FDI flows to emerging Asia
Seven emerging markets find a place in the list of 25 countries included in AT Kearney’s foreign direct investment (FDI) Confidence Index for 2017. While the United Arab Emirates and South Africa are new entrants, Mexico and Thailand have seen improved ranks compared to last year. Brazil, on the other hand, has slipped quite a bit, down to the 16th spot, after being ranked 12th last year.
Meanwhile, India and China rank among the top 10 FDI destinations in the world. Even after slipping one position, China remains in the top three while India has improved one spot from a year ago to eighth.
Since both are categorically included in the Asia region, they make developing Asia particularly attractive with AT Kearney noting that the region “far surpasses” others in terms of FDI flows.
Latin America comes second next to developing Asia, and is then followed by Eurasia and Africa, in that order.
Asia Pacific to retain investor interest
One of the reasons that investors are positive about FDI flows in 2017 is because they expect the global economy to improve. While AT Kearney noted that its 2016 survey indicated bearish sentiment on the global economy, 60% of the survey respondents are more optimistic about the global economy this year.
Even among those bullish about the world economy, investors from Asia-based firms are the most optimistic with 85% of the respondents expressly positive about the global economic outlook. Meanwhile, only 58% of American and 53% of European investors had similar views.
India and China have a role to play in this positive outlook as well as the former may emerge as the world’s fastest growing major country, while fears about hard landing in the latter have died down quite measurably.
Furthermore, as the above graph shows, net optimism regarding the Asia Pacific is the highest among all regions.
Meanwhile, political uncertainty and security risk seem to have negatively impacted Middle East & North Africa (MENA), and sub-Saharan Africa regions because even though more respondents are positive about these regions than they are about others, net optimism has actually declined from a year ago.
This is the case even though Iran and Saudi Arabia have attracted interest from the MENA region while Kenya, Nigeria, and the new resilient seven from sub-Saharan Africa have also emerged as strong contenders for investment.
This shows that developing Asia in general and India and China in particular stand to attract a significant amount of FDI from global investors this year.