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

As the landscape of foreign direct investment (FDI) evolves, it's crucial to stay informed about the latest trends. In 2023, significant shifts were observed, with projects becoming increasingly capital-intensive. Here's an exclusive look by FDI Intelligence at the noteworthy FDI projects that made waves last year 🌐 Dominant Sectors: Energy companies, semiconductor manufacturers, and battery firms took center stage, propelling the top 10 largest greenfield FDI projects of 2023. This surge notably contributed to the rise in the average capex level for cross-border FDI projects globally. 📈 Top Four Projects: TSMC in Germany 🇩🇪: Taiwan Semiconductor Manufacturing Company (TSMC) secured a pivotal position with a confirmed final investment decision in Germany, emphasizing the company's global expansion strategy. Equinor in Brazil 🇧🇷: Equinor, a prominent energy company, made significant strides with a confirmed final investment decision in Brazil, marking its strategic involvement in South America's energy landscape. bp in Germany 🇩🇪: The energy giant bp demonstrated its commitment to sustainable projects with a confirmed final investment decision in Germany, aligning with the global focus on green initiatives. Amazon in Malaysia 🇲🇾: E-commerce behemoth Amazon made a substantial move with a confirmed final investment decision in Malaysia, underscoring the country's attractiveness for major players in the digital economy. VIEW ARTICLE

Locations in Asia-Pacific are being increasingly chosen due to dynamic qualitative factors, such as a skilled workforce, rather than static quantitative factors, such as low-cost considerations. Compared to the previous five years (2013-2017), skilled workforce availability has entered the top three most influential factors amongst determinants cited for investment in the Asia-Pacific region during the 2018-2022 period (figure 7). Approximately half of all Greenfield projects within the software and IT services sector cited skilled workforce availability as having prompted the location decision. The figures are 22 per cent for the business services sector, 22 per cent for communications and 17 per cent for the financial services sector. Similarly, technology and innovation as well as the existence of universities and research hubs moved up the ranks, while conversely, lower cost moved from the ninth place down to fifteenth in the 2018-2022 period. This development underscores that the Asia-Pacific region is increasingly chosen due to its (interrelated) talent pool, technology and innovation ecosystems, industry clusters, and services quality. Such a change in investor appreciation also aligns with the observation that the region is attracting increasingly higher value-added business activities. VIEW REPORT

We are thrilled to announce that KW Group, in its prestigious role as the ASEAN Directorship for the State of Missouri, Department of Economic Development, will be participating as part of the US Pavilion at the upcoming Singapore Airshow as well as supporting Select USA activities around the event. 🤝 Let's Connect Over Coffee - Your Gateway to Aerospace Investment Insights! We extend a warm invitation to all industry partners, and trade and investment collaborators to meet with us during the airshow or in Singapore from February 19th to 25th. Drop us a direct message, and we'll be delighted to schedule a coffee meeting to delve into the exciting prospects of aerospace investments in the State of Missouri. ☕ Coffee, Conversations, and Collaborations Await! For government Investment Promotion Agencies and Economic Development Organizations seeking unparalleled opportunities for representation in the thriving ASEAN region, look no further. KW Group is here to facilitate Foreign Direct Investment (FDI) and Export Development. 🔗 Explore Our Credentials 📧 Contact Andrew K for Exclusive Opportunities: 📩 andrewk@kwconfex.com

