UN: Global FDI to decline 10% this year

Global foreign direct investment flows are expected to reach 1.6 trillion U.S. dollars this year, representing a 10 percent decline from the record level in 2007, a UN report said on Wednesday.

Global FDI inflows rose in 2007 by 30 percent to reach an all-time high of 1.83 trillion U.S. dollars, said the annual World Investment Report, which was released by the United Nations Conference on Trade and Development .

The upward trend in 2007 was apparent in nearly all regions and subregions of the world, despite the global financial and credit crisis that began in the second half of the year, according to the report.

Developed countries continued to attract the largest share of FDI inflows, reaching 1.25 trillion U.S. dollars. The United States remained the largest recipient country, followed by Britain, France, Canada and the Netherlands.

FDI inflows to developing countries also reached a new record of 500 billion U.S. dollars. While South Asia, East Asia, South-East Asia and Oceania accounted for half of all FDI into developing countries, Latin America and the Caribbean recorded the largest increase .

Developed countries remained the biggest source of FDI, accounting for 1.69 trillion U.S. dollars in 2007. The United States was still the top FDI provider at 314 billion U.S. dollars.

Developing countries also continued to gain in importance as a source of FDI, with outflows peaking at 253 billion U.S. dollars. The biggest sources were China, Hong Kong and Russia.

The report said, however, that global FDI flows would decline in 2008 due to the slowdown and financial turmoil in the world economy.

Economic slowdown and financial turmoil have led to liquidity crisis in money and debt markets in many developed countries. As a result, merger and acquisition activity, the main driver of FDI, has begun to slow markedly.

In the first half of 2008, the value of M&A transactions was 29percent lower than in the second half of 2007, the report said.

It estimated that overall FDI flows in 2008 will be about 10 percent less than the level of last year. But FDI flows to developing countries are likely to remain fairly stable.

Source:Xinhua