FDI inflows to South Asia rise by one-third

South Asia received Foreign Direct Investment (FDI) inflows of around $43 billion last year.
South Asia, East Asia and South-East Asia received inflows of around $43 billion, $209 billion, and $92 billion, respectively, according to UNCTAD’s Global Investment Trends Monitor that was released today.
"FDI flows to developing Asia, excluding West Asia, rose by 11 per cent in 2011, despite a slowing down in the latter part of the year," it said, adding that with a 16 per cent increase, South-East Asia continued to outperform East Asia in growth of FDI, while South Asia saw its inflows rise by one-third after a slide in 2010. FDI to China rose by eight per cent to an estimated $124 billion ($116 billion in the non-financial sector) as a result of increasing flows to non-financial services, though FDI growth in the country slowed down in the last two months of 2011.
"Despite turmoil in the world economy, global FDI inflows rose by 17 per cent in 2011 to $1.5 trillion, surpassing their pre-crisis average, based on preliminary UNCTAD estimates," the organisation said. "FDI inflows increased in all major economic groupings - developed, developing and transition economies."
Developing and transition countries continued to account for half of global FDI in 2011 as their inflows reached a new record high, driven mainly by investments in Latin America (up by 35 per cent) and in transition economies (up by 31 per cent), it said, adding that Africa — the region with the highest number least developed countries — continued to experience a decline in FDI.
UNCTAD estimated that FDI flows will climb moderately in 2012 to around $1.6 trillion, but will remain short of the all-time peak of $2 trillion reached in 2007. However, the organisation said the fragile recovery of the world economy in 2011 – with growth tempered by the debt crisis in developed countries, the uncertainties surrounding the future of the euro, and rising financial market turbulence – will have an impact on FDI flows in 2012.
Both cross-border mergers and acquisitions and greenfield investments slipped in the last quarter of 2011, UNCTAD figures indicated. "All these factors suggest that significant risks and uncertainties for further FDI growth in 2012 remain in place."
During 2011, many countries continued to implement policy changes aimed at further liberalising and facilitating FDI entry and operations, but also introduced new measures regulating FDI, according to the UNCTAD’s global FDI quarterly index that remained steady during 2011, underscoring the increased stability of flows witnessed during the year.
Unlike foreign portfolio flows that have dramatically started to decline in the third quarter of 2011, FDI flows maintained their upward trends at least until this period.
However, as preliminary data from cross-border Merger and Acquisitions (M&A) and greenfield investment projects suggest, FDI flows are expected to slow down in the fourth quarter of 2011.