Fifty professors and students gathered at Vi Pakistani core university member, the Institute of Business Administration, for a videoconference on UNCTAD's 2016 World Investment Report (WIR) September 23. The presentation was conducted by Kalman Kalotay, of UNCTAD's Division on Investment and Enterprise.
"Foreign direct investment flows increased after years of fluctuations, reaching USD 1.7 trillion in 2015," he said. "However, that increase was not reflected in higher capital expenditures by large multinationals, which actually fell from USD 2.2 trillion in 2014 to USD 1.9 trillion in 2015."
Regarding the regional distribution of FDI, the WIR reports that eight of the 20 top recipients are developing countries, and six made the top-20 list for outflows.
"Though Developing Asia received the most FDI in 2015, it was Europe which observed the highest increase in FDI inflows,” Kalotay said.
As for the sectoral composition, he stated that around 64 percent of FDI flows went to the service sector, a percentage that increases to 70 percent in the case of Asian countries. FDI for the manufacturing sector accounted for 27 percent (31 percent in the case of Latin American economies). Flows to offshore financial centres slowed down in 2015, though they still stood at around USD 75 billion.
Kalotay warned that in 2016 it is expected that FDI flows will decrease by 10 to 15 percent, due to stagnating aggregate demand, sluggish growth in commodity exporting countries, and policies that have been adopted to curb tax inversion deals, which inflate FDI numbers.
This year's report tackles the issue of investor nationality, a complex topic in times when multinational corporations operate in multiple countries and have "numerous passports," bypassing rules restricting investment in specific sectors to national firms. As an alternative policy, the Report recommends the adoption of "fit-for-purpose" criteria, increasing transparency and competition, and a common approach at the international level to determine investor nationalities.
When questioned about the impact of signing investment agreements on the course of FDI flows, Kalotay replied that "there is evidence that agreements create more investment, but they also may divert investment from other countries." He added that the number of international investment agreements kept on rising in 2015, though there is a slowdown in the signing of new agreements. In that sense, the trend indicates a continuous orientation of national policies toward liberalization and promotion.