The 2024 Foreign Direct Investment Confidence Index (FDICI), released by Kearneys Global Business Policy Council, reveals a robust trend of investor optimism especially towards Asia Pacific markets. Depicting a survey of investor sentiment over the next three years, the Index confirmed that Australia remains among the top 10 attractive markets for foreign direct investment (FDI), alongside the USA, Canada, China (including Hong Kong), UK, Germany, France, Japan, UAE, and Spain.
This year, Australia has seen a significant 39% surge in optimism, marking a 10% rise from the previous year. The countries leading the optimism rankings for potential markets include Canada, the UK, and Australia. The 2024 Index highlights continued positive sentiment for the Asia Pacific region, despite global uncertainties, with eight Asia Pacific markets featuring in the list of top 25 preferred destinations for FDI.
Another highlight from this year's Index was the exploration of the impact of AI and technology on investor operations. A promising 67% of Asia Pacific investors foresee an increase in AI utilisation for making investment decisions in the years to come. More than half of the investors express heightened optimism about the Asia Pacific economy compared to last year, placing it second only to the Americas in terms of increasing optimism.
A notable 88% of respondents stated that they were planning to expand their FDI in the next three years. Meanwhile, a vast majority of 90% of the Asia Pacific respondents admitted FDI's growing importance for their corporate profitability and competitiveness in the next three years.
Despite this optimism, many in the Asia Pacific fear the amplification of geopolitical tensions, with 87% opining that it would affect their investment decisions. However, businesses are resorting to nearshoring and/or friendshoring in response to these concerns.
Furthermore, investors foresee a potentially restrictive business regulatory climate in both developed and emerging markets posing risks. The proliferation of industrial policies and trade restrictions, including those related to emerging technologies, hints at the increasing complexity of the regulatory environment, necessitating diligent monitoring and adherence.
A significant 72% of Asia Pacific investors are making considerable or moderate use of AI in their business operations and expect to use AI for various functions such as customer service and chatbots, automation of manual processes, and supply chain enhancement and human resources.
Arjun Sethi, Regional Head and Chairman, APAC, Kearney, pointed out that despite global uncertainties, the Index reflects APAC's strong near-term growth prospects, consistent appetite for innovation, and remarkable economic resilience. The AI capacities of markets, therefore, become critical determinants for investors in their decision-making process.