Asean rising: supply-chain shake-up
The region is primed for more FDI inflows as it integrates into global network
THE South-east Asian region is riding high as global supply chains shift, driven by geopolitical tensions and pandemic-related disruptions that are pushing more companies to adopt China+1 diversification strategies.
According to latest available data, foreign direct investment (FDI) into the region’s six major economies – Singapore, Indonesia, Malaysia, Vietnam, Thailand and the Philippines – surged 5.5 per cent to a record high of US$224 billion in 2022 from the previous year.
Singapore saw the highest increase in value, accounting for over 60 per cent of FDI in the region.
The region’s share of global FDI is also on the rise. From under 15 per cent in 2021, it rose to more than 17 per cent a year later, according to an investment report released last December by the Jakarta-based Asean Secretariat.
FDI for Malaysia, Singapore and Vietnam hit record levels in 2022, while Cambodia and Indonesia’s growth was flat, although levels of investment remained elevated.
The report noted that the inflows to Asean countries surpassed China for the second consecutive year.
A May 29 report by OCBC attributed the shifting trend of investment direction to a diversification of the global and regional supply networks, driven by strategies such as China+1 and friendshoring.
Strong domestic reforms and an encouraging macro environment are also sweetening the region’s proposition as an investment spot.
FDI inflows into Asean rose to US$236 billion in 2023, a 24 per cent increase from the annual average of US$190 billion between 2020 and 2022, said the OCBC report.
Over 71 per cent of FDI inflows to Asean are from the top 10 sources, compared to 63 per cent in 2021, with the US, Japan as well as China and Hong Kong taking the lead.
The US remained the region’s largest investor: investments rose 6 per cent to US$37 billion, with a bulk or around US$20 billion ploughed into the manufacturing and finance sectors.
Japan, the second highest investor (excluding intra-Asean investments), rose nearly 24 per cent to US$26 billion in 2022, focusing on storage, transportation, automotive parts, and activities related to electric vehicles (EVs).
On the other hand, China’s FDI inflows fell nearly 12 per cent to US$15 billion. About half of the investment was channeled to manufacturing, real estate, infrastructure and the digital economy. China was the largest investor in Cambodia and Myanmar.
The FDI inflows from China, said OCBC, indicate the changing backdrop, including geopolitical factors. “Post-pandemic, FDI inflows from China into the Asean region have sharply increased, diversifying from infrastructure development into electronics, resources and food industries,” said the bank.
Intra-regional investment rose for the third consecutive year to a record US$28 billion in 2022; it was also the second largest source of investment that year.
The top five industries – financial and insurance, manufacturing, information and communication, real estate, and energy – attracted 87 per cent of intra-Asean investment.
Indonesia, Singapore and Vietnam received two-thirds of intra-region investment. Singapore was the largest source, with US$18 billion, a 10 per cent increase from 2021.
Despite rising intra-Asean investment, the share of total FDI inflows has remained under 20 per cent since 2017, according to the investment report. The report estimated that the compound annual growth rate of non-Asean FDI inflows between 2015 and 2022 was 9.2 per cent – 2.5 times the growth rate of intra-regional FDI.
Asean emerges as FDI inflow magnet
US dominates as Asean’s top investor
All in the Asean family
ON THE UP & UP: Asean FDI inflows and share of world inflows
50
100
150
200
250
FDI INFLOWS (US$B)
5
10
15
20
25
113.3
122
130
120
123
155
122
174
224.2
137
182
’12
’13
’14
’15
’16
’17
’18
’19
’20
’21
’22
SHARE OF WORLD INFLOWS (%)
Singapore
Indonesia
Vietnam
Malaysia
Thailand
Philippines
Cambodia
Myanmar
Laos
Brunei
SG HOLDS THE FDI CROWN
2022 (US$B)
141.2
131.1
22.0
21.1
17.9
15.7
17.1
12.1
9.9
14.6
9.2
12.0
3.6
3.5
3.0
1.0
0.6
1.1
-0.3
0.2
2021 (US$B)
Indonesia
Singapore
Vietnam
Thailand
Malaysia
Myanmar
Philippines
Cambodia
Laos
Brunei
NEIGHBOURLY BOOM: Intra-Asean investment inflows
2022 (US$M)
7,315
7,404
6,171
4,477
5,131
5,672
2021 (US$M)
3,681
1,237
3,202
2,124
1,495
528
2,582
611
490
630
161
224
83
44
THAILAND
VIETNAM
INDONESIA
SINGAPORE
MALAYSIA
Biggest winners
1. Singapore: The lion’s share
FDI inflows to Singapore grew by 10 per cent, reaching a record US$141 billion, driven by investments in manufacturing (including electronics and semiconductors) and wholesale and retail trade. The top five sources were the US, Japan, the UK, China and Hong Kong, accounting for 45 per cent of inflows.
