FDI down 18% in '12, developing states take lead: UN

Last year, global foreign direct investments — when a company in one country invests for instance in production facilities or buys a business in another country — came in at US$1.3 trillion, down from US$1.6 trillion in 2011, UNCTAD's Global Investment Trend Monitor showed.

In a dramatic shift on the global investment scale, developing countries reaped US$680 billion of that, or 52 percent of the total amount.

“For the first time in history, developing countries have attracted more investment than developed countries,” James Zhan, who head's UNCTAD's investment and enterprise division, told reporters in Geneva.

The shift was largely prompted by evaporating investments in crisis-hit developed economies like the United States, European nations and Japan, which accounted for 90 percent of the US$300 billion decline in global FDI last year, Zahn said.

“We thought we were on the way to a steady recovery ... (but) the recovery has derailed.”

He pointed out that global investment figures had turned upwards in 2010 and 2011, but amid growing market uncertainty they fell last year to near the historic low of US$1.2 trillion hit at the worst of the global financial crisis in 2009.

The United States, which remains the world's largest recipient of foreign direct investment, saw its FDI inflows slip more than 35 percent to US$147 billion, while Germany saw its net investment level plunge from US$40 billion in 2011 to just US$1.3 billion last year, mainly due to large divestments there.

FDI inflows did increase slightly in some developed countries, including France, Canada, Ireland and Britain, but “none of these increases were significant in historic terms,” UNCTAD said.

“Developing countries also suffered from the global decline,” Zhan said, “but the decline was much more moderate.”

Asia, which raked in 59 percent of all FDI to developing countries, saw its inflow dip 9.5 percent, with China, the world's second-largest recipient of such investments, registering a 3.4-percent drop in 2012 to US$120 billion.

South America and Africa meanwhile registered positive growth in FDI flows last year.

Last year's overall drop in investments came despite the fact that the global economy grew 2.3 percent last year, while worldwide trade was up 3.2 percent.

And it happened at a time when companies worldwide, excluding China, were seen sitting on US$6 trillion, Zhan said.

“Companies are cash-rich ... They are capable but not yet willing to invest,” he said, explaining that the unresolved debt crises in Europe and the United States, weaker economic growth rates and investor uncertainties around which policies will be implemented going forward were leading to a reluctance to invest.

Going forward, UNCTAD expects FDI flows to rise to just US$1.4 trillion this year and to US$1.6 trillion in 2014 — still far below the 2007 precrisis level of some US$2 trillion in investments.

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