150622 FDI Definition Types (3)
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Training Commercial Attaches & Investment PromotersChisinau, June 22, 2015FDI Definition and TypesDavid O’DonovanDirector, Investment Promotion Agency DevelopmentCommunique International Dublin, IrelandEmail: [email protected]: +35316768998Mobile: +353876690820Web: www.communique.ie
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Contents
• Definition of FDI
• Types of FDI
• Attracting FDI with Limited Resources
• Positive and Negative Effects of FDI
CBI Training June 22 2015
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OECD Definition of FDI
CBI Training June 22 2015
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OECD Definition of FDIhttp://www.oecd.org/daf/internationalinvestment/investmentstatisticsandanalysis/40193734.pdf
“Foreign direct investment (FDI) is a category of investment that reflects the objective of establishing a lasting interest by a resident enterprise in one economy (direct investor) in an enterprise (direct investment enterprise ) that is resident in an economy other than that of the direct investor. The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence on the management of the enterprise. The direct or indirect ownership of 10% or more of the voting power of an enterprise resident in one economy by an investor resident in another economy is evidence of such a relationship”
CBI Training June 22 2015
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Four Generic Types of FDI
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Strategic Asset-seeking
• Usually associated with Privatisation Programmes
• Firms seeking access to strategic assets in host country, for example:• Power generation• Telecommunications• Transport facilities, etc.
CBI Training June 22 2015
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Natural Resource-seeking
Natural Resource Seeking:
• Typically, firm is seeking access to raw materials specific to or in abundant supply in host country, for example:
- Rubber (Malaysia)- Mineral resources (Peru)- Oil and Gas (Middle East)
• Here again, if badly managed gives FDI poor image in host country
CBI Training June 22 2015
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Natural Resource-seeking
• Typically, firm is seeking access to raw materials specific to or in abundant supply in host country, for example:
- Rubber (Malaysia)- Mineral resources (Peru)- Oil and Gas (Middle East)
CBI Training June 22 2015
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Market-seeking
• Firm is seeking access to substantial geographic markets outside its home base, for example:
- US company investing in Western Europe for duty-free access to EU markets
- Foreign company investing in countries with very large domestic markets such as Brazil, India and China
- German company investing in Eastern Europe for access to Eastern European and CIS markets
CBI Training June 22 2015
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Market-seeking
• Firm is seeking access to substantial geographic markets outside its home base, for example:
- US company investing in Western Europe for duty-free access to EU markets
- Foreign company investing in countries with very large domestic markets such as Brazil, India and China
- German company investing in Moldova for access to Eastern European and CIS markets
CBI Training June 22 2015
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Efficiency-seeking
CBI Training June 22 2015
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Efficiency-seeking
• Firms seeking the most cost effective location primarily for the purpose of exporting to consumer markets, for example:
- US firm invests in China for export of consumer goods to Western markets
- French company investing in Moldova for lower labour costs and to export to EU and regional markets
CBI Training June 22 2015
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Types of FDI
‘Pull’ and ‘Push’ Concept:
‘Pull’ – the country acts as a magnet for investment• Strategic Asset-seeking (privatisation)• Resource-seeking (mining)
‘Push’ – the investor needs to be convinced about the country
• Market-seeking (local or regional)• Efficiency-seeking (lower production costs)
CBI Training June 22 2015
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Types of FDI
‘Greenfield’ and ‘Brownfield’ FDI:
‘Greenfield’ • Nothing there before• Builds new factory on ‘green’ field
‘Brownfield’• Taking over some existing facility – existing empty factory
building or office in which to locate project
CBI Training June 22 2015
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A Number of Motivations:
• Efficiency-seeking and market-seeking motivations are generally present in ‘greenfield’ FDI
• Strategic Asset-seeking (Privatisations) and Resource- seeking FDI is usually ‘brownfield’
• Irrespective of which motivations are dominant, all FDI investors seek political and economic stability as well as a good business and investment climate
• FDI investors want to see longevity in policies – to be sure that the ‘rules of the game’ will not be changed in the years ahead (e.g. by a change in Government) – the 3 “Cs”, Clarity, Certainty and Consistency
CBI Training June 22 2015
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Understanding Investors’ Needs:
• Successful investment promotion is a demand driven activity, not a supply driven activity; it is truly a buyers’ market, not a sellers’ market
• This is a particularly important concept but….
WHAT DOES IT MEAN?
