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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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global fdi flows have fallen below 1998 levels

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

advanced countries have experienced the sharpest drop in fdi inflows

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

industrialized vs developing markets

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

most attractive fdi destinations 2003

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

slide6

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

slide7

FDI Confidence Index ® The Global Business Policy Council

Global developments most likely to influence FDI decisions

Source: A.T. Kearney

slide8

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

slide9

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

slide10

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

slide11

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

slide12

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

slide13

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

slide14

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)

slide15

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

slide16

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

slide17

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

slide18

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

slide19

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

slide20

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

slide21

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

slide22

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

slide23

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

slide24

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

slide25

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

slide26

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

slide27

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

slide28

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

slide29

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

slide30

FDI Confidence Index ® The Global Business Policy Council

Meeting profitability targets?

If invested, are profitability targets met?

Source: A.T. Kearney

slide31

FDI Confidence Index ® The Global Business Policy Council

The most critical risks to firm operations

(Percentage among top five)

Source: A.T. Kearney

slide32

FDI Confidence Index ® The Global Business Policy Council

Risk management actions

Source: A.T. Kearney

profile of fdi confidence index participants

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