Abstract
Global foreign direct investment (FDI) flows grew substantially in 2005 over those in 2004. As in the late 1990s, that growth was spurred by cross-border mergers and acquisitions (M&As). Recent increases in FDI have been concentrated in certain sectors and regions/countries, and the level of concentration of FDI worldwide has also risen again. Furthermore, investments by collective investment funds (e.g. private equity and hedge funds) – a relatively new source of FDI – have been growing. As investments by these funds often have a shorter time horizon than those by more conventional transnational corporations (TNCs), current FDI growth may not be sustainable. In addition, the way in which the rise in global FDI flows is measured, does not necessarily translate fully into capital formation in host economies, as data on FDI flows include items unrelated to investment in production capacity. This section discusses recent trends in FDI, its composition and characteristics, as well as some issues related to FDI statistics.
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