FD remains the largest extemal source of finance for developing economies. It akes up 39 per cent of total incoming finance in developing economies as a declining trend since 2012. The rate of expansion of intemational production is slowing down. The modalities of international production and of cross-border exchanges of factors of production are gradually shifting from tangible to intangible forms. Sales of foreign affiliates continue to grow but assets and employees are increasing at a slower rate. This could negatively affect the prospects for developing countries to attract investment in productive capacity. Growth in GVCs growth in gkes has stagnated, Foreign value added in g has stagnated countries' exports)peaked in 2010-2012 after two decades of continuous increases. UNCTAD's GvC data shows foreign value added down 1 percentage point to 30 per cent of trade in 2017. Growth in Gvc participation decreased significantly this decade compared with the last, across all regions, developed and developing The GVc slowdown shows a clear correlation with the FDI trend and confirms the impact of the FDI trend on global trade patterns. 22 per cent of board members of the Top 100s are women,O he global Top 100 and the developing-economy 00100 boardrooms, although they have a distance to go. On average lead the way better than both the s&P average and national averages balanced VESTMENT POLICY leadershi 84 DEVELOPMENTS FDI. In 2017, 65 countries and economies adopted at least 16% favourable to investors, They liberalized entry conditions in a number of industries including transport, energy and manufacturing. They also promoted and facilitated investment National investment by simplifying administrative procedures, providing incentives policy measures and establishing new special economic zones(SEZs) World Inestment Report 2018 vestment and NEw Industnal Policies
FDI remains the largest external source of finance for developing economies. It makes up 39 per cent of total incoming finance in developing economies as a group, but less than a quarter in the LDCs, with a declining trend since 2012. The rate of expansion of international production is slowing down. The modalities of international production and of cross-border exchanges of factors of production are gradually shifting from tangible to intangible forms. Sales of foreign affiliates continue to grow but assets and employees are increasing at a slower rate. This could negatively affect the prospects for developing countries to attract investment in productive capacity. Growth in GVCs has stagnated. Foreign value added in global trade (i.e., the imported goods and services incorporated in countries’ exports) peaked in 2010–2012 after two decades of continuous increases. UNCTAD’s GVC data shows foreign value added down 1 percentage point to 30 per cent of trade in 2017. Growth in GVC participation decreased significantly this decade compared with the last, across all regions, developed and developing. The GVC slowdown shows a clear correlation with the FDI trend and confirms the impact of the FDI trend on global trade patterns. MNEs in the global Top 100 and the developing-economy Top 100 are leading the way towards more gender-balanced boardrooms, although they have a distance to go. On average 22 per cent of board members of the Top 100s are women, better than both the S&P average and national averages. INVESTMENT POLICY DEVELOPMENTS Many countries continued policy efforts aimed at attracting FDI. In 2017, 65 countries and economies adopted at least 126 investment policy measures, of which 84 per cent were favourable to investors. They liberalized entry conditions in a number of industries including transport, energy and manufacturing. They also promoted and facilitated investment by simplifying administrative procedures, providing incentives and establishing new special economic zones (SEZs). Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + x World Investment Report 2018 Investment and New Industrial Policies
Recently, an increasing number of countries have taken a more critical stance towards foreign investment. New investment ons 2017 mainly reflected concens about national security and foreign ownership of land and natural resources. Some countries have heightened scrutiny of foreign takeovers, in particular of strategic assets and technology firms. Several countries are considering tightening investment screening procedures 18 Investment treaty making has reached a tuming point. The number of new international investment agreements(IAs)concluded in n217 2017(18)was the lowest since 1983. Moreover, for the first time, Total as the number of eective treaty terminations outpaced the number 3322 maintained momentum, especially in Africa and Asia. e number of new investor-State dispute settlement(SDs)claims remains high In 2017, at least 65 new treaty-based ISDS cases were initiated, bringing the total number of known cases to 855. By the end of 2017, investors had won about 60 per cent of all cases that were decided on the merits MIA reform is well under way across all regions. Since 2012, over 150 countries have taken steps to formulate a new generation of Stainable development-oriented IIAs. For example 65 New revewed their treaty networks and revised their treaty models ISDS cases ountries are also beginning to modemize the existing stock of old-generation treaties. An increasing number of countries are, for example issuing nterpretations or replacing their older agreements. Countries have also been engaging in multilateral reform discussions, including with regard to IsDS After improving the approach to new treaties and modernizing existing treaties the last step in the reform process(Phase 3)is to ensure coherence with national investment policies and with other bodies of intemational law. Striving for coherence does not necessarily imply legal uniformity- inconsistencies and divergence may be intended -but different policy areas and legal instruments should work in synerg
