Developing nations on top for first time in 2012 FDI index: UN

Jan 24 2013, 09:36 IST
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Developing countries overtook their wealthier counterparts in attracting foreign direct investment. (Reuters) Developing countries overtook their wealthier counterparts in attracting foreign direct investment. (Reuters)
SummaryDeveloping countries overtook their wealthier counterparts in attracting foreign direct investment.

Developing countries overtook their traditionally wealthier counterparts in attracting foreign direct investment for the first time last year, as industrialised nations bore the brunt of an 18 per cent plunge in FDI flows, the UN's trade and investment think tank UNCTAD said today.

Last year, global foreign direct investments – when a company in one country invests for instance in production facilities or buys a business in another country – came in at USD 1.3 trillion, down from USD 1.6 trillion in 2011, UNCTAD's Global Investment Trend Monitor showed.

In a dramatic shift on the global investment scale, developing countries reaped USD 680 billion of that, or 52 per cent of the total.

"For the first time in history, developing countries have attracted more investment than developed countries," James Zhan, who head's UNCTAD's investment and enterprise division, told reporters in Geneva.

The shift was largely prompted by evaporating investments in crisis-hit developed economies like the United States, European nations and Japan, which accounted for 90 per cent of the USD 300 billion-decline in global FDI last year, Zahnsaid.

"We thought we were on the way to a steady recovery, … (but) the recovery has derailed," added Zahn, who pointed out that global investment figures had turned upwards in 2010 and 2011. But amid growing market uncertainty, they fell last year to near the historic low of USD 1.2 trillion which came during the worst of the global financial crisis in 2009.

The US, which remains the world's largest recipient of foreign direct investment, saw its FDI inflows slip more than 35 per cent to USD 147 billion, while Germany saw its net investment level plunge from USD 40 billion in 2011 to just USD 1.3 billion last year, mainly due to large divestments there.

"Developing countries also suffered from the global decline," Zhan said, "but the decline was much more moderate."

Asia, which raked in 59 per cent of all FDI to developing countries, saw its inflow dip 9.5 per cent, with China, the world's second-largest recipient of such investments, registering a 3.4-per cent drop in 2012 to USD 120 billion.

South America and Africa meanwhile registered positive growth in FDI flows last year.

Last year's overall drop in investments came despite the fact that the global economy grew 2.3 per cent in 2012, while worldwide trade was up 3.2 per cent.

Going forward, UNCTAD expects FDI flows to rise to

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