…but FDI into Africa slips amidst economic turmoil

Despite turmoil in the world economy, global foreign direct investment (FDI) inflows rose by 17% to $1.5 trillion in 2011, according to the latest UN Conference for Trade and Development (UNCTAD) Global Investment Trends Monitor (GITM) released January 24, 2012.

The year 2010 recorded a global FDI of $1.29 trillion, the monitor shows.

The 2011 figure surpassed the pre-crisis average of $1.4 trillion in 2006, said UNCTAD based on its preliminary estimates because FDI inflows increased in all major economic groupings – developed, developing and transition economies.

“Developing and transition countries continued to account for half of global FDI in 2011 as their inflows reached a new record high at an estimated $755 billion, driven mainly by investments in Latin America (up 35%) and in transition economies (up 31%),” said UNCTAD.

But Africa – the region with the highest number of least developed countries, the monitor said continued to experience a decline in FDI. Its early estimates show that the share of inflows to Africa “dropped by a further 0.6%, to a total of 3.6% of world FDI flows.” The continent recorded $54.4 billion of FDI in 2011 as “West Africa and Southern Africa saw robust growth during the year.”

Inflows to developed countries meanwhile recorded a growth rate of 18.5% and UNCTAD says was “largely due to cross-border mergers and acquisitions” since there was no expansion of investment in productive assets through greenfield projects.

UNCTAD estimates that FDI flows will climb moderately in 2012 to around $1.6 trillion, but will remain short of the all-time peak of $2 trillion reached in 2007.

However, the organization says the fragile recovery of the world economy in 2011 – with growth tempered by the debt crisis in developed countries, the uncertainties surrounding the future of the euro, and rising financial market turbulence – will have an impact on FDI flows in 2012.

Both cross-border mergers and acquisitions and greenfield investments slipped in the last quarter of 2011, UNCTAD figures indicate. All these factors suggest that significant risks and uncertainties for further FDI growth in 2012 remain in place, it added.

By Ekow Quandzie//ghanabusinessnews.com

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