OECD Enterprises in African Development. Andrea Goldstein OECD Investment Division China-DAC Study Group AU, Addis Ababa 16/17 February 2011

Transcription

1 OECD Enterprises in African Development Andrea Goldstein OECD Investment Division China-DAC Study Group AU, Addis Ababa 16/17 February 2011

2 Outline 1 FDI and the Crisis Global Business: A New Geography? OECD Enterprises in Africa The Role of the OECD

3 FDI and the crisis * Projection based upon first half 2010 Source: OECD elaboration based on Dealogic.

4 FDI and the crisis Global FDI inflows by group of countries, 2007/Q1-2010/Q2 (USD billion) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q G20 countries Rest of EU Rest of the world Source: OECD and UNCTAD, Fourth Report on G20 Investment Measures.

5 FDI and the crisis Prospects for 2011 The world economy is slowly recovering from the crisis FDI trails economic growth by at least two quarters. Improvement in business environment profits are progressively coming back to near pre-crisis levels (although firms repatriated a larger share of the earnings) Contrasting trends: pick-up in the value of cross-border M&As slight drop in number of greenfield projects New risk factors: turmoil in sovereign debt markets falling intra-company loans currency wars related escalation of trade protectionism Priorities Balanced growth Smoother functioning of global credit markets

6 Global Business: A New Geography? Share of the global economy PPP terms Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth b

7 Global Business: A New Geography? Contribution to world GDP growth PPP terms (based on 3-yr moving average) 6% Contribution of advanced economies Contribution of emerging and developing economies 5% 4% 3% 2% 1% 0% Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth

8 Global Business: A New Geography? The world s top 100 non-financial TNCs, ranked by foreign assets, 1998 and Difference United States Japan Germany United Kingdom France Italy Benelux Ireland & Portugal Switzerland Spain Canada China & Hong Kong, China Mexico Korea Australia Venezuela Israel Finland, Norway & Sweden Malaysia Source: elaboration on UNCTAD

9 Global Business: A New Geography? Value of global M&A deals by nationality of target Source: OECD, March 2010

10 Global Business: A New Geography? Shares of global M&A deals by nationality of acquirer Source: OECD, March 2010

11 Global Business: A New Geography? Trend of South-South M&A activity Source: OECD, March 2010

12 Global Business: A New Geography? What consequences for OECD countries? More competition in developing countries (e.g., resources in Africa) : Southern FDI as an alternative to MNCs from the North? A subtle game: OECD MNCs maintain complex and multi-level relations (e.g. Chevron-CNOOC, competing for Unocal, cooperating elsewhere) FDI promotion: pro-active policies to attract FDI from emerging economies As in the case of developing countries, issues related to impact have to be considered.

13 OECD Enterprises in Africa FDI Outward flows from OECD countries to Africa, (US$, millions) Excluding New Zealand (2003, 2005, 2006, 2008), Canada and Mexico. For Norway, only data from 2005, 2006 and 2007 are included. Source: OECD FDI database

14 OECD Enterprises in Africa OECD FDI outflows by region OECD Non-OECD Of which Africa Asia Non-OECD Europe Latin America Middle East ROW Source: OECD FDI database

15 OECD Enterprises in Africa Selected OECD countries: geographical distribution of outward FDI stock (US$ m) or 2008 or 2009 Growth USA world 1, , USA Africa Japan world Japan Africa Germany world Germany Africa Canada world Canada Africa Switzerland world Switzerland Africa Austria world Austria Africa Sources: BEA, Columbia FDI Profiles, JETRO

16 OECD Enterprises in Africa Some home country characteristics European firms represent roughly two-thirds of total FDI in Africa, with over half of European investment emanating from the UK and France. Historical ties Petroleum sector Growing diversification (French telecommunications firms, Barclays s acquisition of South Africa s Absa) German firms concentrated in South Africa and tend to favour manufacturing. American firms invest on the same scale as their British and French counterparts two-thirds of capital going into mining and petroleum. substantial presence in manufacturing in SA Source: Thomsen (2005)

