Asia Tops the World and China Ranks Second Globally in FDI Inflows

Asia continues to lead the world in foreign direct investment (FDI), accounting for nearly 30 percent of global FDI inflows, UNCTAD’s World Investment Report 20141 reveals.

Total inflows to developing Asia (excluding West Asia) amounted to US$382 billion in 2013, 4 percent higher than in 2012.

FDI inflows to East Asia rose by 3 percent to $221 billion in 2013.

With inflows at $124 billion, China again ranked second in the world and narrowed the gap with the United States, the country with the largest global inflows.

During 2013, FDI outflows increased by 15 percent, to an estimated $101 billion.

Chinese companies made a number of mega-deals, such as the $15 billion CNOOC-Nexen deal in Canada and the $5 billion Shuanghui-Smithfield deal in the United States.

Inflows to the Republic of Korea reached $12 billion, the highest level since the mid-2000s, and those to Taiwan, Province of China rose to $4 billion.

Hong Kong – the region's other high-income economy and the second largest FDI recipient in East Asia – experienced only 2 percent growth in FDI inflows to $77 billion.

“It is encouraging to see that Hong Kong continues to be one of the leaders in global and regional FDI," says Simon Galpin, the Director-General of Investment Promotion at InvestHK.

"It shows that our city continues to be an important FDI conduit given its enduring advantages including low and stable tax, free market access and easy business environment.”

Slower growth in South-East Asia

Inflows to the Association of Southeast Asian Nations (ASEAN) countries rose by 7 percent in 2013, to $125 billion.

The rapid growth of FDI inflows to the regional grouping, from $47 billion in 2009 to $118 billion in 2012, has now slowed, the report shows.

In Singapore, the largest FDI recipient in South-East Asia, a number of mega-deals took place in 2013, driving FDI inflows to a new record of $64 billion.

With inflows remaining at around $19 billion in the three years up to 2013, Indonesia's performance in attracting FDI has been stable.

In Malaysia, inflows increased by 22 percent to $12 billion. In Thailand, inflows grew to $13 billion; however, many FDI projects there were shelved due to political instability.

FDI performance in ASEAN's low-income economies varied: while inflows to Myanmar increased by 16 percent to $2.6 billion, those to Cambodia, the Lao People’s Democratic Republic and Viet Nam remained at almost the same level.

New opportunities facing South Asia

In 2013, FDI inflows to South Asia rose by 10 percent to $36 billion.

The subregion's total amount of cross-border M&A sales surged by 70 percent, while that of recorded greenfield investments dropped by 38 percent.

Outflows from the region slid by nearly three-fourths, to only $2 billion, owing to the prolonged decrease of outflows from India.

India experienced a 17 percent increase in FDI inflows in 2013, to $28 billion, but macroeconomic uncertainties remain a major concern for investors.

The opening up of multi-brand retail in 2012 has not generated the results that were expected.

Bangladesh continued to experience growth in FDI inflows, with manufacturing accounting for a major part of inflows and contributing significantly to employment creation.

The garment industry has been the major beneficiary, but continues to face serious challenges in labour standards and skill development.

In Pakistan, inflows surged to $1.3 billion, and foreign investment is set to grow in industries such as telecommunications.

East Asia is likely to enjoy an increase of FDI inflows in the near future as economic growth has remained robust and new liberalization measures have been introduced.

The performance of South-East Asia is expected to improve as well, says the report.

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