capital market
By Kulamarva Balakrishna
Vienna,Wednesday,January 9,2008:Cash is awash
all over globe as never before.That is investment
funds.But how much of this flood is really productive
how much is waste,how much is invested on realizing
superstitious fundamentalist terrorist goals may need
to be accounted by more transparent methods in
detail by the United Nations and agencies as well as
powers with political will to make the global system of
peace keeping under transformation into global government.
It is long overdue, the overhaul of the United Nations,
what the United States of America´s Orwellian double
speak leaders of Ronald Reagan and George Bush
hues deride as =obscenity=, as they go fondling the
friendly hands of the heads of single vote democracies
promoting terrorism.(In fact the only region that lost
last year capital flow by 12 percent was the one identified
as exporting terror).Reforming the United Nations as the
effective world government and then give it leadership
would be on top of the historic agenda of the incoming
U.S. President,probably Hilary Clinton´s historic
chance.
Here is the gist from United Nations Conference for
Trade and Development,which monitors growth and
investment cash movement globally to report annually.
According to UNCTAD the global foreign direct
investment (FDI) movement,mis called,inflows because
one region´s inflow becomes another region´s out
flow,grew in 2007 to an estimated 1.5 trillion dollars,
surpassing the previous record set in the pre-11/9
terrorism year 2000.UNCTAD experts reviewing
year-end figures, said FDI continued to rise in
all groups of economies, developed countries,
developing economies and former Soviet influenced
South-East Europe and the Commonwealth of
Independent States (CIS).It reflects high-growth
propensities of transnational corporations (TNCs),
meaning capitalism,which is being found inevitable
even by hard core dead Marxists living in corners
like India,where Marxist left ruled West Bengal
Chief Minister Buddhadeb Bhattacharjee and his
immediate predecessor and mentor Jyoti Basu
acknowledged earlier last week,that Capital is
unavoidable almost nineteen years after formal
death of communism with the pulling down of
the Berlin Wall.
Experts noted strong economic performance in
many parts of the world. Increased corporate
profits and an abundance of cash boosted the
value of the cross-border mergers and acquisitions
(M&As) that made up a large part of cash movements.
The value of M&As in the second half of the year
was less.A financial and credit crisis had begun.
However,it had not affected the overall volume of
cash movements,the economists said.A slow down
in the United States economy,the depreciation of
the dollar may have helped to maintain high levels
capital flows into the country,in particular from
countries with appreciating currencies,like Europe
and developing Asia.
The sub-prime loan problems have impinged
on the lending capabilities of banks, new capital
injections from various funds, including sovereign
wealth funds,have helped overcome them.This is
the fourth year in continuation, fund flows to
developed countries registered growth,reaching
a trillion dollars.Flows were particularly buoyant
in the United Kingdom,France,and the Netherlands.
The United States was the largest single capital
recipient.The European Union (EU) continued to
be the largest host region, attracting almost 40%
of the total inflows.
The current risks to the world economy may have
implications for inflows to and from developed
countries next year,experts said.High and volatile
commodity prices may cause inflation, and a
tightening of financial market conditions.The
increasing chances of a recession in the
United States and uncertainties of global
repercussions may make investors more cautious.
Inflows to developing countries and economies
in transition (the latter comprising South-East
Europe and CIS) rose by 16% and 41%,
reaching new record levels, economists said.
African inflows remained relatively strong,reaching
36 billion dollars,supported by booming
commodity markets.Mergers and acquisitions
in the extraction and related service industries
remained a significant source of capital, new
inbound M&A deals also took place in the
banking industry. Egypt, Morocco, and South
Africa were the main beneficiaries.
Inflows to Latin America and the Caribbean,
rose by 50% to a record level of 126 billion
dollars. Significant increases were recorded
especially Brazil,Chile and Mexico, where
inflows doubled.This strong growth was
driven by greenfield investments (new
investments and expansion) rather than
merger and acquisitions.This pattern was
the result of strong regional economic
growth and increased corporate profits
on the back of high commodity prices.
Resource-based manufacturing explained
a large part of the gain by Brazil.
South, East and South-East Asia, and
Oceania maintained their upward trend.A
new high of 224 billion dollars,an increase
of 12% over the past year.More than half
of all cash to developing countries came
to these economies.At the subregional
level, there was a further shift towards
South and South-East Asia,although
China and Hong Kong remained the two
largest aggregate recipients in the region.
West Asia,recorded an overall decline in
inflows by 12%.But Turkey and oil-rich Gulf
States continued to get the most even the
declining capital.Geopolitical uncertainty
is to blame for the investor disinterest.
South-East Europe and the CIS, or transition
economies, expanded by 41%, to a new make
a record 98 billion dollars. This was the seventh
year of uninterrupted growth of the region.
Inflows almost doubled to the the Russian
Federation. While resource-rich countries,like
Kazakhstan got more than in 2006, it was
the privatization of state-owned enterprises
that attracted cash.Tightening Russian natural
resource regulations and by disputes over
environmental protection and extraction costs
held inflows in check.
Despite some unfavorable economic
projections for 2008 and potential tightening
of rules for foreign investment in natural
resources and related industries, high
demand for natural resources and, as
a result, the opening up of new potentially
profitable opportunities in the primary sector
as in energy are likely to boost cash flow into
the extractive industries.At the same time,
continuing global external imbalances, sharp
exchange-rate fluctuations, rising interest rates,
and inflationary pressures,as well as high
and volatile commodity prices,pose risks
that may cool global cash movements(end)
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