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Global foreign direct investment slips for third straight year: UN report

Published : 12 Jun 2019, 21:30

  DF-Xinhua Report

UNCTAD chief Mukhisa Kituyi.Photo Xinhua.

Global foreign direct investment (FDI) flows slid by 13 percent in 2018, to 1.3 trillion U.S. dollars from the previous year in its third straight annual decline, a key United Nations report said Wednesday.

The UN Conference on Trade and Development (UNCTAD) World Investment Report 2019 said the contraction was triggered mainly by United States' multinational enterprises repatriating earnings from abroad.

In 2019, FDI is, however, expected to recover in developed economies as the effect of the U.S. tax reforms winds down, said the UN agency.

Hardest hit by the earnings repatriation were developed countries, where flows fell by a quarter to 557 billion U.S. dollars -- levels last seen in 2004.

"FDI continues to be trapped, confined to post-crisis lows. This does not bode well for the international community's promise to tackle urgent global challenges, such as abject poverty and the climate crisis," UNCTAD Secretary-General Mukhisa Kituyi said at a UN media conference here.

"Geopolitics and trade tensions risk continuing to weigh on FDI in 2019 and beyond," he noted.

Kituyi said the main drag on FDI in Europe is the "negative pull of Brexit in Britain," where the country is embroiled in extracting itself from the European Union following a referendum in the country that has created considerable uncertainty.

By contrast, developing country flows managed to hold steady (rising by 2 percent), which helped push flows to the developing world to more than half (54 percent) of global flows, from 46 percent in 2017.

FDI inflows to China increased by 4 percent in 2018, to an all-time high of 139 billion USD, accounting for more than 10 percent of the world's total FDI flow.

Despite the FDI decline, the United States remained the largest recipient of FDI, followed by China and Singapore.

In terms of outward investors, Japan became the largest, followed by China and France.

Greenfield project announcements - indicating forward spending plans - point to a rise in 2019, as they were up 41 percent in 2018 from a low in 2017.

Nevertheless, the weak underlying trend indicates that a rise in FDI may be relatively modest and may be reined in by factors, such as geopolitical risk, escalating trade tensions and a global shift towards more protectionist policies.

UNCTAD said the underlying global FDI growth trend has been anemic since 2008.

"If one-off factors such as tax reforms, mega deals, and volatile financial flows are stripped out, FDI over the past decade averaged only 1 percent growth per year, compared with 8 percent between 2000 and 2007, and more than 20 percent before 2000," said UNCTAD's investment and enterprise director, James Zhan.