Foreign direct investment flows projected to rise in next three years – UN

Foreign direct investment flows are expected to increase in the next three years, despite worries over worldwide financial instability and some countries’ protectionist measures, according to the latest United Nations Conference on Trade and Development (UNCTAD) survey on global investment prospects, which was released today.

More than two-thirds of the 192 respondents – among the world’s largest transnational corporations – said they plan to raise FDI expenditure levels every year from 2007 to 2009.

As a result of continued economic growth worldwide, high profitability and the availability of external finance, FDI is projected to increase in all sectors and home countries.

FDI growth will be primarily driven by access to large and growing markets, according to a majority of respondents to the “UNCTAD World Investment Prospects Survey 2007-2009.” The corporations participating in the survey also cited access to resources, especially skilled labour, and access to low-cost labour as reasons to increase FDI.

Three risks – geopolitical, financial instability and protectionism – could potentially hinder their FDI expansion, and over 80 per cent of respondents said these factors are either “important” or “extremely important.”

The survey also found that an increasing number of corporations will consider investing in areas outside their home regions, such as emerging markets in Asia and Europe. China and India were mentioned as the top two locations by the respondents while Viet Nam ranked sixth.

North America and Western Europe remain the top priority locations for the transnational corporations, with the United States coming in third and the United Kingdom and Germany also in the top 10. Poland is a rising destination in Europe.

Russia ranked fourth for investment among corporations, underscoring investors’ rising preference in Eastern Europe and the Commonwealth of Independent States (CIS). Meanwhile, in Latin America, Brazil and Mexico were among the top 10 most favoured locations for FDI.

UNCTAD has been surveying FDI prospects since 1995.