PROMISING MARKETS FOR FOREIGN DIRECT INVESTMENTS IN 2012

According to the 2012 A.T. Kearney (Management Consultants) FDI Confidence Index, large and medium-size emerging markets register the most positive changes in investor outlook. Top destinations for foreign direct investments in 2012 include: 1. China 2. India 3. Brazil 4. United States of America 5. Australia 6. Singapore 7. Indonesia 8. Malaysia 9. South Africa 10.Russia 11.Turkey 12. Vietnam 13. United Arab Emirates 14. Thailand 15. Taiwan 16. South Korea 17. Japan

China, India and Brazil are among the top three on the Index and earn the most positive outlooks from respondents. Emerging markets have eclipsed developed countries in terms of FDI inflows, absorbing more than half of global FDI inflows for the first time in history, and now comprise more than half of the Index's top 25 countries. This trend will likely to accelerate over the next three years and perhaps beyond. Investors looking for promising markets are assigning higher priority to emerging markets because of these markets' size and their strong consumer market growth. Moreover, key emerging economies are shifting the FDI landscape with their own investments. The portion of FDI outflows from developing economies is expected to continue to rise thanks to economic growth, abundant financial resources, and moves to acquire strategic assets abroad. These outflows are being directed primarily toward other emerging economies.

Investment from emerging economies ($ 388 billion) is now more than one-third of the corresponding level from developed countries ($ 935 billion), and the relative tendency of the former to favour other emerging economies as targets could trigger a major shift in the competitive landscape. Given increasingly fierce competition from local investors, companies with aspirations to invest in emerging markets will need to craft strategies supported by a strong understanding of local markets and consumers as well as robust supply chains.

According to the United Nations, there are roughly 21,500 multinationals based in emerging markets. More importantly reverse innovation by OECD multinationals is now common practice. Indeed, the OECD Fortune 500 multinationals now have nearly 100 R&D centers based in emerging markets, mainly in China and India. GE's R&D center in India is the company's biggest worldwide. Cisco spent a billion dollars on another one in India. Microsoft's largest outside of the U.S. is in Beijing. IBM now employs more people in India than in the US, and Germany's Siemens has based 12% of its 30,000 R&D engineers in emerging Asia. To grasp the speed of this global rebalancing, consider that in 1990, more than 95% of R&D was carried out in developed countries; a decade later, the developed countries' share has dropped to 76%. Today, emerging markets account for 40% of the world's researchers. As a report from UNESCO recently highlighted, China, which now spends more than $ 100 billion annually (2.5% of GDP) on R&D, is on the verge of surpassing the US and Europe in terms of the number of researchers. Emerging-market countries will not only claim the lion's share of global growth in the coming decade; they will also increasingly be the source of disruptive and frugal innovation. By 2020, the geography of innovation, in addition to that of the wealth of nations, will have undergone a massive rebalancing process.