The purpose of this note is to provide policy insights to decision makers, academics, and researchers on the trends in investment in Southeast Europe (SEE). A comprehensive assessment of what determines investment is essential to identify, to the extent needed, policy actions that stimulate it. The report looks more in-depth into private investment trends in SEE, and explores some determinants of private investment, such as: the financing sources for investment, the contribution of Foreign Direct Investment (FDI), and the role of public investment. The selection has been made based on the relative importance and data availability for the SEE economies. Some key determinants of investment such as political stability and business environment have not been included because these are already well covered in the existing literature. Overall, the report aims to assess not only the quantity but also the quality of investment. It should be noted that while (investment in) human capital is equally, if not more...

The objective of the South Africa Investment Climate Assessment (ICA) is to evaluate the investment climate in South Africa in all its operational dimensions and to promote policies to strengthen the private sector. The investment climate is made up of the many location-specific factors that shape opportunities and incentives for firms to invest productively, create jobs, and expand. These factors include macroeconomic and regulatory policies, the security of property rights and the rule of law, and the quality of supporting institutions such as physical and financial infrastructure. The main source of information for the ICA is a survey of over 800 formal private enterprises. The survey includes data on firm productivity, the cost of doing business, the regulatory environment, the labor market, the financial sector, the trade regime, and levels of investment. The analysis links business environment constraints to firm-level costs and productivity. Also, the investment climate and performance of firms in South Africa can be compared with those of firms in the more than 70 low- and middle income countries in which Investment Climate Surveys (ICSs) have been conducted.

This report reviews how various countries are seeking to boost public investment management performance (PIMP) in response to the current economic downturn. Public investment, for the purposes of this review, includes investment by the general government plus investment by government-owned corporations. The report was commissioned for the Public Sector Performance Global Expert Team (PSP GET) at the World Bank. The report focuses on the potential roles for public investment management in the current downturn, including: i) scaling-up investment spending i.e. simply doing more; ii) selecting investments that are likely to be most effective in terms of stimulating the economy or protecting particular social/vulnerable groups; iii) helping to accelerate investments by reducing the time between conception to implementation; and iv) other improvements in the general quality of investment spending, i.e. reducing waste or enhancing efficiency and effectiveness.

This review examines corporate governance practices in the investment fund sector of the ten new member states in the European Union, composed of the European countries that transitioned to market economies in the 1990s: the eight countries that joined the European Union (EU) in 2004 .Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. plus Bulgaria and Romania which joined in 2007. Croatia, for which accession negotiations started in 2005, is also included in this Review. (For simplification, these countries will be referred to as the EU11.) The review draws on two sources for data. Over the last two years, in-depth diagnostic reviews of investment governance were conducted by the World Bank in two of the countries, the Czech Republic and Slovenia. The objectives of the reviews were to develop a set of good practices. for investment fund governance and provide specific recommendations for the supervisory authorities in each country. The second source was the public websites of each of the supervisory authorities. The analysis in the review also draws on a number of recent studies done by international organizations such as IOSCO and the EU on governance in the investment fund sector. This review does not attempt to replicate these studies...

The ease of starting a foreign investment in various sectors is a relevant consideration for investors seeking to establish an investment project abroad. Two thematic areas will be analyzed in this paper to answer the following questions: Which economies impose equity ownership restrictions on foreign investors and which procedural barriers do foreign companies face when establishing foreign-owned subsidiaries in these economies? The analysis is based on findings from the Foreign Direct Investment Regulations indicators, which measure 103 economies, on whether they restrict foreign ownership across economic sectors and on the establishment process they impose on foreign-owned companies. Nearly 80 percent of the economies covered in the Foreign Direct Investment Regulations database restrict foreign companies from entering in some sectors of their economies. In addition, establishing a foreign-owned company takes longer and requires more steps than starting a domestically-owned company in 94 percent of the economies observed. Overall...

