The investment story in charts: How South-East Asia is defying global FDI trends
The movement of capital across countries is going through a tumultuous phase. Data released in mid-June by a United Nations body on trade and investment shows that global foreign direct investment (FDI), adjusted for probable conduit financial flows (or capital flows from one country, through an intermediate country), fell 11% in 2024, marking its second consecutive decline.
This year, US President Donald Trump has triggered a tariff war, which could have more ramifications on FDI. In his previous term, Trump dealt a blow to the functioning of the organisation that frames rules for global trade by blocking appointments to its dispute settlement body.
There are other triggers. The economic rivalry between the US and China—the world's top two economies—is forcing companies with manufacturing facilities in the communist nation to look for alternatives to ensure supply chain continuity. India, the world's fifth-largest economy that is currently seeing a demographic dividend, would have liked to be a frontrunner to draw such foreign capital.
However, the latest World Investment Report by the UN Trade and Development (UNCTAD) shows that even as Asia remained the largest recipient of FDI in 2024 (40% share), South-East Asia was the only sub-region that grew in 2024.
Each of the top seven FDI draws in South-East Asia recorded FDI growth in 2024, led by the Philippines, Malaysia and Thailand. In manufacturing, the global rebalancing of locations by multinationals is driving greenfield FDI in South-East Asia, especially in the digital economy. As many as five South-East Asian countries (Singapore, Vietnam, Indonesia, Malaysia and Thailand) figure in the top 10 countries for FDI in the digital economy.
FDI decoupling
Outside of South-East Asia, North America and Africa showed higher growth. North America was driven by FDI inflows into the US towards high-tech (semiconductors) and clean energy sectors. The CHIPS Act (Creating Helpful Incentives to Produce Semiconductors Act), passed in the US in 2022, was an enabler. "...among the top 10 highest-value greenfield projects announced globally in 2024, four were in semiconductor manufacturing, with three of them located in the US," said the latest World Investment Report by the UNCTAD.
But that is an anomaly. Global trade, facilitated by the easy movement of FDI, has lifted millions out of poverty in developing economies. But in recent years, FDI has decoupled from global GDP and world trade (exports of goods and services). The decline in FDI in 2024 is more pronounced in sectors vital for development: infrastructure (35% over 2023), renewable energy (31%), water, sanitation and hygiene (30%) and agrifood systems (19%).
Chinese outreach
The other challenge is the concentration of FDI in a few countries. Ten major emerging markets received 75% of FDI flows to the developing world—the order being China, Brazil, Mexico, Indonesia and India. For most of this century, companies in China have received more FDI than they have invested in other countries. However, in recent years, this has reversed. In the 11 quarters since July-September 2022, China has recorded a negative net FDI figure.
China was a significant investor in several South-East Asian countries in 2024, according to reports specific to these countries. China was among the top three foreign investors in Vietnam, accounting for the largest share of FDI projects (28%). In Malaysia, too, China was among the top three FDI investors. In Indonesia, which drew FDI in metal refining and mining, China was the second-largest FDI investor.
Digital play
Digital is the fastest-growing FDI segment, increasing its share in all greenfield FDI globally from 20% in 2020 to 28% in 2024. This covers both the core digital space (digital infrastructure like data centres, ICT manufacturing and cloud service) and the narrow-scope digital space (like sharing economy, e-commerce, fintech and artificial intelligence services). The top 100 ICT companies by sales have about 40% of their assets outside their home country, and South-East Asia has been a top draw for them.
