Investment by southern transnational corporations (TNCs) reached a record level and southern TNCs are acquiring developed country foreign affiliates in the developing world, says UNCTAD's latest Global Investment Trend Monitor.
Highlights of the Global Investment Trend Monitor:
Investment activity abroad by transnational corporations (TNCs) from developing economies continued to grow in 2013, reaching a record level of $460 billion. Together with those from transition economies ($100 billion) they now account for 39 per cent of global foreign direct investment (FDI) outflows.
Investment by TNCs from developed countries was virtually on a par with investment activity of the previous year · $858 billion · remaining 55 per cent off their peak of 2007. Investments by TNCs from North America slid by 10 per cent in 2013, while those from Europe gained 10 per cent. Japanese investments abroad grew for the third successive year to reach a record level, making Japan the world’s second largest investor several years running.
Almost half of FDI from developing and transition economy TNCs was in equity, while developed country TNCs continued to hold large amounts of cash reserves in their foreign affiliates as part of reinvested earnings. The latter were at record levels of 67 per cent of total FDI outflows from developed countries.
In 2013, the value of global cross-border mergers and acquisitions (M&As) increased by 5 per cent to $349 billion, largely owing to increased acquisitions by TNCs from developing economies and countries with economies in transition. They captured a 56 per cent share of global cross-border M&As.
More than two thirds of cross-border M&As by southern TNCs were directed to developing and transition economies. Half of these were acquisitions of foreign affiliates owned by developed country TNCs. This led to a change of ownership of foreign affiliates operating in developing and transition economies into the hands of southern TNCs.
UNCTAD estimates that the TNC investment appetite will increase in 2014 and 2015, encouraged by improving economic prospects, especially in developed economies. However, TNCs remain guarded due to the fragility in some emerging markets and risks related to policy uncertainties and regional conflicts.