Foreign Direct Investment to Africa continues to fall

Foreign direct investment to Africa continues to fall in 2010, according to a report that revealed that intraregional flows has yet to be realised to their potential.
Similarly, Global foreign direct investment (FDI) also rose modestly by five per cent in 2010, though still 37 per cent below the 2007 peak, according to the World Investment Report 2011 by UNCTAD.
However, FDI flows at the end of the year were still below their pre-crisis average and far below their peak in 2007. The report predicted that the recovery in FDI will continue in 2011, thus returning to the pre-crisis average.
Overall, investment continues to lag behind recoveries in global industrial output and world trade, which are already back to their pre-crisis levels.
Similarly, the report revealed that non-FDI modes of international production are increasingly shaping global value chains, global investment crisis and political unrest weigh on recovery of foreign direct investment in West Asia, investments in Latin America and the Caribbean are driven by developing Asian firms in the oil and gas sector, investment links between developing and transition economies are gaining momentum, UNCTAD report says; overall flows to South-East Europe declined in 2010; those to CIS region rose slightly, new records set for FDI in and out of developing Asia , and FDI to the US recovered in 2010, but that to Europe and Japan continued to decline.
The report also warned that the recent rise in investment restrictions and review procedures have increased risk of protectionism.
With the theme ‘Non-equity Modes of International Production and Development’, this year’s report presented original, ahead-of-curve analyses on why and how non-equity modes (NEMs) like contract manufacturing, services outsourcing, contract farming, franchising and licensing are increasingly used by TNCs in managing their global value chains.
The bottom line is that NEMs represent a highly significant “middle way” between FDI and trade which, among others, shapes patterns of international trade and trajectories of development. For instance, in 2010 cross-border NEM related activities generated over $2 trillion in sales; NEM enterprises employed 14-16 million workers in developing countries; and in some industries they accounted for 70 per cent to 80 per cent of global exports.
It also examined the drivers behind the rise of NEMs, their scale and scope and development impact, and the policy implications which arise.
Investment promotion and facilitation have remained the dominant element in recent national investment policies. Nonetheless, the risk of investment protectionism has increased as restrictive investment measures and administrative procedures have accumulated over the past few years. The international investment regime has been growing rapidly, with three international investment treaties signed per week, which poses challenges for both countries and business.

Nepal stands at 134th position
Nepal ranks at the 134th position in the United Nation’s body on trade, investment and development issues, UNCTAD’s latest World Investment Report. Nepal is not only at the bottom among the least developed countries (LDCs) but also lies at the bottom with Afghanistan, North Korea and Bhutan when it comes to attracting foreign direct investment (FDI). There has been no change in Nepal’s ranking in UNCTAD’s FDI Performance Index in 2010. UNCTAD’s World Investment Report 2011 has placed Nepal at 134th position in the Inward FDI Performance Index. According to World Investment Report, FDI inflow to the country in 2010 and in 2009 has no change. “Nepal received $39 million in FDI in 2010,” the report said.With FDI inflow to India and Pakistan declining by 31 per cent and 14 per cent, respectively, in 2010, it was understandable that Nepal would not witness an increase in foreign investment.
More than half of global FDI inflows were into developing countries and transition economies. The report says FDI inflows to Bangladesh increased by nearly 30 percent to $913 million with the country becoming a major low-cost production location in South Asia.Accroding to UNCTAD report, global FDI flows recovered from the post-meltdown $1.19 trillion to $1.24 trillion in 2010, with the United States being the largest recipient ($228 billion), followed by mainland China ($106 billion) and Hong Kong ($69 billion).