Investment for development: Towards a new generation of investment policies for inclusive growth and sustainable development Anabel González Minister of Foreign Trade, Costa Rica 59th Session Trade and Development Board Geneva, September 24 th, 2012
Content 1 The starting point 2 The case of Costa Rica 3 The global competitive scenario: Where do we stand today?
The starting point FDI is a powerful engine for growth and sustainable development Key points for setting the stage to maximize the benefits of FDI: A B C Embedding investment policy in the national development strategy Aligning investment policy with policies in other areas Making investment policy consistent over time
The case of Costa Rica: Evolution of FDI Agroindustrial Sector First contact centers Consolidation of CR as one of the main FDI locations in Latin America 1960 1982 1986 1990 1995 2000 2004 2012 Pioneer of the industrial sector 1 st leading medical devices company Blue Chip companies
The case of Costa Rica: Evolution of FDI Towards increased sophistication of production processes Sub assembly Assembly Manufacturing and Assembly Design and Engineering Research & Development Parts and components assembly Sub-assembly of components Textile maquila Devices class I Product assembly Extrusion Injection Thermoforming Precision engineering Product assembly Re-design of products Devices class II and III Product validation Re-design of processes Automatization New products design Design of new processes (BTC a/ ) Prototype testing Pre-clinical and clinical studies Packaging Low cost labor Access to highly skilled labor pool Source: CINDE, 2011 Notes: a/ Business Transformation Center.
The case of Costa Rica: Impact of FDI
The case of Costa Rica: Impact of FDI Costa Rica: Evolution of FDI, 1985-2011 (USD millions) Stock of FDI, selected economies, 2010 (% GDP) 2'500 2'000 1'500 1'000 500 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: COMEX using Central Bank of Costa Rica data Costa Rica: Balance of payments, 1990-2010 (% GDP) Source: OECD based on UNCTAD FDI data FDI, selected economies, 1985-2010 (net inflows as % of GDP) Source: OECD based on IMF data Source: OECD based on World Bank data
The case of Costa Rica: Impact of FDI Costa Rican: Evolution of exports, 1985-2011 (USD millions) 12'000 10'000 8'000 4300 products 6'000 4'000 2'000 145 countries 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: COMEX with PROCOMER data
The case of Costa Rica: Impact of FDI 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Structure of industrial exports by intensity in the use of factors of production 8.5% 15.5% 36.2% 23.5% 12.8% 16.3% 14.9% 39.0% 36.3% 14.2% 20.4% 25.9% 12.9% 4.0% 19.6% 1994 2001 2010 Science-based Scale-intensive (K) Natural resources-intensive Labor-intensive (L) Differentiated product Source: CINDE, PROCOMER Costa Rica: Top exports 2011 Integrated circuits and electronic microstructures (18.02%) Precision and medical equipment (11.92%) a/ Banana (7.41%) Pineapple (6.91%) Gold coffee (3.56%) Other food preparations (2.99%) Pharmaceuticals (2.34%) Textiles (2.15%) Electric cables (2.09%) Palm oil (1.93%) Source: Procomer, Comex, 2012 Note: a/ This sector comprises IV sets, medical prosthesis and other medical devices
The case of Costa Rica: Impact of FDI Costa Rica: Evolution of exports in services, 2000-2011 (USD billions) 6.0 5.0 4.0 3.0 2.0 Others IT and Business Services Tourism 1.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source : COMEX based on data from Central Bank of Costa Rica
The case of Costa Rica: Impact of FDI Costa Rica: Participation of global value chains in total exports, 2009 2011 0.5 Share of high tech exports in manufactured exports, selected economies 0.4 GVC Exports 37% Other Exports 63% 0.3 0.2 0.1 0 Costa Rica Korea China Ireland USA Mexico OECD Suriname Barbados Brazil LAC Finland Bolivia Ecuador Argentina Paraguay Peru Spain El Salvador Guatemala Chile Colombia Venezuela Nicaragua Honduras Jamaica Trin &Tob Uruguay Source: COMEX using Central Bank of Costa Rica data 2010 1997
Key drivers of investment in Costa Rica Strategic vision proactive and coordinated approach Attraction of FDI Interagency execution Sound business environment Political and economic stability Export processing zone regime Solid export platform WTO + 12 PTAs Robust air transportation network Educated work force Quality of educational system 1 st in LA (WEF) Cost competitive Privileged geographical location Middle of the Americas Proximity to US market
The new global competitive scenario: Where do we stand today? Opportunities from unbundling of productive processes Key challenges: Continued attraction of FDI Consolidating, growing, upgrading and harnessing investment for sustainable development The role of UNCTAD s Investment Policy Framework for Sustainable Development
Investment for development: Towards a new generation of investment policies for inclusive growth and sustainable development Anabel González Minister of Foreign Trade, Costa Rica 59th Session Trade and Development Board Geneva, September 24 th, 2012