User Guide - Investment Map

Transcription

Investment Map
User Guide
For a better identification of investment opportunities
Market Analysis and Research (MAR)
Division of Market Development
Table of Contents
I. Introduction ........................................................................................................................... 1
II. Selection Menu .................................................................................................................... 4
III. From the “Selection Menu” to the data modules............................................................ 8
IV. Identification of potential sectors for inward investment ............................................. 10
A. Overview of the data.......................................................................................................... 11
B. Analysis of FDI data ........................................................................................................... 13
C. Analysis of foreign affiliates’ data .................................................................................... 15
D. Analysis of the export data ............................................................................................... 17
E. Analysis of barriers to trade .............................................................................................. 24
F. Analysis of imports ............................................................................................................. 25
V. Analysis of countries competing for inward investment in potential sectors ............. 29
VI. Analysis of investment sources in potential sectors ..................................................... 36
A. Data on foreign affiliates grouped by parent company ................................................... 36
B. Outward FDI data by country ............................................................................................ 41
VII. Additional Country Information on FDI ......................................................................... 44
A. Bilateral investment treaties and treaties of non-double taxation ................................... 47
B. Privatisation opportunities ................................................................................................. 48
C. Additional information on the comparison of host countries........................................... 48
VIII. Summary......................................................................................................................... 50
Annex 1: Data limitations ...................................................................................................... 51
A. Classification problems .................................................................................................... 51
B. Limitations specific to FDI data ......................................................................................... 51
C. Limitations specific to data on foreign affiliates .............................................................. 52
D. Trade data limitations ....................................................................................................... 52
Annex 2: Definitions of FDI flows and stocks ...................................................................... 54
Annex 3: How to read the bubble charts............................................................................. 56
A. Dynamic analysis .............................................................................................................. 56
B. Structural analysis ............................................................................................................. 58
C. Additional comments ........................................................................................................ 59
Table of Figures
Figure 1: Market Analysis Tools homepage ...........................................................................................3
Figure 2 : Investment Map home page, English version........................................................................4
Figure 3 : The Selection Menu..................................................................................................................5
Figure 4 : Drop-down list of countries in the Selection Menu ...............................................................5
Figure 5 : Tables that are directly accessible from the Selection Menu..............................................6
Figure 6 : Country and sector selections.................................................................................................7
Figure 7: Country and sector selection - Indicators ...............................................................................8
Figure 8: The four data modules in Investment Map .............................................................................9
Figure 9: Visualization on a bar chart of the FDI-receiving sectors in Brazil .....................................13
Figure 10 : Bubble Graph of Brazil’s export portfolio ...........................................................................18
Figure 11 : Graph presenting export vs. inward FDI flows ..................................................................19
Figure 12 : Detailed information for two of Nestlé’s affiliates ..............................................................34
Figure 13 : Search by company data ....................................................................................................34
Figure 14 : Search by keyword...............................................................................................................35
Figure 15 : Affiliate’s details....................................................................................................................40
Figure 16: FDI outward stock broken down by country on a world map ...........................................42
Figure 17 : Host country’s FDI determinants .........................................................................................45
Figure 18: Additional information...........................................................................................................46
Figure 19 : Information on bilateral investment treaties ......................................................................47
Figure 20 : List of treaties signed by a country .....................................................................................47
Figure 21 : Privatisation information ......................................................................................................48
Figure 22 : Business regulations indicators (Doing Business Indicators) ..........................................49
Figure 23 : Bubble charts – Dynamic analysis ......................................................................................56
Figure 24 : Bubble charts – Structural analysis ....................................................................................58
Table of tables
Table 1 : Information accessible through the Selection Menu .............................................................5
Table 2 : Information accessible through the four data modules .........................................................9
Table 3 : Analysis of Sectors with Potential to Attract Investment ......................................................10
Table 4 : Sorting the data by industry....................................................................................................12
Table 5 : How to show additional FDI indicators ..................................................................................13
Table 6 : FDI flows and stocks ................................................................................................................14
Table 7 : FDI flows over the past 10 years .............................................................................................15
Table 8 : Accessing foreign affiliates’ details .......................................................................................16
Table 9 : Data on foreign affiliates .........................................................................................................16
Table 10 : Overview page with indicators for Brazil .............................................................................17
Table 11 : Trade flow indicators .............................................................................................................20
Table 12 : Food, beverages and tobacco exports ................................................................................20
Table 13 : Exports in selected sectors ...................................................................................................21
Table 14 : Export markets in the chosen sector ...................................................................................22
Table 15 : Export markets in the sub-region .........................................................................................22
Table 16 : Exports at the 6-digit level of the HS for the selected economic activity ..........................23
Table 17 : Export markets at the 6-digit level of the HS .......................................................................23
Table 18 : Analysis of tariffs faced by Brazilian exporters...................................................................24
Table 19 : Tariffs applied to products originating from Brazil.............................................................25
Table 20 : Analysis of dairy products imported by South Africa .........................................................26
Table 21 : Analysis of condensed dairy products in the world ...........................................................27
Table 22 : Analysis of condensed dairy products in SADC .................................................................27
Table 23 : Analysis of applied tariffs by South Africa ..........................................................................28
Table 24 : Overview of the food industry in the SADC region .............................................................30
Table 25 : SADC, foreign companies in the food processing industry ..............................................31
Table 26 : South Africa, foreign companies in the food processing industry ....................................31
Table 27 : Nestlé’s affiliates established in developing countries ......................................................31
Table 28 : Nestlé’s affiliates in SADC ....................................................................................................32
Table 29 : Nestlé’s affiliates in South Africa..........................................................................................33
Table 30 : Results of a search by company ..........................................................................................35
Table 31 : Access to the module “Outward FDI by sector” .................................................................37
Table 32 : Affiliates abroad in the food sector ......................................................................................37
Table 33 : Companies based in France having affiliates in developing countries in food processing
...........................................................................................................................................................38
Table 34 : Danone’s affiliates in the developing country .....................................................................39
Table 35 : French companies’ affiliates active in dried or condensed dairy products ....................39
Table 36 : SEGUR’s affiliates in developing countries.........................................................................40
Table 37 : Outward flow by country in the food, beverage and tobacco sector................................41
Table 38 : Outward stock by country in the food, beverage and tobacco sector .............................42
Table 39 : Ranking of countries in terms of net trade ..........................................................................44
Abbreviations
HS
HS6
IMF
IPA
ISIC
ITC
FDI
MIGA
MFN
NTL
OECD
p.a.
SADC
SIC
TPO
UNCTAD
WAIPA
WEF
WID
WIR
WTO
Harmonized System
Harmonized System at the six-digit level
International Monetary Fund
Investment Promotion Agency
International Standard Industrial Classification
International Trade Centre (ITC)
Foreign Direct Investment
Multilateral Investment Guarantee Agency (World Bank Group)
Most Favoured Nation (WTO)
National Tariff Line Code
Organisation for Economic Co-operation and Development
Per annum
Southern African Development Community
Classification nomenclature of the United States’ economic activities since 1987
("Standard Industrial Classification Manual ")
Trade Promotion Organisation
United Nations Conference on Trade and Development
World Association of Investment Promotion Agencies
World Economic Forum
World Investment Directory (UNCTAD publication)
World Investment Report (annual publication by UNCTAD)
World Trade Organisation
Acknowledgements
This User Guide has been prepared by Luigi Lannutti, with the assistance of Gregory Sampson,
under the supervision of Christian Delachenal, Trade Map and Investment Map manager. We also
wish to acknowledge Pitchaya Eam-On and Cindy Bi for their comments and suggestions.
Note: Please note that the information in Investment Map undergoes regular updates throughout
the year as new information becomes available. These updates may generate varying information
from what is seen in this User Guide, however the principles and applications of Investment Map
remain the same.
Please contact [email protected] for more information or assistance.
INTERNATIONAL TRADE CENTRE
I.
Page 1
Introduction
International trade and FDI, traditionally perceived as different means to penetrate markets, have
increasingly become complementary and both have witnessed strong growths during the last
decades. While in 1990 global FDI flows stood at US$ 207 billion, in 2011 they reached US$ 1.5
trillion, with developing and transitions economies accounting for 51% of global FDI flows 1. World
exports of goods also experienced a relevant growth in the same period from US$ 3,449 billion to
US$ 18,217 billion 2. Furthermore, intra-firm trade and trade in intermediate goods gained more and
more importance along with globalization (intra-firm trade of US affiliates accounts for 8% to 10% of
US exports and for 20% to 25% of US imports 3 in 2009).
A combination of different factors can explain the tremendous growth of international trade and
investment. These include reductions in custom duties and transportation costs, as well as political
events, such as the creation of new states in Eastern Europe and Central Asia and their transition to
market economies.
These trends have contributed to the intensification of the international division of labour and the
rise of vertical FDI to the detriment of horizontal FDI. The latter has been traditionally used to
penetrate protected markets (tariff-jumping FDI) or markets characterized by high transportation
costs, while the former allows firms to optimise their production process (efficiency-seeking FDI) and
subsequently reduce costs.
In summary, FDI and international trade are becoming increasingly complementary and are creating
new business opportunities.
In this context, trade and FDI promotion must be undertaken jointly and in a coherent manner. This
explains why, in about 15 countries, trade and FDI promotion activities are both undertaken under
the supervision of a single institution 4.
Investment promotion agencies (IPA) are faced with the following questions:

Which sectors have a strong potential to attract FDI in my country? In
particular, which sectors are the most attractive to export-platform FDI and
which ones present interesting prospects for import substitution?

Which countries are my main competitors in attracting inward investment in
my country’s most attractive sectors? Which rival countries have had the
greatest success at attracting foreign investment in their most attractive
sectors?

Which foreign companies could be interested in investing or re-investing in
my country? And in which particular sectors or products? What are the main
companies active in the sub-region or in my competitors’ country?

