WORLD INVESTMENT REPORT 2002

The first principal finding is that foreign direct investment (FDI) inflows in 2001 declined to $735 billion. This is less than half the 2000 figure. Behind this decline is the slowdown in the world economy and a weakening of business confidence, both of which were accentuated by the September 11 events in the United States, and both of which contributed to a sharp reduction of cross border mergers and acquisitions that take place predominantly between industrialized countries. In light of the prolonged economic recession and the slow recovery of business confidence, especially in the United States, UNCTAD does not expect a rebound of FDI flows this year.Despite the decline in FDI flows, the expansion of international production continues, although at a slower pace. However, developments differ markedly between various parts of the world. The FDI downturn was concentrated in the developed countries (-59%), with only modest declines in flows to developing countries (-14%) and even a small increase in flows to Central and Eastern Europe (2%). There were also significant variations within the third world, with lower levels of inflows to Asia and Latin America but an increase to Africa. Africa, however, still remains a marginal recipient of FDI.