ASIA

EVOLUTIE 2016-2021
 T H E M O D E R AT E R E C O V E RY
GLOBAL FDI FLOWS EXPECTED
IN 2017REFLECTS
A C C E L E R AT I N G E C O N O M I C
GROWTH IN ALL MAJOR
REGIONS.

• FDI inflows to developing Asia are

expected to increase by 15 per cent in
2017, to $515 billion, as an improved
economic outlook in major Asian
economies is likely to boost investor
confidence. In major recipients such as
China, India and Indonesia, renewed
policy efforts to attract FDI could
contribute to an increase of inflows in
2017
• In South and South-East Asia, several countries are expected to further strengthen their
position in regional production networks. In West Asia, FDI is expected to remain flat, with
the positive effect of recovering oil prices offset by political and geopolitical uncertainty.
• The economic resilience of developing Asia and emerging economies in general, together with
improving growth forecasts for major developed economies, underpin MNEs’ optimism . In
the survey of top executives carried out in the first months of 2017, the economic situation in
developing Asia ranked as the top macroeconomic factor influencing FDI, ahead of the
situation in the United States. Among corporate factors, technological change and the digital
economy are considered by most respondents as positive factors fostering crossborder
investments, although cyber threats and data security are rising concerns among top
executives. Similarly, as commodity prices started to recover, they are now considered a
positive influence.
 DEVELOPING
ASIA
• The fall in incoming investments was driven by a decline in FDI inflow in
Hong Kong from $175 billion in 2015 to $92 billion in 2016. Other Asian
markets that saw sharp declines in incoming FDI were Thailand and
Singapore. India registered a 5 percent decline in FDI inflows to $42 billion.
• On the other hand, FDI inflows into key economies such as China, Australia
and South Korea showed positive growth. Inflows into China, for example,
increased by 2.3 percent to a new record of $139 billion. South Korea saw a
rebound in FDI inflows, with an increase from $4 billion to $9.4 billion.
Chinese infrastructure investment in Pakistan was largely responsible for an
82 percent increase in foreign investment in the country to an estimated $1.6
billion.
• In all, five Asian economies—China ($139 billion), Hong Kong ($92
billion), Singapore ($50 billion), Australia ($44 billion) and India ($42
billion)—ranked among the 10 largest FDI recipients globally. The U.S. led
the list with $385 billion in FDI inflows, and was followed by the UK with
FDI worth $179 billion.
 In East Asia, FDI decreased in Hong Kong ,
but held steady in China
• The decline in FDI flows to developing Asia • FDI flows to East Asia registered
affected three of the four subregions (figure
II.1) and most major economies. In absolute a decline of 18 per cent to $260
terms, the bulk of the decline in flows to billion. This was mainly the result
developing Asia was registered in Hong Kong of diminishing flows to Hong
(China), but inflows to Indonesia, Mongolia,
Singapore, Thailand and Turkey also fell
Kong (China) – from $174 billion
sharply. In contrast, foreign investment in in 2015 to $108 billion in 2016.
China and India remained more or less
unchanged, experiencing a 1 per cent decline
and 1 per cent increase, respectively.
• In South-East Asia, declining flows to Indonesia, Singapore and
Thailand weighed on aggregate FDI inflows, whereas low-income
economies continued to perform well. FDI flows to the 11
economies in South-East Asia dropped by 20 per cent, to $101
billion. Singapore, one of the economies most dependent on
developments in the global economy, as a hub for foreign MNEs’
regional headquarters, recorded a 13 per cent decline in FDI
inflows, to $62 billion. Flows to Malaysia – the second largest
recipient in ASEAN in 2016 – declined by 11 per cent to $10
billion in the face of economic uncertainties, despite an increase in
cross-border M&A sales. Thailand and Indonesia also saw their
FDI inflows plunge, due to sluggish cross-border M&A sales and
significant divestments by foreign MNEs. In Indonesia, large
negative equity inflows in the fourth quarter dragged total FDI
inflows to $3 billion. In contrast, flows to the Philippines – the
third largest recipient in the subregion – increased by more than 60
per cent to a new high of $8 billion in 2016.
• FDI outflows from South Asia declined by 29 per cent to only $6
billion in 2016, as India’s outward FDI dropped by about one third. The
signing of a tax treaty by the Indian and Mauritian Governments in May
2016 might have contributed to reduced round-tripping FDI.5 Outflows
from West Asia slid as well, by 19 per cent to $31 billion. FDI flows
from Kuwait declined to -$6.3 billion from $5.4 billion in 2015, mainly
due to large divestments. In contrast, there was a rise in FDI outflows
from some other oil-producing and oil-exporting countries, including
Qatar and Saudi Arabia, where outflows surged by 96 per cent and 55
per cent, respectively. In the latter, outflows reached $8 billion, a new
high. Most of these outward FDI projects were related to diversification
efforts of the home countries. Growing FDI flows among East Asia,
South-East Asia and South Asia have underpinned an industrial
reconfiguration in these subregions over the past few years (box II.2).
