Inward investment into Ireland fell sharply from $26 billion (€21.6 billion) to $9.1 billion in 2004, according to a United Nations study released yesterday.
However, foreign direct investment in Asia reached record levels last year, surging to $148 billion, and a further increase is expected this year.
One of the major reasons for the falling figures in countries like Ireland is that US companies are increasingly repaying intra-company loans back to their parent companies.
Overall investment in the EU plummeted by 38 per cent. Ireland is also suffering because many companies are shifting investments to low-cost economies in Asia and eastern Europe.
Foreign Direct Investment (FDI) flows into China rose from $54 billion in 2003 to a new high of $61 billion in 2004, making it the third-largest investment destination in the world after the US ($96 billion) and the UK ($78 billion), according to the UN Conference on Trade and Development (Unctad) in its annual world investment report.
China and Hong Kong accounted for two-thirds of all foreign investment coming into the Asia region. India, Australia, South Korea, Vietnam and several other countries also saw record inflows last year.
A big upward revision in US inflows for 2003, originally estimated at just $30 billion and now put at $57 billion, means that, contrary to earlier reports, the US has never ceded its lead to China as an investment destination.
But much of the jump in FDI into the US and UK last year was accounted for by increased merger and acquisitions activity, which is highly volatile, rather than the "greenfield" investments that predominate in Asia.
Increased investment in the UK and US last year also contrasted with a steep drop in overall FDI flows to industrialised countries, which fell 14 per cent to $380 billion.
Instead, dynamic FDI inflows to developing countries, up 40 per cent last year to $233 billion, were the driving force behind a modest 2 per cent increase in global FDI.
Of the $648 billion world total, a third is now accounted for by developing economies. Unctad says it expects a continuing rise in FDI flows to poorer nations, fuelled by the growing demand from China and India for raw materials.
