FDI inflows to South and South-West Asia decreased by 6 per cent in 2017 due to a drop in foreign funding flow to countries like India and Turkey, a United Nations report said Wednesday. As per the UN Economic and Social Commission for Asia and the Pacific (ESCAP) report, the foreign direct investment (FDI) inflow to South and South-West Asia stood at USD 63 billion in the last calender year.
“This relatively modest performance was due to a drop in FDI inflows in South-West Asia, including India and Turkey,” it said. The report noted that while India remains the largest investment destination in the subregion, largely due to its large and growing market and attracted USD 22 billion FDI in the first half of 2018, the country slipped three notches to eleventh ranking in 2018, from 8th ranking in 2017 according to the AT Kearney FDI Confidence Index 2018. This is the first time it has fallen out of the top 10 since 2015, said the ‘Asia-Pacific Trade and Investment Report (APTIR) 2018’ report.
UNCTAD recorded a 9 per cent drop in FDI in India in 2017. The UNESCAP further said Iran, Nepal, Pakistan and Sri Lanka witnessed sharp rises of 49 per cent, 87 per cent, 13 per cent and 53 per cent respectively in FDI. However, with the US announcing the re-imposition of sanctions on Iran in May 2018 with implementation starting in August 2018, the country’s attractiveness to foreign investors is falling.
On services export, it said the growth is driven by a handful of economies, especially China and India. The Asia-Pacific region has outperformed the rest of the world with higher growth of commercial services exports and imports. The share of world exports in commercial services captured by the Asia-Pacific region increased from 22 per cent in 2005 to 28 per cent in 2017, while its share of world imports grew from 28 per cent to 32 per cent, the report said.
“The positive services trade performance was driven mainly by the rapidly growing roles of China and India. These two economies, together with Japan and Singapore, accounted for more than half of the services trade in the region,” it said. It also noted that a further escalation of the US-China trade war is possible in 2019. In the first half of 2018, the world’s largest economy initiated a number of trade remedy procedures, unilaterally raising tariffs on targeted products, especially steel and aluminium products.
China and other affected countries, including Canada, India, the European Union, Mexico and Turkey, filed WTO disputes against the US and some retaliated by imposing higher tariffs on selected imports from the country. “The threat to include all imports from China on the increased tariff lists has made the escalation of the bilateral conflict between the world’s two largest economies a real possibility in 2019,” the UNESCAP said. However, the 90-day truce agreed between President Trump and President Xi Jinping on the side of the G20 summit in December provides some hope of a compromise, it added.