GENEVA: Global foreign direct investment (FDI) is expected to rebound in 2015 after falling 16 percent last year because of a fragile world economy and political and military crises, the UN said on Wednesday (Thursday in Manila).
FDI flows worldwide dropped to $1.23 trillion (about 1.1 trillion euros) in 2014, largely due to shaky investor confidence, the United Nations Conference on Trade and Development (UNCTAD) said in its annual report.
The past year saw an unprecedented rise in conflicts, according to the UN, including the Ukraine conflict which pitted Russia against the West in the worst post-Cold War standoff.
But flows to developing nations reached their highest level at $681 billion—a 2-percent rise, the World Investment Report 2015 said.
China, the world’s second biggest economy, drew a total of $129.6 billion of FDI in 2014, it said.
“I think foreign direct investment will continue to grow steadily,” Shen Danyang, ministry spokesman, said recently.
Asia drew a total of $465 billion in FDI, the report said.
The biggest recipients of overseas investment after China were Hong Kong at $103 billion, the United States at $92 billion, followed by Britain, Singapore, Brazil, Canada, Australia, India and the Netherlands.
The report however forecast an 11 percent rise in FDI this year to $1.4 trillion, spurred by higher investments by multinational organizations.
“Expectations are for further rises to $1.5 trillion in 2016 and to $1.7 trillion in 2017,” it said.
“The share of MNEs [multinational enterprises]intending to increase FDI expenditures over the next three years [2015-2017] rose from 24 to 32 percent,” it said.
But it also warned that the projected recovery could be upset by a number of economic and political risks, “including ongoing uncertainties in the eurozone, potential spillovers from conflicts, and persistent vulnerabilities in emerging economies.”
FDI flows to developed countries fell 28 percent last year to $499 billion, UNCTAD said, adding that flows to Europe dropped 11 percent.
The report said overseas direct investments in services had grown steadily over the past decade due to increasing liberalization of the sector.
“In 2012, services accounted for 63 percent of global FDI stock, more than twice the share of manufacturing,” it said, adding that the primary sector represented less than 10 percent of the total.
The report noted that there was a worldwide trend to tailor policies to attract investment with measures to ease red tape and other irritants and boost investor confidence.
“In 2014, more than 80 percent of investment policy measures aimed to improve entry conditions and reduce restrictions,” it said.
“A focus was investment facilitation and sector-specific liberalization [for example in infrastructure and services],” it added.
UNCTAD said another significant shift was the increase in investment between developing countries over the last 10 years, adding that this now comprised over a third of global flows.
“The largest outward investing economies include Brazil, China, Hong Kong [China], India, South Korea, Malaysia, Mexico, Singapore, South Africa and Taiwan,” it said.