Growth in FDI flows decelerates

ENS ECONOMIC BUREAU

NEW DELHI, SEPTEMBER 18: GROWTH in global flows of foreign direct investment (FDI) decelerated to 18 per cent in 2000 as against a high 50 per cent growth recorded in the previous year. In the current year, there are indications that FDI flows may actually go down from the present level of $1.3 trillion owing to slowdown in the world economy, according to the World Trade Investment Report 2001 published by the United Nations Conference on Trade and Development (Unctad).

FDI inflows to India increased marginally in 2000 to touch $2.3 billion against an investment of $2.1 billion attracted in 1999. Increase in India’s share was marginal despite a record 44 per cent increase in FDI inflows into developing Asia primarily due to an unprecedented FDI boom in Hong Kong. Among developing Asian countries, India ranked a poor seventh below smaller economies like Turkey, Malaysia, Korea, Singapore and Taiwan. While China had FDI inflows of $40 billion, Hong Kong attracted FDI of $64 billion up from $24 billion in 1999. The investment report, which was released on Tuesday, observed that FDI flow was getting concentrated in industrialised countries.

Share of developing countries, in global FDI flow, reduced from 41 per cent in 1994 to 21 per cent in 1999 and 19 per cent in 2000. The Triad countries comprising Japan, the US and the European Union attracted 71 per cent of FDI inflows and were together responsible for 82 per cent of the outflows.

The concentration of FDI flows in the developed world was largely due to the high number of corporate mergers and consolidation taking place, the report said. While the UK and France were the largest source of FDI in 2000, the US remained the single largest recipient of FDI.