New UNCTAD analysis shows global FDI trends defied earlier expectations but highlights that growth was driven by a few European “conduit” economies and raises concerns about the decline in international investment projects. Global foreign direct investment (FDI) defied earlier expectations for 2023, growing by 3% and finishing the year at an estimated $1.37 trillion, according to UNCTAD's latest Global Investment Trends Monitor published on January 17. However, the report highlights a key nuance – the overall uptick was driven mainly by a few European "conduit" economies, which often act as intermediaries for FDI destined for other nations. Strikingly, when these conduit economies are excluded, global FDI flows show a steep 18% decline in 2023. The rest of the European Union recorded a steep 23% decline, and the United States, the world's leading FDI recipient, saw a 3% dip. The UNCTAD report also underscores a worrying decline in international investment project announcements last year, especially in project finance and M&As, which declined 21% and 16%, respectively. Meanwhile, greenfield project announcements dipped by 6% in number but grew by 6% in value, bolstered in part by manufacturing. Looking ahead, the report says “a modest increase in FDI flows in 2024 appears possible”, citing stabilization for inflation and borrowing costs in major markets. But it warns that significant risks persist, including geopolitical tensions, mounting debt in many countries and concerns about further global economic fragmentation. Developing Asia’s FDI engine slows The overall FDI landscape for developing countries in 2023 revealed a 9% decline, amounting to $841 billion. Developing Asian countries bore the brunt with a 12% decrease. China reported an unusual 6% drop in FDI inflows but showed an 8% growth in new greenfield project announcements. India, another regional giant, saw a 47% drop in FDI inflows but remained among the top five global destinations for greenfield projects. The Association of Southeast Asian countries (ASEAN), traditionally an engine of FDI growth, recorded a 16% decline. Yet the region remained attractive for manufacturing investments with a remarkable 37% increase in greenfield project announcements in nations like Viet Nam, Thailand, Indonesia, Malaysia, the Philippines, and Cambodia. Conversely, FDI flows fell by a modest 1% in Africa and held steady in Latin America and the Caribbean, thanks in part to increases to Central America and 21% growth in Mexico, the region’s second-largest economy. VIEW ARTICLE

Small and medium-sized enterprises (SMEs) are important contributors to economic development, representing a substantial portion of businesses globally. Global markets offer SMEs opportunities for growth, diversification and resilience. Access to international markets enables them to tap into new customer bases, gain exposure to diverse business practices and foster innovation through cross-cultural collaboration. However, SMEs encounter significant challenges that hinder their investment overseas. SME investors, relative to large Multinational Enterprises (MNEs), face distinctive bottlenecks including financial and information constraints, difficulties in dealing with regulatory complexities and, importantly, an international investment environment in which facilitation and investment promotion institutions are often geared towards attracting large-scale investment projects. Foreign direct investment (FDI) by SMEs has been in decline in recent years: the number of outward greenfield investment projects in 2022 was only about a quarter of that in 2015. There are good reasons for governments and investment promotion institutions to pay more attention to supporting SME investment. SME investment can be most beneficial for development because it is less footloose, relies more on local suppliers and partners, and is less likely to crowd out local firms. SMEs can become real game changers in a global context characterized by greater competition for a shrinking pool of large-scale projects; a general trend towards regionalization and international tax reforms that will reduce the effectiveness of incentives for large MNEs. Based on original empirical studies in different developing regions and selected developed economies, this report discusses how to reduce the common investment policy bias in home and host countries towards large MNEs, the role of SMEs in South–South and intraregional FDI, and ways and means to maximize the development impact of SME FDI. It introduces a new framework to assess the relevance and effectiveness of existing investment policies for the promotion of SME investment and presents policy options to facilitate overseas investment by SMEs and reduce the existing policy bias, including these six: Adjusting investment promotion and facilitation services towards addressing the needs and challenges that SMEs face, so that size does not hinder their access to financial incentives and facilitation mechanisms. Establishing comprehensive support networks and designing accessible matchmaking programmes and events to help small businesses connect and to foster sustained and successful. Improving SMEs’ competitiveness by supporting their innovation capacity, including through digitalization, technology adoption and capacity-building. Facilitating SMEs’ access to capital, including by improving digital services and infrastructure. Simplifying the regulatory and administrative framework and improving access to information by using digital platforms. Promoting SMEs’ participation in trade to increase their international exposure and knowledge of foreign markets. By implementing a combination of these policies, governments can create an environment that supports SMEs in their efforts to invest and thrive in international markets and to harness the related development benefits. VIEW REPORT

