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).
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.
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.
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.
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.
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
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.
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
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
will be released on 29 April 2011.
James X. Zhan
Investment & Enterprise Division
United Nations Conference on Trade & Development
Palais des Nations, Geneva
Tel: +41 22 9175797