Foreign direct investment (FDI) flows to developing Asia, the world’s largest recipient region, declined 7% last year compared to 2023, but the ASEAN subregion saw a slight rise to set a new record, according to a United Nations report.
The Global Investment Trends Monitor, published by the UN Center for Trade and Development (UNCTAD), said FDI flows to developing Asia decreased by 7% last year to US$588 billion. Of these FDI inflows, greenfield projects dropped by 2% while international project finance deals fell by 25%. This year’s FDI deceleration in the region followed the 6% decline in 2023.
Among the major Asian FDI host economies, FDI in China fell for a second year, declining by 29% last year. “FDI flows to China are now about 40% lower than at their peak in 2022,” the report noted.
In contrast, FDI flows in ASEAN increased marginally (+2%) to a new record of an estimated $235 billion.
FDI rose by 13% in India, where greenfield project announcements also increased in number and value.
Overall FDI to developing countries declined 2% last year, marking a second consecutive annual fall for the Global South and challenging progress on the Sustainable Development Goals (SDGs), which rely heavily on international project finance, said the report issued last month.
Globally, FDI flows reached an estimated US$1.4 trillion in 2024, an apparent increase of 11%. However, excluding financial flows through European conduit economies, which often serve as transfer points before investment flows reach their final destination, they were down about 8%.
International greenfield investment announcements and project finance deals showed declines in both project numbers and values.
Greenfield project announcements, primarily in industrial sectors, saw a moderate decline of 8% in number and 7% in value. Despite the drop, the value of greenfield projects remained high, second only to the record reached in 2023, driven by large-scale investments in semiconductor manufacturing and artificial intelligence (AI) technologies.
By industry, Malaysia was the largest recipient of global greenfield projects in the extractive industries announced in 2024, the FDI going mostly to the coke and refined petroleum segments. It was followed by Taiwan and China.
In greenfield manufacturing projects, the number and value declined by 5% and 2%, respectively, in 2024. Values rose in developed economies but fell in developing countries, reversing the trend observed in 2023.
Greenfield projects in the services sector declined by 6% in value and 11% in number. Along with energy and gas supply, project values also dropped in transport and storage (-25%) and construction (-16%). In contrast, project values in the ICT sector nearly doubled to $200 billion, primarily driven by investments in data centers and data processing.
“The growth of the digital economy and the development of artificial intelligence (AI) applications have accelerated investments in data infrastructure and in semiconductor manufacturing—both significantly represented in the list of the largest greenfield announcements,” said the UNCTAD paper.
International project finance, mainly concentrated in infrastructure sectors, continued its downward trend due to high interest rates, with the number of deals falling by 26% and their value declining by nearly a third. Cross-border merger and acquisition (M&A) activity fell by 13% in the number of deals, but total values increased by 2%.
Prospects for global FDI in 2025 are for moderate growth due to improved financing conditions and an expected increase in M&A activity. However, significant downside risks and investor uncertainty remain, the report said.
Technological advancements and sectoral shifts will continue to affect the FDI landscape, it continued.
“Investments in technology-related sectors, including AI, cloud computing, and cybersecurity, are likely to steer FDI flows as companies modernize and digitize operations. Data center projects and semiconductor manufacturing are already prevalent among the top investment projects,” the report said.
The energy transition, similarly, is already playing an important role in shaping FDI patterns. Investment projects in renewable energy, green hydrogen, and electric vehicle supply chains have pushed up project numbers in recent years, although international investments in renewable energy have slowed in the last two years.
February 18, 2025
