Dear Colleagues,
UNCTAD has just released its World
Investment Report 2018. The Report:
- presents
FDI trends and prospects at global, regional and national levels;
- analyses
the latest developments in national policy measures for investment promotion,
facilitation and regulation;
- highlights
trends in investment treaties and investment dispute settlement, and presents
progress and next steps in reform of the investment treaty regime.
The 2018 edition, subtitled "Investment
and New Industrial Policies", looks at the investment policy dimension
of industrial policies. A global survey carried out for the Report shows
that, over the past 10 years, more than 100 economies across the developed
and developing world have adopted formal industrial development strategies,
with acceleration in the last five years. Industrial policies are a key
driver of investment policy measures; 90% contain specific measures, such
as incentives, special economic zones, investment facilitation, performance
requirements and investment screening mechanisms. The Report argues that
modern industrial policies, especially those aimed at positioning for the
new industrial revolution, call for a strategic review of investment policies.
The following are the Report’s key findings on global FDI trends and prospects:
- Global
FDI flows fell by 23% to $1.43 trillion. The fall was caused in part
by a 22% decrease in the value of cross-border M&As. But even discounting
the large one-off deals and corporate restructuring that inflated FDI in
2016, the 2017 decline remained significant. The value of announced greenfield
investment also decreased by 14%.
- A
decrease in rates of return is a key contributor to the downturn. The
global average return on foreign investment is now at 6.7%, down from 8.1
in 2012. Return on investment is in decline across all regions, with the
sharpest drops in Africa and in Latin America and the Caribbean. The lower
returns on foreign assets may affect longer-term FDI prospects.
- FDI
remains the largest external source of finance for developing economies.
It makes up 39% of total incoming finance in developing economies as a
group, but less than a quarter in the LDCs, with a declining trend since
2012.
- The
rate of expansion of international production is slowing. The modalities
of international production and of cross-border exchanges of factors of
production are gradually shifting from tangible to intangible forms. Sales
of foreign affiliates continue to grow but assets and employees are increasing
at a slower rate. This could negatively affect the prospects for developing
countries to attract investment in productive capacity.
- Growth
in Global Value Chains has stagnated. UNCTAD’s new GVC data shows
foreign value added (the key measure of the importance of GVCs) down 1
percentage point to 30% of trade in 2017, after three decades of continuous
increases. The GVC slowdown shows a clear correlation with the FDI trend
and confirms the impact of the FDI trend on global trade patterns.
- Projections
for global FDI in 2018 show fragile growth. Global flows are forecast
to increase marginally, by up to 10 per cent, but remain well below the
average over the past 10 years. Higher economic growth projections, trade
volumes and commodity prices would normally point to a larger potential
increase in global FDI in 2018. However, risks are significant, and policy
uncertainty abounds.
James X. Zhan
Director, Investment
and Enterprise
Lead, World Investment Report
United Nations Conference on Trade & Development
Palais des Nations, Geneva
http://www.unctad.org/wir
http://www.worldinvestmentforum.org
http://investmentpolicyhub.unctad.org
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