Global FDI skids 19 percent on Trump tax reform, may
rebound in 2019 - U.N.
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[January 21, 2019]
By Tom Miles
GENEVA (Reuters) - Global foreign direct
investment (FDI) fell 19 percent last year to an estimated $1.2
trillion, largely caused by U.S. President Donald Trump's tax reforms,
the United Nations trade and development agency UNCTAD said on Monday.
FDI, comprising cross-border mergers and acquisitions (M&A),
intra-company loans and investment in start-up projects abroad, is a
bellwether of globalization and a potential sign of growth of corporate
supply chains and future trade ties.
But it can also go into reverse as companies pull investments out of
foreign projects or repatriate earnings.
The lowest net global FDI since 2009 was the result of U.S. firms
repatriating $300 billion or more in accumulated earnings to take
advantage of Trump's tax break.
Net investment flows into Europe slumped by an unprecedented 73 percent
to $100 billion, a level not seen since the 1990s, as U.S. firms pulled
years of profits out of affiliates in Ireland, Switzerland and
UNCTAD investment chief James Zhan told reporters that U.S. repatriation
of profits had slowed down and an FDI rebound was possible this year,
but there were also growing risks.
"It's what we call the potential trade-investment-technology war that
will affect global investment, and we see that the rising protectionist
measures of a number of countries and the prospects for global economic
growth are worsening," Zhan said.
The United States remained the top destination for FDI in 2018,
attracting $226 billion, 18 percent less than in 2017.
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Part of a facade of a future urban project of Iraqi-British
architect Zaha Hadid is seen at a construction site in downtown
Beirut, Lebanon December 27, 2017. REUTERS/Jamal Saidi
Second was China, up 3 percent to $142 billion, and third was Britain, which saw
a 20 percent jump to $122 billion, mainly due to a doubling of reinvested
earnings and a tripling in the value of M&A deals.
"Despite the huge uncertainty related to the Brexit, the UK government has
intensified its effort to promote and facilitate new investment, as well as to
retain existing investment in the country, including formulating a strategy and
adopting new measures for attracting foreign investment," Zhan told Reuters.
Notable megadeals included Comcast's <CMCSA.O> $40 billion acquisition of Sky,
Vantif's $10 billion purchase of Worldpay, and the acquisition of Unileverís
margarine & spreads business for $8 billion by KKR & Co.
One major growth area in 2018 was the value of newly announced "greenfield"
investments into developing countries in Asia, which rose 84 percent to $390
Zhan said the rise was largely due to firms restructuring supply chains in
Southeast Asia, driven by a desire to avoid getting caught up in trade tensions,
as well as by new opportunities from the 11-country Comprehensive and
Progressive Trans-Pacific Partnership Agreement and investment liberalization in
(Reporting by Tom Miles, editing by Ed Osmond)
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