Foreign investment in least developed nations hits record level in 2012 – UN report

Foreign direct investment (FDI) inflows to the world’s poorest countries grew by 20 per cent last year to a record $26 billion, led by strong gains in Cambodia as well as five African countries, according to a new United Nations report. 

The World Investment Report 2013, produced by the Geneva-based UN Conference on Trade and Development (UNCTAD), adds that the majority of ‘greenfield’ investment in the least developed countries (LDCs) – new investment or expansion of existing investment in recipient nations, as opposed to investment through mergers and acquisitions – originated in other developing economies, led by India.

Subtitled Global Value Chains: Investment and Trade for Development, the report notes that growth was led by strong gains in Cambodia (where inflows were up 73 per cent), the Democratic Republic of the Congo (96 per cent), Liberia (167 per cent), Mauritania (105 per cent), Mozambique (96 per cent), and Uganda (93 per cent).

However, 20 LDCs reported declines in FDI, the report states, adding that the trend was particularly pronounced in Angola, Burundi, Mali, and the Solomon Islands.

Secretary-General Ban Ki-moon commended the report, calling it a “source of reflection and inspiration” for meeting today’s development challenges.

“The 2013 World Investment Report comes at an important moment. The international community is making a final push to achieve the Millennium Development Goals by the target date of 2015,” he said, referring to the anti-poverty targets known as the MDGs.

“At the same time, the United Nations is working to forge a vision for the post-2015 development agenda. Credible and objective information on foreign direct investment (FDI) can contribute to success in these twin endeavours.”

Global FDI, Mr. Ban noted, declined in 2012, mainly due to continued macroeconomic fragility and policy uncertainty for investors, and it is forecast to rise only moderately over the next two years.

“Yet as this report reveals, the global picture masks a number of major dynamic developments,” he said. “In 2012 – for the first time ever – developing economies absorbed more FDI than developed countries, with four developing economies ranked among the five largest recipients in the world.

“Developing countries also generated almost one third of global FDI outflows, continuing an upward trend that looks set to continue.”

The report notes that while the estimated value of announced greenfield investment projects in LDCs declined, developing economies – with 59 per cent of the value of greenfield projects – were the largest such investors in LDCs in 2012.

In terms of share of greenfield projects in LDCs in 2012, companies from India were responsible for 20 per cent of total value, according to the report. In addition to their scale, India’s investments in LDCs have been diversified geographically and sectorally, it adds.

Among the destinations of large-scale projects, in 2012 Mozambique was the largest recipient of Indian greenfield investment (45 per cent), followed by Bangladesh (37 per cent) and Madagascar (8 per cent).

In Africa, greenfield investments from India were targeted at the east and south of the continent. These projects were not limited to large-scale investments in extractive and heavy industries, but also extended to smaller ones in pharmaceuticals and health care.

In Asia, while Bangladesh was the only LDC where Indian greenfield investment was announced during 2012, Indian projects were spread over various industries, including automotives, information technology, pharmaceuticals, textiles, and tyres, the report says.