Truth in Media Global Watch Bulletins

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TiM GW Bulletin 2003/1-1

Jan 28, 2003

Annual Analysis of U.N. 2002 Report on Global Direct Investments by Largest Multinationals

Global Investments Plummet

... In Aftermath of 9/11; But There Are Some Bright Spots; Gloom and Doom at World Economic Forum

FROM PHOENIX, ARIZONAGLOBAL AFFAIRS


HIGHLIGHTS

Phoenix                               1. Global Investments Plummet

Davos                                  2. Gloom and Doom at World Economic Forum

1. Global Investments Plummet

…In Aftermath of 9/11, But There Are Some Bright Spots

PHOENIX, Jan 23 - In its first report on direct foreign investments for a post-9/11 period, the Geneva-based United Nations Conference on Trade and Development (UNCTAD) provided ample evidence of a global plunge in multinationals’ business spending.

In the aftermath of the Sep 11 attacks, global investments plummeted by 51%.  The business spending in the U.S. and the E.U. (European Union) plunged by 59% and 60% respectively in 2001, according to the UNCTAD 2002 “World Investment Report.”  Spending in the developing world also declined, but much more modestly (down 14% in 2001).

The cross-border M&As (mergers and acquisitions), the main drivers of the foreign investment explosion in the post-Cold War era ($6.1 trillion since 1989), dropped by 48% in 2001. 

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Even in their relative demise, however, the M&A’s gained in prominence as drivers of foreign investment activities.  Their share of direct global investments went form 77% in 2000 to 81% in 2001 (also see “Cross-border M&As Rule the World”, Feb 2001).

But not everything was gloom and doom in the latest UNCTAD report.  There were some bright spots on the global investments map.  Just as we suggested in the immediate aftermath of the 9/11 attacks, what had happened was the End of Folly, Not of World (Sep 2001).  Multinational companies willing to engage in worldwide “stalk and sharp-shoot” contests, rather than “herd and shot-gun” fairs, will fare better.  They will still find the post 9/11 world a target-rich area.

Some Bright Spots

As you can see from the chart, while the developed countries led by the U.S. and the E.U. fell like lemmings off the proverbial cliff in 2001, foreign investments in Mexico, for example, surged by 68%.  Investment activities in India and Hungary were up by 47%.  The Red China, the “Real Cold War Winner,” the developing world’s most popular investment destination, attracted 15% more capital in 2001 than the year before.

Nor were these countries isolated examples.  Eastern Europe, for example, was the only relatively developed region of the world in which foreign investments actually rose in 2001 (they were up 2%).  And they grew at a compound annual rate of 27% in the last 10 years.

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So those among our clients who heeded our 1996 advice - to “stalk and sharp-shoot” by investing in Eastern Europe - are now probably reaping the benefits (see Eastern Europe’s “Renaissance II,” our special report, June 1996).

Africa, the perennial orphan of global bankers and multinationals, appears to have experienced a renaissance of its own amid the post-9/11 gloom and doom.  Foreign investments in that part of the world more than doubled in 2001, from $8.7 billion to $17. 2 billion.  But they continue to be minuscule relative to other world regions.  China alone, for example, received nearly three times as much money in 2001 as the entire continent of Africa in its best year ever.

Furthermore, the increases in Africa are due to large projects in only two countries - South Africa and Morocco.  Global players continue to treat the rest of the continent with casual irrelevance.

By the way, Mexico’s 2001 big jump was also mostly due to a single transaction - Citibank’s $12.5 billion acquisition of Banamex, Mexico’s largest bank.

Regional Analysis

Developed countries weren’t the only losers in 2001.  Investments in Argentina, for example, the Latin American country that bankers and multinational companies showered with money only two years earlier ($24 billion in 1999), dropped by 71% in 2001 to only $3.2 billion.  And the foreign money all but dried out in 2002, as the Argentine financial crisis caused street riots and looting in Buenos Aires.

