Cecilia Sager, Manager Karin C. Millett, Head

1. Investing in Emerging European Markets: Trends and ProspectsStrategic Partnership between Hellenic Ministry of Foreign Affairs and FIAS Cecilia Sager, Manager Karin C. Millett, Head Investment Generation Investment Generation Vienna Office FIAS, World Bank Group Thessaloniki, September 11, 2008

2. Strategic Partnership between Hellenic Ministry of Foreign Affairs and FIAS FIAS, a joint facility of the WB, IFC and MIGA Overview of global and Eastern Europe FDI flows Factors influencing FDI flows, including trends and prospects FIAS Investment Generation Vienna Office—in the region, for the region, reaching out to private sector investors Key Elements of Today’s Presentation

3. Based on discussions, MFA and FIAS have agreed to: Establish productive link between FIAS Investment Generation work and Greek and other European countries to facilitate investments in regions of mutual interest. Geographic priorities: Eastern Europe and Middle East/North Africa Building bilateral linkages between FIAS work and Greek private sector Shared staffing and knowledge exchange Strategic Partnership: Hellenic Ministry of Foreign Affairs (MFA) and FIAS

4. Before we tell you about us, we would like to hear about you, our audience Private sector? Already investing abroad? Where? Sectoral interests? Consultants? Areas of interest? Academics? Areas of interest? Other? Our work may be relevant to all of you as actors and agents in public policy, the marketplace and research The interests of our audience…

5. World Bank (IBRD/IDA), IFC, MIGA World Bank—lending to governments for development priorities IFC – advisory services, investment in private sector, both equity participation and loans MIGA – providing guarantees (insurance) to private sector against: breach of contract by government, expropriation, war and civil disturbance, currency transfer restrictions FIAS – the Investment Climate Advisory Service (partnership of WB, IFC, MIGA) World Bank Group—Who we are

6. FIAS: 20 years of experience in investment climate • Multi-donor advisory service on investment climate • 105 staff in 8 locations • Mission: increase private investments in developing countries • Business model: require client requests and 50% co-funding • 219 projects in 82 countries (last 3 years) FIAS total program spending

7. Doing Business - annual review of around 180 countries - and selected cities - to assess objective measures of business regulations and their enforcement Doing Businees in SEE - covers 22 cities in seven economies: Albania, Bosnia and Herzegovina, Croatia, Kosovo, FYROM, Montenegro, and Serbia FDI Indicators - new FIAS instrument to review specific conditions for cross-border investment WBG - Stimulating Reform through Benchmarking

8. Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business DB and FDI Indicators: what they measure DB vs. FDI INDICATORS Foreign ownership restrictions Investment promotion Pre-establishment procedures Access to land Currency convertibility and repatriation Expropriation and int’l arbitration - - - - - - - - - - - - - - - - - - - - - - - - -

9. Doing Business Indicators SEE & CIS (1)

10. Doing Business Indicators SEE & CIS (2)

11. Creating the institutional foundations for effective markets Promoting open and competitive markets Ensuring social safety nets World Bank Group’s Role in Investment Climate Development TO CONTRIBUTE TO: • Job and wealth creation • Opportunity for all • Better governance

12. Objectives - Extend thematic coverage of DB indicators to areas of FDI regulation in order to: Stimulate appetite for investment climate reforms (as effectively demonstrated by DB) Respond to needs of public policy makers, business,TA providers, and academics Coverage - Six topical indicators measuring FDI regulation and administrative processes. Methodology consistent with DB and anchored instandardized surveys administered primarily to investment lawyers, accountants and consultants. Timing - 22 pilot countries tested in 4 successive phases (Nov ’07 – Oct ’08). Rollout in 80 countries,planned for Jan’09. FDI Indicators: Benchmarking Investment Climate for FDI

13. FDI Indicators: Examples of preliminary results from pilot tests (1) Many countries continue to have sector- specific restrictions on FDI: (2) Several countries in Sub-Saharan Africa require an additional approval for foreign investors: - Yes - No sectoral openness index (0-100) sectoral openness index (0-100) (4) Sub-Saharan African countries vary significantly in the type of land occupancy rights they offer: (3) The quality of land rights for foreign investors varies considerably across the world: quality of land use rights index (0-100)

14. Cross-border mergers and acquisition (vs. Greenfield investments) are the major drivers of global FDI US and the EU15 continue to dominate as recipients of world FDI Among emerging markets, China remains by far the main recipient of FDI Liberalization of trade and investment policies expected to continue Developing countries increasingly outward investors Factors other than Investment Climate affect FDI flows—prospects are good… *Source: World Investment Prospects to 2011; The Economist Intelligence Unit

15. Geopolitical climate more threatening Signs of emerging protectionism against FDI, particularly among developed countries Apparent weakening of appetite for globalization Financial market woes making financing tighter However…..

16. Factors influencing location decision Source: UNCTAD, WIPS 2007-2009

17. Investment trends in SEE & CIS Top investors Top investment destinations Key sectoral opportunities include: automotive components, light manufacturing, IT services, back office services

18. Deficiencies in investment climate and doing business conditions Availability of labor (sometimes due to skills mix, other times the cost, and sometimes the lack of availability due to outward migration) Inadequate infrastructure Slowdown in growth in Europe - possibly recession - will affect FDI flows in short term However, there are challenges…

19. Invest in Western Balkans Program commenced operations in 2005, based in Vienna Primary objective: To promote investment in Western Balkans through improving outreach capacity of Investment Promotion Intermediaries Extensive network of relationships with potential investors IWB results to date: Investments/Jobs:10 investments generated (€145m), 500 direct jobs, 750 indirect jobs, 54 investor site visits Enhancing client promotional capacity:Strengthened marketing capability in partner institutions – marketing strategies and outreach plans FIAS Experience with Investor Outreach in the Western Balkans In 2008, IWB helped secure an investment by Oberndorfer in Croatia. This €5 million investment in the construction materials sector is their first investment outside of Austria and Phase I entails 60 direct jobs.

20. Leading FIAS Investment Generation work in Eastern Europe and Central Asia. Communicating Policy Reform through public-private dialogue, engaging with domestic and foreign investors in client countries Providing advice and technical assistance to analyze, package and implement reforms Assisting with formulating and implementing national FDI strategies, based on sectoral competitiveness Actively reaching out to potential investors to: - Stimulate interest in productive investment, particularly in Greenfield investment FIAS Investment Generation Vienna Office – in the region, for the region

21. Investment Generation Vienna - Goals FDI friendly policies Increased investment flows Improved Investmentclimate Improved Investor Servicing Feedback Loop Investment Jobs

22. THANK YOU! Cecilia Sager csager@worldbank.org and Karin Millett kmillett@worldbank.org www.fias.net