Where are foreign-owned companies located in my country? Where are their
headquarters? What are their contact details?
In this regard, ITC, which has traditionally focused its activities towards the promotion of trade, and
UNCTAD, which plays an active role in the promotion of FDI in developing countries, have
combined their efforts to develop the Investment Map. Investment Map provides a user-friendly
application that combines FDI data, trade flow data and tariffs. In response to users’ needs,
company data on foreign affiliates located in developing countries has also been included.
Investment Map has been primarily developed to assist institutions or analysts with the questions
listed above. Investment Map is intended to assist Investment Promotion Agencies (IPA) to identify
1
“World Investment Report (WIR) - Toward a new generation of investment Policies”, UNCTAD, 2012.
WTO online statistics database at http://stat.wto.org/, WTO, 2012.
3
“The Global Enabling Trade Report 2012, Reducing Supply Chain Barriers” World Economic Forum (WEF), 2012
4
Please see <www.waipa.org> to view a non-exhaustive list of Investment Promotion Agencies across the world
2
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potential sectors for FDI attraction and target groups of investors. Investment Map is also a great
tool for Trade Promotion Organisations (TPO) as well as market analysts, who wish to integrate FDI
statistics in their studies.
An understanding of a country’s strengths and weaknesses is essential for IPAs and TPOs. The
undifferentiated promotion of FDI attractiveness across all sectors, very fashionable twenty years
ago, no longer corresponds to today’s market reality. Today’s market is marked by strong
international competition for FDI. As such, the targeting of potential sectors and investors is crucial
for IPAs because it enables them to better manage their resources and to concentrate their efforts
on potential investment channels.
Investment Map has been developed jointly by the Market Analysis and Research section (MAR) of
the ITC with UNCTAD (www.unctad.org) and in partnership with the Multilateral Investment
Guarantee Agency (MIGA) and the World Association of Investment Promotion Agencies (WAIPA).
Investment Map is not only useful for IPAs and TPOs, but the public and private sector can also
benefit greatly from this web-based tool, as it enables them to:

identify potential investment projects targeting regional and international
markets;

better focus on export development constraints in specific markets such as
high tariffs, and hence serve as a guide for trade negotiations;

provide a benchmark for self-competitiveness assessment;

give advice on how to improve the investment and business environment;
Investment Map’s primary assets are its considerable geographical coverage, its combination of
foreign direct investment, trade and tariff data with information on foreign affiliates.
Information available on Investment Map consists of:

total FDI flows and stocks for more than 200 countries and territories,

FDI flows and stocks organised by industry (ISIC revision 3) and by partner
country for more than 110 countries,

data on exports and imports, as well as indicators on trade potential for
approximately 200 countries,

data on the tariffs applied by over 180 countries and on tariffs faced by over
200 countries and territories,

information on the location, sales, employment and parent company of over
150'000 foreign affiliates operating in developing countries or in transition
economies (for more than 1’000 business lines classified under the US’ SITC
classification).
FDI data is collected directly by ITC thanks to the continued collaboration of official national
sources. Trade flow data is sourced from the ITC’s online database on global trade flows, Trade
Map (www.trademap.org/), and from the United Nations Statistics Division’s (UNSD) COMTRADE
ITC’s. Trade data in Investment Map is updated once a year. Tariff data is sourced from ITC’s
Market Access Map database (www.macmap.org), which is frequently updated. Information relating
to affiliates is updated on an annual basis and is purchased from Dun and Bradstreet, a global
leader in microeconomic data collection and distribution that maintains the highly regarded
database "Who owns whom".
The classification of economic activities in Investment Map is based on the ISIC nomenclature
(International Standard Industrial Classification), revision 3. Trade flows and tariff data is available
not only at the industry level, but also at the deeper level of 6 digits of the Harmonized System for
approximately 5,300 product lines. Trade flow data (imports and exports) is available for the last four
years. Finally, the information on affiliated companies in developing countries is also sorted by
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economic activity and it is based on the 4-digit level of the US SIC87 nomenclature, which includes
1'000 business lines.
The major data limitations relate mostly to difficulties encountered in the data collection process, to
the reliability of FDI flow and stock data and to classification issues. These limitations are explored
in the reference material available on-line and are also covered in Annex 1. These limitations are
particularly problematic when analysing cross-country data for a given sector.
The terms of use and subscription options are available at www.intracen.org/marketanalysis (Figure
1). All subscribers need to register in order to access the Investment Map database through a
username and password. The same log-in details will be valid to access all ITC’s Market Analysis
Tools – Trade Map, Market Access Map, Investment Map and Standards Map. For further
information, please feel free to send an e-mail to [email protected].
Figure 1: Market Analysis Tools homepage
Create your new account
to the tools here
This user guide is designed to serve two different functions. Those readers, who would like a quick
introduction on how to use the tool avoiding detailed explanations, should concentrate on the
paragraphs with two vertical straight lines next to them. This will provide them with a hands-on
tutorial designed to introduce them to Investment Map’s main functions.
However, we strongly recommend all readers to follow all the explanations in order to better
understand the features of the Investment Map tool.
Type the following URL address: www.investmentmap.org into your Internet Address bar. Figure
2 shows the English home page of Investment Map, how to access the French or Spanish
versions of the tool and where to enter username and password in order to access the Investment
Map. After entering your login details, press “enter” or click on the “Log in>>” button to enter the
Investment Map
We invite you to examine the information accessible through the Investment Map home page,
especially under the "reference material" section. You will find information on the classification
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systems used as well as on the data sources and data limitations. It is also possible to download a
copy of the user guide (this document) or take a guided tour.
Figure 2 : Investment Map home page, English version
Click here to change
the language
Enter your
username and
password here
II.
Selection Menu
Once logged in, you will be automatically redirected to the Selection Menu. The Selection Menu
enables a direct access to the different types of information available in Investment Map. Other
ways of retrieving and assessing the information are described in the next chapters.
The Selection Menu provides a direct access to FDI statistics and foreign affiliate information. You
are able to choose the direction of FDI (inward or outward), the country and/or the sector of interest
and the type of information to retrieve: you can choose among “Indicators”, “FDI flows”, “FDI stock”
and “Foreign affiliates”. Table 1 describes the type of information that you can directly retrieve from
the Selection Menu.
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Table 1 : Information accessible through the Selection Menu
Button
Description
Indicators
General overview of the most recent FDI and international trade trends, as
well as of the country/sector information on foreign affiliates, sorted by
sector of destination or by country of origin/destination (depending on the
choices made in the above tabs)
FDI flows
FDI stock
Foreign affiliates
Historical series of inward/outward FDI flows, detailed by sector or by
country (depending on the choice made in the above tabs)
Historical series of inward/outward FDI stock, detailed by sector or by
country (depending on the choice made in the above tabs)
Detailed information on foreign affiliates, sorted by sector of destination or
by country of origin/destination (depending on the choices made in the
above tabs)
The Selection Menu allows you to assess the country- or sector-specific information available in the
tool. You may type in the name of a country and retrieve country-specific FDI and foreign affiliate
information broken down by recipient industry, OR you may type in the name of an industry and
retrieve industry-specific FDI and foreign affiliate information broken down by country of origin or
destination, depending on the direction you chose. A country AND an industry may also be chosen
in the query, if you want to assess the situation of a specific sector in a specific country.
Figure 3 : The Selection Menu
Choose a
country AND/OR
a sector
Choose the
direction of FDI
When the requested information is available, the corresponding button will highlight (if the four
buttons are highlighted, all four pieces of information are available). The Selection Menu also
provides a direct link to the industrial classification used in Investment Map (see link “Industrial
classification” beside the “Sector” tab).
Like in Trade Map, you only need to start typing in the country/sector tab and the system will provide
you with a list of all the items containing the letters you typed in, as shown in Figure 4.
Figure 4 : Drop-down list of countries in the Selection Menu
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The tables in Figure 5 provide an example of the different pieces of information that can be directly
accessed from the Selection Menu. The example is based on Brazil’s inward FDI and the sector of
“food and beverages” manufacturing was chosen.
Figure 5 : Tables that are directly accessible from the Selection Menu
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As figure 5 shows, in the case of Brazil’s inward FDI stock, the sector breakdown of FDI is not
available. Please, also note that when a country is chosen in the Selection Menu, results are broken
down by economic sector, while when a sector is chosen the information is broken down by country.
The Selection Menu also allows a direct access to country-specific information broken down by
partner country. You can obtain this information by selecting at the same time a country AND a
sector. Please note that “Total (merchandise and services)” has to be chosen as a Sector to retrieve
the country breakdown of the selected country’s FDI, as shown in Figure 6.
Figure 6 : Country and sector selections
As you can see in Figure 6, not all the buttons are available at all times. On the top figure the
information on “Foreign affiliates” is not available for the chosen sector, as this particular information
is only available for specific sectors of the economy or when no sector is chosen. The second line of
Figure 6 shows that the button “FDI stock” is not available, as Brazil did not report any data on
inward FDI stock in the sector of “Textile, clothing and leather” manufacturing.
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The button “Indicators” will be available for any query. When a country and a sector are chosen, the
country or the sector of your choice will be highlighted in yellow on the result page, as shown in
Figure 7.
Figure 7: Country and sector selection - Indicators
III.
From the “Selection Menu” to the data modules
The Selection Menu works by redirecting you to the exact page with the information you were
looking for. The different pages in Investment Map are classified under four main modules that are
in the top of all the pages of the tool. These modules are: “Inward FDI by country”, “Inward FDI by
sector”, “Outward FDI by country” and “Outward FDI by sector” and you can see them in Figure 8.
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Figure 8: The four data modules in Investment Map
Table 2 describes the type of information available under each data module. Please, note that the
information retrievable under the data modules is also retrievable directly from the Selection Menu.
Table 2 : Information accessible through the four data modules
Module
Description
Inward FDI by country
Country-specific information on inward FDI, foreign affiliates
established in the country, international trade and tariffs. Information
is broken down by sector.
Inward FDI by sector
Sector-specific information on inward FDI, foreign affiliates
established in the country, international trade and tariffs. Information
is broken down by country.
Outward FDI by sector
Sector-specific information on outward FDI, foreign affiliates
established abroad and international trade. Information is broken
down by country.
Outward FDI by country
Country-specific information on outward FDI, foreign affiliates
established abroad and international trade. Information is broken
down by sector.
From now on, the user-guide will follow a comprehensive path which will guide you through the
identification of the most FDI-attractive sectors and potential investors. It will provide you with a
strategy to assess countries and sector’s FDI attraction potential starting from the data available in
Investment Map.
IV.
Page 10
Identification of potential sectors for inward investment
We want now to identify the most attractive sectors in a specific economy. In the Selection Menu,
we will therefore choose “Inward FDI” as direction, we will type in the name of a country and we will
start our analysis by clicking on “Indicators”. This will lead us to the module "Inward FDI by country",
which provides answers to two questions frequently asked by IPA’s:

Which industries have attracted FDI in my country?

