Fuente : World Bank
http://www.worldbank.org

Record Flows To Developing World Boost Global FDI

/noticias.info/ Record investment flows to developing countries have sparked a recovery in global foreign direct investment, The Financial Times and Les Echos (France) report the United Nations said yesterday.

After three years of decline, world foreign direct investment (FDI) rose 6 percent to $612 billion in 2004 as increased flows to developing countries and central and eastern Europe offset a slump in developed countries. The UN Conference on Trade and Development (UNCTAD) predicted that a continuing improvement in economic activity, equity market valuations and mergers and acquisitions would fuel expansion of FDI over the medium term. FDI in developing countries rose 48 percent to $255 billion from 2003.

La Tribune (France) notes Karl Sauvant, director of UNCTAD's investment division, said the data was "good news" for developing countries, which now accounted for an estimated 42 percent of global FDI inflows. This compared with 27 percent in 2001-2003.

The Financial Times further adds that the US was the world's largest recipient of FDI with inflows of $121 billion, pushing China into second place with half as much. The UK also rose to the top of the European league table with FDI more than doubling to $55 billion from $21 billion thanks to a revival of corporate profitability and mergers. But overall, developed countries experienced a 16 percent fall in FDI to $321 billion, largely due to the repayment of intra-company loans in some countries, particularly Belgium, Germany and the Netherlands. These repayments do not appear in the FDI inflow statistics of the country where the parent company is based.

FDI flows to Asia and the Pacific reached $166 billion, a 55 percent increase over 2003. Improved economic performance, a more favorable policy environment, higher corporate profitability and a rise in mergers and acquisitions fuelled the growth. A strong rebound in commodity prices helped FDI inflows to Africa increase for the second consecutive year to $20 billion. UNCTAD predicted a further increase if high commodity prices prompted multinational companies to undertake new exploration projects in Africa, which accounts for just 3 percent of global FDI flows. FDI flows to Latin America and the Caribbean rose for the first time in five years, up 37 percent to $69 billion. Following a dip, central and eastern Europe attracted a record GBP36 billion worth of FDI inflows.

Writing in a separate piece, The Financial Times notes that the revival in global foreign direct investment is likely to intensify competition between governments seeking to attract new investors. Tax has become one of the most popular weapons at governments' disposal. Economists have traditionally disapproved of the use of tax incentives to attract business, on the grounds that they do not usually justify their cost by creating a sustainable increase in investment. Other factors, including infrastructure, political stability and the cost and availability of labor, are considered more important. But there are exceptions. There is growing evidence that tax rates and incentives can influence location decisions within regional economic groups, such as the EU, according to research by the Foreign Investment Advisory Service (FIAS), an arm of the World Bank and International Finance Corporation. The realization that lower tax countries may be luring investment away from their neighbors has prompted many governments to redesign their tax policies.

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