Crisis impact on FDI less than feared: UN report

6th September 2010, Comments 0 comments

The world economic crisis had a smaller impact on foreign investment than feared, a UN think-tank said Monday, noting that less than a fifth of firms surveyed drastically divested as a result of the downturn.

A survey conducted by the UN Conference on Trade and Development (UNCTAD) on 236 transnational corporations found that 18 percent of the respondents said that the crisis triggered large-scale divestments or closures of foreign subsidiaries.

"The crisis was less destructive to FDI (foreign direct investment) than had been feared," said the UN body.

"While investment budgets, including those for FDI, were squeezed during the crisis, TNCs did not engage in wholesale divestment of their foreign affiliates," it added.

Rather than liquidate their foreign assets, many of these firms have begun a large-scale reduction of operating costs.

"They have preserved the overall structure of their presence overseas, with little reversal in their overall level of internationalisation," it added.

The crisis has however accentuated a shift of investments to emerging economies.

China, India and Brazil now occupy the top three most popular locations for foreign direct investments for 2010 to 2012, relegating the United States, which ranked second in 2009, to fourth place.

UNCTAD had earlier said that FDI is recovering and could be back to near pre-crisis levels by 2012.

It said that total FDIs would reach 1.2 trillion dollars in 2010, before growing to between 1.3 and 1.5 trillion in 2011 and 1.6 to 2.0 trillion in 2012.

FDI reached 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.

© 2010 AFP

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