Undeterred by global markets meltdown, FDI heads for China, India

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Mumbai, Oct 6 : Despite the current global economic slowdown and financial instability, India and China continue to be the most preferred FDI destination in 2008- 2010.

The United Nations Conference on Trade and Development (UNCTAD) survey titled “World Investment Prospects (WIPS) 2008-10” released on Monday points to an upward trend among developing and transition economies especially in Asia, Central and Eastern Europe, and Latin America, both for FDI inflows and outflows.

The six preferred destination for FDI in the survey are the same as last year’s: China takes the lead, followed by India, the United States, the Russian Federation, Brazil and Vietnam. The next in order of preference are Germany, Indonesia, Australia, the United Kingdom, Mexico and Canada

The increase FDI outflows from the developing region attributes to the countries plan to implement ambitious international expansion strategies. On the other hand, the attractiveness of the regions for inward FDI is mainly due to expected buoyant growth of markets and the availability of abundant labour resources.

In addition to China and India, other Asian countries such as Vietnam now rank in the list of the 10 most attractive FDI locations worldwide.

“The respondent companies also seemed to be highly aware of the existence of persistent geopolitical risks, as well as a possible further worsening of the world economic outlook,” the survey noted. The WIPS 2008-2010 is based on a survey of 226 transnational corporations undertaken between April and June 2008.

Companies from developing regions of Asia and Europe, appeared to be the most upbeat with regard to their future investment expenditure plans. Though these companies still focused on investing in their home regions, but more and more are showing interest in global projects. North American companies on the other hand reported the sharpest decline in investment prospects compared to the previous survey.

According to the survey investment prospects are particularly promising in services, notably in infrastructure (telecommunications, transport, electricity, gas and water). More than 25% companies expect to considerably increase their FDI expenditures in infrastructure from 2007 to 2010, as against 20%, on average, of all respondents. In the manufacturing sector, prospects appear to be the most promising for the equipment and machinery industries.