Big firms 'confident' about Asia investment

Big firms 'confident' about Asia investment

GENEVA (Reuters): Big global companies are still confident about investment in East and Southeast Asia despite the region's financial turmoil, the United Nations UNCTAD agency and a top business body said yesterday.

Citing the results of a joint survey last month, UNCTAD and the International Chamber of Commerce (ICC) said almost all the firms covered had a positive long-term view with 81 percent saying direct investment (FDI) prospects were unchanged.

Some 13 percent said prospects had improved, and one in four of firms who took part in the poll reported plans to step up FDI over the short and medium term.

UNCTAD Secretary-General Rubens Ricupero told a Geneva news conference relayed across Asia the survey's outcome "augurs well for recovery in the region".

Ricupero, a former Brazilian finance minister, said 62 percent of the 198 companies who responded to the survey out of 500 leading multinationals polled reported that they were continuing with their existing investment plans.

"The results clearly show that multinational corporations are keenly interested in the region for direct investment in the production of goods and services," he declared.

UNCTAD is the UN's body for trade and development and has a strong record in tracking investment trends in emerging economies.

Maria Cattaui, Secretary-General of the Paris-based ICC, told the news conference the survey result was a "resounding vote of confidence in the economic fundamentals of East and Southeast Asia and the region's long-term prospects.

"Business still sees enormous investment opportunities to be derived from the projected growth of Asian markets in the 21st century," she said. The survey had demonstrated long-haul FDI commitment.

A summary of the poll results issued by the two bodies -- who did not reveal the names of the firms taking part -- said an overwhelming majority of companies from Europe, North America, Japan and developing Asia said long-term views were unchanged.

Among European-based multinationals, 34 percent were actively seeking to increase operations in the financially troubled region. In North America and Japan the figure was 19 percent and in emerging Asian economies 10 percent.

Cattaui said the survey underlined a key difference between reactions of direct investors to the crisis and those of portfolio investors and banks -- whose withdrawal from the region is widely seen as having deepened the crisis.

Direct investors, she said, "are motivated by strategic interests, such as market access and access to resources of various kinds, and tend to involve long-term relationships."

UNCTAD expert Karl Sauvant told the news conference that in the short and medium term lower costs for multinationals -- because of devaluations in the countries most affected by the turmoil -- was an incentive for more investment.

But a growth slowdown would reduce domestic demand in the region that could work to reduce FDI flows in the immediate future to industries targeted on local markets.

The survey showed that 18 per of multinational service firms, mainly heavily dependent on domestic sales, planned to reduce one or more projects over the short and medium term.

However, Savant said, emerging markets continued to be seen as good prospects by global firms -- in line with a trend since in the mid-1980s and which has led to these markets taking some 40 percent of world FDI flows totaling some $350 billion.

According to the responses to the poll, Sauvant said, 37 percent of firms aimed to increase investments in Latin America, 27 percent were looking to expansion in former communist countries in Europe and 18 percent were planning more in South Asia.