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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 UNCTAD Palais des Nations, Geneva Tel: +41 22 917 5797 www.unctad.org/diae www.unctad.org/wir (World Investment Reports)