Malaysia surpassed Indonesia to come in seventh among top economies in the South, East and Southeast Asian region to draw foreign direct investment (FDI) last year.

FDI into Malaysia surged by 52.8 percent to reach US$6.1 billion (RM20.6 billion) last year, compared to US$3.97 billion in 2005, according to the United Nations Conference on Trade and Development (Unctad) World Investment Report 2007.

Meanwhile, Malaysia's FDI outflow more than doubled to US$6.04 billion (RM20.56 billion) as corporations secured strategic investments abroad, it said.

It said the soaring FDI outflows may be attributed to acquisitions of strategic assets abroad and represent created wealth or overseas expansion activities by Malaysian corporations and banks positioning to become global players.

The report also revealed that national oil company Petronas is second among non-financial transnational corporations in the region in terms of foreign assets, totalling US$61.6 billion (RM207.9 billion).

Malaysia's FDI stocks rose to US$53.6 billion in 2006 from US$47.5 billion to reflect investment activities by transnational corporations to own foreign affiliates, it said.

Regionally, the report said, FDI inflows to the South, East and Southeast Asia maintained their upward trend in 2006, rising by 19 percent to reach a new high of US$200 billion while outflows surged by 60 percent to US$103 billion.

China and Hong Kong retained their positions as the largest FDI recipients in the region, followed by Singapore and India.

It said FDIs in the primary and services sectors were significantly higher while in extractive industries, the value of cross border mergers & acquisitions rose nearly fivefold to US$1.7 billion.

It said inflows of FDI into China increased to US$72 billion.

Non-financial FDI alone into China was US$60 billion, registering a slight decline, while flows into financial services rose to US$12 billion, driven by large investments in Chinese banks, it explained.

The report said Hong Kong and Singapore retained their positions as the second- and third-largest recipients in the region, attracting FDI of US$36 billion and US$20 billion, respectively.

It said the region is increasingly attracting "high-quality" FDI aimed at high value-added and knowledge-intensive activities.

Intel is expanding its assembly and testing facilities in China and Malaysia and plans to invest US$300 million in Vietnam to build the country's first semiconductor factory,, it noted.

In China, FDI in the manufacturing sector has been shifting towards more advanced technologies. Airbus, for instance, plans to build an A320 assembly line in China.

The report said with continued high economic growth, the region has become more attractive to market-seeking FDI.

Furthermore, it has become a hot spot for transnational corporation (TNC) investments in financial services and high technology industries.

Asia's newly industrialising economies - Hong Kong, South Korea, Singapore and Taiwan - remained the main sources of FDI from developing countries, despite a significant decline in their total outflows in 2005.

It said the rise in China's foreign currency reserves stimulated rapid growth in outward FDI from the country, helping to reshape the pattern of flows from Asia.

Outward FDI from South, East, and Southeast Asia still focuses on services, but a growing share of capital outflows from the region has been targeting manufacturing and natural resources.

Asian energy companies, in particular those from China and India, have intensified their efforts to acquire oil assets, the report noted.

China National Petroleum Corp (CNPC) acquired PetroKazakhstan for US$4.2 billion in August 2005, by far the largest deal in the oil and gas industry by companies from developing countries and transition economies, it said.

The report noted that rapid economic growth in South, East, and Southeast Asia shows few signs of slowing, and a further expansion of FDI into and from the region is expected.

FDI inflows to India have been gaining momentum in recent years, and the country's prospects for attracting FDI are promising, it said.

FDI is also likely to continue its upward trend in Southeast Asia, especially in relatively low-cost countries.

With a strengthening of government support and some large mergers and acquisition (M&A) deals expected, the surge in outward FDI from China is likely to continue, it said.

Across the globe, the report said, FDI inflows amounted to US$1,306 billion in 2006, rising by more than 38 percent and finishing close to the record level of 2000.

According to the report, the rise in global FDI flows and in international production was a result of strong economic performance around the world, partly driven by increasing corporate profits and resulting higher stock prices that raised the value of cross border M&As.

On the outlook for this year, Unctad said global cross border M&As had risen by 58 percent in the first half of 2007 compared to the corresponding period last year, which indicates that FDI should continue to grow in 2007.