UN forecasts rebound in global investment flows this year

[GENEVA] Global foreign direct investment is expected to rebound in 2015 after falling 16 per cent last year due to a fragile world economy and political and military crises, the UN said Wednesday.

FDI flows worldwide dropped to USUS$1.23 trillion (S$1.65 trillion) in 2014, largely due to shaky investor confidence, the United Nations Conference on Trade and Development (UNCTAD) said in its annual report.

The past year saw an unprecedented rise in conflicts, according to the UN, including the Ukraine conflict which pitted Russia against the West in the worst post-Cold War standoff.

But flows to developing nations reached their highest level at US$681 billion - a two per cent rise, the World Investment Report 2015 said.

China, the world's second biggest economy, drew a total of US$129.6 billion of FDI in 2014, it said.

"I think foreign direct investment will continue to grow steadily," Shen Danyang, ministry spokesman, said recently.

Asia drew a total of US$465 billion in FDI, the report said.

The biggest recipients of overseas investment after China were Hong Kong at US$103 billion, the United States at US$92 billion, followed by Britain, Singapore, Brazil, Canada, Australia, India and the Netherlands.

The report however forecast an 11 per cent rise in FDI this year to US$1.4 trillion, spurred by higher investments by multinational organisations.

"Expectations are for further rises to US$1.5 trillion in 2016 and to US$1.7 trillion in 2017," it said.

"The share of MNEs (multinational enterprises) intending to increase FDI expenditures over the next three years (2015-2017) rose from 24 to 32 per cent," it said.

But it also warned that the projected recovery could be upset by a number of economic and political risks, "including ongoing uncertainties in the eurozone, potential spillovers from conflicts, and persistent vulnerabilities in emerging economies." FDI flows to developed countries fell 28 per cent last year to US$499 billion, UNCTAD said, adding that flows to Europe dropped 11 per cent.

The report said overseas direct investments in services had grown steadily over the past decade due to increasing liberalisation of the sector.

"In 2012, services accounted for 63 per cent of global FDI stock, more than twice the share of manufacturing," it said, adding that the primary sector represented less than 10 per cent of the total.

The report noted that there was a worldwide trend to tailor policies to attract investment with measures to ease red tape and other irritants and boost investor confidence.

"In 2014, more than 80 per cent of investment policy measures aimed to improve entry conditions and reduce restrictions," it said.

"A focus was investment facilitation and sector-specific liberalisation (for example in infrastructure and services)," it added.

UNCTAD said another significant shift was the increase in investment between developing countries over the last 10 years, adding that this now comprised over a third of global flows.

"The largest outward investing economies include Brazil, China, Hong Kong (China), India, South Korea, Malaysia, Mexico, Singapore, South Africa and Taiwan," it said.

AFP