One challenge in the digital space is concentration. Among the top 100 ICT companies by sales, the top five companies account for about 26% of this set's sales. Concentration is also seen at the country level. There are 29 companies from the US, followed by 13 apiece from China and Taiwan, and 12 from Japan. In a fickle policy environment, many of these companies—including Apple, the biggest of them—are reviewing their FDI strategy.
www.howindialives.com is a database and search engine for public data
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Indian Express
19 minutes ago
- Indian Express
Why Canada made a u-turn on its contentious Digital Services Tax
In a bid to restart stalled trade negotiations with the United States, Canada scrapped its Digital Services Tax (DST) hours before it was due to take effect on Monday. Calling the DST 'a direct and blatant attack' on the US, President Donald Trump had on Friday announced the termination of all trade discussions with Canada. With the contentious tax out of the way, talks between Washington and Ottawa will likely resume. What was the DST? The DST was a 3% levy on the digital services revenue a firm made from Canadian users above $20 million in a calendar year. Controversially, the tax was set to be retroactively implemented beginning 2022. This would have had a significant impact on American technology giants such as Google, Meta, Apple, and Amazon — American tech companies would have had to pay roughly $2.7 billion to the Canadian government, if the tax were to be implemented, The New York Times had reported. 'The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians…,' Canada's finance ministry said in its statement on Sunday. While the law had been passed earlier, payments were due from Monday. What does Canada's U-turn mean? Canada is the United States' second-largest trading partner after Mexico, and the largest buyer of US exports. It bought $349.4 billion of US goods and exported $412.7 billion to the US last year, according to US Census Bureau data. At the same time, it currently faces the steepest of Trump's tariffs: apart from the 10% base tariff imposed on most countries, Canada (and Mexico) face an additional 25% on all exports to the US, apparently meant to curb illegal immigration and stop fentanyl smuggling. Trump has also slapped 50% tariffs on steel and aluminum imports from Canada and 25% on auto imports. This makes getting a trade deal with the US a top priority for Canada. Scrapping the DST would help in this regard — Trump had been among its most vehement critics. Early indications are that Washington and Ottawa could meet the previously-set July 21 deadline for a trade agreement. Domestically, the U-turn is unlikely to hurt Canada's Prime Minister Mark Carney, despite his election platform revolving around standing up to the US President. This is because the DST was not particularly popular in Canada either since it could have raised the cost of all kinds of digital services — from hailing cab rides to streaming movies. In fact, in recent months, many speculated that the tax's best purpose could be to serve as a bargaining chip in ongoing trade talks with the US.
New Indian Express
20 minutes ago
- New Indian Express
Sensex rise 118 points, Nifty 50 reaches 25,535; markets open higher on Tuesday
CHENNAI: Indian markets opened slightly higher on Tuesday, supported by gains in Asian equities and improved global sentiment ahead of the upcoming US tariff deadline on July 9. The Sensex rose 118 points to 83,724 at the opening bell, while the Nifty 50 added 18 points to reach 25,535. This positive start reflected a 0.6% rise in the MSCI Asia ex-Japan index and followed a strong finish on Wall Street, fueled by hopes of progress in U.S. trade talks. Meanwhile, oil prices edged lower on expectations of increased output from OPEC+—a welcome sign for India, which relies heavily on crude imports. Additionally, oil prices declined on expectations of an OPEC+ output increase—a favorable development for India, which is a major crude importer. The US dollar softened ahead of key US economic data and an upcoming vote on President Trump's fiscal reforms, which also supported emerging markets like India. On the domestic front, sentiment was supported by hopes for a breakthrough in India–US trade talks. Investors are closely watching for any early resolution ahead of the July 9 deadline. Among stocks in focus, Apollo Hospitals gained over 4% in early trade following news of a planned spin-off and listing of its digital health and pharmacy unit within the next 18–21 months. The parent company plans to retain a 15% stake in the new entity.
