Global FDI inflows falls by 17 pc, Nepal's by 30 pc in 2011/12

The foreign direct investment (FDI) commitment fell by 30 percent to US$ 84 million during 2012 compared to a year earlier. The statistics compiled at the Department of Industry (DoI). The whopping decline in FDI inflows has resulted in 17 percent fall in employment generation with creation of only 9,050 new jobs in the country.The decline in FDI inflows was witnessed in crucial sectors of the national economy such as manufacturing and agriculture.

Meanwhile, the scenario of global FDI inflow is also not satisfactory.

• Global foreign direct investment (FDI) inflows declined by 18% in 2012, to an estimated US$1.3 trillion (figure) – a level close to the trough reached in 2009 – due mainly to macroeconomic fragility and policy uncertainty for investors.

• The FDI recovery that had started in 2010 and 2011 will take longer than expected. FDI flows could rise moderately over 2013-2014, although significant risks to this scenario persist.

• The strong decline of FDI flows presents a stark contrast to other macroeconomic variables, including GDP, trade and employment growth which remain in positive territory

• In developed countries FDI flows fell drastically to values last seen almost ten years ago. The majority of EU countries saw significant drops in FDI flows with the total fall amounting to some US$150 billion. Unites States FDI flows also fell by US$80 billion. FDI flows to developing economies, for the first time ever, exceeded those to developed countries, by some US$130 billion.

• FDI flows to developing economies remained resilient, declining only 3%. Flows to developing Asia lost some momentum, although they remained at historically high levels. Latin America and Africa saw a small increase.

• Cross-border merger and acquisitions (M&As) data shows that developed country investors are divesting massively while investors from developing countries are bucking the trend. Their share in cross-border M&A purchases rose to a record 37%.