FDI to developing world rebounding

December 10, 2010
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, WASHINGTON, Dec 9 – Foreign direct investment to developing countries is expected to rise 17 percent this year as they drive the global economic recovery, the World Bank said Thursday.

"Investors are optimistic about prospects for a global economic recovery led by the developing world," the World Bank said in releasing an investment report.

Following a 40 percent plunge in FDI in 2009 as the global economy struggled to emerge from financial crisis, the rebound in investment flows was being spurred by the fast-growing developing countries.

The World Investment and Political Risk report was based on a survey of multinational executives by the bank\’s Multilateral Investment Guarantee Agency.

Researchers found that investors from the oil, gas and mining industries, as well as those based in developing countries, "are particularly bullish in their investment intentions," it said.

"This upsurge in FDI into developing countries is welcome news, especially considering last year\’s drop," said Izumi Kobayashi, MIGA executive vice president.

"FDI flows directed to productive assets can spur economic growth and reduce poverty."

The World Bank said the finding represented the business community\’s confirmation of economists\’ projections of an FDI recovery over the next few years.

Political risk was the top worry of multinational executives when operating in developing countries over the next three years, the report said.

About a fifth of the investors surveyed use political risk insurance to mitigate this risk. Other concerns were market size, lack of finance and quality of infrastructure.

In conflict-affected and fragile economies, investors were mainly concerned about adverse government intervention rather than overt political violence.

They worried about changes in regulations, expropriations, and currency restrictions, among other issues, the researchers said.

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