Global FDI Rose By 11%; Developed Economies Are Trapped In A Historically Low Share
The foreign direct investment (FDI) into India grew by 17 per cent last year to US$28 billion despite unexpected capital outflows in the middle of the year, according to a United Nations report.Global FDI increased by 11 per cent in 2013 to an estimated US$1.46 trillion-a level comparable to the pre-crisis average, the latest UNCTAD Global Investment Trends Monitor reported. However, developed countries remain trapped in a historically low share of global FDI, accounting for only 39% for the second consecutive year. They increased by 12% to US$576 billion, but only to 44% of their peak value in 2007. FDI to the European Union (EU) increased, while flows to the United States continued their decline.
FDI flows to developing economies reached a new high of US$759 billion, accounting for 52% of global FDI inflows in 2013. At the regional level, flows to Latin America and the Caribbean, and Africa were up; developing Asia, with its flows at a level similar to 2012, remained the largest host region in the world.
FDI inflows to transition economies also recorded a new high of US$126 billion - 45% up from the previous year, accounting for 9% of global FDI inflows.
Among major regional and inter-regional groupings, APEC and BRICS almost doubled their share of global FDI inflows from the pre-crisis level. APEC now accounts for more than half of global FDI flows, on a par with the G20, while BRICS jumped to over one fifth. In ASEAN and MERCOSUR, the level of FDI inflows doubled compared to the pre-crisis level. Regional and inter-regional groups to which developed economies are members (e.g. G20, NAFTA) are all experiencing a slower recovery.
The BRICS - Brazil, Russian Federation, India, China and South Africa - continued to be strong performers in attracting FDI. Their current share of global FDI flows at 22% is twice that of their pre-crisis level. Total inflows to the five leading emerging economies reached US$322 billion in 2013, 21% higher than in 2012. South Africa outperformed other countries within the group, with FDI inflows rising by 126%. Though inflows to Brazil maintained a high level, the rate of growth (-4%) was the lowest among the BRICS.
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The three mega regional integration initiatives - TTIP, TPP and RCEP - show diverse FDI trends. The combined share in global FDI inflows of the United States and the EU, which are negotiating the formation of TTIP, nearly halved from 56% during the pre-crisis period to 30% in 2013. The share in global FDI inflows of the 12 countries participating in the TPP negotiations was 28% in 2013, markedly smaller than their share in world GDP of 40%. RCEP, which is being negotiated between the ten ASEAN Member States and their six FTA partners, accounted for more than 20% of global FDI flows in recent years, nearly twice as large as at the pre-crisis level.
Cross-border mergers and acquisitions (M&As) rose by 5% in 2013 while announced greenfield investments remained unchanged from 2012. Developing economy M&A sales bounced back to the pre-crisis level, mainly driven by sales to other developing economy TNCs.
UNCTAD forecasted that FDI flows will rise gradually in 2014 and 2015, to US$1.6 trillion and US$1.8 trillion respectively, as global economic growth gains momentum which may prompt investors to turn their cash holdings into new investments. However, uneven levels of growth, fragility and unpredictability in a number of economies, and risks related to the tapering of quantitative easing could dampen the FDI recovery.
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