THE United
Nations Conference on Trade and Development (UNCTAD) has reported that
foreign investment in developing and transition economies rose to $745 billion
in the first half of 2013, up some 4 per cent over the same period last year.
The October edition of UNCTAD’s Global Investment Trends Monitor notes that
while developing and transition economies absorbed a record share – nearly
60 per cent – of global foreign direct investment (FDI) inflows during the
period, flows to developed countries declined.
“Cross-border mergers and acquisitions and large retained earnings kept in
foreign affiliates were a driving force behind the current global FDI growth,
rather than investment in new productive assets through greenfield investment
projects,” the report clarifies.
In developing and transition economies, the increase was driven by acquisitions
in Central America and the Caribbean, as well as record inflows into Russia,
according to the report. Although flows to developing Asia fell slightly, the
region continues to absorb more than half of the FDI directed to developing
economies as a group, and one quarter of global FDI flows.
UNCTAD says that the fall in developed countries is mainly owing to declines
in the major host countries including the United States, France and Germany.
The United Kingdom remains an exception, continuing its upward trend in FDI
attraction, and becoming the world’s largest recipient of FDI in this period.
The agency estimates that 2013 FDI flows will remain close to the 2012 level,
despite some improvements in macroeconomic conditions in developed economies.
In addition to risks related to the Euro area and the so-called “fiscal cliff”
in the US, the transition to a slower growth pattern in some emerging markets
and weaker consumer demand in developed countries might have a negative impact
on FDI flows this year.
Looking further ahead, UNCTAD forecasts that global FDI flows are poised to
increase in 2014.
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