The economic and financial crisis seems to have altered the global investment landscape considerably. It is now the developing countries that are taking the lead in attracting investments as well as investing globally, according to the Unctad World Investment Report 2009.
Unctad predicts global inflows to fall from $1.7 trillion in 2008 to below $1.2 trillion in 2009. Recovery is expected to be slow in 2010 (to a level up to $1.4 trillion) and gain momentum in 2011 (approaching $1.8 trillion).
According to Unctad secretary-general Supachai Panitchpakdi, “The BRIC countries (Brazil, Russia, India, China) are the most favoured destination for FDI. Not all trans-national corporations (TNCs) have been affected by the financial crisis, particularly those involved in food and agriculture. Others that have not been affected are those that put their targets on long-term prospects such as the pharma industry.”
The report stresses agricultural production and development as a means to development and food security for these countries, and as Mr Supachai said, “We believe that it is up to national governments to do their bit to revive their agricultural process as the World Investment Report 2009 tries to propose.”
The report shows that there was a huge surge in investments in developing and transition economies, increasing their share in global FDI flows to 43% in 2008. This was partly due a concurrent large decline in FDI flows to developed countries (29%).
FDI inflows to South Asia in 2008 amounted to $51 billion. In 2007, the growth rate in South Asia was 49%. Inflows to the two largest emerging economies, China and India, continued to increase in 2008. China and India have been steadily gaining importance as host economies.
According to Unctad’s World Investment Prospects Survey 2009-11, both India and China ranked third and first, respectively, as the most-preferred FDI locations. Their strong performance, even during the current crisis, has reshaped the landscape of FDI flows to the region as well as to the world at large. China became the third-largest FDI recipient country, after the US and France, with India catching up in the 10th position.
In recent years, leading TNCs in many manufacturing and services industries, ranging from steel and automotives to retail, have speeded up their market entry and expansion in India. FDI flows to India in 2008 surged to a record $42 billion.
Outward investment in regional outflows from China and India rose from 23% in 2007 to 37% in 2008. India ranked third among all developing and transition economies and 13th in the world as a source of FDI. In addition to oil companies, large mining and metal companies from China and India have become more and more aggressive in acquiring overseas assets.
Unctad states that for many Chinese and Indian companies, in particular, the desire to acquire undervalued assets (such as mineral deposits, technologies, brand names and distribution networks) during the global and financial crisis may boost Asian investments in developed countries.
There has been an overall trend by Asian countries to change national policies and legislation to become more favourable to FDI, leading to the further opening up of markets. Thus, in 2008 and early 2009, India has either raised or abolished existing FDI ceilings for certain industries.
source: ET
