UN World Investment Report 2014

Asia as Top FDI Destination

June 30, 2014

Asia Briefing

This Tuesday, the United Nations Conference on Trade and Development (UNCTAD) released the UN World Investment Report 2014, illustrating positive global investment trends and conditions. The report states that global foreign direct investment (FDI) has returned to a trajectory of growth after a decline in 2012. In particular, Asia continues to thrive as the top destination for FDI, accounting for almost 30 percent of the global FDI inflows.

FDI Flows in Asia

According to the report, the investment climate in Asia appears to be optimistic. All parts of Asia registered increases in FDI flow except for West Asia, whose FDI declined for the fifth consecutive year as a result of instability in many parts of the region. The Association of Southeast Asian Nations (ASEAN) performed outstandingly well in terms of FDI flow, with a new high of US$125 billion in 2013, a seven percent  increase from 2012. East Asia also saw a significant rise in FDI inflow, which the report attributed to growing inflows in China, the second largest FDI recipient globally after the United States.

RELATED: ASEAN FDI Flows at a Record High

Hong Kong, a popular investment destination for foreign enterprises interested in operating in mainland China or other parts of Asia, registered the largest rise of FDI inflow among the top 20 recipients, from US$51 billion in 2012 to US$79 billion in 2013.

Aggregate inflows to multilateral economic integration initiatives that involve Asian countries have also registered a large volume increase in FDI over previous years. For example, the total flow of FDI to member nations of the Asia-Pacific Economic Cooperation (APEC) forum rose from an average of US$560 billion prior to the 2008 economic crisis to US$789 billion in 2013. On the other hand, FDI flow of the G20 fell from an average of US$878 billion pre-crisis to US$791 billion in 2013. Currently, the share of total FDI flow accounted to by APEC is on par with the G20.

Emerging national economies, namely Brazil, Russia, India, China and South Africa, also registered a significant increase in their share of FDI flow from 11 percent to 21 percent, while the North American Free Trade Agreement saw a slight increase from 19 percent to 20 percent pre- and post-financial crisis respectively.

RELATED: 2013 Changes in Indian FDI Policy

Among the three ambitious mega-regional economic initiatives, the negotiating nations of the Trans-Pacific Partnership (organized by the United States and countries in the Asia Pacific region) and the Regional Comprehensive Economic Partnership (organized by the ten ASEAN members) all reported a positive trend in aggregate FDI flows, while the Transatlantic Trade and Investment Partnership (proposed between the United States and the European Union) saw aggregate FDI inflows drop from US$838 billion pre-financial crisis to US$434 billion in 2013, hinting that Asia is gradually replacing Europe as the next top spot for FDI.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.

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Tags: asia, emerging markets, fdi, india, indian policy, investment, world market
Posted in Asia, Consulting