Latest news with #Bolwijn
Egypt Today
13 hours ago
- Business
- Egypt Today
Investment outlook for 2025 weak amid policy uncertainty, but Egypt among key bright spots: UNCTAD
Director of the Investment Research Branch at UN Trade and Development (UNCTAD), Richard Bolwijn CAIRO - 19 June 2025: Director of the Investment Research Branch at UN Trade and Development (UNCTAD), Richard Bolwijn, warned that global foreign direct investment (FDI) flows are under growing pressure amid rising trade tensions, weak investor confidence, and ongoing policy uncertainty. He said that preliminary data for early 2025 suggests the investment climate remains fragile, with record-low project announcements in the first four months of the year. Speaking virtually at the Cairo launch of the World Investment Report 2025, Bolwijn noted that global FDI declined by 11% in 2024, marking the second consecutive year of contraction, with the drop driven largely by Europe, China (which recorded a 29% decline), and South America. However, he highlighted Africa as a bright spot, with FDI inflows rising by 75%, including a 40% increase in inflows even when excluding Egypt's megaprojects. 'Egypt stood out with several large-scale projects, making it a key driver of the continent's growth,' Bolwijn said. He explained that project finance, which is a key source of investment for infrastructure and development, has seen a multiyear decline globally, but Egypt was an exception. 'While international project finance has been on a downward trend, Egypt managed to attract significant volumes, particularly in energy and infrastructure,' he added. Bolwijn also pointed to manufacturing investment as another area of modest global recovery, noting a small uptick in industrial projects in response to supply chain shifts. However, he emphasized that most of this investment still goes to a few countries, primarily those that have proximity to major markets, stable policy environments, and access to trade agreements, areas where North African economies like Egypt have potential advantages. On the digital economy, Bolwijn said it remained the fastest-growing sector globally, driven by strong flows into data centers and fintech, although investment remains concentrated in a limited number of countries. Looking ahead to 2025, Bolwijn warned of persistent risks. 'Trade policy uncertainty, tariff escalations, and investor caution are delaying project implementation,' he said. He added that multinational corporations are 'in a wait-and-see mode,' affecting short-term investment prospects. He concluded by highlighting key areas for policy focus: strengthening regional trade and integration, attracting investment in sectors less exposed to trade disruptions, such as local manufacturing, scaling up infrastructure project finance, and enhancing investment promotion mechanisms, including digital platforms. 'Countries like Egypt that continue to push for reform, improve investment facilitation, and focus on key sectors are better positioned to navigate the current downturn,' Bolwijn said.
CNBC
20 hours ago
- Business
- CNBC
M&A market 'back to global financial crisis levels,' UN trade arm warns in downbeat economic outlook
The leading body of the United Nations focused on trade and development, UNCTAD (United Nations Conference on Trade and Development), is warning that international investment in 2025 has turned negative due to changes in global trade policy including tariff uncertainty. While there had been modest growth in global investment at the start of the year, trade tensions have led to downward revisions in most indicators of foreign direct investment (FDI), according to UNCTAD's World Investment Report 2025, released on Thursday. This includes gross domestic product, capital formation, exports of goods and services, foreign exchange, financial market volatility, and investor sentiment. "Taking all of these together, they almost all have been revised in the direction of higher risk, lower growth, lower investment, and so forth, since the beginning of this year," said Richard Bolwijn, one of the authors of the report and head of the Investment Research Branch Division on Investment and Enterprise for UNCTAD. "If we take the projections by the IMF, the World Bank, and other institutions that provide us with the raw data for these indicators, they have all worsened since January. Moderate growth expectations we might have had early in the year have now all disappeared," he added. Among the reversals in growth was a two-year positive trend in manufacturing investments fueled by efforts among manufacturers to diversify their supply chains beyond China, which began during the pandemic. "Companies were continuing to look for new locations for production, but now with the tariffs, they are all sitting on their hands," said Bolwijn. The data for the first quarter of this year shows that both the M&A market and greenfield announcements (new project constructions) are at record lows. "Basically, the M&A market