Overview of the latest trends in FDI & focus on Balkan countries Hugues de Cibon OCO Global, Paris Belgrade – March 2015

2  Introduction: –OCO –FDI?  FDI trends –World trends  Focus on Balkan countries Summary

3  Specialist advisory firm providing economic development solutions to Corporations, Governments, Economic Development Organisations (EDOs) and Special Economic Zones (SEZs), worldwide  Since our inception in 2001, we have become a recognised authority in foreign investment and we have worked successfully with leading organisations such as UKTI, AFII, InvestHK, EFI Florida…  A multinational and multilingual staff of over 50 full time consultants and a direct presence with offices in the first 5 FDI source countries –USA, Germany, United Kingdom, France and Japan  A unique business model integrating, from strategy to implementation, a comprehensive offer covering investment promotion strategy, organisation development, business intelligence, proposition-based marketing and lead generation & representation services OCO Global

4 References – Clients (examples, )

5 FDI (Foreign Direct Investment)?

6  Different forms… –Greenfield –Expansion –Colocation –(M&A) –("Invisible" internationalisation)… "FDI"?

7  Different ways to measure it… – indicators (KPI) –CapEx –Number of jobs –Number of projects –Impact on the economy GVA, wages, value chain, knowledge…  Coverage: –Total (numbers) vs. "Segments" (sector/function/area – market shares) "FDI"?

8 FDI trends – World

9 FDI – Flows by UNCTAD (+OECD, WB, IMF…) FDI flows including: Greenfield and Expansion projects, Acquisitions, Intra-company loans… Source: UNCTAD, 2013 Foreign direct investment flows, annual, 1980–2012

10 Number of projects Capex (M USD) Number of jobs FDI (projects, capex and jobs) Greenfield, Expansion & Colocation projects – excluding Retail, Construction & Extraction projects Source: © fDi Intelligence, from the Financial Times Ltd 2014 – OCO Global (2014)

11  Players: –MNC vs SMEs  Source markets: –North America, Western Europe, Japan; brIC  Sectors/Activities: –Manufacturing vs. Services (tangible & intangible)  Destination markets: –Developing Asia (SE Asia, India and China) vs. W Europe; Eastern Europe vs. Latin America (+USA)  Forms/modes: –Greenfield vs. Invisible forms; Size of the projects Key trends

12  Asia and Americas (North & South), favoured locations –dynamic markets, natural resources, low(er) costs…  Western Europe, recovery (but limited) –mainly a rich (but declining) market, and a high cost location –potential for market related activities: Sales & Marketing, Logistics, Development… / European HQs vs. multiple subsidiaries  Eastern Europe, recovery (but limited) –low(er) costs but dependence on Western Europe  Middle East –diversification from Oil & Gas, Retail and Construction?  Africa –natural resources, but increasingly HR/skills Key trends – geography (destination)

13 FDI – Destination World Regions – nb of projects Greenfield, Expansion & Colocation projects Source: © fDi Intelligence, from the Financial Times Ltd 2014– OCO Global (2014)

14 FDI – Destination World Regions nb of jobs

15  A large majority of projects in activities related to intangible services –a continuous increase in sales/business services focused projects (Sales, Marketing & Support, Business Services, HQ/RHQ…) representing 55% of projects in 2013 vs. 35% in 2003  A strong decrease of the weight of manufacturing –43% of projects in 2003 vs. 22% in 2013 (but still 60% of the employment generated)  A real globalisation of all the activities based on technical/scientific competences –R&D, engineering, "advanced manufacturing"... Key trends – functions/business activities

16 Destination World Regions (04-08 vs 09-13) Manufacturing Sales, Marketing & Support Research & Development Logistics & Maintenance TeleservicesTotal Asia-Pacific37,0%34,8%32,9%31,1%51,5%38,3%28,3%24,5%39,8%27,7%34,7%31,1% Western Europe16,7%13,0%32,1%28,8%24,0%26,5%31,8%28,5%24,3%23,9%26,1%23,8% North America8,6%14,8%8,1%12,4%8,2%13,9%8,2%12,8%6,9%11,5%8,5%13,4% Rest of Europe23,4%16,5%12,8%8,5%8,0%9,0%20,3%15,9%14,9%16,0%16,4%11,4% Latin America & Caribbean 8,3%13,2%5,7%8,4%3,8%7,4%5,0%8,8% 14,4%6,2%9,6% Middle East2,1%2,4%5,2%6,1%2,8%3,1%3,6%5,3%1,7%1,6%4,4%5,3% Africa3,9%5,3%3,2%4,7%1,7%1,8%2,7%4,2%3,5%5,0%3,6%5,3% Total World – FDI (functions/business activities) Market share evolution 2008  2013 Greenfield, Expansion & Colocation projects – excluding Retail, Conctruction and Extraction Source: © fDi Intelligence, from the Financial Times Ltd 2014 – OCO Global (2014)

