India is set to be world's second hottest destination for foreign direct investment after China in the next four years, according to a UN-sponsored survey.

The United States has fallen to the third spot, while Thailand ranks fourth, followed by Poland and the Czech Republic (with equal points), Mexico and Malaysia (equal points) and the United Kingdom, Singapore and South Korea (ranked equal).

These results are based on a joint survey conducted by the UNCTAD in Geneva and by Corporate Location Magazine in London.

More than four out of five international location experts from around the world believe that FDI inflows are about to take off again, following three years of continuous decline in global FDI.

The survey, which polled 87 investment analysts worldwide, gave no figures for investment flows, but said volumes were seen improving after three poor years between 2001 and 2003.

For India and China, major FDIs are expected in the manufacturing sector. Prospects for motor vehicles and other transport equipment, machinery and equipment, chemicals and, to a lesser extent, electrical and electronic products, publishing and media service are brighter.

In the services sector, banking and insurance, business services, tourism, transport, computer-related services, retail and wholesale trade will take the lead in attracting FDI in the years to come, experts said in response to the survey questions.

Asia-Pacific garners the most optimism of all regions in terms of its future FDI prospects.

For both the short and medium term, 88 per cent of the respondents said they expected further improvement in those prospects, with the remaining 12 per cent anticipating that they will remain the same.

Not a single respondent predicted any downturn in the region's prospects.

According to an earlier UNCTAD report, FDI was $653 billion in 2003, unchanged over the previous year, and under half the record $1.4 trillion in 2000 when cross-border mergers and acquisitions were booming.

The survey findings predict that the most likely options for business expansion overseas are evenly divided between mergers and acquisitions (41 per cent) and greenfield investments (37 per cent). Other modes of international business expansion such as licensing and strategic alliances were mentioned by only 22 per cent of the respondents.

Despite the fact that the outsourcing of white collar jobs has become a major issue in many countries and dominates international business headlines, the respondents still see the bulk of relocation occurring in lower value-added corporate functions.

Processing activities, logistics and supply functions are the most frequently mentioned corporate functions likely to relocate abroad.