UNITED NATIONS, Sept 6: Investment in foreign markets fell to $651 billion in 2002, a drop blamed on the slow global economy, a UN study said on Friday.

More than half the world’s countries saw investment decline, with the United States and Britain hit hardest, the UN Conference on Trade and Development (UNCTAD said in its annual World Investment Report.

“The main factor behind the decline was slow economic growth in most parts of the world and dim prospects for recovery, at least in the short term,” the study said. It also cited a drop in merger values.

Economists regard foreign direct investment as an important factor in boosting a country’s growth.

China is now the largest recipient of foreign investment, UNCTAD said, but when compared with countries’ gross domestic product, the list is topped for the second year running by Belgium and Luxembourg.

Oil-rich Angola jumped into second place ahead of Hong Kong. Ireland was fourth and Malta fifth. The study said UNCTAD expects similar low levels of investment in 2003, but it hopes to see a rebound in 2004.

Investment declines in the United States and Britain accounted for more than half of the total loss among the 108 countries that recorded a drop in 2002, UNCTAD said. Developed countries saw foreign investment fall by 23 per cent.

The drop in Africa was 55 per cent, but that came after a record year of investment in 2001, the study said. Investment declined for the third straight year in Latin America and the Caribbean - by 33 per cent. Asia recorded only a minimal decline because of the record investment levels in China.

UNCTAD said most of the fall in investment was in manufacturing and service industries. Investment continued to rise in the mining, quarrying and petroleum industries.