The likelihood of decision makers from the world’s largest firms investing abroad has declined for the first time since the Asian crisis. This is according to the management consultants AT Kearney’s FDI Confidence Index, an annual survey of CEOs, CFOs and other executives of 1,000 global firms.

The index score – a GDP-weighted benchmark for the likelihood of FDI – has fallen from 1.43 to 1.38, the lowest level since the survey began in June 1998. The pessimism is deep-rooted with 47% of those surveyed negative on the outlook of the global economy compared with just 9% in January 2000.

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Global and regional trade agreements were identified for the first time as likely to affect investment decisions. Two-thirds of executives saw the faltering of trade initiatives as having an adverse affect on FDI. As the report states: “Trade openness directly affects corporate operations... Without government commitment to maintain open trade and capital flows, the pace of globalisation may falter.”

Protectionist policies adopted by the US in the steel industry, leading to increasingly strained relations with Europe, are affecting trade negotiations and could affect the next World Trade Organisation (WTO) Round. The Free Trade Area of the Americas has hit some stumbling blocks with Brazil aiming for more continental integration and US policy-makers finding it difficult to make concessions on agricultural issues.

Dr Supachai Panitchpakdi, the new director general of the WTO recently expressed the need to maintain multilateral negotiations: “It is essential these deadlines [for Doha] be met and that these talks stay on course. In an uncertain and divided world, development of a common trade rules and principles for the 21st century is vital.”

Paul Laudicina, vice president and managing director of AT Kearney’s Global Business Policy Council, agreed: “The simultaneous deceleration of all the major economies only underscores the greater need on the part of policy-makers to boost trade expansion rather than succumb to

protectionist tendencies”.

Mr Laudicina pointed out that these latest results were an improvement on a study conducted shortly after September 11, when 95% of respondents expressed negative views. “While corporate investors’ attitudes are not restored to pre-9/11 levels, they have rebounded from the grim view of the world we detected last October,” Mr Laudicina said.

However, things do not look that hopeful as the study also reveals the overwhelming factor determining FDI decisions globally is the state of the US economy, with 91% seeing it as the most influential factor on an investment decision.

China is viewed as the top FDI destination for the first time while the US falls into second place. The latter has suffered a 60% decline in FDI in the last year due to the state of its economy, stock market volatility and corporate scandals.

Investors continue to see European countries as good investment locations, particularly eastern Europe and Russia, which achieved the highest individual improvement. Regional trends are very evident with Latin America suffering knock-on effects from the Argentine crisis. Brazil and Mexico have both been affected with Brazil falling from third-most desirable investment location to thirteenth.

The likelihood of decision makers from the world’s largest firms investing abroad has declined for the first time since the Asian crisis. This is according to the management consultants AT Kearney’s FDI Confidence Index, an annual survey of CEOs, CFOs and other executives of 1,000 global firms.

The index score – a GDP-weighted benchmark for the likelihood of FDI – has fallen from 1.43 to 1.38, the lowest level since the survey began in June 1998. The pessimism is deep-rooted with 47% of those surveyed negative on the outlook of the global economy compared with just 9% in January 2000.

Global and regional trade agreements were identified for the first time as likely to affect investment decisions. Two-thirds of executives saw the faltering of trade initiatives as having an adverse affect on FDI. As the report states: “Trade openness directly affects corporate operations... Without government commitment to maintain open trade and capital flows, the pace of globalisation may falter.”

Protectionist policies adopted by the US in the steel industry, leading to increasingly strained relations with Europe, are affecting trade negotiations and could affect the next World Trade Organisation (WTO) Round. The Free Trade Area of the Americas has hit some stumbling blocks with Brazil aiming for more continental integration and US policy-makers finding it difficult to make concessions on agricultural issues.

Dr Supachai Panitchpakdi, the new director general of the WTO recently expressed the need to maintain multilateral negotiations: “It is essential these deadlines [for Doha] be met and that these talks stay on course. In an uncertain and divided world, development of a common trade rules and principles for the 21st century is vital.”

Paul Laudicina, vice president and managing director of AT Kearney’s Global Business Policy Council, agreed: “The simultaneous deceleration of all the major economies only underscores the greater need on the part of policy-makers to boost trade expansion rather than succumb to

protectionist tendencies”.

Mr Laudicina pointed out that these latest results were an improvement on a study conducted shortly after September 11, when 95% of respondents expressed negative views. “While corporate investors’ attitudes are not restored to pre-9/11 levels, they have rebounded from the grim view of the world we detected last October,” Mr Laudicina said.

However, things do not look that hopeful as the study also reveals the overwhelming factor determining FDI decisions globally is the state of the US economy, with 91% seeing it as the most influential factor on an investment decision.

China is viewed as the top FDI destination for the first time while the US falls into second place. The latter has suffered a 60% decline in FDI in the last year due to the state of its economy, stock market volatility and corporate scandals.

Investors continue to see European countries as good investment locations, particularly eastern Europe and Russia, which achieved the highest individual improvement. Regional trends are very evident with Latin America suffering knock-on effects from the Argentine crisis. Brazil and Mexico have both been affected with Brazil falling from third-most desirable investment location to thirteenth.