Flows into developed countries declined for the fourth consecutive year. In the developing world, Asia has a commanding lead, attracting more than twice as much as Latin America ($166bn against $69bn). In 1999, the two regions were on a par.
Developing countries accounted for 42% of world FDI flows in 2004, the highest figure in two decades (except for 1994, when it was the same). If the countries of central and eastern Europe (including EU-accession countries) are added, all non-developed countries last year accounted for nearly half of world FDI flows.
Developing countries attracted half of the more than 9000 green-field projects undertaken in 2004; if central and eastern Europe is added, this percentage rises to more than two-thirds according to LOCO Monitor.
In some respects, then, the gap between developed and non-developing countries is closing. What matters is not only the quantity but also the quality of the investment – but if green-field investment is an indication, developing countries are receiving increased attention from investors, although a relatively small number of countries are involved.
More importantly, the most dynamic part of the global FDI market consists of emerging economies, for reasons of cost reduction, market expansion and access to skills. While an upturn in mergers and acquisitions may push up figures for developed countries, much of the action is likely to remain in emerging markets. Locational decision makers should take note.
Karl P. Sauvant, Director, Division on Investment, Technology and Enterprise Development, Unctad