Slump In Cross-Border Investment

Global Downturn Causes Slump In Cross-Border Investment, Says OECD

Foreign direct investment (FDI) into 17 OECD countries, including France, Germany, Japan, the UK and the US, fell by 50% in the first quarter of 2009 compared with the last quarter of 2008, according to estimates by the OECD released at the OECD Forum in Paris.

If this rate of decline persists through 2009, OECD economists predict, total FDI into the 30 OECD countries will fall to around USD 500 billion this year from a 2008 total of USD 1.02 trillion.

This fall in FDI is largely due to a plunge in the value of cross-border merger and acquisitions, forecast to decline by 60% in 2009 to USD 439 billion, down from just over USD 1 trillion in 2008.

Outward investment flows from major emerging economies are also falling sharply. M&A spending by Brazil, China, India, Indonesia, Russia and South Africa is forecast to decline by over 80%, based on current trends, to USD21 billion in 2009 from USD120 billion in 2008.

Despite the economic crisis, major countries have so far broadly resisted rising political pressures for protectionism. According to an OECD report which monitors investment policy developments in 42 countries since the first G20 Summit in November 2008, 39 have introduced emergency measures, such as capital injections and public guarantees to boost their flagging economies.

But only six countries have changed their laws governing investment policy, and although the report describes the intended thrust of these policies as “somewhat ambiguous”, it notes that most of the changes were described by the governments concerned as being aimed at increasing openness and clarity for investors.

“The OECD has been monitoring investment policy developments at the request of the G20, and to date governments are honouring their pledge to resist investment protectionism,” said OECD Secretary-General Angel Gurría. “While efforts to fight unemployment and boost economic growth must continue, governments must resist adopting discriminatory policies that will undermine business confidence and delay economic revival.”

For comment or further information, journalists should contact Kathryn Gordon of the OECD’s Investment division (tel. + 33 1 45 24 98 42).

The report, Inventory of investment measures taken between 15 November 2008 and 15 June 2009, includes a summary of investment measures taken and detailed country analysis and is available here.

For comment on trends in FDI, journalists should contact Michael Gestrin of the OECD’s Investment division (tel. + 33 1 45 24 76 24). See the data and analysis on foreign direct investment.

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A regularly updated 3-day schedule of media briefings by ministers, Forum participants and OECD experts is available here.

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ENDS

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