Foreign investment reached new high of $1.5 trillion in 2007, says UN experts

NEW YORK – Global foreign direct investment (FDI) grew to an estimated $1.5 trillion in 2007, the United Nations Conference on Trade and Development said Tuesday, January 8 attributing the record high to the growth of transnational corporations and strong economic performance in many parts of the world.

“Increased corporate profits and an abundance of cash boosted the value of the cross-border mergers and acquisitions that constitute a large portion of FDI flows,” UNCTAD said in a news release, adding that “the financial and credit crisis that began in the latter half of 2007 has not affected the overall volume of FDI inflows.”

Last year FDI flows to developed countries grew for the fourth year in a row to $1 trillion, with the United States retaining its spot as the largest single recipient. At the same time, the European Union as a whole continued to be the largest host region, attracting almost 40 per cent of total FDI flows in 2007.

Foreign investment flows to developing countries and transition economies not only rose last year – by 16 and 41 per cent respectively – but reached new record levels. In addition, FDI to Latin America and the Caribbean rose by 50 per cent to a record $126 billion, with major economies Brazil, Chile and Mexico witnessing a doubling of inflows.

In addition, FDI to South-East Europe and the former Soviet republics increased significantly by 41 per cent to a record $98 billion, and inflows to South, East and South-East Asia continued upward reaching a new high of $224 billion.

UNCTAD also reported that investment remained “relatively strong” last year in Africa, where “an unprecedented level of inflows ($36 billion) was supported by a continuing boom in global commodity markets.”

Meanwhile, the agency noted that overall FDI flows declined by 12 per cent in West Asia (Middle East), adding that “Turkey and oil-rich Gulf States continued to attract the most, but geopolitical uncertainty in parts of the region affected overall flows.

While 2007 posted record highs for many regions, the outlook for this year is more modest. “Continuing global external imbalances, sharp exchange-rate fluctuations, rising interest rates, and increasing inflationary pressures, as well as high and volatile commodity prices, pose risks that may have a chilling effect on global FDI flows,” UNCTAD warned.

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