An excellent initiative to drive institutional investment by Spain’s sovereign wealth fund (SWF) Cofides as they are readying their first deals under a new €2bn fund that will crowd foreign capital into local greenfield projects. The Foco fund underlines the growing trend of governments mandating SWFs to attract inbound investment, developed through collaboration and investor demand. Foco is a co-investment fund that will see Cofides, foreign corporates, and institutional investors invest in Spanish businesses and projects that are pursuing activities linked to the green and digital transition. It was driven by the rationale that investing alongside a state-owned investment partner will reassure foreign investors to back more transformative, potentially higher-risk projects. “The government [putting] some skin in the game shows it is an important project that will get the necessary visibility, provides comfort that permitting and licensing will go smoothly, and reduces investment risks by covering some of the equity needs and potentially crowding in other financial partners,” says Manuel de la Rocha-Vázquez, secretary general for economic and G20 affairs at the office of Spain’s president. Mr de la Rocha-Vázquez said the real genesis was investor demand. “For the most part, it was inspired by conversations with large international funds — SWFs and pension funds — that were looking for opportunities beyond the [securities] and mature companies which they typically invest in,” he says. “We want to direct them to more greenfield projects and new technologies … But they are cautious, so if we accompany them they have more comfort.” PRIORITY ELIGIBLE SECTORS Those that contribute to strategic objectives of the Recovery, Transformation, and Resilience Plan such as, for example: Increased production of renewable energy Energy efficiency Decarbonization of the economy Electric mobility Digitization of business fabric and production processes Sustainable infrastructure development Biotechnology sustainable agriculture VIEW ARTICLE

New rules in China and Vietnam are creating uncertainty for the fast-growing sector 🌏 Projected to grow at a 12% CAGR from 2023 to 2027, the Asia-Pacific data center market is set to reach $48 billion. This growth, however, is navigating through tighter data flow restrictions imposed by regional governments, particularly impacting cross-border data exchanges. China and Vietnam have adopted stricter data regulations for national security, pushing businesses to reassess their data center strategies. Despite China's lead in data center numbers, the search for stable regulatory environments has companies eyeing Singapore, Hong Kong, and Australia as viable alternatives. 🌏 In Southeast Asia, the push towards digitalization is driving robust demand for data centers. While Singapore remains a hub for many companies' regional or global headquarters, there's a noticeable shift towards expanding data center operations into Malaysia, Indonesia, Vietnam, Thailand, and the Philippines, largely influenced by cost efficiencies... The surge in Asia's demand for data centers is propelled by advancements in artificial intelligence and augmented reality, alongside pivotal shifts such as China's move towards a cashless society and the development of next-generation 5G and forthcoming 6G networks. VIEW ARTICLE

A GROWING number of Chinese semiconductor design companies are tapping Malaysian firms to assemble a portion of their high-end chips, keen to hedge risks in case the US expands sanctions on China’s chip industry, sources said. The companies are asking Malaysian chip packaging firms to assemble a type of chip known as graphics processing units (GPUs), according to three sources with knowledge of the discussions. The requests only encompass assembly – which does not contravene any US restrictions – and not fabrication of the chip wafers, they said. Some contracts have already been agreed, two of the sources added. The sources declined to disclose the names of the companies involved or to be identified, citing confidentiality agreements. Seeking to limit China’s access to high-end GPUs that could fuel artificial intelligence (AI) breakthroughs or power supercomputers and military applications, Washington has increasingly placed restrictions on their sales as well as on sophisticated chip-making equipment. Malaysia currently accounts for 13 per cent of the global market for semiconductor packaging, assembly, and testing and is aiming to boost that to 15 per cent by 2030. Chinese chip firms that have announced plans to expand in Malaysia include Xfusion, a former Huawei unit, which said in September that it would partner Malaysia’s NationGate to manufacture GPU servers – servers designed for data centres and which are used in AI and high-performance computing. Shanghai-based StarFive is also building a design centre in Penang, and chip packaging and testing firm TongFu Microelectronics said last year it would expand its Malaysia facility – a venture with US chipmaker AMD. Offering an array of incentives, Malaysia has attracted multi-billion-dollar chip investments. Germany’s Infineon said in August that it would invest 5 billion euros (S$7.26 billion) to expand its power chip plant there. US chipmaker Intel announced in 2021 that it would build a US$7 billion advanced chip packaging plant in Malaysia. VIEW ARTICLE