Global investment promotion best practices (GIPB) assess how well national investment promotion intermediaries (IPIs) from 189 countries attract investment. The assessment is carried out by a review of IPI websites and mystery shopper inquiries that mirror the process in which foreign investors decide the location of the next projects. GIPB 2012 assessment results revealed poor performance of a staggering majority of IPIs in providing information and assistance to prospective investors in the tourism sector (investment facilitation) - a core function of IPIs worldwide. It should also be noted that less than half of the IPIs that listed tourism as a priority sector responded to the inquiry, which even then was often with incomplete information. Based on international best practices, this report recommends that IPIs adopt five key steps in order to position their agencies and locations more competitively for new tourism investment: (1) develop more strategic, focused, and relevant approaches to tourism investment promotion; (2) improve overall capacity and skills to deliver effective investment promotion with an emphasis on developing better tourism-specific knowledge in-house...

Evidence shows that foreign direct investment can provide many benefits to host countries, including productivity improvements, better jobs, and knowledge transfer. Further, it can serve as a vehicle for transformation of domestic production and better integration with global value chains. Nonetheless, these benefits are not automatic. Investment policies are required to maximize the potential gains of foreign direct investment. One challenge is that there are different kinds of foreign direct investment, and each may have different economic, social, and environmental impacts. However, the literature analyzing foreign direct investment often tends to swing from an extremely case-specific focus — analyzing experiences in one particular country in a single sector during a given period — to lumping together the analysis as if it was a homogenous phenomenon. Investment policy formulation requires a framework sophisticated enough to differentiate between the various kinds of foreign direct investment, as well as potential challenges and benefits for development. It must also be simple enough to enable governments to organize and prioritize the multiple and complex variables affecting the maximization of investment benefits. This paper presents an overview of the literature on the impact of foreign direct investment. The paper argues that a logical framework is needed to organize existing evidence from research to fill gaps in the literature and make existing evidence more useful in targeting policy making.

Political risk remains the top preoccupation for foreign investors operating in developing countries over the next three years, in spite of persistent concerns over the global downturn in the short term. The global economic recession triggered by the financial crisis that has unfolded over the past two years has not spared the developing world. Yet, the fragile and modest recovery now under way is being led by developing countries, which are expected to remain attractive destinations for Foreign Direct Investment (FDI). In light of overt political risk perceptions, the revival of FDI to these destinations calls for continued risk mitigation, including Political Risk Insurance (PRI). In the short term, concerns over the fallout from the financial crisis appear to dominate investors' preoccupations. Yet, FDI projections and surveys conducted for this report suggest that investors are cautiously optimistic about prospects for a global economic recovery led by the developing world. As a result, FDI to developing countries is expected to recover over the medium term. Investors from the primary industries...

The impact of good governance on investment management and performance is immense. Several key factors contribute to good governance within pension funds, appropriate governance structures; well-defined accountabilities, policies, and procedures; and suitable processes for the selection and operation of governing bodies and managing institutions. Not surprisingly, good governance requires leadership by individuals with the expertise, professionalism, and integrity to navigate a fund's direction and withstand pressures from multiple constituencies. In the current context of aging populations in many countries, fiscal burdens on pension funds are increasing. At the same time, the necessity of delivering on pension commitments in contributory schemes means that governance, transparency, and accountability should be of utmost importance to pension fund managers. With these concerns in mind, part three of this book provides useful perspectives from senior managers of public pension funds, international pension authorities...

One out of every three dollars invested abroad in 2012 was originated in multinationals from developing countries. This study sheds light on the characteristics, motivations, strategies, and needs of emerging market investors. By including information on investors, potential investors, and non-investors, the study identifies differentiating factors among them that are associated with investment decisions. Results show that emerging market investors are active players in international trade markets; they operate predominantly in manufacturing, and are publicly listed and larger than non-investors. They exhibit a strong regional bias: they invest more heavily in neighbors and in other countries in their own regions. Outward FDI from emerging markets is primarily market-seeking. Expanding regional and host markets emerged as the most important factor influencing the location of investments. However, emerging markets' firms face binding costs of investing in distant, culturally dissimilar markets, resulting...