Which sectors have the potential to further attract FDI in my country?
The module “Inward FDI by country” contains four tabs that are located above the column headings
of the table and provide different types of information on foreign direct investment (FDI), foreign
affiliates, international trade and tariffs.
Start by selecting Brazil from the drop down menu next to "Select country", as shown below:
By default, the different sectors are ranked by the size of their inward investment flows from high to
low. As a result, for each country, those industries that have attracted the highest foreign investment
in the last available year are shown in the top of the table, assuming that data is available.
Table 3 : Analysis of Sectors with Potential to Attract Investment
In order to identify sectors with the highest potential to attract FDI, it is useful to undertake the
analysis from the perspective of a potential investor. You should ask yourself: What are the main
motives for investment? Why should a company prefer my country over another?5
5
This issue can also be conceptualised in terms of "push factors" which push investors to internationalise their activities
and "pull factors" that attract/pull investors to a given country. The interested reader can find more on this topic in
Chapter IV: "Drivers and Determinants" of the "World Investment Report" 2006 edition.
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We can distinguish 4 reasons why investors would invest abroad:
i)
Market-seeking FDI
ii)
Efficiency-seeking FDI
iii)
Resource seeking FDI
iv)
Asset-seeking FDI
These factors are not mutually exclusive. Instead, together, they determine the likelihood of positive
returns on an investment. The development of a global market has increased the importance of
these factors and has forced firms to seek new markets and locations to reduce their production and
maintenance costs in order to remain competitive.
Access to raw materials remains the main driving force behind FDI in sub-Saharan Africa while
access to new technologies plays an important role in encouraging FDI directed towards developed
countries.
The combination of data on inward FDI flows and information on foreign affiliates allows identifying
the economic activities that have been most stimulated by FDI. As we will see in this section,
Investment Map can help users identify new market opportunities.
Table 3 identifies those economic activities that have been stimulated by FDI. Brazil is characterised
by inward FDI in nearly all sectors of its economy.
A. Overview of the data
You can sort the economic activities by the type of industry (primary in yellow, secondary in blue
and tertiary in pink) by clicking on the heading “Industry“, as shown in table 4.
Brazil has successfully attracted significant investment in its extraction industry. FDI in such sectors
is motivated primarily by the search for raw materials, while there is a number of other forms of
investment in other big sectors, that include considerations.
The information can be displayed at different levels of aggregation and by type of activity. Generally
speaking, by clicking on the
symbol, you can access more detailed data, while clicking on the
symbol returns you to a broader overview. You can also rank the industries according to numerous
criteria (for example by the number of exports, number of foreign affiliates, etc) by clicking on the
arrows ( symbol) located at the top of each column.
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Table 4 : Sorting the data by industry
Click here to
classify industry by
sector
Click here to view information at
the macro sectors level (primary,
secondary and tertiary)
sign of the main tabs, located at the top of the columns and beside the
You can also click on the
column headings to access further indicators. For example, click on this
symbol to view the wide
array of information on FDI stocks and flows, as shown in table 5.
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B. Analysis of FDI data
Table 5 : How to show additional FDI indicators
Click here to get the wide array
of information concerning FDI
Click here to visualize the FDIreceiving sectors on a bar chart
Figure 9: Visualization on a bar chart of the FDI-receiving sectors in Brazil
By clicking on the link “See chart” under the heading “Foreign Direct Investment”, as indicated in
Table 5, you will be able to visualize the information on FDI-receiving sectors on a bar chart, which
will open up in a pop-up window. As indicated in Figure 9, once opened the pop-up window, you will
be able to choose among inward/outward flow/stock information, the country and the year of
reference, whether you want to assess the information at an “aggregated” (sectors aggregated at
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the level of primary, secondary and tertiary sectors) or “detailed” (detailed sectors as in Figure 9)
level. You can also choose how many sectors you want to visualize on your bar chart.
By clicking on the red arrows as shown in table 6 you will be able to retrieve annual inward FDI
flows or stocks for the last ten years along with the corresponding sector breakdowns (if available).
Select one of the arrows to expand the corresponding column. You are now in the module “Inward
FDI by country” and therefore you will be able to retrieve historical series of inward FDI only.
Table 6 : FDI flows and stocks
Click here on the red arrows to
retrieve the historical series of
FDI for the last 10 years
The data shown in table 7 indicates a constant rise in FDI flows since 2001 in all sectors. However,
it is possible to observe also certain volatility in FDI flows between 2002 and 2004 and between
2008 and 2010. Volatility can be explained by the fact that FDI is generally characterised by large,
one-off monetary transactions such as mergers or acquisitions. The different components of FDI
flows and stocks are explained in Annex 2.
Page 15
By clicking on the red arrow again, as shown in table 7, the column will condense. Note that you can
also use the "Back" button on your web navigator.
Table 7 : FDI flows over the past 10 years
Click here to go back to the previous
available options and indicators
FDI data broken down by sector is, unfortunately, not available for all countries. In the example of
Brazil, data on inward stocks is only available for the economy as a whole. In order to tackle this
problem of insufficient data availability and in order to help users better identify those sectors which
have attracted FDI in the past, foreign affiliates data has been included in Investment Map. This
data source is also very useful for IPA’s trying to identify target groups of investors. This is covered
in more detail later on.
C. Analysis of foreign affiliates’ data
The two columns under the heading "foreign affiliates" show the number of foreign affiliates present
in the country and the number of parent companies (direct investors) that have affiliates in the
country. In order to expand the information on “foreign affiliates”, click on the
sign next to the
“Foreign Affiliates” heading as shown in table 8.
Table 9 shows the indicators available in “Foreign Affiliates” sub-module. We now have information
on the individual affiliate’s sales, as well as the number of employees. These two types of
information are unfortunately not systematically reported by all affiliates. This explains why the sales
column includes two numbers. The first one shows the sum of the sales generated by the affiliates,
while the second one, shown in brackets, indicates the number of affiliates that have reported this
information. In the same way, we also include two figures for the number of employees. The first
one shows the number of employees, while the second one shows the number of affiliates reporting
this information. You should be aware that the number of employees is more systematically reported
than the sales figure. However, these figures cannot be considered as statistically relevant.
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Table 8 : Accessing foreign affiliates’ details
Click here to obtain further
information about foreign affiliates
established in the country
For Brazil, we find that multinationals are important players in all sectors of the economy. They
create a large number of jobs in the wholesale and retail trade and through the production of
equipment goods (machines and material). The affiliates’ turnover, despite being estimated on an
incomplete statistical basis, is also very important.
The "Recently established" column displays the number of companies that have been created since
2000 and have been reported in the database. The date of the creation of the firm, however, may
not be recorded.
The last two columns provide information on the leading foreign company (parent company) and
investing country, in terms of number of affiliates in the country.
Table 9 : Data on foreign affiliates
Click here to view more information
about foreign affiliates located in the
country in the sector of interest (see
Chapter V for company data – pag. 27)
The joint analysis of FDI and foreign affiliate data enables you to identify those industries that have
been successful at attracting FDI. Those industries can also be considered as potential attractions
for more FDI for a number of reasons. Firstly, IPA’s may feel more confident supporting existing
firms that wish to reinvest profits or expand their activities. 6 Secondly, the presence of a number of
6
Some IPAs, such as that in Norway, which already have numerous transnational companies located in their country,
focus their efforts on improving the services provided to existing investors, as a way to encourage expansion or
reinvestments by those firms.
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firms with a history of successful growth can encourage related or rival companies to follow suit and
invest in the country.
Potential future FDI is not limited to those sectors with a recent history of attracting FDI. The
analysis of trade flows also identifies which markets could be targeted by foreign investors.
Let us first provide a general list of the different markets that can be targeted by investors:
i)
the domestic market
ii)
the regional market
iii)
the international market
We will begin by looking at instances in which the country is being used as an export platform to
access regional and international markets. In order to undertake our analysis, we must assess the
export portfolio of the targeted country. The portfolio can be analysed either in the form of a table or
in the form of a bubble graph.
D. Analysis of the export data
When you are on the overview page with the indicators (i.e. you chose a country in the “Selection
Menu” and clicked on “Indicators”), you can also asses trade information. Click on the link “See
chart” under “International Trade – 2010”, as shown in Table 10. This will open a separate window
visualizing the country’s export profile on a bubble graph, as shown in Figure 9.
Table 10 : Overview page with indicators for Brazil
Click here to view additional
information on international trade
Click on the icon to visualize
export data on a bubble graph
There are two types of bubble graphs used in Investment Map. The first, illustrated in Figure 9,
analyses the export performance in statistical or structural terms (structural analysis), whereas the
second one illustrates the export performance in a dynamic framework (dynamic analysis). The
graphs are explained in detail in Annex 3.
The graphs are inspired by portfolio models, which are used extensively in marketing. The models,
such as the Boston or General Electric ones, are usually applied to large firms. The bubble graphs
apply the portfolio models to the analysis of a country’s export portfolio. While they differ in their
interpretation from the original models, the intuition behind the Investment Map’s bubble graphs is
the same.
The graph puts Brazil’s market share of exports into perspective by comparing it to the growth in
world trade. This shows whether the country is specialised in high-growth sectors or not. The size of
the bubbles is proportional to the value of Brazilian exports in the corresponding industry.
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In Brazil’s case, we can see that the country has a fairly diversified export portfolio, which includes a
variety of primary products (yellow bubbles) and diverse manufactured goods (blue bubbles).
Generally speaking, the country specialises in industries characterised by a strong world export
growth. This is considered a good sign.
Figure 10 : Bubble Graph of Brazil’s export portfolio
Click here to select
another bubble graph
It is also possible to analyse the export portfolio (structural analysis) in relation to the intensity of
inward FDI flows for the year under analysis. Select the graph "Export vs. Inward flows" from the
drop down box, as shown in Figure 10.
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Figure 11 shows a graph comparing Brazil’s exports and inward FDI flows. It is very similar to the
graph shown in Figure 10, with the major difference being that the bubble colour varies depending
on the value of the inward FDI in the selected year. This is explained in detail in the graph’s
legend/explanatory notes at the bottom of the graph (see Figure 11).
For Brazil, the graph indicates that nearly all of the exporting industries have experienced
considerable inward FDI over the course of the last available year (2010 in this case). The two
biggest sectors in terms of exported value are the production of food and the extraction industries.
They are also characterised by important inward FDI flows. In conclusion, the graph shows that
inward FDI and exports are strongly correlated in Brazil. Now let us investigate the main export
markets.
Figure 11 : Graph presenting export vs. inward FDI flows
From the overview page with the indicators –close the window showing the graph, if you are
following the suggested path – click on the
icon as shown in Table 10 to expand on the
information on international trade. Click on the column’s heading “Exports” to rank the industries in
terms of decreasing export value.
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Table 11 includes numerous indicators. In addition to the value of exports and imports, we also find
the world market share, the annual change of exports over the last for years (since 2007 in this
user-guide), an indicator of world trade growth, the level of net trade (export-imports), the net trade
in relative terms and its change over the last four years (since 2007 in this userguide).
Table 11 : Trade flow indicators
Click here to analyse
the sector in depth
Brazil’s food manufacturing sector, which is characterised by significant inward FDI flows, has the
highest activity in terms of export turnover. The sector also generates a strong trade surplus and
exports are growing at a constant rate.
In order to analyse the trade performance of this industry in greater depth, click on the
shown in Table 11.
icon as
Table 12 : Food, beverages and tobacco exports
