FDI, which largely comprises cross-border mergers and acquisitions and investment in start-up projects overseas, slipped by 2 percent past year, much less than the 13 percent fall suggested by preliminary figures in February.
Investment and the Digital Economy, global FDI flows retreated marginally in 2016 by two per cent to $1,75 trillion, amid weak economic growth and significant policy risks perceived by multinational enterprises, Xinhua reported.
The report, however, cautioned that tax-related challenges may pose as a deterrent to some investors. This affected three sub- regions, with only South Asia spared. The Philippines emerged as the top performer in Southeast Asia previous year, when it recorded a 60-percent growth in FDI inflows.
Despite the 12.8 percent decrease of global FDI inflows to the least developed countries (LDCs), the report stated that China remained the largest investing country in LDCs. Foreign MNEs are increasingly relying on cross-border M&As to penetrate the rapidly growing Indian market.
On cross border mergers, the report cited United States dollars 13 billion acquisition of India's Essar Oil by Rosneft (Russian Federation) as one of the significant deals during the year.
On the flip side, it said there are tax related concerns that may pose as deterrent to some foreign investors. Similarly, Bangladesh too saw a marginal increase of FDI to $2.3 bn as the country benefited with the announcement of large-scale power projects. "At the beginning of the year, for instance, the Chinese Government took the bold step of opening a wide range of industries to foreign investment, including extractive industries, infrastructure, finance and manufacturing".
The Philippines' net FDI inflows grew by 40.7% year on year to a record $7.933 billion in 2016, outstripping Singapore's and Malaysia's 20.8% and 14.7% annual increases, respectively, as well as Indonesia's and Thailand's respective drops of 81% and 63.5%, according to data of the Bangko Sentral ng Pilipinas (BSP).
The report noted that signing of a tax treaty by India and Mauritius in May 2016 "might have" contributed to reduced round-tripping FDI. "Cross-border mergers and acquisitions deals have become increasingly important for foreign multinational enterprises to enter the rapidly-growing Indian market", said the UNCTAD's "World Investment Report 2017".
Internationally, Foreign Direct Investments have increased by a significant 5 per cent to approximately 5 per cent in 2017.