The World Investment Report has been published annually since 1991.

Each year´s Report covers the latest trends in foreign direct investment around the World and analyses in depth one selected topic related to foreign direct investment and development.

HIGHLIGHTS
How have foreign direct investment (FDI) flows reacted to the current financial and economic crisis? How do traditional and new foreign investors - transnational corporations (TNCs) - affect agriculture, the basis of livelihood in many developing countries? These are two major issues analysed in detail in World Investment Report 2009 (WIR09), the United Nations Conference on Trade and Development´s 19th annual report on FDI and TNCs.

The Report covers, in particular, questions such as:

• What are the differences between individual regions in terms of their responses in FDI flows to the crisis? Why did the crisis affect FDI to developing countries later than developed countries?
• What are the prospects for FDI in 2009 as well as for the medium term?
• How has the crisis affected national and international policies related to FDI? Has the path of more liberalizations been continued or reversed?
• In the midst of a major industrial restructuring, which companies are the winners and losers in the universe of the world´s largest TNCs?
• Why is agriculture such a special industry for developing countries - and what are its longer term prospects? What role can TNCs play in improving the productivity of agriculture in developing economies?
• How robust is the renewed interest by TNCs in agriculture? Who are the new investors and how do they differ from traditional TNCs? What are the pros and cons of developing country farmers being drawn into global agribusiness value chains?
• What can developing countries expect from the renewal of FDI in agriculture? Given the past record, will this time the impact of TNCs in agriculture be different?
• How does TNC participation in agricuture affect socially sensitive issues, including those related to food security and the food crisis; as well as the non-food uses of agricultural produce for biofuels?
• What policy challenges does TNC involvement in agriculture raise? How are they being addressed within the framework national economic strategies, with the aim of maximizing benefits and minimizing costs from TNC involvement?
• Are policy makers sufficiently prepared to meet the challenges? How can the international community support them?

According to WIR09, after decades of slow growth, TNCs´ interest and participation in agriculture - including FDI - is again on the rise. Despite this rise, in most countries today only a small share of FDI goes to agriculture. There are nevertheless some developing countries, including least developed countries (LDCs), where the share of agriculture in inward FDI is relatively important. Renewed interest of foreign investors in agricultural investment is significant enough to raise questions about whether FDI and other forms of TNC participation in agriculture can contribute to the development of this long neglected industry. WIR09 suggests an integrated policy approach that takes into account all concerns arising from TNC involvement.

As in previous years, WIR09 presents the latest data on FDI and traces global and regional trends in FDI and in international production by TNCs in light of the current financial and economic crisis. WIR 09´s Statistical Annex provides data on FDI flows and stocks for more than 200 economies, as well as information on the world´s largest TNCs.

Download World Investment Report 2009

PDF format, 6.7MB, 313Pages.

World Investment Report 2009
Transnational Corporations, Agricultural Production and Development
United Nations Conference on Trade and Development

PREFACE
World foreign direct investment flows fell moderately in 2008 following a five-year period of uninterrupted growth, in large part as a result of the global economic and financial crisis.

While developed economies were initially those most affected, the decline has now spread to developing countries, with inward investment in most countries falling in 2009 too. The decline poses challenges for many developing countries, as FDI has become their largest source of external financing. The impact is analysed in detail in the first part of this his year’s World Investment Report.

The Report also examines the role that transnational corporations (TNCs) play, and can play, in agricultural production in developing countries. There is renewed and growing interest in this sector, provoked in part by the recent food crisis and concerns about food security. The Report looks at this trend – including the rise of South-South investment – and at specific cases of host countries and industries in which TNCs are active in a meaningful way.

As the Report underscores, efforts to boost investment and agricultural productivity through TNC involvement require an integrated policy approach by governments that takes many considerations into account: the economic implications as well as environmental and social concerns, including those related to land degradation, land tenure rights, food security and the right to food, and the protection of indigenous people and other minorities.

Greater involvement by TNCs will not automatically lead to greater productivity in agriculture, rural development or the alleviation of poverty and hunger. However, with the right policies in place, it can be used to bring about such gains, in particular by strengthening the capacities of local farmers. A concerted effort is required by all development partners to support and equip host-country governments, farmers, cooperatives and others to maximize the development benefits of TNC involvement. This timely Report provides useful analysis and insights for all stakeholders involved in working towards that vital end.