17 Destination World Regions (04-08 vs 09-13) Software & IT services Automotive Components Chemicals Semi- conductors Financial Services Total Asia-Pacific34,7%27,6%35,6%31,4%46,8%42,7%66,5%58,1%34,2%32,5%34,7%31,1% Western Europe36,7%34,3%15,0%11,7%21,9%16,9%17,7%21,6%22,9%20,8%26,1%23,8% North America9,1%15,5%13,5%21,3%9,1%12,8%6,5%8,7%6,0%9,5%8,5%13,4% Rest of Europe7,4%6,5%27,8%19,2%11,2%9,2%4,1%5,2%17,3%10,7%16,4%11,4% Latin America & Caribbean 6,4%9,2%5,9%13,5%6,0%9,7%2,4%3,9%4,9%7,5%6,2%9,6% Middle East3,5%3,9%0,6%0,5%2,4%5,0%2,1%2,4%8,4%8,3%4,4%5,3% Africa2,2%2,9%1,5%2,3%2,6%3,7%0,7%0,0%6,3%10,7%3,6%5,3% Total World – FDI (sectors) Greenfield, Expansion & Colocation projects – excluding Retail, Conctruction and Extraction Source: © fDi Intelligence, from the Financial Times Ltd 2013 – OCO Global (2013)

18  An increasing (and earlier) internationalisation of the SMEs –including start-up companies ("Born Global"), a phenomenon no more limited to "high tech" companies  MNC building "global value chains"  Increase of alternative forms of internationalization, in particular in knowledge-intensive sectors : –joint ventures and non-equity partnerships – such as: scientific collaborations, value added resellers...  Investors more and more demanding, seeking "solutions" (customised propositions) rather than simple "locations" Key trends – Players

19 FDI trends – Drivers

20  Low(er) costs –especially labour (& energy, and taxation)  Flexibility –regulation – especially labour (> outsourcing)  External economies –supply chain/clusters –R&D capabilities  Risk aversion –shift to flexible work patterns –rationalisation and consolidation of existing operations –regionalisation and globalisation rather than localisation  (Quality – skills, infrastructure) Micro drivers & trends

21  GDP –evolution of the economy, per country and per sector  Global value chains –fragmentation of the company/sector value chains  Sector trends: –ICT & Digital –(Health) –(Green – energy and environment) –(Finance)  Government: –regulation, more than interventionism and public spending Macro drivers & trends

22 FDI in the Balkan countries

23 FDI in the Balkan countries – global trend Greenfield, Expansion & Colocation projects – Excluding building and real estate projets Source: © fDi Intelligence, from the Financial Times Ltd 2014– OCO Global (2014)

24 FDI in the Balkan countries – Source regions Greenfield, Expansion & Colocation projects – Excluding building and real estate projets Source: © fDi Intelligence, from the Financial Times Ltd 2014– OCO Global (2014) Western Europe Rest of Europe Northern Amercia Asia - Pacific Middle East Africa South America & Caribbean TOP 10 countries Germany USA Italy Austria Slovenia France UK Greece Turkey Switzerland

25 FDI in the Balkan countries – Business activities Greenfield, Expansion & Colocation projects – Excluding building and real estate projets Source: © fDi Intelligence, from the Financial Times Ltd 2014– OCO Global (2014)

26  Financial services  Food and beverage  Alternative / renewable energy  Business services  Transportation  Software and IT services  Metals  Textiles  Industrial machinery, equipment & tools  Automotive components FDI in the Balkan countries – Top sectors

27 Hugues de Cibon Deputy Director, Paris T: +33 (0) E: OCO Global Ltd (Head office) 6 Citylink Business Park - Durham St. Belfast BT12 4HB, Northern Ireland OCO Global (Europe) 12, Rue de la Chaussée d’Anjou Paris, France OCO Global (North America) 45 Broadway – 21 st Floor New York, NY 10006, USA OCO Global (UK) Whitefriars Street London, EC4Y 8BH, United-Kingdom OCO Global (Asia) East Tower 4th Floor – Otemachi First Square – Otemachi, Chiyoda-Ku Tokyo , Japan