KUALA LUMPUR: International mergers and acquisitions (M&A) are forecast to decline by 56% in 2009 compared to 2008, the largest year-on-year decline since 1995, said the Organisation for Economic Cooperation and Development (OECD).

This estimate is based on OECD analysis of data for international M&A activity up to Nov 26, 2009.

The OECD said the fall was largely due to the 60% decline in value of cross-border M&A by firms based in the OECD area, from over US$1 trillion (RM3.39 trillion) in 2008 to US$454 billion in 2009.

However, it was also due to the first sharp declines in M&A activity into and from major emerging economies as international M&A activity by firms based in Brazil, China, India, Indonesia, Russia, and South Africa fell by 62% to US$46 billion in 2009 from US$121 billion in 2008, it said on its website Dec 8.

M&A activity into these countries is forecast to decline by almost 40% this year to just over US$80 billion from just under US$140 billlion in 2008.

Speaking at the opening of the OECD Global Forum on Investment in Paris, OECD Secretary-General Angel Gurría said that governments needed to do more to promote business investment.

“Against the backdrop of a fragile global economy and sharp declines in international investment activity that have now spread to the emerging economies, the international investment policy community cannot afford to relax.

“Investment protectionism poses a grave risk to recovery by further reducing international investment flows just at a time when these are most needed," he said.

He said global challenges also required investment on a scale that far exceeded available public resources, adding that business investment was an essential part of the solution.

These latest international investment estimates suggest that total foreign direct investment into the 30 OECD countries will fall to US$600 billion in 2009 from a 2008 total of US$1.02 trillion, said the OECD.