May 30, 2020 — reached during the global financial crisis and undoing the already in 2018 as the country faced balance-of-payment challenges.

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iiWorld Investment Report 2020 International Production Beyond the PandemicISBN 978-92-1-112985-4eISBN 978-92-1-005144-6Print ISSN 1020-2218eISSN 2225-1677Sales No. E.20.II.D.23 © 2020, United NationsAll rights reserved worldwide Requests to reproduce excerpts or to photocopy should be addressed to the Copyright Clearance Center at All other queries on rights and licences, including subsidiary rights, should be addressed to: United Nations Publications, 405 East 42nd Street, New York, New York 10017, United States of AmericaEmail: publications@un.orgWebsite: The designations employed and the presentation of material on any map in this work do not imply the expression of any opinion whatsoever on the part of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.This publication has been edited externally. United Nations publication issued by the United Nations Conference on Trade and Development. UNCTAD/WIR/2020

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iiiPrefacePREFACE eign direct investment (FDI) will be under severe pressure this year as a result of the COVID-19 pandemic. These vital resources are expected to fall sharply from 2019 levels of $1.5 trillion, dropping well below the trough ready lackluster growth in international investment over the past decade. Flows to developing countries will be hit especially hard, as export-oriented and commodity-linked investments are among the most seriously affected. Indeed, the crisis could be a catalyst for a process of structural transformation of international production this decade, and an opportunity for increased sustainability, but this will depend on the ability to take advantage of the new industrial revolution and to overcome growing economic nationalism. Cooperation will be crucial; sustainable development depends on a global policy climate that remains conducive to cross-border investment. The World Investment Report , now in its thirtieth year, supports policymakers by monitoring global and regional FDI trends and documenting national and international investment policy developments. This year’s Report naturally takes stock of the COVID-19 crisis. It also includes a new chapter, added at the request of the UN General Assembly, on investment in the Sustainable Development Goals. This analysis shows that inter SDG areas have failed to increase substantially since the adoption of the goals in 2015. With less than a decade left to the agreed deadline of 2030, this makes it all the more important to evaluate the implications of the expected changes in the investment landscape over the coming years.As such, this year’s World Investment Report is required reading for policymakers and an important tool for the international development community. I commend its information and analysis to a wide global audience.António Guterres Secretary-General of the United Nations

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ivWorld Investment Report 2020 International Production Beyond the PandemicThe global economy is in the midst of a severe crisis caused by the COVID-19 pandemic. The immediate impact on FDI will be dramatic. Longer term, a push for supply chain resilience and more autonomy in productive capacity could have lasting consequences. But COVID-19 is not the only gamechanger for FDI. The new industrial revolution, the policy shift towards more economic nationalism, and sustainability trends will all have far-reaching consequences for the national production in the decade to 2030. The overall directional trend in international production points towards shorter value chains, higher concentration of value added and declining international investment in physical productive assets. That will bring huge challenges for developing countries. For decades, their development and industrialization strategies have depended on attracting FDI, increasing participation and value capture in GVCs, and gradual technological upgrading in international production networks. The expected transformation of international production also brings some opportunities for development, such as promoting resilience-seeking investment, building regional value chains and entering new markets through digital platforms. But capturing these opportunities will require a shift in development strategies. Export-oriented investment geared towards exploiting factors of production, resources and low-cost labour will r development ladder could become much harder to climb. A degree of rebalancing towards growth based on domestic and regional demand and promoting investment in infrastructure and domestic services is necessary. That means promoting investment in SDG sectors. The large amounts of institutional capital looking for investment opportunities in global markets does not look for investment projects in manufacturing, but for value-creating projects in infrastructure, renewable energy, water and sanitation, food and agriculture, and health care. eport on investment in the SDGs show that sustainability- themed funds in global capital markets are growing rapidly around in developing countries. We have now entered the last decade for the implementation of the SDGs. We need action to translate increased intereased SDG investment in the least developed countries. I hope that the Action Plan for Investment in the SDGs presented in this report will inspire and reinvigorate efforts around the world to make this happen. FOREWORDMukhisa KituyiSecretary-General of UNCTAD

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viWorld Investment Report 2020 International Production Beyond the PandemicTABLE OF CONTENTSPREFACE iii FOREWORD iv ACKNOWLEDGEMENTS ..v ABBREVIATIONS ix KEY MESSAGES .x CHAPTER I. GLOBAL INVESTMENT TRENDS AND PROSPECTS ..1 A. FDI AND THE COVID-19 CRISIS 2 1. The impact of the pandemic on FDI .3 2. Global and regional FDI forecasts ..6 3. IPA expectations 9 B. 2019 FDI TRENDS 11 1. FDI by geography .11 2. T .15 3. 18 C. INTERNATIONAL PRODUCTION ..22 1. Key indicators of international production ..22 2. Internationalization trends of the largest MNEs .23 CHAPTER II. REGIONAL TRENDS 27 A. DEVELOPING ECONOMIES ..28 1. Africa 28 2. Developing Asia ..36 3. Latin America and the Caribbean .46 B. TRANSITION ECONOMIES 54 C. DEVELOPED ECONOMIES 61 D. STRUCTURALLY WEAK, VULNERABLE AND SMALL ECONOMIES ..67 1. Least developed countries 67 2. Landlocked developing countries .74 3. Small island developing States 79

