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ASEAN Overtakes China for Manufacturing FDI

The 10-country bloc has matured from a China alternative to a target region for investors. Thanks to Alex Irwin-Hunt for inviting Andrew Keable, Managing Partner, KW Group to share perspectives for the recent article with fDi Intelligence along with United Nations ESCAP colleague Heather L. Taylor-Strauss, PhD

ASEAN has moved from a China +1 alternative pre-pandemic to now stand on its own as an alternative to China. With a population of 660 million (30% more than the EU and double that of the USA), ASEAN stands as a formidable market. Its embrace of digital technology and e-commerce is remarkable, signaling a rapid modernization. Once considered the less affluent relative, ASEAN has emerged as a prime target for foreign direct investment.

ASEAN Overtakes China for Manufacturing FDI
ASEAN Overtakes China for Manufacturing FDI

More than $124bn was pledged to greenfield foreign direct investment (FDI) manufacturing projects in Asean in 2022 and 2023, according to fDi Markets, as countries in the region turned the page on pandemic restrictions and became natural destinations for projects that in the past would have likely located within China. While the region had a combined GDP of $3.3tn in 2021, there is an uneven spread of foreign investment across the diverse 10 member countries to the Asean bloc.  

This transition reflects a significant shift in investor perception combined with new soft-power geopolitics, transforming the attitude of major countries and corporations as investors, underlining the region's newfound economic strength and potential.

ASEAN's attractiveness as an investment destination is underscored by its vast consumer base and growing market opportunities, pointing towards sustained growth and development in the region.

“During Covid, supply chains that were overly reliant on manufacturing in China were completely left in the lurch,” says Andrew Keable, Malaysia-based managing partner of KW Group, an advisory firm. “Over the past five years, ASEAN has stood on its own as an alternative to China.” 
“These FDI trends are largely politically driven,” says Heather Taylor-Strauss, an economist and FDI lead at UN’s Economic and Social Commission for Asia and the Pacific. “There is keen interest from many countries to get more involved with Asean in trade and investment.” 
Graph showing ASEAN overtaking China in Manufacturing FDI
ASEAN Overtakes China for Manufacturing FDI


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