UNCTAD estimates that FDI inflows in 2006 reached US $1.2 trillion in 2006, up substantially from US$ 916 billion in 2005. Inward FDI continues to grow in all subregions and reflects an ongoing boom in cross-border mergers and acquisitions (M&As), partly fuelled by funds deriving from commodity price increases.
Two-thirds of FDI flows in 2006, at US$ 800 billion, were to developed countries (up from three-fifths in 2005). This represents an exceptional 48 per cent estimated increase over the US$ 542 billion flows into developed countries in 2005.
FDI flows into developing countries in 2006 rose by a more modest, but significant, 10 per cent to US$ 368 billion. However, there was some variability across developing regions, as highlighted in the boxes below.
FDI in Africa in 2006
At US$ 39 billion, a new record, and increasingly in the extractive sector, FDI in Africa recorded a 25 per cent increase over the US$ 31 billion in 2005. Buoyant demand for commodities continues to attract FDI by both developed and developing country TNCs, especially in the oil and gas industry. Cross-border mergers and acquisitions in the extraction and related service industries in the region in the first half of 2006 were three times more than those in the same period in 2005. However, the regional FDI picture varies across sectors, countries and subregions. Most inflows are concentrated in the West, North and Central African subregions. Inflows remain low in low-income economies that lack natural resources. |
FDI in West Asia in 2006
High oil prices, strong GDP growth rates and further liberalization also led to a substantial increase - 23 per cent - in 2006 FDI flows to West Asia, reaching a total of US$ 43 billion. Turkey and oil-rich Gulf States continued to attract most FDI inflows in spite of geopolitical uncertainty in parts of the region. Energy-related manufacturing and services were the industries most affected. |
FDI in South, East and South-East Asia in 2006
Compared with West Asia and Africa, FDI in South, East and South-East Asia increased at a lower - but substantial - rate of 13 per cent during 2005 to reach US$ 187 billion in 2006. TNCs' investments in high-tech industries are growing rapidly. China, Hong Kong (China) and Singapore retained their positions as the three largest recipients of FDI in the region. India surpassed the Republic of Korea to become the fourth largest recipient. Outward FDI from the region surged further, with newer investors such as China and India joining major existing Asian source economies, such as Malaysia, Singapore and Taiwan Province of China. |
FDI in Latin America and the Caribbean in 2006
In Latin America and the Caribbean, preliminary findings indicate a small fall in FDI inflows to US$ 99 billion in 2006. Mexico and Brazil remained the largest recipient countries, with the level of FDI inflows virtually unchanged in the former and increasing by 6 per cent in the latter. FDI inflows into Chile increased by 48 per cent in 2006, owing to the continued rise in windfall earnings that TNCs are reinvesting in the mining industry. FDI inflows into Colombia and Argentina decreased by 52 per cent and 30 per cent, respectively, as a result of a decline in cross-border M&As. Among other factors, the possibility of regulatory changes and of their extension to more countries in the region may have given rise to uncertainty among investors in the primary sector, potentially resulting in a further decrease in FDI inflows. |
FDI in South-East Europe and the Commonwealth of Independent States in 2006
The fastest rate of growth in FDI flows in 2006 was to South-East Europe and the Commonwealth of Independent States, with inflows growing by 55 per cent over the previous year to US$ 62 billion, the sixth year of uninterrupted growth of FDI in the region. These flows were concentrated in three countries - the Russian Federation, Ukraine and Romania - and in a few industries, principally those linked to natural resources. Inflows into the region's largest host country, the Russian Federation, almost doubled. FDI is likely to remain particularly buoyant in countries that joined the EU on 1 January 2007 (Bulgaria and Romania). |
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