Geneva, 27 July 2011 (WAM) -- Cross-border non-equity modes (NEMs) of international production generated at least $2 trillion in sales globally in 2010 and are growing rapidly, shaping world trade and investment patterns, with important implications for development, the UNCTAD annual report on global investment trends reveals.
The World Investment Report 2011(1) (WIR11) , released today, is subtitled "Non-equity modes of international production and development." The study explains that international production is not exclusively about foreign direct investment (FDI) on the one hand and trade on the other. NEMs - which include contract manufacturing, services outsourcing, contract farming, franchising, licensing, and management contracts - allow transnational corporations to coordinate activities in their global value chains and influence the management of host-country firms without owning equity stakes in those firms. Transnational corporations manage the activities of NEM partner firms in their global value chains - for example, a local company in a host country assembling a product or providing information technology (IT) support - through contracts or, equally important, through access to transnational corporations? technology, skills, business models or internal markets. Transnational corporations seldom take equity stakes in NEM partner firms, although the partner firms are tied to the transnational corporations? global networks. Cross-border NEM activity worldwide is significant and particularly important in developing countries. UNCTAD estimates that contract manufacturing and services outsourcing across borders accounted for $1.1trilllion-$1.3 trillion, franchising $330 billion-$350 billion, licensing $340 billion-$360 billion, and management contracts around $100 billion in sales in 2010 (table 1 for selected industries). In most cases, NEMs are growing more rapidly than the industries in which they operate.Copyright Emirates News Agency (WAM) 2011.
