Slowdown in Global Investment (FDI) Flows
From Determinants of Foreign Direct Investment (FDI)
Foreign direct investment (FDI) is a major component of globalization, together with international trade. Its operation is made possible by movements of factors across countries, in particular, capital. By definition, FDI involves long-term cross-country commitments. According to International Monetary Fund (IMF), FDI entails the establishment of a “lasting interest” by a resident entity of one economy in an enterprise located in another economy (International Monetary Fund, 1993). Lasting interest implies a long-term relationship between the foreign investor and the overseas enterprise where the said investor holds significant influence over management. The IMF defines a direct investment enterprise as one in which a foreign investor holds at least 10% of the ordinary shares or voting power (International Monetary Fund, 1993). The Organization for Economic Cooperation and Development (OECD, 1996, p. 10) classifies enterprises of direct foreign investors into three groups: subsidiaries, in which a nonresident investor holds more than 50% of the ownership; associates, in which a nonresident investor’s shares range between 10 and 50%; and branches, which are unincorporated enterprises owned by a nonresident investor, wholly or jointly. Obviously, such definitions and the resultant measurements leave ambiguities and imprecisions. However, they do help maintain relative consistency in cross-country comparisons.
From 1995 to 2015, the world saw a dramatic increase in FDI. The FDI inflows in 2015 were 8.6 times those in 1995, an increase from about 0.2 trillion USD in 1995 to about 1.8 trillion USD in 2015. While FDI inflows to developed countries increased 8.6-fold, those to developing countries and transitional economies increased 23 times. In 1995, FDI inflows to developing and transitional economies were 17% of the world total, and in 2015 they accounted for 45%. FDI flows to OECD countries peaked in 2007, at about 1.3 trillion USD. Between 2013 and 2014, for the first time, developing countries received more FDI than developed countries (UNCTAD, 2016), though the developed world recaptured the position as the largest FDI recipient in 2015 (see Figure 1).
There is an ever-growing body of literature on FDI. As Markusen (2008) demonstrated, three strands of relevant literature exist:
- the international business approach that is oriented toward the rationale of individual firms,
- the macroeconomic approach that focuses on aggregate flows of FDI without making a distinction between direct and portfolio investments,
- and the international trade theory approach, which increasingly moves closer to the international business approach, combining firm-level FDI analysis with aggregate analysis of capital flows.
From UNCTAD World Investment Report 2017
Key Sources of Research:
2017 AT Kearney FDI Confidence Index
http://www.iberglobal.com/files/2017/fdi_index_atkearney.pdf
UNCTAD World Investment Report 2017
http://unctad.org/en/PublicationsLibrary/wir2017_en.pdf
Recent Developments in Trade and Investment
Pierre Sauvé
Trade and Competitiveness Global Practice
World Bank Group
MIKTA Workshop on Trade and Investment
Session 2
Geneva, 20 March 2017
https://www.wto.org/english/forums_e/business_e/pierre_sauve_world_bank.pdf
OECD FDI Data
https://data.oecd.org/fdi/fdi-flows.htm
UNCTAD FDI Data
http://unctad.org/en/Pages/DIAE/FDI%20Statistics/Interactive-database.aspx
GLOBAL FDI FLOWS SLIP IN 2016, MODEST RECOVERY EXPECTED IN 2017
http://unctad.org/en/PublicationsLibrary/webdiaeia2017d1_en.pdf
Cross border mergers make India favoured FDI route: UNCTAD
June 2017
Cross-border M&As push global FDI flows to $1.76 trillion
June 2016
OECD Bilateral FDI Data
http://stats.oecd.org/index.aspx?DataSetCode=FDI_FLOW_PARTNER
UNCTAD Bilateral FDI Data
http://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics-Bilateral.aspx
World Bank FDI Database
https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD
FDI Markets
FDI Reports
Determinants of Foreign Direct Investment (FDI)
Yi Feng
Online Publication Date: Jun 2017
Viewpoints which Matter 