Global flows of foreign direct investment (FDI) have surpassed
their average 2005-2007 pre-crisis levels, according to a new report released
last week by the UN Conference on Trade and Development (UNCTAD). While global
FDI growth is expected to slow this year, the agency said, projected flows for
2013 and 2014 are set to increase at a “moderate but steady pace.”
The 5 July report found that global FDI flows reached
US$1.5 trillion in 2011; despite surpassing their three-year pre-crisis
average, however, this number remains about 20 percent below the 2007 peak.
Flows this year are expected to level off at US1.6 trillion, the UN agency
found
Foreign investment inflows increased across all major
economic regions, with developed countries reaching US$748 billion in inflows
in 2011 - a notable turnaround after these numbers took a nose dive in 2009.
Developed country numbers, however, still remain below the pre-crisis average,
with growth expected to slow in light of the ongoing eurozone
crisis and tenous nature of the economic recovery in
some major economies.
Developing economies, for their part, continue to account
for nearly half of global foreign direct investment.
Meanwhile, the world’s poorest countries are continuing
to face an FDI recession, according to the UN trade agency. Total group inflows
into least developed countries hit their lowest levels in five years, at US$15
billion.
Notably, FDI prospects for transition economies were
helped by Russia’s impending WTO accession, which is expected to be finalised by the end of this summer after its country’s
State Duma - the lower chamber of the Russian Parliament - voted in favour of the negotiated accession protocol on 10 July.
The agreed terms upon which Moscow is joining the global
trade body include commitments to reduce restrictions on services industries in
various services industries. The UNCTAD report notes that Russia’s accession
could also increase foreign investors’ confidence and improve the country’s
business climate, arguments that were made in favour
of Moscow joining the WTO during the negotiation process.
Sustainable development, regionalism
The report also highlights the rise of a “new generation”
of international investment agreements that include the advancement of
sustainable development as an objective, while acknowledging the difficulties
of implementing sustainable development provisions in international investment
agreements, and of managing the “systemic complexity” of the global investment
regime.
The report calls on countries to design policies aimed at
enhancing the impact of foreign investment on sustainable development and
inclusive growth.
Regionalism also appears to be a growing trend in
international investment agreements, which the UN trade agency notes could be
the result of a gradual shift toward making policy at the regional level, as
well as the controversial nature of such arrangements. High-profile examples
include the ongoing talks for the proposed Trans-Pacific Partnership (TPP)
Agreement - and the recent trilateral investment agreement between China,
Japan, and South Korea.
Most regional treaties are free trade agreements, UNCTAD
noted. “By addressing comprehensively the trade and investment elements of
international economic activities, such broader agreements often respond better
to today’s economic realities, in which international trade and investment are
increasingly connected,” the report said.