Foreign Direct Investment Trends and Outlook in Asia and the Pacific 2019/2020

ABSTRACT

• Global foreign direct investment (FDI) flows declined for the third consecutive year in 2018, dropping 13% from 2017 levels to $1.3 trillion. The largest declines were in developed economies and economies in transition. Inward flows to developing economies, however, grew by 2% in 2018.
• Among developing economies, the Asia-Pacific region received the largest share of global FDI inflows, attracting 45% in 2018. Developing countries in the region attracted 40% of global FDI inflows, which converts into 88% of total Asia-Pacific region inflows.
• Global outflows declined by 29% to $1 trillion in 2018. The largest declines in outflows were from developed economies, whose outflows dropped by 40% to $558 million. While outflows from Asia and the Pacific decreased by 8% to $522.3 billion in 2018, the region nonetheless markedly increased its share of global FDI outflows from 40% in 2017 to 52% in 2018.
• The significance of intraregional greenfield FDI flows has continued to increase in Asia and the Pacific. During the past decade, the share ofintraregional greenfield inflows increased from 40% in 2009 to 53% in 2018.
• Members of the Association of Southeast Asian Nations (ASEAN) have attracted the largest share of intraregional greenfield investments, receiving $100 billion or 47% of all intraregional greenfield investments in 2018. The single largest recipient of intraregional flows in the overall Asia-Pacific region, however, was China, which received $37.7 billion or 18% of intraregional investments.
• The East and North-East Asia subregion was the largest source of intraregional greenfield FDI outflows in 2018,followed by the ASEAN subregion. East and North-East Asia accounted for 66% of all intraregional greenfield FDI outflows, while ASEAN was responsible for 23%
• During the past decade, the general trend in sector composition in the Asia-Pacific region has been a declining share of greenfield inward FDI in the primary sector, a stable amount directed towards the manufacturing sector, and a growing share in the services sector. In 2018, 16% of greenfield investments were directed towards the primary sector, 42% towards manufacturing and 42% towards the services sector.
• The Asia-Pacific region is expected to remain a significant destination and source of FDI in 2019and 2020. However, sluggish growth in greenfield investment may hamper the ability of the region to attract the same levels of investment in 2019,while a decline in investment flows in 2020 is expected if the uncertainty related to international trade continues and companies continue to consolidate their value chains.Therefore,investment prospects for the region remain subdued and tied to unfolding risks of ongoing global political and economic disturbances, such as Brexit, the United States-China trade war, growing protectionist sentiments and a retreat from multilateralism across the world, and civil unrest in Hong Kong, China.