Geneva, 26 July 2011 - Developing Asia (excluding West Asia) set new records for FDI inflows and outflowsin 2010, UNCTAD´s World Investment Report 2011(1) (WIR11) announces. The report, subtitled"Non-equity modes of international production and development", was released today.In 2010, FDI inflows to South, East, and South-East Asia rose 24 per cent to $300 billion, nearly one fourthof the global total, the annual report says. However, the performance of the three subregions and theirmajor economies varied significantly (figure 1): FDI to the member countries of the Association of Southeast Asian Nations more than doubled, reaching $79 billion in 2010. Proactive policy efforts at the country level contributed to the good performance of the group, and seem likely to continue to do so, the report says. Some ASEAN countries, for example, Indonesia and Viet Nam, have gained ground as low-cost production locations, especially for low-end manufacturing, while the region´s least developed countries (the Lao People´s Democratic Republic and Cambodia) received increasing inflows, particularly from neighbouring countries. FDI to East Asia rose to $188 billion, thanks to double-digit growth in inflows to China and Hong Kong (China). Inflows to China climbed by 11 per cent to $106 billion. China continues to experience rising wages and production costs, so that the trend in widespread offshoring of labour- intensive manufacturing to the country has slowed and FDI inflows are shifting towards high- technology industries and services. FDI to South Asia declined to $32 billion, reflecting a 31 per cent slide in inflows to India and a 14 per cent drop in flows to Pakistan. By contrast, inflows to Bangladesh, a rising low-cost production location, increased by nearly 30 per cent to $913 million.FDI outflows from developing Asia grew by 20 per cent to about $230 billion in 2010, driven by increasedinvestment coming out of China, Hong Kong (China), Malaysia, the Republic of Korea, Singapore and TaiwanProvince of China (figure 1). Outflows from the region´s two largest FDI sources - Hong Kong (China) andChina - increased by more than $10 billion each and reached historic highs of $76 billion and $68 billion,respectively. In 2010, China exceeded Japan for the first time in outward FDI, as well as in gross domesticproduct.The region´s share in global FDI outflows has jumped from below 10 per cent before 2008 to around 17 percent over the past two years. Companies from developing Asia have been actively taking over companies inthe developed world, including through a number of very large acquisitions (table 1). However, they arefacing increasing political obstacles, as illustrated by the failed attempts by Huawei (China) to take over3Com and 3Leaf in the United States.The significance of electronics in outward FDI from developing Asia reflects the international competitivenessof Asian companies in this industry, particularly the contract manufacturers, such as Foxconn (TaiwanProvince of China) and Flextronics (Singapore). They have become a dominant force at the production stageof the global electronics value chain (see UNCTAD/PRESS/PR/2011/033).Both inflows to and outflows from developing Asia are expected to continue to grow, the report predicts.Countries in the region have made considerable progress in their regional economic integration efforts. Thereport says that this will translate into a more favourable investment climate for intraregional FDI
Foreign direct investment (FDI) in the region of Asia and Oceania broke records in 2004, according toUNCTAD´s World Investment Report 2005: Transnational Corporations and the Internationalization ofR&D (1). The report, released today, says the region received US$ 148 billion in FDI - US$ 46 billion morethan in 2003 - making it the top recipient among developing regions. Rapid economic growth, an improvedpolicy environment, and increasing strategic commitments to Asian markets by transnational corporations(TNCs) contributed to the surge.China was again the largest recipient of FDI inflows, not only among all countries in the region (fig. 1) butamong developing countries worldwide. FDI in China attained another record of US$ 60.6 billion. Flows toHong Kong, China, amounted to US$ 34 billion, a 150% increase and the highest investment growth rateamong the region´s economies. Together, China and Hong Kong accounted for two thirds of all FDI in thispart of the world.Among the various subregions of Asia, East Asia remained the preferred