With emerging countries rebounding strongly from the global recession, the continued shift of FDI to these areas in 2010 was expected. The shift to emerging markets is exemplified by Brazil, which attracted the largest increase in greenfield FDI in 2010. Latin America and the Caribbean as a whole was the only region to see an increase in greenfield capital investment in 2010, largely driven by FDI into Brazil.
The growing importance of Asia-Pacific was also seen in the FDI statistics for 2010, with Asia-Pacific recording growth in the number of inward FDI projects. Four of the major economies in the region (China, India, South Korea and Australia) recorded the largest increases in greenfield FDI overseas in 2010.
Growth of greenfield FDI into the emerging markets of Latin America and Asia-Pacific, and a partial recovery of FDI levels in eastern and south-east Europe, fuelled the very strong growth of FDI in manufacturing sectors in 2010. However, FDI in most services sectors failed to recover in 2010 with weak investment opportunities in Europe in particular.
The fDi Markets database included a new service in 2010, tracking investor signals, which indicate when a company is considering overseas investment. The signals provide unique insights into the future of FDI.
Investor signals show that the most attractive countries for future investment are broadly consistent with the location of greenfield FDI in 2010. This suggests that companies will map out their global FDI in a similar location pattern to 2010.
Of the most attractive countries for future FDI, India, Mexico, Indonesia and Turkey are the only countries that received a higher share of investor signals than their share of global FDI projects. fDi Intelligence therefore expects FDI into these four countries to increase significantly in the short to medium term.
The source countries of companies considering future FDI is also very similar to FDI trends in 2010. Indian companies are the main exception, with a high number of Indian companies considering future FDI compared with their level of FDI in 2010. fDi Intelligence expects Indian FDI overseas to grow strongly in the short to medium term. Investor signals also indicate that companies from the UK, China and Australia are planning to accelerate their FDI overseas.
Software top sectors
The top three sectors for investor signals (software, financial services and business services) are the same as the top three sectors for FDI projects in 2010, suggesting that they will continue to be the major source of FDI in 2011 and after. The sectors that have a significantly higher share of investor signals than FDI are coal, oil and natural gas; food and tobacco; consumer products; and textiles.
Current political instability in the Middle East and north Africa aside, fDi Intelligence expects strong growth of FDI in the coal, oil and natural gas sector as the world economy expands, pushing up demand. With growing food consumption in emerging markets and rapidly rising prices, FDI in the food and beverage sector is likely to grow above its trend growth rate. Rising incomes in emerging markets and gradual economic recovery in developed markets are also encouraging companies in consumer products and textiles to expand overseas to meet growing demand for consumer goods. fDi Intelligence also expects growth in software and IT services, communications, automotives and renewable energy in 2011, which is supported by investor signals from companies in these sectors.
Long-term growth forecast
The FDI forecasting unit of fDi Intelligence has produced detailed five-year FDI forecasts for destination countries, source countries and sectors. The headline forecast is for a 6.5% growth in greenfield FDI projects in 2011, with more than 12,800 projects expected. Further growth in FDI is forecast for subsequent years with the number of global FDI projects reaching more than 15,000 for the first time in 2014.