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Foreign investment reached a new high in 2007, says UNCTAD

Global foreign direct investment (FDI) reached a new record in 2007, rising almost 18% compared with 2006 to reach an estimated $1.5 trillion.

The crisis in the financial and credit markets at the end of the year did not affect the overall volume economic, experts from the UN Conference on Trade and Development, UNCTAD, said Tuesday. Developed and developing countries as well as south-east Europe and the Commonwealth of Independent States, CIS, all saw rises as a result of high growth by transnational corporations (TNCs) and a strong economic performance in many parts of the world.

In its end-of-year review, UNCTAD said the depreciation of the dollar may have helped maintain high levels of FDI inflows into the US, particularly from countries with appreciating currencies. The sub-prime loan crisis may have affected bank loans but capital injections from other sources had offset some of the problems. FDI flows to developed countries grew for the fourth consecutive year reaching $1 trillion. While the US maintained its place as the largest recipient, the European Union was the largest host region attracting 40% of total FDI inflows in 2007.

UNCTAD warned economic uncertainty and the prospect of a US recession might have a negative impact on FDI flows for 2008. The transitional economies of south-east Europe and CIS saw FDI inflows rise for the seventh year running. They increased 41% to a new record of $98 billion while developing countries saw a 16% increase. In Africa, FDI inflows remained relatively strong, supported by the boom in global commodity markets. Latin America and the Caribbean saw inflows rise 50% to reach a record level of $126 billion, with significant increases in Brazil, Chile and Mexico. South, East and South-East Asia saw a 12% rise over 2006 with FDI inflows reaching $224 billion. China and Hong Kong remained the region's largest recipients. In western Asia, overall FDI inflows fell by 12% due to geopolitical uncertainty in parts of the region.

UNCTAD said continuing demand for natural resources was likely to boost FDI in the extractive industries in 2008 while, at the same time, sharp exchange rate fluctuations, rising interest rates and growing inflationary pressures overshadowed future FDI flows. (m&