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Jakob Wilhelmus
Senior Research Analyst, International Finance and Macroeconomics Research
Capital Flows and Finance and Regulation and Systemic Risk
Jakob Wilhelmus is a senior research analyst in international finance and macroeconomics at the Milken Institute. He studies topics relating to systemic risk, capital flows, and investment. Concentrating on market-level information, his work focuses on identifying and analyzing financial data to produce a better understanding of the behavior and underlying...
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Global Opportunity Index: Global Investors’ Growing Focus on Asia 

By: Jakob Wilhelmus
September 08, 2017
   
   

The global economy is rebounding: global GDP growth rate is expected to rise in all regions for the first time since 2008.[2] However, the improved growth performance in both emerging and developing economies make it difficult to identify regional or local investment opportunities based on macroeconomic performance alone.

As part of the Milken Institute’s mission to improve access to capital, the Global Opportunity Index (GOI) has been developed as a statistical tool for assessing potential investment opportunities in various regions and countries. The Milken Institute’s Global Opportunity Index (GOI) includes considerations that go beyond economic and financial factors. It incorporates qualitative influences based on reviews of key business, legal, and regulatory policies that are critical for ensuring successful foreign investments. The GOI measures the potential for foreign investment in key countries using 51 variables aggregated into five categories that are important for investors when they decide on where to invest:

  • Economic Fundamentals (EF) indicate the current economic strength of a country vis-à-vis the global economic outlook. This factor focuses on the country’s macro-performance, trade openness, quality and structure of the labor force, and modern infrastructure.
  • Financial Services (FS) measure the ability of financial institutions and markets to fund investors and entrepreneurs by looking at a country’s financial infrastructure and the business community’s accessibility to credit.
  • Business Perception (BP) measures explicit and implicit costs associated with business operations such as the size of tax burdens, corporate transparency, corruption, etc.
  • Institutional Framework (IF) measures the extent to which an individual country’s institutions provide a supportive business environment.
  • International Standards and Policy (ISP) reflects the extent to which a country’s institutions, policies, and legal system facilitate international integration by following international standards. 

The full ranking can be accessed at www.globalopportunityindex.org. Focusing on recent developments in Asia the following summarizes some of our key findings: 

  • Four Asia-Pacific economies—Hong Kong, Singapore, Australia, and Japan—rank in the top 10 of the most attractive countries for investment globally, and ten of the region’s 25 economies rank in the top 50.[3]
  • Hong Kong and Singapore maintained their top regional positions as the two most desirable countries for investment. In part, they have been recipients of a growing supply of funds looking for investment opportunities because of improving growth in Europe and Asia. In addition, more investment funds have come from Chinese investors, who have increased their search for investment opportunities abroad.[4]
  • Emerging Asia‘s attractiveness is predominantly linked to investors’ perceptions of the cost of doing business, and the region’s business-friendly institutions and standards. Differences in the business environment and property rights are key influences in explaining both intra-regional variations in investment flows and changes in flows from the rest of the world.
  • Both Japan and Thailand are showing upward momentum as recipients of foreign investment. These improvements are mainly driven by better perceived costs of doing business, growing international trade connections, and stronger domestic demand from fiscal stimulus.

 

Download the Report 

Global Opportunity Index Report

 

 



[1] The views expressed here are those of the author and are not necessarily those of the Milken Institute or its affiliates.

Approved for circulation by William Lee.

[2] IMF, April 2017.

[3] Due to data limitations not all countries are represented in the Index.

[4] The continued growth of Chinese investments for merger and acquisitions is discussed in Adams-Kane (2017).