Asian FDI should assume greater importance to account for 12% to 15% of the global stock of FDI compared with the current 10 %. More Asian firms will grow to rank among the top transnational corporations in the world due to rapid economic growth and industrial upgrading. Outward Asian FDI will continue to focus on both natural resources and manufacturing with more Asian SMEs becoming a part of this new outward FDI, spurred by policy reforms reducing red tape, favouring domestic entrepreneurship and the need to invest abroad to avoid competition and to improve their competitiveness. This Asian outward FDI growth will continue until 2009.

Asian companies, other than wanting to enter new markets, will also try to obtain technology and financing from foreign investors. To achieve these goals, they will need to enter into joint ventures.

Outward FDI, traditionally led by Malaysia and Singapore, will see more action coming from north Asia.

London will continue to be a springboard into Europe for Asian FDI but London’s dominance will be increasingly challenged by tier-two cities in both west and east Europe. Within North America, more Asian FDI will seek out investment opportunities in selected Latin American countries as a springboard into North America.

As for inward FDI, Asian governments are likely to cut non-tariff barriers and improve regional infrastructure, as well as entering into more public-private partnerships.

Other than west Asia, the rest of Asia should remain the world’s most favoured regional location since Asia offers numerous attractive locational advantages.

Lawrence Yeo is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services.

E-mail: Lawrence@asiabizstrategy.com