Hong Kong retained its position as Asia's second largest destination for foreign direct investment (FDI), according to the "World Investment Report 2007", released today (October 17) by the United Nations Conference on Trade and Development (UNCTAD).

     The report, which presents the latest data on FDI and traces the global and regional trends, also once again highlighted Hong Kong as a "front-runner" economy, following high rankings in both its "Inward FDI Potential Index" and its "Inward FDI Performance Index".

     Hong Kong attracted FDI valued at US$42.9 billion during the 2006 calendar year, an increase of 28% on the previous year, and its second highest amount ever recorded.

     Together with Mainland China, which was the largest FDI recipient, the two economies accounted for more than half of FDI inflows into the region last year. Mainland China attracted FDI worth US$69 billion, a 4% decline on the previous year, the first drop in seven years.

     According to the report, the next largest FDI recipients among Hong Kong's neighbouring economies were Singapore (US$24.2 billion), India (US$17 billion), Thailand (US$9.8 billion) and Taiwan (US$7.4 billion).

     Hong Kong was ranked second globally in both the Inward and Outward FDI Performance Indexes.

Global trends
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     On a global scale, Hong Kong ranked seventh in FDI inflows in 2006, up from eighth place the previous year, with cross-border merger and acquisition activity fuelling the rise.

     For the third consecutive year, global FDI inflows rose substantially. Total FDI flows reached US$1.306 trillion, up 38% from 2005, and approaching the peak of $1.411 trillion reached in 2000. According to the report, this rise was driven by increasing corporate profits worldwide and buoyant stock markets which raised the value of cross-border mergers and acquisitions (M&A).

Looking ahead
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     The report predicted that FDI flows would continue to rise in 2007, although at a slower pace. M&A activities would drive cross-border investment, with the report highlighting that M&A activity in the first half of 2007 was already valued at US$581 billion, or a 54% increase year on year.

Commentary
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     Speaking at a press conference, Director-General of Investment Promotion, Mr Mike Rowse said: "Once again this United Nations report confirms Hong Kong's position as a highly attractive market for foreign direct investment. To be second in Asia and seventh in the world is an impressive feat for a city economy of seven million people."

     "These results confirm Hong Kong's status as an international location in Asia for foreign companies and capital. Equally, the report shows that Hong Kong continues to act as a two-way springboard for overseas companies and capital into Mainland China, and for Mainland companies expanding into international markets," Mr Rowse said.

     "Beyond the numbers, this investment also brings new skills, products, services and job opportunities that contribute substantially to our economic development and competitiveness," Mr Rowse said.

     The UN report coincides with the release of half-yearly FDI data by the Hong Kong Government's Census and Statistics Department. According to this data, Hong Kong attracted US$27.1 billion in the first half of 2007, up more than 31% over the same period last year.

     However, Mr Rowse cautioned that Hong Kong could not rest on its laurels. "We're at the heart of a competitive, high-growth, region and investors have more and more choices. Looking ahead, Hong Kong has three key challenges. We need to focus on the high cost of office premises, on improving our air quality and on increasing the number of international school places. The Government is aware of these issues and is working to address them."

About Invest Hong Kong
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     Invest Hong Kong is the Hong Kong Special Administrative Region Government department charged with encouraging and facilitating inward investment into the city by providing the support needed to establish or expand a business presence here. In the first half of 2007, Invest Hong Kong assisted 147 overseas and Mainland companies to set up or expand their business in the city. More information is available at http://www.investhk.gov.hk.

Ends/Wednesday, October 17, 2007
Issued at HKT 16:38

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