By Ben Richardson BBC News Online business reporter

Smart, cheap workforces are helping nations redefine investment trends

The days when foreign investment was the sole preserve of firms from developed countries are over, a report has found.

According to the United Nations Conference on Trade and Development (Unctad), foreign direct investment (FDI) during the past 15 years has surged - with more and more firms in developing nations flexing their muscles and investing overseas.

The rate of FDI growth by companies in many developing nations has now outstripped that of the so-called more sophisticated markets, Unctad says in data released ahead of its September World Investment Report.

Unctad forecasts that this will continue in coming years, as improving economic conditions provide many companies with the cash needed to expand.

Reverse flow

FDI from richer countries has seen a sharp decline as an economic slowdown dented corporate earnings and tumbling share prices made it difficult for many firms to raise capital.

"There has been much talk about the emerging new geography of international trade, referring to the growing importance of developing countries," Unctad said in the report, released on Thursday.

"Similar patterns are also emerging in international investment flows, suggesting the possible emergence of a new geography of international investment relations."

According to Unctad's calculations, outward FDI from developing nations in 2003 accounted for over one-tenth of total world stock, or about $900bn (£492bn).

"Firms from some developing economies, such as Malaysia, the Republic of Korea and Singapore, already have an established track record as outward investors," Unctad said.

It added that Chile, Mexico and South Africa have "become players recently", and "firms in Brazil, China and India are about to take off".

Beaten track

Many of these countries have long been favoured destinations for companies from the developed world seeking cheap labour costs and proximity to raw materials.

Ironically, the things that made many countries so attractive and successful in the first place, are now driving their firms to expand abroad.

"In a globalising world economy, they need a portfolio of locational assets in order to be competitive internationally," Unctad said. "Their investments span all sectors and country groups, and involve complex as well as simple industries."

All aboard the emerging market investment bandwagon!

Indian drugmaker Ranbaxy has been particularly vocal in recent months, with chief executive Brian Tempest outlining plans to buy up a US rival.

Oil and gas company Lukoil, meanwhile, is said to be one of a number of Russian companies sniffing around targets in both Europe and the US.

The UK, for its part, has seen a number of foreign companies and investors move in from further afield during recent years.

Last month, a Thai businessman tried to buy almost a third of Liverpool football club, while Russian billionaire Roman Abramovich had earlier snapped up the London squad Chelsea.

On a smaller scale, and a few years earlier, Leeds busmaker Optare was bought by Hungary's Nabi.

The company's buses now ferry passengers to their cars at airports including Heathrow and Stanstead, as well as through London's congested city streets.

Inside view

One man who has seen how the market place has changed in recent years is Bahman Jahanshahi.

He runs the investment banking operation of Emerging Markets Group (EMG), a company based in Mayfair that provides advice and helps arrange financing for developing nation firms looking to expand abroad.

"I have clients come to me and say there are no opportunities for expansion inside the country, so they want to go outside," Mr Jahanshahi explains.

"It wasn't like this five years ago; it wasn't like this even three years ago."

Mr Jahanshahi said that one of EMG's main focuses is on India, a country he identified as being well-placed to expand its role in global corporate investment.

"It is a very sophisticated market, with its technological abilities and ideas. Indian companies are usually looking to add value somewhere, either in terms of raw materials, trade technologies or outsourcing.

"The country is huge and the opportunity for expansion is going to be very large as well."