China, India and Indonesia are anticipated to play a key role in attracting higher FDI (foreign direct investments) inflows to the developing Asian region between 2017 and 2020, according to GlobalData, a leading data and analytics company.

FDIs are segregated into greenfield and brown field investments. Projects built by a parent company in a foreign land from scratch are referred to as greenfield investments. Brown field investments represent the acquisition of existing facilities for new production.

According to the United Nations Conference on Trade and Development’s (UNCTAD) 2017 World Investment Report, FDI inflows in the developing Asian region are estimated to rise by 15 per cent over the previous year to $515 billion in 2017.

Arnab Nath, Economic Research analyst at GlobalData, said: “With the liberalization of the high growth nations, greenfield investments in the developing Asian nations witnessed over an 8 per cent rise in 2016. This, coupled with a significant improvement in the economic outlook, is expected to spur the investor sentiment over the next three years.”

An increase in globalization and urbanization is resulting in a shift from the primary (mining, quarrying and petroleum) and manufacturing industries to services in the developing Asian region. Of the total greenfield investments in 2016, 60.2 per cent were in the services sector followed by manufacturing (38 per cent) and the primary sector (1.8 per cent).

The liberalization of major economies in the region resulted in greenfield investments in the services and manufacturing sector to rise by 13.6 per cent and 1.6 per cent respectively in 2016 whereas greenfield investments in the primary sector witnessed a decline of 29.3 per cent during the same year due to lower global commodity prices.

India liberalizes FDI in key sectors

In early 2018, the Indian government relaxed the FDI policy for key sectors such as construction & real estate, civil aviation and retail. Foreign investments in the real estate sector were prohibited until the Government amended its FDI policy and allowed 100 per cent FDI without any government approval.

Goods are sold to individual customers under the same brand in single brand retail trading (SBRT), which has been revised from 49 per cent to 100 per cent FDI without any government approval. In the civil aviation sector, foreign airlines were not allowed to invest in the government owned Air India until the policy was relaxed recently. As per the latest amendment, foreign airlines can invest up to 49 per cent of their paid up capital in Air India.

Complementing all these developments, India jumped 30 spots in the ‘World Bank’s 2018 Ease of Doing Business’ ranking, thereby drawing further attention for the country from foreign investors. The country’s rank among 190 countries has improved from 130th in 2017 to 100th in 2018.

India’s score of 60.76 out of 100 in the doing business report is ahead of the South Asian nations average of 53.64 in 2018. A significant improvement has been witnessed in the parameters of resolving insolvencies (136th out of 190 countries in 2017 vs 103rd in 2018), paying taxes (172nd vs 119th), getting credit (44th vs 29th), enforcing contracts (172nd vs 164th), protecting minority investors (13th vs 4th), and construction permits (185th vs 181th).

China becomes investor friendly to tap more inflows

China has emerged as one of the top destinations for inward foreign investments over the last decade, which has played a key role in the country’s growth. In January 2017, the State Council issued a new circular to improve the business environment and boost investments in the country. The Ministry of Commerce confirmed plans to reduce restrictions on market access in the areas of manufacturing, services, mining and green industries.

Under the ‘Made in China 2025’ initiative, China is encouraging foreign investment in the fields of infrastructure construction and green manufacturing. The country’s fiscal and taxation support policy makes the country more investor friendly with more authority given to China’s national-level development zones (these are special areas where foreign investment is encouraged) in investment management.

Regional economic partnership to trigger investment impetus

The Regional Comprehensive Economic Partnership (RCEP), which delivers a free trade agreement among ten ASEAN economies (Indonesia, Cambodia, Myanmar (Burma), Thailand, Vietnam, Brunei, Laos, Malaysia, Singapore, and The Philippines), is expected to be signed this year. The agreement will provide a stimulus for investment across ASEAN countries. – TradeArabia News Service