The drop in foreign direct investment (FDI) flows to the Middle East and North Africa (MENA) region over the past three to four years stems in part from the aftermath of the recent global economic crisis, and in part from the uncertainties created by the political and social changes in the region that have characterized the so-called Arab Spring. However, the medium-term outlook may be more positive as greater governmental transparency and less cumbersome business environments are expected to foster FDI, stimulate entrepreneurship, and create jobs. The Global Investment Promotion Best Practices (GIPB) 2012 report presents well-timed and useful insights into the capacities of IPIs to perform their investment facilitation function. Thus a careful analysis of GIPB findings can be important in helping MENA Investment Promotion Intermediary's (IPIs) introduce targeted improvements that will enable them to increase FDI flows into the region. The GIPB 2012 assessment also detected a number of procedural hitches, such as difficulty in contacting an IPI or a relevant project manager in spite of repeated attempts...

Climate-related hazards have adverse effects on national growth and poverty reduction, affecting the poor and several sectors of the economy simultaneously. At its current rate of growth, Vietnam will become a major global greenhouse gas (GHG) emitter. The Government of Vietnam initiated the Climate Public Expenditure and Investment Review (CPEIR) to advance an understanding of the current policy and institutional architecture as well as to assess current spending on its climate change response to help guide future climate change-related expenditures and policy implementation. The report has three components: (i) a policy, institutional and methodological review; (ii) an analysis of climate change response (CC-response) spending in five line ministries and three provinces; and (iii) recommendations and an action plan. The main goal of the CPEIR is to provide an overview of the current CC-response activities and formulate recommendations for how to improve priority setting, capacity building, coordination, expenditure management...

This report seeks to understand investors' perceptions of political risk as they affect Foreign Direct Investment (FDI), as well as the role of the political risk insurance industry in mitigating these risks. It is found that investors continue to rank political risk as a key obstacle to investing in developing countries, though investors classify macroeconomic instability as their top concern over the medium term. The report confirms a continued increase in the use of political risk insurance as a risk-mitigation tool and reaffirms the industry's health and resilience. Providers have met the challenge of these years with new products and innovative ways to use existing tools as well as substantial capacity to meet growing demand. It also looks at breach of contract risk and its causes. The research helps guide investors and insurers when they participate in a project that involves a contract with a developing-country government entity. As private and public sectors continue to increase their cooperation in service of bringing important investments to fruition, this research is particularly timely.

Weaknesses in the public investment management (PIM) system may limit the gains from higher public sector investments in the Kyrgyz Republic. Capital spending has averaged 6.4 percent of GDP since 2010, up from 4.6 percent of GDP between 2005 and 2009, with significant investment in the energy sector and roads. Still, it remains unclear to what extent these investment decisions reflect the country's and sector priorities. Few projects, with the exception of donor-financed projects are subject to rigorous appraisal and there is no systematic procedure in place to monitor implementation progress. As a result, projects are often delayed or stalled and cost over-runs are frequent. Donor-financed projects, which comprise the bulk of public investment, are subject to relatively more rigorous project cycle management; however, they too face some of the same weaknesses. The rest of the note is structured as follows: section two provides a diagnosis of the public investment portfolio, including the structure of expenditures...

The mission of the Multilateral Investment Guarantee Agency (MIGA) is to promote foreign direct investment (FDI) into developing countries to support economic growth, reduce poverty, and improve people's lives. As part of this mandate, the agency seeks to foster a better understanding of investors' perceptions of political risk as they relate to FDI, as well as the role of the political risk insurance (PRI) industry in mitigating these risks. Today's economic turbulence and fragility in developed countries are again posing challenges for the global economy. Developing countries are feeling the impact through multiple channels, including through the flows of FDI and private capital. Having rebounded sharply in 2010, FDI flows to developing countries continued to increase in 2011, but are expected to moderate going forward. The report highlights once again the salience of political risk as an important concern for multinational enterprises that seek to invest in developing countries. This is also reflected in the increased issuance of new political risk insurance in 2010, a trend that seems to be continuing in 2011, helped by a growing awareness of insurance as a risk-mitigation tool. This year the report also pays special attention to the FDI picture in the Middle East and North Africa region in light of the Arab Spring...

