World Investment Report--CHAPTERI GLOBAL TRENDS(PDF 37)

A. Signs of recovery
Global FDI inflows rose modestly in 2004
following large declines in their value in 2001
(41%), 2002 (13%) and 2003 (12%). At $648
billion in 2004, they were 2% higher than in
2003. This growth reflected increased flows to
developing countries as well as to South-East
Europe and the Commonwealth of Independent
States (CIS) (figure I.1), which more than offset
the decline (for the fourth year in a row) in flows
to developed countries. The difference between
inflows to developed countries and developing
countries shrank to $147 billion – a significant
narrowing of the gap compared with previous
years.1 The United States was the largest
recipient in 2004, ahead of the United Kingdom
and China as well as Luxembourg,2 the top FDI
recipients in 2003.

GLOBAL TRENDS: FDI FLOWS
RESUME GROWTH
Cross-border mergers and acquisitions
(M&As) – key modes of global FDI since the late
1980s – started to pick up in 2004 following three
years of decline. Greenfield FDI continued to rise
for a third consecutive year, strengthening the
likelihood of a reversal of the global downward
trend in flows. Data on the financing components
of FDI show that the overall magnitude and
trends of FDI in both developed and developing
countries are determined to a significant extent
by equity investment. However, fluctuations in
other components can occasionally influence
annual FDI flows to individual countries as in
the case of Germany in 2004. The degree of
transnationality – a measure of the relative
economic importance of foreign affiliates in total
economic activity – continued to rise for host
economies as international
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