World Investment Report 2009: Transnational Corporations - Unctad

80 World Investment Report 2009: Transnational Corporations, Agricultural Production and Development
more than $1 billion) declined sharply. This caused
the value of cross-border M&A inflows to drop to
$35 billion in 2008 (a 65% decrease from the level of
2007). The leading sources of Canada’s FDI inflows
were the United States and European countries.
FDI flows into the ������ countries fell by
40% in 2008, to a total of $503 billion. The financial
crisis and the economic downturn were responsible
for the decline in inward FDI in the majority of
these countries. In 2008, seven of the ten largest
cross-border M&As worldwide took place in the
EU (annex table A.I.3), of which four were intra-EU
transactions. Cross-border bank mergers played an
important role, as the process of consolidation in the
European financial services industry continued. 106 In
the first quarter of 2009, FDI activity in most of EU
countries was down compared to the first quarter of
2008 (table II.27).
Inward FDI flows to the 15 countries of the
����������������������� (EMU) (or the euro zone)
declined in 2008 by 48%, to $287 billion. A large
share of inflows to EMU-member countries consisted
of intra-EMU FDI. 107 Ten of the 15 EMU countries
recorded a significant decline in FDI inflows in 2008.
In France, FDI inflows fell by 26%, from a record
level of $158 billion in 2007 to $118 billion, which
was nevertheless still a high level. Indeed, France
ranked second among FDI recipients worldwide in
2008 (figure II.26), with inflows spread across a wide
range of sectors. The overall decline in FDI inflows
was mainly due to cutbacks in lending by TNCs to
their foreign affiliates located in France. These intracompany
loans fell by 35% to $68 billion. Equity
capital inflows fell by 32% while reinvested earnings
of foreign affiliates in France rose by 23%. Belgium
saw its FDI inflows plunge by 46% to $60 billion in
2008. Flows to Belgium are very volatile due to the
presence of special purpose entities and corporate
headquarters (WIR03, box. II.11). FDI inflows into
Germany also fell sharply, by 56%, to only $25
Figure II.26. Developed countries: top 10 recipients of
FDI inflows, a ����������
(Billions of dollars)
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Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics).
a Ranked by magnitude of 2008 FDI inflows.
billion. As a result, Germany’s ranking among the top
developed-country recipients of FDI fell from seventh
place in 2007 to ninth in 2008 (figure II.26). A fall in
the net equity capital component of FDI inflows by
59% (to $18 billion) – the lowest level for Germany
since the 1990s – contributed to most of the decline
in FDI inflows. This was largely due to the sharply
shrinking investments of foreign private equity
funds. Their leveraged buyouts (LBOs) in Germany
fell by $12 billion to $1.5 billion in 2008 (Deutsche
Bundesbank 2009: 30). In addition, intra-company
loans to foreign affiliates in Germany dried up.
Among the other EMU-15 host countries
Austria, Italy and the ����������� also recorded a
decline in FDI inflows. The Netherlands hosts large
holding and financing TNCs that contribute to volatile
FDI flows, especially in the form of intra-company
loans. Inward FDI in the Netherlands in 2008 turned
negative (-$3.5 billion) compared with $118 billion
in 2007. Part of this dramatic fall can be attributed to
one-off divestment deals. Thus, while FDI inflows in
2007 had been extraordinarily high due to two large
takeovers, 108 in 2008, one of the three banks that took
over ABN-AMRO withdrew from it (i.e. assets of
ABN-AMRO were sold) and the Government took
over the stake that Fortis Belgium owned in Fortis
Netherlands. Together, these two withdrawals reduced
the 2008 figure by some €30 billion. FDI inflows in
Italy fell sharply, from $40 billion to $17 billion. The
large cross-border acquisition of an Italian energy
supplier (Endesa Italia by the German E.ON for
$14.3 billion) was more than offset by divestments
by foreign investors in the banking industry (Banca
Monte dei Paschi di Siena SpA (Italy) acquired Banca
Antonveneta SpA from Santander Central Hispano
SA (SC) for $13.2 billion).
FDI inflows to Finland and Ireland turned
negative in 2008. Ireland was seriously hit by the
financial crisis. Foreign investors withdrew a massive
$38 billion worth of intra-company loans from the
country, and reduced their equity investments by $9
billion. This caused FDI inflows to turn negative,
falling by $45 billion: from an inflow of $25 billion
in 2007 to minus $20 billion in 2008.
Bucking the general downward trend of
FDI inflows in 2008, five of the EMU-15 countries
(Spain, Luxembourg, Greece, Portugal and Slovenia)
recorded an increase in FDI inflows. Inward FDI
to Spain more than doubled, to $66 billion, driven
by several high-value cross-border M&As, such as
the $18 billion acquisition of the Spanish Cigarette
producer Altadis by British Imperial Tobacco. This
consistent rise in inflows raised its stock of FDI to
$635 billion – the sixth highest of all developed
countries. FDI inflows into ����������� which
were negative in 2007, turned positive and reached
$3 billion. FDI inflows also increased in Greece