2013.06.2704:48:32UTC+00Emerging markets FDI inflows overtake advanced nations for the first time

Foreign direct investment into emerging economies surpassed that into developed markets for the first time last year even as such inflows slowed globally, the United Nations said.

Developing countries received 52 percent of investors’ funds in 2012, in comparison with 45 percent the year before, the United Nations Conference on Trade and Development announced in a report today. Foreign direct investment globally declined 18 percent to $1.35 trillion last year, and is forecast to be around the same level in 2013, it said. The agency defines FDI as a lasting interest in an enterprise in a foreign economy.

Investment Recovery

“Recovery to more vigorous investment levels will take longer than expected, mostly because of global economy fragility and political uncertainty,” UNCTAD said, adding total foreign direct investment may reach $1.45 trillion this year and rise to $1.6 trillion in 2014.

China became the world’s third-largest investor last year after the U.S. and Japan, climbing three steps from 2011, UNCTAD said.

“Despite the global downturn, transnational corporations from developing countries continued their expansion abroad,” the report said. “The BRICS countries -- Brazil, the Russian Federation, India, China and South Africa -- continued to be the leading sources of FDI among emerging investor countries.”

The World Bank this month cut its global growth forecast for this year as budget cuts deepened Europe’s contraction. FDI into Europe plunged 42 percent last year while that into the U.S. fell 26 percent, according to UNCTAD.

Inflows into China fell about 2 percent to $121 billion in 2012, the report said. There is “strong downward pressure” on foreign investment into China in manufacturing amid rising production costs, weaker export markets and foreign companies moving to lower-income countries, it said.

Four of the top five recipients of funds are listed as developing economies by the UN. They are China, Hong Kong, Brazil and the British Virgin Islands, which received $65 billion last year.

The British Virgin Islands attracts investments because it’s a tax haven and transit destination before money is moved to its “real destination,” according to Nagesh Kumar, chief economist of the UN’s Economic and Social Commission for Asia and the Pacific.