FDI inflows into South Asia decline

News Desk in Islamabad/Dawn
Asia News Network

Islamabad (Dawn/ANN) - The foreign direct investment (FDI) inflows into South Asia declined sharply in 2012 by an estimated 27 per cent, having risen by 18 per cent the previous year, according to results of a survey released in a report by the World Bank Multilateral Investment Guarantee Agency.

The report, 'World Investment and Political Risk', however says that FDI into South Asia is projected to rebound strongly over the next two years.

Foreign investors, attracted by stronger economic growth in developing countries while mindful of risks, remain relatively optimistic about these destinations in the short term according to the results of a survey.

The World Bank report cautions that as 2012 draws to a close, the economic turbulence unleashed by the 2008 global financial crisis persists.

Although FDI inflows to emerging markets began to recover in the years following the crisis, they are expected to decline this year.

Having risen by 27 per cent to US$1.9 trillion in 2011, driven primarily by cross-border mergers and acquisitions and rebounding growth during the first half of that year, global FDI inflows declined to an estimated US$1.7 trillion in 2012.

Global economic growth estimates for 2012 indicate a continuing fragile recovery.

The ongoing sovereign debt crisis and recession in the euro zone, curtailed bank lending and domestic deleveraging, fluctuating but elevated commodity prices, and the ongoing political turmoil in the Middle East and North Africa has slowed the initial rebound that followed the 2008 global financial crisis, it says.

This slow progress has had an impact on developing countries, which initially fared well in terms of rebounding growth rates, private capital flows, and foreign direct investment, the report says.

For 2013, the report says, FDI inflows to developing countries are projected to rebound by 17 per cent to US$697 billion, as global economic growth is anticipated to accelerate modestly.