GENEVA — Foreign direct investment in the textile, apparel and leather goods industries worldwide, which plunged last year, is expected to continue its downward trend in 2009, fueled in large part by the sharp collapse in exports and contraction in consumer demand in major markets, a United Nations report said Wednesday.
This story first appeared in the May 21, 2009 issue of WWD. Subscribe Today.
In 2008, global cross-border mergers and acquisition sales in textiles, apparel and leather goods totaled only $2.2 billion, a big drop from $12.9 billion posted a year earlier, the report notes.
Looking at the overall trend, the report by the U.N. Conference on Trade & Development, titled “Assessing the Impact,” under its baseline scenario expects foreign direct investment not to pick up until 2011 and the recession to last until the first half of 2010.
Fabrice Hatem, UNCTAD investment analyst and lead author of the report, said global foreign direct investment declined by about 15 percent in 2008 to $1.65 trillion. Hatem said in an interview that the huge drops in exports posted by major apparel exporting nations such as China, Bangladesh and Mauritius indicate the falloff in investments will continue in 2009 and noted preliminary data shows steep declines in the first quarter.
The report notes that FDI to emerging countries “will slow down more markedly than has been observed to date.” It highlights that risk aversion in view of the weak state of the world economy is also a factor.
“Companies’ investment plans may also be scaled back due to a high level of perceived risks and uncertainties in order to develop resilience,” the report said. The study concludes that the financial crisis and the volatility in exchange rates have also had a negative effect on investment expenditures.