Global foreign direct investments rise to $1.24 trillion – UN
Global foreign direct investment (FDI) inflows have risen to $1.24 trillion in 2010 from $1.18 trillion in 2009, says a new United Nations Conference on Trade and Development (UNCTAD) report.
According to the report, titled, “The World Investment Report (WIR) 2011,” released today July 26, 2011, FDI inflows rose by 5%, higher than that of 2008 and 2009.
The report says even though the inflows rose by 5%, it still remained some 15% below their pre-crisis average, and 37% below their 2007 peak.
“Global foreign direct investment (FDI) inflows rose modestly in 2010, following the large declines of 2008 and 2009. At $1.24 trillion in 2010, they were 5% higher than a year before,” said the WIR.
For the first time, the report indicates that developing countries received more than half of the FDI inflows which actually contributed to the growth.
“This moderate growth was mainly the result of higher flows to developing countries, which together with transition economies – for the first time – absorbed more than half of FDI flows while world industrial production and trade are back to their pre-crisis levels,” it noted.
FDI flows to developing economies rose by 12% (to $574 billion) in 2010, due to relatively fast economic recovery, the strength of domestic demand, and burgeoning South–South flows.
Amidst post-crisis business environment still beset by uncertainties, UNCTAD “predicts that the recovery of FDI flows will continue in 2011 and will reach a total of some $1.4 to $1.6 trillion, thus returning to the pre-crisis average. Thereafter, flows are forecast to rise to $1.7 trillion in 2012 and $1.9 trillion in 2013.”
Despite the emergence of certain developing countries, FDI flows continued to decline in some of the poorest regions of the world, the report said.
Flows to Africa and South Asia, as well as to least developed countries, landlocked developing countries and small island developing States fell in 2010.
In terms of which sectors received the highest of these FDIs, the report notes that FDI in services continued its downward path in 2010 with all the main service industries (business services, finance, utilities, and transport and communications) recording a decline though at different speeds.
The services sector decreased from 33% in 2009 to 30% in 2010.
The share of foreign investment channeled to manufacturing increased from 37% in 2009 to 48% in 2010 accounting for almost half of all FDI projects-cross-border mergers and acquisitions and greenfield projects, according to UNCTAD.
The chemical industry, including pharmaceuticals, remained resilient through the crisis, while industries such as food, beverages and tobacco, textile and garments, and automobiles, recovered in 2010 as well as the extractive industries, a sector relatively unaffected by the crisis, declined, despite the growing demand for raw materials and energy resources.
By Ekow Quandzie