Indonesia had 3rd highest FDI in Asia last year
JAKARTA (JP): Foreign direct investment (FDI) inflows to Indonesia were the third highest in the Asian region last year, almost doubling to US$8 billion from $4.3 billion in 1995, according to a new international investment report.
The report published by the United Nations conference on Trade and Development (UNCTAD) says the amount of inflows follows that of China and Singapore.
FDI inflows to China were the highest in the region last year, reaching a record $42.3 billion from $35.8 billion in 1995, says World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy.
Inflows to Singapore, second highest in the region, also reached a record $9.4 billion last year, up from $6.9 billion in the previous year.
Malaysia followed Indonesia with $5.3 billion, up from $4.1 billion in 1995.
The report also notes increasing inflows to India. FDI to India surged by 34 percent to $2.6 billion last year, following a 47 percent rise to $1.9 billion in the previous year.
According to the report, FDI inflows to developing South, East, and Southeast Asia rose 25 percent last year to a record US$81 billion.
The report says the amount represents two thirds of all FDI to developing countries.
At the same time, Asian transnational corporations have become a major source of outward investment, with FDI outflows rising by 10 percent in 1996 to US$45.7 billion, it says.
This is about 90 percent of total FDI outflows from all developing countries,
The report says intraregional investment is the principal single component of FDI for the region.
The report says FDI by major Asian developing economies to other developing economies in the region reached nearly 40 percent. The portion is larger than that coming from Europe, Japan or the United States, it says.
"To some extent, this reflects the substantial growth of leading transnational corporations headquartered in Asia," it says.
It says about two-thirds of foreign assets of the 50 largest transnational corporations in developing countries are accounted for in Asia.
According to the report, UNCTAD's top 50 transnational corporations list, which includes 34 Asian companies, is dominated by those from the South Korea, Mexico, Hong Kong and China.
Among these, Daewoo Corporation of South Korea, in 52nd position, is the highest-ranking transnational corporation from a developing country on the list of the world's 100 largest transnational corporations.
The ranking was based on the corporation's foreign assets.
The report says the world's largest transnational corporations continue to dominate FDI flows.
"They are boosting their investments into more developing countries, participating in a rising volume of cross-border mergers and acquisitions, and entering into an expanding total of international joint venture agreements," the report says.
Transnational companies from developed countries dominated FDI flows to developing countries.
Flows of FDI from transnational companies headquartered in developed countries rose slightly to a new record total of $295 billion from $291 billion in 1995.
FDI inflows to developed countries also rose slightly to $208 billion from $206 billion.
The report states that the United States absorbed two-fifths of total inflows to developed countries. American transnational corporations were also by far the largest source of FDI with outlays of $85 billion, it says.
The report says that market access is the most important motive, "rather than the opportunity, for example, to engage low- cost labor".
The selection of locations by leading transnational companies for foreign investment is driven by considerations of market size and growth, and earnings prospects.
Factors relating to the overall business environment also determine the choice of location, it says.
These include political and social stability, the legal framework, the quality of the work force and infrastructure, and local availability of goods and services. (das)