Asia-Pacific Foreign Investment Brief
The FDI, Trade, and Economic Development Community

Dear Friends and Colleagues, A quick update on 8 essential articles you may have missed and an invitation to join over 15,000 subscribers following the Asia-Pacific Foreign Investment Brief 8 Essential Articles You May Have Missed: ASEAN IPAs Initiate Development Of Regional Approach To FDI & Investment Promotion China’s Investment In The Asia Pacific - 2023 Report: Deal sizes are getting bigger again, particularly for investments Milken Global Opportunity Index 2024: Attracting Foreign Investment - Malaysia named as the country with the best overall investment condition among emerging and developing (E&D) nations in Asia Unleashing the Power of FDI for Gender Equality 💥: Rigorous case studies, impact assessments, and gender-focused metrics are essential to channeling FDI UNCTAD: A World of Debt” Report: Explore the United Nations' “A World of Debt” report, including a debt dashboard & an interactive map with country-specific data Opinion | Unleashing Asia-Pacific’s Digital FDI Dragon: Critical need for increased capital flow and investment from abroad due to limited local liquidity Kearney 2024 FDI Confidence Index: Technological & Innovation Capabilities Remain Top Priority For Investors Australia Announces $70.2 Million ASEAN Hubs for Investment Deal Teams: Are Regional IPAs and Governments Prepared with Investor-Ready Projects? Asia-Pacific Foreign Investment Brief is the FDI, Trade, and Economic Development Community briefing on key insights and resources relevant to the Asia Pacific investment promotion communities – and it is FREE! With over 1200 indexed articles, resources, and references available at your fingertips we source the leading information for policymakers, investors, business leaders, and investment promotion communities to give you essential insights dedicated to and influencing the Asia Pacific region. SUBSCRIBE (FREE) AND ACCESS 1200 INDEXED ARTICLES: https://www.kwglobaltrade.com/blog We welcome members of the foreign investment communities to share articles, comments, opinions, reports, and insights, and welcome contributors to join our growing community. Warm Regards, Andrew Keable, Managing Partner, KW Group Consultant, Trade, Investment & Innovation Division, United Nations ESCAP andrewk@kwconfex.com

The State of Southeast Asia survey, now in its 6th year, continues to gauge the views and perceptions of Southeast Asians on geopolitical developments affecting the region, key international affairs and how ASEAN Dialogue Partners have engaged with the region over the preceding year. The objective of The State of Southeast Asia survey is to present a snapshot of the prevailing attitudes among those in a position to inform or influence policy on regional issues. The survey is not meant to present a definitive view of issues in the region. This year’s survey was conducted over a period of seven weeks from 3 January 2024 to 23 February 2024. The survey was offered in six language options – English, Bahasa Indonesia, Burmese, Khmer, Thai, and Vietnamese. A total of 1,994 respondents from ten Southeast Asian countries took part in the survey. There are six sections in the survey. Section I covers the profile of the respondents by nationality, affiliation, age, and education. Section II explores the regional outlook and provides viewpoints on international affairs in the past year. Section III examines regional influence and leadership of major and middle powers. Section IV looks into ASEAN’s options in the changing regional political-security architecture. Section V measures perceptions of trust among Southeast Asians towards five countries – China, US, Japan, the European Union, and India. Section VI gauges levels of soft power in the region based on travel and work relocation choices. The questions and results have been reorganised for optimal flow and reporting. Figures have been rounded up/down to the nearest one decimal point, and may not add up to 100.0% exactly. VIEW REPORT