What is taking place in FDI in manufacturing, as well as in various
infrastructure industries, is likely to reshape the patterns of intraregional
FDI in developing Asia, with increasing flows expected between China
and countries in East and South Asia.
 DEVELOPING ASIA 2017
• FDI inflows to developing Asia
remained stable at $476 billion in
2017, thanks to the hightech sector in
China, a rebound in Indonesia, and
increases in most ASEAN countries.
This was enough to offset declines in
other large recipient economies in the
region, including Hong Kong
(China), Singapore, India and Saudi
Arabia
• FDI inflows to developing Asia were
characterized by rising inflows in China, most
ASEAN member countries and the Republic
of Korea, and a significant increase in cross-
border M&A sales in the region. Total M&A
sales rose from $48 billion in 2016 to $79
billion in 2017. A number of large
transactions took place in Hong Kong
(China), India and Singapore. The five largest
recipients — China, Hong Kong (China),
Singapore, India and Indonesia — absorbed
four-fifths of FDI inflows to the region
 FDI to West Asia continued to decline,
dropping from $31 billion in 2016 to $26
billion in 2017. Inflows to the region have been
almost continuously declining since the peak of
$85 billion in 2008. Inflows to Saudi Arabia –
traditionally the largest FDI recipient in the
region – slid by four-fifths to $1.4 billion, due
to significant divestments and negative
intracompany loans by foreign MNEs. 7.
• FDI inflows to developing Asia are projected to
remain stagnant in 2018. Inflows to China could
see continued growth, due to recently announced
plans to facilitate foreign investment in industries
such as automotive and finance, which still have
considerable restrictions on the share of foreign
ownership.7 Other sources of growth could be
increased intraregional FDI, including to relatively
low-income economies in the grouping, most
notably the CLMV countries. Investments from
ASEAN, China, Japan and the Republic of Korea in
these countries are likely to continue. In South
Asia, inflows are expected to stagnate or decline
marginally. In West Asia, the evolution of oil
prices, the efforts of oil-rich countries to promote
economic diversification,8 and political and
geopolitical uncertainties will shape FDI inflows.
For instance, Shell (United
Kingdom–the Netherlands)
sold its 50 per cent interest
in the petrochemical joint
venture company (SADAF)
to its partner Saudi
Basic Industries
Corporation (SABIC)
for $820 million. FDI to the
country has been
contracting since the
global financial crisis and,
as a result, Saudi Arabia’s
share in total FDI inflows
to West Asia has collapsed
from 53 per cent in 2009 to
27 per cent in 2015 and a
mere 6 per cent in 201
Modest growth in FDI
outflows from developing
Asia is expected in 2018.
After a sharp decline in
2017, outflows from China
are expected to stabilize or
rebound. In particular,
outward FDI in
infrastructure and
manufacturing could grow
further, driven by
intensified efforts to
implement the Belt and
Road Initiative.
•DEVELOPING ASIA
•FDI inflows to developing Asia rose by 4 per
cent to $512 billion in 2018. Growth occurred
mainly in China, Hong Kong (China), Singapore,
Indonesia and other ASEAN countries, as well as
India and Turkey. Asia continued to be the
world’s largest FDI recipient region, absorbing 39
per cent of global inflows in 2018, up from 33 per
cent in 2017. Outflows from Asia declined by 3
per cent to $401 billion. However, the region
remained a significant source of investment,
representing 40 per cent of global FDI outflows
in 2018. The decline was mainly due to reduced
investments from China, for the second
consecutive year, and from Singapore. In
contrast, outward investment from the Republic
of Korea, Saudi Arabia, the United Arab Emirates
and Thailand increased.
FDI inflows to
East Asia rose
by 4 per cent
•FDI flows to South-East Asia rose by 3 per cent to an all-time
to $280 billion high of $149 billion in 2018. As a result, the subregion’s share
in 2018 but in global inflows rose from 10 per cent in 2017 to 11 per cent
in 2018. The growth in FDI was mostly driven by an increase
remained in investment in Singapore, Indonesia, Viet Nam and Thailand
significantly
below their
2015 peak of
$318 billion

Inflows to Thailand grew by 62 per
cent in 2018 to $10 billion – the
steepest FDI growth in ASEAN
• Singapore remains the subregion’s largest FDI
recipient with inflows of $78 billion in 2018 – a 3 per
cent increase from 2017.
