FDI in 2006 was lifted by a small number of very large cross-border mergers and acquisitions (M&As). The biggest five such transactions, valued at close to USD 120 billion, involved takeovers in the UK service sector (USD 54 billion), Canadian mining (USD 34 billion) and the Luxembourg steel industry (USD 32 billion).
France, Greece, Iceland, Poland, Slovak Republic, Switzerland and Turkey also recorded their highest-ever FDI inflows in 2006. These records to some extent reflect cross-border takeovers, but to a greater extent represent additional investment by foreign companies that were there already.
The United States was also the leading foreign investor in OECD countries, with USD 249 billion, followed by France with USD 115 billion. About one-third of this investment abroad by French firms was accounted for by five big M&As, including Alcatel’s acquisition of US-based Lucent and AXA’s takeover of Swiss insurer Winterthur.
Outside the OECD area, one of the most important trends is the emergence of a number of major international investors domiciled in developing countries. For instance, in 2006 India’s Tata Steel bought the Anglo-Dutch Corus to create the world’s fifth-biggest steel firm while Brazil’s CVRD became the world’s second-largest mining company by acquiring Inco of Canada.
Looking ahead, the report notes the potential impact on FDI of growing public concerns about the impact of globalisation. Business allegations of cross-border investment being dissuaded by hostile attitudes in the host country have also become more frequent. On balance, however, it finds that the negative political undercurrents have not yet translated into a slowdown of direct investment flows.
