On February 22, MIGA partnered with the Singapore Management University (SMU) and International Enterprise Singapore (IE Singapore), to launch the most recent World Investment and Political Risk Report in Asia. The event, at SMU’s downtown campus, focused on the key issues of sovereign and political risk and how foreign investors can mitigate them.
The latest World Investment and Political Risk report is the fourth in a series that we’ve recently launched in London and Washington, DC as well. There are some important nuggets on FDI trends and perceptions this year. The report notes that foreign investors, attracted by stronger economic growth in developing countries while mindful of risks, still remain optimistic about these destinations. Indeed the report findings, based on a survey conducted by the Economist Intelligence Unit for MIGA, show that over half of the survey’s respondents plan to increase investment in developing countries in the next 12 months.
This sentiment dovetails with FDI data showing developing-countries continue to account for a substantial share of global FDI, both inbound and outbound. While global FDI into developing countries slowed from US$640bn in 2011 to US$600bn in 2012, FDI from new investors based in developing countries has risen significantly in recent years, reaching US$240bn in 2012, and is expected to have reached a record level in 2012.
Notably, about a quarter of developing countries’ outward FDI currently goes into other developing countries (“South-South” investment).
The report points to an important factor that has positive implications not only for developing countries, but also for the global economy. That is: FDI into developing countries has remained a significant engine of growth even as the global economic picture has weakened.
World Investment and Political Risk also delves into the thorny issue of sovereign credit default and how this correlates with expropriation risk. As we’ve done every year, we have also examined trends in the political risk insurance industry in general. This year we found that, between 2008 and 2011, issuance of political risk insurance increased by 29 percent for Berne Union members, an increase that has exceeded that of FDI flows into developing countries over the same time period. Interestingly, this corresponds with an uptick in demand for MIGA guarantees, so our experience corroborates that finding.
In Singapore, speakers reiterated the report’s themes: of optimism (especially in Asia), mixed with an appropriate amount of caution about the global economy and the tail risks which remain. Within this general picture, panelists and speakers noted that for Singapore, the story is especially bright. As a hub for many home-grown and international companies, Singapore is one of the largest sources of outbound FDI and long term debt flows from Asia.
And so, IE Singapore has smartly opened its first office in Africa in Johannesburg with the aim of supporting Singaporean investment on the continent. MIGA too has a new Asia Hub in Singapore that provides an ideal opportunity to partner with Singaporean investors and leverage IE Singapore’s efforts to full effect. Finally, IE Singapore has recently launched their political risk insurance subsidy scheme to help Singapore-based companies expand overseas—and MIGA stands ready to partner with Singaporean companies to help them go global!