World Investment Report 2008 (WIR08) is the 18th in a series published by the United Nations Conference on Trade and Development (UNCTAD). The Report analyses the latest trends in foreign direct investment (FDI) and has a special focus in 2008 on the role of transnational corporations (TNCs) in infrastructure development.

OVERVIEW
RECORD FLOWS IN 2007, BUT SET TO DECLINE
Global FDI flows surpassed the peak of 2000…

After four consecutive years of growth, global FDI inflows rose in 2007 by 30% to reach $1,833 billion, well above the previous all-time high set in 2000. Despite the financial and credit crises, which began in the second half of 2007, all the three major economic groupings – developed countries, developing countries and the transition economies of South-East Europe and the Commonwealth of Independent States (CIS) – saw continued growth in their inflows.

The increase in FDI largely reflected relatively high economic growth and strong corporate performance in many parts of the world. Reinvested earnings accounted for about 30% of total FDI inflows as a result of increased profits of foreign affiliates, notably in developing countries.

To some extent, the record FDI levels in dollar terms also reflected the significant depreciation of the dollar against other major currencies. However, even measured in local currencies, the average growth rate of global FDI flows was still 23% in 2007.

FDI inflows into developed countries reached $1,248 billion. The United States maintained its position as the largest recipient country, followed by the United Kingdom, France, Canada and the Netherlands. The European Union (EU) was the largest host region, attracting almost two thirds of total FDI inflows into developed countries.

In developing countries FDI inflows reached their highest level ever ($500 billion) – a 21% increase over 2006. The least developed countries (LDCs) attracted $13 billion worth of FDI in 2007 – also a record high. At the same time, developing countries continued to gain in importance as sources of FDI, with outflows rising to a new record level of $253 billion, mainly as a result of outward expansion by Asian TNCs.

FDI inflows into South-East Europe and the CIS also surged, increasing by 50%, to reach $86 billion in 2007. The region has thus seen seven years of uninterrupted growth. Outflows from this region similarly soared, to $51 billion, more than twice the 2006 level. Among developing and transition economies, the three largest recipients were China, Hong Kong (China) and the Russian Federation. ...

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World Investment Report 2008: Transnational Corporations, and the Infrastructure Challenge
UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

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PREFACE
World foreign direct investment inflows rose last year to a record level of $1.8 trillion. Developing and transition economies attracted more flows than ever before, reaching nearly $600 billion – a 25 per cent increase over 2006, and a third of the global total. While global foreign direct investment flows are projected to decline this year, those to developing and transition economies are expected to suffer less, despite the current financial and credit crisis.

One of the main challenges for the international community is to mobilize greater financial flows for investment conducive to poverty reduction and the achievement of the Millennium Development Goals. In particular, developing countries require investments that will strengthen the infrastructure industries and services that are so essential for future growth and for the social well-being of the poor. The World Investment Report 2008 examines the ways, extent and conditions under which transnational corporations can contribute to meeting the infrastructure challenge.

The Report argues that while the participation of transnational corporations in the infrastructure sector of developing countries has risen significantly, a huge gap remains between current investment levels and what is still needed. Filling the investment gap is particularly urgent in the case of essential infrastructure industries, such as water and electricity; and is critically important in sectors such as telecommunications and transport.

The Report cautions against unrealistic expectations about the contribution of transnational corporations. Companies will only invest in infrastructure projects that can assure adequate returns for commensurate risks. It has proven difficult for countries with small economies and weak governance systems to attract transnational corporations into infrastructure. The policy challenge is to create the appropriate conditions to facilitate investments that can contribute to poverty alleviation and accelerated development.

There is a need to encourage greater involvement by transnational corporations and to maximize hostcountry benefits from their technological and other assets. This implies improved governance and capacitybuilding in host countries, the provision of greater financial and technical support from development partners, and responsible infrastructure investors. A concerted effort by all parties is required. Toward that end, this Report offers valuable information and analysis, and I commend it to a wide global readership.

Ban Ki-moon
Secretary-General of the United Nations
New York, July 2008

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