FDI is likely to exceed a trillion dollars in 2000; activity is driven by mergers and acquisitions
| Pages | 367-368 |
Page 367
Foreign direct investment (FDI) by transnational corporations may surpass one trillion dollars this year, according to the World Investment Report 2000: Cross-Border Mergers and Acquisitions and Development, published by the United Nations Conference on Trade and Development (UNCTAD). Cross-border mergers and acquisitions are driving this record FDI activity, according to the report’s tenth anniversary edition.
In developed countries, FDI rose to $636 billion in 1999 (from $481 billion in 1998), while FDI to developing countries increased to $208 billion (from $179 billion in 1998), the report states. FDI is the largest source of external financing for many developing countries, which have found it to be more stable— particularly during financial crises—than portfolio investment and bank lending.
FDI flows to Africa rose to $10 billion in 1999 from $8 billion in 1998. This, the report explains, was in line with the faster growth rate generally experienced by the continent during the decade, as governments worked to create a more business-friendly environment. Investments by transnational corporations in Africa are still only 1.2 percent of global FDI flows and 5 percent of total FDI into all developing countries. About 70 percent of FDI in Africa in 1999 was concentrated in only five countries—Angola, Egypt, Morocco, Nigeria, and South Africa. The real challenge for Africa, according to the report, lies ahead: “integration into the global economy, including integration into the regional or global production networks of transnational corporations. Only then will the continent become a more prominent player in the world market and benefit more from FDI.”
In the developing countries of Asia, investment prospects are good, given the quality of the underlying economic determinants of FDI, the region’s recovery from the financial crisis, and ongoing widespread liberalization and restructuring efforts, the UNCTAD report says. Total FDI flows into developing Asia rose considerably last year to almost $106 billion (from $97 billion in 1998), contrary to an anticipated decline following the 1997–98 financial crisis. China’s prospects of attracting FDI are seen as good, despite last year’s decline of nearly 8 percent to $40.4 billion. This decline reflected slower growth and excess capacity in some manufacturing industries due to overinvestment in the past decade...
To continue reading
Request your trial