NCCR - Patterns and Dynamics of Asia’s growing share of FDI

Capital throughout the world has become increasingly mobile in recent decades and international trade has been exploding. Advances in information communications technology and the accelerated pace of international distribution in recent years have promoted the growth of foreign investment which divides the various processes of research and development, procurement, production, manufacturing and sales, among others, between a number of countries. Until the recent past, foreign direct investment and trade mainly flowed from the developed countries into the developed countries: in particular Western Europe, the United States, and Japan). Until the mid-1980s, the role of developing and transitional Asian economies as sources of investment was negligible.

A regional pattern of FDI flows has emerged, with investors’ attention shifting away from traditionally important locations in developed countries in favour of emerging markets, especially Asia and South-eastern Europe. A survey by the United Nations Conference on Trade and Development found prospects for Asia and the Pacific to be most positive, with over 85 per cent of experts, multinational corporations and investment promotion agencies expecting significantly increased FDI flows to the region. FDI flows have increased dramatically in recent decades and continue to be a driving factor of economic globalization. As a centre for growth in the world economy, large parts of Asia have become a particularly attractive place for market-seeking FDI. It is in Asia that many of the recent and most innovative agreements have been signed and for which a detailed analysis of preferential commitments is available. In numerous Asian countries FDI restrictions have been reduced, leading to accelerated technological exchange and globally integrated production and marketing networks. Overall, this has benefited the emerging countries that have opened their doors to FDI. According to the 2007 World Investment Report, global FDI inflows rose in 2006 for the third consecutive year . This growth was shared by countries in various stages of development. FDI inflows to South, East and Southeast Asia maintained their upward trend last year, rising by 19 per cent to reach a new high of US$ 200 billion according to UNCTAD’s annual report on global investment trends. South and Southeast Asia saw a sustainable increase in FDI flows, while growth in East Asia was slower. However, FDI in East Asia is shifting towards more knowledge-intensive and high value-added activities.

The book comprises three parts to investigate the current scenario in Asia. The first part addresses the internationalization strategy of emerging Asian firms with examples from China and India. The second part relates to the national and regional initiatives affecting trade and investment in Asia. The third part focuses on the Asian interest in multilateral rules on trade and investment. It raises the question of a potential new paradigm.

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