WAIPA World Investment Conference: Evident Shifts in Global Economic Power

GENEVA, September 12, 2011 -

The crisis and the alarming unemployment of the youth in many countries underline it strongly: Attracting Foreign Direct Investment (FDI) is one of the greatest tasks every country is facing, because such investments meet the pressing needs to generate employment, know-how and growth.

Ministers and officials from the 156 member countries of the World Association of Investment Promotion Agencies, WAIPA, have discussed this challenge during their World Investment Conference (WIC), in Geneva, this week. Alessandro Teixeira, WAIPA President and Deputy Minister of Development, Industry and Foreign Trade of Brazil, pointed out: « Our Conference has been a key occasion to discuss matters such as the changes imposed by the financial crisis, the opportunities afforded by shifts in global economic power and the mismatch between investors’ goals and nations’ needs. »  

The USAare still attracting the main part of the foreign direct investments, but their share fell from some 33% in the 1980’s to an average of 15% in the 2000s. Since 2006, the United Kingdom’s share fell from 10,7% to 3,7% and France (-2,2%) is also losing some ground. To the contrary, China remained quite stable from the 1980’s through the 2000s  (with a share of around 6,5%) but is now progressing to 8,5%. Since 2006 other new economies have moved fast and reached the top ten countries: Hong Kong is reaching 5,5%, Russia 3,3%, Singapore 3,1% and Brazil went from 1,3% to 3,9%.

On the side of the countries investing abroad, the trends are similar, but less pronounced. From 2006 to 2010, the USA have progressed from 16% to 24,9%, China from 1,5% to 5,1%, Hong Kong from 3,2% to 5,7% and Russia from 1,6% to 3,9%. But all the other mature countries of the top ten - Germany, France, Switzerland, Japan Canada and Belgium - are slightly losing ground (but no more than 1,5%).

Global foreign direct investments have decreased from US $ 1.97 trillion in 2007 to 1.19 trillion in 2009. The forecasts for 2012 are optimistic (1.46 trillion) and one expects to get back to the record level of 2007 around 2014. But most participants at the WAIPA Conference agreed that the crisis will again limit overseas investments from mature countries. In fact, except for Japan, this crisis is regional, limited to the western world. Europe is now clearly hoping to do better thanks to the growth of the BRICs and other fast emerging countries. But Europeans have been warned that hungry new competitors appear, notably in South East Asia, where a tremendous growth is generated by their strong regional integration capability.

The Investment Promotion Agencies should drive such regional investments and trade, because that is where the dynamism is. They have to show opportunities to governments and demonstrate which productive capabilities have to be adapted to new economic activities. They have to identify alternatives and solutions.

Investment Promotion Agencies can strongly help governments to shake their vision and plans. But their role must be further recognized by governments. Every government has a trade minister and the World Trade Organization is very influent, but - sadly - there is no such thing for direct investments.

One of the risks for the promotion agencies is to try to be fashionable or trendy. There are many things to be done that are not trendy. Experts recommend adapting production capabilities to new purposes rather than entering an unknown sector. Green technologies and energies are now a crucial stake for all countries. But if the expectations are great, the indications of how to get there remain often undefined and the agencies have to make that clearer for the political world.

Contact : Claude-Olivier Rochat or Philippe Dunant, Rochat & Partners, +41(0)22-786-54-55

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