the industry in depth
Table 12 shows that almost two thirds of the food, beverage and tobacco industry’s exports come
from the “Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats”. The
export of beverages, dairy products and cereals is only a marginal activity in comparison.
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Click on the
icon as shown in Table 12 to obtain more detailed information on the “Production,
processing and preservation of meat, fish, fruit, vegetables, oils and fats” industry arranged by
product.
Table 13 : Exports in selected sectors
the export markets of
the specific industry
Table 13 shows the main products exported by Brazil, as categorised under the six-digit
Harmonised System (HS). The three leading products account for 50% of Brazil’s exports in this
sector.
In order to identify which markets are the major importers of Brazilian products categorised under
the "Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats" click on
the blue numbers relating to this sector, as shown in Table 13. This opens a separate window
showing the annual value of Brazilian exports for the last 4 available years, from 2007 to 2010,
together with the destination countries. The result is shown in Table 14. As a general rule, in
Investment Map, whenever a number is shown in blue, by clicking on it you can access more
information on the country of origin or destination of trade or investment flows.
Within our selected category, Brazil’s exports have nearly doubled over the last four years. In
particular, exports to China nearly tripled over the last four years, although Russia and the
Netherlands remained the largest importers in 2010. The last column shows the average tariffs
applied to Brazil’s exports by the different countries, as shown in Table 14.
Brazil’s strength in such a sensitive sector, which is characterised by high barriers to trade,
demonstrates the extent of Brazil’s competitiveness. This suggests that following the liberalisation of
international markets, Brazil would be well positioned to take advantage of new opportunities for
trade.
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By using the drop down menu, next to “Select Country”, you can restrict the number of countries
being examined. There is a number of pre-defined sub groups (to which Brazil belongs) to choose
from. As an example, select MERCOSUR, to see the equivalent of Table 15.
Table 14 : Export markets in the chosen sector
Click here to select a
group of partner
Click here to select a group
of partner countries
Table 15 : Export markets in the sub-region
Table 15 indicates that exports to other MERCOSUR countries are rather low in this sector, even
though tariff exemptions exist. In order to better understand this phenomenon, it seems sensible to
analyse performances at the product level.
Close the pop-up (Table 15). In order to look at the exports at the product level, click on the
icon
next to “Production, processing and preservation of meat, fish, fruit, vegetables, oils and fats”. This
will provide more details on the different products found under this category, as shown in Table 13.
Now click on the number representing Brazil’s exports of "Soya-bean oil-cake&oth solid residues,
whether or not ground or pellet" (HS code 230400) to the world (as shown in Table 16). This opens
a new pop-up window listing the major importers of Soya-Bean etc., as shown in Table 17.
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Table 16 : Exports at the 6-digit level of the HS for the selected economic activity
Click here to analyse the export
markets at the 6-digit level
By clicking on the blue number indicating the value of exports for the selected product, you are
actually opening up a session in the separate application of Trade Map (www.trademap.org). Table
17 ranks the export markets of a given country at the 6-digit level of the HS. We can now see that,
for this product, Brazil exports mainly to European and Asian countries.
If you have registered to Investment Map, which is also valid for Trade Map, you will be able to
undertake various further analyses, including analysing data at a more detailed level (at the 8-digit
level or more of the National Tariff Line level) or identifying your competitors in a particular market.
Table 17 : Export markets at the 6-digit level of the HS
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E. Analysis of barriers to trade
In Investment Map, click now on the
icon next to the “Tariffs” heading.
Table 18 shows the tariffs faced by Brazilian exporters and the import tariffs applied by Brazil to
foreign imports. We are now going to look at the customs duties faced by Brazilian exporters at the
product level, for the sector "Production, processing and preservation of meat, fish, fruit, vegetables,
oils and fats". This gives us an indication of Brazil’s market access conditions for these products and
enables us to better assess Brazil’s competitiveness.
Table 18 : Analysis of tariffs faced by Brazilian exporters
Click here to analyse the
tariffs faces by your country
at the product level
By clicking on "Details on faced tariffs" as shown in Table 18 it is possible to see Brazil’s market
access conditions for the product "Soya-bean oil-cake&oth solid residues, whether or not ground or
pellet " (HS code 230400). The page opens in a separate pop-up window.
The new window has opened a separate session in the tool of Market Access Map
(www.macmap.org). Table 19 shows the tariffs faced by the country’s exporters in the international
markets for the selected product. We can see that Austria, a country which belongs to the European
Union, applies a 0% tariff rate under the WTO’s MFN agreement. The EU’s customs duty exemption
for this product can help to explain how Brazil has managed to penetrate the EU’s market. However,
as we can see, there are other markets that apply higher customs duties to products originating
from Brazil.
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As shown in Table 19, you can rank the partner countries by the level of protection, by clicking on
the heading "Level of protection" or "Total ad valorem equivalent tariff".
Table 19 : Tariffs applied to products originating from Brazil
Click here to sort the information
by “Level of protection”
By clicking on the heading “Level of protection”, you can sort the information by tariff level. On the
top of the list you will be able to see the countries applying the highest tariff barriers to Brazil for the
selected product. This type of information is crucial for Brazilian governmental agencies, as it
enables them to prepare for bilateral, regional or multilateral negotiations.
In terms of FDI, this information is important as it enables the government to better assess the
export potential of Brazil toward international export markets. Tariff trade barriers are an initial
hurdle in almost all export markets that the trade-related governmental institutions may target. Low
tariff barriers applied to a country may work as an incentive for foreign companies to establish a
foreign affiliate in that country and export from there (export-platform FDI).
The Market Access Map table also includes the column "total ad valorem equivalent tariff", which
refers to the “ad valorem equivalent” tariff that the country faces when exporting the selected
product to a specific market. If your country or institution has a subscription to Market Access Map,
you can undertake a more detailed analysis, for example, at the tariff line level.
F. Analysis of imports
We are now going to investigate the potential for FDI to substitute imports to the domestic and
regional markets. To this end, we are going to analyse the import flows.
The value of imports can indicate the potential gain from substituting these imports by encouraging
local or regional production with the help of FDI. This is known as the import substitution effect of
FDI.
From the Investment Map overview page with indicators, we will now be able to assess the potential
of South Africa to attract import-substitution FDI. From the drop down menu select South Africa.
Page 26
Click on the
icon located on the top of the “International Trade” column. This expands the
heading, introducing a number of extra indicators of international trade. Click on the column
"Imports" to rank the different industries by their import value. Now let us focus our attention on the
food processing sector, which we have already been examining for Brazil. The heading “Food,
beverages and tobacco” should be already expanded from earlier. If not, you can expand the group
by clicking on the
icon next to the industry label. >ou will see a number of different sub-groups
within the selected sector. Let us concentrate our analysis on an even deeper industry level. Click
on the
icon next to the "Manufacture of dairy products" industry to show the different sub-markets
within that industry. You should now have a table similar to Table 21.
South Africa is a net importer of dairy products. The imports are significant (over $12 million) for the
product "040210 - Milk powder not exceeding 1.5% fat". It would appear that there may be potential
for significant import substitution for that product.
For analysis at the sub-region level, click on the heading "040210 - Milk powder not exceeding 1.5%
fat", as shown in Table 20, in order to access the world-trade country-breakdown for this product.
Table 20 : Analysis of dairy products imported by South Africa
Click here to analyse the data by
country for this product or industry
This information provides further details to analyse how countries are competing to attract foreign
investment. The information on imports by industry and by country shows you the position of a
country relative to its competitors in a given industry from an import substitution perspective. Table
21 includes the same indicators we looked at previously. There are, however, a few differences. For
example, measure of the exports per capita or as a share of GDP is now included. This allows us to
analyse the contribution of the exports in relative terms, by relating them to the size of the economy.
The last two columns indicate whether we used "mirror" data (data based on the statistics reported
by partner countries) and the latest available year for the trade data.
Page 27
Table 21 shows the data for all the countries in the world. We can group this data by sub-region.
Click on the drop down menu, as shown in the table and select the "Southern African Development
Community (SADC)". You should now see the equivalent of Table 22.
Table 21 : Analysis of condensed dairy products in the world
Click here to select a subgroup of countries
Table 22 shows that the SADC countries are all net importers of the product "040210 - Milk powder
not exceeding 1.5% fat". This is encouraging in terms of FDI attraction in this sub-region. Now let’s
analyse South Africa’s supply networks.
Table 22 : Analysis of condensed dairy products in SADC
Click here to analyse the supply
sources for this product
Click on the number that corresponds to South Africa’s imports of the selected product, as shown in
Table 22. This opens a separate window run by Trade Map that lists the different suppliers of the
product "040210 - Milk powder not exceeding 1.5% fat” to South Africa. For instance, we can now
see that Australia, New Zealand, Argentina and Ireland are all large exporters of this product to
Page 28
South Africa. In the same way, this information can be accessed for all the other countries in the
group by clicking on their import values in the "Imports" column. This will enable the assessment of
and comparison with the supply networks established in the other SADC countries. For instance, it
may be of particular interest to look at the other large importing markets, such as Mauritius or
Mozambique.
We find that the major direct and indirect suppliers of “Milk powder not exceeding 1.5% fat” to the
SADC countries are Australia, New-Zealand, Singapore and the United Arab Emirates (which is
probably re-exporting the product).
Now let us see whether preferential trade conditions exist for producers within the SADC region for
a given product. Close the Trade Map window and return to the Investment Map interface. Click on
the
icon next to the "Tariffs" tabs. This expands the tariff rates information by introducing two new
columns with details on faced and applied tariffs. Now click on the "Details on applied tariffs" line
corresponding to South Africa. This opens a separate window which shows a number of countries
exporting this product to South Africa and the tariffs they face. By default, only 10 countries are
shown per page. As shown in Table 23, however, you can select the "Show all" option from the drop
down menu to view all the records relating to your query. Now click on either the "Level of
protection" or "Total ad valorem equivalent tariff" headings. This will allow you to rank the level of
tariffs from the lowest to the highest.
Table 23 : Analysis of applied tariffs by South Africa
Select “50” to view 50 records
relative to your query
As we can see in Table 23, South Africa applies a 0% tariff rate to condensed milk for all its trade
partner countries.
In conclusion, Investment Map has allowed us to identify a product with a good potential for “import
substitution” FDI. It enabled us to identify the potential domestic and regional markets for this
product, as well as providing details of the customs duties applied. This may be the basis to develop
an analysis on whether it may be convenient to go and produce locally a product that would
otherwise be exported to region.
In addition, it is necessary to look at the local production conditions, such as the availability of raw
materials (milk, sugar), logistics (transport and storing facilities) and material (required equipment).
This analysis is generally undertaken by sector experts.
Page 29
We can also investigate the customs duties imposed in other markets for condensed milk that
originate from SADC countries. Close the new window and return to the main Investment Map
window. Now click on “Details on applied tariffs” for either Mauritius or Mozambique. This, once
again, opens a new window through the Market Access application. The window shows a number
of countries exporting this product to Mauritius or Mozambique and the tariffs they face. By default,
only 10 countries are shown per page. Once again, select the "Show all" option in the drop down
menu to view all records relating to the query. Now click on either the "Level of protection" or "Total
ad valorem equivalent tariff" headings. This again allows you to rank the level of tariffs from the
lowest to the highest. Mozambique applies higher tariffs to non SADC-members: this customs
behavior may encourage FDI by enabling outside firms to gain access to a protected market. In
economic literatures, this form of import-substitution FDI is known as “tariff-jumping” FDI.
V.
Analysis of countries competing for inward investment in potential
sectors
Now let us investigate a second set of questions that IPA’s generally consider:

