Emerging Markets in Asia Pacific Offer Brightest Prospects for Global FDI

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“For the Asia Pacific region, a key long-term growth driver will be China’s ‘One Belt, One Road’ initiative,” Biswas said. “This will be catalyzed by new infrastructure financing for Asian emerging markets into sectors such as power generation and transmission, railroads, ports and highways from the recently launched Asian Infrastructure Investment Bank, the Silk Road Fund, as well as a number of Chinese bilateral infrastructure financing commitments to a number of Asian countries.”

The initiative will help to accelerate the development of many inland Chinese provinces as well as accelerating the growth of the Greater Mekong Sub-region as a new global manufacturing hub, and will benefit many countries in Southeast and Central Asia.

Despite worries, Chinese and Indian economies outperform most

In China, despite the slowdown evident in the manufacturing sector, strong growth in consumer spending is driving rapid growth in service sector industries such as financial services, healthcare, retailing, e-commerce and logistics. China’s service sector industries are expected to continue to show strong expansion over the medium term outlook, helped by continued rapid growth in consumer spending, with overall Chinese GDP growth forecast to average 6.4 percent per year between 2016 and 2020.

India to outpace China for first time in over 30 years

The Indian economy is forecast to be one of the fastest growing large emerging markets over the medium term, growing at an average pace of 7.6 percent per year between 2016 and 2020, outpacing China for the first time in over three decades.

“The strong growth outlook for India is underpinned by improving consumer spending, accelerated infrastructure development and stronger FDI inflows. The favourable impact of low global oil prices has reduced inflationary pressures and lowered the current account deficit,” Biswas said. “The Modi government’s new initiatives to boost infrastructure development, develop smart cities and attract investment into Indian manufacturing are helping to lift FDI flows into India.”

Rapid growth for Sri Lanka and Bangladesh

Amongst the other South Asian economies, Sri Lanka and Bangladesh are expected to show rapid growth over the next decade. The new Sri Lankan government has embarked on sweeping economic reforms, with its first budget containing considerable economic liberalization measures. The Sri Lankan economy is projected to grow at an average annual pace of 5.6 percent per year over 2016-2020. Key growth industries are expected to include logistics, tourism, agricultural products, IT-BPO industries and construction.

Despite political turbulence, Bangladesh has made considerable economic progress over the past decade, with average annual GDP growth exceeding 6.5 percent per year since 2006. Bangladesh has emerged as an attractive location for FDI into low-cost textiles, clothing and footwear manufacturing, due to its relatively low wage costs compared to coastal China.

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