Contribution to FDI
Professional, scientific, and technical activities, including research and development (R&D), represent a rapidly growing component of foreign direct investment in ASEAN, reflecting the region’s shift toward higher value-added and knowledge-based activities. In 2024, the sector accounted for approximately 10% of total FDI inflows, increasing significantly from a negative contribution in 2023, indicating a strong recovery and expansion in investment demand.
The sector plays a critical role in supporting industrial upgrading and innovation. R&D investment enables multinational enterprises to establish technology centres, design facilities, and innovation hubs that enhance productivity and competitiveness across industries. These activities contribute to value creation by promoting technological advancement and integrating ASEAN more deeply into global value chains.
In addition, the sector supports the development of advanced industries such as semiconductors, digital technologies, and pharmaceuticals. Many investments are concentrated in regional hubs that host innovation ecosystems, where firms benefit from skilled labour, infrastructure, and knowledge spillovers.
The contribution of this sector extends beyond its direct share in FDI. By facilitating technology transfer, enhancing skills development, and strengthening innovation capacity, professional and technical activities play a key role in transforming ASEAN into a more sophisticated and competitive investment destination in the global economy.
Current Trend
The professional, scientific, and technical sector in ASEAN is experiencing strong growth, driven by rising demand for innovation and advanced services. In 2024, FDI inflows into this sector increased significantly, contributing about 10% of total FDI, compared with a negative value in 2023, demonstrating a sharp turnaround and growing investor confidence.
A key trend is the expansion of R&D and innovation centres across the region. While historically concentrated in a few economies, investments are increasingly spreading to major production hubs such as Indonesia, Thailand, and Viet Nam. This reflects a shift from centralized innovation toward more distributed research and development networks supporting regional supply chains.
Another important trend is the integration of R&D activities with manufacturing and digital sectors. Companies are investing in technology centres, AI development, and advanced engineering services to enhance production efficiency and product innovation. This convergence strengthens ASEAN’s role in high-value segments of global value chains.
Moreover, investment in professional and technical services is closely linked to digital transformation, including AI, data analytics, and cloud-based solutions. As firms seek to improve competitiveness, demand for these services continues to rise. Overall, the sector is becoming increasingly dynamic, innovation-driven, and essential to ASEAN’s evolving investment landscape.
Driving Factors
Several key factors are driving foreign direct investment in professional, scientific, and technical activities in ASEAN. One of the most important is the growing need for innovation and technological advancement. As industries become more complex and competitive, companies require R&D capabilities to develop new products, improve processes, and enhance efficiency. This demand encourages investment in research centres and technical services.
Another major driver is industrial upgrading. ASEAN economies are transitioning from labour-intensive production toward higher-value activities, including technology-intensive manufacturing and digital services. This shift creates demand for knowledge-based investment, particularly in engineering, design, and research functions.
Government policies and incentives also play a significant role. Several Member States have introduced measures to promote R&D investment, including financial support mechanisms and targeted incentives for high-tech industries. For example, some investment frameworks provide up to 50% funding support for R&D activities in priority sectors, encouraging firms to establish innovation operations in the region.
In addition, the availability of skilled labour and the development of innovation ecosystems attract foreign investors. Collaboration between multinational enterprises, universities, and research institutions further strengthens these ecosystems. These factors collectively create a conducive environment for sustained FDI in professional and technical activities.
Outlook
The outlook for foreign direct investment in professional, scientific, and technical activities in ASEAN is highly positive, supported by strong structural trends toward innovation and digital transformation. As the region continues to industrialise and upgrade its economic structure, demand for R&D and advanced technical services is expected to grow significantly.
In the short term, investment is likely to remain concentrated in key innovation hubs, but further geographic diversification is expected as more Member States develop capabilities in high-tech industries. Increasing integration with manufacturing and digital sectors will continue to drive demand for technical expertise and research activities.
In the medium to long term, emerging technologies such as artificial intelligence, biotechnology, and advanced materials will play a critical role in shaping the sector. Investment in these areas will enhance productivity and create new opportunities for economic growth. Regional initiatives to strengthen digital infrastructure and innovation capacity will further support this expansion.
However, challenges remain, including skill shortages and the need for stronger research capabilities. Addressing these issues will be essential to sustain growth and attract high-quality investment. Overall, the sector is expected to become an increasingly important driver of ASEAN’s competitiveness, supporting long-term economic transformation and attracting higher-value FDI.
