[full article at http://www.iht.com/IHT/TODAY/WED/FIN/fdi.2.html ]
Paris, Wednesday, October 4, 2000
Investment Flow Grew in 1999, But Takeovers Took Big Share
By Tom Buerkle International Herald Tribune
LONDON - Flows of foreign direct investment to developing countries bounced
back dramatically in the aftermath of the emerging-markets crisis to hit a
record $208 billion last year, but the investment remains concentrated in
only a handful of countries, the United Nations Conference on Trade and
Development reported Tuesday.
The report highlighted the extent to which foreign direct investment is
being driven by a worldwide takeover boom rather than by so-called
green-field development, such as going into a country and building a plant.
It also underscored the extent of investment flows from Europe to the United
States that have lifted the dollar against the euro.
Direct investment flows into the United States, increasingly the hunting
ground of choice for acquisitive multinationals, surged last year to $275
billion, or 31.8 percent of global foreign direct investment, compared with
$186 billion, or 27.4 percent, in 1998. Although inflows to the European
Union rose 23 percent to $305 billion, the bloc sent $510 billion of direct
investment abroad. A record 60 percent of investment flowing out of EU
countries went to non-EU members, principally the United States.
Investment flows to developing countries, which stagnated in 1998 because of
the financial crisis that rippled from Asia to Russia and parts of Latin
America, rose nearly 16 percent to $208 billion in 1999, with most of the
gains occurring in Asia and Latin America. But developing countries' share
of global foreign direct investment declined to 24 percent from 26 percent
the previous year.
Globally, foreign direct investment surged 27 percent last year to $865
billion
The value of completed cross-border mergers and acquisitions increased an
even greater 35 percent last year to a record $720 billion. That was nearly
four times the level of $187 billion seen in 1995. The UN body forecast that
the total would exceed $1 trillion this year. Takeover activity is dominated
by the United States and other large industrial countries, however, and only
10 percent or so involves developing countries.
Gabriele Koehler, head of Unctad's investment division, said green-field
investment was preferable in developing countries because it created jobs
and productive capacity and enhanced the skills of local work forces. But
the experience of the past year showed that foreign takeovers can help
developing countries by providing fresh finance for troubled companies such
as South Korea's chaebol and by generating higher proceeds for governments
selling state assets.
