Euro rout, Mideast unrest hit sentiment

Euro rout, Mideast unrest hit sentiment

The concerns of companies regarding the investment climate in emerging economies have been amplified mainly due to the eurozone debt crisis and the political turmoil in Middle East and North Africa, according to a new report by the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

However, the agency noted in its “World Investment and Political Risk” report that investors are optimistic over the medium term.

A survey among selected global investors showed a “cautious optimism” regarding investment plans in the next 12 months. In contrast, 75 percent of respondents said they plan to expand in developing economies over a period of three years.

Responding to a question on their investment destinations, nearly 20 percent of investors said Turkey is among the countries their company is currently investing.

China topped this list, followed by India, Brazil, Russia, Mexico, Argentina, South Africa and Turkey. Syria ranked at the bottom, with a score of less than 1 percent. Overall, the report said private capital flows to developing countries, including foreign direct investment (FDI), are moderating. However, they are expected to regain speed in the medium term.

Rise of developing economies

“This uncertain economic landscape aside, developing countries are expected to grow more than twice as fast as high-income economies over the next few years,” MIGA’s Executive Vice President Izumi Kobayashi said. “This continued growth, together with stronger and more business-friendly environments, should enhance their appeal to savvy investors worldwide.”

The report noted that developing countries now attract two-fifths of global FDI and originate close to one-fifth of overseas investment.