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Global FDI down sharply

Hardy GraupnerJune 24, 2015

Global foreign investment volumes have taken a hit of late, a fresh UN study has revealed. The drop was particularly sharp in industrialized nations, while developing nations in Asia experienced a boost.

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Building site in Brazil
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The global volume of foreign direct investment (FDI) fell by an alarming 16 percent in 2014, the United Nations Conference on Trade and Development (UNCTAD) said Wednesday in its latest World Investment Report.

The UN body noted that FDI amounted to $1.23 trillion (1.1 trillion euros) worldwide last year, with the year-on-year drop reflecting the fragility of the world economy and uncertainty for investors amid elevated geopolitical risks.

UNCTAD pointed out that the low level of investment flows became most obvious in the case of developed nations in Europe and elsewhere, with FDI volumes to such countries decreasing by 28 percent in 2014. The report added that large-scale divestment from the United States played a crucial role in this development.

Asia bucking the trend

FDI inflows to Africa remained flat at $54 billion last year, while foreign investment in Latin America and the Caribbean was down 14 percent, the report found.

By contrast, developing Asia provided a beacon of hope as it saw its FDI influx grow to historically high levels on a 9-percent increase year on year.

UNCTAD urged an overhaul of multinational investment agreements, saying stipulations contained in such accords should not unduly constrain public policymaking. It spoke out in favor of adding in more provisions on investor responsibilities, such as clauses on compliance with domestic laws and clauses on employment safeguards.

The UN body provided an optimistic outlook for the next couple of years, expecting global FDI to grow by 11 percent to $1.4 trillion this year and further increases in 2016 and the next year. It warned, though, that any positive predictions might be marred by heightened geopolitical tensions in many parts of the world.