Brazil, Latin America’s largest country and the biggest recipient of foreign investments in the last 10 years ($156.7 billion), also took a hit in 2001.  Foreign capital inflows into Brazil dropped by 31% to $22.5 billion.  This placed Brazil behind Mexico’s $24.7 billion for the first time since 1995, when Mexico suffered a financial crisis (see “Wall Street, Not Mexico Bailout,” Annex Bulletin 95-08, Feb 2, 1995). 

Investments in Latin America as a whole fell by 11% in 2001. 

Elsewhere in the world, Southeast Asia, the largest recipient of foreign capital in the developing world, suffered a 28% drop in direct investments in 2001.  Hong Kong led the decline by a 63% drop (although HK is now a part of mainland China, it is still also shown as a separate entity in the UN report).  

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Foreign investments in the Pacific region (which includes Japan, Australia and New Zealand), also dropped off sharply in 2001.  They were down 48% from the year before to $136 billion.  This part of the world has had one of the most sluggish foreign investment records in the post-Cold War era.  While global investments surged at 17% compounded annually in the last 10 years, the Pacific region’s growth has been a mere 5% per year.

The biggest recipient of foreign capital in the Middle East also hit a bump in 2001.  Direct investments in Israel slumped by 31% to $3 billion (from $4.4 billion in 2000).  More than offsetting that decline, however, Turkey received a real shot in the arm in 2001 with a $3.3 billion foreign capital infusion.  That’s about a four-fold jump relative to prior years. 

Oil and gas pipelines, and Turkey’s strategic role as Washington’s secular Islamic partner in the Middle East quagmire, both played a part in global bankers’ and multinationals’ renewed interest in this NATO country.  For decades, Turkey has been NATO’s (read Washington’s) eyes and ears closest to Russia’s soft southern underbelly.

Speaking of Russia, come rain or shine; feast or famine; Al Qaeda or Chechnya… Washington’s partner in the war on terrorism continues to be virtually shunned by the global bankers and multinationals (also see Two Faces of Globalism; Yin and Yang; Princes and Paupers, Dec 1998) and Russia Is Still the Bogey, Oct 1997).  For the second year in a row, and for the third time in four years, direct foreign investments into Russia in 2001 have ebbed.  They reached a peak of $4.9 billion in 1997. 

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In 2001, direct foreign inflows amounted to a mere $2.5 billion - about half that of the tiny Czech Republic, and about the same as that of the equally small Hungary.

If money talks, and if smart analysts follow the money, Russia is still being treated as a bogey by the sweet-talking West.  On a per capita basis, the world’s richest country in terms of mineral resources has been consistently receiving 20 times less foreign capital than Israel; 14 times less than Hungary; eight times less than Mexico; six times less than Brazil; and half as much as China, even though the latter is the world’s most populous country.  Only India, Russia’s nuclear partner, has received less among major countries. Who says politics and business don’t mix?

Summary

In our first report after the 9/11 attacks, we opined that what happened was the End of Folly, Not of World:

When the New York stockmarket reopened on Sep. 17 (2001)… the Dow dropped 7% and the airline stocks plummeted about 40%.  To some investors, it seemed as if the end of the world had come.  It did not.  The universe was unfolding as it always has been.  What goes up must come down.  The end of folly, not of the world, was merely taking place… A cashflow-driven market, which is what we’ve been saying for years the Wall Street casino has become, simply shifted its assets away from some U.S. equities into other investment opportunities. 

Annex Bulletin 2001-18 (Sep 26, 2001)

The latest UN report on global investments confirmed our initial assessment.  There are still plenty of opportunities left in the world for patient sharp-shooters.  But the era of shot-gunning the world markets seems to be over.  That’s good news for bargain hunters; bad news for sheep among global investors.

2. Gloom and Doom at World Economic Forum

DAVOS, Switzerland, Jan 27 - What a difference a year can make.  One year ago, the world's economic and political elite gathered for the first time in New York City in an upbeat show of solidarity with the victims of the WTC 9/11 attacks (see "Davos Move to Park Avenue", Feb 2002 and Annual Meeting 2002 in New York).  Now back at its usual venue in the snowy Swiss Alps, the looming U.S. war against Iraq loomed large on the participants' minds.  

