Fall in foreign direct investment continues in 2009 - no clear improvement before 2011. As a result of a worsening of the financial and economic crisis in 2008, prospects for global foreign direct investment (FDI) remain gloomy, reports UNCTAD´s annual study of worldwide investment trends. After a record figure of US$1.979 trillion in 2007, FDI flows fell in 2008 to $1.697 trillion and are due to experience a further fall in 2009 to at least $1.2 trillion. Recovery is expected to be slow in 2010, reaching no more than $1.4 trillion, but gathering momentum in 2011 to approach $1.8 trillion. While FDI inflows declined globally and in developed countries, where the financial crisis originated, flows to developing countries and the transition economies of South-East Europe and the Commonwealth of Independent States (CIS) continued to rise last year. This reflected, in part, a delay as the economic downturn worked its way through the economies of developing countries and only more slowly affected their exports. This dynamic, along with preliminary data for the first quarter of 2009, explains the downturn in FDI flows in all regions in the second half of 2008. The crisis has changed the FDI landscape, with a surge in the developing and transition economies´ share in global FDI flows to 43% in 2008. This change in the pattern of inflows is partly due to the large decline in FDI inflows to developed countries, which in 2008 shrank by 29%. Africa recorded the largest percentage increase, with West Africa getting the lion's share and a 63% increase on 2007 figures. FDI inflows to South East, Southern and Eastern Asia rose by 17% to record levels. FDI to Western Asia continued to increase for the sixth year in a row, whereas in Latin America and the Caribbean, it increased by 13%. The transition economies of South-East Europe and the CIS had increased inflows for the eighth year in a row. But in 2009, UNCTAD forecasts that FDI flows to all regions will suffer a decline. FDI outflows from developed countries in 2008 fell less sharply (-17%) than inflows. The United States maintained its position as the largest single source country of FDI, followed by France, while Japan, with a 74% increase in outward FDI, entered the list of top five investing countries. In general, outflows from developing regions continued to grow, reaching $293 billion in 2008, though the performances of individual regions varied. Transnational corporations (TNCs) in Latin America and East Asia - especially China - engaged in significant outward expansion. West Asia, on the other hand, reported a substantial decline in outward FDI. Among developing and transition economies, the three largest sources of FDI were Hong Kong (China), the Russian Federation, and China, which ranked among the top 20 investors in the world. A major contributing factor to the decline in global FDI flows has been growing divestments by TNCs worldwide. Cross-border M&As - a major source of growth of FDI in previous years - declined considerably as financial markets seized up in the second half of 2008. Taking that year as a whole, the value of such transactions fell by 35% to $673 billion (a level roughly equal to that of 2006), and so far in 2009 the rate of M&As has continued to fall. Indeed, the year-on-year fall in cross-border M&As in the first quarter of 2009 was 76%. Private equity firms, which through leveraged buyouts fuelled the earlier rise in M&As, saw the value of their cross-border transactions drop 38% in 2008, with a sharper decline registered in the first half of 2009. Bucking the general trend, however, sovereign wealth funds (SWFs) recorded a rise in FDI in 2008. The value of their cross-border M&As - the predominant form of FDI by SWFs - shot up by 16% to $20 billion. (I.L./transl.rh)