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Shanghai Daily reports:

FOREIGN direct investment in developing nations will drop by US$180 billion, or 31 percent, this year as a global recession prompts multinationals to cut spending on factories and mines, according to the World Bank.

The decline will put renewed pressure on emerging-market currencies, even as asset sales by fund managers slow, according to Mansoor Dailami, manager of international finance in the global development prospects group. Rallies in the South Korean won, Brazil's real and the Polish zloty have all faltered since the end of last year as companies, including Rio Tinto Group and Honda Motor Co, put expansion plans on hold.

"This is the most serious reaction so far to the global recession, the factory level," Dailami, who joined the bank in 1986, said in an interview in Washington. "Most emerging-market currencies are already under pressure and this tendency will continue. In 2008, it was a stocks and portfolio story. This year, it will be an FDI story."

The United Nations said in its 2009 outlook that FDI fell an estimated 10 percent in the developing world last year and will cool further this year.

FDI, which typically involves spending on plant and machinery or the purchase of a controlling interest, accounted for 38 percent of inflows into emerging markets in recent years, compared with 10 percent for investment by funds and 54 percent for loans, according to Morgan Stanley estimates.