KATHMANDU: Global flows of Foreign Direct Investment (FDI) in 2021 increased by 64 percent to touch USD 1.58 trillion, from an exceptionally low level recorded in 2020, shows the ‘World Investment Report 2022’ released by United Nations Conference on Trade and Development (UNCTAD).
‘The recovery showed a significant rebound momentum with booming merger and acquisition market and rapid growth in international project finance backed by loose financing condition and major infrastructure stimulus packages’ states the report. However, the recovery of greenfield investment in the industry remains fragile, especially in developing countries.
The report further notes that the fallout of the Ukraine war with the triple crisis (food, fuel, financial) along with the ongoing COVID-19 pandemic and climate disruption, are adding stress, particularly in developing countries. The report also estimates that the resulting investor uncertainty could put significant downward pressure on global FDI in 2022.
However, the report has stated several stabilizing factors including strong cross-border merger and acquisition and financial transactions of multinational companies, and large public support packages adopted for infrastructure investment, with a multiple-year implementation period that provided a floor under international project finance.
According to the report, the FDI flows to developing economies rose more slowly than those to developed regions but increased by 30 percent to reach USD 837. However, the share of developing countries in global FDI flows remained just above 50 percent.
In terms of regions, FDI flows to Africa rose to USD 83 billion from USD 39 billion, while those to developing Asia grew to an all-time high for the third consecutive year to touch USD 619 billion in 2021 as compared to the figure reported in 2021. Similarly, FDI flows shot up by 56 percent to hit USD 134 billion in 2021.
Least Developed Countries (LDCs) and other weak economies continued to command a nominal share of global FDI. According to the report, inflows of FDI to LDCs, landlocked developing countries (LLDCs), and small island developing states (SIDS) combined accounted for only 2.5 percent of global FDI in 2021, down from 3.5 percent recorded in 2020.
Where is Nepal in FDI flows?
The report states that Nepal witnessed a whopping increase in FDI to touch USD 196 million in 2021 from USD 126 million recorded in 2020. Similarly, FDI stock in Nepal reached USD 1850 million in 2021, significantly higher than USD 239 million in 2020.
Top five FDI host countries Top five FDI home countries
1 USA 1 USA
2 China 2 Germany
3 Hong Kong (China) 3 Japan
4 Singapore 4 China
5 Canada 5 UK