GENEVA, 5 September 2003 — Global investment flows are likely to rise in 2004 after steadying this year at depressed levels reached in 2002, the United Nations Conference on Trade and Development forecast yesterday.
Investment flows would steady this year but “a rebound is likely in 2004”, UNCTAD Secretary-General Rubens Ricupero said, launching the 2003 World Investment Report.
The report spotlighted a sudden fall in foreign investment flowing into the United States and Britain - which have a high reputation for being attractive to investors - and put Luxembourg as the top destination for international capital, for tax reasons. It also noted a surge of investment into Central and Eastern Europe.
By sector, manufacturing and financial, transportation and communications services have been the hardest hit but investment in the mining and oil industries rose. The outlook varies considerably from sector to sector. The report said that prospects were “brighter for consumer pharmaceuticals, electronics and semiconductors, but dimmer for automobiles, metals and machinery and aerospace”.
Total world foreign direct investment (FDI) fell by 40 percent in 2001 and then by 21 percent last year to $651 billion (602.77 billion euros) or scarcely more than half the record high figure in 2000, UNCTAD reported. Of 195 countries surveyed, 108 attracted less foreign direct investment in 2002 than in 2001.
The biggest reduction occurred in the United States, usually the world’s most attractive destination for capital for investment. Inflows into the United States fell by nearly 80 percent to $30 billion from $144 billion in 2001, pushing the United States down to fifth position in attracting investment.
Flows into Britain fell by 60 percent to $25 billion from $62 billion. The top destination was Luxembourg, which attracted $126 billion much of which was money being put through the tiny country to gain tax advantages.
It was followed by China, which attracted $53 billion marking an increase of 13 percent, France with $52 billion showing a fall of 6.6 percent, Germany 38 billion dollars, up 12 percent, then the United States, followed by The Netherlands with $29 billion, a fall of 43 percent, and then Britain.
Japan was in 18th position with a 50 percent increase to $9.0 billion reflecting the purchase of Japanese finance houses. Overall, the slump in 2001 and 2002 had been the biggest reduction for 30 years, UNCTAD said, attributing the decline to the world economic downturn, the collapse of stock market prices, a fall in company profits and a general loss of confidence in response to financial scandals.
UNCTAD said another factor had been a “considerable” fall in international merger and acquisition activity, which had totaled $370 billion in 2002 from $594 billion in 2001 and $1,100 billion in 2000.