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Wed, Sep 08, 2010 - Page 10 News List

Impact of crisis on FDI not as bad as feared: UN report


The world economic crisis had a smaller impact on foreign investment than feared, a UN think tank said on Monday, noting that less than a fifth of firms surveyed drastically divested as a result of the downturn.

A survey conducted by the UN Conference on Trade and Development (UNCTAD) on 236 transnational corporations (TNCs) found that 18 percent of the respondents said that the crisis triggered large-scale divestments or closures of foreign subsidiaries.

“The crisis was less destructive to FDI [foreign direct investment] than had been feared,” the UN body said.

“While investment budgets, including those for FDI, were squeezed during the crisis, TNCs did not engage in wholesale divestment of their foreign affiliates,” it said.

Rather than liquidate their foreign assets, many of these firms have begun a large-scale reduction of operating costs.

“They have preserved the overall structure of their presence overseas, with little reversal in their overall level of internationalization,” it said.

The crisis has however accentuated a shift of investments to emerging economies.

China, India and Brazil now occupy the top three most popular locations for foreign direct investments for this year to 2012, relegating the US, which ranked second last year, to fourth place.

UNCTAD had earlier said FDI is recovering and could be back to near pre-crisis levels by 2012.

It said that total FDIs would reach US$1.2 trillion this year, before growing to between US$1.3 trillion and US$1.5 trillion next year and US$1.6 trillion to US$2 trillion in 2012.

FDI reached a record US$2.1 trillion in 2007 before falling back, as the global financial crisis pushed the world economy into recession, to US$1.1 trillion last year, UNCTAD said.

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