Business and financial services sector saw increase in 2012 FDI
According to the new fDi Report 2013, published last week by fDi Intelligence, 2012 was a very difficult year for the global Foreign Direct Investment (FDI) market with the number of global FDI projects declining by 16.38 percent in contrast with the 8.54 percent increase in 2011.
The fDi Report 2013, which uses the FDI markets database of The Financial Times Ltd to track greenfield investment projects and helps to identify the latest FDI trends across the globe, showed some exceptions, with a number of countries experiencing strong growth in inward investment projects, including Chile, Spain, Indonesia, Poland and Oman.
The factors behind last year's decline include lackluster economic growth in Europe, Japan and Brazil, much slower growth in China, political instability in the Middle East, and policy uncertainty in the U.S. FDI was also negatively impacted last year due to the continued recovery from natural disasters, such as the earthquake, tsunami and nuclear disasters in Japan, and flooding in Thailand.
Overall, North America was the best-performing region of the world in 2012. Asia-Pacific was the leading regional destination for FDI and Western Europe remained the leading source of FDI overseas. Although FDI into the Middle East fell, it was the only region to increase its volume of outbound FDI, with FDI projects growing by 15.74 percent. The BRIC economies of Brazil, Russia, India and China, which have in recent years attracted more than 22 percent of global FDI projects, had a 17.6 percent decline in 2012.
In Latin America and the Caribbean, the number of FDI projects into the region declined by 19.52 percent. Despite the decline, the region attracted 1,117 FDI projects with Brazil dominating FDI in the region, with 432 projects, equal to almost two-fifths of the FDI in Latin America and the Caribbean. However, Chile replaced Brazil as the star performer of the year. The fastest-growing country in the region, Chile experienced a 25.4 percent increase in project numbers. It was the only country in the region to record an increase in FDI projects. Investment into Chile is driven by sustained 5 percent-plus GDP growth rates and an influx of renewable energy investments attracted by Chile’s excellent conditions for solar power and electricity demand from the mining sector.
For outward FDI, Latin America and Caribbean projects overseas fell by 31 percent, with only 187 FDI projects recorded. Brazil remained the top country for outward FDI, with 48 overseas projects, accounting for 26.67 percent of the FDI from the region. However, Argentina experienced the fastest growth, with a 95 percent increase in project numbers.
The top three sectors in Latin America and the Caribbean were Business and Financial Services, with 249 projects; Information and Communications Technology (ICT), with 224 projects; and Transport Equipment, with 115 projects. These three sectors accounted for 52.64 percent of FDI projects into Latin America and the Caribbean in 2012.
Major projects included Italy-based car manufacturer Fiat’s plans to build a €2.3 billion production plant in Brazil; UST Global’s plan to build an IT services and solutions facility in Mexico; and U.S.-based Business Process Outsourcing (BPO) and IT-enabled services major Sutherland Global Services’ new global delivery center in Jamaica.
Electronic Components and Semiconductors was the fastest-growing sector in the region, increasing its project numbers by 11.9 percent. Business and Financial Services was the only other sector to experience an increase in project numbers in 2012, with its market share increasing to 22.29 percent, demonstrating the growing attractiveness of emerging economies for services investment.
This is good news for the economy of Trinidad and Tobago, which is currently targeting the opportunity to grow its emerging financial services sector. To spearhead this effort, the government has set up the Trinidad and Tobago International Financial Centre (TTIFC) to promote T&T as a destination for middle and back-office operations for financial institutions, as well as third-party Business Process Outsourcing (BPO) providers.
TTIFC is the state agency entrusted with accelerating the growth and development of T&T’s financial services sector. T&T provides companies with facilitation, support and key linkages to its exceptional resources and talent. To date, TTIFC’s efforts have led to interest among targeted companies in entering into Memoranda of Understanding (MOUs). Two such MOUs have been signed with Scotiabank and Pan-American Life.
Financial services is the fastest-growing sector in Trinidad and Tobago, accounting for 13 percent of all GDP, second only to the petroleum sector, and employing well over 50,000 people directly and many thousands more in related sectors. T&T is recognized as a regional financial center and major source of financing for capital projects. It is home to the regional headquarters of two major Canadian banks and significant foreign reserves and liquidity, due to its robust oil and gas sector.
TTIFC’s FINeSS programme (Financial Institution Support Services) helps implement special incentives to support middle and back-office processing for financial institutions and their BPO providers. The FINeSS programme is expected to bring several benefits to Trinidad and Tobago, including meaningful and sustainable employment opportunities (estimated at between 6,000 – 12,000 jobs) in a dynamic sector for T&T’s increasingly educated labour force, and an estimated TT$1 billion overall contribution to its GDP, which will in turn generate additional revenue through taxes from employment and economic activity.
Overall, the TTIFC and FINeSS programme are helping to lay a strong foundation for growth in ICT-related businesses in order to diversify the economy, create high-quality jobs, and increase FDI investment to Trinidad and Tobago’s shores.