More than 50 per cent of Indian outward investment in Asia is in services sector    

NEW DELHI: A new study published by the Asian Development Bank shows that Indian multinationals prefer Singapore as their preferred investment destination within the Asia-Pacific region and that more than 50 per cent of Indian affiliates abroad are in the services sector.

According to the study titled `Factory Asia: The Determinants of Multinational Activity in the Context of Global Value Chains’ by Natalia Ramondo in a book ‘Future of Regional Cooperation in Asia and Pacific’ published by ADB, the main foreign direct investment destination for Japan and the US is China.

The finding implicitly shows the attraction of the large Chinese market for investors despite points of friction between the Middle Kingdom and its partner countries. Less developed Asian countries such as Vietnam and Indonesia are also popular destinations in Asia for Japanese multinationals, while the second most popular destination in the region for US multinationals is Australia, an English-speaking country.

“Indian multinationals in our data set choose Singapore, an economy specialized in the services sector, as their most popular destination,” the paper said. It added that this distinct pattern is linked to findings which show that outward FDI for India lies in the business services.

More than 50 per cent of  Indian affiliates abroad are in the services sector, according to data accessed by the study. Some 30 per cent plus are in manufacturing. In contrast Japanese multinationals are heavily concentrated in manufacturing, while Chinese affiliates abroad are more diversified with manufacturing coming a first, followed by services with a strong presence in mining.

Interestingly, while inward FDI in China and Vietnam is concentrated in manufacturing, affiliates in Hong Kong, China, Singapore and especially India, are concentrated in business services, the study says.

Building stronger regional strategies

ADB also stresses on the need to build a stronger regional cooperation strategies — including in health, trade, finance, and disaster risk — that can help governments in Asia-Pacific accelerate economic growth.