Foreign direct investment plummeted in early 2009, UN trade arm reports

Global foreign direct investment (FDI) inflows dropped by more than 50 per cent in the first quarter of 2009, with the outlook remaining gloomy for the rest of the year, the United Nations agency that promotes commerce to fight poverty said today.

According to economists with the UN Conference on Trade and Development (UNCTAD), FDI inflows fell by 54 per cent and cross-border mergers and acquisitions (M&As) tumbled by 77 per cent during the first quarter of this year.

“A renewed commitment by policy-makers to an open environment for international investment will play an important role in maintaining favourable conditions for a recovery in FDI flows,” said Secretary-General Supachai Panitchpakdi of UNCTAD, which closely monitors investment policy developments at the national and international levels.

Developed countries are mainly responsible for driving the fall of FDI this year, but poorer nations and transition economies are also experiencing declines, according to the agency.

Also feeling the brunt of the global economic slowdown are transnational corporations, which will likely see their FDI expenditures decline by almost two-thirds this year due to failing market expectations, tighter credit conditions and weakening corporate profits.

Comprehensive analysis of FDI trends and policies will be published in UNCTAD’s “World Investment Report 2009” to be launched in September.