UN report forecasts continued fall in foreign investment in 2003

Global foreign direct investment flows this year are not likely to rebound from their 21 per cent fall in 2002, a result of weak growth or slump in economic activity in many parts of the world among other factors, according to the United Nations Conference on Trade and Development (UNCTAD).

Launching the 2003 edition of the World Investment Report in Geneva today, UNCTAD Secretary-General Rubens Ricupero said "a rebound is likely in 2004."

The report says foreign investment fell to some $651 billion last year and is expected to remain at that depressed level this year. Investment to the developing world declined for the second year in a row, falling from $590 billion in 2001 to $460 billion last year, with the United States and United Kingdom accounting for about 54 per cent of the drop in all countries that had reduced inflows.

Last year's total volume for foreign direct investment was just half the record volume recorded in 2000 - a figure which fell by more than 40 per cent in 2001.

The decline resulted from a combination of macroeconomic factors including weak economic growth or slump in economic activity linked to the business cycles in many parts of the world. Low corporate profits, financial restructuring and institutional factors and the demise of some large corporations were also factors.

The report however stresses that prospects vary widely by industry - brighter for consumer pharmaceuticals, electronics and semiconductors, but dimmer for automobiles, metals and machinery, and aerospace.