Asian businesses lead global foreign direct investment charge

A major international survey which outlines global business investment trends and conditions, pinpoints Asia as the fastest growing single destination for foreign investment, accounting for a third of global Foreign Direct Investment (FDI) inflows.

LONDON - July 22, 2014.

According to the latest UN World Investment Report 2014, the Asian region saw large increases in external investment with the exception of Western Asia, where instability caused a further reduction in foreign money for the fifth consecutive year.

South-East Asia (ASEAN) performed "outstandingly well" in terms of increased foreign investment, totalling $125bn in 2013, up seven per cent from 2012. East Asia also witnessed strong growth, in part because of growing inflows in China which is now second only to the United States in terms of FDI volume.

FDI is defined by the World Bank as 'the value of inward direct investment made by non-resident investors in the reporting economy' - many of these investors are behind commercial capital being injected into existing cross-border businesses, where companies are looking to expand from their established home market into developing economy markets.

Out of ASEAN's top 20 FDI recipients, Hong Kong - the go-to place for investing in foreign enterprises looking to break into mainland Chinese markets - registered the largest rise of FDI inflow, from $51bn in 2012 up to $79bn in 2013.

The total flow of FDI to APEC members rose from $560bn, prior to the global economic crisis, to $789bn in 2013 - while FDI flow of the G20 fell from $878bn to $791, over the same period.

Businesses in emerging economies, such as in Russia, Brazil, China, India and South Africa also saw marked increases in their share of FDI, from 11 per cent to 21 per cent. Meanwhile, the latest business intelligence showed foreign investment derived from the North American Free Trade Agreement stayed almost level at 20 per cent (the same level as before, and after, 2008).

Experts suggested the figures continue to show Asia gradually replacing Europe as the next top spot for FDI.

Growth in the numbers of foreign businesses in Asia can in part be attributed to the relaxing of national requirements and procedures that foreign investors were previously obliged to follow, when establishing and incorporating holding companies within their target Asian marketplaces.

Despite some easing of regulatory and administrative red tape to setting up a business in Asia, significant obstacles to investing and setting up businesses in the region continue to exist. 

In a report entitled 'Fuelling the Asian growth engine' published last year by Deloitte, the highest hurdles foreign investors had to clear when setting up in Asia included: Driving business growth, Dealing with increased competition, Dealing with cost pressures, Expansion into new markets, Keeping pace with regulatory environment, Dealing with increased scrutiny of the organisation’s corporate and social responsibilities; and, Gaining access to capital.

Presswire

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