Foreign investment is surging in Southeast Asia, driven by the appeal of political stability and expansive markets. This region's significance as a buffer amid escalating U.S.-China competition is drawing substantial global investment, with a record of $222.5 billion pouring in during 2022.
Vietnam emerged prominently, touted by the U.S. as a potential partner in fortifying the semiconductor supply chain. This endorsement coincided with U.S. companies like Marvell Technology and Synopsys expressing keen interest in Vietnam. Amkor Technology's inauguration of a $1.6 billion semiconductor plant in Bac Ninh solidified this, set to become their largest global manufacturing hub and generate 10,000 jobs.
Meanwhile, Malaysia secured a $10 billion investment from China's Zhejiang Geely Holding Group for an automobile production base in Perak and is contemplating an electric vehicle plant in Thailand. U.S. and Chinese companies are increasingly acquiring businesses within Southeast Asia, evident in deals like Kimberly-Clark's acquisition of Softex Indonesia for $1.2 billion and Alibaba Group Holding's multi-billion-dollar investment in Lazada.
Over the past five years, foreign direct investment in Southeast Asia has surged by 40%, outpacing other global regions amidst heightened U.S.-China trade tensions. The U.S. leads this investment wave with $74.3 billion, closely followed by China at $68.5 billion, focusing on semiconductor ventures and diverse projects like EV plants and mining development across the region.
The primary impetus behind these investments is the repositioning of manufacturing bases. U.S. companies are embracing "friendshoring," shifting supply chain roles away from China to allied nations, while Chinese firms are relocating facilities to facilitate exports to the West.
Southeast Asia is perceived as an opportune region due to its proximity to China's manufacturing prowess, political stability, and substantial domestic markets, housing over 600 million people. This positioning amidst the escalating U.S.-China tensions allows it to serve as a neutral ground, as described by Ikumo Isono, a senior economist at the Economic Research Institute for ASEAN and East Asia.
Japanese investment, once dominant in Southeast Asia, has dwindled to $43.5 billion over the past five years due to increased demands by host countries for investments in cutting-edge sectors that Japanese companies have been hesitant to pursue. As the U.S. and China intensify their investment efforts, Japanese companies are compelled to reassess their strategy in the region, facing a pressing need for adaptation.
Rewritten from Nikkei Asian Review
