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FDI Confidence Index ® 2003

FDI Confidence Index ® The Global Business Policy Council FDI Confidence Index ® 2003 Press Slides September 2003 FDI Confidence Index ® The Global Business Policy Council Global FDI flows have fallen below 1998 levels Global FDI Flows (US$ billions)

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FDI Confidence Index ® 2003

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  1. FDI Confidence Index ® The Global Business Policy Council FDI Confidence Index® 2003 Press Slides September 2003

  2. FDI Confidence Index ® The Global Business Policy Council Global FDI flows have fallen below 1998 levels Global FDI Flows (US$ billions) $1.4 trillion 41% $824 billion 21% $651 billion Source: UNCTAD

  3. FDI Confidence Index ® The Global Business Policy Council Advanced countries have experienced the sharpest drop in FDI inflows 2001-2002 Industrialized countries -22% Emerging/Transitioning markets -19% Global FDI Flows (US$ billions) Source: UNCTAD

  4. FDI Confidence Index ® The Global Business Policy Council Industrialized vs. developing markets % of Global FDI Flows Share of Global FDI to Developed Countries Share of Global FDI to Emerging/Transitioning Markets Source: UNCTAD

  5. FDI Confidence Index ® The Global Business Policy Council Most attractive FDI destinations 2003 FDI Confidence Index 2003, top 25 China United States Mexico Poland Germany India United Kingdom Russia Brazil Spain France Italy Czech Republic Canada Japan Thailand Hungary South Korea Australia Taiwan Vietnam Hong Kong Malaysia Turkey Indonesia (1) (2) (9) (11) (4) (15) (3) (17) (13) (7) (5) (6) (14) (8) (12) (20) (16) (21) (10) (24) (33) (18) (42) (29) (31) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ( )= 2002 Low Confidence High Confidence Source: A.T. Kearney Values Calculated on a 0 to 3 Scale

  6. FDI Confidence Index ® The Global Business Policy Council Investor outlook on the global economy Percentage change in outlook compared to a year ago Positive change in outlook Negative change in outlook September 2003 February 2001 October 2001* September 2002 June 1999 January 2000 *Post-September 11 FDI Flash Survey Source: A.T. Kearney

  7. FDI Confidence Index ® The Global Business Policy Council Global developments most likely to influence FDI decisions Source: A.T. Kearney

  8. FDI Confidence Index ® The Global Business Policy Council Investor Preference for M&A as FDI mode of entry Percentage Growth Percentage of investors who prefer M&A Source: A.T. Kearney, KPMG, UNCTAD

  9. FDI Confidence Index ® The Global Business Policy Council Planned Investment Increases/Decreases Percentage of global investors with Planned Investment Increases/Decreases Source: A.T. Kearney

  10. FDI Confidence Index ® The Global Business Policy Council Global investors are more attracted to selected emerging markets More attractive * Less attractive Maintained ranking Source: A.T. Kearney * More/less attractive based on moving up/down in the Index

  11. FDI Confidence Index ® The Global Business Policy Council Emerging markets will likely gain a greater share of first-time investments Regional share of total planned first-time investments Russia Poland Rest of Eastern Europe China Vietnam Rest of region India Turkey Rest of Asia-Pacific Rest of region Western Europe Mexico Brazil Europe Asia Pacific Africa, Near andMiddle East North America Latin America Source: A.T. Kearney

  12. FDI Confidence Index ® The Global Business Policy Council Services will likely dominate corporate off-shoring activities over the next three years Allocation of selected offshore activities Source: A.T. Kearney

  13. FDI Confidence Index ® The Global Business Policy Council U.S. vs. China investment attractiveness Percentage difference in FDI Index score between the U.S. and China Source: A.T. Kearney

  14. FDI Confidence Index ® The Global Business Policy Council Factors most likely to impact the attractiveness of the U.S. market over the next one to three years Source: A.T. Kearney (Percentage of total respondents)

  15. FDI Confidence Index ® The Global Business Policy Council The Eastern European “little tigers” are expected to gain significant first-time investments Global allocation of first-time investments Slovenia, Romania, the Baltic States, Croatia, and Serbia 10% Russia 9% Poland 5% Rest of Eastern Europe 8% Source: A.T. Kearney

