World foreign investment flows are projected to recover to the pre-crisis level of US$1.4 trillion to US$1.6 trillion this year, although debt crises in the rich world could hurt the recovery, the UN warned on Tuesday.
“The recovery of FDI [foreign direct investment] flows will continue in 2011 and will reach a total of some US$1.4 trillion to US$1.6 trillion, thus returning to the pre-crisis average,” according to the annual world investment report by the UN Conference on Trade and Development (UNCTAD).
“Thereafter, flows are forecast to rise to US$1.7 trillion in 2012 and US$1.9 trillion in 2013,” it added.
However, the forecast could be scuppered by debt crises in the developed world and overheating in emerging economies.
“If there is a double-dip recession, there will be serious effects” on the world economy, said James Zhan (詹曉寧), who heads UNCTAD’s investment and enterprise division.
However, while poor economic indicators could hurt investment, Zhan said they could also spark opportunities.
“If governments are in heavy debt, one measure is to sell state assets,” he said.
“That may generate opportunities for transnational corporations to get in to acquire these assets,” he said.
In addition, Zhan said that some governments which have injected funds into companies may also begin to “accelerate their exit from these firms” in the next few years.
“That creates further opportunities for investment entry for FDIs,” he said.
After all, large corporations are sitting on a mountain of cash.
“Firms have a record level of cash in their pockets, it reached close to US$5 trillion — a historic high and even twice as much as pre-crisis levels,” Zhan said.
Overall, the US remained the biggest foreign investor country as well as the largest receiver of inflows last year.
China was the second largest recipient of inflows, followed by Hong Kong.
German companies, meanwhile, advanced to second place in terms of FDI last year behind US firms, passing French and outspending Chinese companies, according to the report.
FDI by German firms rose 35 percent to US$105 billion, while French companies invested US$84 billion, 18 percent less than a year earlier, the report said.
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