To: combjelly who wrote (695441 ) 1/26/2013 3:22:50 PM From: tejek Respond to of 1578133 Asean catches up with China in global FDI race Jan 9, 2013 11:30am by Stefan Wagstyl More evidence of a shift in foreign direct investment away from China to other emerging Asian economies, headed by Indonesia, Vietnam, the Philippines and India. HSBC says in a report that south east Asia’s share of global FDI inflows, which slumped from 8 per cent to 2 per cent after the 1998 Asian financial crisis, is back to 7.6 per cent – almost equal to China’s 8.1 per cent. With their young populations, these countries and India should see further FDI increases from companies looking to capitalise on low-cost labour, while Chinese inflows will slow as its population ages and its economy matures. Author and HSBC economist Trinh Nguyen says that as well as the economic change in China, three global trends will drive FDI increases in the rest of Asia: cheap money in the advanced world, the renminbi’s appreciation, and economic stagnation in the developed economies. While China was still the world’s largest FDI recipient in the first half of 2012, inflows have fallen in 11 of the last 12 months. Inflows into the Asean states have increased and closed the gap, as this chart illustrates: Source: Unctad, HSBC HSBC says that India is an obvious destination for companies seeking low-cost labour as it has a similar sized population to China’s – but it faces serious challenges:India has around 800m working age people (between 15 and 64), of which 560m are in the countryside. China has around 1bn workers, of which 500m are in rural areas. However, by the year 2020, India’s rural worker population will rise to 600m, while China’s will decline to 385m (UN Projections). This makes India increasingly competitive in terms of labour but we don’t think it is making the most of this advantage. Its cumbersome business environment, restrictive FDI policy and poor infrastructure can put off foreign investors. As a result, ASEAN countries such as Thailand, Malaysia, Indonesia, the Philippines and Vietnam, while not comparable in size, continue to offer opportunities to investors as they also have a good demographic story to tell. So policy matters, as Asia’s most successful emerging economies have shown, headed by South Korea. HSBC says:While cost and the potential growth are important considerations, what ultimately seals the deal is the accessibility of the market and the ease of operating in that environment. Multinationals don’t like limits on foreign investment of the kind that proliferate in India and are also in place in Indonesia, for example in banking, natural resources and transport. As China has proved, winning foreign investment is a very competitive global game. Players who deliberately handicap themselves have only themselves to blame.blogs.ft.com