Developing and transition economies, for the first time, absorbed more than half of global foreign direct investment flows of about USD 1,122 billion in 2010, according to a UN body report.
While FDI has picked up in countries like Singapore, Hong Kong (China), China, Indonesia, Malaysia and Vietnam, there has been a 14 per cent drop in overseas investment in South Asia due to decline in India’s inflows, the report by the UN Conference on Trade and Development said.
Global inflows of FDI rose marginally by 1 per cent, from USD 1,114 billion in 2009 to almost USD 1,122 billion in 2010, based on UNCTAD estimates, which also revealed that FDI flows to developing economies rose by some 10 per cent to USD 525 billion in 2010, due to a relatively fast economic recovery and increasing South-South flows.
“While FDI inflows to developed countries contracted further in 2010, those to developing and transition economies recovered, surpassing the 50 per cent mark of global FDI flows,” said the issue of UNCTAD’s Global Investment Trends Monitor.
“The improvement of economic conditions in 2010 drove up reinvested earnings, while equity capital and intra-company loans remained relatively subdued,” it added, noting that the cross-border mergers and acquisitions volume rebounded.
India, however, registered a 31.5 per cent decline in FDI at USD 23.7 billion in 2010 from USD 34.6 billion in 2009. Cross border M&A also dipped by 14.3 per cent to USD 5.2 billion in 2010 from USD 6 billion in the previous year.
China registered 6.3 per cent increase in FDI inflows (in the non-financial sector) to USD 101 billion, but its M&A declined by 44.6 per cent. The report said that FDI flows to South, East and South-East Asia have outperformed other developing regions.
“After a 17 per cent decline in 2009, inflows to the region rose by about 18 per cent in 2010, reaching USD 275 billion,” the report said, noting that the growth was due to “booming inflows” in Singapore, Hong Kong (China), China, Indonesia, Malaysia and Vietnam.
A strong rebound in FDI flows to developing Asia and Latin America offset a further decline in inflows to developed countries, according to the UN body. For 2011, UNCTAD estimates FDI flows to be between USD 1.3 trillion and USD 1.5 trillion. Worldwide M&A activity (domestic and cross-border M&As combined) is also expected to rise further this year.
A strong global FDI recovery depends much on the steady economic and FDI recovery of the developed economies,” it said.