Bridges Weekly Trade News Digest • Volume 10 • Number 34 • 18th October 2006

UNCTAD Unveils 2006 World Investment Report


The new edition of the UN Conference on Trade and Development’s annual World Investment Report focuses on new sources of foreign direct investment: transnational corporations (TNCs) from developing countries. Released on 16 October, the study indicates that FDI continued to increase for the second consecutive year, with inflows reaching USD 916 billion in 2005 - a 29 percent increase over the year before. However, FDI in the manufacturing and services sectors declined relative to investment in primary commodities, particularly mining.

Much of this growth was driven by increased investment in developed countries. The UK, the largest recipient of such investment, reaped USD 165 billion in FDI. Regionally, the EU received the FDI inflows totaling USD 422 billion - nearly half of the world total. Inflows of FDI in developing countries reached a record high of USD 334 billion, though they declined as a share of global inward FDI to 36 percent of the total. South, East, and Southeast Asia continued to account for the bulk of FDI flows to developing countries.

Notably, patterns of investment are shifting. While FDI flows used to occur between developed countries only, or from developed countries to developing ones, transnational companies (TNCs) from developing countries are now investing in developed and developing countries as well. These firms emerging from developing countries are becoming powerful regional, even global, players.

According to UNCTAD estimates, FDI between developing countries has grown tremendously over the past 15 years, with total outflows from transition and developing economies increasing from USD 4 billion (1985) to USD 61 billion (2004). Furthermore, the majority of this trading is intraregional, with Asia remaining the key target for FDI flows, followed by Latin American and Africa.

Khalil Hamdani, director of UNCTAD’s investment division, said the most encouraging aspect of the figures was the "resilience of FDI into developing countries."

The World Investment Report 2006 is available online at http://www.unctad.org/Templates/webflyer.asp?docid=7431&intItemID=3968&lang=1&mode=toc.

ICTSD reporting; "Global inflows of foreign direct investment soar," THE FINANCIAL TIMES, 16 October 2006.