World Investment Report 2009: Transnational Corporations - Unctad

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CHAPTER III 113 Figure III.6. Share of agriculture in inward FDI of selected economies, various years (Per cent) a) Flows, 2005–2007 average or latest available three-year period b) Stock, 2007 or latest available year Cambodia Lao People's Democratic Republic Malaysia Ecuador United Republic of Tanzania Mozambique Peru Honduras Indonesia Ukraine Ethiopia Viet Nam �� Source: UNCTAD, based on annex table A.III.3. b. Cross-border M&As Cross-border M&As have been a relatively important mode of TNC entry into agriculture and related activities (Rastoin, 2008) and hence may be viewed as another indicator of TNC involvement in agriculture. In some years (e.g. 1995 and 1998), the value of net cross-border M&A sales in agriculture has come close to that of FDI flows, and in other years, such as 1991 and 2005, their value has even exceeded that of FDI inflows (table III.8). 29 Cross-border M&A data for the most recent period (2007–2008) confirm a major rise of investments in agriculture and related activities. This co-evolution is linked to the fact that, until recently, greenfield investments have been very small in agricultural production (see below), and have had little influence on overall FDI flows. Net cross- Swaziland Malawi Zambia Papua New Guinea Cambodia Viet Nam United Republic of Tanzania Paraguay Namibia Gambia Myanmar Ukraine China Latvia Chile Peru The FYR of Macedonia El Salvador Colombia Russian Federation Madagascar Bangladesh Republic of Moldova Uganda Romania Estonia Venezuela Republic of Korea Lithuania Mongolia Hungary Morocco Bulgaria Poland Brazil Syrian Arab Republic Canada Philippines Italy Czech Republic 0 2 4 6 8 10 12 14 16 18 0 2 4 6 8 10 12 14 16 18 border M&A sales in agriculture reached $1.8 billion in 2007 and $2.1 billion in 2008 (table III.8). This is partly a parallel trend to that in the food processing industry, where M&As increased sharply in 2007 and 2008 (to $33 billion and $86 billion, respectively). A large proportion of M&A deals targeting agricultural production itself were undertaken by TNCs operating primarily in food processing and trade, confirming the importance of vertical integration. Cross-border M&A data also throw light on the relative importance of the various stages of the value chain for TNC activities in recent years. Agriculture alone accounts for only a small part of the total value of net cross-border M&As, which is dominated by the food processing industry. Taking the agribusiness value chain as a whole, in 2007 agriculture (primary sector) accounted for 5% of total cross-border M&As and food processing (manufacturing) for 95%, while
114 World Investment Report 2009: Transnational Corporations, Agricultural Production and Development Box III.6. TNCs in the production of bananas, coffee, cut flowers, rice, soya beans and sugar The participation of TNCs varies widely between the six different products for which UNCTAD has prepared in-depth case studies: bananas, coffee, cut flowers, rice, soybeans and sugar. It is limited in rice production, and mostly confined to contractual arrangements through trading in the coffee and soya bean industries. On the other hand, it is fairly strong in bananas, cut flowers and sugar production. There are no dominant players in global rice production. TNCs which are involved in contract farming in Asia and Africa are often rice wholesalers (e.g. Kitoku Shinryo in Viet Nam and VeeTee in Nigeria) or major food manufactures (e.g. PepsiCo in India). In general, with the exception of Tilda’s (United Kingdom) contract farming in Uganda, the scale of these TNCs’ involvement, and thus their impacts on rice cultivation in host countries has been marginal relative to overall rice production in those countries. In the major soya bean producer countries (Argentina, Brazil and the United States), a small number of TNCs dominate all the stages of the value chain except farming (Moussa and Ohinata, 2009). For instance, four TNCs (ADM, Bunge, Cargill and Louis Dreyfus) control over 40% of crushing capacity in Brazil. In the area of genetically modified soya, one TNC (Monsanto) alone provides 90% of the world’s GM soya seeds. Since the early twentieth century, international banana trade has been dominated by vertically integrated TNCs that control production, packing, shipping, import and ripening. Economic power in the banana trade today remains in the hands of a few large developed-country TNCs such as Chiquita, Dole, Del Monte and Fyffes (Liang and Pollan, 2009). It is estimated that about half of the bananas sold by Chiquita, Dole and Del Monte originate from their Source Source: : UNCTAD, based on the commodity case studies. wholesale trade, which underwent restructuring in 2007 and 2008, had a negative value of net M&A sales, due to divestments in certain foreign locations (figure III.7). 30 The dominance of food processors as a target for M&As in the agricultural and food supply chain suggests that food TNCs (figure III.7) are major investors in primary production, distribution and marketing of food products (see also section E). In agricultural production alone there were 63 crossborder M&A purchases valued at $4.5 billion in 2007, 70% of these M&As by value were undertaken by food-related manufacturing and services TNCs. Data on the international production of affiliates of TNCs, including information on indicators such as sales, exports, employment and assets of foreign affiliates in host economies, are available on own plantations. The role of TNCs in production varies considerably across regions and countries: in Central America, their direct involvement is still significant in Costa Rica, Honduras, Guatemala and Panama; in South America, they are involved in Colombia; in the Caribbean, they are no longer directly involved in production; in Africa and Asia, they have some control over production through joint ventures. �� is grown mostly by local producers, the overwhelming majority being small farmers. TNCs play an important role at the stage of purchasing coffee beans in the major growing countries, such as Brazil, Colombia and Viet Nam, as well as in further processing (Krueger and Negash, 2009). At these stages of the supply chain, a few TNCs specializing in trading and roasting dominate the international market. In certain developing countries where floriculture is a major export industry – such as Ethiopia, Kenya and Uganda – the participation of foreign firms in �� farming has been significant, and they provide an important opportunity for business linkages with local farmers through outgrower arrangements or contract farming (Wee and Arnold, 2009). In countries such as Brazil, South Africa and some LDCs in Southern Africa (Malawi, Mozambique, the United Republic of Tanzania and Zambia), FDI has