What are the main countries competing for inward investment in our targeted
sector?

Which countries, in my sub-region, have experienced the most success at
attracting foreign investors in the markets I am planning to target?

What are the main companies active in the sub-region or in competitor
countries?
The Investment Map "Inward FDI by sector" module attempts to answer these questions. The
module “Inward FDI by country” has enabled us to identify the potential for FDI to promote import
substitution. It has also suggested, as in our example, the countries competing with South Africa for
investment in the market of dairy products manufacturing (specifically the product "040210 - Milk
powder not exceeding 1.5% fat") are mostly other SADC countries.
However, another interesting aspect for external investors must be highlighted. At a first
glance, it would appear that there is little difference among SADC members as potential FDIdestinations for an investor targeting the South African market, as it would benefit from the
same reduced internal tariffs in any country belonging to the SADC. At the same time, for
instance, South Africa and Mauritius do not apply any customs duties to non-SADC importers,
and, as such, do not provide any advantage to SADC producers. For Mozambique, SADC
countries have a slight advantage over non-SADC importers. Within the SADC, the product is
subject to tariffs of 5%, while countries outside the SADC region face tariffs of 10%. Investing in
Mozambique would allow the firm to avoid these tariffs while still having the same access to the
Mauritian market.
The analysis is, however, incomplete. While tariffs represent an important consideration for
investors, there are a number of other aspects which affect their final investment decision. Other
economic factors, such as electricity costs, abundance of labour skills, wage rates, raw materials
availability as well as political considerations, such as the political stability and rules and regulations
regarding foreign investment, play a significant role. Particularly important issues, from an investor’s
perspective, are the possibility to repatriate profits, the protection given to investors, the ease of
access to land and the existence and extent of tax exemptions. These aspects are analysed in the
last section of the guide, which focuses on additional country-specific information concerning FDI.
In this section, we are going to take a look at the capacity of Investment Map to analyze a country’s
overall ability to attract FDI into a given industry. Countries with a successful export track-record in a
given industry or product are likely to attract the attention of foreign investors, as similar economic
activities may also result attractive to foreign capitals.
Page 30
Close the "Market Access Map" windows and return to the general overview page on Investment
Map. Click on the
icon next to the heading "Tariffs". This will minimise the heading and bring you
back to the general data overview. You will notice that the industry selected in the drop down menu
(next to “Select Industry”) is now the “Manufacture of dairy products", and not the product at the 6digit level of the HS nomenclature. This is because the FDI and foreign affiliate’s information is not
available under the disaggregated categories of the HS nomenclature.
The table contains little information available on FDI or about the foreign affiliates active in this
sector. More information may be obtained by looking at a broader sector. Scroll up to select “Food,
Beverages and Tobacco” from the drop down list next to “Select Industry”, as illustrated in Table 24.
Table 24 : Overview of the food industry in the SADC region
Select the industry of
interest
First, we notice is that the information is incomplete. This is because not all members of the SADC
have consistently reported inward FDI data for the selected industry. Secondly, the data on foreign
affiliates shows that South Africa is not the only country in the SADC with numerous foreign
affiliates. Other SADC countries, such as Mauritius or Tanzania, have also attracted foreign
companies in the food processing industry.
Now let us investigate, in detail, the companies operating in SADC. This allows us to gain a better
understanding of the types of enterprises and activities already present in the region. We will look at
the foreign affiliates operating in the dairy products sector.
Click on the
icon next to the “Foreign Affiliates” heading. This expands the information on the
foreign affiliated companies in “Food, Beverages and Tobacco” in the SADC region. For instance,
it gives us details on the leading foreign company active in this sector. In our example of South
Africa, this is Sabmiller Plc. Click on the name of the enterprise as shown in Table 25. This opens a
new window which gives you a list of foreign affiliates in South Africa (Table 26). Let us look at the
Nestlé’s affiliates. To do so, click on the company name "Nestlé" as shown in Table 26. This opens
a list of countries in which Nestlé’s foreign affiliates are active (Table 27).
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Table 25 : SADC, foreign companies in the food processing industry
Click on the
company’s name
Table 26 : South Africa, foreign companies in the food processing industry
Click on the
company’s name
Page 32
Table 27 : Nestlé’s affiliates established in developing countries
Choose a group of countries
Click on the company’s name
As shown in the list of countries where Nestlé S.A.’s foreign affiliates are active (Table 27), South
Africa is well placed among other developing countries in terms of number of foreign affiliates and
number of jobs created. What can we say about the relative position of other SADC countries? From
the drop down menu, select “Southern African Development Community (SADC)”, as shown in
Table 27, to obtain a table showing Nestlé’s economic activity in the sub-region (Table 28).
Table 28 : Nestlé’s affiliates in SADC
Click here
The list of foreign affiliates of Nestlé active in our subgroup (Table 28) shows that, apart from South
Africa, there are affiliates of Nestlé in four other countries which belong to the SADC. In order to get
more detailed information on Nestlé’s affiliates in South Africa, click on the country name as shown
in table 28.
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Table 29 : Nestlé’s affiliates in South Africa
Click here
We now have a list of four Nestlé’s affiliates established in South Africa. We also have information
on the cities they are based in and some information, although incomplete, on their sales, starting
year and number of employees. The information would suggest that the main turnover in the country
comes from cocoa-based products. This can be deduced from the "Line of business" information,
which informs us of each affiliate’s leading activity, as measured by the amount of turnover it
generates. It is, however, likely that each affiliate also engages in other, smaller, lines of business.
Click on the name of each affiliate, starting with the first one. This opens a separate window with a
detailed fact sheet on the selected affiliate of Nestlé’s.
Figure 12 compares two fact sheets taken from the list of Nestlé’s affiliates established in South
Africa. We can now see that Nestlé (South Africa) (Pty) Ltd, which is based in Ranburg, operates in
three main lines of business. As well as its primary business, cocoa and cocoa based products, it
also engages in producing dried, condensed or evaporated dairy products and cheese. The other
affiliate, Nestlé South Africa (Pty) Ltd, is based in Johannesburg and only engages in the production
of chocolate and cocoa products.
The search for potential investors can also be made by using the search-by-company facility.
Choose the module "Company" in the main task bar in the upper part of the screen as indicated
in Figure 13. The query can be made by host country or home country. In this case, click on the tab
"search parent companies" as indicated in Figure 13.
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Figure 12 : Detailed information for two of Nestlé’s affiliates
Figure 13 : Search by company data
1. Click here to get into
the module « Company »
2. Choose this sub-module to search
the database by parent companies
Different criteria for your search of company data are offered. You can for example search for
companies which their name contains a key-word (such as "carrefour") or select all companies
headquartered in a given country.
The module “Company” also allows you to look for all foreign affiliates delivering a specific product
or service. In order to illustrate this option, follow the instructions highlighted in Figure 14. As an
example, enter first the key-word "milk" in the appropriate box. Investment Map will propose you
different products (based on HS labels) and their corresponding business lines (based on the SIC
nomenclature) including the key word in their description. Use the scrolling bar to display all the
proposed products and business lines and tick the box corresponding to "Dry, condensed and
evaporated dairy products" as indicated in Figure 14, point 2. After that, click on the "submit query"
button.
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Figure 14 : Search by keyword
1. Enter a keyword
2. Thick the corresponding box
3. Launch the query
Table 30 shows the results of the query. More than 100 records have been found. Each record
corresponds to a foreign affiliate producing dry, condensed and evaporated dairy products and
located in a developing country. Only 25 records are displayed on the screen at the same time. You
can obtain more records by clicking on the page numbers on the top of the table, as shown in Table
30. You can also click on each column heading in order to sort the records according to different
criteria, such as the name or home country of the parent company. You can also click on each
affiliate's name in order to obtain detailed information about it. Finally, you can refine your request
by modifying your query, for example by limiting the research scope to some countries. However,
any query is limited to a maximum of 500 records.
Table 30 : Results of a search by company
Display more records
Modify the query
Page 36
What can we conclude from our analysis? By looking at the import flows and the barriers to trade
within this product group we have identified a high potential in South Africa and within the SADC
region for the production of dairy products. We have also discovered that several other SADC
countries are competing to attract foreign investors producing dairy products. Despite the fact that
South Africa does not provide a special comparative advantage in terms of preferential tariffs among
SADC countries, it has, nonetheless, demonstrated a strong competitive position in the last decade
in terms of number of foreign affiliates producing food and dairy products.
We have also seen that there may be potential to attract investment in the other SADC countries, for
example in Mozambique and Mauritius, which are already producing industrialised milk with the help
of foreign investors. These two countries also benefit from better market access conditions among
the SADC countries. This is only an initial analysis and, as mentioned earlier, there are a number of
other factors that determine the investor’s final decision on where to locate, and these other factors
will be discussed in depth in the next chapters.
VI.
Analysis of investment sources in potential sectors
In the previous section we have learnt how to identify broad sectors, as well as specific markets,
with the potential to attract FDI. In order to further assist IPA’s in targeting potential FDI partners,
Investment Map also includes a range of information on the affiliates of foreign companies active in
the country. This provides a full package of information which enables users to identify foreign
affiliates active in competing countries and retrieve their contact details. In doing so, Investment
Map aims to help IPAs to answer the following questions:

Which foreign companies would be interested in investing in my country in
the targeted industrial sector?

