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Hong Kong has retained its position as the best-performing host economy for foreign direct investment (FDI) in Asia and as the region's second largest FDI destination, according to the "World Investment Report 2003", released today (September 5) by the United Nations Conference on Trade and Development (UNCTAD).

While FDI inflows declined last year both globally and regionally in difficult economic conditions, UNCTAD forecast that promising prospects in 2003-04 would spur an upturn in FDI - particularly in Asia and the Pacific.

FDI flows to Asia and the Pacific declined for the second consecutive year, from US$107 billion in 2001 to US$95 billion in 2002. Hong Kong's FDI in 2002 reached US$13.7 billion, down from an adjusted US$23.7 billion in 2001. However, Hong Kong maintained its position as the second largest recipient of FDI in Asia, behind the Mainland (US$52.7 billion).

The next largest FDI recipients in Asia, after Hong Kong, were Japan (US$9.3 billion), Singapore (US$7.7 billion), Malaysia (US$3.2 billion) and South Korea (US$2 billion).

The Director-General of Investment Promotion at Invest Hong Kong, Mr Mike Rowse, commenting on the report said, "There is no doubt that 2002 was a difficult year for the global economy and regionally, which is reflected in this year's results. However, it is very encouraging that Hong Kong was able to retain its position as second in FDI inflows and the best performing host economy in Asia.

"This clearly confirms that multinational companies still see the advantages of investing in Hong Kong. Our business-friendly regulatory environment, rule of law and low tax system make us particularly attractive in difficult economic times, when investors face additional risks. At the same time, our proximity to the Mainland provides access to one of the fastest-growing economies in the world.

"The report's positive outlook going forward coincides with ours. Favourable economic prospects for China and Hong Kong, the implementation of CEPA, recovery in the US,and relaxation of restrictions for Mainlanders entering Hong Kong should all contribute to higher FDI inflows in the next 12-18 months," Mr Rowse said.

Hong Kong ranked 3rd globally in the inward FDI performance index. In its study, UNCTAD measured an economy's performance by standardising 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 indicate how countries are performing relative to their investment potential.

Asia continues to be the largest FDI recipient among developing regions according to UNCTAD. It also says that the region's longer-term prospects are very favourable. The factors that have contributed to the FDI downturn - slow global economic recovery, weak global demand, shaken corporate confidence and adjustments in industries like semiconductors/electronics - are expected to improve in 2003-2004, helping to stimulate an increase in FDI.

The report indicates that Global FDI inflows, down by over 40% in 2001, fell by another 21% in 2002 to US$651 billion. Driving this decline was a combination of factors including the weak economic growth, tumbling stock markets, low corporate profits, financial restructuring and a loss of confidence in the wake of corporate scandals.

On a global scale, Hong Kong ranked 15th in FDI inflows in 2002. Luxembourg was the largest FDI recipient last year, followed closely by Mainland China.

End/Friday, September 5, 2003

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( Floor / Cantonese / Putonghua / English )