Emerging firms raise foreign investment to record high: UN

GENEVA: Companies from emerging and developing economies raised their global direct investment abroad to record levels last year, a UN economic think tank said on Wednesday.

‘The BRICs are the leaders,’ said James Zhan, the director of the investment division at the UN Conference on Trade and Development (UNCTAD), referring to emerging nations Brazil, Russia, India and China.

UNCTAD said in its latest Global Investment Trends monitor that global flows of outward foreign direct investment reached $1.3 trillion in 2010, an increase of 13 percent.

Although it marked the latest stage in a three-year recovery, the amount was still 10 percent below the pre-crisis average and 40 percent short of the 2007 peak for outward foreign direct investment flows.

However, UNCTAD underlined a shift in the pattern of investment abroad with a more dynamic economic recovery in Asia and Latin America than in developed Western economies and a strong Russian corporate presence abroad.

‘Outward FDI from developing and transition economies has reached a record high both in absolute terms and as a share of the global total,’ Zhan told journalists.

Corporations based in developing and emerging economies accounted for $377 billion or 28 percent of the global total, an increase of 23 percent over last year and twice as big a share as in 2007.

In 2010, 70 percent of FDI projects, including new factories, in developing countries came from other developing nations, according to the agency.

Developed economies experienced a patchy recovery, especially in Europe.

US firms, traditionally the largest foreign investors, increased their investment abroad by nearly a third to $325.5 billion, while foreign investments from companies in the high performing German and Swiss economies also revived.

However, UNCTAD found that outflows from Britain, traditionally one of the largest sources of foreign investment, fell by 44 percent in 2010 back to levels last seen 18 years ago.

Zhan said major companies were generally cash rich at the beginning of 2011 but reluctant to invest because of the uncertain economic climate, debt crises, and volatile financial and foreign exchange markets.

However, ongoing corporate and industrial resturcturing as well as a ‘new wave of privatisation’ amid stalled public finance provided fresh opportunities for foreign investors.

‘We see the investment recovery is continuing although it is still far away from the pre-crisis height,’ said Zhan.