Southeast Asia seeks foreign direct investments

Association of Southeast Asian Nations (ASEAN) countries are seeking foreign direct investments (FDI) -- especially those from Organisation for Economic Co-operation and Development (OECD) countries -- to power their economic growth.

ASEAN members comprise of Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

Speaking at the ASEAN-OECD Investment Policy Conference, S. Pushpanathan, deputy secretary-general of ASEAN, said economic recovery is still fragile and investments, especially FDI, play a crucial role in stimulating a sustainable recovery.

ASEAN is trying to liberalize the flow of investments, increase the protection of investments, and bring overall business regulations in line with international best practices in order to become an investment hub and compete for FDI.

In addition, ASEAN is trying to encourage investments among ASEAN members by forming the ASEAN Economic Community.

Furthermore, ASEAN and individual ASEAN members are holding workshops and dialogues with Australia, New Zealand, China, Korea, Japan, India, and the OECD to promote investments inflows.

FDI are crucial for developing countries because they lack capital and often cannot drive growth with domestic savings along, said Mario Amano, deputy secretary-general of the OECD, who also spoke at the conference.

FDI are long-term investments that often require the investor to participate in the venture; they are different from speculative hot money inflows, which emerging market countries have been trying to fight off recently with capital controls.

China, for example, encourages FDI, but bans many short-term forms of investments.

ASEAN is an attractive destination for FDI because its economies are expected to expand faster than the developed world.

The world’s economic center of gravity has moved towards the east and south, from OECD members to emerging economies...within our generation, the ASEAN economies could become a powerhouse for world economic development, said Amano.

However, ASEAN does face stiff competition for FDI from other emerging market economies like China.

United Nations (UN) data shows that global FDI to South, East, and South-East Asia peaked at $282 billion in 2008. Much of it went to China, which averaged $88 billion per year for the past three years, said Amano.

Furthermore, he said, an annual survey of Japanese investors consistently show China as the best place to invest, although five ASEAN countries also consistently rank in the top ten.

However, China, along with countries like Malaysia and Chile, can also be sources of outgoing FDI to other developing countries. This developing-country-to-developing-country investment flow has enormous untapped potential, said Amano.

ASEAN's share of total global FDI increased from 2.8 percent in 2008 to 3.6 percent in 2009. In 2009, it received a total of about $40 billion, with roughly half of it coming from OECD countries.

According to Amano, OECD countries have accumulated $330 billion FDI in ASEAN, which is more than what they have put in China and India combined.

Speaking separately at the US-ASEAN Economic Ministers Road Show in May 2010, U.S. Trade Representative Ron Kirk claims ASEAN is now the leading destination of U.S. FDI, receiving three times more than China and nearly ten times more than India.

Email Hao Li at hao.li@ibtimes.com.