And its effect was unmistakably depressing.  Not only has the number of participants dwindled down to a mere quarter of some of its prior meetings, but their spirits have sagged, too.

A poll of people in 15 countries finding that the only leaders the majority trusted were those heading non-governmental organizations, like environmental or social advocacy groups. They scored 56% on the trust meter. Leaders at the United Nations and spiritual/religious counselors scored in the low 40s. Political and business leaders were barely trusted at all. But even they ranked slightly ahead of U.S. political leaders. Just 27% of respondents from other countries said they trusted Washington. Contrast that with about  75% of Americans said they trusted their own leaders, according to a Forbes Jan 27 article.

So "what's a world economic leader to do?," the Forbes asked and then answered tongue-in-cheek its own rhetorical question:

Aside from quitting IBM and joining Amnesty International, they could devote the the World Economic Forum to building trust. "Restoring confidence in the future is the most important leadership challenge today," the organizers say. "Consequently, building trust, the theme of the annual meeting, is more timely than ever."

While restoring confidence seems like a big job, it's nothing compared to what Davos had on its agenda last year. In 2002, when Davos was held in New York City, the goals of the World Economic Forum were to advance security and address vulnerability, reevaluate leadership and governance, reduce poverty and improve equity as well as restore sustained growth. And they were to do all this while sharing values and respecting differences.

Most of these items remain on the world economic leaders' "to-do" lists. The world's leading CEOs have searched in vain for solutions to restore public confidence, Reuters reports. "If any conclusions emerged from the debate in Davos, it was that no single proposal or new piece of regulation was likely to be applicable worldwide, across diverse cultures and borders."

Sounds like the world leaders are at a loss. And rather than stay focused on the business at hand, many are using Davos as a forum to castigate the one group that scores lower than they do in the Davos poll approval ratings: U.S. political leaders.

Here are some excerpts from the Forbes report on that topic:

Davos is focused this year on whether there should be a war with Iraq. Swiss President Pascal Couchepin got things going with a well-received speech arguing that force should not be used against Iraq without the issue being brought before the United Nations' Security Council.

U.S. political leaders still see the World Economic Forum as the place to be, however, a good sign for conference organizers. Attorney General John Ashcroft was there, defending American civil rights policy. Secretary of State Colin Powell made the biggest news of the week with his speech saying that he has lost faith in United Nations weapons inspectors' ability to conduct a definitive search for banned weapons programs. At the same time he did not call for an end to inspections or for an immediate war.

It was not clear how the world took Powell's speech. But in the little corner of the world that is Davos, the mood was still glum and anti-U.S. "The feeling of confrontation against the U.S. was very strong, absolutely too strong for my taste," said Peter Brabeck, chief executive of Nestle SA, the Swiss food giant, to Reuters.

For the rest of the Forbes story, click here.

World Economic Forum 2003 Select Participants

(TiM has highlighted in red some figures particularly interesting to Americans)

Business Participants
Name Position Organization Country
Ziggy E. Switkowski Chief Executive Officer and Managing Director Telstra Corporation Limited Australia
Bertrand Collomb Chairman and Chief Executive Officer Lafarge France
Heinrich von Pierer President and Chief Executive Officer Siemens AG Germany
Carlos Ghosn President and Chief Executive Officer Nissan Motor Co. Limited Japan
Junichi Ujiie President and Chief Executive Officer Nomura Holdings Inc. Japan
Keiji Tachikawa President and Chief Executive Officer NTT DoCoMo Inc. Japan
Nobuyuki Idei Chairman and Chief Executive Officer Sony Corporation Japan
Emilio Azcárraga Jean President, Chief Executive Officer and Chairman of the Board Grupo Televisa SA Mexico
Peter Brabeck-Letmathe Chief Executive Officer Nestlé SA Switzerland
Daniel Vasella Chairman and Chief Executive Officer Novartis AG Switzerland
Peter Sutherland Chairman Goldman Sachs International; British Petroleum Company PLC United Kingdom
Philip Watts Chairman Royal Dutch/Shell Group of Companies United Kingdom
William H. Gates III Co-Founder Microsoft, Bill and Melinda Gates Foundation USA
John T. Chambers President and Chief Executive Officer Cisco Systems Inc. USA
Michael S. Dell Chairman of the Board and Chief Executive Officer Dell Computer Corporation USA
Charles O. Holliday Jr Chairman and Chief Executive Officer DuPont USA
Henry A. McKinnell Chairman and Chief Executive Officer Pfizer Inc. USA

