Strong competition among ASEAN states to attract FDI

According to the World Investment Report 2019, FDI inflows to developing Asia rose by four percent to US$512 billion in 2018. Growth occurred mainly in China, Hong Kong (China), Singapore, Indonesia and other ASEAN countries. Inflows to China increased by four percent to an all-time high of US$139 billion. Flows to Southeast Asia were up three percent to a record level of US$149 billion. Robust investment from other Asian economies, including investment diversion and relocations of manufacturing activity from China, supported FDI growth in the region. Strong intra-ASEAN investments also contributed to the trend.

The growth in FDI was mostly driven by an increase in investment in Singapore, Indonesia, Vietnam and Thailand. Manufacturing and services, particularly finance, retail and wholesale trade, including the digital economy continued to underpin rising inflows to this sub-region.

The report also shows that Vietnam ranked 21st among FDI recipients in the world and third in ASEAN after Singapore and Indonesia.

To increase FDI attraction, some ASEAN countries have provided incentives in accordance with the needs of investors. For example, Thailand is now speeding up the licensing process for foreign investors and further cutting taxes in key industries to increase its attractiveness. The Thai government aims to attract US$24.5 billion in FDI in 2019, focusing on foreign companies wishing to relocate their production facilities from China.

Indonesia is also applying measures to attract FDI and is considered the best market in Southeast Asia in terms of investment opportunity.

FDI inflows into Vietnam are on the rise. According to the Foreign Investment Agency, Vietnam attracted more than US$26 billion in FDI in the first nine months of the year, up 3.1 percent over the same period last year.

Tran Toan Thang, head of the World Economic Department under the Ministry of Planning and Investment’s National Center for Socioeconomic Information and Forecast, said FDI attraction is a competition between countries, so Vietnam needs to create an open investment environment and further improve its competitiveness in order to attract foreign investors.

One of the highlights of Vietnam’s planned investment attraction strategy is a focus on output quality and contributions to the domestic sectors. These include the value chain, added value, application, and transfer of high technology, as well as research and development and innovation, rather than the previous focus on location, sectors, and investment scale.