This Region’s FDI Inflow Grows despite the 41% Global Slump

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Southeast Asian countries received more foreign direct investment in the first six months of 2018 compared to the same period a year ago, according to a recent report by the United Nations Conference on Trade and Development.

FDI comprises cross-border corporate takeovers, intra-company loans and investments in start-up projects abroad, showing a potential sign of growth of corporate supply chains and future trade ties.

The net FDI flow into region was up 18% to US$73 billion in the said period while the global total contracted 41%.

The rise in FDI in South East Asia was driven by Singapore (US$35 billion), Indonesia (US$9 billion), and Thailand (US$7 billion).

In South Asia, India attracted US$22 billion of FDI flows, contributing to the sub-region’s 13% rose on FDI in the said period.

A recent survey by the American Chamber of Commerce in China also indicates that that 18.5% of U.S. companies in China are planning to relocate or had already moved their manufacturing facilities to Southeast Asia as a result of the trade war’s higher import tariffs.

The survey was conducted between Sep 21 and Oct. 10, shortly after the US imposed duties on another $200 billion worth of Chinese goods.

Southeast Asia is seen as an ideal location for foreign firms that want to move away from China because of the higher import tariffs resulting from the US-China trade war because if offers the benefits of lower labor costs and proximity to major markets such as China and India.

“Trump’s U.S. tax reforms were the main cause of the global FDI slump, “the UNCTAD investment and enterprise division director James Zhan pointed out.

He said that the agency had warned in early January that there was “about US$2 trillion of stock in the form of cash or in the form of reinvested earnings of retained earnings outside the US”, which may be repatriated in some form, following wholesale tax reform.

“And indeed, it’s happening,” he added. “We have seen that outward FDI from the US was from $147 billion last year to a negative $247 billion this year.”

 

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