The official warm welcome that foreign investors receive in the U.S. may not be matched by common sentiment among the American electorate. The United States has largely been a welcome environment for foreign investment. That’s part of the reason it is the leading country for foreign direct investment (FDI) inflow, which generally is defined as new construction projects, finance deals, and mergers and acquisitions. Japan is the number one investor into the U.S., followed by Canada, Germany, the United Kingdom, and Ireland. The Inflation Reduction Act (IRA), the CHIPS and Science Act, and other recent U.S. policies have spurred more FDI into the country. South Korea has been the largest clean-tech and semiconductor investor into the U.S. since the passage of the IRA. SK Hynix, for example, recently announced a $3.9 billion chip plant in Indiana. Governor Eric Holcomb attended the announcement, saying he was “proud to officially welcome SK Hynix to Indiana.” But the official warm welcome that foreign investors receive in the U.S. may not be matched by common sentiment among the American electorate. And the results of the November presidential election will chart two very different paths for the United States on a number of fronts, including its relations with Asia and U.S. policies on foreign investment, trade, tariffs, and protectionism. A second Biden administration would likely maintain and seek to expand first-administration policies that have spurred billions in Asian investment in the U.S., such as the IRA and its electric vehicle tax credit. But former President Donald Trump’s camp has called for revising the IRA, including its electric vehicle tax credits, throwing Asian automakers and suppliers into uncertainty. This kind of proposed policy reversal doesn’t happen without the perceived support of a substantial base of voters. VIEW ARTICLE

Sumatra, Indonesia posts the fastest FDI regional growth in 2023 with the Philippines, Vietnam, Japan, and Malaysia in the top 10 global locations! by Alex Irwin-Hunt, FDI Intelligence. Sumatra in western Indonesia ranked as the fastest-growing region for greenfield FDI announcements in 2023 due to major plans by multinationals to build digital and port infrastructure and downstream processing facilities. Almost $13bn was pledged to 13 FDI projects in Sumatra last year, up from just one project in 2022, according to fDi Markets data. Despite the opportunities presented by its resources, Indonesia has faced scrutiny over its environmental, social, and governance credentials, due to variable labour standards and the fact coal still makes up more than 60% of its energy mix. Alongside these developments, Sumatra has benefitted from the rush to develop digital infrastructure. Singapore-based Princeton Digital Group plans to invest at least $1bn into a data center campus in Batam across the Singapore Strait. China’s GDS Services has also committed to building a hyperscale data centre on the island. VIEW ARTICLE

South East Asia is "woefully off track" on green investments to reduce emissions and needs new policies and financial mechanisms to help bridge the gap, the global consultancy Bain & Company said on Monday. With energy consumption in the region expected to grow 40% this decade, climate-warming carbon dioxide emissions remain on the rise, with the region still dependent on fossil fuels, said an annual report compiled by Bain, green investment group GenZero, Standard Chartered Bank and Temasek. While green investment grew 20% last year, it is way short of the $1.5 trillion required this decade, and emissions in the 10 countries in the region could overshoot their 2030 pledges by 32% if they continue on their current trajectory, it warned. "We believe that an acceleration of effort by countries, corporates and investors is imperative as Southeast Asia remains woefully off-track," said Kimberly Tan, GenZero's managing director. "There is over $1 trillion of unrecovered capital in young coal plants and that's predominantly in Asia," said Tim Gould, chief energy economist at the International Energy Agency. "It doesn't allow much room for renewables to grow ... so there is a need for creative financing approaches," he told a conference in Singapore. Meanwhile, only four of the 10 countries in the region - Indonesia, Malaysia, Singapore, and Vietnam - have made progress in putting a price on carbon. VIEW ARTICLE

