Global foreign direct investment (FDI) nudged down slightly as flows into developed countries hit a historical low, but key Islamic economies enjoyed increases, according to data released Monday (Jan 20) by the United Nations.
FDI globally declined 1% to $1.39 trillion in 2019 against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, the U.N. trade and development agency UNCTAD said in a report.
UNCTAD data includes cross-border mergers and acquisitions (M&As) and intra-company loans to foreign affiliates.
FDI flows to developed countries decreased by 6% to an estimated $643 billion, led by a 15% drop to $305 billion for the European Union (EU), with the UK seeing a 6% drop to $61 billion as Brexit unfolds, said UNCTAD.
The U.S. continues to attract the most FDI although the $251 billion it saw in 2019 was down slightly from $254 billion the year before.
Key Islamic economies Indonesia and Saudi Arabia bucked the downward trend.
Investments into Indonesia rose 12% to $24 billion with significant flows going into wholesale and retail trade, including the digital economy, and manufacturing, said UNCTAD.
Investments into Saudi Arabia increased by 9% to an estimated $4.6 billion. The Kingdom on Sunday announced a ‘record year’ for investments, saying FDI increased by 10.2% to $3.5 billion for January to September.
In North Africa, Egypt continues to lead as the largest FDI recipient, with a 5% increase to $8.5 billion. Most of Egypt’s FDI were still driven by the oil and gas sector but major investments were also seen in real estate and tourism, said UNCTAD.
In West Africa, fellow Organisation of Islamic Cooperation (OIC) member state Nigeria saw a 71% surge to $3.4 billion, largely due to the oil and gas sector.
It was not all increases for Islamic economies. Pakistan and Bangladesh saw 20% and 6% declines, respectively. Pakistan attracted $1.9 billion and Bangladesh $3.4 billion.
Turkey was also hit. FDI for the country dropped to $8.3 billion from $13 billion in 2018.
UNCTAD expects FDI flows to rise moderately in 2020 as the global economy improves although the agency also points out that significant risks persist, including high debt accumulation among emerging and developing economies, geopolitical risks and concerns about a further shift towards protectionist policies.