Developing Asia sees significant surge in greenfield FDI in 2023

In 2023, developing economies in Asia experienced a significant surge in greenfield foreign direct investment (FDI), according to the World Investment Report 2024 by the United Nations Trade and Development (UNCTAD). The overall value of greenfield investment announcements increased by 44 per cent, while the number of such announcements rose by 22 per cent. This growth indicates companies' efforts to establish or expand their operations overseas.

Despite a broader decline in foreign investment flows to developing Asia, the region maintained a high level of FDI, totalling $621 billion. Led by East and Southeast Asia, the continent continued to be the world’s largest recipient of FDI, accounting for nearly half of global inflows.

However, cross-border mergers and acquisitions, which typically constitute 10 to 15 per cent of foreign investments in developing Asia, fell by almost $30 billion to $57 billion in 2023. This decline represented about half of the total drop in FDI inflows to the region.

China and its Hong Kong Special Administrative Region (SAR) remain the largest investors in the region by total FDI stock, followed by the US, Japan, and Singapore.

In East Asia, FDI inflows decreased by 9 per cent, primarily due to declines in China and Hong Kong SAR. While the estimated value of greenfield announcements soared by 65 per cent, overall growth was mitigated by a 58 per cent decline in the value of project finance deals.

FDI inflows to Southeast Asia remained stable, supported by an increase in mergers and acquisition sales. The number of greenfield announcements surged by 42 per cent, adding $62 billion in value. However, this gain was offset by a $64 billion decline in the value of international project finance deals.

South Asia experienced a decline in FDI inflows, largely driven by a 43 per cent drop in India, while flows to other countries in the subregion remained relatively stable.

In West Asia, FDI fell by 9 per cent due to lower mergers and acquisition sales. Nonetheless, the region showed growth in both the number and value of greenfield investments and project finance deal announcements, particularly in Saudi Arabia, Turkiye, and the United Arab Emirates.

Central Asia saw a 27 per cent reduction in FDI. Despite this, stable performance in greenfield investment announcements and international project finance deals provides optimism for improved prospects in 2024.

Across developing Asia, investment in sectors related to the sustainable development goals (SDGs) saw modest growth. The number of announced greenfield projects in these sectors increased by 30 per cent to 1,225 projects, with a 54 per cent rise in value, especially in renewable energy, transport, and telecommunication sectors.

Conversely, the number of international project finance deals decreased by 17 per cent, partially offsetting the gains in greenfield FDI for sustainable development.

Fibre2Fashion News Desk (DP)