Un-UNCTAD officials: Global foreign direct investment continues to slump

Geneva, June 24 (Xinhua) Zhan, director of the investment, Technology and Enterprise Development Division of the United Nations Conference on Trade and Development (UNCTAD), said in an interview with Xinhua news agency 24th that global foreign direct investment and cross-border mergers and acquisitions have plummeted since the fourth quarter of 2008, a trend that continued to grow in the first quarter　　It is expected to be difficult to change in the next few quarters. Zhan cited the latest figures published by UNCTAD to say that global foreign direct investment fell 54% per cent in the first quarter of this year, compared with the same period last year.　　Foreign investment by major foreign-absorbing countries such as Brazil, China and Russia has fallen, while OFDI from France, Germany, Japan and the United States has declined. The latest data on cross-border mergers and acquisitions in the world also reflect the same trend, Zhan said. Cross-border mergers and acquisitions in the first quarter of this year fell by 77% compared with the same period in 2008.　　Cross-border mergers and acquisitions in developed, developing and transitional economies (South-east Europe and the CIS) have fallen. If the trend continues, global foreign direct investment is expected to fall by nearly half this year, Zhan said.　　A sharp reduction in investment inflows to developed countries, which contributed significantly to the decline in global foreign direct investment this year, was a major factor in the fall in foreign direct investment (FDI) in developing countries and the economies of the transition in 2008.　　UNCTAD forecasts a similar trend for global cross-border mergers and acquisitions, which could fall by two-thirds per cent this year, with the decline of more than 70% in developed countries, more than 50% per cent in developing countries and more than 85% per cent in the transition economies. According to preliminary results of the UNCTAD World Investment Outlook survey 2009-2011, nearly two-thirds per-year surveyed TNCs indicated that their foreign direct investment spending is expected to fall in the coming years. Multinationals are facing challenges from the global economic slowdown and the recession in some major economies, leading to a slowdown in market expectations, a credit crunch, a sharp sell-off in the stock market and consequent declines in asset prices and corporate profits. At the same time, they will have to deal with the huge uncertainties about how the global economic crisis can evolve further in the short term.　　Many multinationals have now announced plans to cut production, cut jobs and reduce capital expenditures, which will have an impact on global FDI. Zhan that in order to overcome the consequences of the economic crisis, multinationals are eager to cut costs and spending.　　In the short term, they are likely to rely more and more on non-equity entry models (such as partnerships or franchising) to expand their international business, while taking a more cautious approach to equity investments such as cross-border mergers and acquisitions. Zhan said that among the various global risks that are being presented that may have a potential impact on TNCs ' outward investment plans, it is a concern that the governments of their home countries may take more protectionist measures, discourage or restrict their enterprises from investing abroad or increase their capital to their existing overseas subsidiaries, Even prompting these companies to repatriate profits to their home countries rather than return investmentFor reinvestment.　　This would have a serious impact on the less developed countries that were innocent victims of the crisis and would pose a serious challenge to their efforts to promote and retain foreign investment. However, UNCTAD's survey of trends in international investment policies shows that, so far, the investment measures taken by countries to respond to the crisis have been largely non-discriminatory. Countries avoid restrictive policy measures against inward and outward FDI. Several other countries have taken steps to further loosen restrictions on the entry of foreign investors into their countries and to promote foreign investment by domestic enterprises.　　This overall positive trend is also reflected in the significant increase in the number of recent international investment agreements signed. In this context, it is important for national policymakers to rededicate themselves to an open international investment environment and to maintain an environment conducive to the rapid recovery of foreign direct investment, Zhan said.