TABLE OF CONTENTS PREFACE ACKNOWLEDGEMENTS OVERVIEW PART ONE ANOTHER YEAR OF FDI GROWTH CHAPTER I. GLOBAL TRENDS: RISING FDI INFLOWS 3 A. OVERALL TRENDS AND DEVELOPMENTS IN FDI 3 1.Trends, patterns and characteristics ..- . 3 a.Global FDI- .. 3 b.Sectoral analysis: revival of FDI in natural resources 7 c.Trends in international production- .. 10 2.Some issues concerning FDI statistics: what is behind the numbers? 10 3. A new wave of cross-border M&As- .. 13 a.Recent trends ..- .. 13 b.Cross-border M&As versus greenfield FDI. 15 c. An emerging trend: the rise in FDI by collective investment funds 16 4.FDI performance and potential- .. 21 B. POLICY DEVELOPMENTS ..- 23 1.National policy changes ..- 23 2.Recent developments in international investment arrangements 26 a.The IIA network continues to expand..- 26 b.Systemic issues in international investment rule-making.. 27 C. THE LARGEST TNCS .. 30 1. The world's 100 largest TNCs- 30 2. The top 100 TNCs from developing economies .. 31 3. Transnationality of top TNCs ..- 32 4. TNCs' most-favoured locations- . 34 5. The world's 50 largest financial TNCs ..- 34 D. PROSPECTS- .. 36 NOTES CHAPTER II. REGIONAL TRENDS: FDI GROWS IN MOST REGIONS.. 39 INTRODUCTION- 39 A. DEVELOPING COUNTRIES 1. Africa..- .. a.Geographical trends ..- .. 41 (i)Growth driven by high commodity prices 41 (ii) Outward FDI: down in 2005 ..- .. 44 b.Sectoral trends: FDI up in the primary sector.. 45 c.Policy developments ..- . 46 d.Prospects ..- 49 2.South, East and South-East Asia, and Oceania 50 a.Geographical trends ..- .. 50 (i)Inward FDI: continues to soar ..- 50 (a) South, East and South-East Asia .. - 50 (b) Oceania.- .. 53 (ii) Outward FDI: overall decline, but flows from China surge. 53 (a) South, East and South-East Asia- 54 (b) Intraregional FDI ..- 54 b.Sectoral trends ..- . 55 (i)Inward FDI: strong growth in services and high-tech industries 55 (ii) Outward FDI: growing interest in natural resources.. 57 c.Policy developments ..- . 58 d.Prospects ..- 59 3.West Asia- ._ a.Geographical trends ..- .. 59 (i)Inward FDI: unprecedented rise ..- .. 59 (ii) Outward FDI: petrodollars boost investment 63 b.Sectoral trends: rising flows to energy-related industries .. 64 c.Policy developments ..- . 65 d.Prospects ..- 66 4.Latin America and the Caribbean- 67 a.Geographical trends ..- .. 68 (i)Inward FDI: strong increase to Andean countries.. 68 (ii) Outward FDI: continued growth..- 70 b.Sectoral trends: natural resources and manufacturing increasingly targeted. 71 c.Policy developments ..- . 75 d.Prospects ..- 77 B. SOUTH-EAST EUROPE AND THE COMMONWEALTH OF INDEPENDENT STATES 77 1.Geographical trends..- .. 78 a.Inward FDI: fifth year of growth ..- 78 b.Outward FDI: strong performance of Russian TNCs continues.. 79 2. Sectoral trends: manufacturing dominates inflows, natural resources lead outflows. 80 3. Policy developments- .. 81 4. Prospects- .. - 81 C. DEVELOPED COUNTRIES- 82 1.Geographical trends..- .. 83 a.Inward FDI: recovering from the downturn- . 83 b.Outward FDI: overall decline.- .. 87 2.Sectoral trends: inflows up in all sectors.- .. 90 3.Policy developments- .. 93 4. Prospects- 94 NOTES ..- ..- 95 PART TWO FDI FROM DEVELOPING AND TRANSITION ECONOMIES: IMPLICATIONS FOR DEVELOPMENT INTRODUCTION- . 103 CHAPTER III. EMERGING SOURCES OFFDI.. 105 A. DEVELOPING AND TRANSITION ECONOMIES GAIN GROUND AS HOME COUNTRIES.. 1.FDI from developing and transition economies increases .. 105 a.Growing overseas investments from developing and transition economies 105 b.Cross-border mergers and acquisitions on the rise.. 108 c.Greenfield and expansion investments ..