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UN agency reports record FDI in developing, transition economies

01 November 2013 03:10 (UTC +04:00)

Baku-APA. Developing and transition economies absorbed a record share, nearly 60 percent, of global foreign direct investment (FDI) inflows in the first half of 2013, a UN report released Thursday showed, APA reports quoting Xinhua.

Foreign investment in developing and transition economies rose to 745 billion U.S. dollars in the first half of 2013, up some 4 percent over the same period last year, whereas flows to developed countries declined, according to the survey by the United Nations Conference on Trade and Development (UNCTAD).

"Cross-border mergers and acquisitions and large retained earnings kept in foreign affiliates were a driving force behind the current global FDI growth, rather than investment in new productive assets through greenfield investment projects," the report said.

In developing and transition economies, the increase was driven by acquisitions in Central America and the Caribbean, as well as record inflows into Russia, said the report. Although flows to developing countries in Asia fell slightly, the region continues to absorb more than half of the FDI directed to developing economies as a group, and one quarter of global FDI flows.

Meanwhile, the report attributed the fall in investment in developed countries to declines in major host countries including the United States, France and Germany.

However, Britain remained an exception, continuing its upward trend in FDI attraction and becoming the world's largest recipient of FDI in this period.

The UN agency estimated that 2013 FDI flows will remain close to the 2012 level, despite some improvements in macroeconomic conditions in developed economies.

On top of risks related to the euro area and the so-called " fiscal cliff" in the United States, the transition to a slower growth pattern in some emerging markets and weaker consumer demand in developed countries might also have a negative impact on FDI flows this year.

Looking further ahead, UNCTAD forecasted an upward trend in global FDI flows in 2014.