Public Figures
Name Position Organization Country
Abdullah Abdullah Minister of Foreign Affairs of Afghanistan Afghanistan
Alexander Downer Minister of Foreign Affairs of Australia Australia
Alvaro Silva-Calderón Secretary-General Organization of the Petroleum Exporting Countries (OPEC), Vienna Austria
Lord Robertson Secretary-General, North Atlantic Treaty Organization (NATO), Brussels Belgium
Patrick Cox President of the European Parliament Belgium
Mario Monti Commissioner, Competition, European Commission, Brussels Belgium
Javier Solana Madariaga EU High Representative for Common, Foreign and Security Policy and Secretary-General of the EU Council, Brussels Belgium
Luis Inacio Lula da Silva President of Brazil Brazil
Allan Rock Minister of Industry of Canada Canada
José Miguel Insulza Minister of the Interior of Chile Chile
Alvaro Uribe Velez President of Colombia Colombia
Zoran Djindjic Prime Minister of the Republic of Serbia Federal Republic of Yugoslavia
Tarja Halonen President of Finland Finland
Francis Mer Minister of Economy, Finance and Industry of France France
Donald J. Johnston Secretary-General, Organisation for Economic Co-operation and Development (OECD), Paris France
Ronald K. Noble Secretary-General, International Criminal Police Organization (Interpol), Lyon France
George A. Papandreou Minister of Foreign Affairs of Greece Greece
Jaswant Singh Minister of Finance and Company Affairs of India India
Hassan Wirajuda Minister of Foreign of Indonesia Indonesia
Mary Harney Deputy Prime Minister and Minister for Enterprise, Trade and Employment of Ireland Ireland
Shimon Peres Former Prime Minister of Israel Israel
Heizo Takenaka Minister for Economic and Fiscal Policy and for Financial Services, Japan Japan
H.M. King Abdullah II Ibn Hussein of the Hashemite Kingdom of Jordan Jordan
H.M. Queen Rania of the Hashemite Kingdom of Jordan Jordan
Vaira Vike-Freiberga President of Latvia Latvia
Boris Trajkovski President of Macedonia, FYR Macedonia, FYR
Vicente Fox President of Mexico Mexico
Mahathir bin Mohamad Prime Minister of Malaysia Malaysia
Nambar Enkhbayar Prime Minister of Mongolia Mongolia
Abbas El Fassi Minister of State, Office of the Prime Minister Morocco
Joaquim Alberto Chissano President of Mozambique Mozambique
Salam Fayyad Minister of Finance of the Palestinian Authority Palestine Authority
Cheng Siwei Vice-Chairman of the Standing Committee, National People's Congress People's Republic of China
Alejandro Toledo President of Peru Peru
Aleksander Kwasniewski President of Poland Poland
Hamad Bin Jassim Bin Jabr Al-Thani Minister of Foreign Affairs of Qatar Qatar
Chung Dong-Young Chairman Millennium Democratic Party of the Republic of Korea Republic of Korea
Adrian Nastase Prime Minister of Romania Romania
Paul Kagame President of Rwanda Rwanda
Ali bin Ibrahim Al- Naimi Minister of Petroleum and Mineral Resources of Saudi Arabia Saudi Arabia
H.R.H. Prince Turki Al Faisal Al Saud Chairman King Faisal Center for Research and Islamic Studies Saudi Arabia
Lee Hsien-Loong Deputy Prime Minister of Singapore Singapore
Janez Drnovsek President of Slovenia Slovenia
Alec Erwin Minister of Trade and Industry of South Africa South Africa
Trevor Manuel Minister of Finance of South Africa South Africa
Felipe González Márquez Prime Minister of Spain (1982-1996) Spain
Gro Harlem Brundtland Director-General World Health Organization (WHO), Geneva Switzerland
Pascal Couchepin President of the Swiss Confederation and Federal Councillor of Home Affairs Switzerland
Joseph Deiss Federal Councillor of Economy of the Swiss Confederation Switzerland
Kaspar Villiger Federal Councillor of Finance of the Swiss Confederation Switzerland
Kaspar Villiger Federal Councillor of Finance of the Swiss Confederation Switzerland
Benjamin William Mkapa President of Tanzania Tanzania
Recep Tayyip Erdogan Chairman of the AK Parti Turkey
Patricia Hewitt Secretary of State for Trade and Industry of the United Kingdom United Kingdom
Victor F. Yanukovych Prime Minister of Ukraine Ukraine
John Ashcroft US Attorney-General USA
Paul S. Atkins Commissioner, US Securities and Exchange Commission USA
Mark Malloch Brown Administrator, United Nations Development Programme (UNDP), New York USA
William J. Clinton Founder, William Jefferson Clinton Foundation; President of the United States (1993-2001) USA
Kenneth W. Dam US Deputy Secretary of the Treasury USA
Donald L. Evans US Secretary of Commerce USA
Anne Krueger First Deputy Managing Director, International Monetary Fund (IMF), Washington DC USA
Colin Powell US Secretary of State USA
Vu Khoan Deputy Prime Minister of Vietnam Vietnam

