states of the OECD. Finally it appears that the countries that benefit most of ‘new brains’ are the USA, France and Australia (net positif flow). However, they are also the countries where the net numbers are of the highest, so they probably also count a lot of leakage. The sorry champions in this category of brain leakage in the developed world are the United Kingdom and Germany. To read the entire article: http://www.oecd.org/dataoecd/58/50/42259140.pdf

In a earlier post, I described how OECD forecasted a decrease in European FDI flows in 2008 (http://www.western-france.info/sophie/?p=104 ). The UNCTAD seems to foresee a similar happening in global FDI in 2008. The World Investment Report 2008 (containing data on 2007) claims indeed a 22% decrease for 2008. We’ll see when they publish their WIR2009! For downloads, go to: http://www.unctad.org/Templates/webflyer.asp?docid=10502&intItemID=4629&lang=1&mode=downloads

For those that are looking for books on FDI, the Lavoisier website is very usefull. Here you find the link to the 146 books on FDI that are in their shop: http://www.lavoisier.fr/fr/livres/index.asp?texte=foreign%20direct%20investment&select=motcle&exact=on&togo=&support=NULL&from=
Its major advantage is that the referenced books are starting in the 90ties, so you can even find theories, country surveys, and statistics from 20 years ago. Probably a good thing to pick up some ‘old’ books: will we see that nothing changed… or on the opposite: that globalisation is the true dynamics for increasing FDI? Keep me updated on your readings!