Global for­eign di­rect in­vest­ment hits eight-year high in 2015: UN re­port

The Pak Banker - - BUSINESS -

Global for­eign di­rect in­vest­ment (FDI) flows rose by 36 per cent in 2015, reach­ing their high­est lev­els since the fi­nan­cial cri­sis, ac­cord­ing to a re­port out to­day from the United Na­tions Con­fer­ence on Trade and De­vel­op­ment (UNCTAD), which pegged the in­crease to a wave of cross-bor­der merg­ers and ac­qui­si­tions. The UN agency's lat­est Global In­vest­ment Trends Mon­i­tor shows that for­eign in­vest­ment to­talled some $1.7 tril­lion and the that in­creased FDI "in­vest­ment made by a com­pany or en­tity based in one coun­try, into a com- pany or en­tity based in an­other coun­try "in de­vel­oped coun­tries was the main fac­tor be­hind the un­ex­pected spike, with in­dus­tri­al­ized na­tions ac­count­ing for 55 per cent of global FDI in­flows last year. Strong growth in flows was re­ported in the Euro­pean Union (EU) as well as in the United States where FDI quadru­pled, al­though from a his­tor­i­cally low level in 2014.

Ac­cord­ing to the re­port, de­vel­op­ing economies saw their FDI reach­ing a new high of $741 bil­lion, five per cent higher than in 2014. De­vel­op­ing Asia, with its FDI flows sur­pass­ing half a tril­lion dol­lars, re­mained the largest FDI re­cip­i­ent re­gion in the world, ac­count­ing for one third of global FDI flows. Flows fal­tered in Africa and Latin Amer­ica and the Caribbean re­gion (ex­clud­ing off­shore fi­nan­cial cen­tres) re­flect­ing the plum­met­ing prices of their prin­ci­pal com­modi­ties ex­ports. FDI in tran­si­tion economies also fal­tered, slip­ping by 54 per cent amid plum­met­ing com­mod­ity prices and re­gional con­flicts.

The re­port ex­plained that global FDI growth in 2015 was largely at­trib­uted to cross-bor­der merger and ac­qui­si­tions, which rose by 61 per cent last year. It goes on to note that only lim­ited con­tri­bu­tions from green­field in­vest­ment projects fi­nances used to cre­ate a busi­ness or fa­cil­ity where none pre­vi­ously ex­isted in pro­duc­tive as­sets were recorded, with the to­tal value of green­field in­vest­ment projects re­main­ing much the same as in 2014. Look­ing ahead, UNCTAD said that bar­ring an­other wave of merger and ac­qui­si­tion deals and cor­po­rate re­con­fig­u­ra­tions, FDI flows are ex­pected to de­cline in 2016, re­flect­ing the fragility of the global econ­omy, volatil­ity of global fi­nan­cial mar­kets, weak ag­gre­gate de­mand and a sig­nif­i­cant de­cel­er­a­tion in some large emerg­ing mar­ket economies.

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