Ban Ki-moon
Secretary-General of the United Nations
New York, July 2009

KEY MESSAGES
FDI TRENDS, POLICIES AND PROSPECTS
Global FDI flows have been severely affected worldwide by the economic and financial crisis. Inflows are expected to fall from $1.7 trillion to below $1.2 trillion in 2009, with a slow recovery in 2010 (to a level up to $1.4 trillion) and gaining momentum in 2011 (approaching $1.8 trillion).

The crisis has changed the FDI landscape: investments to developing and transition economies surged, increasing their share in global FDI flows to 43% in 2008. This was partly due to a concurrent large decline in FDI flows to developed countries (29%). In Africa, inflows rose to a record level, with the fastest increase in West Africa (a 63% rise over 2007); inflows to South, East and South-East Asia witnessed a 17% expansion to hit a new high; FDI to West Asia continued to rise for the sixth consecutive year; inflows to Latin America and the Caribbean rose by 13%; and the expansion of FDI inflows to South-East Europe and the CIS rose for the eighth year running. However, in 2009 FDI flows to all regions will suffer from a decline.

The agriculture and extractive industries have weathered the crisis relatively well, compared with business-cycle-sensitive industries such as metal manufacturing. In addition, there is a better outlook for FDI in industries such as agribusiness, many services and pharmaceuticals.

With regard to the mode of investment, greenfield investments were initially more resilient to the crisis in 2008, but were hit badly in 2009. On the other hand, cross-border M&As have been on a continuous decline, but are likely to lead the future recovery. Divestments were particularly significant during the crisis.

There was a marked downturn in FDI by private equity funds as access to easy financing dried up. Endowed with sizeable assets, sovereign wealth funds attained a record FDI high in 2008, though they too faced challenges caused by falling export earnings in their home countries.

Overall policy trends during the crisis have so far been mostly favourable to FDI, both nationally and internationally. However, in some countries a more restrictive FDI approach has emerged. There is also growing evidence of “covert” protectionism.

TNCs IN AGRICULTURAL PRODUCTION AND DEVELOPMENT
Foreign participation can play a significant role in agricultural production in developing countries, which are in dire need of private and public investment, thereby boosting productivity and supporting economic development and modernization.

FDI flows in agricultural production tripled to $3 billion annually between 1990 and 2007, driven by the food import needs of populous emerging markets, growing demand for biofuel production, and land and water shortages in some developing home countries. These flows remain small compared to the overall size of world FDI, but in many low-income countries agriculture accounts for a relatively large share of FDI inflows; and the latter are therefore significant in capital formation in the industry.

Moreover, FDI in the entire agricultural value chain is much higher, with food and beverages alone representing more than $40 billion of annual flows.

Contract farming activities by TNCs are spread worldwide, covering over 110 developing and transition economies, spanning a wide range of commodities and, in some cases, accounting for a high share of output.

Developed-country TNCs are dominant in the upstream (suppliers) and downstream (processors, retailers, traders) ends of the agribusiness value chain. In agricultural production, FDI from the South (including South-South flows) is equally significant as FDI from the North.

TNC participation in agriculture in the form of FDI and contract farming may result in the transfer of technology, standards and skills, as well as better access to credit and markets. All of these could improve the productivity of the industry – including the farming of staple foods – and the economy as a whole. Moreover, TNCs’ contribution to food security is not just about food supply; it also includes enhanced food safety and affordability. These depend on the right policies for host countries to maximize benefits and minimize the costs of TNC participation.

Governments should formulate an integrated strategic policy and regulatory framework for TNC activities in agricultural production. This should include vital policy areas such as infrastructure development, competition, trade and trade facilitation, and R&D. It is equally important to address social and environmental concerns regarding TNC involvement.

Governments could also promote contract farming between TNCs and local farmers in the direction of enhancing farmers’ predictable income, productive capacities and benefits from global value chains. To protect the interests of farmers, governments could develop model contracts for them to use or consider when negotiating with TNCs To ensure food security in host countries as a result of export-oriented FDI in staple food production by “new investors”, home and host countries could consider output-sharing arrangements.

In order to address the concern about “land grab”, the international community should devise a set of core principles that deal with the need for transparency in large-scale land acquisitions, respect for existing land rights, the right to food, protection of indigenous peoples, and social and environmental sustainability.

Public-private partnerships can be an effective tool for bringing a “new green revolution” to Africa. One initiative in this regard is seed and technology centres that adapt seeds and related farming technologies to local needs and conditions, distribute them to local farmers, and build long-term indigenous capacities.

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