FDI Trends and Prospects
Global foreign direct investment (FDI) witnessed a modest, but uneven recovery in thefirst half of 2010. This sparks some cautious optimism for FDI prospects in the short runand for a full recovery further on. UNCTAD expects global inflows to reach more than$1.2 trillion in 2010, rise further to $1.3–1.5 trillion in 2011, and head towards $1.6–2trillion in 2012. However, these FDI prospects are fraught with risks and uncertainties,including the fragility of the global economic recovery.
Developing and transition economies attracted half of global FDI inflows, and investedone quarter of global FDI outflows. They are leading the FDI recovery and will remainfavourable destinations for FDI.
Most regions are expected to see a rebound in FDI flows in 2010. The evolving natureand role of FDI varies among regions. Africa is witnessing the rise of new sources ofFDI. Industrial upgrading through FDI in Asia is spreading to more industries and morecountries. Latin American transnational corporations (TNCs) are going global. Foreignbanks play a stabilizing role in South-East Europe, but their large scale presence alsoraises potential concerns. High levels of unemployment in developed countries triggeredconcerns about the impact of outward investment on employment at home.
Overcoming barriers for attracting FDI remains a key challenge for small, vulnerable andweak economies. Overseas development assistance (ODA) can act as a catalyst for boostingthe role of FDI in least developed countries (LDCs). For landlocked developing countries(LLDCs) to succeed in attracting FDI they need to shift their strategy to focus on distanceto markets rather than distance to ports. Focusing on key niche sectors is crucial if smallislands developing States (SIDS) are to succeed in attracting FDI.
