Investment Flows to Developing Asia Defy COVID-19, Rise 4%


Developing Asia is the only region that recorded growth in foreign investment in 2020, accounting for more than half of global inflows and outflows.

Foreign direct investment (FDI) flows to developing countries in Asia increased by 4% to reach $ 535 billion in 2020, reflecting resilience in the face of the global FDI contraction, according to the World Investment Report 2021 by UNCTAD, published June 21.

“Despite the pandemic, FDI to and from the region remained resilient in 2020. Developing Asia is the only region to record growth in FDI, accounting for more than half of global FDI inflows and outgoing, “said James Zhan, director of investments and enterprises at UNCTAD. .

“The outlook for FDI in 2021 for Asia is more favorable than the world average, due to the recovery in trade, manufacturing activities and a strong forecast of GDP growth,” he added.

More than half of global flows

The region, already the world’s largest recipient of FDI in 2019, received more than half of global FDI. Growth was driven by China, Hong Kong (China), India and the United Arab Emirates. Elsewhere in the region, FDI has contracted. In economies where FDI is concentrated in tourism or manufacturing, the contractions have been particularly severe.

East Asia

Flows to East Asia increased 21% to $ 292 billion, inflated by the resumption of FDI in Hong Kong (China), which jumped 62% (to $ 119 billion), after a sharp drop in FDI in 2019 and due to business reconfigurations by multinationals. enterprises (MNEs) having their seat in the economy.

In China, FDI growth accelerated in 2020 (from 6% to $ 149 billion), reflecting the country’s success in containing the pandemic and its rapid recovery in GDP growth. Growth has been driven by technology-related industries, e-commerce, and research and development.

In the Republic of Korea, FDI fell 4% to $ 9 billion. Although the country was among the first to contain the COVID-19 epidemic and economic growth remained strong, a sharp decline in cross-border mergers and acquisitions (M&A) due to large divestments led to a decline in investment .

South East Asia

Southeast Asia, the engine of global FDI growth over the past decade, recorded a 25% contraction in FDI to $ 136 billion.

Singapore, Indonesia and Viet Nam, the region’s largest FDI recipients in that order, all recorded declines in FDI. FDI to Singapore fell 21% to $ 91 billion, to Indonesia 22% to $ 19 billion, and to Viet Nam 2% to $ 16 billion.

Lockdown measures, successive waves of COVID-19 infection, supply chain disruption, declining corporate profits, economic uncertainties and delayed investment plans were the main reasons for the contraction .

In Thailand, FDI fell to -6 billion dollars, driven by the sale of Tesco (United Kingdom) to a group of Thai investors for 10 billion dollars. In Malaysia, FDI fell 55% to $ 3 billion. FDI in Cambodia remained stable at 3.6 billion dollars thanks to financial flows. In Myanmar, FDI fell 34% to $ 1.8 billion.

South Asia

FDI in South Asia rose 20% to $ 71 billion, mainly due to a 27% rise in FDI in India to $ 64 billion.

In India, robust investments in ICT and construction supported FDI inflows. Cross-border mergers and acquisitions jumped 83% to $ 27 billion, with major deals involving ICT, health, infrastructure and energy.

FDI has fallen in other South Asian economies that depend on export-oriented clothing manufacturing. Inflows to Bangladesh and Sri Lanka fell by 11% and 43% respectively. In Pakistan, FDI fell 6% to $ 2.1 billion, dampened by continued investment in the power generation and telecommunications sectors.

West Asia

FDI flows to West Asia increased 9% to $ 37 billion in 2020, driven by a marked increase in mergers and acquisitions (60% to $ 21 billion) in resource-related projects natural.

FDI in the United Arab Emirates rose 11% to $ 20 billion due to major acquisitions in the energy sector. FDI in Saudi Arabia has remained robust; inflows increased 20% to $ 5.5 billion, with investment focusing on financial services, retail, e-commerce and ICT.

FDI in Turkey fell 15% to $ 7.9 billion. Investment picked up towards the end of the year ($ 2.3 billion in the fourth quarter), preventing a steeper decline.


Outward FDI (FDI) from Asia rose 7% to $ 389 billion – again, the only region to record an expansion in outflows. This underlines the importance of the region as a significant investor for the developing region.

Growth was driven by strong investments from Hong Kong (China) and Thailand. China, the largest investing country in 2020, saw FDI stabilize at $ 133 billion. The country’s tighter screening of FDI, coupled with increased control by the United States of investment from China, has weighed on the country’s FDI since 2017.

The continued expansion of Chinese multinationals and active overseas M&A purchases supported stabilization in 2020.


The FDI outlook for the region is more favorable than the global outlook, with projected growth of 5% to 10%, thanks to resilient intraregional value chains and strong prospects for economic growth. Signs of recovery in trade and industrial production in the second half of 2020 provide a solid basis for FDI growth in 2021.

Manufacturing, an important FDI sector for the region, has already shown signs of recovery in the second half of 2020. However, in small service-oriented economies and labor-intensive industries, in particular for hotels, tourism and clothing, FDI could decline further in 2021.

Developing Asia: FDI Flows, Top 5 Host Economies, 2020
(value and change)

Source: UNCTAD, World Investment Report 2021.


About Author

Leave A Reply