Foreign Direct Investment Inflows into South Asia

Abstract

After discussing macroeconomic performances in Chap. 2 and evolution of FDI policies in Chap. 3, we analyse comparative FDI performances of five South Asian countries in Chap. 4 over the period 1980–2010. Trends in FDI inflows to South Asian countries indicate that FDI inflows increased significantly since early 1990s. Robust economic growth, the region’s large domestic markets, and positive perception of foreign investors have induced FDI inflows into the region. The chapter also shows that sources of FDI and sector-wise FDI inflows vary across South Asian Countries. Sector-wise FDI inflows indicate that services sector attracted higher FDI followed by manufacturing and agricultural sector. Sector-wise heterogeneity is due to the market potential and resources availability. Notwithstanding higher level of FDI inflows into South Asia in recent times, FDI inflows are still low compared to other emerging market economies in and outside Asia. Poor business climate, poor infrastructure, restrictive labour policy and labour unrest, political uncertainties and civil conflicts, weak regulatory systems, and rampant corruption are considered to be a major hindrance for higher FDI inflows. The present chapter also brings out in detail the outflow of FDI from South Asia, South–South FDI inflows, and intra-regional FDI among south Asian countries.