Surge in Foreign Investments in ASEAN Amid China+1 Strategy

Foreign Direct Investments (FDI) into the ASEAN economies of Indonesia, Malaysia, the Philippines, Thailand, Singapore, and Vietnam surged to US$236 billion in 2023, significantly higher than the annual average of $190 billion recorded between 2020 and 2022.

Southeast Asia has become a preferred destination for companies diversifying their production away from China due to escalating tensions between Washington and Beijing. This trend, known as the China+1 strategy, involves companies maintaining operations in China while expanding into other countries to mitigate risks associated with over-reliance on a single market.

Kuo-Yi Lim, co-founder and managing partner of Southeast Asian venture capital firm Monk’s Hill Ventures, highlighted Southeast Asia’s strong position to benefit from this diversification. The region’s strategic advantage has led to increased investments from global players.

According to a May report by OCBC economists, the influx of FDI into ASEAN was driven primarily by the US, Japan, the EU, mainland China, and Hong Kong. Vietnam, in particular, has emerged as a significant manufacturing hub. Apple has increasingly shifted its product assembly operations to Vietnam as part of its efforts to diversify away from China. Additionally, Vietnam serves as a major research and development center for Samsung, as well as a key manufacturing and export base for its smartphones.

Kai Wei Ang, an ASEAN economist at BofA Securities, noted that Vietnam’s competitive labor costs and extensive network of free-trade agreements make it easier for companies to export to other markets, such as the EU. This influx of foreign investments reflects Southeast Asia’s growing importance in global supply chains and its potential to attract further economic activity amidst the evolving geopolitical landscape.

Have you read?
Countries Most in Debt to the International Monetary Fund (IMF).
Most Successful Unicorn Startups.
$100 Billion Club: Richest People With The 12-Figure Fortunes.
Largest electricity consumers in the world, by country (in terawatt-hours).
Countries that Export the Most Goods and Services.