Globally, foreign direct investment (FDI) inflows continued to rise in 2007: at $1,833 billion, they reached a new record level, surpassing the previous peak of 2000. The financial and credit crisis, which began to affect several economies in late 2007, did not have a significant impact on the volume of FDI inflows that year, but it has added new uncertainties and risks to the world economy.
This may have a dampening
effect on global FDI in 2008-2009. At the
same time, the global FDI market is in a
state of flux, making it difficult to predict
future flows with any precision.
This chapter examines recent
trends in global FDI, cross border
mergers and acquisitions (M&As) and
international production.
Section A describes their changing geographical
and industrial distribution, the relative
positions of countries in terms of their
transnationalization and inward FDI
performance, and recent developments
in FDI policies. Section B focuses on the
impact of financial crisis that erupted in
2007 and on the depreciation of the dollar
on FDI flows.
Section C sheds new light on the rise of sovereign wealth funds as
direct investors, and section D presents
UNCTAD's latest ranking of the world's
largest transnational corporations (TNCs).
The final section discusses the prospects
for FDI, drawing on an UNCTAD survey of
226 large TNCs.
A. FDI and international production.
1. Recent trends in FDI
a. Overall trends
Global FDI reached a new record high
in 2007, reflecting the fourth consecutive
year of growth. With inflows of $1,833
billion, the previous record set in 2000 was
surpassed by some $400 billion (figure I.1).
All the three major groups of economies -
developed countries, developing countries
and the transition economies of South-East
Europe (SEE) and the Commonwealth of
Independent States (CIS) - saw continued
growth in FDI.
Since the WIR reports the value and growth of
FDI flows in United States dollars, their numbers in
2007 could be considered inflated to some extent, due
to the significant depreciation of the dollar against
other major currencies.1 Growth rates of dollardenominated
global FDI flows in 2007 diverge from those denominated in local currencies under the
current exchange rate realignment: if denominated
in countries’ own currencies, the average growth
rate of global FDI flows would be 23% in 2006-
2007, which is 7% lower than when flows are
denominated in United States dollars (table I.1).