Foreign direct investment (FDI) into developing economies is forecast to peak while China is expected to become a net investor, according to an annual report from an UN agency that was published on Tuesday. In a related survey, Ireland is not among preferred future host sites of top global companies.
The UN Conference on Trade and Development (Unctad) in its annual World Investment Report says FDI grew 9% in 2013 to $1.45tn and is forecast to rise 12.5% this year to $1.6tn.
Despite an overall increase in inflows to $566bn in developed economies , the recovery was concentrated in a smaller set of economies with 24 of 39 economies registering a fall in inflows. Overall outflows were weighed down by a contraction of outflows from North America, despite the continued expansion of investment from Japan and a recovery in Europe. In terms of global share, developed countries accounted for 39% of total inflows and 61% of total outflows – both at a historically low level.
Flows into the developing world were at a record
$778bn, accounting for 54% of global FDI last year with China and the rest of
developing Asia attracting $426bn in FDI in 2013 while the EU and North America
both drew about $250bn in FDI.
By region, inflows to Europe were $251bn (up 3% over 2012), of which the EU countries accounted for $246bn. Among the major economies, inflows to Germany – which had recorded an exceptionally low volume in 2012 – rebounded sharply, but France and the United Kingdom saw a steep decline. In all cases, large swings in intra-company loans were a significant contributing factor. Inflows to Italy and Spain rebounded sharply with the latter becoming the largest European recipient country in 2013.
Ireland had inflows of $38bn and outflows of $23bn in 2013 compared with $38bn and $18bn in 2012 -- however the key metrics are projects and employment as retained earnings, which could be cash holdings related to tax avoidance, are treated as inflows. See chart here on FDI employment in Ireland 2000-2013.
There will likely be a headline that in 2013 the UK inflow was less than the Irish level but again, it would be an empty boast.
Responses to this year’s World Investment Prospects Survey (WIPS) support an optimistic scenario. This year’s survey generated responses from 164 TNCs and China remains the post popular destination for big companies - - see chart above.
In an EY report on Europe published last month [pdf; see page 12], of a panel of 808 international executives, 76% chose Germany (40%), UK, France and the Netherlands as the most attractive destinations.
Outflows from Europe increased by 10% to $328bn,
of which $250bn were from the EU countries. The report shows that Switzerland
became the Europe’s largest direct investor country. However, set against the
drastic decline in 2012, the recovery of European FDI was modest. Both inflows
and outflows remained about half of the level in 2011 and about a quarter of the
peak in 2007.
© Copyright 2011 by Finfacts.com