Editor Pick: World Investment Prospects to 2011
The ‘World Investment Prospects to 2011: Foreign Direct Investment and the Challenge of Political Risk’ reports that 2004-2006 showed a strong recovery of global FDI inflows rising from $703.2 b in 2004 to $971.7 b in 2005 and $1.34 trillion in 2006. Improving business environment, technological progress and cost competitiveness were driving these inflows supported by strong M&A and private equity activity. In 2006, these inflows accounted for 2.8% of the world GDP which is much lower than the peak reached in the 1990s. Almost 62% of these inflows went to developed countries compared to 56.3% of the total inflows in 2005. Developed countries also witnessed a stronger growth in inflows compared to emerging markets (and the same trend is expected continue in 2007). U.S. was the top recipient of FDI inflows followed by U.K, France and China. Also, China followed by India topped the list of countries receiving the largest number of Greenfield projects. Sub-Saharan Africa and Latin America however saw a decline. Outward FDI by emerging markets strengthened further from $160 b in 2005 to $ 210 b in 2006 as companies in these countries continued to pursue global opportunities and developed countries increasingly becoming an important (though still a small share) recipient of these inflows.
It states that while the upward trend of FDI inflows would continue in 2007 to reach almost $1.47 trillion, the growth rate would however slow owing to tight financial conditions and slowdown in M&A activity. Nevertheless, it expects inflows to recover by 2009 to reach $1.6 trillion by 2011. The U.S. followed by U.K. would continue to remain the top two recipients during 2007-11 while China would be the top recipient among emerging markets. Nevertheless, global financial volatility, FDI protectionism, tighter government regulations, a U.S. slowdown and tighter monetary policy not to mention geo-political tensions, political violence and security concerns pose downside risks to an otherwise benign macroeconomic environment for the FDI flows.
Also in the report:
-Global foreign direct investment to 2011 by Laza Kekic
-Regulatory risk and the growth of FDI by Karl P. Sauvant
-Addressing political risk in the energy sector by Jeffrey D. Sachs
-The investors’ view: economic opportunities versus political risks in 2007-11 by Matthew Shinkman
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