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Top foreign direct investment trends in Southeast Asia

Analysis of recent UNCTAD's World Investment Report presented by UOB FDI Advisory

Global flows of foreign direct investment (FDI) have been hit harder by the coronavirus pandemic than the global financial crisis of 2008-2009.


According to a 2021 report by the United Nations Conference on Trade and Development (UNCTAD), global FDI flows dropped one-third from US$1.5 trillion in 2019 to US$1 trillion in 2020. In fact, 2020's FDI flows were 20 percent lower than in 2009 after the financial crisis.

Lockdowns and the prospect of a recession have caused many companies to reassess their investment plans. But how does the landscape look like in Southeast Asia? We combed through the report and came up with four FDI trends in the region according to UNCTAD's World Investment Report 2021.

1. FDI inflows across Asia remain resilient

Despite the COVID-19 pandemic, Asia stood out as an attractive destination for FDI.

According to the report, flows to developing Asia in 2020 rose by four per cent to US$535 billion – driven by investment flow into China. FDI inflows to China was at US$149 billion in 2020, compared to US$141 billion in 2019. This helped prop up declining FDI in developing economies – which decreased by eight per cent compared to 58 per cent in developed and transition economies.


For example, Volkswagen AG, the German automobile manufacturer, has increased its stake in Chinese EV maker, Anhui Jianghuai Automobile Holding, from 50 to 70 per cent, in a bid to be China's biggest foreign automaker. It is also looking to become the largest shareholder in battery supplier Gotion High-Tech Co. Ltd., and the first international automotive manufacturer to invest directly in the Chinese EV battery market.

FDI growth in Asia is expected to continue, with a five to 10 per cent year-on-year increase in 2021. According to the report, this growth is driven by "growing markets, extensive regional and global linkages, and an investment climate that has remained generally open despite the pandemic".


The recent signing of the Regional Comprehensive Economic Partnership (RCEP) involving all ASEAN member countries, China, Japan, South Korea, Australia and New Zealand is expected to be one of the major growth drivers as the trade bloc becomes more economically integrated.

2. Only Asia saw growth in energy infrastructure projects

In 2020, energy infrastructure projects fell 40 per cent to US$27 billion – the lowest point in eight years. Asia was the only region to grow both in the number and value of projects.

FDI in Vietnam, for example, fell by only two per cent, buoyed by investments in electricity projects. A US$5 billion gas-fired power plant was proposed by ExxonMobil (United States) and a US$2.2 billion coal-fired power plant will be developed by Thai companies in the Quang Tri Economic Zone. Delta Offshore Energy (Singapore) will also be setting up a US$4 billion LNG power generation facility in Bac Lieu, Vietnam.


FDI in renewable energy sources is set to grow further. Defying the global slowdown in spending, FDI in renewable energy projects increased to US$33.4 billion in 2020 from US$30.7 billion in 2019.

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