Global investment: uncertainties blocking a breakthrough

Considering the economic turmoil and fiscal uncertainties in the developed world, it is not startling that the emerging markets have been feeding the recovery in the global FDI flows in recent years. USA has battled to maintain its position as the top destination in the developed world, while China continued to be the prime location for FDI. The global economy is now showing some signs of opening up as the US jobless claims have witnessed a fall and the financial crisis in EU region has started to lighten, thanks to ECBs efforts. However, the risks tied to the oil shock have taken precedence as the main global concern for the world right now. In such volatile environments, the decision on when and where to place money depends on the future investment landscape. If the global economy continues to ease with no further deterioration in the euro zone substantiated by the continued improvement in US and other developed nations, the global FDIs could be expected to jump back to highest levels of two trillion dollars achieved in CY07. The warning by IEA about a surge in oil imports to 1.5 trillion dollars this year if oil prices stay at current levels certainly does not sound good for the investment backdrop. There are high chances that fragility of the situation could tip the world back into a slump. Moreover, the landscape is set for another change as there are growing speculations that the combination of rising domestic wages and reduced exports demand in developed markets might lead to fall in FDI in China, the worlds investment hub. Even with not-so-good prospects about wages in China, the country is poised to remain one of the top destinations in the near future. Service sector, where it lags far behind other economies like Singapore and Hong Kong, can be a key area to attract foreign investment. This makes sense when the manufacturing sector is threatened by a fall in export demand. With recovery looming, United States status as one of the worlds largest recipient of foreign investment is still optimistic for the times to come. However, the troubles in the European countries have dimmed euro zones economic prospect even after some respite in sovereign debt crisis.