The World Investment Report 2013, produced by the Geneva-based UN Conference on Trade and Development (UNCTAD), adds that the majority of ‘greenfield’ investment in the least developed countries (LDCs) – new investment or expansion of existing investment in recipient nations, as opposed to investment through mergers and acquisitions – originated in other developing economies, led by India.

Subtitled Global Value Chains: Investment and Trade for Development, the report notes that growth was led by strong gains in Cambodia (where inflows were up 73 per cent), the Democratic Republic of the Congo (96 per cent), Liberia (167 per cent), Mauritania (105 per cent), Mozambique (96 per cent), and Uganda (93 per cent).

However, 20 LDCs reported declines in FDI, the report states, adding that the trend was particularly pronounced in Angola, Burundi, Mali, and the Solomon Islands.

Secretary-General Ban Ki-moon commended the report, calling it a “source of reflection and inspiration” for meeting today’s development challenges.

“The 2013 World Investment Report comes at an important moment. The international community is making a final push to achieve the Millennium Development Goals by the target date of 2015,” he said, referring to the anti-poverty targets known as the MDGs.

“At the same time, the United Nations is working to forge a vision for the post-2015 development agenda. Credible and objective information on foreign direct investment (FDI) can contribute to success in these twin endeavours.”

Global FDI, Ban noted, declined in 2012, mainly due to continued macroeconomic fragility and policy uncertainty for investors, and it is forecast to rise only moderately over the next two years.

“Yet as this report reveals, the global picture masks a number of major dynamic developments,” he said. “In 2012 – for the first time ever – developing economies absorbed more FDI than developed countries, with four developing economies ranked among the five largest recipients in the world.

“Developing countries also generated almost one third of global FDI outflows, continuing an upward trend that looks set to continue.”

The report notes that while the estimated value of announced greenfield investment projects in LDCs declined, developing economies – with 59 per cent of the value of greenfield projects – were the largest such investors in LDCs in 2012.

In terms of share of greenfield projects in LDCs in 2012, companies from India were responsible for 20 per cent of total value, according to the report. In addition to their scale, India’s investments in LDCs have been diversified geographically and sectorally, it adds.

Among the destinations of large-scale projects, in 2012 Mozambique was the largest recipient of Indian greenfield investment (45 per cent), followed by Bangladesh (37 per cent) and Madagascar (8 per cent).

In Africa, greenfield investments from India were targeted at the east and south of the continent. These projects were not limited to large-scale investments in extractive and heavy industries, but also extended to smaller ones in pharmaceuticals and health care.

In Asia, while Bangladesh was the only LDC where Indian greenfield investment was announced during 2012, Indian projects were spread over various industries, including automotives, information technology, pharmaceuticals, textiles, and tyres, the report says.

But global FDI nevertheless declined by eight per cent in the first half of 2012 as economic recovery suffered new setbacks in the second quarter of the year, the UN Conference on Trade and Development (UNCTAD), stated in its tenth Global Investment Trend Monitor. In the developing world, FDI inflows decreased by five per cent.

“The slow and bumpy recovery of the global economy, weak global demand and elevated risks related to regulatory policy changes continue to reinforce the wait-and-see attitude of many transnational companies toward investment abroad,” UNCTAD said in a press release on the report.

“UNCTAD’s longer term projections still show a moderate rise,” it added. “However, the risk of further macroeconomic shocks in 2013 can impact FDI inflows negatively.”

The report finds that global FDI fell $61 billion, with the decline mainly caused by a drop of $37 billion in inflows to the US and a fall of $23 billion in inflows to BRIC countries – Brazil, Russian Federation, India and China.

China nevertheless emerged as the world’s largest recipient of FDI in the first half of 2012, followed by the United States, the report notes.

It adds that FDI flows to the US might be stronger in the second half of 2012 because the value of cross-border mergers and acquisitions in the third quarter of the year was “double those of the first half of the year,” and some further acquisitions are “already taking place or announced in the fourth quarter.”

One example cited by the report is the acquisition by the Japanese telecommunication company SoftBank of US firm Sprint Nextel for more than $20 billion. This will mark the largest investment ever by a Japanese company, the report says.

The position held by developing countries was made possible by the “steep fall” in FDI flows to the US and a “moderate decline” in flows to the EU, the report notes.

“For the first time, developing economies alone accounted for a half of the global total,” the report states, emphasizing it distinguished developing countries from the so-called “transition” economies, such as those of South-East Europe and the Commonwealth of Independent States.

“But while flows to Latin America and Africa rose, those to developing Asia decline,” the report adds.

“Investment leads economic growth but the current trends of investment flows to developing countries, particularly to Asia, are worrisome and the challenge for channelling FDI into key development sectors such as infrastructure, agriculture and the green economy remains daunting,” UNCTAD’s Secretary-General, Supachai Panitchpakdi, said in the news release.

In developed countries, the rise in flows to Europe and developed countries was not enough to compensate for the decline in flows to North America, the report says.

Compared to the full-year forecast of FDI inflows published in July, UNCTAD says it now projects that FDI flows will, at best, level-off in 2012 at slightly below $1.6 trillion.