China, India to buck global slowdown in FDI inflows: UNCTAD

Thursday, 24 October 2002, 07:00 Hrs
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While China is expected to overtake the United States as the biggest recipient of foreign direct investment (FDI) this year, India too is expected to buck the global slowdown trend, a U.N. report Thursday stated.

NEW DELHI: China is expected to attract $50 billion FDI in 2002, overtaking the U.S. for the first time, United Nations Conference for Trade and Development (Unctad) has said in a preliminary estimates report.

The U.N. organisation expects a 27 percent drop in FDI investment inflows globally at $534 billion.

"Overall, more than half of the 85 economies for which data are available can be expected to receive lower FDI flows in 2002 than in 2001," the UNCTAD report stated.

As in 2001, the decline - about a third of the peak value recorded in 2000 - is expected to be most in developed countries, with a dip of 31 percent, than in developing countries with 23 percent and one percent in Europe.

"The uncertain economic situation and weak stock markets are undermining business confidence, with a sharp impact on cross-border mergers and acquisitions and corporate investment expansion plans," UNCTAD says.

Although FDI inflows in developing nations of Asia are expected to decline by 12 percent to $90 billion in 2002 from $102 billion last year, China and India would continue to see increased inflow, UNCTAD said.

"Overall, the possibly drastic decline in FDI in most of the region's economies is unlikely to be offset by an increase in such economies as China, India, Malaysia and Philippines," the report said.

The FDI inflows to India have been showing a very positive growth during 2002, bringing in $2.85 billion (net of ADRs/GDRs) up to August 2002. Compared with the $2.25 billion (net of ADRs/GDRs) received in the corresponding period in 2001, this represents a 26.67 percent growth.

On a fiscal year basis, $1.64 billion of FDI inflows (net of ADRs/GDRs) were received in April-August 2002 as compared with $1.53 billion (net of ADRs/GDRs) received in April-August 2001, again resulting in a growth of 6.92 percent.

The drop in FDI flows into developing Asia are expected largely due to the result of slowing flows from Europe and the U.S., despite the strong economic growth of the region's leading economies, says UNCTAD.

The U.S. is set to witness a sharp fall in FDI inflow attracting only $44 billion as against $124 billion in 2001, while Britain is likely to see the largest drop in FDI to $12 billion this year compared to $54 billion last year.

Source: IANS

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