Republic bucks OECD inward investment trend

The Republic stood out among OECD states last year for raising its levels of inward investment amid a generally declining trend.

The increase in foreign direct investment (FDI) in the Republic from $24.4 billion (€20.1 billion) to $25.5 billion last year came as FDI into OECD member countries as a whole fell back for the third year in a row.

The Paris-based organisation said FDI across its 30 member states dropped by 28 per cent to $384 billion last year.

The US suffered the biggest fall among OECD countries in inward FDI, with investment falling from $72 billion to $40 billion.

Other large economies such as the UK and Germany also recorded substantial drops. FDI flows into the UK almost halved in 2003 to $14.6 billion, from $27.8 billion in 2002. The OECD said the 2002 level "was already unimpressive by historical standards".

The OECD cited weakness in the global economic recovery and concerns about international security among the reasons for the decline in FDI.

It also pointed to a preference among companies to "consolidate" existing acquisitions before making new ones. FDI flows into Germany fell by 64 per cent to $12 billion, down from $45 billion in 2002.

Inflows into France were steady at about $47 billion, with the OECD remarking that the result was boosted by the ease with which foreign firms can buy French companies.

In Europe as a whole, FDI inflows fell by 23 per cent. Some of the largest relative declines came in Central Europe, with FDI into the Czech Republic and Slovakia dropped by 70 and 85 per cent respectively. The fall related in part to the one-off effect of large investment projects in 2002.

The OECD study shows that FDI in the Republic has held steady after recovering from a drop of almost 65 per cent in 2001, a year of global economic turmoil.

Investment announcements such as Intel's decision to pump €1.6 billion into its Leixlip operations between now and 2006 are likely to ensure that the Republic will also maintain a healthy level of FDI in the near future.

The OECD has identified signs that FDI could "trend slightly upwards" around the world over the long term as the cyclical recovery takes firm hold.

China overtook the US as the biggest recipient of foreign direct investment for the first time last year. The country attracted $53 billion from OECD countries and elsewhere.

The OECD has concluded that the size of the domestic Chinese economy is a big draw for foreign firms.

This comes in contrast to earlier decades when FDI was driven by the availability of low-cost labour and production costs in recipient nations.