- 110 2.Growing importance of Asia as a source of FDI 112 3.Services dominate- 115 4.South-South FDI becomes significant- 117 B. GLOB ALAND REGIONAL PLAYERS EMERGING FROM DEVELOPING AND TRANSITION ECONOMIES 122 1.The rise of TNCs from developing and transition economies .. 122 2.TNCs from Africa 125 3.TNCs from Asia ..- 126 a.TNCs from East and South-East Asia- 127 b.TNCs from South Asia- 130 c.TNCs from West Asia ..- 131 4.TNCs from Latin America and the Caribbean .. 132 5.TNCs from South-East Europe and the CIS ..- 134 C. SALIENT FEATURES OF THE EMERGING SOURCES OF FDI 135 NOTES CHAPTER IV. DRIVERS AND DETERMINANTS 141 A. CONCEPTUAL FRAMEWORK 1.The theory of transnational corporations and foreign direct investment 142 2.The investment development path and the emergence of TNCs from developing and transition economies- 143 3.Application of the theory to TNCs from developing and transition economies .. 146 B. COMPETITIVE ADVANTAGES, DRIVERS AND MOTIVES . 150 1.Sources of competitive advantages ..- .. 152 2.Drivers to internationalization..- .. 155 a.Home country drivers (push factors)- 155 b.Host country drivers (pull factors)- 155 c.Empirical evidence on drivers (push and pull) 156 3.Motivations and strategies ..- 157 a. Market-seeking ..- 158 b. Efficiency-seeking- . 158 c. Resource-seeking.- . 161 d.Created asset-seeking- . 162 e.Other motives.- .. 163 c. CONCLUSIONS NOTES CHAPTER V. IMPACT ON HOME AND HOST DEVELOPING ECONOMIES- .. 169 A. IMPACT ON HOME ECONOMIES 169 1.Outward FDI and the competitiveness of developing-country TNCs 170 2.Outward FDI and the competitiveness and restructuring of home-country industries.. 175 a.Industrial competitiveness ..- 175 b.Industrial restructuring- 177 3.Macroeconomic, trade and employment effects in the home economy .. 178 a.Financial resource flows and balance of payments . 179 b.Domestic investment- 180 c.International trade ..- .. 180 d. Employment- .. 181 4.Concluding remarks.- . 182 B. IMPACT ON HOST ECONOMIES 183 1. Assessing host-country impact..- 184 2.Impact on host developing economies ..- .. 184 a.Financial resource flows and investment- 185 b.Technology and skills ..- 188 c.International trade ..- .. 189 d. Employment- .. 192 e.Other impacts.- .. 195 3.Concluding remarks.- . 196 C. CONCLUSIONS NOTES CHAPTER VI. NATIONAL AND INTERNATIONAL POLICIES.. 201 A. THE ROLE OF HOME-COUNTRY POLICIES- .. 202 1.Competitiveness policies and outward FDI- .. 202 2.Policies specific to outward FDI- 203 a.More countries remove barriers to outward FDI 204 b.Active promotion of outward FDI ..- . 208 (i)Main instruments used to promote outward FDI.. 209 (ii) Agencies promoting outward FDI ..- .. 212 c. Home-country measures to promote South-South FDI.. 217 3.Mitigating potential risks associated with outward FDI. 218 B. IMPLICATIONS FOR HOST-COUNTRY POLICIES 219 1. Host-country policies for maximizing the benefits from South-South FDI 219 2. More FDI sources for IPAs to target..- .. 220 3. Reactions to takeovers by TNCs from developing countries 222 C. INTERNATIONAL AGREEMENTS AND FDI FROM DEVELOPING AND TRANSITION ECONOMIES 1. The growing role of IIAs ..- 228 2. Regional economic integration agreements and South-South FDI 230 D. CORPORATE SOCIAL RESPONSIBILITY AND TNCS FROM DEVELOPING AND TRANSITION ECONOMIES- .. 232 1. Multilaterally agreed CSR principles ..- 233 2. Benefits for TNCs from the South from addressing CSR issues.. 235 3. Encouraging good practices- 237 E. CONCLUDING REMARKS ..- 238 NOTES..-..- ..241 CONCLUSIONS REFERENCES SELECTED UNCTAD PUBLICATIONS ON TNCs AND FDI 333 QUESTIONNAIRE