World Investment Report 2009: Transnational Corporations - Unctad

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CHAPTER I 21 services, also began to feel the adverse effects of the crisis, though to a lesser extent. Confronted by declining profits and growing overcapacities, many TNCs announced major cost-cutting programmes, including layoffs, divestments, and a reduction of investment expenditures. In some of the most affected industries, such as automotives, the crisis also triggered a wave of major restructurings (as mentioned in section A above). Activity indicators for the top 100 TNCs show that the impact of the crisis was only marginal in 2008 as a whole (annex tables A.I.9-A.I.10). Their total sales increased from their 2007 sales figures by 12% in current dollar terms, representing additional revenue of about $901 billion, and their total employment also rose by 4%. 27 A handful of TNCs in the automotive industry (especially General Motors, Chrysler, Toyota, Nissan and Honda), which had already faced a depressed market even before the crisis began, recorded declining sales in 2008. There are three major reasons for these apparently paradoxical results. First, the financial crisis, which deepened in September 2008, started affecting the activities of the largest TNCs only from the last quarter of 2008, thus limiting the apparent impact on activity indicators for the year as a whole (figure I.15). For instance, despite a sharp fall in demand for commodities (and subsequently in prices) at the end of 2008, many oil and even some mining companies, such as Total, ExxonMobil and BHP Billiton, outperformed the previous year’s results in terms of sales and profits for the whole year because of favourable market conditions in the first three quarters of 2008. Second, in many industries such as utilities, food and beverages and business services, the market remained relatively stable until the end of the year. For instance, sales for the fourth quarter of 2008 by Figure I.15. Quarterly evolution of sales, total assets, and net income for selected TNCs among the 100 largest, 2006–2009 (Index: 100 = 2006 1st quarter) �� Source: UNCTAD, based on Bloomberg. Note: Based on data for 62 of the top 100 TNCs that reported quarterly data for the entire period. E.ON, InBev and Vivendi Universal were higher than those observed for the same period in 2007. Third, the largest TNCs continued to acquire other companies, with direct consequences for the apparent growth in volume of their activity. In 2008, they undertook 21 major cross-border M&A purchases valued at more than $3 billion (annex table A.I.3). However, what did turn negative was their net income, which declined by 27% overall. 28 There were a number of causes of this downturn. First, as a direct consequence of the financial crisis, the cost of borrowing increased in the last months of 2008. The spread on corporate bonds, for instance, reached a historic high at the end of 2008. 29 Second, companies’ results reflected heavy losses in the value of their assets and real estate property as a result of falling stock markets and real estate markets. 30 At the end of 2008, the value of the total assets of the largest TNCs was 0.9% lower than the previous year. 31 Provisions were also made to cover the costs of cost-cutting plans, especially with respect to layoffs (see below). Thus, some companies, such as Cemex, Dow Chemical, Rio Tinto, Alcoa and Xtrata, which in the past had implemented very ambitious development plans – especially through M&As – were suddenly confronted with high levels and costs of debt, lower asset values and a slowdown in their markets and revenues. Third, for some of the largest TNCs, which had already experienced a slowdown of activity before the crisis erupted, yearly profits declined significantly in 2008, turning into heavy losses for a number of them. Those particularly hard hit were many automobile companies such as Ford, General Motors, Nissan and Toyota. Fourth, some companies – especially those directly involved in processing commodities into manufactured goods – were faced with higher prices of inputs, which they were unable to pass on in their selling prices due to tightening market conditions. This �� therefore on profits. Negative consequences of the economic and financial crisis on the largest TNCs’ activities and their financial results have continued to unfold and deepen, particularly from the beginning of 2009. This is especially true for TNCs engaged in commodities, intermediate goods and automotives. For instance, sales in the first quarter of 2009, as compared to the same period last year, were down by 49.3% for ArcelorMittal, 49% for Royal Dutch/Shell, 47% for General Motors, 47% for Chevron, and 46% for ExxonMobil. 32
22 World Investment Report 2009: Transnational Corporations, Agricultural Production and Development In order to improve their balance sheets and arrest their deteriorating profits, TNCs have been extensively curtailing expenditures and taking steps to reduce their debt. This is being done through three major channels: �� through layoffs. Plans for large job cuts have been announced by many of the top 100 TNCs since September 2008. 33 �� planned acquisitions or greenfield projects of the top TNCs have been cancelled, reduced or postponed due to the combined impact of a setback in market expectations and reduced internal and external financial resources. 34 �� These operations are meant not only to curtail operating costs, but also to generate cash in order to reduce debt ratios, and/or simply beef up available cash that had diminished due to faltering sales. This has led, in particular, to a rising number of sales of non-strategic affiliates. 35 Another consequence of the crisis is an acceleration of industry restructurings due to two main factors. First, some companies suffering from an already fragile financial situation before the crisis might be affected by the current turmoil to the point that they go bankrupt or have no other choice than to be acquired to survive. Others might become vulnerable to such hostile bids due to the presently Table I.10. Examples of recent restructurings by some of the 100 largest non-financial TNCs Daimler Chrysler AG A de-merger took place in May 2007 between Daimler and Chrysler. The latter was then sold to a consortium of United States investors led by the investment fund, Cerberus. After filing for bankruptcy in April 2009, Chrysler’s capital was restructured. Major owners will be the United Auto Workers (a trade union) and the Italian auto maker Fiat. The United States Federal Government and the Governments of Canada and its Province of Ontario will also own some stakes. Suez Suez merged with GDF (France) in July 2008. Total foreign assets of the two companies amounted to more than $110 billion in 2007, placing the new group 12th among the largest