UNCTAD sees increased FDI in extractive industries

GENEVA (Reuters) - Mining and energy industries are likely to see increased foreign direct investment (FDI) this year, the United Nations Conference on Trade and Development (UNCTAD) said on Tuesday.

But global FDI flows overall would be constrained by economic imbalances, worsening financial market conditions and other risks to the world economy, it said in a report.

UNCTAD noted the unfavourable economic outlook for 2008 and a potential tightening of rules for foreign investment in natural resources and related industries, but added:

"High demand for natural resources around the world -- and as a result, the opening up of new potentially profitable opportunities in the primary sector -- are likely to boost FDI in the extractive industries."

Masataka Fujita, head of UNCTAD's investment trends section told Reuters the forecast for extractive industries FDI was global, but given the distribution of resources it applied particularly to developing countries.

He said UNCTAD does not provide specific forecasts of FDI.

UNCTAD said global FDI inflows grew in 2007 to a record $1.5 trillion, increasing in all three groups of economies -- developed countries, developing countries and the transition countries of Southeast Europe and the former Soviet Union.

"The financial and credit crisis that began in the latter half of 2007 has not affected the overall volume of FDI inflows," the report said.

"Even with a slowdown of the United States economy, the depreciation of the US dollar may have helped to maintain high levels of FDI flows into the country, in particular from countries with appreciating currencies, such as Europe and developing Asia," it continued.