The Organization for Economic Cooperation and Development,OECD has just released its analysis of Foreign Direct Investment trends and developments in 2015 with a special chapter on return on inward FDI by sector. Historically, the analysis of rates of return was hampered by a lack of comparability in the valuations of positions.
With the implementation of the most recent international standards for compiling FDI statistics, more and more countries are now reporting market value estimates of FDI positions which enables an improved analysis of rates of return.
Among the findings are:
- Global FDI flows increased by 25% to USD 1.7 trillion in 2015, reaching their highest level since the global financial crisis began in 2007.
- Part of this increase was the result of financial and corporate restructuring rather than of new, productive investments. For example, global FDI flows were boosted by record levels of FDI inflows in the United States in the first half of 2015 which were partly driven by cross-border M&As designed to reduce companies’ US tax obligations.
- OECD FDI inflows almost doubled compared to 2014, mostly due to large inflows in Ireland, the Netherlands, Switzerland and the United States. Investors from those countries were also responsible for the 35% increase in OECD outflows. These countries appear among the top destinations and top sources of FDI worldwide in 2015.
- OECD FDI flows for resident special purpose entities (SPEs) decreased in 2015 by around 10%.
- FDI inflows to the G20 as a whole increased by 26%. FDI flows to OECD G20 economies increased by 81% but were partly offset by a 13% drop in FDI inflows to non-OECD G20 economies. As a result of these changes, the share of the non OECD G20 countries in global inflows dropped from about one-third to just over one-fifth.
- The importance of specific sectors varies across countries. The highest shares of FDI in manufacturing are in the Netherlands, Sweden, Japan and Korea. The highest shares (over 40%) in ‘other’, which includes primary industriessuch as mining and agriculture and also water and electricity, are in Chile, Australia and Norway. The highest shares (over 40%) of financial and insurance services are in Luxembourg, Denmark, Portugal and Japan (excluding FDI in Luxembourg, Danish and Portuguese SPEs).
The full report is available at www.oecd.org/daf/inv/investment-policy/FDI-in-Figures-April-2016.pdf.
