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Foreign Direct Investment World Services Group 2008 Annual Meeting

Foreign Direct Investment World Services Group 2008 Annual Meeting. Karin C. Millett, Head FIAS Investment Generation-Vienna World Bank Group Munich, September 13, 2008. World Bank (IBRD/IDA), IFC, MIGA World Bank—lending to governments for development priorities

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Foreign Direct Investment World Services Group 2008 Annual Meeting

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  1. Foreign Direct InvestmentWorld Services Group 2008 Annual Meeting Karin C. Millett, Head FIAS Investment Generation-ViennaWorld Bank GroupMunich, September 13, 2008

  2. 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 (joint facility of WB, IFC, MIGA) World Bank Group—Who we are

  3. 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

  4. 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

  5. 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 - - - - - - - - - - - - - - - - - - - - - - - - -

  6. 75. Macedonia, FYR 81. Montenegro 86. Serbia 97. roatia 105. Bosnia and Herzegovina 136. Albania Top 30 on the Ease of Doing Business — Doing Business Report 2008 www.doingbusiness.org

  7. 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

  8. …We follow the Doing Business approach and methodology Focus on objective and verifiable data, rather than opinion and perception based information Survey of laws/regulations and their application in practice Respondents are private sector intermediaries (i.e. Investment lawyers, consultants, accountants, etc.) Survey filled out by governments for validation/cross-checking purposes How are the FDI Indicators constructed

  9. 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)

  10. FDI important to developing countries –they benefit from productive cross-border investment, bringing new technology, management know-how and, of course, jobs. Benchmarking countries against each other creates awareness of deficiencies in investment climate and stimulates appetite for reform. Together with DB indicators, provide a robust view of business conditions for entry, operation and exit by both domestic and non-national firms. Why has FIAS Developed Indicators to benchmark ease of cross-border investment?

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

  12. Location criteria by sector UNCTAD World Investment Prospects Survey 2007-09

  13. Growth in overall FDI flow has accelerated percent $ billions Forecast was $456 billion (3.2 percent of GDP)in 2007 Low-Income Countries Percent of GDP Middle Income Countries

  14. FDI is highly concentrated FDI inflows to developing countries $ billions China Russia Turkey Mexico Brazil * 2007 data World Bank staff projection

  15. Services have been an important driver of growth Share in FDI Stock in 2005 percent Services Manufacturing Primary

  16. Total FDI in 2007 (including reinvested earnings) estimated at $1.34 trillion 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 Trends are expected to continue… *Source: World Investment Prospects to 2011; The Economist Intelligence Unit

  17. Survey of investors about intentions up to 2011 by EIU and UNCTAD indicates investors concerned about: More threatening Geopolitical climate Signs of emerging protectionism against FDI, particularly among developed countries Apparent weakening of appetite for globalization Financial market woes making financing tighter However…

  18. FIAS Investment Generation Goals FDI friendly policies Increased investment flows Improved Investmentclimate Improved Investor Servicing Feedback Loop Investment Jobs

  19. As noted, for the FDI Indicators we seek input within the target country from lawyers, accountants, and providers of other services to businesses. Targeting 80 countries this year, starting November. Profile of WSG members makes them potentially good sources of input. Potential Involvement of WSG Members

  20. THANK YOU! Karin Millett kmillett@worldbank.org www.fias.net

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