While global foreign direct investment (FDI) fell by 11 percent in 2024, Southeast Asia moved in the opposite direction. The region attracted USD 226 billion in FDI that year, an 8 percent increase from the previous year, and maintained its position as the largest FDI destination among developing regions for the fourth consecutive year.
What makes this figure particularly noteworthy is the broader context: during the same period, FDI inflows to China declined by 29 percent.
This trend is not a temporary phenomenon. Since 2016, ASEAN has attracted an average of USD 170 billion in annual FDI, nearly double the USD 92 billion recorded between 2006 and 2015. Between 2021 and 2023, the annual average climbed even higher to USD 220 billion.
In 2023, ASEAN accounted for 17 percent of global FDI inflows, up from an average of just 6 percent a decade earlier. This growth pushed the region’s total FDI stock to USD 3.9 trillion, compared with USD 1.7 trillion in 2015.
Global Supply Chains Are Shifting & ASEAN Is Benefiting
Trade tensions between the United States and China have triggered a major restructuring of global supply chains. The China+1 strategy adopted by multinational corporations has directly channeled new investment into Vietnam, Indonesia, Malaysia, and Thailand.
The impact is clearly visible. According to UNCTAD, FDI in ASEAN’s manufacturing sector surged by nearly 150 percent to USD 44 billion in 2024, driven by supply chain-intensive industries such as electronics, semiconductors, automotive manufacturing, and pharmaceuticals.
In the electronics and electrical equipment sector alone, announced greenfield investments reached USD 31 billion. Investment in the digital economy also more than doubled to USD 16 billion in 2024, according to data from Singapore’s Economic Development Board (EDB).
The contrast is striking. In 2023, Southeast Asia’s six largest economies attracted more FDI than China for the first time in a decade, receiving USD 206 billion compared with China’s USD 43 billion. Between 2018 and 2022, FDI inflows into the region grew by 37 percent, while China recorded growth of just 10 percent, according to Bain & Company data.
A New Dimension of FDI
Beyond manufacturing and the digital economy, renewable energy has emerged as an increasingly important investment destination in Southeast Asia.
According to the ASEAN Investment Report 2024, the number of international investment projects in the region’s renewable power generation sector has grown by an average of 15 percent annually since 2020, surpassing the global average of 11 percent.
Between 2020 and 2023, average annual greenfield investment in the sector exceeded USD 27 billion, accounting for roughly 25 percent of total investment in the region.
In 2023, investment in high-value services, including research and development (R&D), surged from USD 0.3 billion to USD 21 billion, while FDI in the financial sector increased by 53 percent to USD 92 billion. These figures suggest that investors no longer view ASEAN merely as a low-cost manufacturing base.
This growth is supported by a vast consumer market of more than 650 million people, with a combined market size of USD 3.8 trillion and a middle class projected to expand by 5 percent annually through 2030.
Structural Advantages That Are Difficult to Replicate
Three long-term factors continue to underpin the region’s attractiveness.
First, demographics. Most ASEAN countries are still benefiting from a demographic dividend. While Japan and South Korea are facing shrinking workforces, countries such as the Philippines, Vietnam, and Indonesia continue to see growth in their working-age populations.
Second, stable economic growth. The Asian Development Bank (ADB) projects that developing Southeast Asia will grow by an average of 4.7 percent in both 2025 and 2026, with Vietnam, the Philippines, and Cambodia expected to exceed 6 percent growth.
Third, a mature regional trade architecture. Since coming into force in January 2022, the Regional Comprehensive Economic Partnership (RCEP) has connected the 10 ASEAN member states with China, Japan, South Korea, Australia, and New Zealand in a trade bloc that represents approximately 30 percent of global GDP and 32 percent of global FDI flows.
Challenges: Growth That Remains Uneven
Behind the strong headline figures, two major pressures cannot be ignored in 2025–2026.
The first is internal: FDI growth across the region remains highly concentrated. Singapore, Indonesia, Vietnam, and Malaysia continue to attract the largest share of investment, while many other ASEAN member states lag significantly behind.
Internationally financed infrastructure and renewable energy investments also declined sharply in 2024, falling at a rate twice as steep as the average decline across other developing regions, largely due to tighter financing conditions for long-term projects.
The second challenge is external and more immediate. The reciprocal tariffs introduced by the United States in 2025 have placed Southeast Asia in a structurally different position from that of the 2018 trade war.
At that time, ASEAN largely benefited because U.S. tariffs were directed at China, prompting companies to relocate investment and production to the region. This time, however, ASEAN countries themselves have become direct targets. Vietnam, for example, initially faced tariffs of up to 46 percent before negotiations reduced the rate to around 20 percent.
Meanwhile, goods considered to be Chinese transshipments continue to face tariffs exceeding 40 percent, putting pressure on the supply chain strategies that have long been one of the region’s key competitive advantages.
The export-oriented manufacturing model that has underpinned Southeast Asia’s economic rise is now facing deeper structural challenges than before.
The central question is no longer simply which country can attract more FDI, but whether the very growth model that helped ASEAN become one of the world’s leading destinations for foreign investment can remain viable in an era of increasingly entrenched protectionism.
