16 July 2024 | 07:36 am GMT +7
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  • ASEAN Advantage

    Why invest in ASEAN?

    • Integrated Supply Chain

      ASEAN provides an effective platform for investors to utilize and maximize its value chain.

      The varying levels of economic development in ASEAN coupled with each country’s industry specialization allow greater complementation among local and multinational companies (raw material supply and high value chain) and locational complementation between member countries (labour force and natural resources). Market-seeking and efficiency-seeking FDIs may leverage on these complementations and increase their involvement in the regional supply chain.

      The ASEAN Investment Report 2023 discusses how newer member countries of ASEAN are attracting more FDI growth with strong investments in manufacturing, wholesale and retail trade, with 5 major contributing industries comprising 86 percent of total FDI inflows.1 For example, the report mentions cases where Malaysia, Indonesia, and Thailand have mostly benefited from the FDI received in the electric vehicle (EV) manufacturing sector. Multinational corporations in various industries invest in upstream activities (such as charging infrastructure) across the region. Some invest in research and development in several Member States, including in Singapore. Investment from multinational corporations is aimed at deepening their foothold in the region and building an integrated supply chain network. International companies, including new entrants and startups, play crucial roles.2

      The practice of finding another ASEAN country to complement current operations has led ASEAN-based investors to deepen their engagements with the region.  Increasingly, multi-national companies in ASEAN are adopting production strategies that involve horizontal and vertical multi-plant operations in two or more ASEAN countries for strategic and economic reasons.  The ASEAN production network is used as part of the companies' regional value chain that is within integrated business arrangements and linked with different functions and operations (i.e., marketing, research and development, manufacturing).  

      Intra-regional trade

      ASEAN’s entry into different free trade agreements enable companies to tap and trade with supporting industries and suppliers based in the region and in partner countries. Access to goods, raw materials, or product components for final assembly and production increased as tariff for more than 5,000 product lines were reduced to 0-5%. In fact, data shows intra-ASEAN trade improved in the last few years, acquiring 21.3% of the region’s US$ 856 million trade value in 2022.3 China and Japan follow ASEAN in the list of top trade sources, with 11.7% and 11.4% of the region’s total trade.4

      Integrated regional or global supply chains are widely utilized in in the fast-moving consumer goods (FMCG) industry, particularly for food, beverage, and agricultural products.5

      Case study: Procter & Gamble

      P&G is one of the largest consumer goods companies in ASEAN, employing more than 107,000 people in 35 countries.6 The company has 10 product categories, The company has 10 product categories, and has 8 manufacturing sites, 8 mega distribution centres, and a business service centre in ASEAN. 

      Singapore is the regional headquarters for P&G in the Asia Pacific, hosting regional business units as well as global business units. In October 2013, Singapore will be home to P&G's Innovation Centre, a US$250 million purpose-built R&D centre.  The Philippines, meanwhile, hosts the company's business service centre while Thailand serves as the marketing hub for beauty and fabric and homecare products.  

      P&G has manufacturing operations in Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam.  Its diversified manufacturing footprint in ASEAN covers the full spectrum of the company's value chain.  For instance, P&G's US$50 million oleo-chemicals plant in Malaysia processes feedstock from Indonesia and Malaysia into chemicals that go to other P&G plants in ASEAN and other parts of the world as raw materials.  In Thailand, P&G's haircare manufacturing plant is the company's largest haircare export plant in the world, while P&G's Cabuyao plant in the Philippines is P&G's largest multi-category manufacturing in Asia.  

      Note: Case study on P&G was lifted from the ASEAN Investment Report 2012

  • Reasons for Investing in ASEAN

    ASEAN is a choice destination for ASEAN and international investors. Investors enjoy profitable operations and commit to deeper engagement in the region as shown by strong reinvestment and sustained growth in foreign direct investments (FDI).  FDI stock in the region has quadrupled within a little more than a decade.  In 2011, FDI stock exceeded US$1 trillion compared with only US$266 billion in 2000.