The United Nations Conference on Trade and Development (UNCTAD)’s 2020 Global FDI report has mentioned Qatar Investment Authority’s announced acquisition of a 10% stake of Borsa Istanbul.
In its ‘January 2021 Investment Trends Monitor’, UNCTAD noted FDI flows to West Asia dropped by 24% to $21bn.
In most oil exporters the impact of the pandemic was exacerbated by low energy prices, it said.
FDI to Saudi Arabia remained stable, with inflows increasing by 4% to an estimated $4.7bn, the report said.
Policy interventions in investment promotion and diversification under the framework of Vision 2030 appear to be showing an effect.
MNEs based in Egypt and India were the most active investors in Saudi Arabia, followed by the United Kingdom, UNCTAD noted.
According to UNCTAD, global foreign direct investment (FDI) collapsed in 2020, falling by 42% to an estimated $859bn, from $1.5tn in 2019. FDI finished 2020 more than 30% below the trough after the global financial crisis in 2009.
The decline was concentrated in developed countries, where FDI flows fell by 69% to an estimated $229bn.
Flows to Europe dried up completely to -$4bn (including large negative flows in several countries). A sharp decrease was also recorded in the United States (-49%) to $134bn.
The decline in developing economies was relatively measured at -12% to an estimated $616bn. The share of developing economies in global FDI reached 72% – the highest share on record.
China topped the ranking of the largest FDI recipients.
The fall in FDI flows across developing regions was uneven, with -37% in Latin America and the Caribbean, -18% in Africa and -4% in developing Asia.
East Asia was the largest host region, accounting for one-third of global FDI in 2020.
FDI to the transition economies declined by 77% to $13bn, it said.
FDI in China, where the early phase of the pandemic caused steep drops in capital expenditures, ended the year with a small increase (+4%).
FDI in India rose by 13% boosted by investments in the digital sector.
FDI in ASEAN – an engine of FDI growth throughout the last decade – was down 31%.
The halving of FDI inflows to the United States was due to sharp drops in both greenfield investment and cross-border mergers and acquisitions (M&As), UNCTAD said.
FDI in the EU fell by two thirds, with major declines in all the largest recipients; flows to the United Kingdom fell to zero.
“Looking ahead, the FDI trend is expected to remain weak in 2021. Data on an announcement basis, an indicator of forward trends, provides a mixed picture and point at continued downward pressure,” the report noted.
According to UNCTAD, sharply lower greenfield project announcements (-35% in 2020) suggest a turnaround in industrial sectors is not yet in sight. Upticks in the fourth quarter of 2020 dampened earlier declines in newly announced international project finance deals (-2% for the full year).
International investment in infrastructure sectors could thus prove stronger, also buoyed by economic support packages in developed countries.
Similarly, the 2020 decline in cross-border M&As (-10%) was cushioned by higher values in the last part of the year.
Looking at M&A announcements, strong deal activity in technology and pharmaceutical industries is expected to push M&A-driven FDI flows higher, UNCTAD noted.
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