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Foreign Direct Investment

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Foreign Direct Investment. Mobilizing International Resources ... British Virgin Islands. 84. 96. 14.3. Others. 1 380. 1 601. 16.0. Total. 4 578. 5 588. 22.1 ... – PowerPoint PPT presentation

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Title: Foreign Direct Investment


1
Foreign Direct Investment
  • Mobilizing International Resources for
    Development in the ESCWA Region
  • Riad Meddeb
  • Division on Investment and Enterprise

2
  • I- FDI trends in ESCWA region
  • II- FDI and development Challenges for ESCWA
    countries

3
I
  • FDI TRENDS IN ESCWA REGION

4
ESCWA in Comparison
5
FDI Inflows
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics/)
6
Top Recipient Countries
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics/)
7
FDI Inflows by Country
FDI Inflows (in millions of US Dollars) FDI Inflows (in millions of US Dollars) FDI Inflows (in millions of US Dollars) FDI Inflows (in millions of US Dollars)    
2002 2003 2004 2005 2006
Saudi Arabia 453 778 1'942 12'097 18'293
Egypt 647 237 2'157 5'376 10'043
United Arab Emirates 1'307 4'256 10'004 10'900 8'386
Jordan 74 436 651 1'532 3'121
Bahrain 217 517 865 1'049 2'915
Lebanon 1'336 2'977 1'993 2'751 2'794
Qatar 624 625 1'199 1'152 1'786
Oman 122 494 229 900 952
Syrian Arab Republic 115 180 275 500 600
Iraq -2 0 300 515 272
Kuwait 4 -67 24 250 110
Palestinian Territory 9 18 49 47 38
Yemen 102 6 144 -302 -385
Total 5'008 10'457 19'831 36'767 48'924
Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
8
Distribution of FDI flows among ESCWA countries,
by range, 2006
Range Inflows Outflows
Over 5 billion Saudi Arabia, UAE, Egypt Kuwait
3-4.9 billion Jordan
1-2.9 billion Bahrain, Lebanon, Qatar UAE
0.5-0.9 billion Oman, Syrian Arab Republic Bahrain Saudi Arabia
0.1-0.4 billion Iraq, Kuwait Qatar, Oman
Less than 0.1 billion Palestinian territory , Yemen Lebanon, Syrian Arab Rep, Yemen, Paletianian territory and Jordan
SourceTNC database (www.unctad.org/fdistatistics/
)
9
FDI Outflows
Source UNCTAD, FDI/TNC database
(www.unctad.org/fdistatistics/)
10
FDI Outflows
Source UNCTAD, World Investment Report 2007.
11
FDI Outflows by Country
FDI Outflows (millions of US Dollars) FDI Outflows (millions of US Dollars) FDI Outflows (millions of US Dollars) FDI Outflows (millions of US Dollars)
2002 2003 2004 2005 2006
Kuwait -77 -4'960 2'526 5'142 7'892
United Arab Emirates 413 991 2'208 3'750 2'316
Bahrain 190 741 1'036 1'123 980
Saudi Arabia 211 368 709 1'183 753
Qatar -21 88 192 352 379
Oman 3 153 250 114 247
Egypt 28 21 159 92 148
Lebanon 0 40 213 122 71
Syrian Arab Republic 119 57 48 61 55
Yemen 39 61 21 26 36
Total 2'907 -437 9'366 13'970 14'883
Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/) Source UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
12
Top Recipient Sectors
  • Services remained the dominant sector for FDI in
    the region, a major proportion of which went to
    financial services.
  • There were also several large deals in
    telecommunications.
  • High oil prices have are attracting increasing
    FDI in oil and gas-related industries.
  • GCC countries with large surpluses are rapidly
    increasing expenditures on large infrastructure
    projects, which are also attracting more FDI.

13
Diversifying Industries
Number of foreign firms in Jebel Ali Free Zone, by nationality, 2005-2006 Number of foreign firms in Jebel Ali Free Zone, by nationality, 2005-2006 Number of foreign firms in Jebel Ali Free Zone, by nationality, 2005-2006 Number of foreign firms in Jebel Ali Free Zone, by nationality, 2005-2006
Number Number Growth rate
Economy 2005 2006 ()
Iraq 673 954 41.8
United Arab Emirates 609 856 40.6
India 530 627 18.3
Islamic Rep. of Iran 412 452 9.7
United Kingdom 367 389 6.0
United States 195 230 17.9
Germany 139 170 22.3
Pakistan 104 115 10.6
Japan 85 98 15.3
British Virgin Islands 84 96 14.3
Others 1 380 1 601 16.0
Total 4 578 5 588 22.1
Source JETRO, 2006 358 Source JETRO, 2006 358 Source JETRO, 2006 358 Source JETRO, 2006 358
  • The Gulf countries seeking to diversify their
    production activities beyond oil-related
    activities have set up initiatives to attract FDI
    into the manufacturing sector.
  • One example is the establishment of Free Trade
    and Industrial Zones in the United Arab Emirates.
  • The largest of these zones is the Jebel Ali Free
    Zone in Dubai.

14
Qualified Industrial Zones
  • Jordan has taken a similar approach with its
    Qualified Industrial Zones (QIZ).
  • These zones are attracting investors to set up
    manufacturing plants to take advantage of
    Jordan's preferential trade agreements with the
    United States and Europe.

