Developing Asia was the only region that recorded growth in foreign investment in 2020, accounting for more than half of global inward and outward flows, according to UNCTAD’s World Investment Report 2021 published on 21 June. Foreign direct investment (FDI) flows to developing countries in Asia increased by 4% to USD535 billion in 2020, reflecting resilience amid global FDI contraction.
“Despite the pandemic, FDI to and from the region remained resilient in 2020. Developing Asia is the only region recording FDI growth, accounting for more than half of global inward and outward FDI flows,” said UNCTAD’s director of investment and enterprise, James Zhan. “FDI prospects in 2021 for Asia are more favourable than the global average, because of recovery in trade, manufacturing activities and a strong GDP growth forecast.”
The region, already the world’s largest FDI recipient in 2019, received more than half of global FDI. Growth was driven by China, Hong Kong (China), India and the United Arab Emirates. Elsewhere in the region, FDI contracted. In economies where FDI is concentrated in tourism or manufacturing, contractions were particularly severe.
FDI flows in West Asia increased by 9% to USD37 billion in 2020, driven by marked increase in M&As (60% to $21 billion) in natural resource-related projects. FDI in the UAE rose by 11% to $20 billion due to significant acquisitions in the energy sector, ranking the UAE as the 15th-biggest recipient of FDI worldwide in 2020, seven places higher than 2019 and one place ahead of the UK.
The UAE was also the 13th-biggest investor in terms of other nations’ economies, recording an FDI outflow of USD19 billion.
FDI in Saudi Arabia remained robust; inflows increased by 20% to $5.5 billion, with investments concentrating in financial services, retail, e-commerce and ICT. Investment picked up as the year progressed, with inflows of USD1.9 billion generated in the final quarter. Bahrain’s Gulf International Bank investing USD450 million to begin commercial operations in the Kingdom and an investment of USD200 million into the Saudi Digital Payments Company by Western Union were two of the bigger deals.
FDI prospects for the whole Asia region are more favourable than the global outlook, with a projected growth of 5% to 10%, thanks to resilient intraregional value chains and strong economic growth prospects. Signs of trade and industrial production recovering in the second half of 2020 provide a strong foundation for FDI growth in 2021.