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Hong Kong was named as the best-performing host economy for foreign direct investment (FDI) in Asia according to the "World Investment Report 2002", released today (September 18) by the United Nations Conference on Trade and Development (UNCTAD). Hong Kong holds the second place in the global rankings after Belgium/Luxembourg.
In its benchmark study, UNCTAD measured an economy's performance by standardizing FDI inflows to the size of the economy and assessed its investment potential by using a set of economic and policy factors of importance to foreign investors.
Taken together, the Inward FDI Performance and Inward FDI Potential Indices developed by UNCTAD, show how countries are performing relative to their investment potential.
Hong Kong also has been classified in the "World Investment Report 2002: Transnational Corporations and Export Competitiveness" (covering 2001 and previous years) as a "front-runner" economy, which means that the SAR out-performed its investment potential by attracting very high FDI flows relative to its economic size. It shared this designation in Asia with Malaysia, Singapore and Thailand.
Hong Kong's top ranking came in a year when overall FDI flows to Asia and the Pacific declined by 24% to US$102 billion. FDI inflows to Hong Kong in 2001 also fell to US$22.8 billion.
However, it is important to note that the volume of Hong Kong's FDI (US$61.9 billion) in 2000 was exceptionally high and was mainly due to one single large acquisition in telecommunications by China Mobile, valued at US$24 billion. If this extraordinary item is discounted, Hong Kong's drop in FDI in 2001 is less severe and more in line with regional and international developments.
The report shows that global FDI inflows in 2001 declined to US$735 billion, which is less than half of the 2000 figure.
UNCTAD attributed this decline to the slowdown in the world economy and a weakening of business confidence, both of which were accentuated by the September 11 events in the US, and both of which contributed to a sharp reduction in cross border mergers and acquisitions that take place predominantly between industrialized countries.
In 1999, Hong Kong's inflow of FDI amounted to US$24.6 billion.
On a global scale, Hong Kong ranked 10th in FDI inflows in 2001, with the US and UK as the top and second largest recipients respectively, and Mainland the sixth.
The UNCTAD study also points out that Hong Kong was able to solidify its position as a regional business hub with 3,237 transnational corporations establishing regional offices here (including 944 regional headquarters) in 2001. This represents an 8% increase over 2000.
The Director-General of Investment Promotion at Invest Hong Kong, Mr Mike Rowse, commented on the results of UNCTAD's World Investment Report. He said: "It is encouraging to see that Hong Kong has maintained its position as a major destination for FDI. This is particularly important in times when overall investment is on the decline. Being named the best-performing host economy in Asia and number two in the world clearly confirms that Hong Kong's business environment and its fundamentals remain highly attractive to international investors."
"We take UNCTAD's assessment as an encouragement to work even harder to make Hong Kong the preferred business hub for companies aiming at establishing or expanding operations in Asia," said Mr Rowse.
"We are aware of keen competition for FDI in the region. We will continue to undertake targeted efforts to promote existing locational advantages and retain our competitive edge to attract foreign investors," he concluded.
Invest Hong Kong is a Hong Kong Special Administrative Region Government department charged with encouraging and facilitating foreign investment into the city by providing all the support needed to establish a business presence here.
End/Wednesday, September 18, 2002
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