Intra-Asian FDI reached $272bn in 2016

Updated 26 Oct 2017

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ISLAMABAD: The Asian Development Bank says that foreign direct investment (FDI) within Asia rose in absolute value to reach $272 billion in 2016, despite a 6 per cent decline in global FDI flows into the region.

The Asian Economic Integration Report 2017, released on Wednesday, says the intra-regional FDI increased as a share of the total FDI to the region from 48pc in 2015, to 55pc in 2016.

Given the role intra-Asian FDI plays in enhancing global and regional value chain development, this is expected to help strengthen the region’s trade growth globally.

The report says that strong intra-regional trade and investment are acting as a buffer for the region against uncertainties in global trade and economic growth, according to the report.

In 2016, Asia’s intra-regional trade share - measured by value - rose to 57.3pc in 2016, a record high, up from an average of 55.9pc from 2010 to 2015.

South Asia saw a marginal increase (3pc) in inward FDI to $50.4bn - with all economies above 2015 levels except Afghanistan and Bhutan. Mauritius, Singapore and Japan were the top three sources accounting for 90pc of FDI in India. Inward FDI to Pakistan, Sri Lanka and Bangladesh grew 56pc, 32pc and 4pc, respectively.

Growing trade and investment linkages in Asia and the Pacific have helped improve the region’s economic resilience to uncertainties in the global economic and trade policy environment.

Asian economies have continued expanding their global presence, with FDI originating from Asia rising 11pc in 2016 to $482bn, primarily through investment in renewable energy, natural resources, semiconductors, and information technology.

Twenty years after the Asian financial crisis, Asia stands strong —with more flexible exchange rates, higher foreign reserves, healthier financial systems, stronger regulations, deeper capital markets, and better regional financial cooperation mechanisms.

Nonetheless, the region’s economic growth and financial stability were briefly disrupted by the GFC. Significant challenges remain, along with unresolved financial market and system weaknesses.

Published in Dawn, October 26th, 2017