Training Commercial

Attaches &
Investment
Promoters

Chisinau, June 22, 2015

FDI Definition and Types

David ODonovan
Director, Investment Promotion
Agency Development
Communique International
Dublin, Ireland
Email:
david.odonovan@communique.ie
Tel: +35316768998
Mobile: +353876690820
Web: www.communique.ie

Contents
Definition of FDI
Types of FDI
Attracting FDI with Limited Resources
Positive and Negative Effects of FDI

CBI Training June 22 2015

OECD Definition of FDI

CBI Training June 22 2015

OECD Definition of FDI

http://www.oecd.org/daf/internationalinvestment/investmentstatisticsandanalysis/40193734.pd
f

Foreign direct investment (FDI) is a category of

investment that reflects the objective of establishing a
lasting interest by a resident enterprise in one economy
(direct investor) in an enterprise (direct investment
enterprise ) that is resident in an economy other than
that of the direct investor. The lasting interest implies
the existence of a long-term relationship between the
direct investor and the direct investment enterprise and
a significant degree of influence on the management of
the enterprise. The direct or indirect ownership of 10%
or more of the voting power of an enterprise resident in
one economy by an investor resident in another economy
is evidence of such a relationship

CBI Training June 22 2015

Four Generic Types of FDI

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Strategic Asset-seeking

Usually associated with Privatisation

Programmes
Firms seeking access to strategic assets in
host country, for example:
Power generation
Telecommunications
Transport facilities, etc.

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Natural Resource-seeking
Natural Resource Seeking:

Typically, firm is seeking access to raw materials specific

to or in abundant supply in host country, for example:
- Rubber (Malaysia)
- Mineral resources (Peru)
- Oil and Gas (Middle East)

Here again, if badly managed gives FDI poor image in

host country

CBI Training June 22 2015

Natural Resource-seeking

Typically, firm is seeking access to raw

materials specific to or in abundant supply in
host country, for example:
- Rubber (Malaysia)
- Mineral resources (Peru)
- Oil and Gas (Middle East)

CBI Training June 22 2015

Market-seeking

Firm is seeking access to substantial geographic

markets outside its home base, for example:
- US company investing in Western Europe for duty-free
access to EU markets
- Foreign company investing in countries with very large
domestic markets such as Brazil, India and China
- German company investing in Eastern Europe for
access to Eastern European and CIS markets

CBI Training June 22 2015

Market-seeking

Firm is seeking access to substantial geographic

markets outside its home base, for example:
- US company investing in Western Europe for duty-free
access to EU markets
- Foreign company investing in countries with very large
domestic markets such as Brazil, India and China
- German company investing in Moldova for access to
Eastern European and CIS markets

CBI Training June 22 2015

Efficiency-seeking

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Efficiency-seeking

Firms seeking the most cost effective location primarily

for the purpose of exporting to consumer markets, for
example:
- US firm invests in China for export of consumer goods
to Western markets
- French company investing in Moldova for lower labour
costs and to export to EU and regional markets

CBI Training June 22 2015

Types of FDI
Pull and Push Concept:
Pull the country acts as a magnet for investment
Strategic Asset-seeking (privatisation)
Resource-seeking (mining)
Push the investor needs to be convinced about the
country
Market-seeking (local or regional)
Efficiency-seeking (lower production costs)

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Types of FDI
Greenfield and Brownfield FDI:
Greenfield
Nothing there before
Builds new factory on green field
Brownfield
Taking over some existing facility existing empty factory
building or office in which to locate project

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A Number of Motivations:

Efficiency-seeking and market-seeking motivations are

generally present in greenfield FDI

Strategic Asset-seeking (Privatisations) and Resourceseeking FDI is usually brownfield

Irrespective of which motivations are dominant, all FDI

investors seek political and economic stability as well as a
good business and investment climate

FDI investors want to see longevity in policies to be sure

that the rules of the game will not be changed in the
years ahead (e.g. by a change in Government) the 3
Cs, Clarity, Certainty and Consistency
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Understanding Investors Needs:

Successful investment promotion is a demand

driven activity, not a supply driven activity; it is
truly a buyers market, not a sellers market

This is a particularly important concept but.

WHAT DOES IT MEAN?