CBI Training June 22 2015
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Understanding Investors’ Needs:
• It looks at the market first and only then at the product (what your country can offer) – a ‘meeting investor needs’ approach rather than a ‘selling what we have approach’
• It looks at the needs of investors and matches your country’s competitive advantages to those needs
• Investor motivation is crucial and is different for different categories of FDI
• For success, the strategic rationale of the investor must be understood by the people promoting investment in your country
CBI Training June 22 2015
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Attracting FDI with Limited Resources
• FDI trends data are available both free over the internet and at relatively modest cost for subscription-based data
• Likewise, company lists from which to identify potential target companies by country and sector are also available both free and for a modest cost in some cases
• Examples of both follow.......
CBI Training June 22 2015
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FDI Trends Data
• IBM Global Locations Trends Reports (http://um.dk/da/~/media/UM/Admin/2013%20Report%20-%20Global%20Location%20Trends.pdf)
• UNCTAD World Investment Reports (http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=937)
• OECD (http://www.oecd.org/investment/statistics.htm)• Eurostat (
http://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/dataset?p_product_code=TEC00053)
• FDI Reports.Com (www.fdireports.com)
CBI Training June 22 2015
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IBM Global Locations Trends Reports
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportWorldwide Jobs and Projects
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportSources of FDI by Country (Jobs)
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportDestination of FDI by Country (Jobs)
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportDestination Countries Pro Rata with Population (jobs per million people)
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportTop Ranking FDI Destinations in Europe
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportTop FDI Receiving Countries by Average Project Value
CBI Training June 22 2015
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IBM Global Locations Trends 2013 ReportFDI by Sector (Jobs)
CBI Training June 22 2015
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UNCTAD World Investment Report
CBI Training June 22 2015
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UNCTAD World Investment Report 2014
CBI Training June 22 2015
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UNCTAD World Investment Report 2014
CBI Training June 22 2015
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UNCTAD World Investment Report 2014FDI by Region
CBI Training June 22 2015
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UNCTAD World Investment Report 2014FDI Flows into CIS Countries
CBI Training June 22 2015
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UNCTAD World Investment Report 2014FDI Stock in CIS Countries
CBI Training June 22 2015
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OECD
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OECD
CBI Training June 22 2015
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Eurostat
CBI Training June 22 2015
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FDI Reports.Com
CBI Training June 22 2015
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FDI Target Companies Data
• www.forbes.com/global2000/ • www.kompass.com • www.hoovers.com – or www.dnb.com • www.corporateaffiliations.com • www.businessmonitor.com • www.europages.com
CBI Training June 22 2015
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Forbes Global 2000 Top Companies
CBI Training June 22 2015
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Forbes Global 2000 Top Companies
CBI Training June 22 2015
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FDI Target Companies Data
• http://en.wikipedia.org/wiki/List_of_companies_of_the_United_Statesby_state (List of US Companies by State)
• www.fdiintelligence.com (and its affiliated websites such as FDI Markets and FDI Reports)
• www.hoppenstedt.de
• www.world-businessguide.com
• www.europes500.com (Business Week Top 500 in Europe)
CBI Training June 22 2015
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FDI Target Companies Data
Also a number of commercial companies that have lists of small companies:
• www.manta.com
• www.uscompanydatabase.com
CBI Training June 22 2015
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FDI Target Companies Data
For more intelligence on US companies, trade and investment issues, the following are useful websites:
• US Trade and Development Agency (www.ustda.gov)
• U S Export Agency (www.export.gov)
• Business USA (www.business.usa.gov)
• Security and Exchange Commission – www.sec.gov
• Security and Exchange Commissions of US States – www.secstates.com
CBI Training June 22 2015
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Positive & Negative Effects of FDI
Positives:
• More jobs, especially in ‘Greenfield’ FDI
• More exports
• Positive contribution to National Income
• Widens the local tax base
• Faster economic development
• Brings modern technology
• Brings expertise/management skills
• More diversified industrial structure
CBI Training June 22 2015
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Positive & Negative Effects of FDI
Positives:
• Improved productivity
• Local expenditure on raw materials, components and supplies
• Linkages with local companies – joint ventures, outsourcing of production
• Improved competitiveness of local firms
• Locally hired managers starting own companies after experience gained
CBI Training June 22 2015
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Positive & Negative Effects of FDI
Positives:
• More effective integration of the country into the international economy
• Attraction of emigrants back to the country
CBI Training June 22 2015
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Positive & Negative Effects of FDI
Negatives:
• Can damage local indigenous companies if granted unlimited access to local market
• Can have very limited ‘spillover’ effects if Government does not have effective ‘Linkage’ Program in place
• Can push up costs for local companies
CBI Training June 22 2015