By Pascal Fletcher

PRAIA (Reuters) - Sharp increases in foreign direct investment in at least three poor West African states could point to a surge in illegal proceeds from cocaine-trafficking swelling their economies, U.N. crime experts said on Tuesday.

A report by the United Nations Office on Drugs and Crime (UNODC) on "Drug Trafficking as a Security Threat in West Africa" singled out Guinea-Bissau, Gambia and Guinea as states which had seen a jump in foreign direct investment (FDI) and other inflows not clearly justified by economic performance.

These countries are part of a West African region which U.N. anti-narcotics experts say is under attack from powerful Colombian drug-trafficking cartels which are channelling at least 50 tonnes of cocaine each year, and possibly nearly double that, through the area on its way for sale in Europe.

The UNODC says the investment flows are a form of money laundering by criminals who are undermining the region's democratic governments and distorting its more vulnerable economies, which are mostly dependent on raw materials exports.

"Foreign direct investments in these (three) countries, unexplained so far by their economic performance, have exploded. Remittances have grown. Even the currencies of the region are being revalued," UNODC executive director Antonio Maria Costa said while presenting his agency's report in Praia, Cape Verde.

"We sense there is no causality that would justify such a rapid increase," he told a two-day conference of West African ministers aimed at forging a common strategy to confront the drug-trafficking threat.

"This is a form of money laundering, it comes in as foreign direct investment, it goes into rural real estate, purchase of land, hotels, tourism," Costa said.

In Guinea-Bissau, a small, poor former Portuguese colony whose main export is cashew nuts, the UNODC report said U.N. data showed that after years of little or no FDI, the country suddenly attracted $42 million of FDI in 2006, equal to nearly a sixth of GDP.

Police have made major seizures of cocaine in Guinea-Bissau in the last two years, and suspected Colombian and Venezuelan traffickers have been detained there, but later released.

The UNODC report said FDI inflows into Gambia also grew from around $40 million in the first years of the new millennium to $70 million in 2006. Much of this gain could be legitimate, the UNODC said, but a more detailed analysis could uncover anomalies linked to the drug trade.

The Gambian dalasi currency also saw a rapid appreciation in late 2007, apparently unexplained by local economic conditions.

THREAT TO STABILITY

For French-speaking Guinea, the world's leading exporter of the bauxite ore from which aluminium is made, the UNODC report said FDI inflows increased from just $10 million in 2000 to $108 million in 2006.

International mining companies have bauxite and alumina operations in Guinea and are eyeing big investment plans.

But at the same time the country, most of whose population live in poverty, is under scrutiny from international law enforcement agencies which believe it is a major cocaine trans-shipment and storage hub used by traffickers.

Costa said that even if these FDI inflows could be initially beneficial for the countries concerned, the likely illicit origin of some of them were a threat to their political and economic stability.

"Even if it looks like legitimate investment, in the end it undermines legitimate powers and institutions -- these people don't play by the rules," he said.

The UNODC report said the street value of the cocaine transiting the region, estimated to be worth $2 billion a year, often amply exceeded the respective total annual commodity export earnings of individual West African states.