Emerging markets displace US and UK in FDI league table

Posted on October 11, 2016

Investment in big emerging markets is surging, with India, China and Indonesia surpassing the US as recipients of greenfield foreign direct investment in the first half of this year. This comes as the economic picture brightens somewhat for emerging markets after a period of volatility.

The top 10 destinations globally for greenfield investments announced between January and July 2016 include eight emerging markets; and the three aforementioned countries rank first, second and third, with the US trailing in fourth place (see table).

Last year at the same midway point, seven emerging markets were in the top 10 and the US ranked first for capturing capital investment in greenfield projects.

This is according to figures from fDi Markets, an FT data service that tracks cross-border greenfield investments that are announced or launched (with no previous announcement) in any given period.

Investment into emerging markets as a whole is up year-on-year, with $314.9bn of greenfield investment unveiled during the first half of this year compared with $283.8bn this time last year.

Emerging markets are taking a bigger share of a bigger pie

Jan-July 2016 Jan-July 2015
Country Capex, $m* Country Capex, $m*
India 36,195 US 37,119
China 30,005 India 36,334
Indonesia 28,300 China 33,544
US 23,779 UK 29,240
Egypt 20,781 Indonesia 19,426
UK 20,637 Mexico 16,512
Vietnam 15,163 Brazil 11,548
Mexico 13,566 Malaysia 9,622
Saudi Arabia 10,592 Vietnam 9,588
Iran 9,074 Australia 8,325
Source: fDi Markets *projects announced or launched; includes estimates

India appears to be continuing its strong FDI performance, which saw it emerge by year-end as the top-ranked investment destination for greenfield capex in 2015. As of July 2016, the country had attracted $36.2bn, compared with China’s $30bn.

Investors very often chase growth, and India looks to continue to deliver. The International Monetary Fund expects the Indian economy, Asia’s third-largest, to expand 7.6 per cent in 2016-17 while the government is anticipating close to 8 per cent. Last year India surpassed China, its main competitor, as well as the US to become the number one destination for greenfield investment, as ranked by fDi Markets.

Indonesia is also continuing a good run, moving from fifth to third place and hauling in $28.3bn in the first half of 2016 compared with $19.4 the same period last year. Mega investments in metals, chemicals and energy have boosted Indonesia’s investment levels but manufacturing has also been performing strongly as a driver of inward investment.

The IMF has increased its growth forecast for developing countries to 4.2 per cent from the 4.1 per cent estimated in July while warning in an update to its World Economic Outlook released on October 4: “The outlook for these economies is uneven and generally weaker than in the past. While external financing conditions have eased with expectations of lower interest rates in advanced economies, other factors are weighing on activity.”

Advanced economies, meanwhile, are seeing slippage in their FDI competitiveness so far this year. The US has attracted only $23.8bn in the first six months compared with $37.1bn in the same period last year. The UK has dropped from fourth place (with $29.2bn attracted) in 2015 to sixth place ($20.6bn). Australia, hanging on to tenth place last year, has dropped out of the top 10, making room for a fast-rising Iran, which is benefiting from increased investor interest ahead of a relaxing of sanctions.

Courtney Fingar is head of content for fDi Intelligence, an FT data division.

This story has been revised to reflect the fact that the data are for cross-border greenfield investments that have been announced or launched during the periods in question.

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