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Investors learning to like Germany

Germany is now among the 20 most attractive countries for foreign investors. The UN's new World Investment Report also reveals world investment flows have returned to near their levels before the global financial crisis.

Global trade is growing strongly, and developing countries are gaining a growing share of foreign direct investment (FDI) , the Geneva-based United Nations Conference on Trade and Development says in its latest World Investment Report, released Tuesday.

The US and China are once again the biggest targets for foreign direct investment, while confidence seems to be returning to the countries at the center of the eurozone crisis. Germany, traditionally behind its neighbors as a target of foreign investment, entered the top 20 for the first time.

Unlike other forms of investment, FDI includes the construction of production sites, the establishment of branches and subsidiaries and the acquisition of corporate shares. It thus has great significance for the real economy as it usually results in job creation. In addition, it serves as a barometer of the global economy, alongside foreign trade.

US, China and Russia in the lead

The US held onto its position as the world's most attractive investment location with an increase in FDI by 27 billion dollars to nearly 187 billion.

China remained in second place, even though its $124-billion inflow was barely more than that of 2012. Behind it was Russia, with $79 billion, thanks largely to foreign investments in the oil sector.

Among EU countries is ninth-place Spain. After years struggling with chronic high unemployment and debt, its FDI inflow exploded by $26 billion to around 39 billion.

Another country hit hard by the eurozone crisis, Italy, went from essentially zero FDI in 2012 to $16.5 billion the following year, ranking 20th. In contrast, France and Britain experienced sharp declines in foreign investment.

Germany's economic boom was reflected in a doubling of its capital inflows to nearly 27 billion dollars. Germany thus climbed into 15th place in the FDI list, which has been published annually since 1991.

Worldwide, UNCTAD recorded a 9 percent increase in FDI to $1.45 trillion for 2013, coming very close to the level before the global financial crisis. In 2007 FDI was $1.49 trillion. For the next few years, the UN experts predict significant growth - up to $ 1.8 trillion in 2016.

Developing countries benefit

For the second consecutive year, more than half of all foreign investment - $778 billion - flowed to developing countries. That was up 7 percent, or around $50 billion, over 2012. Perhaps most visibly, World Cup host Brazil ranks fifth.

UN Secretary General Ban Ki Moon called this "an encouraging trend."

In light of this development, UNCTAD is calling for a comprehensive investment program to further strengthen developing countries. It wants $2.5 trillion per year to go into economic development by 2030, to build infrastructure such as roads, railways, ports, airports, power stations, water treatment and sanitation. But it says investments in agriculture, health and education systems are also necessary, as well as in coastal protection at a time of climate change.

The organization also sees great potential in the Transatlantic Trade and Investment Partnership, the proposed free trade agreement between the US and the European Union. These countries already account for about half of global FDI, a share that could rise significantly if TTIP, which would be the world's largest free trade zone, comes into effect.

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