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Global foreign direct investment (FDI) flows will fall 10% this year from their 2007 record as major companies scale back spending plans, the United Nations Conference on Trade and Development (UNCTAD) has said.
FDI flows rose 30% to $1.83 trillion in 2007, despite the onset of the global financial crisis halfway through the year, UNCTAD said in a new report issued on September 24. But they are falling this year, largely because of a sharp drop in merger and acquisition (M&A) activity, the main driver of FDI, it said in its yearly review of investment trends.
“FDI flows to developing countries as a group are likely to remain quite stable. The main drop will be found in the area of mergers and acquisitions,” UNCTAD secretary general Supachai Panitchpakdi said.
Cross-border M&A, mainly between developed countries, was 29% lower in the first half of this year than in the second half of 2007, UNCTAD said. In 2007 as a whole it totalled $1.64 trillion.
A survey of 226 of the biggest multinationals conducted between April and June this year -- before the full force of the financial crisis set in -- shows 21% of companies expect a large increase in FDI over the next three years, UNCTAD said. That compares with 32% of companies in a similar survey a year ago.
The UNCTAD survey shows that companies consider China, India, the US, Russia and Brazil as the most attractive destinations for investment.
Developed countries continued to attract the biggest share of FDI, with $1.25 trillion in 2007, led by the US, where the weak dollar stimulated inflows, Britain, France, Canada and the Netherlands.
FDI inflows into developing countries jumped 21% to $500 billion, with Africa attracting a record $53 billion. (Source: LiveMint)
October 1, 2008
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