Vindicating the Goldman Sachs’ Bric paradigm, the UN Commission on Trade and Development in its report World Investment Prospects Survey 2010-2012, has said that by 2012 India and Brazil will have leapfrogged the US as second and third most attractive FDI destinations. China will remain the the most attractive FDI destination.
According to the report which surveyed 36 leading multinational corporations and 116 investment promotion agencies to access the international investment climate, said the recent financial crisis has accentuated a shift of the geographical focus of FDI towards developing and former communist economies.
While M&A deals from emerging markets to developed economies have risen significantly in the past two years, profitable valuations and amended policies that are investor friendly mean that first world multinational companies are hedging all their bets on the emerging Bric nations. A majority of the investments are expected to be in the primary sector with services and manufacturing following. Further, the report suggests that foreign investments will be made through the equity mode of investment such as cross-border M&As or greenfield projects. Some may also choose to rely on non-equity forms of investment such as partnerships, alliances or subcontracting. These modes of entry allow companies to share risks, to reduce their investment expenditures, and to take advantage of complementaries in know-how, technologies, and market shares by type of product or region.
The Geneva-based agency, which acts as a think-tank on economic trends in developing nations also predicted that Russia will remain in fifth place, the same as in 2009, but Mexico will leap to sixth place from 12th last year, leapfrogging Britain at seventh, Vietnam at eighth and Indonesia at ninth. Germany, Europe’s biggest economy, will fall from seventh to 10th place. Thailand, Poland, Australia, France and Malaysia were the five countries next most favoured, the UNCTAD survey showed.