Recent Trends in FDI

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3.1 With the integration of international capital markets, global FDI flows grew strongly in the 1990s at rates well above those of world economic growth and trade. Recorded global inflows grew by an average of 13 percent a year during 1990-97. 1 Driven by large cross-border mergers and acquisitions (M&A), these inflows increased by an average of nearly 50 percent a year during 1998-2000, reaching a record $1.5 trillion in 2000 (see Table 3.1). Inflows declined to $729 billion in 2001, mostly as a result of the sharp drop in cross-border M&A among the industrial countries, coinciding with the correction in world equity markets. 2 Worldwide, the value of cross-border M&A declined from the record $1.1 trillion in 2000 to about $600 billion in 2001. 3

3.2 The industrial countries have long dominated the FDI inflows and outflows and accounted for 94 percent of outflows and over 70 percent of inflows in 2001 (see Figure 3.1). Inflows of FDI to developing countries grew by an average of 23 percent a year during 1990-2000. In 2001, these inflows declined by 13 percent to $215 billion, largely reflecting reduced inflows into Hong Kong Special Administrative Region (SAR), Brazil, and Argentina. Excluding these three economies, FDI inflows into developing countries increased by about 18 percent in 2001. During 1998-2001, FDI inflows to developing countries averaged $225 billion a year. In the same period, portfolio investment and other investment inflows to developing countries were much lower and in aggregate averaged $22 billion a year.

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Table 3.1. Regional Allocation of FDI Inflows

(Billions of U.S. dollars)

1990-94 (Average) 1995 1996 1997 1998 1999 2000 2001
Total 197.7 327.9 372.9 461.4 690.4 1076.6 1489.8 729.2
Industrial countries 137.7 205.5 226.4 272.3 486.5 844.8 1241.5 513.8
Developing countries3A 59.9 122.4 146.5 189.1 203.9 231.8 248.3 215.4
Africa 2.7 5.0 5.3 9.8 7.5 9.7 7.5 17.7
Asia, of which 33.5 66.3 74.4 82.8 87.0 99.9 128.2 91.4
China 16.1 35.8 40.2 44.2 43.8 38.8 38.4 44.2
Hong Kong SAR . . . . . . . . . . . . 14.8 24.6 61.92 22.8
Europe 4.4 17.4 16.7 22.3 26.6 29.3 30.1 31.2
Middle East 3.6 3.2 5.8 8.0 9.3 4.9 6.5 5.7
Western Hemisphere, of which 15.7 30.5 44.4 66.2 73.5 88.0 76.0 69.5
Argentina 3.0 5.6 6.9 9.2 7.3 24.0 11.7 3.2
Brazil 1.7 4.9 11.2 19.7 31.9 28.6 32.8 22
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