Dear Sir or Madam, 

It is my pleasure to share with you the key findings of UNCTAD's World 
Investment Report 2015 on Global FDI Trends.   

Foreign direct investment (FDI) inflows fell by 16 per cent globally to 
$1.23 trillion in 2014, mostly because of the fragility of the global 
economy, policy uncertainty for investors and elevated geopolitical risks. 
The decline in FDI flows was in contrast to the general global performance 
of macroeconomic variables such as GDP, trade, gross fixed capital 
formation and employment, which all grew. However, some large divestments 
masked a rise in new investments. 

Prospects for global FDI inflows are good, with a projected growth of 11 
per cent to $1.37 trillion in 2015.  It is expected that global FDI flows 
may increase further to $1.5 trillion in 2016 and to $1.7 trillion in 
2017. Both UNCTAD's FDI forecast model and its business survey of large 
multinational enterprises (MNEs) signal a rise of FDI flows in the coming 
years. These expectations of higher FDI flows are supported by growth 
prospects in the United States, the demand-stimulating effects of lower 
oil prices and accommodating monetary policy, continued investment 
liberalization and promotion measures in host countries, and high levels 
of profitability and increase in use of cash reserves among MNEs. The 
share of MNEs intending to increase FDI expenditures over the next three 
years (2015–2017) rose from 24 to 32 per cent. Trends in cross-border 
mergers and acquisitions (M&As) also point to a return to growth in 2015. 
However, a number of economic and political risks, including ongoing 
uncertainties in the Eurozone, potential spillovers from geopolitical 
tensions and persistent vulnerabilities in emerging economies, may disrupt 
the projected recovery. 

In 2014, cross-border M&As rebounded strongly to $399 billion, facilitated 
by the availability of cheap debt coupled with considerable MNE cash 
reserves. The number of deals with values larger than $1 billion increased 
to 223 – the highest number since 2008 – from 168 in 2013. At the same 
time, MNEs made divestments equivalent to half of the value of 
acquisitions. Announced greenfield investment remained sluggish, declining 
by 2 per cent to $696 billion. 

FDI by special investors varied. The significance of private equity funds 
in the global M&A market, with $200 billion in acquisitions in 2014, was 
reflected mainly in transactions involving large companies. Sovereign 
wealth funds, which invested $16 billion in FDI in 2014, are increasingly 
targeting infrastructure internationally. State-owned MNEs' international 
expansion has decelerated; in particular, their cross-border M&As declined 
by 39 per cent to $69 billion. 

The shift towards services FDI over the past 10 years has continued, in 
response to increasing liberalization in the sector, the increasing 
tradability of services, and the growth of global value chains in which 
services play an important role. Services account for 63 per cent of 
global FDI stock, more than twice the share of manufacturing, at 26 per 
cent. The primary sector represented less than 10 per cent of the total. 

Despite the decline in FDI inflows, international production by MNEs’ 
foreign affiliates is expanding. International production rose in 2014, 
generating value added of approximately $7.9 trillion. The sales and 
assets of MNEs’ foreign affiliates grew faster than those of their 
domestic counterparts. At the end of 2014, some 5,000 MNEs had an 
estimated $4.4 trillion in cash holdings, 40 per cent more than during the 
2008–2009 crises. However, MNEs in some industries such as oil and gas, 
and utilities used cash holdings for more capital expenditures and 
acquisitions in that year. 
Best regards, 

James Zhan 
Director, Investment and Enterprise 
Team leader, World Investment Report 
Palais des Nations, Geneva 
Tel: +41 22 917 5797 (World Investment Reports)