Singapore, HK biggest Asia recipients of FDI after China in 2017: UNCTAD

Singapore

MORE direct investments flowed into Asia last year despite a decline globally - and China, Hong Kong as well as Singapore were the biggest recipients, according to the United Nations Conference on Trade and Development (UNCTAD).

An estimated US$144 billion in foreign direct investment (FDI) went into China, while about US$85 billion landed in Hong Kong, data in UNCTAD'S latest Investment Trends Monitor report shows. Some US$58 billion entered Singapore.

These make China the second, Hong Kong the third and Singapore the eighth biggest recipients of FDI inflow in the world in 2017. The US remained the biggest.

The quarterly report did not provide comparative figures for individual economies, but based on the numbers in the Investment Trends Monitor report a year ago, FDI pumped into Singapore rose from US$50 billion in 2016 to US$58 billion in 2017.

The latest report indicated that FDI flowing into Asean, of which Singapore is a member, increased by a third to US$130 billion last year. Singapore accounted for almost half - 45 per cent - of the inflow.

Still, the FDI channelled into Singapore in 2017 remained below those in 2014 (US$68 billion) and 2015 (US$65 billion), the years before inflow fell to US$50 billion in 2016.

"Developing Asia's higher FDI inflows were mainly the result of a sharp increase in the value of cross-border mergers and acquisition (M&A) sales, from US$42 billion in 2016 to US$73 billion in 2017," the report said. "This mainly reflected the cross-border M&A activities of foreign companies in Hong Kong, India and Singapore."

Globally, FDI flows tumbled 16 per cent last year to an estimated US$1.52 trillion, from a revised US$1.81 trillion in 2016, according to UNCTAD.

"FDI recovery continues to be on a bumpy road," said UNCTAD secretary-general Mukhisa Kituyi.

James Zhan, UNCTAD'S director of the Investment Division, said: "The decline of global FDI flows is in stark contrast to other macroeconomic variables, such as GDP and trade growth, which saw substantial improvements in 2017."

A slump in FDI flows to developed countries (minus 27 per cent) was the principal factor behind the global decline, the report said. Both Europe (minus 27 per cent) and North America (minus 33 per cent) saw a strong drop in FDI inflows in 2017, due mainly to a return to levels of inflows in the UK and the US after spikes in 2016.

The declines were tempered by an 11 per cent growth in FDI flows to other developed economies, especially Australia.

FDIs which went into transition economies (those in Eastern Europe and Russia Federation) also fell 11 per cent. Inflows were flat in Africa but up 2 per cent in Asia (excluding Japan) and 3 per cent in Latin America.

"Developing Asia regained its position as the largest FDI recipient region in the world, followed by the European Union and North America," the report said.

According to the report, cross-border M&A deals sank 23 per cent to US$666 billion last year, weighed down by a 30 per cent slump in developed economies. But such activities in developing economies jumped 44 per cent to US$100 billion.

The value of cross-border M&As globally was higher than the value of greenfield projects, but the report said the number of greenfield projects was still about twice that of cross-border M&As.

UNCTAD expects the pick-up in the global economy and trade to lift global FDI inflows to almost US$1.8 trillion in 2018.

"A synchronised upturn of economic growth in major economies, the gradual recovery in commodity prices and improved profit prospects in various sectors could boost business confidence and MNCs' appetite to invest," the report said.

But it cautioned that "elevated political risks and policy uncertainty" could hamper "the scale" and alter the "contours" of the FDI recovery.

"The possibility that protectionist rhetoric translates into trade restrictive actions, a worrying rise in global geopolitical tensions and a rising economic toll from natural disasters may have an impact on FDI flows," the report added.