On behalf of the UN systems in Tanzania, the United Nations Conference on Trade and Development (UNCTAD), and my own, I welcome you all to the launch of the 2011 edition of the World Investment Report.
This year’s Report focuses on Non-Equity Modes of international production and development. These modes, with growing interest by transnational corporations (TNCs), present opportunities for developing and transition economies to integrate more closely into the rapidly evolving global economy, to strengthen the potential of their home-grown productive capacity, and to improve their international competitiveness.
The Report, examines recent trends in FDI flows and policies and forecasts full recovery to the pre-crisis levels in the next two years, barring any unexpected global economic shocks . This recovery will present both a huge opportunity and a challenge for policymakers in all countries. Above all, the development community will particularly be challenged to support these countries to realize the potential from FDIs and derive the benefits from the Non Equity Modes of production, to indeed alleviate poverty and contribute to the attainment of the Millennium Development Goals.
The report highlights that in today’s world, policies aimed at improving the integration of developing economies into global value chains must look beyond FDI and trade. It argues that Policymakers need to consider non-equity modes (NEMs) of international production. NEM activities can be found throughout the global value chains of TNCs. They include contract manufacturing, services outsourcing, contract farming, franchising, licensing, management contracts, and other types of contractual relationship through which Transnational Corporations (TNCs) coordinate the activities of host-country firms, without owning a stake in those firms.
The Report for example shows that Cross-border Non Equity Mode activities worldwide are significant and particularly important in developing countries, as it is estimated to have generated over $2 trillion of sales in 2009. Contract manufacturing and services outsourcing accounted for $1.1–1.3 trillion, franchising $330–350 billion, licensing $340–360 billion, and management contracts around $100 billion. In most cases, NEMs are growing more rapidly than the industries in which they operate and have yielded significant benefits in terms of employment creation, promoting value addition and export development as well as skills and technology transfer.
Foreign Direct Investment (FDI) is a key component of the world's growth engine and if well coupled with a thriving domestic investment can indeed provide a unique driver for economic transformation. . However, the post-crisis recovery in FDI has been slow to take off and is unevenly spread, with especially the poorest countries still in "FDI recession". Many uncertainties still haunt investors in the global economy. National and international policy developments are sending mixed messages to the investment community. Investment policymaking is becoming more complex, with international production evolving and with blurring boundaries between FDI, non-equity modes and trade.
The growth of NEMs poses new challenges but also creates new opportunities for the further integration of developing economies into the global economy. The World Investment Report 2011 aims to help developing-country policymakers and the international development community navigate through those challenges and capitalize on the opportunities for their development gains. It presents a couple of areas for policy action to maximize development benefits from NEMs, among which is the integration of NEM policies in national strategies, strengthening domestic productive capacities and creating an enabling legal and institutional framework for their thrival. The least developed countries especially from Africa may need to invest more in these aspects to stimulate more of the NEMs and compensate the relatively poor trends in the FDI, while bearing in mind and taking measures to address any associated risks and negative consequences.
With these few opening remarks, let me invite our Guest of Honour who will give us a more concrete overview of the report and what it means in the Tanzania context.
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