GLOBAL FOREIGN DIRECT INVESTMENT FLOWS REACH $325 BILLION IN 1995, AN ALL-TIME HIGH, SAYS UNCTAD
Press Release
TAD/1832
GLOBAL FOREIGN DIRECT INVESTMENT FLOWS REACH $325 BILLION IN 1995, AN ALL-TIME HIGH, SAYS UNCTAD
19960605 GENEVA, 4 June (UNCTAD) -- Between 1994 and 1995, worldwide foreign direct investment inflows had an increase of $103 billion -- or 46 per cent -- setting a new record, estimated at $325 billion. The increase in absolute terms reflects a comparable increase in real terms, with foreign direct investment rising by 38 per cent between the two years, at constant 1994 dollars. All categories of countries registered new record levels.Following their emergence from a period of slow growth and boosted by a new wave of mergers and acquisitions, foreign direct investment inflows to the developed countries reached an estimated $216 billion in 1995. The United States led the way with record inflows of $75 billion and record outflows of $97 billion, according to preliminary estimates.
Developing countries registered inflows estimated at $97 billion, an all-time high. The transition economies of central and eastern Europe received twice as much in 1995 as in the previous year, reaching an estimated $12 billion, the highest ever recorded. Both in developing countries and in central and eastern Europe, a limited number of countries accounted for a large part of the increases in 1995: China, Indonesia, Malaysia and Thailand in the former group, and Czech Republic, Hungary and the Russian Federation in the latter group.
Although the data is still preliminary, foreign direct investment flows in 1995 demonstrated the cyclical nature of those investments, which follow closely, although with a lag, fluctuations in economic growth. Underpinning the cyclical nature of foreign direct investments are global competitive pressures that push all firms, including a growing number of transnational corporations based in developing countries, to become more active internationally through that type of investment or other non-equity forms of international involvement.
Outflows from the United States and Germany more than doubled, and increased by a half of their 1994 value in the case of the United Kingdom. Behind that increase lay rising cross-border mergers and acquisitions that once again became large enough to determine the level, direction and composition of foreign direct investment flows. While there were a number of
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large-scale mergers and acquisitions among large enterprises in pharmaceutical, chemical and financial services industries -- reflecting ongoing consolidations in those industries in developed countries -- small and medium-sized enterprises have also entered the mergers and acquisitions market. Unlike the previous boom in such market in the late 1980s, when many of those mergers and acquisitions were financially motivated, the recent boom resulted from corporate strategies meant to enhance core competencies of firms.
The unprecedented level of global foreign direct investment flows in 1995 suggests that the speed of globalization of production by transnational corporations may be accelerating, as that type of investment represents an alternative means of delivering goods and services to foreign markets that is increasingly intertwined with international trade. It is also a means of accessing inputs and organizing production.
The surge in global foreign direct investment flows is one of the topics examined by the Division on Transnational Corporations and Investment of the United Nations Conference on Trade and Development (UNCTAD) in its World Investment Report 1996, to be published later this year. The 1996 Report will provide extensive data on the regional and country breakdown of those flows and an analysis of the factors underlying the new developments. It will also examine the interrelationship between international trade and international investment as a way of delivery of goods and services in the world economy. On the policy side, the Report will examine issues related to a possible multilateral framework on investment.
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