Majority of FDI starting to flow into emerging markets
New York, US (PRWEB) January 09, 2014
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Recent trends indicate that the vast majority of new foreign direct investment (FDI) is beginning to flow into emerging markets rather than traditional markets such as the US.
Highlighting a shift in the competitive landscape, the US is starting to lose out to emerging markets in relation to FDI, much of which travels across borders in the form of mergers and acquisitions.
Of all new FDI travelling around the globe in 2012, 12 per cent flowed into the US, making it the largest single recipient of FDI but at a dramatically reduced rate. In 2000, 22 per cent of new FDI travelled into the US, highlighting a marked drop in last year’s tally.
Despite the fact that factors such as political instability surround emerging economies – they are seen as far better for quick economic growth, offering investors the opportunity to get more bang for their buck.
In 2012, developing economies attracted more than half – 52 per cent – of global foreign direct investment, taking over from developing countries for the first time.
Overall global FDI fell in 2012 following years of increases after the last recession. However, for the first half of 2013, new FDI into the US dropped by 22 per cent from the first six months of 2012. The United Nations has predicted that FDI will not improve until after this year, due in part to “macroeconomic weakness” across the globe, the WSJ reported.
Companies now have so many options in terms of countries to invest in, confirmed Matthew Slaughter, professor at Dartmouth's Tuck School of Business. While the US still has so many positives, including a business-friendly environment linked to global integration and relatively low tariff barriers, its smaller piece of global FDI is concerning. It needs to begin to focus on what international investors are looking for.
Chief financial officers of U.S. subsidiaries of foreign companies were polled by PricewaterhouseCoopers LLC in a 2011 survey for the Organization for International Investment. They were asked what they were looking for when they chose where to invest, and listed the country’s the corporate tax system, workforce skills and trade policy. To many, the US has not been making much progress on those three points, while in contrast, other countries are progressing well.
The EU and Canada are currently ironing out the final details of a trade pact, hot on the heels of the one signed by Taiwan and Singapore last month. The US’ trade pacts that are currently in the pipeline – the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership – were affected and slowed by the 16-day federal government shutdown in October.
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