The United Nations Conference on Trade and Development (UNCTAD) on Monday said that
India was among the top 10 recipients of Foreign Direct Investment (FDI) in 2019, attracting $49 billion in inflows, a 16% increase from the previous year, driving the FDI growth in South Asia. The majority went into services industries, including information technology.
UNCTAD, in its Global Investment Trend Monitor report said that the global foreign direct investment remained flat in 2019 at $1.39 trillion, a 1% decline from a revised $1.41 trillion in 2018.
“South Asia recorded a 10% increase in FDI to $60 billion. The growth was driven by India, with a 16% increase in inflows to an estimated $49 billion. The majority went into services industries, including information technology,” it said.
Inflows into Bangladesh and Pakistan declined by 6% and 20%, respectively, to $3.4 billion and $1.9 billion.
“This is against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, including trade tensions,” it said.
According to the report, flows of FDI to developing economies remained unchanged at an estimated $695 billion.
It also showed that FDI rose 16% in Latin America and the Caribbean and 3% in Africa.
As per the multilateral agency, FDI flows to developed countries remained at a historically low level, decreasing by a further 6% per cent to an estimated $643 billion.
FDI to the European Union fell 15% to $305 billion while flows to the United States-the largest recipient of FDI- remained stable at $251 billion.
China, the second largest recipient, saw zero-growth in FDI inflows. Its FDI inflows in 2018 were $139 billion and $140 billion in 2019. The FDI in the UK was down 6%
as Brexit unfolded.
Slow M&A activity
The report showed that cross-border M&As declined 40% in 2019 to $490 billion – the lowest level since 2014.
The fall in global cross-border M&As sales was deepest in the services sector which declined 56% to $207 billion, followed by a 19% fall in manufacturing to $249 billion and a 14% decrease in primary sector to $34 billion.
The decline in M&A values was driven also by a lower number of mega deals. In 2019, there were 30 mega deals above $5 billion compared to 39 in 2018.
Going ahead, UNCTAD expects FDI flows to rise moderately in 2020, as current projections show the global economy to improve somewhat from its weakest performance since the global financial crisis in 2009.
It said that GDP growth, gross fixed capital formation and trade are projected to rise, both at the global level and, especially, in several large emerging markets.
Such an improvement in macroeconomic conditions could prompt MNEs to resume investments in productive assets, given also their easy access to cheap money, the fact that corporate profits are expected to remain solid in 2020, and hopes for waning trade tensions between the United States and China, it said.
However, it highlighted that significant risks persist, including high debt accumulation among emerging and developing economies, geopolitical risks and concerns about a further shift towards protectionist policies.