17 OECD Enterprises in Africa The contribution of multinationals to African development Unilever in SA Unilever South Africa (ULSA) Has been operating in South Africa for more than 100 years. It ranks among that country s Top Forty companies In 2005 it generated about R8.5b in sales and employed >4,000 people 3,000 suppliers and their 20,000 employees Direct or indirect impact throughout the SA economy in 2005 Generated output of more than R32 billion Supported approximately jobs. For every ULSA job, another 22 workers depended upon the company for some part of their livelihood. majority of these jobs are located in the retail trade sector of the economy input-output analysis for every R100 of ULSA sales, R145 added to the country s GDP broader social and environmental impacts wages and comprehensive benefits (medical care and a private pension scheme) Training, BEE, environmental policies and programmes Source: Kapstein (2008)

18 OECD Enterprises in Africa What explains the recent rise? Availability of natural resources and mega projects the oil industries of Nigeria and Angola Aluminium smelters in Guinea and Mozambique Economic reforms Privatization trade & investment liberalization Simplification of business regulation Size of the domestic economy (also in the context of regional integration) Emerging middle class Gross returns on investment can be very high (although the effect is more than counterbalanced by high taxes and a significant risk of capital losses )

19 OECD Enterprises in Africa What are the persisting problems? macroeconomic instability Inflationary episodes Currency crashes loss of assets due to non-enforceability of contracts; physical destruction caused by armed conflicts sustainability of national economic policies, poor quality of public services Relatively closed trade regimes More attention to upgrading of suppliers Provide top-notch training Reduce environmental footprint (Unilever = packaging) Maintain an ongoing dialogue with government

20 The role of the OECD

21 The role of the OECD Investment Policy at the OECD (1) legal instruments Code of Liberalisation of Capital Movements Code of Liberalisation of Current Invisible Operations Declaration on International Investment and Multinational Enterprises Guidelines for Multinational Enterprises (voluntary rules of conduct for multinational enterprises) Convention on Combating Bribery of Foreign Officials in International Business Transactions

22 The role of the OECD Investment Policy at the OECD (2) Non-legal instruments Policy Framework for Investment (PFI) Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones Principles for Private Sector Participation in Infrastructure Framework for Investment Policy Transparency

23 The role of the OECD Investment Policy at the OECD (3) Investment Committee and subsidiary bodies Regional initiatives Global Forum for International Investment Freedom of Investment Roundtable Guidelines for Recipient Country Investment Policies relating to National Security (2009) Sovereign Wealth Funds (SWFs) - OECD Declaration and Guidance (2008)

24 The role of the OECD OECD pilot project on due diligence in the mining and minerals sector Part of the follow-up initiatives to the 2002 Final report of the UN Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the DRC Broad consultations, including with ICGLR. Key documents include the main Due Diligence Guidance and a Supplement on Tin, Tantalum and Tungsten ( 3T Supplement ). Development on a Supplement on Gold and Other Precious Metals begun in December 2010.

25 The role of the OECD EE5 involvement in Investment Committee activities Brazil China India Indonesia S. Africa OECD Declaration Investment Committee FOI process Adherent No No No No Regular observer; full participant (Declaration) Regular observer No No No Ad hoc observer Ad hoc observer Ad hoc observer Full participant Ad hoc observer WGIIS Ad hoc observer Ad hoc observer Ad hoc observer Ad hoc observer Ad hoc observer Investment Policy Reviews , 2006, No GFII host No 2003 Official secondment No No No No Yes

26 The role of the OECD China s Investment Policy Reviews Have contributed in some degree to subsequent policy developments: 2003 Review foreign investment approval procedures streamlined 2006 Review new M&A regulations which represented a net increase in transparency; 2008 Review process corporate conduct guidelines for SOEs

27 An immediate increase in productivity per man could be brought about by well-directed foreign investments added to present savings RAÚL PREBISCH, The economic development of Latin America and its principal problems, 1950 For, essentially, the debate is still defined by two principal questions: one, where lies the responsibility for our lag? In ourselves or in the outside world which exploits us? Two, how can we make progress? By imitating others (the West or Russia) or by fashioning our own way? ALBERT O. HIRSCHMAN, Latin American issues. Essays and comments, 1961

28 For more information