No. 8 24 January 2012
GLOBAL FLOWS OF FOREIGN DIRECT INVESTMENT EXCEEDING PRE-CRISIS LEVELS IN 2011, DESPITE TURMOIL IN THE GLOBAL ECONOMY HIGHLIGHTS Despite turmoil in the global economy, global foreign direct investment (FDI) inflows rose by 17 per cent in 2011, to US$1.5 trillion, surpassing their pre-crisis average, based on UNCTAD estimates (figure 1). Figure 1. Global FDI flows, average 2005 2007 and 2007 to 2011 (Billions of US dollars) 1 969 1 744 1 480 1 472 1 180 1 290 1 509
0 pre-crisis average 2005-2007 2007 2008 2009 2010* 2011**
Source: UNCTAD. * Revised. ** Preliminary estimates.
FDI inflows increased in all major economic groupings developed, developing and transition economies Developing and transition economies continued to account for half of global FDI in 2011 as their inflows reached a new record high, at an estimated US$755 billion, driven mainly by robust greenfield investments. In this group, the 2011 increase in FDI flows was no longer driven by South, East and South-East Asia (which saw an increase of 11 per cent), but rather by Latin America and the Caribbean (increase of 35 per cent) and by transition economies (31 per cent). Africa, the region with the most least developed countries (LDCs), continued its decline in FDI inflows.
FDI flows to developed countries also rose by 18 per cent, but the growth was largely due to cross-border merger and acquisitions (M&As), not the much-needed investment in productive assets through greenfield investment projects. Moreover, part of the M&A deals appear to be driven by corporate restructurings and a focus on core activities, especially in Europe. Looking forward, UNCTAD estimates that FDI flows will rise moderately in 2012, to around US$1.6 trillion. However, the downward quarterly trend in FDI projects over the final quarter of 2011 indicates that the risks and uncertainties for further FDI growth in 2012 remain in place.
Global FDI flows rose in 2011, surpassing their pre-crisis level Global FDI inflows rose in 2011 by 17 per cent compared with 2010, despite the economic and financial crisis. The rise of FDI was widespread, including all three major groups of economies developed, developing and transition though the reasons for this increase differed across the globe (see below). During 2011, many countries continued to implement policy changes aimed at further liberalizing and facilitating FDI entry and operations, but also introduced new measures regulating FDI (see UNCTAD's Investment Policy Monitor). UNCTAD’s global FDI quarterly index remained steady during 2011, underscoring the increased stability of flows witnessed during the year. Unlike foreign portfolio flows that have dramatically started to decline in the third quarter of 2011, FDI flows maintained their upward trends at least until this period (figure 2). However, as preliminary data from cross-border M&As and greenfield investment projects suggest, FDI flows are expected to slow down in the fourth quarter of 2011. Figure 2. UNCTAD’s global FDI quarterly index compared with global foreign portfolio investment index , first quarter 2007 to last quarter 2011 (Base 100: quarterly average of 2005) 350
Foreign portfolio investment
0 Q1 - 50 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Source: UNCTAD. Notes: The Global FDI Quarterly Index is based on quarterly data of FDI inflows for 67 countries. The index has been calibrated so that the average of quarterly flows in 2005 is equivalent to 100. The similar index for global foreign portfolio investment is also based on quarterly data of portfolio investment inflows for the same 67 countries. This index has also been calibrated so that the average of quarterly flows in 2005 is equivalent to 100. Figures for the last quarter of 2011 are UNCTAD estimates.
After three years of consecutive decline, FDI flows...
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