Asean nations attracted more foreign direct investment than China for the first time in a decade last year, according to a report
The rivalry between China and the US, the world’s two largest economic powers, is bringing a massive wave of opportunities to Southeast Asian nations (Asean) in terms of fresh investment and trade diversification, experts said.
The geopolitical tensions have prompted more manufacturers to diversify their supply chains to the region at a quicker pace, said William Fung, deputy chairman of Li & Fung, a Hong Kong-based pioneer in consumer goods supply chain. This will help these Southeast Asian countries upgrade their infrastructure, attract talent and embrace new technologies, he added.
“For the people, the industrialists relocating from China, Asean is the obvious stop” to avoid potential tariff risks, Fung said in an interview on the sidelines of the UOB Gateway to Asean Conference in Ho Chi Minh City, Vietnam. “The opportunity really falls in this region.”
Southeast Asia attracted more foreign direct investment than China for the first time in a decade last year, as global manufacturers adopted the “China plus one” supply-chain strategy to mitigate the fallout from Washington-Beijing tensions. A tariff war since the Trump presidency has stoked manufacturing costs, eroding China’s appeal as a cheap manufacturing base.
Asean’s top economies Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam attracted US$206 billion in FDI in 2023, while China received US$43 billion, according to a joint report published by Angsana Council, Bain & Co and DBS Bank.
“They will bring employment, technology transfer, foreign exchange in terms of earnings, and over time, the whole supply chain will move in,” Fung said. “These geopolitical pressures have speeded up the process.”
The region’s economy is expected to grow by 5.1 per cent on average over the next decade, with Vietnam being among the likely best performers, the report showed.
Vietnam is seen as the favourite destination for Chinese companies to diversify their supply chain and production base, and the nation has enjoyed surging demand for industrial space, said Li Fan, a managing director at US private equity firm Warburg Pincus. That is likely to continue, driven by the “China plus one” strategy and the indigenous growth in sectors like e-commerce, he added.
BW Industrial Development, Vietnam’s largest industrial real estate developer co-funded by Warburg Pincus, is an example. The firm has elevated its services as the supply chain evolves, while also providing a streamlined process and helping clients set up their businesses, Fan said.
The opportunities lie more in the future as institutional-grade real estate in emerging countries, especially in Vietnam, is still developing.
“When these assets become more mature, there will be some really large-scale landmarks, and from there, global investors in institutional real estate will come in at scale,” he said.
United Overseas Bank, Singapore’s second largest banking group, is gearing up to tap the boom by focusing on trade finance and funding the entire supply chain value system for buyers and sellers, said Frederick Chin, head of group wholesale banking and markets.
Over the past decade, UOB has supported more than 4,500 companies in their overseas expansion plans, especially into Asean and invested in an integrated financial supply chain management system to connect businesses along the value system, he added.
“As Asean’s most extensive trade network, we are strategically positioned to support businesses [in the region], connecting them to Greater China and the rest of the world,” Chin said.
Source: South China Morning Post
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
