G. Support for FDI flows

G. Support for FDI flows . 72 73 24

FDI flows in services between developing countries are growing faster than flows between developed and developing countries.

Flows to developing countries appear to lead the recovery in global FDI.

(d) Appropriate harnessing of the potential for foreign direct investment (FDI) and encouraging increased FDI flows to small island developing States

Currently, the US receives only about 2 3 of FDI flows from China.

Meanwhile, FDI flows bounced back in the United Kingdom and the United States.

FDI represents a highly significant level of financial flows from developed to developing countries.

The private sector is becoming the main source of FDI flows to developing countries.

Gradually, FDI flows are being redirected to the region and export performance is improving.

Interestingly, a large proportion of the increased FDI flows has been channelled to the developing Asia and Pacific economies and after 1986 the region became the largest recipient of FDI flows in the developing world.

Another area requiring special attention is that of foreign direct investment (FDI) flows to Africa.

Regional integration in ASEAN had encouraged intra ASEAN investment, which contributes to South South FDI flows.

In the long term, private capital flows other than FDI tended to be highly pro cyclical.

The developed world still accounts for nine tenths of world outward FDI flows, but FDI from developing countries has shown higher growth rates in the recent past.

To be sure, the US remains the world s leading destination for FDI, accounting for 15 of global flows.

42. During the early 1990s, FDI flows to developing countries continued to rise, with the exception of Africa.

Financial flows to developing countries were increasing, their costs were low by historical standards, and non debt creating flows, notably foreign direct investment (FDI), were assuming greater importance.

But this Chinese FDI is bundled together with concessional loans, and there is much double counting, with the same ventures being recorded both as aid flows and as inflows of FDI.

Its findings were quite sobering the African continent received very low levels of FDI flows, mostly in the extractive sectors.

Portfolio flows and foreign direct investment (FDI) posted the strongest growth, accounting for more than two thirds of total private inflows.

Overall, however, the impact of FDI on Benin's economy had been relatively small due to the limited size of the flows.

Africa s share of global flows of foreign direct investment (FDI) also fell, from 1.8 in 1986 90 to 0.8 in 1999 2000.

Flows of foreign direct investment (FDI) to developing countries, for example, reversed their three year downward trend in 2004 (see table 3).

Overall, FDI flows are expected to increase over the medium term because of improvements in the main fundamentals that drive FDI a broad based economic recovery, equity market valuations and mergers and acquisitions (M As) activity.

Privatizations had been the main engine behind the FDI flows, though the dependence upon too few investing countries had not permitted proper differentiation.

In October 2004, the Government of South Africa took further steps to facilitate outward FDI by abolishing exchange control limits on such flows.

This said, FDI is only one of several sources of private capital flows that could benefit Africa, as demonstrated in table 2 below.

FDI flows to Asia and the Pacific reached an estimated 166 billion, which suggests a 55 per cent increase over the level in 2003.

Leading problems faced by developing countries, especially least developed countries, in compiling statistics on FDI flows and stocks and on the activities of TNCs

Source UNCTAD, FDI TNC database (www.unctad.org fdi statistics).

Third, as had already been mentioned, FDI flows were concentrated in regions that had the necessary infrastructure in place and dynamic manufacturing and industrial sectors.

Most developing country micro enterprises operated outside legal frameworks, but the assets of these enterprises were greater than the FDI flows to some developing countries.

The share of net foreign direct investment (FDI) flows to least developed countries has increased, reaching almost 5 per cent in the period 2003 2004.

FDI flows from India, which ranked 61 on the Outward FDI Performance Index 2001 2003, have accelerated sharply in the past two years as the Government has eased restrictions and the country's software and call centre companies have expanded abroad.

Some estimates suggest that South South FDI flows grew from less than 5 billion in 1994 to over 50 billion in 2000 (Aykut and Ratha, 2004).

The flows and impact of FDI should, therefore, be among the criteria for evaluating progress in goal 8 in the context of the right to development.

(c) Reduce barriers to long term, non debt creating capital flows, especially FDI, and the costs to migrants of sending their remittances through sanctioned institutional channels.

Its asset coverage was estimated to be 1.4 billion a year and was expected to grow after a slow year of FDI flows to developing countries.

20. The major types of long term financial flows to Africa can be broadly classified into three groups official development finance (ODF) private loans and FDI.

South South FDI flows have been motivated by push and pull factors, and similar structural, cyclical and policy factors similar to those between developed and developing countries.

In 2003, the 31 landlocked developing countries received in total about 8 billion in foreign direct investment (FDI) or 1.4 per cent of total world inward flows.

Despite increases in FDI globally from 15 billion in 2003 to 20 billion in 2004, Africa's share in global foreign direct investment flows remains only 3 per cent.

Despite the efforts of African governments over two decades to comply with this policy advice, poverty increased, growth performance was disappointing, and FDI flows failed to match expectations.

In fact, regional comparisons are not really the right place to begin an examination of FDI flows, simply because they tend to deflect attention from more fundamental determinants.