Foreign Investment Fell Worldwide in 2014, U.N. Says

  • by Roger Hamilton-Martin (united nations)
  • Inter Press Service

The UNCTAD report pointed to the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks as factors contributing to the drop in FDI. New investments were also offset by some large divestments.

However, FDI rose slightly to developing economies, which extended their lead in global inflows of investment. China is now the largest global recipient of FDI.

Released just ahead of the third international conference on financing for development in Addis Ababa in mid-July, the report concluded that reforming international investment governance is key to building an enabling environment for investment, maximising the chances of reaching ‘financing for development' targets to be discussed at the conference.

West Asia maintained its downward trend in FDI in 2014 for the sixth consecutive year, decreasing by 4 per cent to 43 billion dollars. The report describes a succession of crises that have hit the region, including the global economic crisis and an eruption of political unrest leading to conflict in some countries, which have contributed to the continuous fall.

Elsewhere in South, East, and South-East Asia, the report was more positive. Inflows to South Asia rose to 41 billion dollars in 2014, primarily owing to good performance by India, while inflows to East Asia rose by 12 percent to 248 billion, and those to South-East Asia experienced a 5 percent increase, to 133 billion. China's boost was driven by an increase in FDI to the services sector, while FDI fell in manufacturing, especially in industries that are sensitive to rising labour costs.

Developing economies as a group attracted 681 billion dollars worth of FDI and remain the leading region by share of global investment inflows. Among the top 10 FDI recipients in the world, half are developing economies: Brazil, China, Hong Kong (China), India and Singapore.

Developed economies, however, recorded a 28 per cent decline in inflows last year. This figure was greatly affected by the single mega divestment by Vodafone of its Verizon Wireless business in the United States. The Vodafone deal was indicative of a general trend in merger and acquisition activity which saw divestment deals rising to one out of every two mergers and acquisitions.

Edited by Kitty Stapp

© Inter Press Service (2015) — All Rights ReservedOriginal source: Inter Press Service