Overview of the latest trends in FDI & focus on Balkan countries Hugues de Cibon OCO Global, Paris Belgrade March 2015
Summary Introduction: OCO FDI? FDI trends World trends Focus on Balkan countries 2
OCO Global 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 3
References Clients (examples, 2010-14) 4
FDI (Foreign Direct Investment)? 5
"FDI"? Different forms Greenfield Expansion Colocation (M&A) ("Invisible" internationalisation) 6
"FDI"? 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) 7
FDI trends World 8
FDI Flows by UNCTAD (+OECD, WB, IMF ) Foreign direct investment flows, annual, 1980 2012 FDI flows including: Greenfield and Expansion projects, Acquisitions, Intra-company loans Source: UNCTAD, 2013 9
FDI (projects, capex and jobs) Capex (M USD) Number of projects Number of jobs Greenfield, Expansion & Colocation projects excluding Retail, Construction & Extraction projects Source: fdi Intelligence, from the Financial Times Ltd 2014 OCO Global (2014) 10
Key trends 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 11
Key trends geography (destination) 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 12
FDI Destination World Regions nb of projects Greenfield, Expansion & Colocation projects Source: fdi Intelligence, from the Financial Times Ltd 2014 OCO Global (2014) 13
FDI Destination World Regions nb of jobs 14
Key trends functions/business activities 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"... 15
World FDI (functions/business activities) Market share evolution 2008 2013 Destination World Regions (04-08 vs 09-13) Manufacturing Sales, Marketing & Support Research & Development Logistics & Maintenance Teleservices Total Asia-Pacific 37,0% 34,8% 32,9% 31,1% 51,5% 38,3% 28,3% 24,5% 39,8% 27,7% 34,7% 31,1% Western Europe 16,7% 13,0% 32,1% 28,8% 24,0% 26,5% 31,8% 28,5% 24,3% 23,9% 26,1% 23,8% North America 8,6% 14,8% 8,1% 12,4% 8,2% 13,9% 8,2% 12,8% 6,9% 11,5% 8,5% 13,4% Rest of Europe 23,4% 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% 8,8% 14,4% 6,2% 9,6% Middle East 2,1% 2,4% 5,2% 6,1% 2,8% 3,1% 3,6% 5,3% 1,7% 1,6% 4,4% 5,3% Africa 3,9% 5,3% 3,2% 4,7% 1,7% 1,8% 2,7% 4,2% 3,5% 5,0% 3,6% 5,3% Total 16 021 14 346 13 720 17 647 3 811 3 757 3 867 4 351 1 586 1 379 52 083 60 348 Greenfield, Expansion & Colocation projects excluding Retail, Conctruction and Extraction Source: fdi Intelligence, from the Financial Times Ltd 2014 OCO Global (2014) 16
World FDI (sectors) Destination World Regions (04-08 vs 09-13) Software & IT services Automotive Components Chemicals Semiconductors Financial Services Total Asia-Pacific 34,7% 27,6% 35,6% 31,4% 46,8% 42,7% 66,5% 58,1% 34,2% 32,5% 34,7% 31,1% Western Europe 36,7% 34,3% 15,0% 11,7% 21,9% 16,9% 17,7% 21,6% 22,9% 20,8% 26,1% 23,8% North America 9,1% 15,5% 13,5% 21,3% 9,1% 12,8% 6,5% 8,7% 6,0% 9,5% 8,5% 13,4% Rest of Europe 7,4% 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 East 3,5% 3,9% 0,6% 0,5% 2,4% 5,0% 2,1% 2,4% 8,4% 8,3% 4,4% 5,3% Africa 2,2% 2,9% 1,5% 2,3% 2,6% 3,7% 0,7% 0,0% 6,3% 10,7% 3,6% 5,3% Total 6 836 7 920 2 164 2 145 2 168 2 364 945 458 5 644 6 261 52 083 60 348 Greenfield, Expansion & Colocation projects excluding Retail, Conctruction and Extraction Source: fdi Intelligence, from the Financial Times Ltd 2013 OCO Global (2013) 17
Key trends Players 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" 18
FDI trends Drivers 19
Micro drivers & trends 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) 20
Macro drivers & trends 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 21
FDI in the Balkan countries 22
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) 23
FDI in the Balkan countries Source regions Western Europe Rest of Europe Northern Amercia Asia - Pacific Middle East Africa South America & Caribbean Greenfield, Expansion & Colocation projects Excluding building and real estate projets Source: fdi Intelligence, from the Financial Times Ltd 2014 OCO Global (2014) TOP 10 countries Germany USA Italy Austria Slovenia France UK Greece Turkey Switzerland 24
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) 25
FDI in the Balkan countries Top sectors Financial services Food and beverage Alternative / renewable energy Business services Transportation Software and IT services Metals Textiles Industrial machinery, equipment & tools Automotive components 26
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