Foreign direct investment slowdown fears

THE LEVEL of foreign direct investment (FDI) is expected to slow over the rest of 2011, as global economic woes continue to constrain private investment and job creation.

Against this backdrop, a new report is urging countries to co-ordinate short-term crisis management to encourage long-term productive investment.

According to the sixth joint UNCTAD/OECD report into G20 country investment measures, G20 members have followed through with their avowed policies to avoid investment protectionism.

Indeed the report states that most policies over the past six months have indicated a move towards eliminating restrictions to foreign investment and improving clarity for investors.

Nine G20 members have implemented policy measures related to investment and capital flows, with Brazil, China, India, Italy and the Republic of Korea all taking investment-specific policy measures, and Canada, Indonesia, Japan and the Russian Federation concluding bilateral investment treaties.

It indicates that the number of restrictive measures introduced since the beginning of May this year has declined slightly to 108, down from 122 recorded during the preceding six months. While the situation is not yet “alarming”, the report points out that it is adding to the downside risks to the global economy

“Unilateral actions to shield domestic industries and jobs from international competition, although appealing from a narrow short-term perspective, will not solve global problems, and on the contrary may turn the situation worse by triggering a spiral of tit-for-tat reactions in which every country loses,” it warns.