The latest World Investment Report, published today by UNCTAD, reveals a significant increase in Greenfield foreign direct investment (FDI) to developing economies in Asia. Despite a broader decline in overall FDI flows to the region, the rise in Greenfield investments indicates robust investor confidence in the long-term potential of these economies.
KEY HIGHLIGHTS
- In 2023, developing economies in Asia saw a 44% increase in the overall value of Greenfield investment announcements and a 22% increase in the number of such announcements.
- Although foreign investment flows to developing Asia receded, they remained high at $621 billion.
- East and Southeast Asia continued to be the largest recipients of FDI, accounting for nearly half of global inflows.
SURGE IN GREENFIELD FDI IN DEVELOPING ASIA
Greenfield FDI, where companies establish or expand operations overseas, surged in developing Asia in 2023. This trend highlights the region’s attractiveness to foreign investors despite global economic challenges. The significant rise in Greenfield investments points to strong prospects for economic growth and job creation in the region.
SUBREGIONAL TRENDS AND INSIGHTS
East Asia
- FDI inflows fell by 9%, primarily due to declines in China and Hong Kong SAR.
- Despite this, the value of Greenfield announcements shot up by 65%, though growth was offset by a 58% decline in project finance deals.
Southeast Asia
- FDI inflows remained stable, with a notable increase in M&A sales.
- The number of Greenfield announcements surged by 42%, adding $62 billion in value, countered by a $64 billion fall in project finance deals.
South Asia
- The decline in FDI inflows was largely due to a 43% decrease in India, while other countries in the region saw relatively stable flows.
West Asia
- FDI dropped by 9% due to lower M&A sales, but the region saw growth in Greenfield investments and project finance deals, particularly in Saudi Arabia, Turkey, and the United Arab Emirates.
Central Asia
- FDI receded by 27%, though stable performance in Greenfield investment announcements and project finance deals suggests better prospects for 2024.
IMPACT ON SUSTAINABLE DEVELOPMENT GOALS (SDGS)
Investment in sectors linked to the Sustainable Development Goals (SDGs) rose modestly across developing Asia. The number of announced Greenfield projects in these sectors increased by 30% to 1,225 projects, with a 54% rise in value, especially in renewable energy, transport, and telecommunications. However, the number of international project finance deals dipped by 17%, partly offsetting gains in Greenfield FDI for sustainable development.
The World Investment Report 2024 underscores the resilience of developing Asia as a destination for Greenfield FDI, with significant increases in investment announcements despite broader declines in FDI flows. This trend, particularly in sectors aligned with the SDGs, reflects the region’s strong potential for sustainable development and economic growth. As global financial conditions ease and efforts towards investment facilitation continue, the outlook for FDI in developing Asia remains optimistic.