World Investment Report 2005 (WIRO5) presents the latest trends in foreign direct investment (FDI) and explores the internationalization of research and development by transnational corporations along with the development implication of this phenomenon. Part One highlights recent global and regional trends in FDI and international production by TNCs. Global FDI flows resumed growth in 2004, but inflows continued to decline in developed countries. This Part documents the fact that developing regions are leading the recovery in FDI flows. It also documents different trends and patterns between developed and developing countries as regards the financing component of FDI as well as the modes of investment. Part Two assesses the implications of the recent surge in R&D internationalization by TNCs, R&D activities at growing levels of complexity are increasingly being established in selected developing countries. In contrast to past experience, this R&D often goes beyond local market adaptation and involves highly complex activities targeted on global markets. The Report discusses the driving forces behind this trend and considers how host as well as home countries are affected. Finally, the Report analyses the need for active government policies to enhance development benefits from TNCs’ internationalization of R&D. The Report underlines the importance of coherent policies in order to create an environment conductive to fruitful interaction between the R&D activities of TNCs and those of domestic firms and institutions. A final chapter outlines the role of international agreements in this area.
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