Manama: Global foreign direct investment (FDI) flows rose by 9 per cent to $1.45 trillion in 2013, according to UNCTAD’s World Investment Report 2014.
FDI inflows increased in all major economic groupings, developed, developing and transition economies. Global FDI stock also rose by 9 per cent, reaching $25.5 trillion.
Subtitled Investing in the SDGs: An Action Plan, the report focuses on channelling investment to sustainable development targets such as poverty reduction, social inclusion and climate change.
Astrit Sulstarova, Chief, Trade and Data Section Investment Trends and Issues Branch, Division on Investment and Enterprise was in Bahrain to launch the WIR 2014. Astrit Sulstarova was joined by Dr Zakriya Hejres Head of MENA Investment Centre and Chief Economist at the Economic Development Board (EDB) Dr Jarmo Kotilaine.
UNCTAD projects that global FDI flows will rise to $1.6 trillion in 2014, $1.75 trillion in 2015 and $1.85 trillion in 2016, driven mainly by investments in developed economies. However, fragility in some emerging markets and risks related to policy uncertainty and regional conflict could still derail the expected upturn in FDI flows. The regional distribution of FDI inflows may tilt back towards the “traditional pattern” of a higher share of global inflows received by developed countries. UNCTAD projections suggest that flows to developed countries as a share of global inflows could reach 52 per cent in 2016, after plummeting to less than 40 per cent in recent years. Nevertheless, FDI flows into developing economies will remain at a high level in the coming years.
In 2013, FDI flows into developing economies reached a new high at $778 billion, accounting for 54 per cent of global inflows, although the growth rate slowed to 7 per cent, compared with an average growth rate over the past ten years of 17 per cent. Developing Asia continues to be the region with the highest FDI inflows. FDI inflows were also up in the other major developing regions: Africa (up 4 per cent) and Latin America and the Caribbean (up 6 per cent, excluding offshore financial centres).
FDI by transnational corporations (TNCs) from developing countries reached $454 billion in 2013, another record high. Together with transition economies, they accounted for 39 per cent of global FDI outflows, compared with only 12 per cent at the beginning of the 2000s. Six developing and transition economies ranked among the twenty largest investors in the world in 2013. Increasingly, developing-country TNCs are buying up the foreign affiliates of developed-country TNCs in the global south.
In terms of regional groupings, the share of Asia-Pacific Economic Cooperation (APEC) countries in global inflows increased from 37 per cent before the crisis to 54 per cent in 2013. Although their shares are smaller, FDI inflows to Association of Southeast Asian Nations (ASEAN) and the Common Market of the South (MERCOSUR) in 2013 were at double their pre-crisis level, as were inflows to the BRICS, Brazil, the Russian Federation, India, China and South Africa.
The three mega-regional integration initiatives currently under negotiation, the Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) – show diverging FDI trends.
The United States and the EU, which are negotiating the formation of the TTIP, saw their combined share of global FDI inflows cut nearly in half, from 56 per cent before the 2008 crisis to 30 per cent in 2013. As for the TPP, the declining share of the United States is offset by the expansion of emerging economies in the grouping, helping the aggregate share increase from 24 per cent before 2008 to 32 per cent in 2013. The RCEP accounted for more than 20 per cent of global FDI flows in recent years, nearly twice as much as the pre-crisis level.