World Investment Report 201022.07.2010“The World Investment Report 2010: Investing in Low-carbon economy” prepared by the United Nations Conference on Trade and Development (UNCTAD) was made public on July 22nd, 2010 in the seat of the Polish Information and Foreign Investment Agency in Warsaw.This year’s issue of the report, analysing world trends in foreign direct investment (FDI) flows, shows that after falling a further 37 % last year, caused mainly by continued weakness in the global cross-border M&A market, global FDI flows began to bottom out in the latter half of 2009, and witnessed a modest recovery in the first half of 2010. Investment flows were on decrease in all country groups. UNCTAD estimates that global inflows are expected to increase to over $1.2 trillion in 2010, rising further to $1.3–1.5 trillion in 2011, and then $1.6–2 trillion in 2012. However, FDI flows are recovering in the wake of a drastic decline in 2009 and the brighter FDI prospects for 2010-2012 are cautiously optimistic. Only in 2012 is FDI expected to recover to its 2008 level, with a range estimated at $1.6–2 trillion. That is still below the $2.1 trillion peak of 2007.
From the left: Professor Zbigniew Zimny, UNCTAD representative in Poland, Marek £y¿wa, Member of the PAIiIZ Management Board and Robert Seges, Head of the Services Division in PAIiIZ |
According to the International Monetary Fund, 2010 will be the first year since the II World War to see world economy contract (GDP by 1%). This fall will influence all FDI factors – M&A, greenfield investment and credits. All regions experienced a decline in FDI inflows in 2009, with an upswing commencing in early 2010 in most cases. Developed countries were among the first and most strongly hit by the crisis. Already 2007 saw gradual decreases in the number and volume of mergers and acquisitions and since the second half of 2008 – due to sluggish demand and increase in credit risks and costs - also in greenfield investment. In 2009 as many as 85% companies admitted that the crisis did have a bad or very bad influence on the investment potential in the next 3 years.
In developed countries, having been falling for the past two years, inward FDI is expected to rise in 2010. High levels of unemployment in developed countries have triggered concerns about the impact of outward investment on employment at home. This fact clearly indicates that policymakers are increasingly faced with the challenge of integrating investment policies into other policy areas, and should make them mutually coherent and supportive. They include the interface between investment policies, on the one hand, and agricultural, financial and climate change-related policies, on the other hand. International initiatives - spearheaded by FAO, the World Bank, UNCTAD and IFAD have been launched to develop international principles for responsible agricultural investment.
Changes in the geographic and sectoral structure if global FDI which were emphasised in the previous years, strengthened in 2009 and will continue. The changes concern mainly the growing role of the developing countries and countries in transformation (without the 10 new EU countries). In 2009 the two groups attracted half of the global FDI and 25% of global outflows originated from the groups.
In the global context the greatest proportion of investment projects was run in the sector of business services, finance, transport and logistics, food, metal, machines and automotive. According to the Report, now it is the M&A, the type of FDI which was most limited during the time of crisis, that will now grow dynamically. Greenfield investment will probably be slower in gaining pace of growth.
The latest Ernst&Young study shows that the coming years should see the CEE become the most attractive, just after China and India, investment destination in the world with a fast-developing BPO sector. Due to the crisis the number of new projects in capital intensive and production-oriented sectors fell and gave way to initiatives in the services sector. The tendency can be seen mainly in Europe. Poland, after Ireland, became the major BPO investment destination on the continent. For the first time since 2003, the BPO projects in the field of sales, marketing and business services constitute the most numerous group of new investment projects in the whole world. For Poland what counts most is the fact that enterprises now pay attention to the level of business risk.
Falls in FDI flows did not bypass Poland (22%). Data published by the National Bank of Poland show that the decrease was to a large extent influenced by the weakening zloty. FDI inflow to Poland expressed in the country’s currency maintained its level from 2008. At the same time FDI in the Czech Republic fell by nearly 60%, in Romania by 55% and in Spain by 80%. The UNCTAD Report indicates Poland as the biggest FDI recipient in the region (in 2009 over USD 11 billion). In the same period the Czech Republic attracted only EUR 2.7 billion, Slovakia and Hungary experienced disinvestment of USD 50 million and USD and 5,6 billion respectively. Since the end of the previous year investors’ interest in Poland rose considerably. A number of potential investors admit that it has only been during the last few months that they started to seriously consider Poland as a good location for their projects. In the next decade Poland’s competitiveness is estimated to benefit from the well-qualified pool of employees.
The special theme of this year’s report is tackling climate change through investment in a low-carbon economy and the role TNC may play in the construction of the low carbon economy. This year’s WIR provides arguments for the role that the private sector can play in the process of adapting to a low-carbon economy.
UNCTAD estimates that in 2009 low-carbon FDI flows into three key low-carbon business areas (renewables, recycling and manufacturing of products related to environmental technology) alone amounted to $90 billion. The potential for cross-border low-carbon investment is therefore enormous, as the world transitions to a low-carbon economy. Policymakers need to maximize the benefits and minimize the risks of low-carbon foreign investment but this is not straightforward, especially since most developing countries have little experience in this area. Against this background, UNCTAD is proposing a global partnership to coordinate synergies between investment and climate change policies to promote low-carbon foreign investment. The key elements of the partnership would include, among other things, establishing clean-investment promotion strategies, enabling the dissemination of clean technology, securing the contribution of IIAs to climate change mitigation, harmonizing corporate disclosure of GHG emissions and setting up an international low-carbon technical assistance centre.
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