ASEAN FDI outpaces China for first time in decade

For the first time in a decade, Southeast Asia has surpassed China in attracting foreign direct investment (FDI).

This is chiefly driven by the "China + 1" strategy as companies seek alternatives to rising costs and tariffs in China. A report by the Angsana Council, Bain & Company, and DBS Bank revealed that in 2023, FDI in Southeast Asia's top six economies (SEA-6) totaled US$206 billion, compared to China’s US$43 billion.

The report predicts that Southeast Asia will continue to outpace China in FDI growth over the next decade, particularly in emerging sectors like electric vehicle (EV) manufacturing, semiconductors, and data centers. Of course, despite these shifts, China remains a formidable competitor due to its low production costs, large domestic market, and state-driven innovation.

While Southeast Asia has seen significant FDI growth, the region must continue to improve its service provision and innovation to maintain momentum. To address these gaps, it needs to invest more in technology and innovation. Improving infrastructure and fostering a culture of innovation, similar to the strategies employed by China and the United States, will be key.

This could involve increasing support for tech startups, enhancing education and training in STEM fields, and encouraging collaboration between governments, private sector, and academia.

Additionally, the region must focus on creating a more integrated market, which could help scale up manufacturing capabilities and improve competitiveness. Steps have been taken towards this goal, notably with ASEAN member states looking to sign a Digital Economy Framework Agreement in the near future.

With these promising developments in store, Southeast Asia can solidify its position as a leading global investment hub in the coming decade.

Article by Su-Lin Tan for SCMP. Read more here or in the PDF below.

Asean FDI outpaces China for first time in decade amid supply shifts, rising costs_ report.

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