Foreign direct investment flows can, and should, be encouraged.

FDI by SMEs involved evaluation of investment locations based on a set of variables which could be clustered under markets, costs, natural resources, infrastructure framework, policy framework and business promotion and support factors.

An increase in FDI outflows is a priority in China for two reasons.

One is that Governments have been supporting FDI outflows.

Each of the developing regions experienced an increase in FDI inflows in 2004.

While foreign direct investment flows kept increasing, the trend could not be guaranteed.

Meanwhile, FDI flows bounced back in the United Kingdom and the United States.

Foreign direct investment

Foreign direct investment flows have generally been influenced by policies that do not discriminate between foreign and domestic investors.

A panel of experts on FDI presented data related to the growth of FDI outflows from developing countries, this growth being fastest in the Asia Pacific region, which now accounted for nearly three quarters of developing country outward FDI stock.

Overall, FDI flows are expected to increase over the medium term because of improvements in the main fundamentals that drive FDI a broad based economic recovery, equity market valuations and mergers and acquisitions (M As) activity.

The Libyan Arab Jamahiriya will significantly increase its FDI inflows as a result of the end of sanctions in 2003.

Flows to developing countries appear to lead the recovery in global FDI.

Foreign direct investment

The other major advantage of such regional groupings has been their ability to attract foreign direct investment. Since the early 1990 s, Mercosur has managed to mobilize 5.9 of world FDI inflows.

Currently, the US receives only about 2 3 of FDI flows from China.

The Benefits of Chinese FDI

Table 2. FDI outflows as a percentage of gross fixed capital formation in selected economies, 2001 2003a

Lack of institutional structure and lack of capacity are obstacles to intra African FDI and portfolio investment.

In the case of ASEAN, intraregional FDI accounts for close to one fifth of the total FDI.

Beware of FDI Protectionism

FDI inflows had become significant in Benin only after the establishment of a market oriented economy in the late 1980s.

More than 64 per cent of Singapore's OFDI was in Asia.

Over the past 15 years, FDI outflows from developing countries have grown faster than those from developed countries.

South South FDI flows have been motivated by push and pull factors, and similar structural, cyclical and policy factors similar to those between developed and developing countries.

Uribe has also proven to be a strong economic administrator, attracting increasing flows of foreign direct investment to Colombia.

FDI inflows into developed countries fell by an estimated 16 per cent to 321 billion in 2004.

From a very low base, FDI in Africa increased for the second consecutive year to 20 billion.

Since 1993, substantial OFDI from Singapore has helped increase the competitiveness of Singaporean firms and the Singapore economy.

Ireland showed the importance of foreign direct investment.

The impact of FDI on development

Emerging FDI from developing countries

Obstacles to OFDI

FDI flows in services between developing countries are growing faster than flows between developed and developing countries.

Despite the significant increase in recent years, FDI inflows remained concentrated in a few specific sectors sectors particularly oil, steel, chemicals and pharmaceuticals Moreover, they seemed not to have a significant impact on the national economy in terms of job creation, access to markets and technology transfer.

His Group requested UNCTAD to continue to review FDI trends and policy issues related to the impact on home and host countries of outward FDI from developing countries, particularly in the South South context.

He reaffirmed the commitment of his Government to reinforcing investors' confidence in the country. Several reforms had already been implemented and would be pursued. He stressed the importance of follow up in the implementation of the policy recommendations of the report

) To the extent that these agreements protect investment and open up industries for FDI, they facilitate OFDI from developing countries.

The shift of FDI to services

Outward FDI from developing countries

Table 2. FDI outflows as a percentage of gross fixed capital formation in selected economies, 2001 2003a (concluded)

The case of South South FDI

Drivers and motivation of OFDI

Luxembourg and Spain, both major recipients of FDI in 2003, received lower FDI inflows last year.

The Expert Meeting will focus on the issues of FDI data compilation and analysis and its role in the formulation of FDI policies from a development perspective.