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APTIT FDI 20212022 Download
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Trade, Investment and Innovation Division +66 2 288-1234 [email protected]

• The COVID-19 pandemic has contributed to the collapse of global foreign direct investment (FDI) flows, which fell 42 per cent from US$1.5 trillion in 2019 to an estimated U$$859 billion in 2020. The most recent data for 2021, however, suggests global FDI flows have already started to rebound, having reached US$852 billion in the first half of the year.

• In Asia and the Pacific, the rebound in the first half of 2021 was driven by accelerated FDI flows, both to the East and North-East Asian and South-East Asian subregions. The region as a whole, however, has remained a top destination for inward FDI since 2020, thanks to China in the East and North-East Asian subregion and India in the South and South-West Asia subregion. Flows to the former grew by 23 per cent and to the latter by 20 per cent in 2020. Meanwhile, FDI inflows to the North and Central Asia subregion recorded the largest contraction at 59 per cent between 2019 and 2020.

• Announced greenfield investments targeting the Asia-Pacific region totalled US$103 billion in 202,1 falling only slightly short of their value in the same period of 2020 (US$106 billion) largely due to the impact of the severe third and fourth waves of COVID-19 in the region.

• Intraregional investments continued to be significant in the region, with 47 per cent of all greenfield investment to Asia and the Pacific being intraregional in nature in 2020. Overall greenfield investment has continued to decline in 2021, and intraregional greenfield investments have also continued to decline.

• The Asia-Pacific region maintained its position as the largest source of global FDI outflows since 2018. Developing countries in the region accounted for 77 per cent of all outflows in 2020.

• The Asia-Pacific region has remained an attractive market for mergers and acquisitions (M&As), despite the COVID-19 pandemic. M&As only declined moderately by 1.5 per cent (in value) in the Asia-Pacific region in 2020, compared to the 10 per cent decline witnessed globally.

• Simultaneously, a growing number of deals have also been put on hold. Due to remote communication, increased cautiousness of buyers and delayed regulatory approvals, have led to prolonged negotiations and an increase in pending M&As in the region, equal to US$736 billion in 2021, much above the completed M&As with a value of US$461 billion. This trend is a continuation from 2020, when 53 per cent of all deals were put on hold due to the pandemic.

• Asia and the Pacific economies are expected to register small, but positive, growth in FDI inflows. However, in 2022, FDI is expected to remain below pre-pandemic crisis levels in the region as many economies are still struggling to contain the third and fourth waves of the pandemic as well as speed up vaccination roll out to the general public, and respond to severe socio-economic disruptions exacerbated by the pandemic.

• The coming into force of the Regional Comprehensive Economic Partnership Agreement, together with the recently concluded ASEAN Investment Facilitation Framework, is expected to help boost more sustainable FDI in the region, particularly value chain-linked FDI, in the medium and long term.

• Increasing investment in the health-care sector was already a core priority in many Asian and Pacific countries before the pandemic. However, declining flows into the sector and the need to be better prepared for any future health crises has led to greater prioritization of the sector in investment and promotion activities.

• Greenfield investment in the health sector in Asia and the Pacific has been volatile since 2008. Between 2019 and 20202, investment in the health-care sector dropped by 45 per cent, and continued to decline in 2021 to 34 per cent in the first three quarters of the year.

• Although investment promotion activities are essential in attracting the quantity and quality of investment needed in the health-care sector, key challenges include poor regional and domestic investment ecosystems, lack of capital, technology and skills, low regulatory capacity, and poor infrastructure and related services.

• Regional cooperation and political commitment to openness for investment will be critical to helping economies build back better and harness the potential of FDI, particularly for the health sector. Regional and multilateral cooperation is needed in addressing transnational challenges, and make national and international investment governance more coherent and sustainable development oriented.

Contact
Trade, Investment and Innovation Division +66 2 288-1234 [email protected]