Global foreign investment recovering: UN think-tank

22nd July 2010, Comments 0 comments

Global foreign direct investment is recovering and could be back near pre-crisis levels by 2012, providing there are no fresh shocks, a UN think-tank said Thursday.

"Global inflows are expected to pick up to over 1.2 trillion dollars in 2010, rise further to 1.3-1.5 trillion dollars in 2011 and head towards 1.6-2.0 trillion in 2012," the UN Conference on Trade and Development said.

FDI hit a record 2.1 trillion dollars in 2007 before falling back, as the global financial crisis pushed the world economy into recession, to 1.1 trillion dollars in 2009, UNCTAD said.

A "modest recovery" was recorded in the first half of 2010, "sparking some cautious optimism for FDI prospects in the short term," the agency said in its annual World Investment Report.

"In the longer term, the recovery in FDI flows is set to gather momentum," it said, warning that the forecast is fraught with uncertainties given the risks, including a possible sovereign debt crisis in European countries.

South, East and Southeast Asia are expected to play a leading role in the recovery, with the region's growth engine China becoming a key factor in determining FDI flows.

While China remains an attractive region for investors, it faces rising costs in its coastal regions, so becoming less attractive for labour intensive industries which have moved into neighbouring countries.

China in turn, is moving up the value-added chain, seeking higher grade investment accordingly.

"Due to its economy's size and growth potential, China is becoming a key force that could shape the region's production landscape in the years to come," the report said.

In Europe and North America, which bore the brunt of the global crisis, inbound investment fell dramatically in 2009, with the United States alone down 60 percent to 130 billion dollars while the European Union slumped by a third.

UNCTAD said however that the "short- and medium-term prospects for FDI inflows have improved during the first half of 2010" in these countries.

In particular, FDI inflows are expected to increase due to a fresh round of privatisations as European countries with large public deficits and debt try to raise funds to balance their budgets.

© 2010 AFP

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