ISLAMABAD: The combined foreign direct investment (FDI) flows to developing Asia fell 15 per cent to $443 billion in 2016, according to a UN report published on Wednesday. However, South Asia escaped the decline mainly due to a rise in flows to Pakistan and stable flows to India.

The report, titled ‘World Investment Report 2017: Investment and the Digital Economy’, says FDI to Pakistan rose by 56pc last year, pulled by China’s rising investment in infrastructure under the China-Pakistan Economic Corridor (CPEC). Some of the under-construction CPEC projects have also attracted a large amount of foreign investment, especially in electricity generation and transport.

The report, the flagship publication of the United Nations Conference on Trade and Development (UNCTAD), says South Asia was the only sub-region to avoid a contraction in foreign investment in 2016; FDI flows to the region rose by 6pc to $54bn.

Despite a historically high number of announced greenfield projects in 2015, FDI flows to India were largely flat at about $44bn in 2016, up only 1pc from 2015. Foreign multinational enterprises are increasingly relying on cross-border merger and acquisitions to penetrate the rapid growing Indian market.

Developing Asia remained the second-largest FDI recipient in the world, with China, Hong Kong, Singapore and India ranking among the top-10 FDI host economies. FDI outflows from developing Asia rose by 7pc to $363bn, mainly because of surging FDI outflows from China. An improved economic outlook in the Association of Southeast Asian Nations and China is likely to lift investor confidence and help boost FDI inflows in 2017 and beyond, the report says.

For the first time, China was the world’s second-largest investor, as FDI outflows surged by 44pc to $183bn, a new high. By contrast, flows from other sub-regions and major investing economies in developing Asia declined substantially. Overall, FDI outflows from developing Asia rose by 7pc to $363bn, driven by cross-border mergers and acquisitions purchases by Chinese firms.

Published in Dawn, June 8th, 2017