In 2023, the FDI landscape was heavily influenced by the Energy transition. Major FDI announcements not only mirrored globalization patterns but also signified significant macroeconomic changes in the global economy. By Alex Irwin-Hunt, FDI Intelligence Three macro takeaways: 1️⃣ Preliminary full-year 2023 figures indicate an all-time high of 174 FDI projects valued at $1bn or more were announced worldwide, up from the previous high of 156 recorded in 2022. 2️⃣ Software & IT services — our label for the broadly defined tech industry — slipped from 6th in 2022 to 11th last year in the investment matrix. This is the first time the software industry has fallen out of the top 10 sectors for FDI capex since 2013. 3️⃣ The average capex committed to FDI projects globally stood at $314m in 2023, down slightly from the record $400m a year earlier, but at historic highs unmatched by any other year since records began in 2023. VIEW ARTICLE

No industry sector – the site selection industry included – is immune from the disruption brought on by the rise of artificial intelligence (AI). The Site Selectors Guild, the only association of the world’s foremost professional site selection consultants, took some initial steps toward understanding the potential impacts of AI on the site selection industry. Seeking answers, the Guild undertook two research projects in the fall of 2023. A survey of Guild members to gauge their current and anticipated use of AI in the site selection process, the greatest opportunities, and existing limitations to create a comprehensive overview of the integration of AI in the site selection industry. A research study designed to “test” three AI platforms against human-generated outcomes in two real-world site selection projects – one office and one industrial. As professionals who manage high-stakes location decision-making for companies across the globe, Guild members recognize the importance of understanding how AI tools might be successfully leveraged without sacrificing the quality and accuracy of site location searches. Download the white paper for the full methodology and findings.

Incredible initiative by Investment Fiji! Leveraging investments from the diaspora constitutes a crucial strategic channel for governments to actively foster economic growth and development. Attracting the Fijian diaspora overseas is a strategy Investment Fiji is working on and they will make some recommendations to the government to see how they can attract more of them and make things easier. CEO Kamal Chetty says diaspora investment is very important and they do their part in several events to attract that diaspora investment in Australia, New Zealand and other places. Chetty says last year, Investment Fiji received about 1,100 foreign investment enquiries from investors to set up businesses in Fiji. He says investors from 44 different countries expressed interest in doing business in Fiji. Chetty adds this broad spectrum of interest demonstrates Fiji's ability to attract capital from a wide range of nations, diversifying the sources of foreign investments. VIEW ARTICLE

According to the Foreign Investment Agency, cited by Vietnam+, the government granted registration certificates to 190 new projects. The registered capital hit $2bn, or 67% higher than in January 2023. In addition, investors from 39 countries and territories announced projects in Vietnam since the beginning of the year. Singaporean businesses took the lead, with over $1.4bn in FDI inflows, or 59.3% of the total investment capital spent in Vietnam. The sharp increase in the number of projects and the appearance of large-scale projects (with an investment of more than 600 million USD each) were one of the main factors driving the sharp increase in foreign investment capital. In addition, 75 projects registered to adjust investment capital with more than 235.4 million USD added, down 15.7% and 23.1% respectively. The month also saw foreign investors contribute more than 116.5 million USD to make 174 share purchases, down 14.7% and 33.1% respectively over the same period last year. Foreign investors disbursed 1.48 billion USD during the month, a year-on-year increase of 9.6%.In terms of investment fields, foreign investors invested in 15 industries out of 21 national economic sectors. Of that, the real estate sector attracted the most with more than 1.27 billion USD (53.9%) and the processing and manufacturing industry ranked second with nearly 926 million USD (39.2%). They were followed by the science and technology sector with 65.2 million USD and wholesale and retail with nearly 54.5 million USD. The wholesale and retail sector attracted the highest number of new projects (accounting for 38.9%) and capital contribution to purchase shares (accounting for 49.4%). Companies from 39 countries and territories invested in Vietnam in January 2024. Of them, Singapore led with more than 1.4 billion USD, accounting for 59.5% of total investment capital. Japan came second with nearly 297 million USD. The foreign investors invested in 35 provinces and cities across the country. Hanoi attracted the most FDI this month with over 867 million USD, or 36.7% of the total registered investment capital and 39.7 times higher than the same period in 2023. Ba Ria-Vung Tau ranked second with nearly 282 million USD, followed by Bac Giang, Bac Ninh, and Dong Nai. VIEW ARTICLE