NGO Participants
Name Position Organization Country
Peter Eigen Chairman of the Board Transparency International Germany
Ashok Khosla President Development Alternatives India
Kumi Naidoo Secretary-General and Chief Executive Officer Civicus : World Alliance for Citizen Participation South Africa
Yolanda Kakabadse Navarro President The World Conservation Union (IUCN) Switzerland
Claude Martin Director-General WWF - World Wide Fund for Nature Switzerland
Irene Khan Secretary-General Amnesty International United Kingdom
Burkhard Gnärig Chief Executive Officer International Save the Children Alliance United Kingdom
Kenneth Roth Executive Director Human Rights Watch USA
Jonathan Lash President World Resources Institute USA

Religious Leaders
Name Position Organization Country
Sheikh El-Zafzaf President, Permanent Committee for Dialogue among Monotheistic Religions, Alazhar Al Sharif Egypt
Oscar Andres Rodriguez Maradiaga Archbishop of Tegucigalpa Honduras
David Rosen International President, World Conference of Religions for Peace Israel
Junei (Yorihide) Nakada Buddhist Priest Honsenji (Shinagawa-dera) Japan
His Eminence Metropolitan Kirill Metropolitan of Smolensk, Russian Orthodox Church Russian Federation
Lord Carey of Clifton Former Archbishop of Canterbury United Kingdom
Michael L. Fitzgerald President, Pontifical Council for Interreligious Dialogue, Vatican City

Faculties and Members from the Academia
Name Position Organization Country
Ismail Serageldin Director Bibliotheca Alexandrina Egypt
Haruo Shimada Professor of Economics Keio University Japan
Hernando de Soto President Instituto Libertad y Democracia Peru
Laura Tyson Dean London Business School United Kingdom
David Puttnam Chairman The National Endowment for Science, Technology and the Arts United Kingdom
Susan Greenfield Director The Royal Institution of Great Britain United Kingdom
Sadako Ogata Former High Commissioner for Refugees, United Nations High Commissioner for Refugees (UNHCR), Scholar in Residence, Ford Foundation USA
Francis S. Collins Director National Human Genome Research Institute (NHGRI) USA
Wesley Clark Former Supreme Allied Commander for Europe, North Atlantic Treaty Organization (NATO), Managing Director, The Stephens Group USA
C.K. Prahalad Professor of Business Administration University of Michigan Business School USA

