There was unprecedented investment abroad by American, British and German companies, while the same three countries, along with Canada and Sweden, also reported record inward investment.
Investment in developing countries is also likely to have increased sharply again from 1994's $40bn.
A report published yesterday by the Organisation for Economic Co-operation and Development (OECD) argues that cheap labour is a secondary consideration for investment after access to markets and raw materials.
However, the OECD cautions that there could still be a backlash from workers who fear that their jobs might be put at risk by the increasing levels of foreign investment, which most governments have retained the power to control.
There are already some clear examples of the transfer of jobs across international borders as companies relocate factories. For instance, more than 2,000 small and medium sized German companies have invested in the Czech Republic in the last few years to take advantage of lower wages.
''Although firms have been investing abroad for well over a hundred years, never before have so many firms from so many industries invested in so many countries,'' the report says.
Mergers and acquisitions explained much of the surge, according to its latest Financial Market Trends. The pharmaceuticals and telecommunications industries dominated this activity, along with banking and electricity, gas and water utilities. The figures also include the reinvestment of earnings by existing overseas subsidiaries.
US investment abroad doubled last year to $97bn - higher than the world direct investment total less than a decade ago. Europe was the prime destination. Investment in the US also reached an all-time high of $75bn. Of this $65bn came from Europe and $47bn from Britain, Germany and Switzerland.
British firms invested $27bn in the US, which is ''possibly the most that has ever been invested by one country in another in a single year,'' according to the OECD. Inward investment into Britain was a record $30bn compared with outflows of $38bn.
Between 1985 and 1994, the US and UK were host to the biggest cumulative inflows of direct investment, at $402bn and $172bn respectively. They were followed, at some distance, by China and France.
Although most foreign direct investment continues to be made by and in the industrial countries, a growing number of developing countries are joining in.
Direct investment flows in OECD ($m)
1994 1995 1994 1995
US 49,448 74,701 49,370 96,897
UK 11,066 29,910 29,721 37,839
France 10,955 12,156 10,895 9,582
Germany 3,003 9,012 14,587 34,890
Japan 888 37 17,938 22,262
OECD total 138,517 189,788* 187,550 242890*
* based on incomplete data Source: OECDReuse content