Question : The Economic and Social Commission for Asia and the Pacific (ESCAP) serves as the United Nations’ regional hub promoting cooperation among countries to achieve inclusive and sustainable development. On which date it released ‘FOREIGN DIRECT INVESTMENT TRENDS AND OUTLOOK IN ASIA AND THE PACIFIC’ ?
(a) 22 December 2020
(b) 22 December 2020
(c) 22 December 2020
(d) 22 December 2020
Answer (a)
Related facts
- The Economic and Social Commission for Asia and the Pacific (ESCAP) serves as the United Nations’ regional hub promoting cooperation among countries to achieve inclusive and sustainable development.
- It has recently(22 December 2020) released a report named FOREIGN DIRECT INVESTMENT TRENDS AND OUTLOOK IN ASIA AND THE PACIFIC.
Highlights of the report
- Indian economy
- India’s economy could prove the most resilient in the subregion over the long term.
- India attracted comparatively more FDI in 2019 compared to 2018.
- In 2019, Viet Nam received the second largest share of inward greenfield investment (11%), followed by India (10%), and Sri Lanka (8%).
Within Asia and the Pacific, ASEAN was the largest destination for Japanese FDI outflows in 2019, receiving $35 billion, followed by China ($14 billion), India ($5 billion) and the Republic of Korea ($2 billion) (JETRO, 2020). - Inward FDI flows to South and South-West Asia slightly decreased by 2% in 2019,from $67 billion in 2018 to $66 billion in 2019. The growth was mainly driven by India,which accounted for 77% of total inflows to the subregion and received $51 billion in 2019, up 20% from the previous year.
- FDI outflows from South and South-West Asia increased for the fourth consecutive year, modestly growing from $14.8 billion in 2018 to $15.1 billion in 2019. The geographical spread of FDI outflows from the subregion remained uneven.
- Just two countries (India and Turkey) accounted for the vast majority of outflows in 2019.As such, the slight increase in outward FDI was predominantly due to an increase in outflows from India, which accounted for 80% of total outward investment from the subregion.
- In the short term, both inflows and outflows from and to the subregion are expected to decline. In the first three quarters of 2020, the value of greenfield FDI inflows declined by 43% compared to the same period last year, signaling a reversal of the growth trend in the subregion.
- Most of the greenfield flows (87%) were destined for India, although the overall greenfield inflows to the country declined by 29%.
- Equally, FDI from India is projected to decline in 2020, with the largest MNEs revising their earnings down by 25% in early 2020 due to the impacts of the pandemic.
- FDI inflows have been steadily increasing and positive, albeit lower,economic growth after the pandemic and India’s large market will continue to attract market-seeking investment. India’s fast-growing telecom and digital space, in particular, could see a faster rebound as global venture capital firms and technology companies continue to show interest in India’s market through acquisitions.
- Facebook and Google’s investment in Jio Platforms, an Indian, in 2020 worth $5.7 billion and $4.5 billion respectively, are testament to this trend.
- India was the most active terminator of agreements in the region, with 7 BITs(Bilateral investment treaties) terminated during January 2019 to October 2020 period (figure 9).
- Meanwhile, India has implemented a number of noteworthy investment policies and measures since 2019.
- Some of the most noteworthy include, the relaxation of limits to FDI in the insurance sector which abolished ownership ceilings for FDI insurance intermediaries; liberalization of FDI rules which ended equity caps in several sectors including coal and lignite mining, contract manufacturing and single brand retail trading.
Global Economy
Globally, both FDI inflows and outflows started to recover in 2019, with the former growing 30% to $1.5 billion and the latter increasing by 33% to $1.3 billion. However, the COVID-19 pandemic has caused global FDI flows to drop by 49% in the first two quarters of 2020 compared to the same period in 2019.
- Asia-Pacific’s share in global FDI inflows dropped from 45% in 2018 to 35% in 2019,and its share in global FDI outflows decelerated from 52% to 41%. Nonetheless, the region remained the largest source of global outflows for the second year running.
- In 2019, China and Hong Kong, China were the largest FDI recipients attracting 38% of total FDI inflows to the region. Japan was the largest source of investment from the region in 2019, responsible for 42% of regional outward FDI.
- The COVID-19 pandemic has accelerated the downward trend already recorded in recent years in greenfield FDI with the value of announced inbound greenfield investment projects from January to August 2020 dropping by 40% from the average over the same period in 2019. Likewise, outbound greenfield investment project values declined 48% over the same period in 2019.
- Intraregional greenfield investments as a whole have slowed in 2020 due to the pandemic, with announced intraregional greenfield investment values dropping 45% to $35 billion in the January-August 2020 period compared to the same period in 2019.
- FDI is expected to remain low and below pre-crisis levels throughout 2021. The outlook beyond 2021 is highly uncertain and dependent on the duration of the crisis, the effectiveness of policy interventions to stimulate investment and navigate the economic effects of the pandemic, as well as geo-economic tensions. FDI recovery rates are challenging to predict at this stage because they are dependent on the rate of overall socio-economic recovery, and consequently investment levels, within the region and socio-economic rate of recovery from countries outside of the region.
- On the bright side, the recent signing of the Regional Comprehensive Economic Partnership is expected to strengthen flows and lift investment prospects, especially for smaller and least developed countries in the group.
- Beyond this, restoring and increasing FDI in the medium and long-term in the region as whole requires swift, coherent and appropriately sequenced action from policymakers to, inter alia, review, revise and revamp FDI strategies to make them more fit-for-purpose, develop green growth recovery plans with a robust role for FDI, operationalize policy measures to support value-chain linked FDI and boost FDI in the digital economy.
By — Pankaj Pandey.
Link:
https://www.unescap.org/sites/default/d8files/knowledge-products/APTIT%20FDI.pdf