Greenfield FDI started to recover in 2013 with 10.94% annual growth, according to figures released in The fDi Report 2014, an annual assessment of crossborder investment based on the fDi Markets database, which, like fDi Magazine, is part of the Financial Times’ fDi Intelligence division.
The growth in FDI in 2013, however, was unevenly distributed across regions of the world. Latin America and the Caribbean was the best performing area, with a doubling of
FDI in 2013.
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The Middle East recorded the second largest increase in FDI in 2013, 43.68% higher than in 2012. Over the same period, Africa recorded growth of 10.76% and North America experienced a slight decline of 1.36%. FDI also fell in the Asia-Pacific (by 4.67%) and in Europe (by 12%). Overall, Asia-Pacific, and Latin America and the Caribbean regions attracted the highest volume of FDI in 2013.
FDI in both China and the US fell slightly in 2013 as it did in most major economies. Growth of FDI in 2013 was mainly in medium and small sized emerging and frontier markets, most notably Nicaragua, Myanmar, Vietnam, Iraq, Jordan, Colombia, Peru and Mozambique.
An indicator of the nascent world economic recovery is that FDI in the hotels and tourism sector increased by 36.3% in 2013, while FDI in building and construction materials increased by 88.39%.
A special feature of the report, focusing on location determinants, demonstrates that FDI was primarily market-seeking, with more than 45% of FDI projects driven by access to domestic markets and one-third of FDI projects driven by proximity to (regional) markets and customers. This strongly suggests that the growth in FDI in 2013 is linked to expectations of market growth as economic recovery takes place.
The report also notes how the demand for cloud storage and data back-up among consumer users is boosting FDI into the communications sector. In 2013, fDi Markets recorded 762 investment projects in the communications sector with a total value of $61.59bn. This represents an increase of 82.2% on the 2012 spending and the highest capital investment figure for the communications sector since fDi Markets began recording such data in 2003.
Other key findings of the report include:
• Asia-Pacific remained the leading destination for FDI in 2013 with projects recorded bringing capital investment to $184.67bn.
• While China still leads Asia-Pacific in 2013 with a dominant 34.73% market share position, announced FDI into the country declined slightly while several other countries in the region recorded very strong FDI growth. Vietnam almost tripled its FDI in 2013 to $15.31bn from $5.34bn the year before. FDI into Myanmar, which continues to benefit from political and economic reform, grew from $1.54bn in 2012 to $13.22bn in 2013.
• Even though FDI into Europe declined in 2013, the UK remains the leading destination, accounting for almost 20% of FDI into the region.
• Iraq and Jordan saw major growth in greenfield FDI in the Middle East.
• Countries in Latin America and the Caribbean region showing strong growth for greenfield FDI included Nicaragua, which attracted the biggest project in the world in 2013, a $40bn canal. Mexico also saw strong growth in greenfield FDI, while FDI in Brazil was flat.
• Project numbers and resulting capital investment in North America declined 0.77% and 1.36%, respectively. Ontario was the top province or state in the region with $7.23bn invested in 2013.
• Africa performed well in 2013, attracting $51.98bn in inward capital investment compared with $46.92bn in 2012.
• Western Europe was the top source region for FDI in 2013. The region accounted for 34.94% of all announced outward FDI in the year.
• Coal, oil and natural gas; communications; business services; renewable energy; and real estate were the top five sectors by capital investment in 2013, accounting for 47.26% of FDI globally.
This year’s issue of the report focuses for the first time on the capital investment announced by foreign investors rather than the number of FDI projects. A focus on capital investment provides a strong indicator of how foreign investors are responding to the nascent world economic recovery.
In terms of expectations for the coming years, fDi Intelligence anticipates growth in the FDI market to accelerate in 2014 and record solid annual growth over the next five years.
The expectation is that countries that are beating economic growth forecasts and with strong economic fundamentals and political stability will record the fastest growth of FDI in 2014.
Asia-Pacific is expected to increasingly become a major greenfield investor overseas and the hype surrounding opportunities to attract Chinese FDI will become fact rather than fiction in the next five years.
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