Asia's “striving tiger cubs” – India and the ASEAN-5 – are well placed to attract the bulk of foreign direct investment or FDI flows over the next few years, according to Nomura, as rising labour costs in China and ageing population in north east Asia disincentivises flows in those regions.
Nomura said bulk of the FDI inflows is likely to come in from Japan and China, unlike U.S. and European Union in the past. It expects FDI flows into India and ASEAN-5 (Indonesia, Malaysia, Thailand, Phillippines and Vietnam) combined to surge from $100 billion per annum currently to around $240 billion by 2025.
The pull factors for India and ASEAN-5 include:
- Large, growing domestic markets
- Focus on reforms
- Liberal FDI regimes
- Sound economic management
- Political stability
- Low-cost labour
In India, FDI inflows is seen in sectors in need of growth capital, like infrastructure, banks, e-commerce and hospitals, Nomura said. Sectors with strong long-term growth prospects such as retail, automobile, pharma and diagnostics are also expected to benefit, the broking and research firm adds.
Listed e-commerce players, however, may see a negative impact of the higher inflows due to increased competition.
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