Institutional Investors are playing a crucial role in the investment attraction strategy of Investment Promotion Agencies, aiming to bolster capital inflow and foreign investment, especially in regions with constrained local liquidity. We are actively collaborating with UNESCAP to facilitate the development of Investor-ready projects for IPAs across the Asia Pacific region, positioning them as prime targets for Foreign Direct Investment (FDI) influx - Article by Danielle Myles, FDI Intelligence In years past, the world’s biggest foreign direct investment (FDI) pledges were the exclusive terrain of corporates. The rare $20bn-plus projects were inevitably masterminded by the Chevrons, Intels and EDFs of the world. This trend came to a screeching halt in February when ADQ, an Abu Dhabi sovereign wealth fund (SWF), announced a $35bn investment into Egypt to develop the new city Ras al-Hekma along its central Mediterranean coast, plus a handful of related projects. According to fDi Markets, it is the biggest FDI commitment ever in the Middle East and Africa. The ADQ deal laid bare the fact that SWFs, contrary to their historical role of investing surplus government revenues into public markets, are now moving the needle on FDI. Their potential is boosted by soaring assets under management (AUM). SWFs and public pension funds (PPF) had a collective $35.2tn in AUM as of March 2024, up from $18.2tn 10 years earlier, figures from research firm Global SWF show. Investment-hungry governments have taken notice. “That is direct cash, which is easy to funnel … into big infrastructure projects in things like offshore wind, hydrogen, nuclear power,” Lord Dominic Johnson, the UK’s investment minister, told fDi in February. VIEW ARTICLE

ADB - Developing Asia’s Economic Outlook: Asian Development Outlook (ADO) April 2024 - Economic growth in developing Asia continues to be resilient. - ADB forecasts 4.9% growth for the region this year and next year. - Growth in developing Asia is being driven by robust domestic demand, improving semiconductor exports, and a continued recovery in tourism. - Inflation in developing Asia is expected to decline to 3.2% this year and 3.0% next year, as interest rate hiking cycles have peaked. "We see strong, stable growth for the majority of economies in developing Asia this year and next. Consumer confidence is improving, and investment is resilient overall. External demand also appears to be turning a corner, particularly with regard to semiconductors." Albert Park, ADB Chief Economist Economic growth in developing Asia continues to be resilient. Following the rise in inflation in 2021 and 2022, inflation has declined in 2023 and into 2024. Growth is being driven by robust domestic demand, improving semiconductor exports, and continued recovery in tourism. ADB forecasts 4.9% growth for developing Asia this year and next year. VIEW VIDEO

The terminology used by professionals in the foreign direct investment (FDI) world can be confusing. In this video series, the fDi team lifts the lid on some of the most common jargon and concepts. This first episode explains the definition of FDI. An excellent new resource series presented by Alex Irwin-Hunt, FDI Intelligence

A deep dive into private sector sentiments can yield some insight into ASEAN’s preferred economic partner of choice. Kristina Fong Siew Leng, Lead Researcher for Economic Affairs at the ASEAN Studies Centre, ISEAS - Yusof Ishak Institute The ASEAN region has been a hotbed of economic activity, drawing significant attention from developed economies for trade and investment opportunities. China remains ASEAN’s key trade partner, representing 18.8 per cent of total trade (US$722 billion) for the region in 2022, with the U.S. representing a more moderate 10.9 per cent share at US$420 billion. That said, foreign direct investment (FDI) inflows from the U.S. into ASEAN outpaced those coming in from China, at US$37 billion versus US$16 billion in 2022 respectively Given the ongoing push and pull in the region caused by the China-U.S. trade rift, ASEAN countries continue to strategically balance their delicate relationships with these two big economies. Using insights derived from the responses from private sector respondents in the latest ISEAS – Yusof Ishak Institute State of Southeast Asia Survey 2024, some interesting perspectives are uncovered. These may help to explain regional firms’ sentiments about ongoing geopolitical and geoeconomic tensions, and what preferences the firms may have in terms of strategic economic partnerships going forward. Caught up in the crossfire of U.S.-China trade tensions, private sector stakeholder sentiments continue to show a strong preference to err on the conservative side. A larger proportion of respondents opted to indicate a neutral stance of not picking sides (31.4 per cent) compared to a year ago (26.5 per cent) VIEW REPORT

