Overseas investment falling, developing countries largely unscathed: UN trade agency

Foreign direct investment (FDI) has dropped 40 per cent year-on-year so far, the UN Conference on Trade and Development (UNCTAD) said on Monday, but the $470 million decline is happening mainly in wealthy, industrialized nations, especially in North America and Western Europe.

Overall, the global financial picture is “gloomy”, said UNCTAD’s James Zhan, Director, Division on Investment and Enterprise. He explained that foreign direct investment is important because it gives countries access to external capital, technology, market access and tax contributions.

According to UNCTAD, the development is mainly owing to recent tax reforms in the U.S. which have encouraged big firms there to bring home earnings from abroad – principally from Western European countries.

He said that the agency had warned in early January that there was “about $2 trillion of stock in the form of cash or in the form of reinvested earnings of retained earnings outside the US”, which may be repatriated in some form, following wholesale tax reform.

“And indeed, it’s happening,” he added. “We have seen that outward FDI from the US was from $147 billion last year to a negative $247 billion this year.”

Trade disputes another negative factor

Other factors have contributed to this year’s “huge difference in repatriation” of overseas profits by US multinationals, Mr. Zhan said. These include uncertainty about the detail and impact of tax reform and the potential impact of unresolved international trade disputes; such as the tit-for-tat tariffs imposed by the United States and China.

In contrast to the overall decline in foreign investment, the UNCTAD report highlights a 42 per cent increase in so-called “greenfield” projects, to $454 billion.

These initiatives can involve building operations in a foreign country from scratch and they are seen an indicator of future trends, Mr. Zhan explained, before noting that investment in this sector had been at “relatively low levels” in the same period last year.

'Only slight' fall in developing country investment

While the fall in foreign direct investment has happened mainly in richer nations, including Ireland (down $81 billion) and Switzerland (down $77 billion), developing economies saw FDI flows declining “only slightly” in the first half of the year by four per cent, to $310 billion, compared with 2017.

This includes developing Asia - down four per cent - to $220 billion - in the same period, driven mostly by a 16 per cent decline in investment in East Asia. China, the notable exception, was in fact the largest recipient of foreign direct investment in the first half of 2018, attracting more than $70 billion.

Latin America and the Caribbean, meanwhile, saw a six per cent drop in investment, amid uncertainty over upcoming elections that were offset by higher commodity prices, UNCTAD said.

This indicates that the country “is seeing a return to earlier levels of investment after a steep slowdown in the preceding years”, UNCTAD said, noting that Egypt remains Africa’s largest recipient of foreign investment - up almost a quarter - compared with the first half of 2017.

Photo: The Port of Salvador on All Saints Bay, Bahia, Brazil. As one of the bigger, emerging economies reliant on commodity exports, Brazil can expect some economic improvement, according to a United Nations Conference on Trade and Development (UNCTAD) report. (credits: Mariana Ceratti / World Bank / Flickr Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0))

Turning to Western Africa, the data indicates a 17 per cent fall in investment there in the first half of the year, from $5.2 billion to 4.3 billion. This is blamed partly on the “volatile global economic environment” and mixed commodity prices, and it could be turned around by advances in regional integration, including an African Continental Free Trade Agreement, the UNCTAD report suggested.

But that still leaves a significant gap in the investment that will be required for poorer countries to achieve Sustainable Development Goals by 2030, a list of ambitious objectives including extreme poverty eradication and ending world hunger, agreed three years ago.

Source: The UN Conference on Trade and Development (UNCTAD) 

Read more

Comments

No comments to display.

Related posts

The Application of Mobile Edge Computing in Agricultural Water Monitoring System

In this paper, a data link management solution is proposed in combination with advanced Mobile Edge Computing (MEC) technology, which effectively realizes the sinking of business anchor points and greatly reduces the business response time.

A Review of Commercial Biogas Systems and Lessons for Africa

The review identified the critical barriers to commercial biogas development to be high initial capital costs, weak environmental policies, poor institutional framework, poor infrastructure and a general lack of willpower to implement renewable energy policies and set challenging targets.

Call for applications: The Itron Smart City Challenge

The Itron Smart City Challenge will bring together leading IoT developers from across Europe to tackle a set of key business and societal challenges. These challenges will be designed by city leaders with the goal of identifying breakthrough solutions that enhance citizen wellbeing, improve operational efficiency and build more resourceful communities.
Application Deadline in 2 months

Thailand announced incentives to Boost Investment in Food Innovations

The incentives range from 5-10 years of corporate income tax exemption depending on the type of business and the level of technological advancement. To make this industry more attractive, BOI has offered addition incentives to top up from normal package. The additional incentives such as 50% corporate income tax holiday for five years or an additional two more years of income tax holiday will also be available.

BestMixer.io’s Bitcoin Blender Aims to Bring Anonymity Back to Crypto

The BestMixer.io development team has introduced their next generation bitcoin blender in an effort aimed at disrupting the quickening pace of blockchain analysis firms such as Chainalysis.

A Glimpse of What Lies Ahead for the Hazardous Location Air Conditioners Market

arious types of air conditioners such as central air conditioners, dehumidifiers, and ductless split system, portable are used in hazardous locations.

A Peek At The Immediate Future of the Haptics Technology Market

The global haptic technology market is valued $18.31 billion in the year 2017 and is expected to grow at a CAGR of 19.8% from the year 2017 to 2022.

Big Data in Smart Farming – A review

The review shows that the scope of Big Data applications in Smart Farming goes beyond primary production; it is influencing the entire food supply chain. Big data are being used to provide predictive insights in farming operations, drive real-time operational decisions, and redesign business processes for game-changing business models. Several authors therefore suggest that Big Data will cause major shifts in roles and power relations among different players in current food supply chain networks.
a day ago

OpenSHS: Open Smart Home Simulator

This paper develops a new hybrid, open-source, cross-platform 3D smart home simulator, OpenSHS, for dataset generation. OpenSHS offers an opportunity for researchers in the field of the Internet of Things (IoT) and machine learning to test and evaluate their models.
2 days ago

A Peek At The Immediate Future of the Hand Sanitizer Market

The global Hand sanitizer Market is estimated to grow at an estimated CAGR of 7.8% to reach $1,836.3million by 2023. Hand Sanitizer market is anticipated to gain highest level of profit globally by introducing of new skin safe products.