Recently, an increasing number of countries have taken a more critical stance towards foreign investment. New investment restrictions or regulations in 2017 mainly reflected concerns about national security and foreign ownership of land and natural resources. Some countries have heightened scrutiny of foreign takeovers, in particular of strategic assets and technology firms. Several countries are considering tightening investment screening procedures. Investment treaty making has reached a turning point. The number of new international investment agreements (IIAs) concluded in 2017 (18) was the lowest since 1983. Moreover, for the first time, the number of effective treaty terminations outpaced the number of new IIAs. In contrast, negotiations for megaregional agreements maintained momentum, especially in Africa and Asia. The number of new investor–State dispute settlement (ISDS) claims remains high. In 2017, at least 65 new treaty-based ISDS cases were initiated, bringing the total number of known cases to 855. By the end of 2017, investors had won about 60 per cent of all cases that were decided on the merits. IIA reform is well under way across all regions. Since 2012, over 150 countries have taken steps to formulate a new generation of sustainable development-oriented IIAs. For example, some have reviewed their treaty networks and revised their treaty models in line with UNCTAD’s Reform Package for the International Investment Regime. Countries are also beginning to modernize the existing stock of old-generation treaties. An increasing number of countries are, for example, issuing interpretations or replacing their older agreements. Countries have also been engaging in multilateral reform discussions, including with regard to ISDS. After improving the approach to new treaties and modernizing existing treaties, the last step in the reform process (Phase 3) is to ensure coherence with national investment policies and with other bodies of international law. Striving for coherence does not necessarily imply legal uniformity – inconsistencies and divergence may be intended – but different policy areas and legal instruments should work in synergy. Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + Key Messages xi
INVESTMENT AND NEW Formal industrial INDUSTRIAL POLICY development strategies Industrial policies have become ubiquitous. UNCTAD's global survey of industrial policies shows that, over the past 10 years, at least 101 economies across the 鄂钢 developed and developing world (accounting for more than 90 per cent of global GDP)have adopted formal 01 countries industrial development strategies. The last five year have seen an acceleration in the formulation of new strategies he survey shows that modern industrial policies are increasingly diverse and complex, addressing new themes and including myriad objectives beyond conventional industrial development and structural transformation, such as Gvc itegration and upgrading, development of the knowledge economy, build-up of sectors linked to sustainable development goals and competitive positioning for the new industrial revolution(NIR UNCTAD's survey groups industrial policies into three categories: build-up, catch-up and NIR-based strategies. Some 40 per cent of industrial development strategies contain vertical policies for the build-up of specific industries. Just over a third focus on horizontal competitiveness-enhancing policies designed to catch up to the productivity frontier. And a quarter focus on positioning for the new industrial revolution About 90 per cent of modem industrial policies stipulate detailed investment policy tools, mainly incentives and performance requirements, SEZs, investment promotion and facilitation and, increasingly, investment screening mechanism Investment policy packages across the three models use similar investment policy instruments with different focus and intensity. Modern industrial policies are thus a key driver of investment policy trends. In fact, more than 80 per cent of investment policy measures recorded since 2010 are directed at the industrial system(manufacturing, complementary services and industrial infrastructure), and about half of these clearly serve an industrial policy purpose. Most are cross-industry: about 10 per cent target specific manufacturing industries. World Inestment Report 2018 vestment and NEw Industnal Policies
