1. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency A CHANGING FDI CONTEXT FACILITATING NEW INVESTMENT IN DIFFICULT MARKET CIRCUMSTANCES Amaya Manrique Kingston, Jamaica October 2010

2. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 2 Understanding the changing nature of FDI and the importance of investor facilitation Day 1 Day 2 Day 3 Close Module 2 Online Investment Promotion Implications of recession for FDI Responding to investors’ needs What constitutes good facilitation Facilitation in the Caribbean Module 1 -- Understanding the Context Module 3 Building relationships with investors 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 Summing up Event debriefing and participant evaluation Certificate awards

3. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 3 FDI in the Current Economic Recession 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 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 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 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 Recession Most severe recession since 1929 Global FDI flows fell 47% between 2007 and 2009 Recession Most severe recession since 1929 Global FDI flows fell 47% between 2007 and 2009 Sources:World Investment Report 2010, United Nations Conference on Trade and Development Global Location Trends—Annual Report 2009, IBM—Plant Location International

4. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 4 FDI in the Current Economic Recession

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

6. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 6 Source: UNCTAD WIR2010

7. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 7 FDI Inflows to the Caribbean, 1990-2009 (excluding financial centers) Millions of USD Source: UNCTAD FDI Database

8. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 8 Source: fDi Markets database

9. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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) 9

10. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Traditional Sectors Recession’s Impact on Specific Sectors in the Caribbean Resilient Sectors 10 Declining Sectors Software & IT Services Transportation Metals Coal, Oil & Natural Gas Alternative/ renewable energy Financial Services Business Services Communications Hotels & TourismMetalsBusiness ServicesFinancial ServicesCoal, Oil & Natural GasCommunicationsAlternative/ renewable energyTransportationSoftware & IT ServicesTextiles

11. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 11 Sources:UNCTAD WIR2010 and FDI database

12. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 Source: UNCTAD WIR2010 Global FDI flows, 2002-2009, and projections for 2010-2012

13. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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 14 Which locations will do better?

15. THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Thank you. Questions