Statistics show that FDI inflows continue to flow strongly into Southeast Asian countries, especially in the manufacturing sector. In which, Vietnam and Indonesia are the two markets receiving the most FDI. Vietnam is transforming itself into a technology production center, while Indonesia is focusing on the electric vehicle supply chain.
This is the statement in a new report of HSBC’s analysis team on direct investment (FDI) flows into the ASEAN region. A remarkable point is that after each crisis, more FDI flows into this sector.
For example, during the global financial crisis (GFC) in 2008-2009, the total amount of FDI flowing into the ASEAN-6 group (Singapore, Malaysia, Indonesia, Thailand, Vietnam and the Philippines) averaged nearly $127 billion per year since 2010, nearly three times more than a decade earlier (the average for the period 2000-2009 was $41 billion).
Similarly, net FDI (the difference between inward and outward investment) has averaged nearly $54 billion a year since 2010, nearly four times what it was a decade earlier.
The latest example is that since the beginning of the Covid-19 epidemic, FDI flows have remained steady. In 2020, ASEAN-6 attracted a record high amount of FDI, accounting for about 13% of FDI worldwide, largely thanks to the investment boom in Singapore.
According to HSBC, this is because multinational companies seek investment opportunities in fast-growing economies with cost advantages. In addition, reforms in the legal framework for FDI in each ASEAN country in recent years have helped attract significant investment capital.
Furthermore, not all benefit equally from FDI inflows. For example, after the global financial crisis, most of the capital went back to Singapore, which is known as the financial center of the region.
As for the manufacturing sector, Malaysia and Vietnam are two prominent markets. While Malaysia’s approved FDI in Q4-2021 jumped to 12% of GDP, Vietnam has transformed into an emerging global manufacturing hub, capturing a significant global market share in many sectors, which includes textiles, footwear and consumer electronics, according to HSBC.
Accordingly, new FDI flows into Vietnam since the 2010s, focusing on the manufacturing sector, have always accounted for 4-6% of GDP.
Initially, most of the investment was in low-value-added sectors such as textiles and apparel and footwear, but in the last two decades Vietnam has been moving up the value chain, becoming a major manufacturing hub for electronic products.
Statistics show that electronic goods exports have reached a record high of $100 billion in 2021, accounting for more than 30% of Vietnam’s total export value 20 years ago, the proportion was only 5%.
This trend has grown even stronger during the period of trade tension between the US and China, which not only raised Vietnam’s export output but also increased FDI inflows into the country. Although this process has been somewhat disrupted due to Covid-19, FDI into Vietnam has remained very stable.
According to HSBC’s report, Vietnam’s competitive FDI attraction strategy and healthy fundamentals will continue to attract quality FDI, a key factor in helping the economy move up the value chain.
@ Saigon Times
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Source: Vietnam Insider