4 December 2024 | 11:29 pm GMT +7
  • Home
  • Contact Us
  • News and Events

    WHAT’s new?

    • ASEAN Maintained Strong FDI Growth and Adoption of Favourable Investment Policies in 2023

      The recent United Nations Trade and Development (UNCTAD) release of its 2024 World Investment Report shows that ASEAN continues to maintain a strong FDI growth and becoming a significant global FDI destination. This achievement is attributable to the region’s continued progress in creating favourable investment environment, as well as in adopting favourable investment measures.

      ASEAN surpassed global growth of FDI inflows in 3 consecutive years

      In 2023, ASEAN attracted USD 226 billion of FDI, or 17 percent of global FDI. This was also a positive growth of 1.2 percent against the backdrop of global and other region’s FDI inflow slowdown in 2023 (See Table 1), reflecting its economic competitiveness as a region. Since the outbreak of the pandemic in 2020, the growth of FDI inflows to ASEAN have always surpassed the average growth rate of World, Asia, as well as developing economies indicating its not only strong but also sustainable improvement in terms of competitiveness to other countries.

       Table 1: Foreign Direct Investent Inflows by Region 2020-2023

       

       

      2020

       

      2021

       

      2022

       

      2023

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      ASEAN

       

      120

       

      -27.3

       

      208.8

       

      74

       

      223.5

       

      7

       

      226.3

       

      1.24

       

      Asia

       

      513.1

       

      3.1

       

      666.5

       

      29.9

       

      677.8

       

      1.7

       

      621.1

       

      -8.4

       

      Developing Economies

       

      647

       

      -8.2

       

      890

       

      37.6

       

      929.5

       

      4.5

       

      867.4

       

      -6.7

       

      World

       

      984.6

       

      -43.1

       

      162.2

       

      64.7

       

      135.6

       

      -16.4

       

      133.2

       

      -1.8

       

      Source: UNCTAD World Investment Report 2024 Annexes, Author’s analysis

      The positive FDI trend is explained by both positive trends of Merger and Acquisition value and greenfield FDI Value. Both grew about 129 percent and 55 percent (year on year) to USD 28 billion and USD175 billion, respectively in 2023.

      The strong growth of greenfield FDI value indicates positive investor perception towards the investment risk in the region. Greenfield FDI refers to the establishment of new facilities which is commonly associated with high capital cost (Muller, 2006)[1], the need to adapt to domestic institutional environment (Alon, Elia, & Li, 2020)[2], and only popular between countries which has established formal economic relationship which includes the provision that host countries could give support to the full control and protection over the investment of the foreign investors (Alon et al., 2020[3]; Wu, Li, & Selover, 2012). Greenfield FDI is also an important development to ASEAN as host economies as it brings in new technology and management practices as well as creating new sub-contracting opportunities (Albulescum & Tămăşilă, 2014)[4], which domestic firms in the region may benefit from.

      Table 2: Greenfield FDI Announcement by Destination Region 2020-2023

       

       

      2020

       

      2021

       

      2022

       

      2023

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      Value (USD bn)

       

      Growth (yoy, %)

       

      ASEAN

       

      69.8

       

      -24.8

       

      67.9

       

      -2.8

       

      112.9

       

      66.3

       

      175

       

      55.1

       

      Asia

       

      180.6

       

      -36.6

       

      170.9

       

      -5.4

       

      312.6

       

      83.0

       

      451.3

       

      44.4

       

      Developing Economies

       

      296.7

       

      -37.9

       

      292.8

       

      -1.3

       

      622

       

      112.4

       

      749.4

       

      20.5

       

      World

       

      640.6

       

      -29.5

       

      829.7

       

      29.5

       

      1,309.1

       

      57.8

       

      1,380.4

       

      5.4

       

       Source: UNCTAD World Investment Report 2024 Annexes, author’s analysis

       

      Most Observed AMS IMD Global Competitiveness Rank Improved

      ASEAN has also recorded improvements in its economic competitiveness indicated in parameters such as the recently released IMD Global Competitiveness Index 2024, which correlates to its strong FDI performance. In the recent release of IMD World Competitiveness 2024, the performance of 5 AMS included in the index namely Indonesia, Malaysia, Philippines, Singapore, and Thailand, have shown positive development with 2 AMS maintaining its competitiveness and 2 recorded increasing its competitiveness relative to other countries in the world. As can be seen from Table 3 below, Indonesia jumped from the 34th place to the 27th while Thailand also improved its competitiveness by going from the 30th place to the 25th.

      In 2024, most of these 5 AMS are already in top 50 in the world across all subcategories except for infrastructure. In most of the subcategories, namely economic performance, government efficiency, business efficiency, as well as infrastructure, most of these AMS have shown strong performance. Highest improvement is in the subcategory of infrastructure with Thailand jumped 11 ranks to 5th in the world, and in the subcategory of business efficiency with Indonesia recorded 8 ranks’ jump to 23th in the world.  IMD suggested that ASEAN needs to focus on areas such as job-generating investment, supply-side strategy to combat inflation, research and development investment, workforce quality, continuation of bureaucracy reform, strengthening of legal infrastructure to deal with corruption, as well as climate change adaptation and mitigation in order to further enhance their competitiveness.