&w=3840&q=100)
First Post
26 minutes ago
- First Post
'There will be framework': Dalai Lama hints succession plan ahead of 90th birthday
Ahead of his 90th birthday this week, Tibetan leader the Dalai Lama has said that there will be some kind of a framework for the continuation of the institution after his death. He is expected to outline his succession plan around his birthday. read more Tibetan spiritual leader the Dalai Lama greets devotees as he arrives at the Tsuglakhang temple in Dharmsala, India, Tuesday, Aug. 29, 2017. (Photo: AP) The Dalai Lama will address a major three-day gathering of Buddhist religious figures this week ahead of his 90th birthday, as his followers wait for the Tibetan spiritual leader to share details about his succession in a move that could irk China. Beijing views the Dalai Lama, who fled Tibet in 1959 after a failed uprising against Chinese rule, as a separatist and says it will choose his successor. The Dalai Lama has said his successor will be born outside China and urged his followers to reject anyone chosen by Beijing. STORY CONTINUES BELOW THIS AD Tibetan Buddhists hold that enlightened monks are reborn to carry forward their spiritual legacy. The 14th Dalai Lama will turn 90 on Sunday and has said he would consult senior monks and others at this time to share possible clues on where his successor, a boy or a girl, could be found following his death. 'The rest of my life I will dedicate for the benefit of others, as much as possible, as extensive as possible,' the Dalai Lama told a gathering of his followers on Monday as they offered prayers for his long life. 'There will be some kind of a framework within which we can talk about the continuation of the institution of the Dalai Lamas,' he said, without elaborating on the framework. He has previously said he could possibly reincarnate in India, where he lives in exile near the northern Himalayan town of Dharamshala. He was identified as the reincarnation of his predecessor when he was two. Dolma Tsering Teykhang, the deputy speaker of the Tibetan parliament-in-exile in Dharamshala, said it was important for the world to hear directly from the Dalai Lama on the issue because while China 'tries to vilify him at every chance … it is trying to frame rules and regulations on how to have the reincarnation of the Dalai Lama in their hand'. STORY CONTINUES BELOW THIS AD 'China is trying to grab this institution … for its political purpose,' she said. 'We want the incarnation of the Dalai Lama to be born not only for the survival of Tibet as a distinct culture, religion and nation, but also for the well-being of the whole humanity.' Thupten Ngodup, Tibet's chief state oracle, said typically such discussions on the reincarnation do not take place when a monk is still alive but things are different now mainly because the 'Chinese government is interfering'. Beijing said in March that the Dalai Lama was a political exile who had 'no right to represent the Tibetan people at all'. China has said it is open to discussing his future if he recognises that Tibet and Taiwan are inalienable parts of China, a proposal the Tibetan government in exile has rejected. 'As if he's not there' The religious conference this week, being held for the first time since 2019, will be attended by more than 100 Tibetan Buddhist leaders and will feature a video statement from the Dalai Lama. Hollywood star Richard Gere, a long-time follower of Tibetan Buddhism, will be among those attending, organisers have said. STORY CONTINUES BELOW THIS AD The Dalai Lama will attend prayers called by the Tibetan government in exile on July 5 and participate in his birthday celebrations a day later, according to a schedule shared by the organisers. He will speak at the celebrations for about half an hour. India's parliamentary affairs minister, Kiren Rijiju, and some other Indian officials are expected to attend. Tibetans have been praying for his long health, especially since knee surgery in the U.S. last year, although the Dalai Lama told Reuters in December that he could live until he was 110. The previous Dalai Lama died earlier than expected at 58. The Dalai Lama and Tibetan officials say there is a system in place for the government-in-exile to continue its political work while officers of the Dalai Lama's Gaden Phodrang Foundation search and recognise the next Dalai Lama. The current Dalai Lama set up the foundation in 2015 and its senior officers include several of his aides. STORY CONTINUES BELOW THIS AD Teykhang and other Tibetan officials said the Dalai Lama has been preparing his people for the day when he is gone, especially through his 2011 decision to hand his political role to a democratically elected government, ending a 368-year-old tradition of being both spiritual and temporal head of Tibetans. 'Since he has come in the form of a human, we have to agree that there will be a moment when he is not with us,' said Teykhang. 'His Holiness has really prepared us for that day, he made us act as if he's not there.' (This is an agency copy. Except for the headline, the copy has not been edited by Firstpost staff.)
