5:53 AM Jun 6, 1996


Geneva 4 Jun (TWN) -- Foreign Direct Investment (FDI) flows increased by $103 billion or 46% between 1994 and 1995 setting a new record and reaching an estimated $325 billion, the UN Conference on Trade and Development reported in a preliminary estimate.

An UNCTAD press release, a pre-publication blurb for its annual World Investment Report 1996, said that the new records were registered in all groups of countries - developed, developing and central and eastern Europe.

Of the $325 billion, the developing countries accounted for $97 billion, while the transition economies of central and eastern Europe accounted for $12 billion.

Both in developing and transition economies, FDI recipients were concentrated in a limited number of countries -- China, Indonesia, Malaysia and Thailand in the developing world and the Czech Republic, Hungary and Russia in the transition economies.

The increase, the UNCTAD press release says, has been boosted by a new wave of mergers and acquisitions -- with FDI in developed countries reaching an estimated $216 billion. The US registered a $75 billion inflow and a $97 billion outflow.

FDI outflows more than doubled in the US and Germany, and by a half in the UK, and has followed closely fluctuations in economic growth, though with a lag, says UNCTAD in the press release.

However, 1995 has been marked by slow or stagnant growth in the industrial world.

Cross-Border mergers and acquisitions have become large enough to determine the level, direction and composition of the FDI flows -- with mergers and acquisitions involving large enterprises in pharmaceuticals, chemicals and financial services industries, but also involving some small- and medium-enterprises.

The UNCTAD press release says that the record levels of FDI flows suggests an accelerating process of "globalization of production by TNCs".

But the acquisitions and mergers (and the downsizing and job-shedding) of the chemical, pharmaceutical and financial service industries have been mostly by or of firms in the industrial world, and associated with the particular type of "globalization" now being pushed, have been rousing concerns in the developed countries -- where though it is being blamed on the developing world.