India among top five for FDI inflows, says UNCTAD Survey
By TIOL News Service
NEW DELHI, SEPT 11, 2010: INDIA was rated as the second most popular destination for inviting foreign direct investment (FDI) inflows between 2010 and 2012. According to the World Investment Prospects Survey report published by the United Nations Conference on Trade and Development (UNCTAD), the top five FDI destinations are expected to be China, India, Brazil, US and the Russian federation.
The UNCTAD report provides an outlook on future trends in foreign direct investment by the largest transnational corporations (TNCs). The report, based on interviews with transnational company executives on their international investment strategies, provides insight on when FDI flows are expected to recover and the regions and industries most favoured by transnational companies.
According to the report, there is expected to be a slow recovery in 2010, before FDI flows gain momentum. The survey estimated that the level of FDI inflows in 2011 would be in the range of US .3–1.5 trillion, rising in 2012 to between .6 and 2 trillion.
The report indicated that developing countries were more attractive as an investment location for TNCs, mainly those in Asia and Latin America.
Moreover, developing Asia came through as a more attractive destination than developed countries. For the first time, the four major emerging markets – China, India, Brazil and the Russian Federation – all ranked among the top five investment destinations, while countries like UK and Australia had moved down the list as compared with the results of the survey conducted earlier. The EU-15 and North America continued to be ranked among the top priority regions for FDI.
The report is especially relevant considering that FDI flows have dramatically changed since the end of 2008, in response to the world economic and financial crisis.
According to the report, factors including faltering profits, reduced access to financial resources, declining market opportunities as well as the risk of a possible worsening of the global economic downturn have led to fall in FDI flows.
There are also major concerns about the capability of multinational corporations to continue investing and expanding overseas, especially in the developing world that relies on international investments to finance domestic growth and employment creation.
The report indicated that despite the strong impact of the global financial and economic crisis on TNCs' investment programmes, significant divestment of their foreign assets had not been made, and companies remained committed to expanding their presence abroad.
It suggested that TNCs were more optimistic about the investment environment since last year. Although, they were cautious about investment prospects in the short term, the optimism increased over the medium term.
In the short-term, the financial crisis appeared to have negatively impacted companies' investment plans regardless of the home economy. However, developing-country TNCs were more optimistic in the short-term about the global business environment and their investment prospects than their developed-country counterparts.
The report mentions that although still limited, there are an increasing number of TNCs from developing countries carrying out large-scale international investment programmes.