Investment in ASEAN
CEIC Gallery/Emerging Economies - December 3, 2015 Introduction The expansion of foreign direct investment (FDI) inflows is one of the main drivers of an acceleration of economic growth and development in ASEAN. Since the 1980s, ASEAN has long pursued outward-oriented FDI policies, and has successfully been integrated with East Asia’s production networks and supply chains (in advanced ASEAN countries, namely; Singapore, Malaysia, Thailand and the Philippines). The ASEAN Economic Community (AEC) aims to integrate the regional economies by 2015 to increase a competitiveness with the rest of the world. All charts below demonstrate time series data of investment indicators, provinding insight and trend of investment in ASEAN. Chart 1 & 2
- In 2014, FDI inflows in ASEAN continuously rose, this was due to the increase of allowable foreign ownership in ASEAN developing countries. On top of that, countries like U.S. and EU have shifted their focus to ASEAN as their destination for investment.
- There has been a steep rise in Intra-ASEAN FDI, albeit from a small base. Despite the continued increase in intra-ASEAN investment, the amount was still far lower than that of inflows from Extra-ASEAN.
- In 2014, Singapore accounted for almost half of total FDI to the region; followed by Indonesia and Malaysia repectively. Thailand's FDI inflows declined significantly from 2013-2014 , owing to the political instability.
- In 2014, the major sources of FDI for ASEAN were EU, intra-ASEAN and Japan, accounting for half of total FDI to ASEAN. FDI inflows from EU has increased, and has retained its spot as the top investor in ASEAN after the slowdown in 2012 due to the Euro zone crisis. On the other hand, FDI inflows from Japan dropped noticeably, with a loss of 62.7 percent. In recent years, Autralia, the Republic of Korea, and other ASEAN countries have become progressively essential sources of FDI.
- The chart 5 indicates that ASEAN 5 countries are the main destination of FDI inflows in ASEAN. In 2013, China achieved FDI inflows slightly more than ASEAN 5, however; the FDI-to-GDP ratio in ASEAN 5 are relatively higher than that of China, especially from 2012 to 2014.
- China significantly complements ASEAN as a destination for FDI, and also has become an important player in FDI inflows to ASEAN. However, as China labour and operational costs continue to increase, some FDI to China starts to shift to ASEAN. Japanese companies are recently shifting their investments from China and increasingly focusing on the ASEAN. In addition, due to the slowdown of China's and India's economies, the region is increasingly becoming a destination for investment.
- Chart 7-13 illustrate a comparison and trend of FDI inflows-outflows and portfolio investment inflows-outflows among ASEAN member states and aggregated countries.