The Wide, Wide World of FDI

♠ Posted by Emmanuel in at 10/23/2007 12:05:00 AM
The UN Conference on Trade and Development (UNCTAD) has just released its World Investment Report for 2007. Having just plowed through the IMF's World Economic Outlook, I'll take a breather before reading UNCTAD's new publication, though I am sure that I can pick up tidbits from it just as I have from the WEO. In the meantime, the Financial Times reports on the rising flow of FDI worldwide based on the UNCTAD report. From the looks of it, it's interesting stuff. The strange phenomenon of "capital flowing uphill" continues with the US retaking the lead in FDI flows. I find it kind of funny, I find it kind of sad...'tis a mad world:

Global inflows of foreign direct investment are on track this year to surpass the record $1,411bn (€996bn, £694bn) reached in 2000, despite the turmoil in financial markets, the United Nations Conference on Trade and Development said on Tuesday.

The Geneva-based agency’s annual World Investment Report showed that inflows of FDI amounted to $1,306bn in 2006 – the highest since 2000. “Unctad expects the FDI figures to be even higher in 2007 than in 2006,” said Supachai Panitchpakdi, secretary-general of the agency

Khalil Hamdani, an Unctad director, said the agency’s “back-of-the-envelope calculations” suggested FDI this year of $1,500bn. This was partly because of strong mergers and acquisitions activity before this summer’s credit squeeze: cross-border M&A activity rose by 58 per cent to $581bn in the first half of the year compared with the same six months of 2006.

Mr Panitchpakdi said, how­ever, that financial in­stability and high energy prices made the forecasts un­certain. Partly for this reason, Unctad expects FDI this year to grow at “a somewhat slower rate than in 2006”, when inflows rose by 38 per cent compared with 2005.

The growth in FDI inflows last year was due to strong global economic growth, high corporate profits and a boom in mergers and acquisitions activity; there were 172 mega-deals last year, each worth more than $1bn, according to Unctad.

The US regained its position last year as the largest recipient of FDI, after being temporarily displaced in 2005 by the UK. Inflows to the US rebounded to $175bn.