INVESTMENT AND NEW INDUSTRIAL POLICY Industrial policies have become ubiquitous. UNCTAD’s global survey of industrial policies shows that, over the past 10 years, at least 101 economies across the developed and developing world (accounting for more than 90 per cent of global GDP) have adopted formal industrial development strategies. The last five years have seen an acceleration in the formulation of new strategies. The survey shows that modern industrial policies are increasingly diverse and complex, addressing new themes and including myriad objectives beyond conventional industrial development and structural transformation, such as GVC integration and upgrading, development of the knowledge economy, build-up of sectors linked to sustainable development goals and competitive positioning for the new industrial revolution (NIR). UNCTAD’s survey groups industrial policies into three categories: build-up, catch-up and NIR-based strategies. Some 40 per cent of industrial development strategies contain vertical policies for the build-up of specific industries. Just over a third focus on horizontal competitiveness-enhancing policies designed to catch up to the productivity frontier. And a quarter focus on positioning for the new industrial revolution. About 90 per cent of modern industrial policies stipulate detailed investment policy tools, mainly incentives and performance requirements, SEZs, investment promotion and facilitation and, increasingly, investment screening mechanisms. Investment policy packages across the three models use similar investment policy instruments with different focus and intensity. Modern industrial policies are thus a key driver of investment policy trends. In fact, more than 80 per cent of investment policy measures recorded since 2010 are directed at the industrial system (manufacturing, complementary services and industrial infrastructure), and about half of these clearly serve an industrial policy purpose. Most are cross-industry; about 10 per cent target specific manufacturing industries. Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + xii World Investment Report 2018 Investment and New Industrial Policies
Incentives remain the tool most commonly used for Industial policy more effective instuments for industrial development. About packages two-thirds of incentives schemes applicable to manufacturing target multiple or specific industries, and even horizontal schemes tend to focus on defined activities, such as research and development(R&D), or on other industrial development contributions. Performance requirements (mostly conditions attached to incentives)are also widely used to maximize MNE Strategies and contributions to industrial development, but much of their measures functionality could be achieved by better designed, cost-based incentive mechanisms SEZs continue to proliferate and diversify. In most countries, the transition from pure export processing zones to value added zones continues, and new type of zones are still emerging. Targeted strategies to attract specific industries and link multiple zones have supported industrial development and Gvc integration in some countries that have adopted build-up and catch-up industrial policies, although enclave risks remain. High-tech zones or industrial parks are also becoming a key tool for NIR-driven industrial policies Modem industrial policies have boosted investment facilitation efforts, which until recently played a secondary role in investment policy frameworks lany developing countries have made investment facilitation one of the key horizontal measures in industrial development strategies. Targeted investment promotion(beyond incentives and SEZs) Investment agencies (PAs) are quided by industrial policies in defining Policy Tools priority sectors for investment promotion, and three-quarters have specific promotional schemes to upgrade technology in Investment screening procedures are becoming more outright foreign ownership restrictions except in highly ensitive industries. However restrictions remain common in some infrastructure and sectors that are relevant for
Incentives remain the tool most commonly used for industrial policy. Significant progress has been made in making incentives more effective instruments for industrial development. About two-thirds of incentives schemes applicable to manufacturing target multiple or specific industries, and even horizontal schemes tend to focus on defined activities, such as research and development (R&D), or on other industrial development contributions. Performance requirements (mostly conditions attached to incentives) are also widely used to maximize MNE contributions to industrial development, but much of their functionality could be achieved by better designed, cost-based incentive mechanisms. SEZs continue to proliferate and diversify. In most countries, the transition from pure export processing zones to value added zones continues, and new types of zones are still emerging. Targeted strategies to attract specific industries and link multiple zones have supported industrial development and GVC integration in some countries that have adopted build-up and catch-up industrial policies, although enclave risks remain. High-tech zones or industrial parks are also becoming a key tool for NIR-driven industrial policies. Modern industrial policies have boosted investment facilitation efforts, which until recently played a secondary role in investment policy frameworks. Many developing countries have made investment facilitation one of the key horizontal measures in industrial development strategies. Targeted investment promotion (beyond incentives and SEZs) also remains important: two-thirds of investment promotion agencies (IPAs) are guided by industrial policies in defining priority sectors for investment promotion, and three-quarters have specific promotional schemes to upgrade technology in industry. Investment screening procedures are becoming more common. Manufacturing sectors are rarely affected by outright foreign ownership restrictions except in highly sensitive industries. However, restrictions remain common in some infrastructure and services sectors that are relevant for Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + Key Messages xiii