Where are those foreign companies located? How can I contact them?
In this section, we are also going to take a look at the decision of where to locate from an investor’s
perspective. Investment Map can provide valuable information to help understand the factors
motivating the investor’s decision to establish some activities in a foreign country.
A. Data on foreign affiliates grouped by parent company
Close the two small windows that we opened in the previous section. You will recall that one of them
listed the foreign affiliates in South Africa while the other provided more in depth information on
each affiliate. When you have closed both of these windows you will return to the main Investment
Map screen (as shown in Table 31). Click on “Outward FDI by sector” as shown in Table 31. This
action switches the perspective from which the data is organised and provides a list of the main
countries investing abroad in the sector of interest, rather than a list of the host countries that have
attracted investment.
Right now we are still looking at the sub-group of SADC countries. Select the drop down menu
shown in Table 32 and scroll up to select "All Countries". We now have a list of all the countries that
provide FDI in the targeted sector worldwide.
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Table 31 : Access to the module “Outward FDI by sector”
Click here to switch perspective
Table 32 : Affiliates abroad in the food sector
1. Select “All countries”
2. Click on this
parent company
Table 31 shows a list of countries with the potential to invest abroad. They are ranked by the
number of foreign affiliates belonging to national MNE’s. There is also information about the amount
of sales, the number of employees and the name of the leading parent company. It is important to
keep in mind that this information only takes into account affiliates located in developing countries.
Now let us investigate a group of companies which headquarters is located in a country in which
you are particularly interested. For instance a country which your country have recently concluded a
bilateral investment treaty with (see section B of this same chapter at page 40). In our example, we
will look at affiliates originating from France. Follow the second step shown in Table 32 and click on
the leading parent company in France, "Danone". This opens a new window with a list of parent
companies located in France ranked by the number of affiliates they have in the developing world.
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Table 33 : Companies based in France having affiliates in developing countries in food processing
Click here
Table 33 shows the extensive list of French companies (or strictly speaking companies
headquartered in France) that are active in developing countries. Now let us further examine the
first firm on the list. This is, again, “Danone”. This makes sense, as we have already seen that it is
the leading parent company in France. By clicking on “Danone” again (as shown in Table 33), we
move to a list of Danone’s affiliates within the “Food, beverage and tobacco” manufacturing industry
located in developing countries (Table 34). The list is ranked alphabetically by default.
You can re-arrange the list in Table 34 in a number of different ways. For example, the table can be
ranked alphabetically by the name of the host country, chronologically by the year the company was
established or by the amount of sales or the number of employees. In any case, the table shows
that Danone is active in a wide range of developing countries, such as Algeria, Uruguay, Turkey and
Russia. We can also see that their affiliates produce a much diversified range of food products.
If you wish to find out more about each affiliate, click on its name. You will then get a table similar to
the one shown in Figure 11 on page 33 (details on affiliates), as previously seen.
Now, click on the heading "Line of business" shown in Table 34 to sort the affiliates by their main
activity alphabetically. Now scroll down until you reach the group of products we are interested in,
namely “Dry, condensed and evaporated dairy products". Click on the heading as shown in Table
34. This opens a list of companies headquartered in France with affiliates active within this product
group (Table 35).
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Table 34 : Danone’s affiliates in the developing country
Click on this
line of business
Look at the list of companies headquartered in France with affiliates active within the dairy
production industry (“Dry, condensed and evaporated dairy products”) in developing countries.
There are 3 companies that match these criteria. Click on the first one (Segur Developpement SA),
as shown in Table 35. This gives us a list of the affiliates of the company Segur. Note that this is the
equivalent of Table 34 that we created for Danone, but for a different company. Click on the “line of
business” heading to rank the affiliates alphabetically by their main products (you should now be
able to see the equivalent of Table 36).
Table 35 : French companies’ affiliates active in dried or condensed dairy products
Click on this
company
By looking at the “Line of business” column we can see the major lines of business where SEGUR
development Sa, is active. The company appears to be more focused on dairy production than
Danone, which activities are spread over a larger range of products. Further, by cross-assessing the
“line of businesses” information with the “Country” information, we can see where the MNE has
concentrated the production of what. For instance, it seems that the French SEGUR development
has concentrated its production of “dry, evaporated and condensed dairy products” in Eastern
European countries.
It is important to keep in mind that certain affiliates may have activities in multiple domains, be it in
the production of goods or services. As an example, click on the name of affiliate based in Poland
and called “Mleczarnia Turek”, as shown in Table 36. This opens a new window with a detailed fact
sheet on the affiliate, as shown in Figure 15. Figure 15 shows the other lines of business this
affiliate operates in. While its primary line of business is fluid milk, it also manufactures dried,
condensed and evaporated dairy products. It also produces undefined canned specialities as well
as running a dairy products store. The same fact sheet also provides the parent company’s contact
details.
Page 40
Table 36 : SEGUR’s affiliates in developing countries
Click on this affiliate’s
Figure 15 : Affiliate’s details
Page 41
B. Outward FDI data by country
Investment sources can also be identified by assessing outward FDI flows and stocks. Analysis
international trade flow can also be useful for identifying potential sources of investment.
In the overview page with the indicators, click on the
icon next to the "Investment" heading. This
expands the information on Foreign Direct Investment by providing a number of new columns. Now
click on the column’s heading "Outward flow" in order to sort investor countries by the level of their
outward FDI flows in the food industry. Be careful not to click on the red arrow next to the column,
which expands the number of years of data on FDI outflows.
You should now have the equivalent of Table 37, which ranks the countries by outward flow toward
the food processing industry. You can see that that the United-States, Japan and Germany are
three large foreign investors in this sector. This information is, however, only indicative as not all
countries consistently report their outward flows of investment for every industry type (see Annex 1).
We therefore recommend that you also analyse outward FDI stock figures. Click on the column
heading “outward stock” (once again making sure you do not click the red arrow). This action allows
you to rank the data by the size of outward stock. You should now have the equivalent of Table 38.
Table 37 : Outward flow by country in the food, beverage and tobacco sector
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Table 38 : Outward stock by country in the food, beverage and tobacco sector
Click here to visualize the FDI
information on a world map
Table 38 allows you to identify other major potential sources of investment, such as the United
Kingdom or Canada, which are absent in Table 37. These countries report the details of their
outward stocks of FDI by industry, but unfortunately they do not report their outward flows or their
outward flow in the most recent years. Food processing companies headquartered in the
Netherlands, for instance, have the third largest outward stock of FDI in the “food, beverage and
tobacco” sector.
Figure 16: FDI outward stock broken down by country on a world map
Page 43
The information on the countries investing in the sector of reference can also be visualized on a
world map, as shown in Figure 16. By clicking on “See map” under the heading “Foreign Direct
Investment”, you are able to retrieve a world map whit an indication of how much each country has
invested abroad in the sector of reference. The map is displayed in a separate pop-up window,
where you are be able to further assess the information by choosing the direction (inward or
outward) and the type (flow or stock) of FDI, the sector and the year of reference.
Now let’s analyse trade flows. We assume that countries that produce a given product or operate
within a particular industry are an important potential source of investment. To this end, the analysis
of export flow data within the sector is very helpful as it indicates that a country is an internationally
competitive producer of a good. 7
icon next to the "Trade" tab (see Table 39). This simultaneously collapses the
Click on the
information on Foreign Direct Investment and extends the range of indicators on “International
Trade”. Now click on the “Exports" heading in order to rank the countries by the value of their
exports.
We notice that among the top exporters of “food, beverages and tobacco” products are the United
States, Germany and France. These countries are characterised by large internal markets and
strong economies of scale, which allow them to become “industrial giants” and become more
competitive. They may be well placed to use their funds and expertise to expand production into
foreign markets. Therefore, they might be good potential sources of investment in the sector.
It is also interesting to take a look at the general trend of trade flows in the recent past. Some
countries show a decline in terms of exports coupled with an increase in imports. This reflects a loss
of international competitiveness and a strong pressure for relocation. This phenomenon concerns
primarily developed countries.
In order to identify such countries, let us look at the changes in net trade. By clicking on the “net
trade” heading twice (the black arrow next to the heading will point upward, as shown in Table 39),
you will rank the countries by decreasing net trade values.
A number of countries, such as Japan, Saudi Arabia and Italy show a strongly negative trade
balance (or net trade) in the food industry. Moreover, the trade balance has worsened over the last
few years, as can be seen in the column "Chg net trade since 2007” (change in relative net trade
since 2007). There are therefore likely to be strong pressures within these countries to search for
new production locations.
For countries such as the United States and the Republic of Korea, the trade balance in the given
sector, while remaining strongly negative, has improved over the past few years. This indicates that
the country is performing well in terms of international competitiveness and would suggest that it is a
healthy market for inward investment.
7
It is important to remain cautious when interpreting export figures as certain products can be re-exported without being
produced locally (see Annex 1). This phenomenon, while it concerns only a small share of world trade flows, can be a
significant proportion of trade in some territories, such as the Netherlands, Hong-Kong, Dubai or Djibouti, which have large
ports and play a key role in the redistribution of exports in their respective regions.
Page 44
Table 39 : Ranking of countries in terms of net trade
Click twice on this arrow
VII.
Additional Country Information on FDI
Investment Map’s main objective is to identify opportunities for future investment within a sector or a
particular industry in a given country.
The application provides historical data series enabling an assessment of a country’s past
performances in attracting resources in to specific sectors. The historical approach allows an expost analysis, which needs to be complemented with a comparative analysis of the investment
determinants. This should enable a better positioning of the country under analysis in comparison to
its main competitors in terms of FDI attraction.
Figure 17 provides an overview of the main motivations for multinational companies to invest
abroad. The approach classifies the motives for investing overseas into three main categories:
"market-seeking" FDI, "resource" or "asset-seeking" FDI and "efficiency-seeking" FDI.
Figure 17 also gives an insight into the main factors affecting multinationals’ decisions when
choosing a target country to invest in. Three main categories of determinants are presented:
i) Policy framework
ii) Economic determinants
iii) Business facilitation and rules
Let us take a look, in particular, at the policy framework and business facilitation, as these are
factors greatly influenced by governments.
In order to attract foreign direct investment, a favourable political context is a necessary preliminary
condition. The host country should provide social, political and economic stability and develop an
FDI legal framework (such as an investment code). Bilateral or regional FDI treaties are crucial
factors in this sense. In addition to creating a favourable environment for attracting FDI, the country
should also ensure that FDI, trade and other policies are all consistent.
A clear framework providing rules and regulations regarding privatisation and competitiveness is
also essential, though this often needs to be adapted to the specific economic sectors. For instance,
the government should put in place a legal framework that allows access to land to foreign investors
and protects them from expropriation.
Page 45
Figure 17 : Host country’s FDI determinants 8
8
Source: "Investment Promotion Strategy for Bosnia and Herzegovina". Report published in 2004 by the UNCTAD and
FIPA (Foreign Investment Promotion Agency of Bosnia and Herzegovina).
Page 46
The host government should also provide assistance to foreign companies interested in investing
and ensure that they feel welcome. Business facilitation is likely to be especially important in the
final stages of the investor’s decision-making process, when the number of locations has already
been narrowed down and the ultimate decision depends less on fundamentals and more on deal
brokering. The government should take measures to encourage new companies to invest in the
country, including ensuring that there are a number of competent local IPA’s facilitating their
establishment.
Also fiscal and other financial incentives, such as tax exemptions or profit repatriation, certainly
encourage foreign companies to invest abroad. The government should also try to ensure a good
working environment by reducing administrative costs and fighting corruption. Finally, the
importance of a pleasant living environment should not be underestimated and a secure, welcoming
atmosphere as well as good local facilities, such as high quality international schools, should be
provided.
Investment Map currently offers a number of different links to external information sources on the
political atmosphere (for example indicators showing good governance) as well as the business
regulations. These links allow you to better capture the country’s policy framework and business
environment and provide relevant information for a country "benchmarking" or for identifying FDI
opportunities. For instance, links to a bilateral investment treaties database or privatisation
opportunities are provided.
Click on the link "Additional country information on FDI" to the top-right hand-side of the screen to
access a page providing external links to relevant external sources of information on FDI (see
Figure 18).
Figure 18: Additional information
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A. Bilateral investment treaties and treaties of non-double taxation
Information on bilateral investment treaties and non-double taxation treaties are very important in
the absence of a multilateral investment negotiation framework. These treaties constitute a very
important guarantee for investors as well as foreign governments, as they provide an important
legal framework in case of disputes.
Bilateral treaties identify bilateral investment opportunities, while provide a way to position your
country as an attractive environment for foreign investors.
Complete versions of bilateral treaties have been collected by UNCTAD and made available
online.
Once you are on the page “Additional information on FDI for South Africa, click on the “full texts on
BITs” link, as shown in Figure 19. This opens a page on the UNCTAD website which gives the
opportunity to list the bilateral investment treaties signed by South Africa. Figure 20 shows an
extract of the result page of the UNCTAD database for South Africa. The dates of the
signature of the treaty and of its entry into force are also included.
Figure 19 : Information on bilateral investment treaties
Click on South Africa
Click on “full texts on BITs”
Figure 20 : List of treaties signed by a country
Pick South Africa
and click on
“Submit”
Page 48
B. Privatisation opportunities
Privatization information is also available and is taken from the World Bank’s database. Please
note that this information dates back to 2008.
To access this information, scroll down to the bottom of the page, where you will see the heading
“Privatization FDI” in bold. Click on the corresponding link with the country name. In this case we
are looking at South Africa (see Figure 21). This action will open the World Bank’s privatization
database in a new window. You will need to download an Excel file where you will find the
privatisation deals occurred in South Africa up to 2008.
Figure 21 : Privatisation information
Click here to
retrieve the full text
Click here to be redirected to
the World Bank’s database
C. Additional information on the comparison of host countries
The page "Additional country information on FDI" is made up of a number of sub-headings with links
to external sources of information on the economic condition of the host country. These different
pieces of information allow investors to gain a complete picture of the host country and assist them
in their search for competitive zones to invest in. Available information includes a measure of the
political stability of the country, a list of the tax exemptions, indications on the possibility to repatriate
profits and on the exchange rate volatility.
This information database, which contains the key factors which influence investment decisions,
also allows IPA’s to see how competitive their country is in terms of FDI attractiveness compared to
their competitors. It also assists them in their role of policy advocate by showing which areas need
improvements.
Numerous reference portals are maintained by the World Bank, such as the "Doing Business ", the
"World Development indicator" or the "Enterprise Surveys" website.
We invite you to consult them one by one. In particular, we recommend the World Bank’s online
database "Doing Business" (www.doingbusiness.org) which provides a comparison of business
regulations in most countries.
The information is organised in a dozen sub-categories that relate to areas such as enterprise
creation policies as well as access to property and other legal issues concerning investor protection.
Figure 22 shows the “Doing Business” data for South Africa. The first table synthesises the business
climate within a country and ranks it against other countries’. It also shows its evolution compared
with the previous year. The following tables present the details for each of the analysed aspects, as
well as a comparison by region and with OECD countries. You can see from the tables that South
Africa is very well positioned in terms of investor protection.
Figure 22 : Business regulations indicators (Doing Business Indicators)
Page 49
VIII.
Page 50
Summary
Investment Map is an interactive web-based tool that combines statistics on foreign direct
investment, international trade and market access into a single portal. Investment Map allows
analyses by country, partner and industry. It also includes information on the location, sales,
employment and parent company for around 150,000 foreign affiliates located in developing
countries and economies in transition. Investment Map provides information that is very easily
accessible.
Investment Map is intended to assist Investment Promotion Agencies (IPA) in their different tasks,
particularly in the identification of potential sectors for FDI and targeting of investor groups.
Investment Map is also of great use for Trade Promotion Organisations (TPO) and market analysts
who wish to ingrate FDI in their studies and market analysis.
Investment Map’s strengths are its considerable geographical coverage, its combination of foreign
direct investment, trade and tariff data and its information on foreign affiliates.
Investment Map consists of:
 Total flows and stocks of FDI for approximately 200 countries and territories