Asia Pacific has the second strongest showing with eight markets represented on The Kearney FDI Index—the same representation as last year. China jumps four ranks to 3rd, and Japan falls from 3rd to 7th. Australia holds firm at 10th, while Singapore decreases from 9th to 12th, perhaps owing in part to a 44 percent drop in FDI commitments, most notably from the United States, China, and Europe last year. New Zealand drops one rank to 16th, and India drops from 16th to 18th. South Korea drops marginally from 19th to 20th, while Taiwan (China) reappears on the main Index at 22nd after last making the list at 25th in 2020. General investor optimism regarding the economies on this year’s Index is almost two percentage points higher than the average net optimism level last year (see figure 3). Canada, the United Kingdom, Australia, the United Arab Emirates, and France comprise the top five markets with the most optimistic economic outlook in net terms. Notable increases in net scores are seen in Australia (39 percent) with a jump of 10 percent, the United Kingdom (39 percent) with an increase of 8 percent, and the United Arab Emirates (37 percent) with a rise of 7 percent. The United States also has higher net optimism levels, from 34 to 36 percent year-over-year, though it slipped in relative net optimism levels from 3rd to 6th rank among the 25 markets. Conversely, Canada drops 1 percent in net optimism to 41 percent, but remains the highest ranked market on the list. Investors are least optimistic about Poland, Taiwan (China), and Argentina, likely on the back of their relatively low GDP growth rates in 2023, amounting to 0.4 percent, 0.8 percent, and -1.2 percent, respectively. VIEW ARTICLE

China is ready to continue building a closer China-ASEAN community with a shared future, and bring more certainty and positive energy to peace, stability and sustained prosperity in the Asia-Pacific and beyond, said Chinese Ambassador to ASEAN Hou Yanqi. Hou made her remarks in talks with media people and researchers in Jakarta , with a theme "China's economic development and expectations for the China-ASEAN economic and trade cooperation in 2024." The ambassador said she believes that China and ASEAN will continue to upgrade economic and trade cooperation and achieve solid progress in their comprehensive strategic partnership. And together they will contribute more to economic globalization in the right direction and make global governance more just and balanced. ASEAN has remained China's largest trading partner for intermediate goods for many years. China-ASEAN economic and trade relationship has been full of highlights and promising prospects. The bilateral trade volume reached $911.7 billion in 2023. She noted economic and trade cooperation cannot be achieved without institutional support of free trade and institutional support of the free trade agreement. She was referring to negotiations on version 3.0 of the ASEAN-China Free Trade Area (ACFTA) to create broader space for regional development. In 2002, China and ASEAN countries signed the Framework Agreement on Comprehensive Economic Cooperation as its legal basis for the ACFTA. Both China and ASEAN are members of the Regional Comprehensive Economic Partnership or RCEP and other international groups. Moreover, China is upgrading its economy with new quality productive forces, which means advanced productivity with innovation playing the leading role, she said. VIEW ARTICLE

Foreign direct investment (FDI) refers to the investment made by individuals, companies, or entities from one country into businesses, assets, or ventures located in another country. FDI plays a pivotal role in global economic development, as it facilitates capital flows, fosters business expansion, and contributes to job creation and economic growth, Visualcapitalist Cambodia Tops the List The 10 countries with the strongest FDI prospects for 2024 are spread across Asia, Africa, the Middle East, and Europe. Asia features six countries on the list, with Cambodia expected to carry the strongest investment momentum this year. With a GDP growth forecasted at 6.1% in 2024, up from 5.6% in 2023, the IMF expects Cambodia to be the fastest-growing economy in Southeast Asia. The country has strengthened its trade relationships with China, South Korea, and the EU. Additionally, Cambodia has benefited from a recovery in tourism since China started lifting its COVID-related travel restrictions earlier in 2023. Meanwhile, the IMF expects the Philippines, in second place, increase GDP growth from 5.3% to 5.9% in 2024. Both public and private investment have played a key role in reinforcing its growth, bolstered by the opening of the renewable energy sector to foreign investors. VIEW ARTICLE