Emerging Themes in Investment Policy New challenges and their consequences Ivan Nimac, Head Vienna Office Investment Climate Department World Bank Group Investment Policy Global Workshop Vienna, 14 th May 2012

Emerging Markets benefit most from the slow recovery of FDI flows in the aftermath of the global economic crisis Source: United Nations Conference on Trade and Development (UNCTAD) Global FDI Inflows (US$ Trillion) ♦ Global FDI inflows recover slowly after the global economic downturn, but are still well below the pre-crisis average ♦ For the first time ever developing and transition economies attracted more than 50% of total FDI flows 15% Source: AT Kearney Foreign Direct Investment Confidence Index 2012 Change in investment portfolio (last two years in %) ♦ Large and medium sized emerging markets are able to benefit most from the slow recovery ♦ In particular China, India and Brazil are in the lead of a trend that is expected to continue over the next years Developed countriesDeveloping countries

Especially in turbulent times, an attractive and stable business environment is a key concern for investors Source: Ernst & Young’s 2011 European attractiveness survey Key location factors for investors (812 respondents) Source: World Investment and Political Risk 2010, Multilateral Investment Guarantee Agency (MIGA) Major obstacles for investors (% of respondents) ♦ International investors look at a favorable and stable business environment when investing abroad, and especially in turbulent times, strong protection by the rule of law ♦ Yet, the investment policy framework remains weak in many developing countries according to various data sources

4 Linking Competitiveness Analysis to Investment Policy SECTOR/INDUSTRYANALYSIS Industry trends Market trends Price trends Competition and ownership policy Links to national/global supply chains Technological trends Global policy trends (WTO/AFTA) Price Factors Factor costs Input costs Finance availability/cost Transaction costs Taxes and customs duties Investment law Non-tariff barriers Utilities service quality, price Regulatory barriers Market structure & competition policy Factor market rigidities (e.g., min. wage) Price controls/subsidies Product quality standards Risk APPROPRIATE ROLE FOR GOVERNMENT DETERMINANTS OF COMPETITIVENESS Productivity Factors o Skills o Innovation o Management o Infrastructure Productivity Factors o Skills o Innovation o Management o Infrastructure Public PolicyPrivate Sector

Emerging Themes in Investment Policy – New challenges and their consequences The panelists: Sergiu Ciobanu, Deputy Minister of Economy, Moldova Alexander Schwartz, Partner, TJP Vienna Roel Spee, Global Leader, Plant Location International (PLI), IBM Business Services Robert Whyte, Global Product Specialist, Investment Policy, Investment Climate Department, World Bank Group

Thank you ! Ivan Nimac Head Vienna Office Investment Climate Department World Bank Group