SA a top 20 priority global investment destination

South Africa ranks nineteenth in a league table of “top priority host economies” for foreign direct investment (FDI), which was released on Monday as part of the latest ‘World Investment Prospects Survey 2010-2012′ compiled by the United Nations Conference on Trade and Development (Unctad) – hitherto, South Africa had fallen outside the top 20.

The yearly survey is based on responses to a questionnaire from 236 transnational corporations (TNCs) and 116 investment promotion agencies (IPAs).

The survey results showed that there was renewed optimism being expressed by TNCs and IPAs about prospects for FDI in 2010, pointing to a likely recovery from the recession-induced slumps of 2008 and 2009. The results also indicated that there could be further FDI growth in 2011 and 2012

As was the case in 2009, China headed the ranking of the top priority host economies for FDI, followed by India, Brazil, the US and Russia.

It was also the first time that the four major emerging markets (China, India, Brazil and Russia) all ranked among the top five investment destinations.

Unctad noted the continued rise of developing Asia’s relative importance as host for FDI, with six countries among the top 15, as against five in the 2009 survey.

By contrast, the attractiveness of developed countries declined slightly, with only six countries ranking among the top 15, with countries such as the UK and Australia moving down the list – the UK fell to seventh from sixth, while Australia declined from eighth to thirteenth.

The survey results, Unctad said, indicated that the global economic crisis had been less destructive to FDI than had been feared. “While investment budgets, including those for FDI, were squeezed during the crisis, TNCs did not engage in wholesale divestment of their foreign affiliates.”

The crisis did, however, accentuate the shifting in the geographical focus by TNCs from developed to developing and transition economies.

Further, of the leading 20 most promising investor countries nearly one-half were developing and transition economies. China occupied second spot, behind the US, and ahead of Germany, the UK and France – India ranked sixth and Russia ninth.

Developing country TNCs were more optimistic in the short-term about the global business environment and their investment prospects than their developed country counterparts. TNCs from developing countries, especially developing Asia, anticipate a stronger growth of their FDI expenditures from 2009 to 2012 than those from developed countries, especially Europe.

Global FDI inflows slumped by 37% to $1,1-trillion in 2009, having already fallen in 2008 from the record of around $2,1-trillion achieved in 2007.

Unctad reported in July that there were signs of a pick-up in FDI flows since the second quarter of 2009, but that it was not clear that a rebound in FDI was under way. Nevertheless, it was forecasting a “slow recovery” in FDI in 2010 and that the flows would gain momentum in 2011.

The survey found that 43% of respondents intended increasing their international investment expenditures in 2010 as compared with the low levels of 2009, while 58% of respondents predicted increases in 2011 and 2012.

“On the basis of the findings of the survey, as well as other indicators of TNC and FDI activity, Unctad estimates the level of FDI inflows in 2011 to reach a range of $1,3- to $1,5-trillion, rising in 2012 to between $1,6 and $2-trillion,” the survey stated.

FDI growth prospects for the medium term are considered better for the primary and services sectors than for manufacturing.

To download World Investment Prospects Survey 2010-2012 report Click Here



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