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INVESTMENT
NAREERAT WIRIYAPONG
The US financial turmoil and the global economic slowdown will take their toll on global foreign direct investment in 2008, with significant drops in overseas investments expected over the next three years, says the World Investment Report 2008. The annual report, prepared by the United Nations Conference on Trade and Development (Unctad), projected that overall FDI flows would be about $1.6 trillion this year, a decline of 10% from 2007.
The estimates, however, did not take into account last week's financial market turbulence in the US, said Unctad, which released the report yesterday.
Mergers and acquisitions have begun to slow drastically since the first half of this year, when they fell 29% from the same period of 2007 to $193.9 billion.
Masataka Fujita, the chief of Unctad's investment trends and data section, said the FDI flows were expected to decline this year because of a slowdown in the world economic growth and decreased corporate profits.
The trend was first detected in the second half of 2007.
Unctad's World Investment Prospects Survey (WIPS) 2008-10 found that the percentage of companies planning large increases in investment overseas over the next three years dropped significantly from 2007.
The annual WIPS results were based on responses from 226 world's largest transnational corporations.
''Limited impacts of the global financial crisis on FDI were seen in 2007, when global flows reached an all-time high of $1.83 trillion, up 30% over the previous year, surpassing the previous record set in 2000 by some $400 million,'' said Mr Fujita.
''But the figure is set to drop as the slowdown and financial turmoil in the world economy have led to a liquidity crisis in money and debt markets in many developed countries.''
Mr Fujita forecast that the collapses of US investment banks last week were unlikely to have a significant impact on the targeted 2008 FDI flows, saying emerging markets were not much affected.
Thai banks, for example, have only slight exposure to the US sub-prime woes.
''We expect the decline would be 10% (from 2007) or even lower. While some countries are affected negatively, there are opportunities arising in some sectors such as agriculture,'' he said.
In 2007, FDI inflows to developed nations soared 33% to $1.24 trillion, while those flowing to developing countries posted 21% growth to $500 billion.
East Asian countries dominated half of all FDI flows into developing countries, with Thailand ranking fifth among the FDI top destinations in Asia in 2006-07.
However, Thailand is not among the 15 most attractive FDI destinations in the 2008 report, unlike China, India, Vietnam and Indonesia, it said.
Commenting on the report, Thanavath Phonvichai, director of the Centre for Academic and Business Forecasting at the University of the Thai Chamber of Commerce, said the findings reflected the fact that Thailand lagged other Asian countries in attracting FDI.
''Even though the FDI flows to Thailand in 2007 were second in Asean (the Association of Southeast Asian Nations) after Singapore, the annual growth rate was just 5%, which is much lower than Indonesia and Vietnam,'' said Mr Thavanath.
He added that Malaysia had come very much closer to Thailand in terms of FDI flows.
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