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Developing nations will find foreign direct investment slashed

21 January 2009 12:53 (UTC +04:00)

Baku. Vahab Rzayev â€“ APA-Economics. Foreign direct investment in developing nations will drop by $180 billion, or 31 percent, this year as a global recession prompts multinationals to cut spending on factories and mines, according to the World Bank, Bloomberg reports.
Foreign direct investment fell an estimated 10 percent in the developing world in 2008 and will cool further this year, the United Nations said in its 2009 outlook.
Rio, the third-largest mining company, this month postponed a $2.15 billion expansion of an iron-ore mine in Brazil. Honda, Japanâ€™s No. 2 automaker, delayed construction of a $100 million factory in Argentina and has shelved expansion plans in Turkey and India. Hitachi Construction Machinery Co., the worldâ€™s largest maker of giant excavators, froze a $1 billion plan to expand production in China and other emerging markets.
Of the worldâ€™s five largest economies, only China has so far escaped recession. The nation will tomorrow report a 6.8 percent expansion for the fourth quarter, the slowest growth in seven years, according to the median estimate of economists surveyed by Bloomberg News.
The World Bank estimates that foreign direct investment in developing countries will shrink to $400 billion this year from an estimated $580 billion in 2008 and $500 billion in 2007, according to Dailami, author of the lenderâ€™s annual Global Development Finance report.
Some $67 billion was pulled out of emerging-market equities and bonds funds in 2008, after net inflows of $62 billion the previous year, according to EPFR Global, a Cambridge, Massachusetts-based research company. The outflows eased this year as the funds took in $4.29 billion in the first 14 days of 2009, the data show.