Political risk is a top concern for corporate foreign investors from industrialized but also developing countries when venturing into emerging markets. At the same time, these investors maintain a positive outlook on economic and business prospects in the developing world, which is expected to attract a growing share of global foreign direct investment (FDI) as the world economy slowly, recovers. Positive business sentiment over emerging markets amid concerns over political perils point to a sustained need to mitigate these perils. This, added to the rise of South-based investors, offers opportunities and challenges for the political risk insurance (PRI) industry. In the current context of high uncertainty, understanding how investors perceive and deal with political risks helps to map out the role of PRI in the emerging post-crisis investment landscape. This report focuses on FDI and PRI for long-term investment, and only covers political risk in developing countries. Although political risk also affects other forms of private capital flows...

Public pension funds have the potential to benefit from low operating costs because they enjoy economies of scale and avoid large marketing costs. But this important advantage has in most countries been dissipated by poor investment performance. The latter has been attributed to a weak governance structure, lack of independence from government interference, and a low level of transparency and public accountability. Recent years have witnessed the creation of new public pension funds in several countries, and the modernization of existing ones in others, with special emphasis placed on upgrading their investment policy framework and strengthening their governance structure. This paper focuses on the experience of four new public pension funds that have been created in Norway, Canada, Ireland and New Zealand. The paper discusses the safeguards that have been introduced to ensure their independence and their insulation from political pressures. It also reviews their performance and their evolving investment strategies. All four funds started with the romantic idea of operating as 'managers of managers' and focusing on external passive management but their strategies have progressively evolved to embrace internal active management and significant investments in alternative asset classes. The paper draws lessons for other countries that wish to modernize their public pension funds.

Many countries spend significant resources on investment promotion agencies in the hope of attracting inflows of foreign direct investment. Despite the importance of this question for public policy choices, little is known about the effectiveness of investment promotion efforts. This study uses newly collected data on national investment promotion agencies in 109 countries to examine the effects of investment promotion on foreign direct investment inflows. The empirical analysis follows two approaches. First, it tests whether sectors explicitly targeted by investment promotion agencies receive more foreign direct investment in the post-targeting period relative to the pre-targeting period and non-targeted sectors. Second, it examines whether the existence of an investment promotion agency is correlated with higher foreign direct investment inflows. Results from both approaches point to the same conclusion. Investment promotion efforts appear to increase foreign direct investment inflows to developing countries. Moreover...

Like many other developing countries, South Asian nations have been experiencing increased foreign direct investment inflows over the past decade as developing countries get a larger share of cross-border investments that were once sent to developed countries. Nonetheless, South Asia's inflows of foreign direct investment remain the lowest relative to gross domestic product among developing country regions. Why are South Asia's foreign direct investment inflows so low and what lessons can be drawn for developing countries as a whole? The analysis in this paper uses a novel empirical model that accounts for possible trends in convergence in the ratio of foreign direct investment to gross domestic product between countries and cross-sectional data for 78 countries from 2000 to 2011. The sample contains 52 developing countries. The analysis finds that two key factors are at work -- high overall regulatory restrictions on foreign direct investment and specific restrictions placed on doing business with other countries. These factors include overall trade restrictiveness...

Global economic growth estimates for 2012 indicate a continuing fragile recovery. The ongoing sovereign debt crisis and recession in the euro zone, curtailed bank lending and domestic deleveraging, fluctuating but elevated commodity prices, and the ongoing political turmoil in the Middle East and North Africa have slowed the initial rebound that followed the 2008 global financial crisis. This slow progress has had an impact on developing countries, which initially fared well in terms of rebounding growth rates, private capital flows, and foreign direct investment (FDI). This report examines investors' perceptions and risk-mitigation strategies as they navigate today's uncertain economic waters. It finds that investors continue to rank political risk as a key obstacle to investing in developing countries and are increasingly turning toward Political Risk Insurance (PRI) as a risk-mitigation tool. The insurance industry has responded with new products and innovative ways to use existing products as well as substantial capacity to meet the growing demand.