Investments have largely tapered off in the United States and Europe, however FDI in booming Asian nations in on the rise. Indonesia recently reported that it is attracting record levels of Foreign Direct Investment. Other South East Asian nations are reporting similar results. This is most likely due to investors looking for more stable markets with a higher potential of returns.
Indonesia offers an interesting prospect for investors. Home to some 250 million people, the island nation has a huge population of potential consumers. And while the country has a GDP per capita of only $3,500 (nominal), the country has been recording strong growth rates over the last few years. As the economy grows, the amount of discretionary income should rise.
In the final quarter of 2012, FDI in Indonesia picked up some 22 percent year-over year. The January to March period saw FDI surge even more, 27 percent YOY. Indonesia is South East Asia’s largest country and largest single economy, and has recorded growth rates in excess of 6 percent in four of the last five years. Perhaps most importantly however, is the fact that Indonesia’s economy is internally focused instead of export oriented. Compared to export-led countries like Malaysian and Singapore, Indonesia should be able to weather any global downturns.
Indonesia is not the only country seeing surging investments. The Philippines stock market has surged 20 percent so far this year as domestic and foreign investors look to profit off of strong economic growth. Bond markets have also seen strong growth. Other nations across South East Asia are also seeing increasing interest from foreign investors.
Myanmar has also seen foreign direct investments surge with the ending of sanctions by the European Union and United States. Malaysia and Singapore have seen FDI rates increase in recent years, though recent trends suggest that FDI might be leveling off.
Stock markets have been on the rise in the United States, suggesting that things may not be as bad as they appear. Rising investment and wealth need not be a zero sum game, and rising stock markets in the USA coupled with increasing FDI in Indonesia and across the emerging world, could signal increased strength in the global economy.
Still, some believe that stock markets are being largely buoyed by low interest rates and the Fed’s quantitative easing efforts. Some even believe that U.S. stock markets are forming a bubble destined to collapse further on down the road.
Interestingly, other Asian nations are among the biggest participants in foreign direct investment. For example, Indonesia’s FDI numbers are dominated by other Asian nations, such as Singapore, Japan, and South Korea. These three nations have already achieved a high level of economic development. Instead of being caught flat footed with changes in the structure of the global economy, investors and businesses in these countries are repositioning themselves to take advantage of emerging markets.