Business

Friday September 18, 2009

Global FDIs to fall below US$1.2tril this year

By Leong Hung Yee


hungyee@thestar.com.my

KUALA LUMPUR: Global foreign direct investment (FDI) inflows are estimated to fall to below US$1.2 trillion in 2009 from US$1.7 trillion last year.

According to the United Nations Conference on Trade and Development’s World Investment Report 2009 (WIR 2009), prospects for global FDI remained gloomy as a result of a worsening of the financial and economic crisis in 2008.

“Recovery is expected to be slow in 2010, reaching no more than US$1.4 trillion, but gathering momentum in 2011 to approach US$1.8 trillion,” it said.

While FDI inflows declined globally and in developed countries, where the financial crisis originated, flows to developing countries and the transition economies of south-east Europe and the Commonwealth of Independent States continued to rise last year.

“The crisis has changed the FDI landscape, with a surge in the developing and transition economies’ share in global FDI flows of 43% in 2008.

"This change in the pattern of inflows is partly due to the large decline in FDI inflows to developed countries, which in 2008 shrank by 29% to US$962bil, compared with their level in the previous year,” said WIR 2009.

The United States remained the world’s largest recipient followed by France, China, Britain and Russia.

The least developed countries attracted a record US$33bil worth of inward FDI in 2008.

FDI inflows to developing economies rose by 17% to US$621bil, with South-East Asia and Oceania accounting for roughly half of those flows.

Despite slowing inward and outward FDI in the region since late 2008, South, East and South-East Asia, recorded a 17% jump in FDI due to earlier momentum in 2008, posting a record US$298bil in the year.

Nevertheless, overall FDI inflows in the region were one-third lower in the first quarter of this year, compared with the same period in 2008.

Singapore saw a massive decline of 61% in FDI inflows in the first quarter of 2009 compared with the previous corresponding period.

Its FDI outflows shrunk by 44% in the first quarter against the same period in 2008.

According to the report, regional and global FDI flows were being reshaped by China and India, which accounted for 50% of regional FDI inflows and about 10% of global inflows.

Both countries reported historic FDI inflows in 2008, bringing in US$108bil and US$42bil respectively.

FDI outflows from developed countries in 2008 fell less sharply than inflows.

The United States maintained its position as the largest single source country of FDI, followed by France, while Japan had a 74% increase in outward FDI.

In general, outflows from developing regions continued to grow, reaching US$293bil in 2008 although the performances of individual regions varid.


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