While Russia is considered sixth top FDI recipient, Saudi
Arabia and India have gained eighth and ninth positions respectively in terms
of foreign investments, revealed a study conducted by the Associated Chambers
of Commerce and Industry of India (ASSOCHAM).
China, which is leading as the priority host economy for FDI
amongst the developing economies, is also considered the second largest FDI
recipient in the world, the study added.
While the developing countries are experiencing an increase
of about 17 percent and have managed to sustain uninterrupted inflow growth
since 2003, the inflows into the developed countries have recorded a sharp
decline of nearly 30 percent in 2008.
Globally, the FDI inflow during the past year dropped to
$1.77 trillion, a decline of 37 percent over the year 2008. Despite a
widespread decline in FDI inflows in 2009 across all the three major group of
economies, the impact on flows to developing and transition economies was
relatively lesser as compared to developed countries.
While the developing economies recorded a drop in FDI flows
of nearly 32 percent in 2009 as compared to a year earlier, the developed
market witnessed a fall of more than 42 percent during the same period.
“The major recipients of FDI for second quarter of 2010
shows a sharp contraction in the flows to the majority of developed countries
leading to negative flows in few highly favored investment destination such as
United Kingdom and Belgium,” said ASSOCHAM President Swati Piramal.
While the United Kingdom witnessed a drop of $6.96 billion in
FDI, Belgium recorded a decline of $8.36 billion in foreign investment inflow
in the second quarter of this year, said the report.
On the contrary, foreign investment flow to the key
developing nations such as China, Russia, Brazil and India witnessed a modest
gain over the first quarter, recording an increase of 35.5 percent, 30.8
percent, 15.6 percent and 16.8 percent respectively, it added.
The developing economies, according to early indications,
are right on the track of outperforming and attracting more FDI than developed
countries in 2010, said the ASSOCHAM report.
“The potential impact of the economic crisis, however,
enforced the shifting of geographical focus to developing and transition
economies because of their much better economic performance than the developed
economies,” it added.
According to the report, total FDI inflow in the world
soared to a record high of almost $2.1 trillion in 2007, of which developed
countries received $1.44 trillion, a 68.8 percent of the total FDI inflow in
the world.
In 2007, developing and transition economies received only
31.2 percent of the total inflow in the world. India alone received $8.88
billion during April-August 2010-11.
“Factors such as weaker economic growth in developed
countries and abnormal functioning of the world credit are putting pressures on
the pace of recovery of FDI flows,” said Piramal.
“In addition to other factors, increased screening
requirements and new limitations of foreign equity policies of government
during crisis is also impairing with the inflows. Even with the gradual
recovery of FDI in short term, developed nations chances of attracting more FDI
are fraught with mounting fiscal deficits and debt levels,” she added.