FDI flows and stocks organised by industry (ISIC revision 3) for approximately
110 countries

Data on exports and imports, as well as trade potential indicators for more
than 200 countries

Data on the tariffs applied by 180 countries on 200 countries and territories

Information on the location, sales, employment and parent company, for more
than 150'000 foreign affiliates established in developing countries and
transition economies (for 1'000 activities classified under the US SITC
classification).
Investment Map allows users to answer a number of questions, such as:

Which sectors have a strong potential to attract FDI in my country? In
particular, which are the promising sectors in terms of export-platform FDI, or
which present interesting prospects for import substitution?

Which countries are my main competitors in attracting investment in sectors
where my country has potential? Which rival countries have had the most
success at attracting foreign investment in my country’s most attractive
sectors?

Which foreign companies could invest in my country in particular sectors or
products? What are the main companies active in my sub-region or in
competitor countries?
Where are the foreign companies located? Where are their headquarters?
What are their contact details?

Investment Map is accessible by ergistration. The same subscription will allow complete access to
the four tools (Trade Map, Market Access Map, Investment Map and Standards Map). Tools can be
adapted to IPA’s or TPO’s needs through a special website accessible to subscribers with the use
of a username and password, allowing multiple connections by large groups of users. For
individuals or enterprises who subscribe to the tool, they can access it directly
through the www.investmentmap.org web address.
Contact: For further information concerning the different subscription options or subjects analysed in
this user guide, please feel free to send us an e-mail at: [email protected].
Page 51
Annex 1: Data limitations
Investment Map users should be aware of the data limitations. Data constraints should always be
born in mind, especially when making cross-country comparisons.
A first source of problems with the data is due to inconsistencies in the combination of data coming
from various sources and reconciled in the UN ISIC rev.3 nomenclature. This can lead to inaccurate
industry classification. Such problems primarily concern data on FDI and foreign affiliates.
A. Classification problems
FDI data cannot always be unilaterally allocated to a certain industry. It therefore becomes
necessary to assign the data to an additional industry (not defined in the ISIC nomenclature) such
as "unspecified secondary" or "unspecified wholesale trade". This problem of undefined data also
affects the geographical classification of FDI data by countries or territories, and part of the data
may have to be contained in a residual category such as "Unspecified European Union" or
"Unspecified South America". The residual "unspecified" categories generally contain only small
investments, but for some countries they may include large investments. With these statistical
issues in mind, cross-country FDI comparisons, classified by industry, should only be considered as
indicative.
The information on foreign affiliates was originally based on an American classification, US SIC87
(predecessor of NAICS), which is composed of 1,000 business lines. It is often difficult to convert
this data to the UN ISIC classification. As an example, the SIC code "7389", labelled "business
services, nes" might correspond to up to three ISIC industries: "trade", "transport, storage and
communications" and "other services". It was decided to duplicate the data of companies who fall
into multiple categories. In our example, a company classified under the SIC code would appear in
the three separate industries in ISIC code. As such, when analysing the company data for any given
country, users should check the line on top of the table, displaying the total number of companies.
For merchandise trade data, while the reclassification from the 6-digit level of the HS to the ISIC
industries is generally straightforward, there is still a hybrid group of products which, having both a
manufacturing and a service component, such as paintings, pictures or movies, have been allocated
to an additional industry called "mixed goods (trade data)".
Trade in services statistics are reported under the EBOPS (Extended Balance of Payments
Services) nomenclature and a correspondence with the UN ISIC nomenclature is not completely
straightforward. However there is a close link between FDI and trade in services, as FDI often
represent the commercial presence abroad of a service-providing enterprise. So far Investment Map
presents a direct unilateral correspondence between EBOPS and UN ISIC rev. 3 for three sectors,
namely “Education”, “Finance” and “Construction”.
In addition to classification, there are other issues which are more specific to each data type.
B. Limitations specific to FDI data
FDI data is collected from National Banks and through enterprise surveys. Due to the intangibility of
financial flows it is difficult to accurately capture FDI flows (like trade in services data). In addition,
unlike trade in goods, which capture many relatively small transactions, FDI data is generally
characterised by few large transactions, making it more sensitive to the accurate recording of these
large observations.
International reporting practices set by the IMF (5th edition of the IMF Balance of Payments Manual)
and the OECD are often not followed uniformly. For example, some countries deviate from the 10%
threshold value of foreign ownership (share in the equity of the foreign affiliate to determine a
foreign investment as FDI). Moreover, all three components of the FDI flows (equity capital, intracompany loans and reinvested earnings) may not be included by all countries. Some countries, for
Page 52
instance, do not report short-term intra-company loans, while others do not report re-invested
earnings and only a minority of countries report reverse investment (investment of a foreign affiliate
in its parent firm).
Bilateral discrepancies observed between FDI data reported by two countries may also be due to
differences in time periods over which the FDI transactions were recorded.
There are also specific issues affecting the comparability, comprehensiveness and reliability of FDI
data. They include:

Difficulties in identifying the ultimate owner company (direct investor) and
target company (foreign affiliate) for several cross-border mergers and
acquisitions

