ASEAN continues to shine amidst a volatile world.

FDI Increased inflows into ASEAN. 8% represents a value of up to... 226 One billion US dollars in the year 2568 Which increased in the manufacturing sector. 147 % เป็น 44 One billion US dollars

ASEAN has become a key hub in global supply chains amidst geopolitical tensions and the ongoing US tariffs. Furthermore, ASEAN continues to perform well in attracting foreign direct investment (FDI), reinforcing growing investor confidence. FDI into ASEAN is projected to increase by 8%, reaching US$226 billion by 2568, with the manufacturing sector seeing a 147% increase to US$44 billion, driven by the automotive, electronics, and semiconductor industries.

the role of FDI to ASEAN

Foreign direct investment (FDI) plays a crucial role in driving ASEAN's emergence as a global supply chain hub across diverse industries. These investments not only build physical and digital infrastructure such as transportation systems, warehousing, special economic zones, and energy, but also expand supply-intensive manufacturing sectors and strengthen the business ecosystem by connecting local entrepreneurs and suppliers. All of this is a key mechanism for enhancing the region's competitiveness on the global stage.

Currently, trade tensions between the US and China and the imposition of US tariffs are accelerating diversification strategies, leading companies to invest in ASEAN. This is due to the region's strong economic potential and diverse growth opportunities, including economic growth and stability, a supportive demographic structure, strategic location, trade integration, industrial opportunities, supply chain diversification, competitive costs, and infrastructure development.

Furthermore, ASEAN has benefited from the “China+1” strategy, where businesses have diversified their supply chains to one or more ASEAN countries to avoid over-reliance on China. ASEAN also surpassed China as the number one destination for manufacturing investment from companies in OECD (Organization for Economic Co-operation and Development) countries in 2565-2566.

5 countries with outstanding FDI.

Vietnam: Foreign direct investment hits record high.

Foreign direct investment (FDI) in Vietnam grew remarkably, increasing by 9% and reaching a record high for the first time, exceeding US$20 billion. This growth was primarily driven by strong investment from companies in Singapore, South Korea, and China, in that order.

The manufacturing sector remains the most invested sector, reflecting investors' confidence in Vietnam's potential. Meanwhile, the real estate sector continues to attract increasing interest, a result of strong economic growth and rapidly expanding domestic demand.

Thailand: Signs of Confidence Amidst Global Challenges

Thailand remains a key destination for foreign investors. In the first half of 2568, 502 foreign companies received business licenses, with a total investment value of 111.5 billion baht (approximately US$3.1 billion), a 37% increase from the previous year. This reflects confidence in the potential of the Thai economy, despite global trade tensions and regional uncertainty.

Japan leads in investment with a value of 43 billion baht, followed by the United States and China. Singapore and Hong Kong also remain in the top five. These investors focus on high-potential industries such as retail, advanced plastics research, data center services, and digital platforms.

Furthermore, the EEC is a highlight for investment, attracting over 62.9 billion baht, representing 56% of all foreign investment, a 36% increase from the previous year. This reflects the crucial role of the EEC in driving the Thai economy towards a new industrial era.

These figures not only indicate Thailand's strength as an "investment hub," but also reflect its ability to maintain investor confidence amidst global economic volatility.

Indonesia : FDI continues to grow, driven by diversified investments.

Foreign direct investment (FDI) in Indonesia in 2024 showed steady growth, increasing by 13% to reach US$24 billion. Key drivers of this growth included investment in several sectors, particularly mining, which surged fourfold to US$1.3 billion; wholesale and retail trade, which increased by 127% to US$2.6 billion; and healthcare, which expanded fivefold to US$2.2 billion.

Despite increased interest in the automotive industry, particularly the electric vehicle (EV) supply chain, FDI in the manufacturing sector remained stable at US$12 billion. However, manufacturing remains the largest sector receiving investment, accounting for almost half of all investment.

In terms of sources of funding, ASEAN countries accounted for the largest share, representing half of all FDI. Investment from Singapore increased by 114% to US$12 billion, while investment from China rose by 64% to US$2.5 billion, also focusing on the EV supply chain. Investment from Hong Kong (China), Japan, and South Korea combined accounted for 35% of the total investment.

Malaysia : FDI surges, driven by data centers and electronics.

Foreign direct investment (FDI) in Malaysia in 2567 showed remarkable growth, increasing by 36% to reach US$11 billion. This was largely driven by investment in data centers and the electronics industry, reflecting the continuously growing demand for digital infrastructure. The information and communications technology sector, particularly data centers, saw a 122% increase in investment to US$5.8 billion, accounting for half of all FDI in the country and highlighting Malaysia's role as a "regional digital hub."

In terms of funding sources, ASEAN countries remain the largest investors, increasing by 5% to US$5 billion, or 44% of total investment. Singapore remains the largest investor in the region, although its investment remained stable at US$4.8 billion. Meanwhile, Hong Kong (China) continued its investment expansion for the fourth consecutive year, increasing by 9% to US$4 billion, becoming the second largest investment source in 2024.

Singapore : FDI hits new record high despite financial sector slowdown.

Foreign direct investment (FDI) in Singapore expanded by 6% in 2567, reaching a record high of US$143 billion. This was driven primarily by investment in the manufacturing sector, which rebounded from a negative US$13 billion in 2566 to a positive US$9 billion, and investment in professional, scientific, and technical activities, including research and development (R&D) and holding companies, totaling US$22 billion.

Although the financial sector, the largest recipient of investment, declined by 33% to $87 billion, it still accounts for a significant 60% of all FDI. Investment from the United States, the largest investor, fell sharply by 55% to $37 billion, due to a contraction in investment in holding companies and regional headquarters, as well as declines in investment in the financial and e-commerce sectors.

However, investment from the European Union increased by 13% to US$19 billion, and from the United Kingdom, it surged by 243% to US$17 billion, boosting overall FDI growth. In addition, investment from other major investors such as Japan, China, ASEAN, Taiwan, and South Korea also increased significantly, with Malaysia remaining the largest source of intra-regional investment.

Challenges to FDI in ASEAN

Foreign direct investment in ASEAN still faces several significant obstacles that affect its competitiveness and ability to attract new capital. Regulatory complexity and policy inconsistencies among member states complicate cross-border business operations, while infrastructure gaps, particularly in logistics and digitalization, continue to limit the potential for investment in advanced technologies.

Furthermore, pressure from ESG standards adds to the challenges, as global investors demand sustainability, while ASEAN is still in the process of harmonizing its regulatory framework. Political and governance issues, as well as sudden policy changes, further increase uncertainty.

Furthermore, geopolitical tensions and protectionist trade policies between major powers affect supply chain strategies and create skills gaps in the labor market, particularly in advanced manufacturing and digital sectors, which may hinder future investment.

Follow and read other columns in the Bank Finance Journal, December 2568, Issue 524 in digital format: https://goo.gl/U6OnIi

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