A CHANGING FDI CONTEXT

1. A CHANGING FDI CONTEXT FACILITATING NEW INVESTMENT IN DIFFICULT MARKET CIRCUMSTANCES Amaya ManriqueKingston, Jamaica October 2010

2. Understanding the changing nature of FDI and the importance of investor facilitation Day 1 Module 1 -- Understanding the Context • Implications of recession for FDI • Responding to investors’ needs • What constitutes good facilitation • Facilitation in the Caribbean Module 2 Online Investment Promotion Module 3 Building relationships with investors Day 2 • Understanding how investors use online information sources • Enhancing your content to meet investor needs • Learning how to present online information with promotional impact and keep it up to date • Promoting your services and Web site effectively • Understanding how and when investors get in contact with IPIs • Learning how to handle and build on first contacts from investors • Partnering with public and private institutions for inquiry-handling • Building and implementing professional facilitation services • Developing systematic approaches to handling investor inquiries Day 2 Day 3 • Summing up • Event debriefing and participant evaluation • Certificate awards Close

3. FDI in the Current Economic Recession • Recession • Most severe recession since 1929 • Global FDI flows fell 47% between 2007 and 2009 • Recovery • Tentative recovery in the first half of 2010 • Cross-border M&As, representing ¼ of total FDI, increased 36% • Total FDI in 2010 is forecast to increase by 10% over 2009 • Business Response • Significant decrease in access to credit • Re-capitalization of banks is taking place in many countries • Lower corporate profits • Leading site selection firms report slowdown and postponement of investment projects • Companies restructuring to deal with the crisis; cautious about recovery • Investment plans frozen or discarded • De-locations and outright plant closures Sources: World Investment Report 2010, United Nations Conference on Trade and Development Global Location Trends—Annual Report 2009, IBM—Plant Location International

4. FDI in the Current Economic Recession What we don’t know yet: • How long this crisis will last or how deep it will be • The final extent of FDI decline • The relative impact between greenfield and M&A investment • The geographical impact by region and country • The extent to which the crisis will affect different sectors

5. Investment flows – Global • Global FDI at $1.11 trillion [Greenfield and M&A] • 2nd consecutive year of decline after 4 years of growth • Still 5th highest year in history • Share of developing countries rose to 43%, the highest since 1982 Source: UNCTAD WIR2010

6. Investment flows – Developing economies • Developing economies • $630 billion in 2008 was the highest level ever, while developed economies saw a decline of 16% • $478 billion in 2009 was a 24% decrease, but was much more modest than the 44% decrease in developed countries • South and Central America • $72 billion in 2009 was the third highest ever, but a decline of 41% from the 2008 peak • Caribbean (excluding British Virgin Islands and Cayman Islands) • $6 billion in 2009 was the second highest ever, but a decline of 39% from the 2008 peak Source: UNCTAD WIR2010

7. Investment flows – the Caribbean • The region enjoyed a dramatic, 9-fold increase from 1996 to 2008 • Major declines only in 2000 and 2009 due to global economic downturns FDI Inflows to the Caribbean, 1990-2009 (excluding financial centers) Millions of USD Source: UNCTAD FDI Database

8. Investment flows – the Caribbean • 24 FDI projects per year on average (Jan. 2003-Sept. 2010) • 145 companies invested in 183 projects • 370 jobs created per project on average • Leading sector: Hotels & tourism, with 15% of projects • Leading activity: Manufacturing, with 21% of projects Source: fDi Markets database

9. Investment flows – the Caribbean • Top 10 companies accounted for 16% of projects, including: • Sol Melia Hotels and Restaurants (Spain) • The Bank of Nova Scotia (Canada) • British Petroleum (U.K.) • Top 3 destinations in the Caribbean • Dominican Republic: 43% of projects (FDI per capita $214) • Trinidad and Tobago: 15% of projects (FDI per capita $391) • Jamaica: 14% of projects (FDI per capita $530)

10. Recession’s Impact on Specific Sectors in the Caribbean Traditional Sectors Resilient Sectors • Alternative/ renewable energy • Financial Services • Business Services • Communications Declining Sectors • Software & IT Services • Transportation • Metals • Coal, Oil & Natural Gas

11. Investment flows – Other trends and characteristics • Other recent trends • South-South FDI flows: TNCs from developing and transition economies, mainly from Asia • Reinvested profits: 30% of FDI • High FDI concentration • 50% is concentrated in top 10 countries • FDI is cyclical with a strong upward trend • 2001-2003: ↓ • 2004-2007: ↑ • 2008-2009: ↓ • 2010-201?: ↑? • Increased 18 of the last 24 years Sources: UNCTAD WIR2010 and FDI database

12. Prospects for FDI Recovery: 2009-2012 • For illustration only – wide variation in possible outcomes • Dependent on: • Financial sector liquidity and willingness to fund new projects • Government response policies – e.g. extent of protectionism Global FDI flows, 2002-2009, and projections for 2010-2012 Source: UNCTAD WIR2010

13. What will drive FDI in the recession and subsequent recovery? • Drive to lower cost and more flexible solutions: • Outsourcing to lower cost locations • Rationalisation and consolidation of existing operations • Search for government support and funding • Shift to flexible work patterns • Drive to greater market relevance and growth • Regionalisation and globalisation rather than localisation • Search for growing markets

14. Which locations will do better? • Lower costs …… but balanced by need for lower risks • Low taxes • Access to incentives • Flexible labour markets • More conducive investment climate – e.g. ease of establishing and running a business • Logistics, infrastructure & accessibility • Language skills

15. Thank you. Questions