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UN Finds Widespread Growth in Foreign Direct Investment

A new report finds growth in foreign direct investment (FDI) last year was the largest since 2000 and occurred in all regions of the world. In its annual World Investment Report, the U.N. Conference on Trade and Development says the developing countries and transition economies of the former Soviet Union broke all records in attracting the highest FDI inflows ever. Lisa Schlein reports for VOA from UNCTAD headquarters in Geneva.

The report says foreign direct investment (FDI) in 2006 amounted to more than $1.3 trillion, rising more than 38 percent over the previous year. It says this is slightly less than the record level achieved in 2000.

It says foreign direct investment to developed countries rose by 45 percent to reach $857 billion. It says the United States regained its position as the leading host country for FDI followed by Britain and France.

UNCTAD says FDI to developing countries and former Soviet economies attained their highest levels ever. It notes China, Hong Kong and Singapore received the most FDI among developing countries and Russia led the pack among transition countries.

For the first time in seven years, the report says FDI in China declined in 2006. But, chief of UNCTAD's Investment Analysis Branch, Anne Miroux, calls the decrease relatively small.

"For 2007, our preliminary estimate is that for China the level of FDI will remain more or less the same," she said. "And, it is still a huge amount. It is between $69 billion and $70 billion. So, one has to interpret the lower flows to China with a pinch of salt, I would say."

UNCTAD economists say rising demand, especially from Asia, for oil, gas, and metals has spurred an investment boom in mineral exploration and extraction. They say those industries are largely responsible for the recent increases in FDI in many mineral-rich developing countries, notably in Africa.

UNCTAD Secretary-General Supachai Panitchpakdi says several of the world's poorest countries have benefited from the rise in commodity prices and increased interest in the extractive industries.

"We are quite pleased to see that countries like Chad, Equatorial Guinea, and Mali are now being included in the group of recipients of FDI, particularly they are LDCs [Least Developed Countries]," he noted.

The report says transnational corporations from developed countries remain the leading sources of FDI. They account for 84 percent of the global outflows in 2006.

UNCTAD argues the commodities boom should provide opportunities for development and poverty alleviation in mineral-exporting countries. But, it warns the money generated from extractive industries can have both positive and negative effects.

It says both the host countries and the transnational corporations must not trample on the environment or the social and human rights of local communities in their rush to make profits.