LONDON, UK; WASHINGTON, DC, December 6, 2012 – Foreign investors,
attracted by stronger economic growth in developing countries while
mindful of risks, remain relatively optimistic about these
destinations in the short term, according to the results of a survey
released in a report by the World Bank’s Multilateral Investment
Guarantee Agency (MIGA). World Investment and Political Risk notes
that half of the survey’s respondents plan to increase investment in
developing countries in the next 12 months.
This sentiment dovetails with foreign direct investment (FDI) trends
that show developing-country flows continue to account for a
substantial share of global FDI: in 2012 they are estimated to be 36
percent of inflows and 14 percent of outflows. FDI to developing
countries is expected to rebound in 2013 to exceed pre-2008 highs. New
challenges, especially the ongoing sovereign debt crisis and recession
in the euro zone, have slowed the flow of FDI from traditional
sources. However, FDI from new investors based in developing countries
has risen significantly in recent years, and is expected to reach a
record level this year. Notably, about a quarter of developing
countries’ outward FDI currently goes into other developing countries
(“South-South” investment).
Nevertheless, the report finds that both sovereign default risk and
expropriation—among other political risks—remain dominant issues for
foreign investors deciding their investment plans.
“Our report points to an important factor that has positive
implications not only for developing countries, but also for the
global economy,” said Izumi Kobayashi, MIGA’s Executive Vice
President. “FDI into developing countries has remained a significant
engine of growth even as the global economic picture has weakened.”
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