The report by the United Nations Conference on Trade and Development (UNCTAD) goes by the less than riveting title of World Investment Report 2011: Non-Equity Modes of International Production and Development but nevertheless has number of interesting and important implications for New Zealand, says Peter Enderwick, professor of International Business at AUT University.
Foreign direct investment (FDI) flows n 2010 were US$1.24 trillion, still 15 percent below pre-crisis levels. Enderwick says the report highlights the changing structure of the world economy with, for the first time, developing and transition economies absorbing more than half of global FDI flows.
While investment liberalisation remained the dominant policy trend, he says the risk of investment protectionism has increased. “Almost one-third of (policy) measures in 2010 relate to regulation or restriction of FDI compared to only two percent at the start of the decade.”
Enderwick says this year’s report has several important implications for New Zealand. “One is the increased competition to attract FDI. With more than half of all global flows going to developing countries, there is more intense competition to attract new investment.
“A second implication is the changing sources of new investment. The growing significance of outward investment from emerging markets such as China and India means that we can expect to see more such investment here, and probably beyond the farming sector. New Zealand’s policy response to this trend will be of critical importance.”
Enderwick says the power of multinational enterprises is also apparent in the report. “Worldwide such firms, of which New Zealand has perilously few, account for about one-quarter of global GDP. They are clearly powerful engine for growth, development and integration in the world economy.”
He says the report also provides useful analysis of the importance of state-owned multinationals, particularly in respect of investment from countries such as China and Russia.
As in previous years, UNCTAD’s annual review of international investment trends contains chapters on foreign direct investment, global and regional trends and key policy developments with special focus this year on non-equity modes of international production. These include contract manufacturing, services outsourcing, licensing, franchising and myriad of contractual relations. For New Zealand, contract manufacturing in the garments industry and the outsourcing of some business services are probably the most important activities in this sector, says Enderwick.
• For copy of the full report visit www.unctad.org