      Table 3: ASEAN IMD World Competitiveness Rank Difference 2024

      Country Name

      Overall

      Economic Perfomance

      Government Efficiency

      Business Efficiency

       

      INFRASTRUCTURE

      2023

      2024

      2023

      2024

      2023

      2024

      2023

      2024

       

      2023

      2024

      Score

      Rank

      Score

      Rank

      Score

      Rank

      Score

      Rank

      Score

      Rank

      Score

      Rank

      Score

      Rank

      Score

      Rank

       

      Score

      Rank

      Score

      Rank

      Indonesia

      70,75

      34

      71,52

      27

      57,86

      29

      54,31

      24

      57,79

      31

      57,51

      23

      72,85

      20

      71,38

      14

       

      34,89

      51

      34,59

      52

      Malaysia

      75,75

      27

      68,13

      34

      70,69

      7

      62,52

      8

      59,4

      29

      50,41

      33

      57,17

      32

      41,55

      40

       

      56,14

      35

      49,71

      35

      Philippines

      54,14

      52

      52,64

      52

      52,53

      40

      48,86

      40

      37,88

      52

      36,66

      49

      46,45

      40

      38,01

      43

       

      20,13

      58

      18,71

      61

      Singapore

      97,44

      4

      100

      1

      80,27

      3

      70,85

      3

      84,14

      7

      87,8

      2

      85,5

      8

      95,96

      2

       

      80,24

      9

      77,08

      4

      Thailand

      74,54

      30

      72,51

      25

      62,52

      16

      64,32

      5

      60,78

      24

      55,14

      24

      70,88

      23

      62,04

      20

       

      44,38

      43

      40,22

      43

      Source: IMD, author’s analysis[5]

      ASEAN Also Lead the World in Adopting Favourable Investment Measures

      Investment policy trend in ASEAN is also indicating positive developments, with ASEAN leading the position globally. In 2023, there are more new measures introduced by AMS that are favourable for investors compared to global average. The proportion of favourable new measures to total new measures is almost 90%, higher than developed (43%) and average developing countries (86%) subgroups as can be seen in Table 4 below[6].

      Table 4: Share of Favourable Investment Measures Against Total Investment Policy Measures

      Region

       

      Share of Favourable Investment Measures (% of total investment policy measures)

       

      ASEAN

       

      90%

       

      Developing Economies

       

      86%

       

      Developed Economies

       

      43%

       

      Source: World Investment Report 2024, UNCTAD Investment Policy Monitor, author’s analysis

      With regard to the introduction of more favourable investment policy measures, ASEAN follows the global trend as highlighted in World Investment Report 2024[7] whereby Facilitation-related measures led the list with 6 new measures adopted in 2023, followed by Incentives (5 measures), Liberalisation (2 measures), movement of business people (2 measures), and promotion (1 measure). The examples of facilitation measures include Cambodia’s new aftercare services, and Philippines’ established Green Lanes for strategic investments. Meanwhile, incentives are increasingly used as the measure to attract investment such as Malaysia’s Special Financial Zone in Forest City to attract foreign investment, Thailand’s new investor visa for Eastern Economic Corridor (EEC) and more liberal investment regime which allows foreigners to work or invest in 18 targeted industries. All of these national policy measures complement the regional initiatives of implementing the ASEAN Comprehensive Investment Agreement (ACIA), ASEAN Trade in Services Agreement (ATISA) or previously ASEAN Framework Agreement on Services (AFAS), as well as the ASEAN Investment Facilitation Framework (AIFF).

      Looking at the development of both FDI inflows as well as the competitiveness and investment policy regime, ASEAN has strong potential to remain as attractive FDI destination in the middle of challenging global economic development. To further unlock its potential, ASEAN should continue and accelerate their current efforts in creating enabling environment for FDI to complement other efforts in enhancing competitiveness, whereby the quality of investment facilitation as the potential key area of improvement, as quoted by UNCTAD in their World Investment Report 2024.

       



      [1] Muller, T. (2006). Analyzing modes of foreign entry: Greenfield investment versus acquisition. Review of International Economics, 15(1), 93–111.

      [2] Wu, J., Li, S., & Selover, D. D. (2012). Foreign direct investment vs. foreign portfolio investment. Management International Review, 52(5), 643–670. https://doi.org/10.1007/s11575-011-0121-0.

      [3] Alon, I., Elia, S., & Li, S. (2020). Greenfield or M&A? An institutional and learning perspective on the establishment mode choice of Chinese outward investments. Journal of International Management, 26(3), 100758. https://doi.org/10.1016/j.intman.2020.100758.

      [4] Albulescum, C. T., & Tămăşilă, M. (2014). The impact of FDI on entrepreneurship in the European countries. Social and Behavioral Sciences, 124(2), 219–228.

      [5] https://www.imd.org/wp-content/uploads/2024/06/WCY_Bookletv1_2024-1.pdf

      [6] The development for the previous period can be seen in ASEAN Investment Report publication site while the upcoming ASEAN Investment Report 2024 will be launched during ASEAN Business and Investment Summit https://aseanbaclaos.la/abis.

      [7] https://unctad.org/system/files/official-document/wir2024_ch02_en.pdf

  • Industries

    Air Travel

    Air Travel

    The move towards an ASEAN Single Aviation Market boosted infrastructure investment and aviation development plans in the region. Growth is also attributed to the proliferation...

    > READ MORE

SUCCESS STORIES