On 24 July 2013 at a press conference in Sofia InvestBulgaria Agency presented the World Investment Report 2013 (WIR). Traditionally IBA presents the conclusions of the World Report on the background of the business climate in Bulgaria.
WIR is published annually since 1991 by the United Nations Conference on Trade and Development (UNCTAD). The focus of the report is on global, regional and local FDI flows and new methods for world economic development. The topic of the report this year is: “Global value chains: Investment and trade for development”.
The thematic part of this year’s report focuses on the increasing dominance of global value chains (GVC) in the world trade and the opportunities they give to developing countries to increase their “value-capture”. GVCs give the opportunity to harvest greater profits, wages and retain investment as goods make ever-more-complex international journeys from raw materials to finished products.
According to the report GVCs can have a significant contribution to the economic development. This is shown by the fact that value-added trade contributes nearly 30 per cent to countries’ GDP in developing countries on average and 18 per cent in developed countries. There is also a positive correlation between participation in GVCs and GDP per capita growth rates.
The report shows that 2012 global FDI fell under pre-crisis level, which is mainly due to macroeconomic instability and political uncertainty. For the first time in 2012 developing economies attract more FDI (52%) than developed countries (42%). Additionally developing countries generate almost one third of the global FDI outflows, which is an upward trend set to continue. The global FDI recovery that started in 2010 and 2011 will take longer than expected, according to the report. While the world economy is on a bumpy road to recovery, the world FDI flows could see a slight increase in 2013 – 2014.
The FDI recovery can be further delayed if structural weaknesses in the global financial system, weaker growth in the EU countries and the significant political uncertainty in areas important for the investors continue. At a regional level the report shows a serious decline of the FDI inflows in the U.S. and Europe, the only region with a slight growth is Africa ( + 5%). The FDI decline in the U.S. is 26 per cent and in 2013 – 2015 the U.S. is expected to lose its leading position, as a FDI attractive destination, to China. In Europe there is a serious decline in M&A transactions, reflecting the significant crisis in the Eurozone. Leader in attracted FDI in South-East Europe continues to be Turkey, despite the 23 per cent drop. The FDI outflow from Turkey increased significantly by 73 per cent. There is a 24 per cent drop in attracted FDI in South-East Asia, although China and Hong Kong are respectively second and third in attracted FDI in the world.
Despite the global decline in FDI, the foreign direct investments in Bulgaria for 2012 amount to EUR 1.478 billion, showing a growth of 13 per cent, compared to 2011. This indicates that Bulgaria will continue its recovery after the crisis and its economy is as competitive as those of the developed countries. The services sector marks the highest growth of FDI: 125 per cent. A decline can be observed in the extractive and the manufacturing industries with 30 and 38 per cent respectively. Bulgaria maintains a relatively high level of FDI per capita. The main investors in the country are Luxembourg – EUR 382 million (26%), Russia – EUR 225 million (15%), Switzerland – EUR 212 million (14%), Germany – EUR 177 million (12%) and the Netherlands – EUR 168 million (11%).
Official presentation materials of the report can be downloaded here.