The production of goods and services by an estimated 79,000 TNCs and their 790,000 foreign affiliates continues to expand, and their FDI stock exceeded $15 trillion in 2007. UNCTAD estimates that total sales of TNCs amounted to $31 trillion a 21% increase over 2006. The value added (gross product) of foreign affiliates worldwide represented an estimated 11% of global GDP in 2007, and the number of employees rose to some 82 million. The universe of TNCs is expanding.
Manufacturing and petroleum companies, such as
General Electric, British Petroleum, Shell, Toyota
and Ford Motor, retain some of the top positions in
UNCTAD’s ranking of the 25 largest non financial
TNCs in the world. However, TNCs in services,
including in infrastructure, have become increasingly
prominent during the past decade: 20 of them featured
among the top 100 in 2006, compared with only 7 in
1997.
The activities of the 100 largest TNCs
increased significantly in 2006, with foreign sales and
foreign employment almost 9% and 7% higher than
in 2005, respectively. Growth was particularly high
for the 100 largest TNCs from developing countries:
in 2006, their foreign assets were estimated at $570
billion - a 21% increase over 2005. Their countries of
origin have changed little over the past 10 years, with
companies from East and South East Asia dominating
the list of the top 25 such TNCs.
...while sovereign wealth funds are
emerging as new actors on the FDI scene.
A new feature of global FDI is the emergence
of sovereign wealth funds (SWFs) as direct investors.
Benefiting from a rapid accumulation of reserves in
recent years, these funds (with $5 trillion assets under
management) tend to have a higher risk tolerance
and higher expected returns than traditional official
reserves managed by monetary authorities. Although
the history of SWFs dates back to the 1950s, they
have attracted global attention only in recent years
following their involvement in some large scale
cross border M&A activities and their major capital
injections into some troubled financial institutions in
developed countries.
While the amounts invested by SWFs in the
form of FDI remain relatively small, they have been
growing in recent years. Only 0.2% of their total
assets in 2007 were related to FDI. However, of the
$39 billion investments abroad by SWFs over the past
two decades, as much as $31 billion was committed in
the past three years. Their recent activities have been
driven by the rapid build up of reserves generated
by export surpluses, changes in global economic
fundamentals and new investment opportunities in
structurally weakened financial firms.
Almost 75% of the FDI by SWFs has been in
developed countries, with investments in Africa and
Latin America very limited so far. Their investments
have been concentrated in services, mainly business
services.
Investments by SWFs in the banking industry
in 2006-2007 were generally welcomed, owing to their
stabilizing effect on financial markets. However, they
also prompted some negative public sentiment, with
calls to impose regulatory restrictions on investments
by these funds, notably on national security grounds.
International institutions, such as the International
Monetary Fund (IMF) and the Organisation for
Economic Cooperation and Development (OECD),
are in the process of establishing principles and
guidelines relating to FDI by SWFs.