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viiTable of ContentsCHAPTER III. RECENT POLICY DEVELOPMENTS AND KEY ISSUES .87 A. INVESTMENT POLICY RESPONSES TO THE PANDEMIC 88 1. Investment policies counter the crisis in numerous ways. . . . . . . . . . . . . . . . . .88 2. Likely lasting impact of the pandemic on investment policymaking .96 B. NATIONAL INVESTMENT POLICIES 97 1. Overall trends 97 2. Merger controls affecting foreign investors ..103 C. INTERNATIONAL INVESTMENT POLICIES 106 1. Trends in IIAs: new treaties and other policy developments 106 2. Trends in ISDS: new cases and outcomes 110 3. Taking stock of IIA reform 112 CHAPTER IV. INTERNATIONAL PRODUCTION: A DECADE OF TRANSFORMATION AHEAD 119 INTRODUCTION 120 A. THE RUN-UP: 30 YEARS OF INTERNATIONAL PRODUCTION .123 1. Two decades of growth followed by one of stagnation .123 2. 2020: a crossroads for international production ..126 B. THE CONFIGURATION OF INTERNATIONAL PRODUCTION TODAY .129 1. Key dimensions of international production ..129 2. Industr .132 C. MEGATRENDS AFFECTING INTERNATIONAL PRODUCTION ..138 1. Technology and the NIR .138 2. Policy, sustainability and COVID-19 ..147 D. POSSIBLE TRAJECTORIES FOR INTERNATIONAL PRODUCTION .156 1. Reshoring ..156 2. ..159 3. Regionalization ..161 4. Replication ..163 E. A DECADE OF TRANSFORMATION AHEAD: POLICY IMPLICATIONS .168 1. 168 2. Meeting the challenges and capturing the opportunities .170

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viiiWorld Investment Report 2020 International Production Beyond the PandemicCHAPTER V. INVESTING IN THE SDGs .179 INTRODUCTION 180 A. TRENDS IN SDG INVESTMENT IN DEVELOPING ECONOMIES 181 B. SUSTAINABLE FINANCE 187 1. ..187 2. Financial market response to the COVID-19 crisis 195 C. SUSTAINABLE STOCK EXCHANGES AND ESG INTEGRATION .199 1. The role of stock exchanges and regulators. . . . . . . . . . . . . . . . . . . . . . . . . .199 2. SDG integration in CSR initiatives 203 3. Reporting on gender by MNEs ..205 D. GLOBAL INVESTMENT POLICY DEVELOPMENTS RELATED TO THE SDGs 210 1. National strategies for promoting the SDGs ..210 2. Investment policy tools related to the SDGs ..214 3. Investment policy measures enacted since the adoption of the SDGs .219 E. THE WAY FORWARD 222 1. A “Big Push” 222 2. A balanced approach 222 3. A set of transformative actions ..223 4. Recommendations to the General Assembly .226 REFERENCES .231 ANNEX TABLES 237 Annex table 1. by region and economy, 2014–2019 ..238 Annex table 2. FDI stock, by region and economy, 2000, 2010 and 2019 242

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ixABBREVIATIONS Abbreviations3Dthree-dimensionalAAAAAddis Ababa Action AgendaAfCFTA African Continent Free Trade Area AIACPAfrican, AfCFTA African Continental Free Trade Area BITbilateral investment treatyCAGRcompound annual growth rateCARIFORUM Caribbean ForumCEPA Comprehensive Economic Partnership Agreement CETA Comprehensive Economic and Trade Agreement CFTA Continental Free Trade Agreement CISCommonwealth of Independent StatesCOVID-19coronavirus disease 2019CPTPPComprehensive and Progressive Agreement for TPartnership CSRcorporate social responsibilityECTEnergy Charter Treaty EGLSestimated generalized least square EPA Economic Partnership Agreement ESAEastern and Southern Africa States ESGenvironmental, social and governance ETFexchange-traded fundEVelectric vehicleFBSDFamily Business for Sustainable DevelopmentFETfair and equitable treatmentFTfree trade agreementGCIGuidance on Core IndicatorsGMMgeneralized method of moments GVCglobal value chainIC information and communication technologyICMAInternational Capital Market Association ICSIDInternational Centre for Settlement of Investment DisputesIFCInternational Finance CorporationIIAinternational investment agreementIMFInternational Monetary Fund INFFIntegrated National Finance FrameworkIOSCOInternational Organization of Securities CommissionsIoTinternet of thingsIPA investment promotion agencyIPFSDInvestment Policy Framework for Sustainable DevelopmentISDSinvestor–State dispute settlementLDCleast developed country LLDClandlocked developing country M&Asmergers and acquisitionsMIGAMultilateral Investment Guarantee Agency MNEmultinational enterpriseMSMEmicro, small and medium-sized enterprises NAFTA North American Free Trade Agreement NEMnon-equity modeNIRnew industrial revolutionOEMoriginal equipment manufacturerPPEpersonal protective equipmentPPPpublic-private partnershipR&Dresearch and developmentRCEPRegional Comprehensive Economic PartnershipRVCregional value chainSDGsSustainable Development GoalsSEZspecial economic zoneSIDSsmall island developing StatesSMEssmall and medium-sized enterprisesSO-MNEState-owned multinational enterpriseSSESustainable Stock Exchanges (initiative)TIFATrade and Investment Framework Agreement TIPtreaty with investment provisionTiSA Trade in Services Agreement TPPT TTIPTransatlantic Trade and Investment Partnership UNCITRALUnited Nations Commission on International Trade Law UN DESAUnited Nations Department of Economic and Social Affairs UNGCUnited Nations Global CompactUNWTOUnited Nations World Tourism Organization USMCAUnited States–Mexico–Canada Agreement WEPsWomen’s Empowerment Principles WFEWorld Federation of Exchanges WEOWorld Economic Outlook WHOWorld Health Organization WTOWorld Trade Organization

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