Global FDI defies economic crisis

Global foreign direct investment flows jumped by 17 per cent in 2011 despite worldwide economic turmoil and there is reason to be cautiously optimistic of another rise in 2012, a United Nations report said on Tuesday.
Most of the increase was due to cross-border mergers and acquisitions.
Rising FDI implies increasing globalisation and growing appetite for big projects abroad, which may lead to more trade and create more manufacturing capacity around the world. Set against the gloomy mood of the world’s financial markets, a returning appetite for investment could be a rare positive sign.
Global FDI flows rose for the second year running to an estimated $1.509 trillion in 2011. That is 28 per cent more than two years ago in 2009 but still 23 per cent below the 2007 peak.
Spending on cross-border mergers and acquisitions leapt by 49.7 percent to $507.3 billion in 2011 while greenfield investments, where an investor starts a foreign operation from scratch, slipped 3.3 percent to $780.4 billion.
“GDP growth is still positive, and although it’s lower than previously expected, companies still have cash in their pockets, and they have to invest anyway. But at the same time there’s uncertainty because of the fragility of the world economy,” said Astrit Sulstarova, an economist at the United Nations Conference on Trade and Development, which produced the report.
Developing countries received record inflows of FDI, mainly driven by greenfield investments. China, the second biggest FDI destination, received $124.0 billion of FDI, a record for the second year in a row. FDI to India rebounded 38 per cent after a big fall in 2010, but remained far behind China at $34 billion.
contd.