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Dec 01, 2009, 03.12 PM IST | Source: Reuters

Global FDI picked up in second quarter 2009

Global flows of foreign direct investment, in retreat for well over a year, picked up in the second quarter of 2009 against the first three months of the year.

Global FDI picked up in second quarter 2009
Global flows of foreign direct investment (FDI), in retreat for well over a year, picked up in the second quarter of 2009 against the first three months of the year, the United Nations UNCTAD agency said on Monday.

But in a brief report, it said FDI -- on which many countries rely for growth programmes -- remained much lower than during the second quarter of 2008, and that there was little sign of any further advance this year.

UNCTAD, the world body's trade and development agency, said the second quarter showed FDI up 38 percent overall against the January-March period in G20 countries -- the group of major and emerging economies now prominent in global governance.

Counting the European Union as a separate member although four of its members are also in the G20 individually, other countries in the group include Argentina, Brazil, Canada, China, Japan, South Korea, Russia, South Africa and the United States.

However, the advance was uneven over the group, with inflow growth especially marked in France, Germany, Spain, Ireland and Sweden, lower in other countries, and even declining in some, including Britain, the agency said.

UNCTAD, in a new four-page publication titled "Global Investment Trends Monitor", or GITM, to be issued quarterly from December 1, gave no concrete figures for the flows nor detailed country-by-country breakdowns.

In a earlier report on September 17, the agency said the financial crisis in 2008 which hit private equity firms and caused multinational companies to cut spending meant FDI was unlikely to fully rebound for two years or more.

The new Monitor said the second quarter upturn produced slight increases in Brazil, India and Russia, while they remained level in China. The report gave no details for other G20 countries, nor for poorer countries outside the group.

But it warned that the overall second quarter pickup "should be treated with some caution", because the absolute level of FDI was considerably lower than in the second quarter of 2008.

Further, the upturn seemed to be largely attributable to an increase in intra-company flows and reinvested earning, while equity flows -- the component most directly related to long-term investment stragies -- remained low.

"This suggests that companies remain cautious about their international expansion, UNCTAD said. Initial indicators available for the third quarter of the year seemed to confirm this analysis, the Monitor said.

However, in a note of optimism it added that "various macroeconomic indicators provide signals that the overall environment for international investment is slowly improving."

Among these were a rise in profits of the trans-national corporations (TNCs) that largely drive FDI during the second and third quarters, reversing a sharp drop at the end of 2008.

Nevertheless, it said, "it is likely that FDI flows will remain relatively weak until the end of this year."

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