Dear Sir or Madam,

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

Foreign direct investment (FDI) flows to developing economies reached their highest level ever, at $681 billion with a 2 per cent rise. Developing economies thus extended their lead in global inflows. China became the world's largest recipient of FDI. Among the top 10 FDI recipients in the world, 5 are developing economies.

- Developing Asia saw FDI inflows grow to historically high levels, reaching nearly half a trillion dollars in 2014, further consolidating the region’s position as the largest recipient in the world. Multinational enterprises (MNEs) have become a major force in enhancing regional connectivity in East and South-East Asia, including through cross-border investment in infrastructure. In West Asia weakening private investment in parts of the region is partly compensated by increased public investment, which has boosted non-equity modes (NEMs) of MNE activities in areas such as construction. In South Asia, FDI continues to increase in the manufacturing sector such as automotives.

- FDI inflows to Africa remained flat at $54 billion. Although the services share in FDI in Africa is still lower than the global and the developing-country averages, services accounted for 48 per cent of the total FDI stock in the region (mainly concentrated in a few advanced countries), more than twice the share of manufacturing (21 per cent). FDI stock in the primary sector was 31 per cent of the total.

- FDI flows to Latin America and the Caribbean decreased to $159 billion in 2014, after four years of consecutive increases. This was mainly due to a decline in cross-border mergers and acquisitions (M&As) in Central America and the Caribbean and to lower commodity prices, which dampened FDI to South America. The FDI slowdown, after a period of strong inflows driven by high commodity prices, may be an opportunity for Latin American countries to re-evaluate FDI strategies.

FDI inflows to structurally weak developing groups varied. FDI to the least developed countries (LDCs) increased by 4 per cent. Landlocked developing countries (LLDCs) experienced a decline of 3 per cent in FDI inflows, mostly in those in Asia and Latin America. By contrast, FDI inflows to Small Island Developing States (SIDS) increased by 22 per cent, due to a rise in cross-border M&A sales. These variations in FDI inflows, differences in other sources of external flows, and dissimilar development priorities require a careful evaluation of strategies by groups and individual countries for the post-2015 development agenda when FDI is combined with ODA and other domestic and foreign sources of finance.  

South‐South FDI flows, including intraregional flows, have intensified in recent years. FDI outward stock from developing economies to other developing economies, grew by two-thirds from $1.7 trillion in 2009 to $2.9 trillion in 2013. The share of the poorest developing regions in South-South FDI is still low, but growing.

The low level of flows to developed countries persisted in 2014. FDI flows to this group of economies declined by 28 per cent to $499 billion. Divestment and large swings in intracompany loans reduced inflows to the lowest level since 2004. The numbers were also significantly affected by a single large-scale divestment from the United States. The impact of MNE operations on their home countries' balance of payments has increased, not only through FDI, but also through intra-firm trade and FDI income. The recent experience of the United States and Japan shows that growing investment income from outward FDI can provide a counterbalance to the rising trade deficits.

FDI in transition economies decreased by 52 per cent to $48 billion in 2014. In the Commonwealth of Independent States (CIS), regional conflict coupled with falling oil prices and international sanctions reduced foreign investors’ confidence in the strength of local economies. The Russian Federation − the largest host country in the region −  saw its FDI flows fall by 70 per cent due to the country's negative growth prospects, and as an adjustment after the level reached in 2013 due to the exceptionally large Rosneft−BP deal.

Most regional groupings and initiatives experienced a fall in inflows in 2014. The groups of economies negotiating the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) saw their combined share of global FDI inflows decline. ASEAN (up 5 per cent to $133 billion) and the Regional Comprehensive Economic Partnership (RCEP) (up 4 per cent to $363 billion) bucked the trend.

With 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)