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Global FDI flows to rise this, next year

10 Juin 2017

Foreign direct investment (FDI) inflows to Bangladesh rose by 4.38% to $2.33bn in 2016 from $2.2bn in 2015, while the inflows to developing Asia shrank by 15% to $443bn during the same year, according to a new report of the United Nations Conference on Trade and Development (UNCTAD) published on Thursday.

Ranked fifth in 2015, China jumped over the Netherlands (now 3rd) and Japan (now 4th) due to huge year-on-year growth of 42.9 percent.

Investment and the Digital Economy, global FDI flows retreated marginally in 2016 by 2 percent to 1,75 trillion US dollars, amid weak economic growth and significant policy risks perceived by multinational enterprises.

"The FDI inflows to developing Asia is expected to increase by about 15% as an improved economic outlook in major Asian economies is likely to boost investor confidence in the region".

This year it is expected to grow thanks to higher economic growth expectations, a resumption of trade growth, and increasing corporate profits, the United Nations trade and development agency UNCTAD said.

While the United States remained the top host country for FDI in 2016 with $391 billion inflows, and the UK saw an unprecedented rise from $33 billion in 2015 to $254 billion in 2016, inflows to India grew 1% to $44.5 billion.

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In major recipients such as China, India and Indonesia, renewed policy efforts to attract FDI could contribute to an increase of inflows in this year, it said.

"This affected three sub-regions, with only South Asia spared".

The modest increase in FDI flows is expected to continue into 2018, taking flows to 1.85 trillion USA dollars, but still below the all-time peak of 1.9 trillion dollars in 2007, said the report. Several significant deals were announced in 2016, including the $13 billion acquisition of Essar Oil by Rosneft (Russian Federation) and a consortium led by Trafigura (Singapore) - the largest deal ever in the country.

On the flip side, it said there are tax related concerns that may pose as deterrent to some foreign investors.

The report noted that signing of a tax treaty by India and Mauritius in May 2016 "might have" contributed to reduced round-tripping FDI. Foreign multi-national enterprises are increasingly relying on cross-border merger and acquisitions to penetrate the rapidly growing Indian market.

China became the second largest investing country after the United States past year, a UN report said on Wednesday.

Global FDI flows to rise this, next year