UNCTAD: Germany to Remain a Top FDI Location in Europe

07/26/2010

Berlin - FDI flows to Germany increased by 46 percent in 2009 while FDI stocks rose slightly, positioning the country as a strong economic foundation for Europe throughout the crisis. Germany is expected to remain a key destination country for FDI for the period 2010-2012, according to a survey of transnational corporations. These are the results of the 2010 UNCTAD World Investment Report published last week.

Germany ranked seventh worldwide in total FDI flows, increasing from USD 24 billion to USD 36 billion from 2008 to 2009. It was the only country in the top seven that posted inflow growth. This increase is largely due to an upswing in inter-company loans, according to the study. By comparison, inflows to the United States, still the leading destination country for FDI inflows despite the crisis, dropped drastically from USD 316 billion to USD 130 billion over the same period.

According to the study, "FDI flows to developed countries suffered the worst decline of all regions, contracting by 44 percent to USD 566 billion." A testament to Germany’s stability, the study later praises the country’s strong performance: "North America was the worst affected, while the 27 member countries of the EU weathered the blow better with Germany…."

Germany also fares well in international FDI stock rankings, increasing its FDI stocks slightly in 2009 while retaining its position at number six worldwide. Measuring FDI stocks provides a reliable performance indicator, as it is less volatile than FDI flows and represents long-term value created by investments.

A key component of the UNCTAD report is a survey of transnational corporations on FDI trends for the future. Here Germany also fares well, cited by decision makers along with the USA and UK as a main destination country among industrialized nations for FDI investments for the period 2010-2012.

UNCTAD makes a number of policy recommendations, most significantly in favor of investments in low-carbon technologies. According to the report, investments in a broad range of areas including renewable energies, recycling, and low-carbon production processes can bring economic benefits to countries regardless of location or economic strength. Germany is well positioned to transfer to a sustainable economy, as it is already a recognized technology leader in several green technology fields.