United States manufacturers have returned to Asia with their investment dollars after taking flight during the 1997-98 financial crisis. A survey due to be released today by Deloitte Consulting shows that foreign direct investment (FDI) into Asia by US manufacturers surged to US$6.8 billion in 1999 - after having slowed to a trickle at just US$282 million in 1998. The return of FDI flows to pre-crisis levels has coincided with a fundamental shift in targets, said Stephen Chang, managing director of Deloitte Consulting's Singapore office, and manufacturing practice leader for East Asia. 'Contrary to popular belief that FDI heads to the low-wage countries, the survey shows that the largest proportion went to high-wage countries,' said Mr Chang. The biggest Asian recipient of US manufacturing FDI flows in 1999, was Singapore - which attracted US$3.4 billion, or half of the total investments made by the sector in the region in 1999. The data contained valuable lessons for policymakers in emerging markets, said Mr Chang: 'In order to attract investments they will have to get their fundamentals right, which means they must offer political stability, a disciplined and educated workforce, and reliable infrastructure.' The Deloitte survey of data compiled by the US Department of Commerce shows that capital flows into the electronics and industrial machinery sectors accounted for a majority of the big increase in FDI. Transportation equipment, chemicals and pharmaceuticals also showed solid increases in 1999. High-wage countries captured 87 per cent of the investment flows, reflecting the greater importance of non-wage factors in overseas investment decisions, according to the report. 'The year 1999 also saw a rebound in FDI flows to Asia, as US manufacturers regained confidence in the region after the emerging markets crises in 1997 and 1998,' noted the report. 'Singapore, in particular, saw a return to favour with nearly half of total US manufacturing FDI in Asia funnelled into Singapore's electronics and industrial machinery sectors. 'Australia, Hong Kong, Japan, Korea, Taiwan and Thailand also experienced increases. 'Together, the European and Asia-Pacific regions received 83 per cent of total foreign direct investment by US manufacturers in 1999 - showing the preference of US investors for these traditionally strong FDI destinations.' Sectors that suffered most in the crisis included industrial machinery, chemicals and pharmaceuticals, transportation equipment and food. However, the devaluation of Asian currencies and the economic recoveries that took hold in 1999 had a positive effect on US investment flows. Investment in industrial machinery rose to US$2.7 billion from a negative US$291 million in 1998, with the vast majority of investments going to Singapore. Investments in the electronics sector rose to US$2.1 billion from US$777 million in 1998, with most going to Singapore, South Korea and China. US manufacturing FDI into China was unfazed by the crisis, the report said. Investment levels rose to US$1.2 billion in 1998 but fell back to near the 1997 level of US$941 million in 1999. The report dismissed concerns that the present US economic slowdown could have a negative impact on long-term investment flows. 'US firms have learned the lesson that globalisation is no longer an option for a select few industries, but is instead an imperative to remain competitive. 'The long-term benefits of globalisation in production - increased economies of scale, access to top-notch manufacturing and technological resources, and presence in growing markets - cannot be safely ignored by any firm.' Major opportunities for US manufacturers around the globe would continue to draw US capital, even in a slight economic downturn, said the report. Graphic: fdi18gbz