played a major role in expanding sugar r production and exports (Van Giffen and Kalotay, 2009). In Brazil, sugar and ethanol production attracts TNCs – from traditional sugar producers to energy companies and investment funds. In Southern Africa, newly emerging investors, such as the Associated British Foods’ South African affiliate Illovo, are becoming major players in local sugar production, while Tongaat Hulett, a South African sugar TNC, has expanded production to Mozambique, Swaziland and Zimbabwe. a selective basis. Data for affiliates abroad of United States TNCs in agriculture, hunting, forestry and fishing show that in the total sales of affiliates, the share of domestic sales in host countries was the most dynamic element in 1983–2006, closely followed by sales to foreign countries. On the other hand, the value of sales back to the home country was shrinking (figures III.8 and III.9). These patterns suggest dual motivations on the part of investors: market-seeking motives related to local sales in host countries, and resource-seeking ones related to exports, mainly to third countries. The composition of exports themselves revealed that a large proportion of exports to third countries took place within the corporate network (i.e. between affiliates of the same firm), confirming a high degree of international integration of TNCs involved in agricultural production (section C).
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UNITED NATIONS CONFERENCE ON TRADE
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PREFACE World foreign direct invest
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ACKNOWLEDGEMENTS The World Investme
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TABLE OF CONTENTS Page PREFACE.....
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Page b. Outward FDI: moderate but a
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3. Addressing environmental and soc
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Page I.24. Number of IIAs concluded
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A.I.6. Estimated world inward FDI f
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KEY MESSAGES FDI TRENDS, POLICIES A
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OVERVIEW xix Amid a sharpening fina
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OVERVIEW xxi TNCs in international
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OVERVIEW xxiii been expressed that
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OVERVIEW xxv TRANSNATIONAL CORPORAT
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OVERVIEW xxvii The universe of agri
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OVERVIEW xxix role TNCs could play
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OVERVIEW xxxi Host countries should
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PART ONE FDI TRENDS, POLICIES AND P
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Page 126 and 127: INTRODUCTION For the greater part o
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CHAPTER IV 163 in farming the same
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CHAPTER IV 165 producing simple, la
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CHAPTER V POLICY CHALLENGES AND OPT
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CHAPTER V 169 b. Land and water use
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CHAPTER V 171 Table V.1. Percentage
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CHAPTER V 173 improve life for loca
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CHAPTER V 175 them with seeds, pest
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CHAPTER V 177 3. Addressing environ
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CHAPTER V 179 productive uses and u
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CHAPTER V 181 Box V.10. Sector-spec
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CHAPTER V 183 Box V.11. Trade barri
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CHAPTER V 185 Box V.12. China’s p
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CHAPTER V 187 agricultural producti
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CHAPTER V 189 advancing by the end
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CHAPTER V 191 industry. However, ex
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CHAPTER V 193 10 11 12 13 14 15 16
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EPILOGUE Building on advanced techn
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AAAID (2002). Arab Authority for Ag
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REFERENCES 199 China, Ministry of A
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REFERENCES 201 FARA (Forum for Agri
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REFERENCES 203 International Instit
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REFERENCES 205 Pardey, G. Philippe
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REFERENCES 207 Tauli-Corpuz, Victor
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REFERENCES 209 United Nations (2004
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ANNEXES 2009
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ANNEX A 213 Annex table A.I.1. Numb
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ANNEX A 215 Annex table A.I.2. Numb
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ANNEX A 217 Annex table A.I.3. Cros
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ANNEX A 219 Sector/industry Annex t
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ANNEX A 221 Annex table A.I.7. Esti
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ANNEX A 223 Region/economy Year Ann
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ANNEX A 225 Annex table A.I.9. The
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ANNEX A 235 Table A.I.13. IIAs (oth
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ANNEX A 237 Annex table A.III.3. In
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ANNEX A 239 Annex table A.III.4. Th
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ANNEX A 241 Annex table A.III.6. Th
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DEFINITIONS AND SOURCES 243 DEFINIT
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DEFINITIONS AND SOURCES 245 C. Data
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ANNEX B 247 Region/economy ��
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ANNEX B 273 ��
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SELECTED UNCTAD PUBLICATIONS ON TNC
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SELECTED UNCTAD PUBLICATIONS ON TNC
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QUESTIONNAIRE World Investment Repo
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GE.09- United Nations UNCTAD/WIR/20
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