Thursday, June 17, 2010

Global Investment Trends Monitor, 3rd Issue [2010]

UNCTAD has just released its 3rd issue of Global Investment Trends Monitor.

The current issue provides the latest data on global FDI flows. Below is a brief summary of the Monitor.

  • Foreign direct investment (FDI) flows remained relatively stable during the fourth quarter of 2009, though at a level much lower than that of 2007 and 2008. UNCTAD’s FDI Global Quarterly Index was practically unchanged at 117 over the previous quarter and half the level in the first quarter of 2008.
  • During the last quarter of 2009 only a handful of economies – including China, Hong Kong (China) and Ireland – received more FDI inflows than those in the quarterly average of 2007.
  • Among the three components of FDI flows, equity flows – the most closely linked to real investment operations abroad – compared to reinvested earnings and other capital (intra-company loans) remained at a very low level. Transnational corporations (TNCs) thus apparently remained cautious regarding their international investment expenditures during the last quarter of 2009, as also illustrated by the low value of cross-border mergers and acquisitions (M&As) and number of greenfield projects.
  • Prospects for the first quarter of 2010 are better as indicated by improvements of the global business environment and a growing optimism of TNC executives regarding their own company’s prospects and a pick-up in the value of cross-border M&As.
  • In general, growth of FDI inflows trails economic growth, this time with a time lag of two quarters. Government policies regarding the current crisis have double-edged effects. While the majority of these policies may promote and facilitate FDI, some policies such as increased screening requirements and new limitations of foreign equity may work against renewed flows.
  • With the slight drop in the number of greenfield projects in the first quarter of 2010, it is premature to say that FDI is now on a strong rebound. TNCs still remain very cautious in their international investment programmes.