is back to global financial crisis levels," he said. Bolwijn said even if the situation improves and clarity is provided on tariffs, it will be hard to recover from the shock of the first six months of the year. Globally, he said, $100 and $200 billion of value in projects is at risk. "This is not all going to disappear overnight, but projects will be delayed which will cause a gap permanently going forward," he said. "While tariffs have led to some investment project announcements aimed at restructuring supply chains in manufacturing sectors, their main effect has been a dramatic increase in investor uncertainty," the report stated. "Early data for the first quarter of 2025 show record-low activity in deals and projects." Cross-border mergers and acquisitions remained below the long-term average, "signallng a structural shift toward domestic and nearshore investment strategies amid rising policy risks, regulatory scrutiny and global uncertainty," the report added. The report showed that global foreign direct investment contracted for the second consecutive year. International project finance, which makes up the highest share of FDI in the least developed countries, continued its slump in 2024. Infrastructure investment makes up a large part of this investment. According to the report, the value of IPF was 26 percent lower in 2024, extending a sharp decline from 2023. Uncertainty over exchange and interest rates was the reason cited behind the impact in financing conditions, with least developed countries the most in need of these funds. UNCTAD warned these countries would be most affected by the current investment downturn. Overall, FDI into developing countries was stable in 2024, at $867 billion, but the spread between the winners and losers was wide, according to the report. Africa's foreign direct investment recorded its highest level ever, with a 75% increase to $97 billion. The lion's share of that investment came from a single international project finance deal in Egypt by a sovereign investment fund in the United Arab Emirates. Taking that investment out, FDI flows to Africa were still up 12% ($64 billion.) Record FDI flows increased to developing Asia (ASEAN), up 10%, to $225 billion. Foreign Direct investment in China, however, continues to slump. "Over the past 15 years or so, we have always reported a gradual increase in its foreign direct investment [China] but over the past two years, we've seen two subsequent years of decline. Last year was down 29%," said Bolwijn. "If we look now at the comparison between the peak two years ago, it's like 40% down," he added. Bolwijn said it is not necessarily seeing companies pull out of China in terms of production capacity, but the tariffs are affecting their investment decisions. "So where international companies are looking to expand or create new manufacturing facilities, they now have to consider that there is a tariff and that from a trade cost perspective, they will look at locations that are most advantageous," he explained. FDI in South America saw an 18% decrease. India saw a modest 2% decrease. Latin America and the Caribbean saw a decrease of 12%, largely due to lower energy prices in 2024. Brazil, the region's largest FDI recipient, saw a decrease of 8%. "The pullback in FDI affects all developing countries and the relative opportunity they have to either enter into or expand participation in the global value chains and certainly in manufacturing sectors," Bolwijn said. "India relies on foreign direct investment to expand its manufacturing, training and production capacity." Structurally weak and vulnerable economies saw a marginal increase. Least developed countries saw an increase of 9% ($37 billion), or 2.4% of global FDI flows. Landlocked developing countries saw a 10% decrease, while small island developing states saw an increase of 11%. UNCTAD wrote the "most alarming" deterioration in FDI was in sectors aligned with the sustainable development goals. Investment in energy and gas supply fell by 28%, while project finance in renewable energy declined by 16%. "This trend comes at a time when the world can least afford to fall short. Reversing this negative trend in goals investment will demand not only more capital – both public and private – but also deeper alignment of investment flows with long-term sustainability goals," the report stated. Bowlijn said there is huge growth in semiconductor projects, including in the U.S. and India. Foreign direct investment in digital infrastructure is also increasing. "Digital economy investment is the fastest-growing segment around the world, including developing countries," said Bowlijn. "This includes data centers, which have seen big growth," he added. But while digital investment is the fastest-growing segment in FDI, these investments are asset-light. "So it may bring us less value in terms of FDI on the balance of payment, but it might bring us more projects and good development opportunities for developing countries," Bowlijn said.