Valuation problems of FDI stocks

FDI under the fully consolidated systems

Round-tripped investments

The role of special-purpose entities located in tax heavens
These issues were discussed in an expert meeting on capacity building in the area of FDI data
compilation and policy formulation in developing countries, organised by UNCTAD in Geneva in
December 2005. All the presentations of this expert meeting are available on-line at:
(www.unctad.org/Templates/Page.asp?intItemID=3640).
For
example,
the
Luxembourg
representative, in his presentation described the strong share of flows in transit (estimated at 95% of
the country's flows) in his country. Most of the funds in transit are made by special-purpose entities
(SPE) established in the country.
SPE’s are foreign affiliates (direct investment enterprises) that are established with a specific
purpose (e.g. administration, management of foreign exchange risk, facilitation of financing of
investment) or with a specific structure (e.g. holding companies, regional headquarters) and
represent an integral part of the TNC network. SPE’s tend to be established in low tax countries and
are often used to channel the funds to, and borrow funds from, third countries. They may not have
any economic activity of their own. Thus there are few employees and few non-financial assets. The
real impact on the economy is negligible.
This phenomenon also overestimates the level of FDI in countries such as the Cayman Islands,
Bermuda, Saint Kitts and Nevis, Antigua and Barbuda, Aruba and Northern Marianas. Finally, a
potential double counting due to SPE’s also results in a non-negligible overestimation of global FDI
flows.
C. Limitations specific to data on foreign affiliates
Data on foreign affiliates, maintained by D&B, is collected by counterparts in each of the countries
and vary greatly in terms of the depth of coverage and accuracy. Some countries, such as Brazil
and the Czech Republic, are extremely well covered, while others, like Mongolia, have been barely
analysed. In addition, some fields, such as the amount of sales or the number of employees, are not
systematically reported. Special care therefore needs to be taken when interpreting cross-country
comparisons. Foreign affiliates data should, instead, be used as a complementary information to
FDI flows and stocks in order to help users to assess the weight of foreign-owned companies in the
different industries of a country and to analyse the global strategy of a multinational corporation.
D. Trade data limitations
Merchandise trade statistics are comprehensive in terms of product (more than 5,300 products
under the Harmonized System), geographical (around 220 countries and territories covering 95% of
Page 53
world trade) and chronological coverage (data under the Harmonized System is available for the last
decade). Moreover, they are readily available at moderate cost and therefore are attractive tools in
market research and trade performance assessment. Notwithstanding the many positive aspects of
merchandise trade statistics, users should be aware of the drawbacks described below.
Trade data can never cover the complete movement of goods. Smuggling and non-reporting are a
serious problem in a number of countries. In addition, trade statistics, like any source of information,
can suffer from mistakes and omissions in the compiling process.
Most countries include re-exports in their trade statistics. This can be very misleading. For example,
a low-income country may show up as an exporter of airplanes simply because its national airline
has sold second-hand planes.
The export value refers to the total or contract value of the product. According to international
conventions for reporting trade statistics, the export value refers to the total or contract value, which
may of course, be very different from local value-added. For many processing activities the local
value added remains below 20% of the export value.
Different products are categorized differently. Even at the most detailed level, the classification used
for product groups in the trade nomenclature does not necessarily coincide with trade names and
often contains a wide range of different products. Moreover, the product nomenclature itself is
sometimes misleading. The labels used for aggregated product groups are often very general and
provide at times only limited guidance on which are the leading items within the group of products.
Merchandise trade is well covered in Investment Map. Although detailed trade statistics are not yet
available for services, they may account for a sizeable share of national exports. Therefore, trade in
services statistics are also being integrated in Investment Map (trade data for the service sectors of
“Construction”, Education and “Finance” are already available).
Exchange rate fluctuations are not always recorded. Exchange rate fluctuations are not always
properly recorded in international trade statistics. Values are normally aggregated over the period of
one year in local currency and converted into US dollars.
Mirror statistics are sometimes used, as well. For countries that do not report trade data to the
United Nations, ITC uses partner country data. This approach is referred to as mirror statistics.
Mirror statistics are a second-best solution. By including mirror statistics we can extend the level of
coverage by more than 50 countries that do not consistently report national trade statistics to the
United Nations. However, mirror statistics have a number of shortcomings when compared to the
preferred nationally reported data. First and foremost, they do not cover trade with other nonreporting countries. As a result, mirror statistics hardly cover South-South trade and would not be a
suitable source for an assessment of intra-African trade. Secondly, there is the problem of
transhipments, which may hide the actual source of supply. Thirdly, mirror statistics follow inverted
reporting standards by valuing exports in CIF terms (which includes transport cost and insurance)
and imports in FOB terms (which excludes transport cost and insurance).
In an effort to make some of these discrepancies more transparent, Investment Map reports when
mirror statistics are used and Trade Map provides an option to switch between mirror and direct
statistics.
Page 54
Annex 2: Definitions of FDI flows and stocks
Foreign direct investment (FDI) is defined as an investment involving a long-term relationship and
reflecting a lasting interest and control by an entity resident in one economy (foreign direct investor
or parent enterprise) in an enterprise resident in a different economy (FDI enterprise or affiliate
enterprise or foreign affiliate).
FDI implies that the investor exerts a significant degree of influence over the management of the
enterprise resident in the other economy. Such investment involves both the initial transaction
between the two entities and all subsequent transactions between them and among foreign
affiliates, both incorporated and unincorporated. FDI may be undertaken by individuals as well as
businesses.
Flows of FDI comprise the capital provided (either directly or through other related enterprises) by a
foreign direct investor to an FDI enterprise. This is, by definition, equivalent to the capital received
from an FDI enterprise by a foreign direct investor.
FDI has three components: equity capital, reinvested earnings and intra-company loans. They are
defined in the following way:
i) Equity capital is the foreign direct investor’s purchase of shares of an enterprise in a
country other than its own;
ii) Reinvested earnings comprise the direct investor’s share (in proportion to direct
equity participation) of earnings not distributed as dividends by affiliates, or earnings
not remitted to the direct investor. Such retained profits are considered as
reinvested by the affiliates;
iii) Intra-company loans or intra-company debt transactions refer to short- or long-term
borrowing and lending of funds between direct investors (parent enterprises) and
affiliate enterprises;
FDI flows with a negative sign (reverse flows) indicate that at least one of the components in the
above definition is negative and not offset by positive amounts of the remaining components. For
example, Germany recorded negative total inflows in 2004, due to a sizable repayment of an intracompany loan by a foreign affiliate located in Germany to its American parent company. The low
value of the US$ against the € facilitated the repayment of the dollar-denominated debt (source:
WIR 2005).
FDI stock is the value of the share of the capital and reserves (including retained profits) attributable
to the parent enterprise plus the net indebtedness of affiliates to the parent enterprise. FDI flow and
stock data used in WIR are not always defined as above, because these definitions are often not
applicable to disaggregated FDI data. For example, in analysing geographical and industrial trends
and patterns of FDI, data based on approvals of FDI may also be used because they allow a
disaggregation at the partner country or industry level.
Non-equity forms of investment
Foreign direct investors may also obtain an effective voice in the management of another business
entity through means other than acquiring an equity stake. These are non-equity forms of
investment, and they include, among others, subcontracting, management contracts, turnkey
arrangements, franchising, licensing and product-sharing. Data on these forms of transnational
corporate activities is usually not separately identified in the balance-of-payments statistics. The
statistics, however, usually present data on royalties and licensing fees, defined as “receipts and
payments of residents and non-residents for: (i) the authorized use of intangible non-produced, nonfinancial assets and proprietary rights such as trademarks, copyrights, patents, processes,
techniques, designs, manufacturing rights, franchises., and (ii) the use, through licensing
Page 55
agreements, of produced originals or prototypes, such as manuscripts, films, etc.”. The UNCTAD’s
World Investment Report 2011 addresses the topic of “non-equity modes of international production
and development”.
Page 56
Annex 3: How to read the bubble charts
Bubble charts present the trade performances of the leading export product groups in the country
under review. There are two types of bubble charts: one showing the export performance in
dynamic terms (dynamic analysis) and one illustrating the export performance in static or structural
terms (structural analysis).
A. Dynamic analysis
Figure 23 : Bubble charts – Dynamic analysis
Figure 23 shows the export value of the product group under review (size of the bubbles), and it
compares national increase in world market share (horizontal axis) to the growth of international
demand (vertical axis). The chart also indicates the average nominal growth of world exports over
the same period, indicated by the horizontal red reference line. Moreover, the vertical red reference
line (i.e. the line of constant world market share) divides the chart into two parts: exports of product
groups to the right of this line have grown faster for the country under review than world exports and
thereby increased their share in the world market. Conversely, product groups to the left of the
vertical line have experienced a decrease in their world market share.
The vertical and the horizontal reference lines are of particular interest from a trade development
perspective, since they divide the chart into four quadrants with different characteristics. For ease of
reference, each of these quadrants has been given a name.
Page 57
This "matrix" or "quadrant" approach is inspired by firms' portfolio models widely used in marketing,
such as the Boston Matrix model or the General Electric Model. Under the National Export
Performance approach, these models are applied to nations instead of firms. The interpretation of
the results is of course significantly different at the country level than the firm level, but the basic
intuition remains the same.
Winners in growing sectors (upper right quadrant): These are the export products for which the
country under review has performed very well. Exports of the products in this quadrant have been
growing faster than world trade in general. The country has been able to outperform world market
growth and has, consequently, increased its share in world exports. Exporters of these products
have proven their international competitiveness over recent years. Trade and investment promotion
efforts for these products are less risky, as there is a proven track record of success. Promotional
efforts should aim at broadening the supply capacity for these products.
Losers in growing sectors (upper left quadrant): These products represent particular challenges
for trade promotion efforts in the country under review. While international demand has been
growing at above-average rates, the country has been falling behind. Its exports have either
declined or grown less dynamically than world trade. As a result, the country under review has seen
its share on the international market decline. In general, the bottleneck effect does not come from
the international demand, but from supply factors. For these products, it is essential to identify and
remove the specific bottlenecks that impede a more dynamic expansion of exports. FDI can
contribute to remove the bottlenecks on the supply side and improve the international
competitiveness of the country.
Losers in declining sectors (lower left quadrant): The export prospects for these products tend
to be bleak. World exports of the concerned products have been stagnating or have actually
declined, and the market shares of the country under review have declined. Trade promotion efforts
for product groups in this category face an up-hill task. They need to adopt an integrated approach
to take into account bottlenecks both on the supply and on the demand side.
Winners in declining sectors (lower right quadrant): Products in this quadrant are characterized
by growing shares of the country’s exporters in world export markets that are declining or growing
below average. From a trade promotion perspective, niche marketing strategies are required to
isolate the positive trade performance from the overall decline in these markets.
Notes: Growth rates are calculated as least-square trends. In the charts, annual growth rates of
world market share above 100% have been cut off and set at 100% and annual growth rates of
world market share below -20% have been cut off and set at -20%.
For some countries, for which the data is based on mirror estimates, charts are not available or
incomplete (some sectors may be not be displayed due to a lack of consistent time series).
Page 58
B. Structural analysis
Figure 24 : Bubble charts – Structural analysis
Figure 24 is similar to Figure 23, i.e. to the dynamic perspective chart. The size of the bubble for
example is also proportional to the country’s export turnover. The key difference is in the horizontal
axis, specified here as the country’s world market share for the corresponding product group. The
structural chart is closer to the original Boston Matrix model, also known as the growth-share model.
This chart is “structural” in nature because market shares do not vary much over time. As a result,
the overall picture does not change much from one year to the next. The dynamic perspective chart,
by contrast, reflects the most recent changes in market shares. The two charts are therefore
complementary.
Bubbles to the right of the vertical axis represent those products in which the country is specialised
in. That is, those products in which the country has a Revealed Comparative Advantage (RCA, also
known as the Balassa Specialisation Index).
Strong in growing sectors or "Champions" (upper right quadrant):
Products located in this quadrant are those that are growing faster than world trade in real terms.
They are also products in which the country has specialised in and has captured relatively high
world market share. Exporters of these products have proven their international competitiveness
over recent years. Trade and investment promotion efforts for these products are less risky, as they
have a track record of success. Promotional efforts should aim to consolidate or expand the
country’s market share of these products.
Page 59
Weak in growing sectors or "Underachievers" (upper left quadrant):
These products present particular challenges for a country’s trade promotion efforts. While
international demand has been growing at above average rates, the country is a relatively minor
player with a relatively low market share. This may be because the country has only recently started
developing exports of these products or it may be because the country is specialised in niches
within the product group in question. For these high growth products, the country needs to identify
strategies to increase its market share. It may wish, for example, to analyse the source of supplyside bottlenecks and look into opportunities for horizontal diversification. FDI may be one means by
which the country can increase its world market share.
Weak in declining sectors or "Declining industries" (lower left quadrant):
Export prospects for these products tend to be bleak as world exports have been stagnating or
declining and the country has a low market share. Trade promotion efforts for these products face
an up-hill struggle. Strategies for these products need to take into consideration bottlenecks on both
the supply and demand side.
Strong in declining sectors or "Achievers in adversity" (lower right quadrant):
Products in this quadrant are those where the country has high market shares but where world
demand is declining or growing at below the world average rate. Trade promotion efforts need to
focus on niche marketing strategies in order to identify and increase the country’s specialisation in
the best performing products within an overall declining product group.
C. Additional comments
The charts also provide an overview of the concentration of exports: if the graph is dominated by
only a few comparatively large circles, or in the extreme case only one circle, this implies that
exports are highly concentrated.
This classification of the export portfolios into four groups can be a useful preliminary analytical
step. For concrete policy applications and product-specific trade promotion strategies and
measures, the decision-making process is more complex. The approach needs to be refined and
additional product-specific information has to be considered as well.
Please also take into account that a county policy may be directed toward specialising in some
specific markets. Therefore a strategy may also consist in reducing the country’s market share for
specific products. Export strategies may differ depending on the country, the market and the
products.

User Guide - Investment Map

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