APEC region’s FDI recovery remains intact, lifts global investment above pre-financial crisis levels

The APEC region’s foreign direct investment (FDI) continued to regain ground in 2011 and helped to lift global FDI inflows above their pre-financial crisis level, despite lingering global economic uncertainty.

FDI inflows to APEC economies increased 16 percent year-on-year to US$733 billion last year, according to an APEC Policy Support Unit analysis of data from the newly launched United Nations Conference on Trade and Investment (UNCTAD) World Investment Report 2012.

This year’s World Investment Report traces global trends in FDI using the latest data and provides a framework towards a new generation of investment policies.

The APEC region helped to drive global FDI inflows, which also increased 16 percent in 2011.

APEC economies’ relatively fast rate of investment recovery compared to other regions increased their share of global FDI inflows to 48 percent in 2011, from an average of 37 percent during the 2005-2007 run-up to the financial crisis.

It also brought the APEC region’s average FDI inflows for 2009-2011 to a level 13 percent higher than their average during the 2005-2007 pre-crisis period.

“While investment opportunities in the APEC region are not immune to global economic realities as we have seen, they are proving to be resilient and provide an outlet for capital that has the potential to spur growth for businesses and markets worldwide,” said APEC Secretariat Executive Director, Ambassador Muhamad Noor.

“APEC member economies continue to work together to advance initiatives that support economic development, including the promotion of greater free and open trade and investment, in line with APEC’s 2012 priorities.”

The new data suggests a measure of progress on this front, but with the spearheading of the APEC region’s FDI growth coming from different ends of the spectrum.

FDI inflows to developed APEC economies grew by 21 percent in 2011 versus 12 percent growth for developing APEC economies. The latter maintained a larger proportion of the region’s FDI inflows at 58 percent, however.

Global economic uncertainty and the possibility of lower FDI growth rates in emerging markets will result in a mere five percent increase in global FDI inflows to US$1.6 trillion in 2012, UNCTAD predicts.

“We have found that FDI inflows are a major component of overall investment in many APEC economies,” said Dr Denis Hew, APEC Policy Support Unit Director.

“In light of the downside risks arising from the ongoing EU debt crisis, there is a concern that the uncertain business environment will cause many transnational corporations to scale back their operations and investments. APEC economies will therefore need to be extra vigilant and proactive to ensure their policies remain supportive of foreign investments,” Dr Hew cautions.

Looking ahead, barring any macroeconomic shocks, UNCTAD forecasts that global FDI inflows will rise by 11 percent to US$1.8 trillion in 2013 and seven percent to US$1.9 trillion in 2014.

The World Investment Report 2012 can be found at http://www.unctad.org/wir. A more detailed APEC Policy Support Unit analysis of the UNCTAD World Investment Report 2012 can be found here.

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