Manufacturing
Real estate
Infrastructure
Digital economy
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2. Indonesia: In the crosshairs Despite a slight decline from US$24 billion in 2019, Indonesia remains a top investment destination. Singapore leads the way as the largest investor (US$6.6 billion), followed by China and Hong Kong, South Korea and Japan.
Strong interest in transportation, storage, communication, and finance sustains high inflows, with growing attention to EVs, data centres, and the digital economy and payment systems.
3. Vietnam: Powering ahead The country’s FDI inflows surged nearly 15 per cent to US$18 billion, with the manufacturing sector – particularly electrical and electronics – attracting the most investment from intra-Asean, China, Japan and South Korea.
4. Malaysia: More diverse inflows FDI inflows surged by 39 per cent to a record US$17 billion, driven by strong manufacturing investment, which accounted for 66 per cent of FDI. The US was the largest investor at US$8.6 billion, contributing over half of the inflows, followed by Singapore, Japan, China and Hong Kong.
5. Thailand: Love thy neighbour FDI inflows to Thailand dropped 33 per cent to US$10 billion, due to the impact of reduced investments in the manufacturing, finance and insurance, and real estate sectors. However, the country saw a nearly 200 per cent surge in FDI from the intra-Asean region, reaching US$3.6 billion.
SOURCE: UN TRADE AND DEVELOPMENT
SOURCE: ASEAN SECRETARIAT
SOURCE: ASEAN SECRETARIAT
GRAPHICS: HYRIE RAHMAT, CHARMAINE MARTIN, TEOH YI CHIE
FDI for Malaysia, Singapore and Vietnam hit record levels in 2022, while Cambodia and Indonesia’s growth was flat, although levels of investment remained elevated.
The investment report noted that the inflows to Asean countries surpassed China for the second consecutive year.
A May 29 report by OCBC attributed the shifting trend of investment direction to a diversification of the global and regional supply networks, driven by strategies such as China+1 and friendshoring.
Strong domestic reforms and encouraging macro environment are also sweetening the region’s proposition as an investment spot.
FDI inflows into ASEAN rose to $236 billion in 2023, a 24% increase from the annual average of $190 billion between 2020 and 2022, said the OCBC report.
US dominates as Asean’s top investor
Top ten investors in Asean in 2022
United States
Asean
Japan
China
Hong Kong
Korea
United Kingdom
Taiwan
Netherlands
France
US$B
37
28
27
15
13
13
10
7
6
5
Biggest winners
1. Singapore: The lion’s share
FDI inflows to Singapore grew by 10%, reaching a record $141 billion, driven by investments in manufacturing (including electronics and semiconductors) and wholesale and retail trade. The top five sources were the US, Japan, the UK, China, and Hong Kong, accounting for 45% of inflows.
2. Indonesia: On the crosshair
Despite a slight decline from $24 billion in 2019, Indonesia remains a top investment destination. Singapore leads as the largest investor ($6.6 billion), followed by China and Hong Kong, South Korea, and Japan.
Strong interest in transportation, storage, communication, and finance sustains high inflows, with growing attention to EVs, data centers, and the digital economy and payment systems.
3. Vietnam: Powering ahead
The country’s FDI inflows surged nearly 15% to $18 billion, with the manufacturing sector - particularly electrical and electronics - attracting the most investment from intra-Asean, China, Japan, and Korea.
4. Malaysia: Inflows more diverse
FDI inflows surged by 39% to a record $17 billion, driven by strong manufacturing investment, which accounted for 66% of FDI. The US was the largest investor at $8.6 billion, contributing over half of the inflows, followed by Singapore, Japan, China, and Hong Kong.
5. Thailand: Love thy neighbour
FDI inflows to Thailand dropped 33% to $10 billion, impacted by reduced investment in manufacturing, finance and insurance, and real estate sectors. However, the country saw a nearly 200% surge in FDI from the intra-ASEAN region, reaching $3.6 billion.
THAILAND
VIETNAM
INDONESIA
SINGAPORE
MALAYSIA
Over 71% of FDI inflows to Asean are from the top ten sources, compared to 63 per cent in 2021, with the US, Japan as well as China and Hong Kong taking the lead.
