Here are some interesting information concerning the flow of Direct Foreign Investment (FDI) for KAWAN’S readers’ information:
UNCTAD recently released new estimates on Global foreign direct investment (FDI). Complete UNCTAD estimates is attached (please refer below).
Global flows of FDI fell 21% to US$1.4 trillion in 2008 from a record high of US$1.8 trillion in 2007, and set to decline further in 2009.
Preliminary data for 2008 indicates that a number of countries that were formally leading recipients of FDI experienced the sharpest drops in 2008:
· UK - fell by 51% to US$109 billion;
· France - fell by 27.6% to US$114.3 billion;
· Italy - fell 94.3% to US$2.3 billion;
· Germany – fell 48.9% to US$48.9 billion; and
· Netherlands – fell 70.4% to US$29.5 billion.
However, inflows to the US fell by just 5.5%, to US$220 billion.
In Asia, inflows fell by 2.2%, mainly due to a 21.3% drop in investment in the Middle East. However, inflows were increased in China and India, 10.2% to US$92 billion and 59.9% to US$36.7 billion respectively. Malaysia enjoyed 53.4% increase from 2007 figure of US$8.4 billion to US$12.9 billion in 2008, while Singapore incurred a drop of 57.2% in their investment inflows. Thailand and Indonesia experienced a drop in investment inflows, 4.4% and 21.3% respectively.
Africa attracted more investment in 2008, with inflows up 16.8% from 2007 to US$61.9 billion. Inflows to Latin America and the Caribbean rose by 12.7% to US$142.3 billion.
UNCTAD stated that:
· Factors such as anticipated global recession, tighter credit conditions, falling corporate profits, uncertainties for global economic growth as well as companies’ announced plans to reduce production, lay off workers, and cut capital expenditures will contribute to reduce FDI.
· In the short-term, the negative impacts of the financial and economic crises on FDI are expected to remain dominant and to contribute to a continued fall in overall FDI through 2009.
· Developing countries will not be spared, and FDI falls in 2009 is expected to be more widespread.
· Public policies will play a major role in the establishment of favorable conditions for a quick recovery of FDI flows.
· Structural reforms aimed at ensuring more stability in the world financial system, prompt and effective economic stimuli by national governments, renewed commitment to an open attitude towards FDI, the implementation of policies aimed at favoring investment and innovation especially in the fields of environment, new energy sources, and small and medium-sized enterprises are key issues in this respect.
· With the reforms, the current crisis thus could turn into a major opportunity for creating new impetus for global FDI provided that policymakers resist calls for more protectionism and other policies that restrict FDI.
Beyond 2009, the outlook for FDI flows is still unclear due to the exceptional magnitude of the present crisis and the fact that it could lead to major structural changes in the world economy. UNCTAD expects (worst-case scenario) that FDI flows may not start to rise again until 2012.
