Flows of foreign direct investment (FDI) into OECD countries declined more steeply in 2001 than in any previously recorded year, according to data recently published the OECD. The fall appears to have continued in 2002, although at a reduced rate.
The figures are contained in an article on Trends and Recent Developments in Foreign Direct Investment to be published in September in the first volume of a new annual OECD publication, International Investment Perspectives. The article surveys trends in FDI affecting OECD countries in 2001 and provides early indications of international investment flows in 2002.
Some of its main findings are:
â€¢ From an all-time high of US $1.27 trillion in 2000, FDI inflows into OECD countries fell 56 per cent to $566 billion US$ in 2001.
â€¢ FDI net outflows from OECD countries to the rest of the world held up. On current estimates they rose from 12 billion US$ in 2000 to 27 billion US$ in 2001.
â€¢ The decline in FDI inflows into OECD countries appears to have continued into 2002, albeit at a reduced rate. On current trends and using mergers and acquisitions in the first half of the year as a rough indicator, FDI inflows into OECD countries seem likely to fall by an additional 20 to 25 per cent this year.
â€¢ The decline in international investment flows could represent a â€œreturn to normalâ€ following the extremely high transactions of the late 1990s and in 2000, and so the end of a recent mini-boom in FDI.
â€¢ The boom of previous years was spurred by an apparent stock market overvaluation, especially in the telecom and high-tech sectors. Record-high equity prices boosted companiesÂ' liquidity and ability to buy while at the same time providing previous owners with incentives to sell. Cross-border takeovers were further fed by a wave of utilities privatisations in OECD countries and beyond in the late 1990s.
â€¢ While telecom companies figured prominently in the mergers and acquisitions completed in 2001, they barely appear among the transactions in 2002 to date.
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