$ 1.2 trillion – that’s the level reached by foreign direct investment flows in 2006, according to Geneva-based UNCTAD, the United Nations Conference on Trade and Development. That is up 34% compared to 2005, but is not the $1.4 scored in 2000. In its recent release of figures that will be analysed in its next World Investment Report, UNCTAD says:
“FDI flows to developed countries in 2006 rose by 48%, well over the levels of the previous two years, and reached US$800 billion (…). The United States recovered its position as the largest single host country for FDI in the world, overtaking the United Kingdom, the top FDI recipient in 2005. The European Union (EU) as a whole continued to be the largest host region, accounting for 45% of total FDI inflows in 2006.”
Also to be noted:
The most spectacular growth of FDI was in South-Eastern Europe and the CIS: a 56% surge overall, with Kazakhstan, Russia and Ukraine showing the most spectacular growth. China remains the main developing-country recepient of global FDI flows. FDI declined in Latin America (-4.5%).
That is all very good news overall.
- The usual patterns remain – cross-border investment is and remains a rich-country story. China comes only very low down the ladder of global volumes of FDI. A lot of unfounded fears in rich countries, then.
- Recent FDI flows are very much a commodity story, with high prices triggering investment. Oil is the major story, of course. Kazakhstan with its spectacular reserves and projects witnessed a 94% surge in FDI in 2006. FDI in Russia surged too due to oil, though non-oil FDI recently soared. Given Russia’s uncertain political environment in the run-up to the 2008 elections and given recent conflicts between the government and foreign investors regarding the Sakhalin oil extraction projects, nobody knows if this trend is going to remain.
- That leads me to: politics. With the recent political turmoil right across Latin America, and the rise of “Chavezian” populism from Bolivia to Nicaragua, inherently hostile to international integration, no wonder. This despite high commodity prices. Latin America seems to be missing out on something important, once again. The sole exception is Chile. A surge of 48.4%. Conclusion on Latinoland: S.O.S. – Same Old Story.
- A notable trend highlighted in UNCTAD’s 2006 World Investment Report : the rise of South-South FDI and the emergence of multinationals originating in emerging economies, actively involved in global FDI. Mittal Steel from India, Chinese companies from oil to electronics, various mining and energy companies from Russia are but a few examples. Particularly controversial are Chinese investments in Africa, triggered by China’s thirst for oil and hunger for commodities, leading to a de facto support for the world’s “friends of humanity” such as the Sudanese government, or Robert Mugabe.