Foreign Direct Investment Flow Trends in the Asia-Pacific Region

Sunday, March 11, 2012

Have the numbers recovered since the 2007 Global Financial Crisis?

As the effects of the 2007 Global Financial Crisis spread, unsustainable pricing bubbles burst in sectors such as housing and banking, confidence in existing systems fell and an increase in cautionary measures swiftly took hold. As a result, foreign direct investment (FDI) flows in the Asia-Pacific region also fell.

In 2010, global FDI flows ascended to $1.24 trillion but were still 15% beneath their pre-crisis average. Investment flows have lagged behind global industrial output and trade, which in 2010 were back to pre-crisis levels.

According to a study by the United Nations Conference on Trade and Development (UNCTAD) titled ‘Inward and outward foreign direct investment flows 1970-2010’ there has been a dispersed spread of results with many nations in the region making a steady recovery on previous high flow levels. From the results of the study, as a whole entity, FDI levels in ASEAN have recovered. The ASEAN region suffered from a drop in 2009 but figures are now reaching the highest levels they have ever been, overtaking 2007 levels. The report estimated “that global FDI will recover to its pre-crisis level in 2011, increasing to $1.4–1.6 trillion, and approach its 2007 peak in 2013.”

Most APEC nations have recovered from the 2009 drops in FDI flows, most are now in the process of overtaking 2007 levels.

Recovered:

Hong Kong, USA, IndonesiaRussia, Singapore and PeruMalaysia has recovered from a strong drop in 2009 figures.

Steadily Recovering:

China, KoreaMexico, PhilippinesThailand and VietnamAustralia experienced a drop in 2009, in 2010 flows steadily increased, the most current statistics show that in 2010 flows were up but not to the point of 2008 levels.

Depressed Flows:

Nations still experienced depressed foreign direct investment flows are Canada which had extremely high flows in 2007, which halved in 2008 and continued to drop in 2009. Japan experienced a huge withdraw of foreign direct investment in 2009 and in 2010 had experienced negative flows. New Zealand felt a drop in 2009 and still had low levels in 2010.

The continued increase on FDI will be reliant on state-owned Transnational Cooperation’s (TNCs) which will be able to withstand current pressures due to the global economic downturn and will be the source of emerging flows. The size of TNCs justifies their ability to reignite global flows.  In 2010, just 1% of state owned TNC which accounts for around 650 giant companies has their outward investment accounting for 11% of global FDI.

The United Nations Conference on Trade and Development official report page is available here.

Click here for the UNCTAD home page.