The 15 most attractive economies for the location of FDI (Per cent of responses to the UNCTAD survey) - China, India, US, Russian Federation, Brazil, Vietnam, Germany, Indonesia, Australia, Canada, Mexico, UK, Poland, South Africa, France and Turkey

Foreign direct investment (FDI) surged 30% in 2007 to $1,833bn (€1,250bn, £990bn), surpassing the previous peak in 2000 by some $400bn. Flows of foreign investment into Ireland last year amounted to $31 billion, the 16th highest. The number of Irish greenfield projects fell 22%, following a decline of 25% in 2006. Investment from Ireland rose by more than 30% to $20.7 billion.

The economic downturn and financial instability have made the largest transnational corporations (TNCs) more cautious about their medium-term foreign direct investment (FDI) ambitions, the World Investment Prospects Survey 2008-2010, which was published by UNCTAD (United Nations Conference on Trade and Development) on Wednesday shows. The percentage of companies planning large increases in investment overseas over the next three years has dropped significantly from 2007. The annual survey, known as the WIPS, was released in conjunction with the World Investment Report 2008.

Top recipients of FDI in 2007 were the US with $233bn, the UK ($224bn), France ($158bn), Canada ($109bn) and the Netherlands ($99bn). China was in sixth place ($84bn), followed by Hong Kong ($60bn).

Together with China, the rest of the BRIC emerging economies – Russia came ninth ($52bn), Brazil 14th ($35bn) and India 20th ($23bn) – all featured among the top 20 FDI beneficiaries in 2007 after big increases in inward investment over the previous two years.

FDI into Ireland last year amounted to $31 billion, the 16th highest. This followed three years of negative figures due to large transfers by subsidiaries to their parent companies. Investment from Ireland rose by more than 30% to $20.7 billion.

Greenfield FDI projects in Ireland fell 22% to 114 in 2007, following a decline of 25% in 2006 to 146. Greenfield projects in Romania rose from 116 in 2003 to 366 in 2007 while in the same period, the number of Polish projects rose from 154 to 333.

The greenfield indicator is a crude one but the value ranking can give a distorted picture because of fund movements by existing multinationals in a country.

Rich nations dominated the top rankings mainly because of  record cross-border M&A activity of more than $1,600bn last year. Private equity funds accounted for a highest-ever $460bn of that. The role of sovereign wealth funds in direct investment was $10bn.

The report says Denis O'Brien's Digicel investment in Papua New Guinea contributed to increased FDI in that host economy while for example, in Jamaica, Digicel had 1.9 million customers by 2008, equivalent to 82% of the country’s mobile market and 72% of the total population.

The WIPS results survey, based on 226 responses to queries sent to the world´s largest TNCs, indicates that a majority of respondent companies still plan to increase their international investment expenditures, albeit at a more moderate level, over the next three years. This is largely due to an underlying and persistent trend towards expanding the share of TNC production, employment, and sales abroad. This trend towards internationalization will affect all corporate functions, including research and development (R&D) and decision-making centres, which so far have tended to remain in TNCs´ home countries.

Analysis by home region shows the quickly growing international ambitions of companies from the developing world, particularly Asia, while FDI prospects for companies from developed countries, especially North American and Japan, have dimmed as compared to a year ago. Although still very focused on investing in their home regions, companies are expressing a growing interest in "far-shore" investments, providing evidence of a gradual extension of their strategic scope.

Five very large countries are considered by large TNCs as the most attractive destinations for future foreign investment: China, India, the United States, the Russian Federation, and Brazil. Their rankings are unchanged from last year´s survey. However, the Russian Federation and Brazil have caught up noticeably in attractiveness. It is noteworthy that four of the five top destinations are the emerging economies known collectively as BRICs (Brazil, Russia, India, and China).

Location criteria in order of importance, 2008-1010 (Per cent of responses to the UNCTAD survey)

Among the top 15 destination countries, Vietnam again ranks 6th; Germany and Indonesia have improved to 7th and 8th, respectively. Australia, the United Kingdom, Poland, and France have declined slightly in the rankings but still remain in the top 15. Newcomers to the top 15 are South Africa, Canada, and Turkey. Market growth, market size, and access to international/regional markets are by far the most important factors influencing companies´ choices of investment location (50% of answers combined), followed by quality of business environment, including availability of skilled labour (8%), suppliers (6%), and adequate infrastructure (7%). The legal environment and government effectiveness were also mentioned frequently by TNCs responding to the survey. Availability of cheap labour, although not a negligible factor on average (8% of responses), appears to be a major determinant only for a few labour-intensive manufacturing activities such as garment production.