South Asia is becoming an increasingly attractive region for foreign direct investment (FDI). This is due to its growing population, the presence of large domestic markets, a well-developed infrastructure, and a stable political environment. Additionally, the region offers a combination of lower costs and higher returns in comparison to other regions. As a result, many multinational companies are investing in South Asia as they seek to capitalize on the opportunities this growing market presents.  According to BCG, Southeast Asia's manufacturing industry is predicted to generate approximately $600 billion USD in annual revenue by 2030.  

Let us dig deep to understand the factors that make this region a preferred destination for Foreign Direct Investment.   

Strategic Location

South Asia has a strategic location that makes it a preferred destination for Foreign Direct Investment (FDI). It is located in the center of the world’s busiest trade routes, making it an ideal hub for international commerce. South Asia is strategically located, providing businesses with access to major markets in Asia, Europe and the Middle East. It also offers businesses a platform to tap into the vast untapped opportunities in the region. South Asia is also home to some of the fastest-growing economies in the world, providing investors with access to a large and growing consumer base.

The region offers investors access to low-cost labor, abundant natural resources, and preferential trade agreements with major markets like China and India. Additionally, South Asian countries have been actively pursuing economic reforms and liberalizing their investment policies to attract more FDI. This has resulted in increased investment opportunities in sectors such as manufacturing, services, and infrastructure development. With its strategic location and attractive investment policies, South Asia is becoming an increasingly attractive destination for foreign direct investments.

Growing Domestic Economy   

The South Asian region is a rapidly growing market with an increasing demand for consumer goods and services. This has made the region very attractive to foreign direct investors, who are looking to capitalize on the numerous opportunities that this growth presents. The past few years have seen tremendous progress in terms of development and growth in this region, resulting in a burgeoning economy that has been able to sustain its current upward trajectory. The region is currently the most valuable market in the world. Consumer spending in the South Asian region has been rising incessantly. The region has been able to maintain its economic prowess due to its long-term focus on development and growth.

Rapidly Growing Talent Pool 

The South Asian market also boasts of a rapidly growing talent pool, which provides businesses with access to skilled labour and new ideas. This further attracts foreign direct investors to the region. The region offers an abundance of skilled professionals, from software developers and engineers to marketing experts, who are willing to work at competitive rates. This has enabled foreign companies to access high-quality talent at lower costs than in other parts of the world.

“FDI flows to developing economies in Asia during the pandemic have bucked the global trend and underscored the resilience of developing economies in Asia,” according to James Zhan, director of UNCTAD’s investment and enterprise division. South Asia's future as a manufacturing hub looks bright due to its strategic location, strong economic growth, and favorable demographic trends. With continued investment in infrastructure and human capital development, South Asia could become one of the most important manufacturing centers in the world in the years ahead.