Foreign direct investment (FDI) flows to developing countries in Asia increased 19% to a record $619 billion in 2021, shows UNCTAD’s World Investment Report 2022 published on 9 June.
It is for the third consecutive time investment flows to Asia increased despite the COVID-19 pandemic that hurt the global FDI by 35% in 2020.
“FDI flows to developing economies in Asia during the pandemic have bucked the global trend and underscored the resilience of developing economies in Asia,” said James Zhan, director of UNCTAD’s investment and enterprise division.
Although most subregions, except South Asia, saw an uptrend in investment attraction, still just six countries accounted for more than 80% of FDI inflows.
China led the race, followed closely by Hong Kong (China), Singapore, India, the United Arab Emirates, and Indonesia.
How Asia Performed Overall?
East Asia : FDI Flow grew by 16% to $329 billion
FDI growth in China accelerated in 2021, up 21% to $181 billion, after a 6% uptick in 2020. It was on the back of hefty investment in services and high-tech sectors. The outlook for the region stays positive for 2022.
International project finance deals in Xi Xing Ping’s country marked a record and remained the focal point. Its projects included the construction of a $1 billion data center in Shanghai, sponsored by Singapore-based Princeton Digital Group.
FDI flows to Hong Kong, China increased by 4% to $141 billion, mostly accounted for by companies reinvesting their earnings ($108 billion).
South-East Asia: FDI flow rose 44% to $175 billion
Singapore, a Southeast Asian country, was the largest recipient of FDI. It saw an increase of 31% to $99 billion, supported by a jump in cross-border mergers and acquisitions (M&As).
It witnessed one of the largest Mergers worth $34 billion between US-based Altimeter Growth Corp with Grab, a Singapore-based software publisher.
Greenfield projects in the city-state nearly doubled by $13 billion, with a $4 billion project by UAE-based GlobalFoundries to build a chip-making plant in Singapore.
Malaysia also remained an attraction for chipmakers. The semiconductor companies announced huge investments worth billions. These include Risen Solar Technology (China) for $10 billion, Intel (United States) for $7 billion, and AT&S (Austria) for $2.1 billion.
Overall, the growth was spurred by investment in manufacturing, the digital economy, and infrastructure.
West Asia: 59% increase in FDI flows to $55 billion
The FDI inflow to West Asia in 2021 was due to cross-border M&As. The United Arab Emirates attracted the highest inflows worth– $20 billion in the region, while inflows in Saudi Arabia were triple-folded to $19 billion. After witnessing a decline in the previous two years in FDI, Turkey, this year, clocked a 60% rise in inflow to $13 billion.
In the United Arab Emirates, the German-based logistics company DHL Global Forwarding and the French energy and oil company Total announced a joint project on solar energy in Dubai for $633 million.
Turkey could heave a sigh of relief as its FDI trend reversed because of the refinancing of project debt across several oil and gas assets in Turkey by Socar, based in Azerbaijan.
South Asia: FDI Inflow dropped by 26% to $52 billion
South Asia was the only sub-region in Asia that saw a fall in FDI inflows in 2021. The inflow of investment in India dropped by 30% from its record level in 2020 to $45 billion in 2021.
However, 108 new international project finance deals are underway in the country compared with an average of 20 in the last decade. Renewables attracted the most number of projects (23).
Arcelormittal Nippon Steel is building a $13.5 billion steel and cement plant in India, and Suzuki Motor is building a $2.4 billion automobile manufacturing facility. Both businesses have headquarters in Japan.
Central Asia: FDI Inflow rose by 12% to $7 Bn
FDI flows to Kazakhstan, Central Asia’s largest recipient, plunged by 14% to $3.2 billion in 2021, with a decline recorded in extractive industries and transportation.
Meanwhile, FDI flows jumped by 18% to $2 billion in Uzbekistan and 24% to $1.5 billion in Turkmenistan.