non-financial TNCs. General Motors GM filed for bankruptcy in June 2009. According to the rescue plan, it will be owned 60% by the United States Federal Government, 17% by the United Auto Workers, and 12% by the Governments of Canada and Ontario Province. Endesa In February 2009, the Italian group Enel, which already owned 67% of Endesa, acquired an additional 25% share in Endesa from the Spanish construction company Acciona. Source: UNCTAD. low market value of their stocks. Such companies as Chrysler or Endesa have already changed owners (table I.10). Others (e.g. Volvo among others) might also go through major changes in ownership in the coming months. Second, and conversely, companies less affected than others by the crisis, and having substantial cash �� by the crisis to increase their market share or critical mass. 36 Some large TNCs have undertaken major �� Consequently, the crisis might accelerate underlying trends towards restructuring and concentration in many industries. This is likely to have �� these opposing factors seem to have balanced each other, as the average TNI of the top TNCs remained practically unchanged between 2007 and 2008 (figure I.14). �� impact of the crisis on the largest TNCs has differed widely by industry and country, and even by individual firm. On the one hand, firms in many businesscycle-sensitive industries such as automotive and other transport materials, construction, electrical and electronic equipment, and intermediate goods, as well as those in the financial sector, have been among the worst hit by the crisis. On the other hand, those in some less cyclical industries, with more stable demand patterns, have been less affected. For example, among the 100 largest TNCs, many in oil and gas (ExxonMobil, Chevron, British Petroleum, �� beverages and tobacco (Nestlé, SAB-Miller, Coca- Cola, Kraft Foods, British American Tobacco), in telecommunication services (Deutsche Telekom, TeliaSonera), in utilities (Endesa, RWE, EDF) and in pharmaceuticals (Roche, AstraZeneca, Johnson & Johnson), as well as in consumer goods (Unilever, LVMH) and retailing (Wal-Mart) continued to register large profits, and some even growing profits, in 2008. 2. The top 100 TNCs from developing economies a. A growing role in the world economy Reflecting the overall strengthening of �� TNCs from developing countries, compared to their counterparts from developed countries, has grown rapidly over the past 15 years. This trend continued in 2007, when the assets of the 100 largest TNCs
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UNITED NATIONS CONFERENCE ON TRADE
Page 4 and 5: PREFACE World foreign direct invest
Page 6 and 7: ACKNOWLEDGEMENTS The World Investme
Page 8 and 9: TABLE OF CONTENTS Page PREFACE.....
Page 10 and 11: Page b. Outward FDI: moderate but a
Page 12 and 13: 3. Addressing environmental and soc
Page 14 and 15: Page I.24. Number of IIAs concluded
Page 16 and 17: A.I.6. Estimated world inward FDI f
Page 18 and 19: KEY MESSAGES FDI TRENDS, POLICIES A
Page 20 and 21: OVERVIEW xix Amid a sharpening fina
Page 22 and 23: OVERVIEW xxi TNCs in international
Page 24 and 25: OVERVIEW xxiii been expressed that
Page 26 and 27: OVERVIEW xxv TRANSNATIONAL CORPORAT
Page 28 and 29: OVERVIEW xxvii The universe of agri
Page 30 and 31: OVERVIEW xxix role TNCs could play
Page 32 and 33: OVERVIEW xxxi Host countries should
Page 34: PART ONE FDI TRENDS, POLICIES AND P
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INTRODUCTION For the greater part o
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CHAPTER III TNCS AND AGRICULTURAL P
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CHAPTER III 97 significant agent fo
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CHAPTER III 99 Table III.2. Agricul
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CHAPTER III 101 pesticides and chem
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CHAPTER III 103 ��
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CHAPTER III 105 Table III.5. Biofue
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CHAPTER III 107 Figure III.3. A typ
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CHAPTER III 109 Box III.4. The OLI
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CHAPTER III 111 Much of the analysi
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CHAPTER III 113 Figure III.6. Share
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CHAPTER III 115 Table III.8. Compar
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CHAPTER III 117 Table III.9. Inward
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CHAPTER III 119 In recent years, co
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CHAPTER III 121 has been engaged in
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CHAPTER III 123 Figure III.14. Inve
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CHAPTER III 125 bottom nine compani
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CHAPTER III 127 Box III.10. Selecte
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CHAPTER III 129 Table III.13. Examp
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CHAPTER III 131 4 For instance, the
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CHAPTER IV DEVELOPMENT IMPLICATIONS
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CHAPTER IV 135 Box IV.1. TNC partic
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CHAPTER IV 137 Box IV.3. The signif
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CHAPTER IV 139 Sachs, 2001). Withou
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CHAPTER IV 141 such as BASF, Dupont
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CHAPTER IV 143 collective actions i
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CHAPTER IV 145 cocoa and banana pla
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CHAPTER IV 147 produce sold by Shop
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CHAPTER IV 149 of TNCs - internatio
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CHAPTER IV 151 international agribu
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CHAPTER IV 153 to mitigate power as
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CHAPTER IV 155 including least deve
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CHAPTER IV 157 directly in agricult
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CHAPTER IV 159 acquired by foreign
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CHAPTER IV 161 themselves or by the
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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 269 ��
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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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World Investment Report 2009: Transnational Corporations - Unctad

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