FDI Falls 18% in 2012 but Developing Countries get $700bn

Global foreign direct investment (FDI) inflows fell by 18 percent in 2012 - down from a revised US$1.65 trillion in 2011 to US$1.35 trillion - according to the 2013 World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD).

The slowdown was mainly due to sustained macroeconomic instability and policy ambiguity for investors, the UN report said. These inflows are expected to rise only moderately over the next two years, remaining close to 2012 levels with an upper range of US$1.45 trillion. However, risks to this recovery include structural weaknesses in the global financial system, weaker growth in the EU, and policy vagueness in zones critical for investor confidence.

Nonetheless, FDI inflows to developing nations have “proved to be much more resilient” than flows to developed nations, with the former absorbing an unprecedented US$142 billion more than the latter. While FDI inflows to developed countries contracted considerably to US$561 billion, inflows to developing economies reached US$700 billion - the second-highest level ever recorded.

Notably, the BRICS countries - Brazil, Russia, India, China, and South Africa - have become important outward investors, the report said, with their outward FDI rising by 10 percent of world flows.