15
FDI Potential and Performance
High FDI performance Low FDI performance
High FDI potential Front-runners Bahrain, Jordan, Qatar, United Arab Emirates Below Potential Kuwait, Oman, Saudi Arabia
Low FDI potential Above Potential Egypt, Lebanon Under-performers Syrian Arab Republic, Yemen
Source UNCTAD World Investment Report 2007
16
II
  • FDI AND DEVELOPMENT
  • Challenge for ESCWA countries

17
CHALLENGE
  • The objectives and the challenge for ESCWA
    countries is not just to stimulate FDI fows, but
    private flows which lead to Development

18
New Actors since 2002
  • Foreign investment originating from developing
    countries has emerged as a new actor unforseen in
    the Monterrey Consensus.
  • Private equipty funds and sovereign funds from
    ESCWA(GCC) have become a essential source of FDI
    in recent years.
  • Cross-border MAs by investors from ESCWA
    countries with large current-account surpluses
    from high oil prices.
  • About two-thirds of cross-border MAs from the
    ESCWA region in 2006 targeted developed
    countries, especially the United Kingdom, Canada
    and the United States.

19
South-to-South Investment within ESCWA region
  • Investors from developing countries may have
    technologies and business models more adaptable
    to the economies of FDI recipients.
  • High oil prices are supporting high growth in
    oil-exporting countries and some Gulf governments
    are spending much more on infrastructure.
  • Most greenfield investments from ESCWA went to
    developing countries in South, East and
    South-East Asia.
  • Increase of ESCWA investment in Maghreb
    countries.
  • However, investments from one ESCWA country to
    another within the region is growing and needs to
    be encouraged.

20
Domestic Private Sector
  • Foreign direct investment provides capital for a
    country's economic development, if the right
    policies and investment environment is in place.
  • For example, FDI can effect technology and
    knowledge transfers to the domestic private
    sector.
  • Encouraging entrepreneurship, especially in Small
    and Medium-Sized Enterprises, are an important
    component for strengthening the local private
    sector.
  • In the right conditions, local companies can take
    advantage of these transfers to improve their
    international competitiveness.
  • Encouraging FDI requires the right domestic and
    international factors, including a transparent,
    stable and predictable operating environment.

21
Encouraging Investment
  • Evaluate domestic law and regulations for
    investor friendliness. In some areas, it may be
    possible to revise legal requirements to be more
    streamlined and enforceable.
  • Provide a stable and predictable investment
    environment through greater transparency and
    accountability in decision-making.
  • Develop a local supply of qualified labour by
    facilitating skills transfer and human-resource
    development from foreign companies investing in
    the host country.
  • Introducing competition to the domestic economy
    for more efficient sectors and local companies
    that can be internationally successful.

22
Recent Investment-Friendly Policy Developments
  • Qatar
  • In telecommunications, Qatar's Supreme Council of
    Information and Communication Technology launched
    the licensing process for a second fixed-line
    phone operator.
  • The Government is reportedly considering a
    revision to the investment law to allow majority
    foreign participation in more sectors.
  • Syrian Arab Republic
  • Introduce new law providing equal treatment
    between domestic and foreign investors.
  • Create the Syrian Investment Authority to
    implement national investment policies and to
    handle certain procdures for foreign investors.

23
  • United Arab Emirates
  • The Government modified the Agencies Law so
    companies can break contract with nonperforming
    agents.
  • It is also preparing a law to open more economic
    sectors to foreign ownership.
  • Saudi Arabia
  • The Government will start permitting FDI in
    previously restricted sectors, such as mining,
    film distribution, air transport, wholesale and
    retail trade, etc.
  • It will also start granting multiple-entry visas
    for business people.
  • The Government will also establish industrial
    cluster zones to encourage industrial investment.

24
Infrastructure
  • For continued growth, ESCWA countries will need
    to meet the infrastructure demands of their
    economies.
  • The private sector can be deterred from taking on
    an entire infrastructure project due to the large
    capital investment and long project duration.
  • Public-private partnerships can combine the
    technical expertise and management of the private
    sector with the capital of the public sector.One
    challenge of public-private partnerships is the
    need for Governments to have the necessary level
    of project oversight.

25
Strenthening the cooperation between UNCTAD and
UNESCWA on Data Collection Sharing
  • Data on FDI flows and the transactions of
    international corporations is important
  • Accurate and recent data help governments and
    organizations to formulate FDI policies to
    maximize development
  • Developing countries need help to augment their
    capacities in data collecting and analysis
  • FDI data can aid in efforts for good governance
    and transparency

26
Challenges to FDI Growth
  • Security concerns and political uncertainties in
    certain parts of the ESCWA region will continue
    to affect investor confidence in these areas.
  • Trade barriers and domestic regulations remain as
    deterrents to increased FDI and deregulation is
    needed to accelerate FDI and economic growth.
  • Domestic workforces need the training and skills
    to increase economic efficiency and the rate of
    return for investors.
  • By developing a healthy and competitive private
    sector, more local companies are open to the
    transfer of new knowledge and business models
    from foreign investors.
  • A business environment favourable to
    entrepreneurship and innovation is needed to
    foster a strong, diversified private sector for
    the long term.

27
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