Despite a recovery in the level of global foreign direct investment (FDI) last year, multinational investment in Ireland plummeted last year, according a report from United Nations Conference on Trade and Development (UNCTAD). Most other developed European economies also fared badly in the report.
UNCTAD’s World Investment Report 2005: Transnational Corporations and the Internationalisation of R&D showed FDI flows into Ireland fell by 66pc from US$26.88bn in 2003 to US$9.12bn in 2004. FDI is now at pre-2001 levels. The data also showed that FDI outflows fell sharply from US$3.5bn in 2003 to
US$7.4bn in 2004.
At US$648bn, global FDI inflows were 2pc higher than in 2003. But the global figure masks diverging trends. Flows to developing countries surged by 40pc to reach US$233bn – the second highest level ever recorded – while developed countries saw inflows decline by 14pc, to US$380bn. Some 36pc of all FDI went to developing countries in 2004. Seven of the 10 economies with the largest increases in FDI were developing or transition economies, while the 10 largest declines were in developed countries. The US remained the largest FDI recipient, followed by the UK and China.
There were major variations in FDI performance among developed countries, the report reveals. FDI flows to the US shot up by 62pc (to US$96bn) and flows to the UK more than tripled (to US$78bn), partly because of an increase in large mergers and acquisitions (M&A) in those countries. FDI flows to Australia also soared to a record US$43bn, driven by equity investments and a rise in M&As.
EU trends varied sharply between old and new EU members. In the former group, inflows plunged by 40pc, reaching their lowest levels since 1998. In some countries, such as Denmark, Germany and the Netherlands, the large declines were partly the result of repayments of intra-company loans and capital repatriation by parent companies. France and Spain, which have registered large increases in recent years, also experienced significant declines in FDI flows in 2004. By contrast, FDI in all the new EU member countries rose to US$20bn, almost 70pc more than in 2003, with the Czech Republic, Hungary and Poland receiving the largest chunks of these inflows. The biggest investors in these countries were firms based in original 15 EU nations, such as Austria, France, Germany and the Netherlands. But FDI in the EU as a whole – including new EU members – plummeted by 38pc (to US$216bn) last year.
By Brian Skelly
