Investment flows grow in Asia: Report
JAKARTA (JP): Foreign direct investment (FDI) in Asian countries boomed in 1995 on the back of deregulation, privatization and the growth of multinational companies headquartered in the region.
According to the World Investment Report 1996 published yesterday by the United Nations Conference and Development (UNCTAD), developing countries in Asia accounted for almost two- thirds of total FDI flows into all developing countries last year.
Total investment inflows in 1995 surged by 40 percent to an unprecedented US$315 billion over the previous year.
The FDI volume to developing Asian countries rose by 21 percent to US$65 billion last year over 1994's record volume. China was the largest recipient, with FDI inflows of $37.5 billion, up 10 percent on 1994's figures.
Malaysia received the second largest FDI inflow, $5.8 billion, up 35 percent on the previous year, while Singapore was ranked third, it received $5.3 billion, down from $5.6 billion in 1994.
Indonesia was ranked fourth, with an FDI inflow of $4.5 billion, up 114 percent on 1994. Thailand was fifth with $2.3 billion, up 280 percent on 1994.
Hong Kong was ranked sixth, with an FDI inflow of $2.1 billion, up $2 billion on the previous year.
Economist Djisman Simandjuntak, who launched the report yesterday, projected that the flows of foreign direct investment into Indonesia would continue to increase in 1996 and 1997 despite concerns over possible instability in the country's politics in the next few years.
"Political trouble will disturb portfolio investment but I don't think it will affect inflow of the direct investments," he said when asked if a change in the course of the country's political direction would affect FDI inflows in coming years.
Outflows
Developing Asia is rapidly becoming home to multinational corporations which are increasing their FDI flows, especially within Asia.
In 1995, FDI outflows in developing Asian countries amounted to $43 billion, representing 90 percent of all developing countries' outflows. Hong Kong was the single largest outward investor among the developing countries, with FDI outflows of around $25 billion. Taiwan was in the second place with outflows of $3.8 billion, followed by China with 3.5 billion, Korea with $3 billion, Singapore with $2.8 billion and Malaysia with $2.6 billion.
According to the report, the sheer size and dynamism of the region has made developing Asia most important to multinational companies.
This is accentuated by liberalization and deregulation policies that a number of countries in the region are pursuing.
Four members of the Association of South East Asian Nations (ASEAN) -- Indonesia, Malaysia, the Philippines and Thailand -- account for a sizable amount of total FDI inflows into developing Asia,excluding China. The four ASEAN members attracted $14 billion last year, compared to $8.6 billion in 1994.
In last year's report, UNCTAD noted that European multinational companies had been relatively slow to directly invest in developing Asia. But now this is changing.
European multinationals are supported by a range of programs from the European Commission, and they may receive further stimulus from the Asia-Europe Investment Promotion Action Plan to be launched as a result of the Asia-Europe summit in March.
Flows of FDI into Asia should continue to grow, particularly when India becomes more attractive to FDI and when the Central Asian countries' economies recover.
The development of the region's infrastructure needs substantial funding, and policies are being formulated and introduced to attract FDI for this. For example, privatization in developing Asia, which is lagging behind other regions, is showing signs of taking off, particularly in telecommunications.
A major factor affecting FDI flows into Asia and out of Asia is the growth of multinational companies headquartered in Asia. In 1994, 21 of the 25 top multinationals from developing countries, ranked by foreign assets, were based in Asia.
The regional orientation of these multinationals is evident in their FDI decisions, with intra-regional investment accounting for around 40 percent of total FDI stocks in East and South-Asia.
Daewoo of Korea, for example, is the largest foreign investor in Vietnam and Acer of Taiwan is the largest investor in Subic Bay, the Philippines' largest industrial zone.
Increasingly, the largest multinationals in developing Asia are investing in developed countries to access markets more efficiently and to obtain new technologies. (hen)