The Global FDI Annual Report 2022, produced by GlobalData and Investment Monitor, shows the number of greenfield foreign direct investment (FDI) projects into the Asia-Pacific region grew by 17% in 2021, totalling 3,419. However, this is still well below the level experienced in 2019, before the Covid-19 pandemic hit.
East Asia was the leading Asia-Pacific FDI region in 2021
East Asia recorded the largest number of FDI projects in 2021 on a regional basis in Asia-Pacific. Totalling just over 1,000 projects, the region finished ahead of South-East Asia (908 projects) and South Asia (795). Oceania was the region with the largest annual growth (65%), driven by FDI into Australia. It was also the only Asian region to have received more inward investment projects in 2021 than in 2019. Central Asia saw the largest drop in FDI project volumes in 2021 (compared to 2019), falling by 57%.
India received the most FDI projects in Asia-Pacific region
India received 713 inbound investment projects in 2021, a 27% increase when compared with 2020. The country accounted for more than one-fifth of total inbound FDI into the Asia-Pacific region. The largest investment in terms of job creation recorded in 2021 was in India. In September 2021, Teleperformance, the France-based global contact centre provider, announced plans to expand its workforce in the country, creating 50,000 new jobs.
Australia experienced the largest growth in FDI of any country in the Asia-Pacific region in 2021, at 65%. It growth saw it surpass China, becoming Asia-Pacific’s second largest inbound recipient. This surge was driven by a quick recovery of its leading sectors, such as software and computer services and business and professional services, after dips in 2020 caused by Covid-19. Australia also made large gains in several other sectors, which often exceeded pre-Covid levels. Financial services FDI almost double compared with levels in 2019, while renewables, logistics and communications FDI grew strongly.
Eight of the top ten Asia-Pacific inbound destinations recorded an annual increase in FDI in 2021. Only Vietnam (-13%) and Malaysia (-6%) saw levels decline.
East Asia drives outbound Asia-Pacific FDI
More than half (58%) of Asia-Pacific's outbound FDI comes from East Asia. However, growth in outbound FDI projects from the sub-region grew by only 2% on 2020 figures, and contracted by 27% when compared with 2019. By contrast, South Asia was growth of 91% in 2021 when compared with 2020 figures.
When it comes to outbound FDI projects emanating from the Asia-Pacific region, China was the most productive country in 2021 with 631 projects. This represented a 17% increase from 2020 but was still 9% below 2019 levels. However, it was Japan’s huge decline – with a 50% lower volume of projects in 2021 when compared with 2019 – that accounted for East Asia’s overall decline. Japan still remained the second largest outbound market in Asia-Pacific for FDI projects.
India and Hong Kong were big gainers throughout the three-year period analysed. Indian companies created 416 projects in 2021, up 31% from 2019, while Hong Kong-based companies grew their outbound FDI levels by 39% in 2021 when compared with 2019.
Outbound FDI from Singapore and Australia also grew substantially in 2021 when compared to 2020. However, this was more of a recovery as compared to the number of outbound projects recorded in 2019, both countries grew by only a modest amount.
US and Western Europe are key source markets for Asia-Pacific FDI
The US and Western European countries were the dominate source markets for FDI into the Asia-Pacific region in 2021. Companies based in the US created more than 1,000 FDI projects in the region in this year. The UK and Germany ranked second and third, respectively, as the next most important source markets. In fact, both North America and Western Europe-based companies accounted for a larger shared of FDI into Asia than inter-Asian FDI. Singapore, China and Japan were the biggest sources of inter-Asian FDI.
Only a small proportion (6%) of FDI into the Asia-Pacific region came from other world regions. Of these regions, the Middle East and North Africa was the largest source market, with FDI projects into Asia-Pacific almost doubling in 2021. The United Arab Emirates was the primary source of this FDI, though projects from Israel and Saudi Arabia also continued to increase.
Top sectors for FDI projects into Asia-Pacific in 2021
Software and computer services was the largest sector in Asia-Pacific in 2021 when it comes to inbound FDI, with 659 projects. Asia-Pacific accounted for 23% of global software FDI – the second largest inbound world region, behind Western Europe. India, Australia and Singapore were key tech destinations within Asia-Pacific in 2021.
The sectoral composition of FDI into Asian-Pacific almost mirrored that of global FDI in 2021. Of the top ten global FDI sectors, only the consumer goods sector was missing from the Asia top ten (with automotive ranking tenth).
Asia-Pacific was the number one world region for FDI in education and space and defence. Although they are relatively small FDI sectors, Asia-Pacific accounted for a respective 43% and 26% of global inflows. India and, to a lesser extent, China were chief destinations for education FDI, while Australia was a preferred home for space and defence FDI. Additionally, Asia-Pacific accounted for a high proportion of global FDI in electronics, tourism and financial services.
Leading investors in Asia-Pacific in 2021
Amazon was the leading foreign investor in the Asia-Pacific region in 2021, creating 57 investment projects, up significantly from 32 in 2020. Its investments were primarily based around logistics and sales operations, with India the most popular destination country.
US-based Cloudflare and Marriott International were the second and third largest investors, respectively. Cloudflare launched internet exchange point network infrastructure across Asia, with a particular focus on China. Marriott International also focused its Asian investment in China, with several new hotels announced or opened.
The largest intra-Asian investor was Singapore-based Temasek. Through its subsidiaries, the company created investments across several industries. It was behind seven tourism-related projects, six in communications and media, and four in renewable and alternative power projects, among others. These investments spanned across several Asian countries.