Cultural Figures
Name Position Organization Country
Youssou N'Dour Singer, Chairman Youth Network for Development Senegal
Anant Singh Film Producer Videovison Entertainment South Africa
Shekhar Kapur Film Director United Kingdom
David Puttnam Producer and Chairman National Endowment for Science, Technology and the Arts United Kingdom
Julia Ormond Actress and Co-Chair Advisory Committee FilmAid International USA
Ron Silver Actor and Activist Primiparous Productions USA

Media Leaders
Name Position Organization Country
Frederick Kempe Editor and Associate Publisher The Wall Street Journal Europe Belgium
Hamad bin Thamer Al Thani Minister of Broadcasting and Chairman, Al Jazeera Satellite Channel, Qatar Qatar
Arne Wessberg President European Broadcasting Union (EBU) Switzerland
Richard Sambrook Director, BBC News BBC - British Broadcasting Corporation United Kingdom
Geert Linnebank Editor-in-Chief Reuters Group Plc United Kingdom
Stephen B. Shepard Editor-in-Chief Business Week USA
Pamela Thomas-Graham President and Chief Executive Officer CNBC USA
James F. Hoge Editor, Foreign Affairs Magazine Council on Foreign Relations USA
Richard M. Smith Chairman and Editor-in-Chief Newsweek USA
David Ignatius Associate Editor and Columnist The Washington Post Company USA
Mortimer B. Zuckerman Chairman and Editor-in-Chief US News & World Report USA

For more details about this year's Forum, check out the World Economic Forum web site: http://www.weforum.org/.

Also clickhere for an Index of 911-related articles ... and for others on Global Affairs.

Such as… "Greed Bites Back," "Wall Street Casino Revisited""Dirty Tricks with Dirty Bombs",  "Repressing White Americans Through Rampant Immigration", "Plutocrats of the World Unite,"  "Bush League All-Stars,"  “Enronizing Pretzelitis:” New Alzheimer Strain Strikes Potus Potatus Primus Censorship Comes to AmericaGrotesque and Pathetic War,   Clash of GreensEnd of Folly, Not of WorldCollateral Damage Hits Home.  

Plus... Stitching Together the New World Order Flag wpe35.jpg (40845 bytes)

Also, check out some of some other Annex Research reports on global investments and trends:

China: Real Cold War Winner (Mar 2002), Robber Baron Era Is Back (Feb 2001), End of Folly, Not of World (Sep 2001), A Cleaner, Neater World? Hardly. Deadlier, for Sure (Feb 2000), Death of The Corporation (July 1999), Two Faces of Globalism; Yin and Yang; Princes and Paupers (Dec 1998), The Great Asian Bailout (Oct 1997), Russia Is Still the Bogey (Oct 1997).

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Also, check out... Djurdjevic's CHRONICLES magazine columns: "ON THE BRINK OF MADNESS",  "A BEAR IN SHEEP'S CLOTHING",  "WALL STREET BOOM, MAIN STREET DOOM",  "PERPETUAL WAR FOR PERPETUAL COMMERCE",  "WIPING OUT THE MIDDLE CLASS",  "WALL STREET'S FINANCIAL TERRORISM"

Or Djurdjevic's WASHINGTON TIMES columns:  "Christianity Under Siege," "Silence Over Persecuted Christians", "Chinese Dragon Wagging Macedonian Tail,"  "An Ugly Double Standard in Kosovo Conflict?", "NATO's Bullyboys", "Kosovo: Why Are We Involved?", and "Ginning Up Another Crisis"

Or Djurdjevic's NEW DAWN (Australia) magazine columns: "Macedonia: Another Farcical American Oil War,"  "Anti-Christian Crusades,"  "Blood for Oil, Drugs for Arms", "Washington's Crisis Factory,"  and "New Iron Curtain Over Europe"