• FDI flows to Indonesia grew by 7 per cent to $22
billion. Intra-ASEAN investments, mainly from
Singapore, accounted for more than 50 per cent of the
flows. Increased investment from China and Japan
further contributed to the record inflows.
• FDI inflows to South Asia grew by 4 per cent in 2018 to $54 billion. FDI to India,
which has historically accounted for 70 to 80 per cent of inflows to the subregion,
increased by 6 per cent to $42 billion. Investment was strong in manufacturing,
communication and financial services – the top three industry recipients. The growth
in cross-border M&As from $23 billion in 2017 to $33 billion in 2018 was primarily
due to transactions in retail trade ($16 billion), which includes e-commerce, and
telecommunication ($13 billion). Notable megadeals included the acquisition of
Flipkart, India’s biggest e-commerce platform, by Walmart (United States). In
addition, telecommunication deals involving Vodafone (United Kingdom) and
American Tower (United States) amounted to $2 billion
• Investment prospects for the region in 2019 are cautiously optimistic, with
improving investment environments, growing intraregional investment
and strong economic fundamentals. The 100 per cent rise in the value of
announced greenfield investment projects in the region, from $207 billion
in 2017 to $418 billion in 2018, confirms the region's investment
prospects. However, trade tensions could weigh on the prospects of higher
inflows or they could also lead to further investment diversion.
 • FDI inflows to the region in 2020 are
expected to fall by between 30 and 45 per
cent as a result of the COVID-19 pandemic.
All subregions and the five largest
recipients, which accounted for about 80 per
ASIA cent of FDI inflows in Asia in 2019, will see
a decline in investment across a wide range
2020 of industries, primarily in manufacturing
and services. The number of announced
greenfield investment projects in the first
quarter of 2020 dropped by 37 per cent.
• China has been severely affected by the pandemic. In the first quarter of
2020 its economy contracted for the first time on record, with a growth
rate of -6.8 per cent. The drastic measures taken to contain the spread of
the virus had a profound economic impact. Retail spending, which
contributed nearly 60 per cent of China’s economic growth in 2019,
plunged 19 per cent from a year earlier. Fixed-asset investment, another
major growth driver, sank 16 per cent.5 The capital expenditure of
Chinese MNEs in the first two months of 2020 declined by 25 per cent
• Outflows from South Asia grew 6 per cent, driven by investment from India. Yet they
remained small, representing only 1 per cent of global outflows. Companies in India are
the subregion’s largest investors, with more than 90 per cent of outflows in 2019.
• FDI outflows from West Asia contracted significantly, from $50 billion in 2018 to $36
billion in 2019. In Saudi Arabia, outward investment declined from $23 billion in 2018
to $13 billion, and firms in Kuwait divested $2.5 billion of overseas investments. Major
outward investments announced in 2019 included a $10 billion project by Saudi
Aramco (Saudi Arabia) to develop oil and gas facilities in China and a $9 billion oil
project by Qatar Petroleum to expand its existing facilities in the United States,
although it is unclear when these projects will be fully realized
 ASIA
2021
• FDI inflows to developing Asia grew by 4 per
cent to $535 billion in 2020, increasing Asia’s
share of global inflows to 54 per cent. M&As
were robust, but the value of announced
greenfield investments in 2020 contracted, and
the number of international project finance
deals stagnated. FDI growth in the region was
fundamentally driven by resilient inflows in
the largest economies and inflated by a sharp
rebound of inflows in Hong Kong, China after
anomalously low inflows in 2019 and because
of corporate reconfigurations and transactions
by MNEs headquartered in the economy. In
China and India, FDI increased by 6 per cent
(to $149 billion) and 27 per cent (to $64
billion), respectively. In the United Arab
Emirates, FDI increased by 11 per cent to $20
billion
 FDI flows to West Asia increased by 9 per
cent to $37 billion in 2020
• FDI in developing Asia grew by 4 per cent, to $535 billion in 2020, making it
the only region to record growth. That growth was due to corporate
reconfigurations and transactions by MNEs headquartered in Hong Kong,
China, inflated by a rebound of investment in the economy after social unrest
suppressed FDI in 2019
• FDI in East Asia increased 21 per cent to $292 billion. Overall growth was
inflated by the FDI recovery in Hong Kong, China in 2020.
• FDI in South-East Asia, an engine of global FDI growth for the past decade,
contracted by 25 per cent to $136 billion
FDI inflows in Asia are expected to increase
in 2022.