Mergers, acquisitions push global FDI to $1.6 trillion surpassing 2007 pre-crisis levels – UNCTAD

Global foreign direct investment (FDI) outflows rose by 16% in 2011 to an estimated $1.66 trillion, surpassing the pre-crisis levels of 2007, according to the UN Conference on Trade and Development’s (UNCTAD) latest Global Investment Trends Monitor released April 12, 2012.

FDI in 2010 recorded an amount of $1.42 trillion.

This growth, UNCTAD said was due in large part to cross-border mergers and acquisitions (M&A).

“Cross‐border M&A purchases were sharply up in 2011, rising by 70% to reach $585 billion,” the Monitor said. It adds that developed‐country Transnational National Corporations (TNCs) generated the majority of this increase, especially those from the EU and Japan, with their purchases rising 79%, to $401 billion.

Purchases by TNCs from developing regions, in contrast, registered only a 6% increase, largely due to a slowdown in cross-border purchases by Indian and Brazilian TNCs, UNCTAD observed.

The report notes that much-needed direct investment in new productive assets through greenfield investment projects or capital expenditures in existing foreign affiliates appeared to be limited.

The Monitor indicated that the outward FDI from developed countries rose by 25% in 2011, exceeding $1.23 trillion, with the European Union (EU), North America, and Japan contributing to the growth.

Meanwhile, FDI outflows from developing countries fell by 7%. This was “mainly due to significant declines in outward FDI from Latin America and the Caribbean,” it added.

The drop has put the share of developing and transition economies in global FDI outflows to 26% in 2011 from 31% in 2010.

Prospects for FDI outflows in 2012 continue to improve since the depth of the crisis, but they remain guarded due to the fragility of the global economic recovery, the Monitor says.

By Ekow Quandzie