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Understanding Investors Needs:

It looks at the market first and only then at the

product (what your country can offer) a meeting
investor needs approach rather than a selling what
we have approach

It looks at the needs of investors and matches

your countrys competitive advantages to those needs

Investor motivation is crucial and is different for

different categories of FDI

For success, the strategic rationale of the investor

must be understood by the people promoting
investment in your country
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Attracting FDI with Limited Resources

FDI trends data are available both free over the
internet and at relatively modest cost for
subscription-based data
Likewise, company lists from which to identify
potential target companies by country and sector
are also available both free and for a modest cost
in some cases
Examples of both follow.......
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FDI Trends Data

IBM Global Locations Trends Reports

(http://um.dk/da/~/media/UM/Admin/2013%20Report%20%20Global%20Location%20Trends.pdf)
UNCTAD World Investment Reports
(http://unctad.org/en/pages/PublicationWebflyer.aspx?
publicationid=937)
OECD (http://www.oecd.org/investment/statistics.htm)
Eurostat (
http://epp.eurostat.ec.europa.eu/portal/page/portal/product_det
ails/dataset?p_product_code=TEC00053
)
FDI Reports.Com (www.fdireports.com)

CBI Training June 22 2015

IBM Global Locations Trends Reports

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IBM Global Locations Trends 2013 Report

Worldwide Jobs and Projects

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IBM Global Locations Trends 2013 Report

Sources of FDI by Country (Jobs)

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IBM Global Locations Trends 2013 Report

Destination of FDI by Country (Jobs)

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IBM Global Locations Trends 2013 Report

Destination Countries Pro Rata with Population
(jobs per million people)

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IBM Global Locations Trends 2013 Report

Top Ranking FDI Destinations in Europe

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IBM Global Locations Trends 2013 Report

Top FDI Receiving Countries by Average Project
Value

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IBM Global Locations Trends 2013 Report

FDI by Sector (Jobs)

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UNCTAD World Investment Report

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UNCTAD World Investment Report 2014

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UNCTAD World Investment Report 2014

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UNCTAD World Investment Report 2014

FDI by Region

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UNCTAD World Investment Report 2014

FDI Flows into CIS Countries

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UNCTAD World Investment Report 2014

FDI Stock in CIS Countries

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OECD

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OECD

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Eurostat

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FDI Reports.Com

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FDI Target Companies Data

www.forbes.com/global2000/
www.kompass.com
www.hoovers.com or www.dnb.com
www.corporateaffiliations.com
www.businessmonitor.com
www.europages.com

CBI Training June 22 2015

Forbes Global 2000 Top Companies

CBI Training June 22 2015

Forbes Global 2000 Top Companies

CBI Training June 22 2015

FDI Target Companies Data

http://en.wikipedia.org/wiki/List_of_companies_of_the_United_States
by_state
(List of US Companies by State)
www.fdiintelligence.com (and its affiliated websites such as FDI
Markets and FDI Reports)
www.hoppenstedt.de
www.world-businessguide.com
www.europes500.com (Business Week Top 500 in Europe)
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FDI Target Companies Data

Also a number of commercial companies that have lists of small
companies:
www.manta.com
www.uscompanydatabase.com

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FDI Target Companies Data

For more intelligence on US companies, trade and investment issues,
the following are useful websites:
US Trade and Development Agency (www.ustda.gov)
U S Export Agency (www.export.gov)
Business USA (www.business.usa.gov)
Security and Exchange Commission www.sec.gov
Security and Exchange Commissions of US States
www.secstates.com
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Positive & Negative Effects of FDI

Positives:

More jobs, especially in Greenfield FDI

More exports

Positive contribution to National Income

Widens the local tax base

Faster economic development

Brings modern technology

Brings expertise/management skills

More diversified industrial structure

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Positive & Negative Effects of FDI

Positives:

Improved productivity

Local expenditure on raw materials, components and

supplies

Linkages with local companies joint ventures,

outsourcing of production

Improved competitiveness of local firms

Locally hired managers starting own companies after

experience gained
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Positive & Negative Effects of FDI

Positives:

More effective integration of the country into the

international economy

Attraction of emigrants back to the country

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Positive & Negative Effects of FDI

Negatives:

Can damage local indigenous companies if

granted unlimited access to local market

Can have very limited spillover effects if

Government does not have effective Linkage
Program in place

Can push up costs for local companies

CBI Training June 22 2015