The report titled “Transnational Corporations, Extractive Industries & Development” captured the dynamic of rising FDI investments in extractive industries involving oil, natural gas, and metals in Africa and elsewhere. In 2005, India received FDI flows to the tune of US$6.7 billion as compared to US$72 billion by China. This jump in the FDI flows to India are more because of rising hot portfolio funds than green field investments.  “China is most preferred investment location, followed by India, the US and then the Russian Federation and Brazil,” the report released worldwide said. India’s ranking in inward FDI performance index has also improved to 113 in 2006 from 121 in 2005.

Major players
“..India registered substantial increase in FDI amounting to $17 billion,” the report said, adding thanks to India, the FDI inflows to South Asia surged by 126 per cent amounting to $22 billion in 2006.

India and China are emerging as major players and “beginning to challenge the dominance of Asian newly industrialising economies (NIEs) — Hong Kong (China), the Republic of Korea, Singapore and Taiwan — as the main sources of FDI in developing Asia,” it said.

In fact, the two Asian giants are rapidly becoming resource-seeking FDI players in different countries where they are investing heavily in oil and other metal extractive industries. Rapid economic growth in South, East and South-East Asia is likely to continue, underpinned by strong performance of China and India. In addition, the region may become more attractive to “efficiency-seeking” FDI, owing to plans of several countries such as India and China, Indonesia and Vietnam to develop their infrastructure.

Investor confidence
“India received more FDI than ever before (153 per cent more than in 2005), equivalent to total inflows to the country during the period 2003-05,” it said adding that rapid economic growth has led to improved investor confidence in the country. It said the sustained growth in income has made the country increasingly attractive to market-seeking FDI.

It noted that firms from India and China are also reaching out to the world with outward FDI. India’s outflows were almost four times higher than those of 2005.

Compared to China, where FDI outflows are driven by international expansion of State-owned enterprises, booming outflows from India have been dominated by privately-owned conglomerates.

Driving force
It said Asian investors have become a driving force in M & A boom in Europe, in particular in 2006.
During first half of 2007, the value of cross-border M&As increased by nearly 20 per cent over corresponding period in 2006.

Global FDI inflows soared in 2006 to reach $1,306 billion showing a growth of 38 per cent.