Irish Economy
Irish Economy: Foreign direct investment - - FDI- - into Ireland fell in 2011
By Finfacts Team
Jul 6, 2012 - 7:10 AM

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Irish Economy:  Foreign direct investment - - FDI- - into Ireland fell in 2011. However, these values include fund transfers and retained earnings. In 2011 overall across the world, FDI from the United States was driven by a record level of reinvested earnings, as multinationals built on their foreign cash holdings.

Overall, global FDI inflows rose 16% in 2011, surpassing the 2005–2007 pre-crisis level for the first time, despite the continuing effects of the global financial and economic crisis and the current debt crisis in Europe, according to UNCTAD’s (United Nations Conference on Trade and Development) annual survey of investment trends reports.

Developing countries accounted for 45% of global FDI inflows in 2011. The increase was driven by East and South East Asia and Latin America. East and South-East  Asia still accounted for almost half of FDI in developing  economies.

The World Investment Report 2012 , subtitled “Towards a New Generation of Investment Policies,” was released Thursday.

The report says FDI flows to developed countries grew strongly in 2011, reaching $748bn, up 21% from 2010. FDI flows to Europe increased by 19%, mainly owing to large cross-border M&A purchases by foreign TNCs (transnational corporations: chapter II). The main factors driving such M&As include corporate restructuring, stabilization and rationalization of companies’ operations, improvements in capital usage and reductions in costs.

Ongoing and postcrisis corporate and industrial restructuring, and gradual exits by states from some nationalized financial and non-financial firms created new opportunities for FDI in developed countries.

In addition, the growth of FDI was due to increased amounts of reinvested earnings, part of which was retained in foreign affiliates as cash reserves. (Reinvested earnings can be transformed immediately in capital expenditures or retained as reserves on foreign affiliates’ balance sheets for future investment.

Both cases translate statistically into reinvested earnings, one of three components of FDI flows.) They reached one of the highest levels in recent years, in contrast to equity investment.

FDI inflows to Ireland were valued at $13bn down from $26bn in both 2010 and 2009.

Greenfield investments were valued at $7bn compared with $4.5bn in 2010 and the number grew from 190 to 228.

UNCTAD's definition of 'greenfield,' includes projects from existing companies. Such projects can include new Tesco supermarkets.

Ireland gets a 5th ranking for attractiveness because of the existing large stock of FDI (chart at top of page). However, in a survey of multinational companies, Ireland doesn't appear in the top 20 favourite destinations for 2012-2014 (chart on right).

See also Finfacts article on FDI in Ireland

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