The Merco Press says that the British Virgin Islands received more foreign direct investment (FDI) last year than the major emerging economies of India and Brazil combined, a United Nations survey saidlast month. Brazil and India got 63 billion and 28 billion respectively.
The BVI, a tax haven, has jumped up the league table of top investment destinations in the past five years. It welcomed 92 billion dollars of foreign cash in 2013, according to preliminary figures compiled by the U.N. trade and economy think-tank UNCTAD.
That was the fourth biggest haul of investment globally. The world’s biggest economy, United States, attracted 159 billion. China, the world’s second biggest economy, got 127 billion, while major oil and metals producer Russia took in just 2 billion more than the British Virgin Islands.
For most countries, foreign direct investment mainly consists of companies spending on cross-border corporate acquisitions and new overseas projects. But for the British Virgin Islands, most of the money is transferred quickly in and out of the country or cash moved through the treasury accounts of large firms, which UNCTAD terms “transnational corporations” or TNCs.
“In the British Virgin Islands there are some financial companies that perform the role of treasuries of the TNCs, as a kind of profit unit or profit centre,” said James Zhan, director of UNCTAD’s investment and enterprise division.
“The TNCs’ revenues basically flow from their foreign affiliates in countries with higher tax rates to there,” he told a news briefing.
The islands’ annual inflow of foreign investment was 40% up from a year ago and continues a trend that took off after the economic crisis struck and governments began cracking down on tax avoidance.