Foreign direct investment (FDI) inflows in South, East, and South-East Asia reached a new high of US $165 billion (Rs 742,500 crores) in 2005, a 19% increase over 2004, according to UNCTAD's World Investment Report 2006.
In South Asia, India received an FDI inflow of $7 billion out of a total of $10 billion.
“Rapid economic growth in South, East, and South-East Asia shows few signs of slowing, and a further expansion of FDI into and from the region is expected. FDI inflows to India have been gaining momentum in recent years, and the country's prospects for attracting FDI are promising”, said the report.
With continued high economic growth, the region has become more attractive to market-seeking FDI. It is a hot spot for transnational corporations, investors in financial services and high technology industries, said the report.
About two-thirds of the FDI in South, South-East and East Asia went to two economies -- China ($72 billion) and Hong Kong ($36 billion). The UN still lists the two as separate economies.
China was the largest recipient of FDI among all developing countries worldwide. Non-financial FDI alone was US $60 billion, a slight decline over the past year, while flows into financial services rose to US $12 billion, driven by large investments in Chinese banks. Hong Kong (China) and Singapore retained their positions as the second- and third-largest recipients in the region, attracting FDI of US $36 billion and US $20 billion, respectively.
A number of Association of South East Asian Nations (ASEAN) member states also received their highest FDI inflows ever. Inflows to Indonesia surged by 177% to US $5.3 billion.
In China, FDI in the manufacturing sector has been shifting towards more advanced technologies. Airbus plans to build an A320 assembly line in China, says the report.
In terms of cross-border M&As, the combined share of the manufacturing and primary sectors rose significantly, from 29% in 2004 to 54% in 2005. Asian energy companies, in particular those from China and India, have intensified their efforts to acquire oil assets.