Largest transnational corporations pursued further expansion abroard in 2007, Report says

Geneva, 24 September 2008 - The production of goods and services by an estimated 79,000 transnational corporations (TNCs) and their 790,000 foreign affiliates continued to expand in 2007, the latest World Investment Report(1) reveals. The value-added activity of foreign affiliates worldwide accounted for 11% of global gross domestic product (GDP) in 2007, and sales amounted to US$ 31 trillion -- a 21% increase over 2006. The foreign activities of the world´s largest TNCs increased significantly, with those from developing economies expanding most quickly.

The World Investment Report 2008 is subtitled "Transnational Corporations and the Infrastructure Challenge". The report was released today.

Manufacturing and petroleum companies retain some of the top positions in UNCTAD´s ranking of the world´s 25 largest non-financial TNCs (Table 1). However, TNCs in services, including in infrastructure, have become increasingly prominent during the past decade. Comparatively, the largest TNCs from developing economies operate in a broader range of industries, with companies from the electrical/electronic and computer industries, the petroleum sector and telecoms dominating the list (Table 2).

The regions and countries of origin of the world largest TNCs have changed little over the past ten years. While the "triad" -- the European Union, Japan, and the United States -- is still home to most of the world´s largest TNCs, the geographic distribution of firms from developing economies is still in favour of South, East, and South-East Asia. Another striking aspect of foreign operations is the widening geographical spread, or the number of countries hosting foreign affiliates.

One notable aspect of transnationality from the operations perspective is the intensity of foreign operations -- defined as the number of foreign affiliates and the number of host countries in which a company has established its affiliates. The Internationalization Index (II), the ratio of a TNC´s foreign to total affiliates, shows that, on average, more than 70% of the affiliates of the world´s largest TNCs are located abroad. Also, this ratio for companies in the pharmaceuticals, telecommunications, and electrical and electronics industries is much higher than that for companies in the motor vehicle or petroleum industries, meaning a wider spread of their operations in many countries even though foreign direct investment (FDI) may be less important relative to their total assets.

On average, the largest TNCs have affiliates in 41 foreign countries while companies from developing economies have, on average, foreign affiliates in only nine host countries. Developing-country TNCs have expanded mostly in their own regions, although the top locations for their foreign affiliates are the United Kingdom and the United States.

ANNEX

Tables and figures

Table 1. The world´s top 25 non-financial TNCs ranked by foreign assets, 2006(Millions of dollars and number of employees)


Source: UNCTAD; World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge

Note:a - TNI, the Transnationality Index, is calculated as the average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment. Ranking is based on the top 100 TNCs.
b - II, the"Internationalization Index", is calculated as the number of foreign affiliates divided by the number of all affiliates (Note: Affiliates counted in this table refer to only majority-owned affiliates). Ranking is based on the top 100 TNCs.Note: In some companies, foreign investors may hold a minority share of more than 10 per cent.

Table 2. The world´s top 25 non-financial TNCs TNCs from developing countries, ranked by foreign assets, 2006(Millions of dollars and number of employees)


Source: UNCTAD; World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge

Note:a - TNI, the Transnationality Index, is calculated as the average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment. Ranking is based on the top 100 TNCs.
b II, the"Internationalization Index", is calculated as the number of foreign affiliates divided by the number of all affiliates (Note: Affiliates counted in this table refer to only majority-owned affiliates). Ranking is based on the top 100 TNCs.
Note: In some companies, foreign investors may hold a minority share of more than 10 per cent.