- The Washington Times - Wednesday, September 18, 2002

Terrorism and recession have not dislodged the United States from its place as the leading destination for foreign investment.

The economic slowdown dampened foreign investment across the globe, but the United States fared no worse than the world as a whole, according to a U.N. report released yesterday and other statistics.

"The attraction of the United States as an [investment] destination is still strong, and the country most likely will remain the leading recipient in the foreseeable future," said Karl Sauvant, an economist with the Conference on Trade and Development, the United Nations' main economic arm.

In 2000, foreign companies sank $300 billion into the United States by acquiring companies or building new facilities, spending commonly referred to as foreign direct investment. The number dropped sharply to $124 billion in 2001, but the United States was still the top investment destination.

The United States fared no worse than the world as a whole. Overall, cross-border investment sank from $1.49 trillion in 2000 to $745 billion last year, according to the United Nations.

The U.N. report surveyed major investors and concluded that most were "unaffected by the events of September 11," even though they are slowing their pace of investment, especially in the United States and other rich countries because of the economic slowdown.

"These companies have less money to spend on anything worldwide and in the United States," said Nancy McLernon, deputy director of the Organization for International Investment, a group representing major foreign companies in Washington.

She added that the group's member companies, who are predominantly Europe-based, were as shocked as any other by the terror attacks. But their investment plans, though scaled back, remain heavily focused on the United States.

A much slower merger-and-acquisition market a key avenue for international transactions reinforced the trend toward a slower pace of investment in the United States, according to Mergerstat, which monitors the transactions.

After a record-setting 2000, the value of purchases by foreign companies in the United States slowed to $92.4 billion in 2001. By early this month, foreign acquisitions hit $46.1 billion for 2002, a rate 30 percent slower than last year.

The U.N. survey found that investment trends varied substantially by region.

China, for example, saw foreign investment increase by 15 percent, to $46.8 billion in 2001, largely on the strength of its new membership in the World Trade Organization. By contrast, economic turbulence in Brazil and especially Argentina dragged down new spending in those countries.

A report issued last week by a World Bank agency that insures overseas investments, concludes that the flow of money into most poor countries will not rebound as quickly as it will to the United States.

"Uncertainty continues to be a prevailing characteristic of the world investment environment, and the return of previous levels of flows into developing countries may take time," said Motomichi Ikawa, executive vice president of the bank's Multilateral Investment Guarantee Agency.

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