Twelve researchers from Brazilian affiliate member, the Institute for Applied Policy Studies (IPEA), a think tank linked to the Strategic Affairs Secretariat of the Presidency of Brazil, participated in the Vi’s third fall videoconference, held October 1.
Masataka Fujita, Head of UNCTAD’s Investment Trends and Issues Branch, led the videoconference presentation, which focused on the findings of the latest World Investment Report (WIR).
“In 2011, global foreign direct investment (FDI) flows surpassed the average of the pre-crisis 2005-2007 period,” Fujita began.
FDI inflows increased across all major economic groupings, with developing and transitions economies accounting for 51 percent of the flows, he explained, and although FDI outflows from emerging economies fell slightly, they remained quite high.
While global FDI flows risk losing momentum in 2012, projections for 2013 and 2014 show a steady growth. According to the WIR, 53.4 percent of Transnational Corporations (TNCs) view the global investment climate in 2014 in positive terms, compared with 19.6 percent for 2012.
“In the short term, uncertainty among investors is still high but the expectations are improving significantly,” Fujita said.
He went on to introduce three new UNCTAD FDI-related indexes gaging attraction, potential and level of contribution to the economy. The attraction index ranked Brazil relatively high, which appears to be in line with what economic fundamentals would suggest.
FDI across sectors has changed significantly in the aftermath of the crisis. While FDI projects in the primary sector increased remarkably after 2008, FDI in manufacturing and service sectors grew at a lower rate. In terms of prospective FDI hosts, China continued to top the list, with Brazil coming in fifth.
The WIR also found that TNC’s international production advanced in 2011, but that companies are holding record-high reserves.
“TNCs have cash and funds which could be used for investment purposes but they are not investing,” Fujita said.
Fujita also emphasized the role of sovereign wealth funds (SWFs) as FDI actors. SWFs manage roughly USD 5 trillion in assets, but have only invested USD 125 billion to date.
“So far, SWFs have not been considered as a possible FDI source, but there is big potential in there,” Fujita said.
The presentation concluded with an overview of UNCTAD’s Investment Policy Framework for Sustainable Development, part of this year’s WIR. The framework aims to help policymakers address challenges posed by recent and ongoing crises, by providing guidelines for national investment policies and policy options with regard to different elements of International Investment Agreements (IIAs).
“So far, too much focus has been placed on the rights of the investors and the obligation of the States,” he said. “A balance is required.”