industrial development. Most measures adopted over the past decade have removed or relaxed foreign ownership restrictions, but entry rules - or rather procedures have been tightened in some cases through new screening In summary, investment policies (in particular FDI policies) are a key instrument of industrial policies. Different industrial policy models imply a different investment policy mix. Build-up, catch-up and NIR-based industrial policies emphasize different investment policy tools and focus on different sectors, economic activities and mechanisms to maximize the contribution of investment to the development of industrial capabilities. The investment policy toolkit thus evolves with industrial policy models and stages of development Modern industrial policies, be they of the build-up, catch-up or NIR-driven variety tend to follow a number of design criteria that distinguish them from previous generations of industrial policies. These include openness, sustainability, NIR readiness and inclusiveness. Investment policy choices should be guided by these design criteria, and by the need for policy coherence, flexibility and effectiveness In line with these developments, countries need to ensure that their investment olicy instruments are up-to-date, including by re-orienting investment incentives, modernizing SEZs, retooling investment promotion and facilitation and crafting smart mechanisms for screening foreign investment. The new industrial revolution, in particular, requires a strategic review of investment policies for industrial development For modern industrial policies to contribute to a sustainable Modem development strategy, policymakers need to enhance their dustrial and synergy with national and intermational investment policies and other policy areas, including social and environmental policies. They need to strike a balance between the role of the market and the state, and avoid Coherence overregulation. They also need to adopt a collaborative pproach, open to international productive-capacity cooperation, and avoid beggar-thy-neighbor outcomes World Inestment Report 2018 vestment and NEw Industnal Policies
industrial development. Most measures adopted over the past decade have removed or relaxed foreign ownership restrictions, but entry rules – or rather procedures – have been tightened in some cases through new screening processes or requirements. In summary, investment policies (in particular FDI policies) are a key instrument of industrial policies. Different industrial policy models imply a different investment policy mix. Build-up, catch-up and NIR-based industrial policies emphasize different investment policy tools and focus on different sectors, economic activities and mechanisms to maximize the contribution of investment to the development of industrial capabilities. The investment policy toolkit thus evolves with industrial policy models and stages of development. Modern industrial policies, be they of the build-up, catch-up or NIR-driven variety, tend to follow a number of design criteria that distinguish them from previous generations of industrial policies. These include openness, sustainability, NIR readiness and inclusiveness. Investment policy choices should be guided by these design criteria, and by the need for policy coherence, flexibility and effectiveness. In line with these developments, countries need to ensure that their investment policy instruments are up-to-date, including by re-orienting investment incentives, modernizing SEZs, retooling investment promotion and facilitation, and crafting smart mechanisms for screening foreign investment. The new industrial revolution, in particular, requires a strategic review of investment policies for industrial development. For modern industrial policies to contribute to a sustainable development strategy, policymakers need to enhance their coherence and synergy with national and international investment policies and other policy areas, including social and environmental policies. They need to strike a balance between the role of the market and the State, and avoid overregulation. They also need to adopt a collaborative approach, open to international productive-capacity cooperation, and avoid beggar-thy-neighbor outcomes. Total IIAs 3 322 18 in 2017 + ISDS cases 65New chaper 1-2 chaper 3 FDI downward trend Developed $712 bn Developing $671 bn Transition $47 bn 2005–2017 84% 16% Restriction/Regulation Liberalization/Promotion National investment policy measures - $1.43 trillion 23% Global FDI 2017 90of %Global GDP Formal industrial development strategies: 101 countries Strategiesand measures Industrial policy packages Top 100 lead the way Gender balanced leadershipSpecial economic zones Facilitation & IPAs Screening procedures Investment Policy Tools Investment incentives Modern industrial & synergy Coherence policies Growth in GVCs has stagnated + xiv World Investment Report 2018 Investment and New Industrial Policies