India to be world leader in manufacturing investment

NEW YORK, USA: The United States and China will remain the prime destinations for foreign direct investment over the next five years, while global corporations continue to expand their investments in emerging economies in a quest for access to new customers and favorable operating conditions, according to a new study released by KPMG International.

The worldwide survey of more than 300 CFOs, chief investment officers and other senior executives revealed that the United States will remain the leader in in-bound investment for 2008-09, with 27 percent of respondents anticipating "significant investment," followed by China, at 17 percent, the UK at 14 percent and Germany at 13 percent. By 2014, China is predicted to edge out the United States, at 24 percent, followed closely by the United States at 23 percent, Russia at 19 percent and India at 18 percent.

"The survey confirms that the world's leading organizations recognize that investing in the United States offers them opportunities to access its broad customer base, stable political environment, and well-established infrastructure," said Shaun Kelly, vice chair-tax at KPMG LLP in the United States. "As the global economy continues to develop, shifts to investment in emerging economies will eventually create opportunities to grow and expand."

India a leader?

India is projected to see the largest growth in its share of foreign investment across all sectors and should become the world leader for investment in manufacturing. European economies are expected to keep their attraction for investors, with the UK maintaining a very strong position, especially in financial services. Russia can expect a dramatic increase in investments over the next five years, largely driven by manufacturing, business and consumer services.

The survey indicates that the United States will remain the leader in business and financial services investment through 2014, as Brazil and Russia begin strong climbs in that sector. Investments in consumer services in China are projected to match those of the United States by 2014, while China becomes the world leader in industrial products and mining and should see significant investment in IT and telecom.

"We've seen strong in-bound investment in the United States in recent years, as companies capitalized on the weaker dollar to enter for the first time or to expand operations here," said Kelly. "KPMG has helped many companies learn about and take advantage of the range of state and local economic incentives available to them to support their growth and create jobs. The results of the study would indicate that we should continue to see this activity through 2014 and beyond."

Other highlights from the KPMG Global Corporate Capital Flows Study include:

* Increased investment activity in Brazil, Russia, India, and China (BRIC) will help fuel economic growth and build sustainable infrastructure.

* Sovereign stability remains an important factor for international investment; in addition, unstable tax systems may act as a deterrent for foreign investment.

* Financial services organizations will solidify the United States and UK's dominant position as leading destinations for investment capital; influence of private equity and sovereign wealth funds likely to increase.