Foreign direct investment shows green shoots, OECD says

2 Dec 2010

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While international investment remained flat well into the fourth quarter of 2010, there are signs of improvement over two years of steep declines in 2008 and 2009. In Ireland, foreign direct investment may be up 50pc on last year.

The OECD projects that global foreign direct investment flows will decline by around 8pc in 2010, a markedly better performance over the 19pc drop in FDI flows seen in 2008 and the 43pc decline in 2009.

If current trends hold, international M&A investment – an important component of FDI – will hover near US$670bn in 2010, an increase of 6pc over 2009. This would be the first increase in international M&A activity since 2007, following declines of 21pc in 2008 and 53pc in 2009, according to the report.

Ireland may actually be bucking the FDI trend. According to a spokesman for IDA Ireland, the country, which attracts more FDI than Brazil, Russia, India and China combined, secured 72 projects – mostly technology-based – this year, with more on the way.

The recent IBM Global Trends Report 2010 has put Ireland ahead of other foreign direct investment locations, such as Singapore, Hungary and the Czech Republic

In addition, recovery firm Hughes Blake found that 71.6pc of Hughes Blake members would recommend Ireland as a location for investment, 55.6pc do not believe that the country’s reputation has suffered any more than other countries and cost competitiveness and workforce quality rank highly in the poll.

Momentum

Lacking any clear momentum of its own, international investment in 2011 will be particularly sensitive to the strength of the economic recovery across the global economy, the OECD said.

It will also be sensitive to whether G20 countries can avoid investment protectionism or any further conflict over foreign exchange policies, which could create uncertainty over the pricing of international assets and the valuation of expected future income from these assets.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com