Global FDI flows at $1.4 trillion, says UN trade body

Written by fe Bureau | New Delhi | Updated: Jun 27 2013, 11:17am hrs
Global foreign direct investment flows may inch up by 3.6% to $1.4 trillion in 2013 after falling 18.2% last year to $1.35 trillion due to economic fragility and policy uncertainty, the United Nations Conference on Trade and Development (UNCTAD) said on Wednesday, while warning that capital flows could reverse if financial markets continue to remain volatile and economic growth slows.

As the global economy recovers and investors regain confidence, transnational corporations (TNCs) may convert their record level of cash holdings into investment and push up FDI flows to $1.6 trillion in 2014 and further to $1.8 trillion in 2015, the UNCTAD said in its World Investment Report.

FDI inflows into India may rise by 15% in 2013 after falling 29% to $26 billion in 2012, UN Escap's South Asia chief economist Nagesh Kumar said, referring to a raft of reform initiatives announced by the government and proposed steps to raise FDI limits in a number of sectors. Though growth has slowed in emerging nations like China and India, they continue to lure a majority of FDI flows. "FDI inflows in 2013 are expected to remain close to the 2012 level with an upper range of $1.45 trillion," the UNCTAD report said, adding structural weaknesses in the global financial system, the possible deterioration of the macroeconomic environment and significant policy uncertainty in areas crucial for investor confidence might lead to further decline in FDI inflows.

Though FDI inflows in developing nations declined by 4% to $703 billion in 2012, it was for the first time that more than half of foreign investment (52%) has flowed to emerging nations. BRIC grouping have emerged as a major source of FDI in other developing nations with outward investment of $145 billion or 10% of the global FDI flows.

FDI inflows into developed nations dropped 32% to 10-year low of $561 billion in 2012, due to slowdown in US, recession in Europe and Japan.