In 2023, Southeast Asia's top six economies attracted US$206 billion in FDI, surpassing China's US$43 billion. A new report by Angsana Council, Bain & Company, and DBS Bank highlights the shift towards "China + 1" supply chains and forecasts continued growth in the region over the next decade.
For the first time in a decade, Southeast Asia has attracted more foreign direct investment (FDI) than China as investors shift faster towards building “China + 1” supply chains amid increasing manufacturing costs and rising tariffs that have reduced Beijing’s competitiveness.
That is according to a new report on the state of investments in the region released by the Angsana Council, Bain & Company, and DBS Bank on Thursday. The report forecasts that the growth in foreign investments in Southeast Asia will continue to outpace China’s over the next 10 years, reversing the underinvestment in the region in the past three decades. Much of those lost investments had gone to China.
In 2023, foreign direct investments in Southeast Asia’s top six economies (SEA-6) – #Indonesia, #Malaysia, the #Philippines, #Singapore, #Thailand and #Vietnam – reached US$206 billion, compared with US$43 billion for China, according to the report, titled “Navigating High Winds: Southeast Asia Outlook 2024-2034”.
Between 2018 and 2022, FDI in SEA-6 grew by 37 per cent while in China, FDI grew 10 per cent, the report found.
What do we expect to happen? And perhaps more importantly, what is possible if businesses and governments in Southeast Asia seize the opportunities ahead of them?
Since the mid-1990s, Southeast Asia has lagged behind China on many growth measures: real GDP, GDP per capita, trade growth, and the size of foreign and domestic investments. But during that time, the winds supporting a higher growth rate began to shift. Southeast Asia laid the groundwork to accelerate four key growth drivers: a growing workforce, higher labor productivity, higher capital spending, and higher capital productivity. Based on our analysis, Southeast Asia should, in this next decade, outpace China in GDP growth, reversing the trend of the last 30 years.
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