GENEVA — Global foreign direct investments are projected to expand in 2010 to more than $1.2 trillion, compared with last year’s 37 percent decline to $1.1 trillion, but manufacturing industries, including textiles and apparel, are expected to lag behind in the upturn, a United Nations report said Thursday.
“Global FDI flows began to bottom out in the latter half of 2009 and witnessed a modest recovery in the first half of 2010,” Supachai Panitchpakdi, secretary-general of the U.N. Conference on Trade & Development, told reporters here. “This suggests brighter FDI prospects for the short term.”
Related Articles
However, UNCTAD’s “World Investment Report 2010” concludes that the recovery in FDI appears uneven and says “the recent retreat in manufacturing FDI relative to that of services and primary sectors is unlikely to be reversed.”
You May Also Like
The report outlines that based on the value cross-border mergers and acquisitions, the manufacturing sector was worst affected last year and posted a declined of 77 percent compared with 47 percent and 57 percent for primary and service sectors, respectively.
Overall, the number of cross-border M&A’s contracted 34 percent (64 percent in value) compared to 15 percent for the number of start-up ventures.
In 2009, global cross-border M&A sales in textiles, apparel and leather goods totaled only $410 million, down from $2.1 billion in 2008, and $10.2 billion in 2007, UNCTAD analysts estimated. The number of M&A deals worldwide in the sector was also down to 39 compared with 64 in 2008, it said. However, the agency noted that the number of cross-border start-up investments in the textiles industry worldwide last year reached 1,012, up from 810 projects in 2008.
Looking ahead, Supachai said UNCTAD anticipates global FDI rising to $1.3 trillion to 1.5 trillion in 2011, and edging up to $1.6 trillion to $2 trillion in 2012, recovering to the 2008 level.
The agency said the U.S. and followed by China were the top destinations for FDI inflows in 2009 with $130 billion and $95 billion, respectively, a sharp contraction from $316 billion and $108 billion posted respectively the year before.
However, James Zhan, UNCTAD chief for investment and enterprise, said FDI in China faces a challenge in labor-intensive, export-oriented industries, including textiles and apparel, because of the rapid growth in wages that are expected to increase in the next two to three years by 20 percent or more. He said this is driven by government policy to close the wage gap and is also fueled by shortages in skilled labor.
Zhan said textiles and apparel “will be very much affected” by the increased labor costs and noted that companies in the coastal areas are moving in two directions, either to central China or relocating to Cambodia, Vietnam, Bangladesh and Sri Lanka. He noted that one of the implications for investors in moving inland is that transportation costs, sourcing of materials and time of delivery are costlier.