WIR
Dear Members of the World Investment Network
(WIN),
It is my pleasure to share with you the
latest issue of UNCTAD's Global
Investment Trends Monitor: Global
FDI recovery derails.
- Global foreign direct investment (FDI) inflows
declined by 18 per cent in 2012 down from US$1.6 trillion in 2011 to an
estimated US$1.3 trillion. It hit a level close to the trough reached in
2009, due mainly to macroeconomic fragility and policy uncertainty for
investors.
- The strong decline of FDI flows is in stark
contrast to other macroeconomic variables, including GDP, trade and employment
growth which all remain in positive territory.
- The FDI recovery that had started in 2010
and 2011 will now take longer than expected. FDI flows could rise moderately
to US$1.4 trillion in 2013 and US$1.6 trillion in 2014, due to slight improvements
in macroeconomic conditions and the re-profiling of business operations
by transnational corporations (TNCs). However, significant risks to this
scenario persist, including structural weaknesses in major developed economies
and in the global financial system, and policy uncertainty in areas crucial
for investor confidence. Should these risks prevail, the FDI recovery could
be further delayed.
- In 2012, FDI flows to developed countries
fell drastically to $550 billion, a level last seen almost ten years ago.
Of the US$300 billion global decline in FDI inflows, almost 90% was accounted
for by developed countries. FDI declined sharply in Europe and in
the United States. European countries that saw the largest declines in
FDI inflows were Belgium and Germany. FDI flows to the Southern European
countries hit by the crisis (Greece, Italy, Portugal, and Spain) together
more than halved from 2011. The United States remained the largest recipient
of FDI flows in the world, despite the FDI fall in 2012. Elsewhere,
Japan saw a net divestment for the third successive year. A few other developed
countries bucked the trend and saw their FDI inflows increase, namely France,
Canada, Ireland, and the United Kingdom, although none of these increases
were significant in historic terms.
- FDI flows to developing economies remained
resilient in 2012, declining by only 3%, to US$680 billion – still the
second highest level ever recorded. Developing economies absorbed an unprecedented
US$130 billion more than developed countries.
- FDI inflows to developing Asia decreased
by 9.5% as a result of declines across most sub-regions and major economies,
including China, Hong Kong (China), India, the Republic of Korea, Singapore
and Turkey. However, 2012 inflows to Asia were still at their second highest
level, accounting for 59% of FDI flows to developing countries. FDI flows
to China declined slightly but the country continues to be a major FDI
recipient – the second largest in the world. FDI to India declined by
14%, although it remained at the high levels achieved in recent years.
For ASEAN as a whole, FDI inflows declined by 7%. However, some member
countries (such as Cambodia, Myanmar, the Philippines, Thailand and Viet
Nam) registered increases in inflows. FDI flows to West Asia declined for
the fourth consecutive year.
- Latin America and the Caribbean registered
positive growth in FDI in 2012. The rise was strongest in South America.
The persistent strength of commodity prices continues to encourage investments
in the extractive industries, particularly in Chile, Colombia and Peru.
FDI to Brazil slowed but remained robust, and the country is still the
top investment destination in the region.
- FDI flows to Africa rose in 2012. Flows
to North Africa reversed their downward trend, as Egypt saw a rebound of
investment from European investors. The positive growth of FDI flows
to South Africa contributed to a rise in inward FDI flows to Southern Africa.
- Transition economies experienced a decline
in FDI flows of 13% as a result of sluggishness of investment from EU countries
in South-East Europe, and the fall of FDI flows to the Russian Federation.
- Data on cross-border merger and acquisitions
(M&As) show that developed country investors are divesting massively
while investors from developing countries are bucking the trend. In 2012,
the value of cross-border M&As fell by 41%, to the lowest level since
2009. The weak M&A market reflects global macroeconomic uncertainty
and its impact on corporate confidence, especially in developed markets.
A number of developed countries such as Australia, France, Luxembourg,
Portugal and the United Kingdom saw large divestments by their TNCs from
assets abroad in 2012. In contrast, acquisitions by TNCs from developing
economies reached US$115 billion, accounting for a record-high share of
37% of total world M&A purchases. The value of announced greenfield
projects declined for the fourth straight year, falling by 34% to their
lowest level ever. However, the value of greenfield investments still accounts
for two thirds of global investments.
For the latest issue of the Global Investment
Trends Monitor and the UNCTAD Investment Policy Monitor, please click
here . For the latest World Investment
Report, please click
here.
James Zhan
Director
Investment & Enterprise Division
United Nations Conference on Trade &
Development
Palais des Nations, Geneva
Tel: +41 22 9175797
www.unctad.org/diae