UNCTAD (United Nations Conference on Trade and Development) has published its latest annual report on investment in the world. Entitled "World Investment Report 2002" (350 pages, $49, ISBN 92-1-112551-0), the publication takes stock of the evolution of foreign direct investment (FDI) flows worldwide. The new edition is improved with more detailed conclusions compared to previous years, the result of new UNCTAD reference tools that now measure the results obtained by any one country for incoming FDI compared to the weight of its economy and its attraction potential. It uses a number of economic and political factors that foreign investors consider important. On the whole, the report indicates that incoming FDI fell 51% in 2001 to settle at $735 billion, marking their first drop in a decade. This fall mainly concerns the developed countries (-59%) while developing countries (LDC) underwent a less significant fall (-14%). LDC and the Central and Eastern European Countries (CEEC) account, moreover, for a growing part of total FDI. The plummeting of investment flows is largely due to the fall in international merger-acquisition operations which are the driving force behind them. These operations should, moreover, remain weak this year also if one observes the results obtained between January and July. Such operations generated $222 billion only, 40% down compared to the same period of 2001. The global recession which has mainly hit the three main economies (United States, EU and Japan) coupled with a marked slowdown in the stock exchange activities of industrialised countries explains this decline. Thus: United States: The US remains the main FDI recipient although FDI has fallen by half to reach $124 billion. The United States also remains the number one investor worldwide but, in this case also, flows declined 30%, that is $114 billion; the European Union: incoming and outgoing FDI to and from the EU also fell by some 60% ($323 and 365 billion respectively). The United Kingdom and Germany are the countries where incoming FDI fell the most, followed to a lesser extent by Denmark and Finland. Only France, Greece and Italy benefited from a certain stability at this level; Japan: FDI entries fell in 2001 whereas outgoing FDI increased by 21% (i.e. $38 billion). As mentioned earlier, LDC also suffered a decline of incoming FDI with a 14% slowdown of these flows last year (from $238 to 205 billion), largely because of the instability experienced by Argentina, Brazil and Hong Kong. China is the only developing country that has experienced a rise in incoming FDI because, analysts say, of its entry into the WTO, which has attracted investors. LDC and CEECs should, in the near future, enjoy the consequences of the after-recession period, with investors seeking to relocate or extend their activities in less costly areas. This process is already underway, with LDC and CEECs being the most numerous to record a rise in incoming FDI in 2001 (77 and 13 respectively) while investment intended for developed countries fell in 22 countries out of 25. Transnational companies: UNCTAD also highlighted the growing importance of transnational companies in the world economy. The turnover of subsidiaries abroad of the 65,000 transnational companies worldwide (some 850,000 companies), amounting to nearly $19,000 billion, represented over twice as much as world exports in 2001 whereas, in 1990, both figures were almost the same. The stock of investments, on the other hand, has reached record levels, going from $1700 to 6600 billion. At the present time, foreign subsidiaries account for 11% of world GDP as opposed to 7% in 1990 and a third of world exports. All these factors indicate encouraging long term prospects for FDI, UNCTAD considers. Contact: UNCTAD, Sales and Marketing Section, Office E-4, Palais des Nations, CH-1211 Geneva 10, Switzerland. Tel.: (+41-22) 917 2614; Fax: (+41-22) 917 0027; E-mail: unpubli@unog.ch; Internet: http: //http://www.un.org/publications .