The US remained the region’s largest investor: investments rose 6% to US$37 billion, with a bulk or around US$20 billion ploughed into manufacturing and finance sectors.
Japan, the second highest investor (excluding intra-Asean investments), rose nearly 24% to $26 billion in 2022, focusing on storage, transportation, automotive parts, and EV-related activities.
On the other hand, China’s FDI inflows fell nearly 12% to US$15 billion. About half of the investment was channeled to manufacturing, real estate, infrastructure and the digital economy. China was the largest investor in Cambodia and Myanmar.
The FDI inflows from China, said OCBC, indicate the changing backdrop, including geopolitical factors. “Post-pandemic, FDI inflows from China into the Asean region have sharply increased, diversifying from infrastructure development into electronics, resources and food industries,” said the bank.
All in the Asean family
Indonesia
Singapore
Vietnam
Thailand
Malaysia
Myanmar
Philippines
Cambodia
Laos
Brunei
Intra-Asean investment inflows (2021 to 2022)
2022 (US$M)
2021 (US$M)
7,315
7,404
6,171
4,477
5,131
5,672
3,681
1,237
3,202
2,124
1,495
528
2,582
611
490
630
161
224
83
44
SOURCE: ASEAN SECRETARIAT
Manufacturing
Real estate
Infrastructure
Digital economy
Intra-regional investment rose for the third consecutive year to a record US$28 billion in 2022; it was also the second largest source of investment that year.
The top five industries—financial and insurance, manufacturing, information and communication, real estate, and energy - attracted 87% of intra-Asean investment.
Indonesia, Singapore, and Vietnam received two-thirds of intra-region investment. Singapore was the largest source, with US$18 billion, a 10% increase from 2021.
Despite rising intra-Asean investment, the share of total FDI inflows has remained under 20% since 2017, according to the investment Report.
The report estimated that the CAGR of non-Asean FDI inflows between 2015 and 2022 was 9.2% - 2.5 times the growth rate of intra-regional FDI.
GRAPHICS: HYRIE RAHMAT, CHARMAINE MARTIN, TEOH YI CHIE
The South-east Asian region is riding high as global supply chains shift, driven by geopolitical tensions and pandemic-related disruptions that are pushing more companies to adopt China+1 diversification strategies.
Given the prime position, foreign direct investment (FDI) into the region’s six major economies or Asean-6 - Singapore, Indonesia, Malaysia, Vietnam, Thailand and the Philippines - surged 5.5% to a record high of US$224 billion in 2022 from a year ago.
Singapore saw the highest increase in value, accounting for over 60% of FDI in the region.
The region’s share of global FDI is also on the up and up - from under 15% in 2021, it rose to more than 17% a year later, according to a “special Asean investment report” released in December last year by the bloc’s secretariat.
Asean emerges as FDI inflow magnet
50
0
100
150
200
250
113.3
122
130
120
123
155
122
174
224.2
137
182
’12
’13
’14
’15
’16
’17
’18
’19
’20
’21
’22
Asean FDI inflows and share of world inflows 2012 to 2022
FDI INFLOWS (US$B)
5
10
15
20
25
’12
’13
’14
’15
’16
’17
’18
’19
’20
’21
’22
SHARE OF THE WORLD INFLOWS (%)
FDI inflows in Asean countries in 2021 and 2022
Singapore
Indonesia
Vietnam
Malaysia
Thailand
Philippines
Cambodia
Myanmar
Laos
Brunei
2022 (US$B)
141.2
131.1
22.0
21.1
17.9
15.7
17.1
12.1
9.9
14.6
9.2
12.0
3.6
3.5
3.0
1.0
0.6
1.1
-0.3
0.2
2021 (US$B)
SOURCE: UN TRADE AND DEVELOPMENT
SOURCE: ASEAN SECRETARIAT
UN TRADE AND DEVELOPMENT
Asean Rising: supply-chain shakeup
Asean countries are primed for further FDI inflows as the region further integrates into global supply chains.
PHOTO: ADOBE STOCK
WHO IS LEADING THE SURGE?
United States
Asean
Japan
China
Hong Kong
Korea
United Kingdom
Taiwan
Netherlands
France
US$B
37
28
27
15
13
13
10
7
6
5
SOURCE: UN TRADE AND DEVELOPMENT | 2022
Sectors channelling China investments
Sectors channelling China investments