20110117
reuters

GENEVA (Reuters) - Developing countries and economies in transition together attracted more foreign investment than developed countries in 2010 for the first time, a United Nations study showed on Monday.

The report by the United Nations Conference on Trade and Development (UNCTAD) was further evidence that economic recovery is more robust in developing than in rich countries.

Overall, flows of foreign direct investment (FDI) stagnated at almost $1.12 trillion in 2010 after $1.14 billion in 2009, but are still 25 percent below pre-crisis levels in 2005-2007, UNCTAD said in its latest global investment trends monitor.

UNCTAD repeated its forecast that global FDI would pick up to $1.3-1.5 trillion this year, with stronger growth held back by the uneven economic recovery, investment protectionism, currency volatility and sovereign debt worries.

On the other hand, multi-national companies in developed countries are now holding a record $4-5 trillion in cash -- one source of investment, which will be seeking a home.

FDI refers to long-term investments, such as stakes in foreign companies or the construction of a plant for a subsidiary, in contrast to volatile financial investments. Businesses and economists pay close attention to UNCTAD's data.

James Zhan, director of UNCTAD's investment and enterprise division, said developing countries would not attract most FDI over the long term, once flows to developed countries recovered.

"The absorptive capacity of developing countries of FDI is still limited," he told a news conference.