FDI in Israel Will Decline 70% This Year, Predicts UN

Foreign direct investment throughout the world will be down $500 billion this year, to $1.2 trillion, due to the global economic crisis, stated the United Nations Conference on Trade and Development in its annual report on global financial investments, mergers and acquisitions.

Foreign direct investment in Israel, which was at a six-year low in 2008, will continue to tumble, states the report. Worldwide foreign investment will begin to recover in 2010, hitting an expected $1.4 trillion, and in 2011 it is expected to be $1.8 trillion - still less than the record high of $1.97 trillion in 2007.

Initial data for 2009 was collected from 96 countries. In Israel, figures were compiled by the School of Business Administration and the College of Management in Tel Aviv. The report shows how the global economic crisis altered foreign investment around the world.

Investment in emerging economies rose to 43% of all foreign direct investment in 2008, while investment in developed economies declined to 29%. Foreign direct investment in Africa grew to $88 billion, thanks to a 63% jump in foreign investment in West Africa.

Foreign investment in Europe fell by 48%, to $287 billion, while investment in the U.S. rose by 17%, to $316 billion.

Foreign investment in Israel totaled $9.6 billion in 2008, the lowest figure since 2002. In 2009 foreign investment in Israel is expected to plummet another 70%, to just $2.5 billion.

Some recovery is expected in 2010 and 2011, with a forecasted $4.5 billion. The reason for the decline this year is that most international companies are currently investing in industries in which Israel has little presence, such as food, energy and mining.

Prof. Adi Armoni, who heads the School of Business at the College of Management, says the UNCTAD report bears little good news for Israel.

Long-term damage to foreign investments in Israel will harm workplaces, job security, tax revenues and ultimately the state budget, explained Armoni, who suggested increasing investment in energy and advanced agriculture as possible solutions.