Foreign investment keeps falling but outlook healthier UN report says

World Investment Report 2004, released today by the UN Conference on Trade and Development (UNCTAD), argues that the outlook for the year ahead is promising, thanks to better economic growth, increasing corporate profits, higher stock prices and more mergers and acquisitions.Foreign investment is also increasingly being targeted at services, especially the business, financial, telecommunications and leisure industries, and away from manufacturing and primary industries.The annual report shows that foreign direct investment (FDI) inflows dropped 18 per cent to $560 billion last year from $679 billion in 2002 – well below the $1.4 trillion mark reached in 2000.The slow and irregular pace of economic recovery in the developed world – which dominates the overall FDI totals – was the biggest reason for the slide, with the United States (down 30 per cent to its lowest levels since 1992) and the European Union (down 21 per cent) both suffering.FDI inflows into Central and Eastern Europe also slumped, but the report’s authors at UNCTAD forecast that trend will turn around given many of the region’s nations joined the EU on 1 May.The picture in the developing world was more mixed, with Africa and the Asia-Pacific – led by China – gaining overall, but Latin America and the Caribbean enduring another fall. The changes were unequal even within continents, with many of Africa’s most impoverished countries unable to attract nearly as much FDI as their neighbours.African States rich in natural resources, such as Morocco, Angola, Equatorial Guinea, Nigeria and Sudan, attracted the bulk of the increased FDI to the continent – a total of $15 billion – whereas 24 countries received less than $100 million each.Professor Jeffrey Sachs, Special Adviser to Secretary-General Kofi Annan on the Millennium Development Goals (MDGs) – a set of eight, time-bound targets for reducing poverty and hunger and improving overall living standards – told a press briefing today that the outlook for the globe’s poorest States remains bleak.”Many of the poorest countries are simply being bypassed by globalization, and the promises of the rich countries are not being fulfilled,” he said, adding that FDI is so important because it is one of the strongest engines for growth in the developing world.Professor Sachs said the solution was not to try to halt the forces of globalization but to make them fairer, and to pressure affluent nations to meet their pledges.”We need more globalization that reaches the poor countries, and more successful globalization, not less. The kind of globalization that the poorest countries are feeling is brain-drain. They’re not seeing the inflow of foreign investment.”