20000321

Foreign

investment

to Asia rose

in 1999

ISLAMABAD: Foreign Direct Investment (FDI) flows to developing Asia in 1999 increased by one percent over 1998 to $91 billion, contrary to a decline anticipated in the wake of the 1997-1998 financial crisis, depict the preliminary estimates by UNCTAD.

This regional increase, however, masks considerable variation in FDI flows to individual countries, United Nations Conference on Trade and Development (UNCTAD) said in a report.

China, the principal FDI recipient in developing Asia throughout the 1990s, retained its lead but saw a nearly 8 percent drop to just over $40 billion.

Compensating for this were the boom in the Republic of Korea (up nearly 55 percent, to $8.5 billion), the 20 percent increase in Singapore (to $8.7 billion), and the substantial recovery in Taiwan ($2.4 billion).

Among the five countries most affected by the crisis, flows declined in Indonesia, the Philippines and Thailand, while remaining steady in Malaysia and sky-rocketing in the Republic of Korea. As a result, all five together gained one percent, to reach $18 billion.

Cross-border mergers and acquisitions continued to be a driving force for FDI flows to the five crisis-hit countries reached an annual average value of $12 billion in 1998 and 1999, as compared to $1 billion annually in the 1994-1996 period.

They have been driven by some of the consequences of the crisis, such as the availability of cheap assets and additional incentives and have been responsible in turn for industrial and corporate restructuring, like in the Republic of Korea and Thailand.

Countries whose primary sources of foreign direct investment have been other states in the region continued to suffer from the negative effects of the crisis e.g., Vietnam, the least developed countries in Asia and, to some extent, China. FDI inflows to West Asia maintained their upward trend in 1999 following their recovery in 1997 and 1998.

Although direct investment flows to Thailand dropped 15 percent in 1999 to $5.8 billion Ñ this was in part due to the flattening of the wave of massive recapitalisation in the banking sector, which reached exceptional highs in 1998. Nevertheless, FDI flows into Thailand surpassed the historically high level the country had achieved in 1997. Manufacturing continued to attract considerable FDI to Thailand.

The investment prospects for developing Asia remain bright in the light of the quality of the underlying economic determinants for FDI flows, the recovery of the regional economy, the on-going liberalisation and restructuring efforts that are widespread in the region, and the probable accession of China to the WTO in the near future, the UNCTAD said.ÑAPP