Despite a global contraction in foreign investment in 2014, a number of locations look set to be well on their way to finish the year stronger than ever, when full-year results are released.
The stream of foreign investments began to weaken in 2014, according to greenfield investment monitor fDi Markets. In the first three quarters of 2014, investors launched 12,525 new ventures, compared with 13,164 projects started in the same period of 2013, down 4.9%.
Defying this downward trend was Egypt, the most improved destination for FDI worldwide. The country saw a 61% increase in new crossborder ventures in the first three quarters of 2014 with 58 projects recorded. Shaken by the Arab Spring uprisings in 2011 and the military ousting of president Mohammed Morsi in 2013, Egypt seems to be firmly back on investors’ radars. This is especially true given that the number of projects secured in 2014 is on par or higher than the average number of investments recorded before this bout of unrest.
Real estate revival
Egypt’s rebound in FDI figures was driven mostly by the real estate sector and particularly by two United Arab Emirates-based companies, Arabtec Holding and Majid Al Futtaim Group. In March 2014, Arabtec Holding announced 12 residential projects across the country, while in the same month Majid Al Futtaim unveiled plans to build four supermarkets. Consequently, companies hailing from the UAE were among the top investors in Egypt in 2014, ahead of Saudi Arabia, the UK and the US.
Second on the list of the countries that recorded the biggest gains in FDI in 2014 is Vietnam. In the first three quarters of 2014, the country secured 151 new projects, up 57% from the same period a year earlier.
“With improvements in the stability of the exchange rate, reductions in the level of inflation – which fell from a year-on-year peak of 23% in 2011 to 6% in 2013 – and an increase in foreign exchange reserves, [Vietnam’s] macroeconomic environment has stabilised in recent years,” reads an investment report published by global consultancy PwC in mid-2014.
PwC experts explain Vietnam’s growing appeal to investors by pointing towards ongoing negotiations on the Trans-Pacific Partnership, a regional treaty that might provide easier access to American and Japanese markets for apparel and footwear manufactured in Vietnam.
Malaysia, with a 54% increase in the number of investments in 2014, closely follows Vietnam. With 156 new projects landed in the first three quarters of 2014, Malaysia is currently the 15th most popular destination for FDI worldwide (up from 27th spot in 2013) and in south-east Asia is second only to Singapore, which traditionally ranks among the top FDI performers globally.
Malaysia's strengthening position in FDI tables stems by and large from the reformist push of Najib Razak’s government, which has been in power since 2009. The country currently ranks an impressive 18th in the World Bank's Doing Business ranking. Importantly, according to the World Bank, Malaysia is among the world's top improvers when it comes to the business environment, with 17 business-oriented reforms introduced in the past nine years, five more than the global average.
In 2014 alone, Malaysia introduced measures to help decrease the cost of starting a business, established a one-stop shop system for obtaining construction permits and simplified the process of getting connected to the electrical grid. Two sectors that fuelled growth in FDI inflows into Malaysia are financial services and transportation. The country received 20 new financial services projects in the first three quarters of 2014 and 10 new transportation projects, in both cases double what it secured in the same period in 2013.
The Philippines also ranked high on the list of locations popular in 2014, securing the biggest growth in the number of crossborder investments. In the year to the end of September, the Philippines received 107 greenfield projects, up 37% on 2013. Although not as business friendly as Malaysia (the country ranks 95th according to the most recent Doing Business ranking, down nine places year on year), there are a number of factors that caught site selectors' attention in the past two years, according to a report published in August by the US Commercial Service, a trade promotion arm of the US Department of Commerce.
“The Philippines’ GDP rose by 7.2% [in 2013], second only to China in the Asia region. Most economists project the economy will grow approximately 5% to 6% in 2014,” the report reads. Additionally, US Commercial Service experts claim the country’s standing in the eyes of investors rose, with its continuing stability throughout 2013 despite Typhoon Haiyan, which ravished the eastern part of the country, and a deadly earthquake in Bohol province.
The main sectors for FDI in 2014 remained relatively unchanged from 2013, as the Philippines continues to position itself as a main hub for business process outsourcing services. However, the country also attracted 10 new real estate projects, more than three times higher than in the first three quarters of 2013. Most of these projects were related to office developments, a sign that investors are betting on further expansion of the Philippines’ economy in the near to mid-term.
India closes the list of top major FDI destinations that recorded the biggest increase in crossborder investment projects in the first three quarters of 2014. In that period, the country attracted 488 new projects, 32% more than in the comparable period of 2013. The country that in previous years has seen the pulling back of companies such as retail giant Wal-Mart and Warren Buffet's conglomerate Berkshire Hathaway, seems to be regaining investor trust with new prime minister Narendra Modi in charge.
Shortly after taking office in May 2014, Mr Modi launched pro-FDI campaign ‘Make in India’ and introduced a number of business-friendly measures such as easing FDI controls in sectors such as construction, defence and the railways. In the first nine months of 2014, the main sectors for FDI remained unchanged from 2013, with software and IT services, financial services and business services the three top sectors for investment.