- 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.