On June 25, the United Nations Conference on Trade and Development published its “World Investment Report 2015.” On page A4 of the 20-page “Annex Tables” section, the UNCTD published a chart of Foreign Direct Investment “flows,” calculating the inbound and outbound investment of the world’s developed economics.
According to the report, from 2013 to 2014, foreign direct investment (“inflows,” or countries investing in Israel) dropped 46%, from $11.804 billion to $6.432. Israeli investment in foreign economies (“outflows”) dropped as well, from $4.671 billion to $3.975, or about a 15% decrease.
Ynet news reported Dr. Roni Manos of the College of Management, and one of the reports authors, as saying, “We believe that what led to the drop in investment in Israel are Operation Protective Edge and the boycotts Israel is facing. In the past there were large transactions such as Waze and ISCAR Metalworking which boosted investment, but over the past year there were not enough such deals.”
But the decline is not just in Israel. According to the UN report, world FDI investments during the past year amounted to only $1.23 trillion, a 16% drop compared to 2013 ($1.47 trillion dollars). However, when one considers the forecast given in 2014, the decline is march sharper. The UN’s World Investment Report (WIR) estimated last year that the FDI would total $1.6 trillion, in other words, with respect to the 2014 forecasts, FDI fell by 23%.
The main reason for this, according to the report’s authors, is weak global economic growth and uncertainty regarding economic and business policy in many countries, which deterred many investors. Among others, the uncertainty due to the rate of quantitative easing in the US and Europe, the Greek debt crisis and its impact on stability in the Eurozone, and the pace of economic growth in China.
Other factors influencing the decline in global FDI were geopolitical risks such as the conflict in Ukraine, which has calmed down in recent months, the worsening of relations between the West and Russia, and revolutions and regime changes in several countries in the Middle East. Large scale divestment has also contributed to a decline in FDI. A prominent example is Vodafone’s divestment of Verizon amounting to $130 billion.
Jonathan Zalman is a writer and teacher based in Brooklyn.