  16. FDI Confidence Index ® The Global Business Policy Council China’s lead notwithstanding, Mexico and Brazil score well with heavy manufacturing investors Top 10 most attractive investment destinations for Heavy Manufacturing sector, 2003 FDI Index Score Heavy Manufacturing sector Highly Attractive (1) (2) (5) (7) (3) (8) (11) (16) (17) (13) 1 2 3 4 5 6 7 8 9 10 China United States Mexico Brazil Germany India Poland Russia Thailand Japan June 1999 Jan 2000 Feb 2001 Sept 2002 Sept 2003 () = 2002 Least Attractive Source: A.T. Kearney

  17. FDI Confidence Index ® The Global Business Policy Council Asia has overtaken both Latin America and Europe as a regional FDI destination Global Investors FDI Index Score Highly Attractive Asia surpasses Europe Latin America falls behind Asia Least Attractive Sept 2002 Sept 2003 June 1999 Feb 2001 Jan 2000 Dec 1998 Source: A.T. Kearney

  18. FDI Confidence Index ® The Global Business Policy Council China’s lead over most emerging market destinations has strengthened Percentage likelihood of investing in China over these other markets (percentage difference in FDI Index scores) Source: A.T. Kearney

  19. FDI Confidence Index ® The Global Business Policy Council China has also made advances against major developed countries China’s relative attractiveness against developed countries (difference in FDI Index scores) China more attractive China less attractive Sept 2002 Dec 1998 June 1999 Jan 2000 Sept 2003 Feb 2001 Source: A.T. Kearney

  20. FDI Confidence Index ® The Global Business Policy Council FDI Confidence Index 2003, Asian Investors (1) (2) (4) (14) (3) (15) (32) (5) (8) (6) (13) (11) (16) (9) (7) (10) (18) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Low confidence High confidence ( )= 2002 Regional economic dynamism fuels Asian investor bullishness Asian investors are most optimistic on the global economy Intra-developing Asia’s share of global trade (ex-Japan) Percentage share of global trade 1990 2001 Source: A.T. Kearney, WTO World Trade Report 2003

  21. FDI Confidence Index ® The Global Business Policy Council The Emerging Giants – China, Brazil, Mexico, India, and Poland The Emerging Giants receive a large share of FDI flowing to the developing world Thirteen attributes influencing FDI decisions were benchmarked across these markets • Market Size • Market Growth/Potential • Production/Labor Costs • Access to Export Markets • Competitor Presence • Availability of M&A Targets • Financial/Economic Stability • Political/Social Stability • Tax Regime • Infrastructure • Transparency • Highly Educated Workforce • Quality of Life 2002 Source: A.T. Kearney

  22. FDI Confidence Index ® The Global Business Policy Council China displays a comparative advantage across most FDI attractiveness attributes Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  23. FDI Confidence Index ® The Global Business Policy Council Poland takes second position behind China Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  24. FDI Confidence Index ® The Global Business Policy Council India’s comparative advantage lies in market growth, costs, and education Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  25. FDI Confidence Index ® The Global Business Policy Council Yet, India displays weakness in several key categories Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  26. FDI Confidence Index ® The Global Business Policy Council Mexico and Brazil are less competitive in terms of education and production/labor costs as FDI destinations Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  27. FDI Confidence Index ® The Global Business Policy Council Mexico and Brazil are recognized for attractive infrastructures, transparency, and access to export markets Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  28. FDI Confidence Index ® The Global Business Policy Council Relative stability among big emerging markets Relative attractiveness of various markets for selected attributes (weighted score of country rankings) Source: A.T. Kearney

  29. FDI Confidence Index ® The Global Business Policy Council Relative risk profiles among big emerging markets Percentage of global investors that ranked countries for High, Medium, and Low Risk Brazil China India Mexico Poland Source: A.T. Kearney

  30. FDI Confidence Index ® The Global Business Policy Council Meeting profitability targets? If invested, are profitability targets met? Source: A.T. Kearney

  31. FDI Confidence Index ® The Global Business Policy Council The most critical risks to firm operations (Percentage among top five) Source: A.T. Kearney

  32. FDI Confidence Index ® The Global Business Policy Council Risk management actions Source: A.T. Kearney

  33. FDI Confidence Index ® The Global Business Policy Council Profile of FDI Confidence Index participants Geographical Distribution Respondent Titles 4% 3% 5% 25% 22% 20% 71% 50% Sectoral Distribution North America Europe Asia Other CEOs, CFOs and Board Members Senior Strategy and Development Executives Int’l Operations Executives Other 5% 30% 29% 9% 11% 16% Financial and Non-financial Services Wholesale and Retail Telecom and Utilities Light Manufacturing Heavy Manufacturing Primary Source: A.T. Kearney

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