target last year, with a 46% gain inFDI inflows; in terms of FDI growth, West Asia performed the best. Foreign investment there was up by51%, to US$ 9.8 billion. This was due to high oil prices, efforts to diversify, and a series of liberalizationmeasures aimed at improving the investment climate, the UNCTAD report states. South-East Asia(comprising the 10 member States of the Association of South-East Asian Nations and Timor-Leste) saw afurther rise in inflows - from US$ 17 billion in 2003 to US$ 26 billion in 2004 - the steepest increase sincethe 1997-1998 financial crisis. In fact, the climb in investment there shows that the impact of the crisis onFDI inflows is now a thing of the past, the report suggests. FDI in South Asia increased by 31% to US$ 7billion because of higher flows to India, Pakistan and Bangladesh. By contrast, Oceania (the Pacific islandeconomies) suffered a 54% decline in FDI last year, to US$ 67 million.While greenfield investment remained the most important mode of FDI in the region, cross-border mergersand acquisitions (M&As) continued to increase, particularly in the services sector. This was due largely to arise in M&A transactions in East Asia, UNCTAD says. FDI in research and development (R&D), a relativelynew area of growth for transnational corporations (TNCs) in developing countries, has expanded rapidly indeveloping Asia in recent years (see UNCTAD/PRESS/2005/033). Some countries have become importantdestinations for FDI in R&D, especially China and India, both of which have large pools of technically well-qualified workers. In China, the number of foreign affiliate R&D centres climbed to 700 in 2004; in India,more than 100 TNCs have established R&D facilities. In addition, some relatively small-sized economieshave attracted R&D by TNCs. Thailand, for example, was recently selected as the site of Toyota´s fourthoverseas R&D centre.Outward FDI from Asia and Oceania quadrupled to US$ 69 billion last year, driven particularly by flows ofUS$ 40 billion from Hong Kong, China, the report notes. Outflows from the Republic of Korea and Singaporealso rose sharply, as did those from China and India. Intraregional FDI has expanded considerably in recentyears, encouraged by regional integration efforts, the expansion of production networks and the relocationof production to lower-cost areas. Of UNCTAD´s list of top 50 developing-country TNCs, 39 are based inAsia, and four of those 39 rank among the 100 largest TNCs worldwide (see fig. 2 for the top five, andUNCTAD/PRESS/PR/2005/039). Ranked 16th globally in terms of foreign assets, Hutchison Whampoa (HongKong, China) is the region´s leading TNC. Some Chinese, Indian and Korean firms in the information andcommunications technology field have been actively expanding their R&D activities abroad.As the policy environment for FDI continues to improve within the region, prospects for both inward andoutward FDI remain promising, the report says. FDI to China is expected to rise yet again this year, led byflows to the services sector. Flows to South-East Asia are also set to surge, for the third consecutive year,with increases expected in South Asia (led by India) as well. In West Asia, the upward trend in FDI inflowsshould persist through 2005, notably in oil- and gas-related industries in response to increasing worlddemand. The report predicts a recovery by the Oceania subregion in FDI flows this year. And as TNCsconstantly seek to improve their competitiveness by reducing costs in highly knowledge-intensive activities,the rapid expansion of R&D by TNCs in developing Asia will most probably continue as well, the reportposits.Chinese, Indian and Korean firms will account for an increasing proportion of an expected continued growthin FDI outflows from the region during 2005, including through large-scale overseas mergers andacquisitions, UNCTAD foresees. China is set to become a major foreign investor in Latin America, driven byits growing demand for natural resources and commodities with which to fuel its rapid economic growth.Chinese investments in developed countries will also mount, as exemplified by Lenovo (China)´s takeover of
IBM´s PC business. Because of the huge amount of "Chinese dollars" still rapidly accumulating, as well asother developments, China is seeking to acquire corporate equities in the United States rather thancontinuing to serve merely as a large holder of US Treasury bonds. This trend has been illustrated by recentChinese corporate bids for companies in the United States.