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Dear Members of the World Investment Network,
 
It is my pleasure to share with you the key findings of the latest issue 
of UNCTAD's Global Investment Trends Monitor, which this quarter focuses 
on outward FDI (please see attached).
 
·         The good news is that, "global FDI outflows rose by 13%, with 
flows from developing and transition economies reaching a record high, 
both in absolute terms and as a share of global total flows ".  The bad 
news is that, "global FDI outflows are still 40% short of the record level 
achieved in 2007, the year prior to the financial crisis". 
With public debt unsustainably high in many countries, governments now 
have to rein in budget deficits. Sustained recovery will thus become 
increasingly dependent on private investment stepping in. Fortunately, 
companies are awash with cash. Unfortunately, they seem reluctant to part 
with it. However, on the positive side, it seems that firms are reigniting 
the investment engine. In consequence, global FDI outflows in 2010 thus 
increased by 13%, to over $1.3 trillion. Nevertheless, this level is still 
some 10% below the pre-crisis average, and 40% below the 2007 peak. 
 
·         Outward FDI from developing and transition economies has reached 
a record high, both in absolute terms and as a share of the global total. 
The strength of  developing and transition economies, the dynamism of 
their TNCs, and their growing aspiration to compete in new markets, drove 
up their outward FDI flows to  $377 billion, a 23% increase over the 
previous year. Their share in global outflows reached 28%, up from 15% in 
2007. Investors from Latin America and South, East and South-East Asia 
were the major sources for this strong upsurge in FDI outflows. In 
addition, while FDI outflows from Africa and West Asia continued to 
decline, those from transition economies also grew in 2010. 
 
·         The lion’s share of FDI from the South is directed to the South. 
In 2010, 70% of FDI projects (cross-border and greenfield FDI projects) 
from the South were directed towards other developing and transition 
economies. 
 
·         Developed countries saw a limited recovery in their total 
outward FDI, but their investment in developing economies has increased 
significantly.   Reflecting the divergences of economic conditions in 
major developed economies, trends in FDI outflows differed markedly across 
countries and  regions: Outflows from Europe were slightly up (3%), those 
from the United States rose significantly (31%), but Japanese outward FDI 
flows dropped further in 2010  ( by 24%).The lingering effects of the 
crisis in developed countries has forced many developed-country TNCs to 
invest further in emerging markets in an effort to maintain their markets 
and profits. In 2010 almost half of developed country's investments 
(cross-border and greenfield FDI projects) was in developing and 
transition economies, compared to only 30 per cent in 2007. 
 
·         The increase in FDI outflows in 2010 was driven by higher 
reinvested earnings, thanks to improved economic performance in many parts 
of the world and increased profits of foreign affiliates, especially in 
developing countries. This increase together with improvements in other 
investments (mainly intra-company loans) offset equity investments – the 
component most directly related to TNCs' long-term investment strategies – 
which remained sluggish in 2010. 
 
·         Cross-border M&As are still volatile. They increased in 2010 as 
a whole, reflecting the growing value of assets on the stock market and 
the increased financial capability of potential buyers, but declined again 
in the first quarter of 2011. Greenfield investment projects, in contrast, 
are larger in value and number than cross-border M&As, but also maintained 
their upward trend at the beginning of 2011.
 
·         With the global economy gaining strength, rising stock market 
valuations and rebounding TNC corporate profits, UNCTAD expects FDI 
outflows to continue to rise in 2011 . Ongoing corporate and industrial 
restructuring, and a new wave of privatization in some countries, are 
creating new investment opportunities for cash-rich companies based in 
both developed and developing countries. TNCs from emerging economies are 
expected to continue to grow in 2011. 
 
·         Clearly, a number of downside risks to FDI growth remain, such 
as the unpredictability of global economic governance, the sovereign debt 
crisis in developed countries and fiscal austerity, instability in some 
regions, rising energy prices and the dangers inherent in inflation, and 
exchange rates volatility. In addition, the rise in trade and investment 
protectionism continues to raise concerns and might also play a part in 
potentially derailing FDI recovery. 
 
For your information, the next issue of UNCTAD's Investment Policy Monitor 
 (www.unctad.org/diae) will be released on 29 April 2011. 
James X. Zhan 
Director 
Investment & Enterprise Division 
United Nations Conference on Trade & Development 
Palais des Nations, Geneva 
Tel: +41 22 9175797 
www.unctad.org/diae 

 


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