This year's WIR from UNCTAD focuses on the role of transnational corporations (TNCs) in the extraction of oil, gas, and metal minerals. It emphasises the need for coherent and well-designed host country policies that involve all stakeholders in order to maximize development gains from such industries.
Being rich in natural resources holds both opportunities and challenges, also referred as the "resource curse". The host country's institutional capacity to regulate and monitor its extractive industries is therefore identified as an essential factor if economies want to reduce poverty and raise living standards through energy and mineral extraction.
Recent years have seen a rising demand in minerals, reflected in a steep increase in natural resource-related FDI. Transnational corporations (TNCs), particularly in low-income countries, play a key role in the mining of metals and in the extraction of oil and gas because they provide the necessary foreign capital, know-how, technology and skills. This is seen as a new opportunity for developing countries to become better integrated into global markets. Nonetheless, the most positive outcomes of resource extraction have been found in countries with well-functioning institutions, where the development of industries has involved the active participation of domestic enterprises rather than only TNCs.
The report further points out that resource extraction can lead to environmental degradation and social conflicts. Those adverse environmental consequences could be reduced by the involvement of TNCs which are more likely to use advanced technologies and apply and diffuse higher standards of environmental management than domestic companies. The identified challenge is therefore to strike a balance between economic efficiency and environmental compatibility.
As in previous years, WIR07 analyses the latest data on FDI and traces global and regional trends in FDI and in international production by TNCs. The growth of FDI in 2006 is reported to be the largest since 2000 and occurred in all three groups of economies: developed countries, developing countries, and the transition economies. Despite the general positive prospects for global FDI, it is predicted that the world economy will face several challenges and risks, which may have implications for FDI flows in 2007 and 2008. These include global current-account imbalances causing exchange rate shifts, volatile oil prices, and a potential tightening of financial market conditions.
You can download the entire report from the Vi site by clicking here.