Southeast Asia’s lucrative investment climate has continued to garner global recognition over the past few years. According to a panel discussion conducted at the Asian Financial Forum 2019, Southeast Asia has officially been dubbed the best investment destination in 2019. Let’s take a look at where this accolade has come from, the reasons behind the region’s growth potential, and what to expect looking ahead.
The panel discussion, “Global Investment in The New Economy,” conducted at a forum in Hong Kong surveyed a range of prolific CEOs from around the region. Nearly 40% of those CEOs identified Southeast Asia as having the highest potential for producing investment returns. China followed behind at 35%, with the U.S. garnering the support of 16% of respondents.
The results yielded from this year’s survey show a significant drop in the confidence of investment returns in China. In a similar survey conducted in 2018, 55% of respondents labelled the emerging superpower as the top destination. One major contributing factor to this shift is the present trade war between the U.S. and China, which has resulted in many companies shifting production and operations to Southeast Asia. This is one of Southeast Asia’s many benefits that has emerged from the ongoing trade war.
Not Southeast Asia’s first time in the public eye
January’s forum was not the first time that Southeast Asia’s investment potential has been thrust into the spotlight. In a list compiled by CEOWORLD Magazine, which looked at the best places to invest or conduct investments in 2018, Malaysia took the top spot out of the 50 nations surveyed. The Philippines and Indonesia followed suit, taking out third and fourth place respectively, which shows the level of recognition that the region is experiencing—and not just in a purely fiscal sense. The criterion used by the CEOWORLD survey in determining the results included factors such as trade and financial freedom, investor protection, and infrastructure.
Why is the region making such an impact globally?
The global recognition and confidence in Southeast Asia as a prime investment destination can also be attributed to progress and commitments made by the Association of Southeast Asian Nations (ASEAN) favourable economic policies. In the Chairman’s Statement from the 33rd ASEAN Summit from November 2018 in Singapore, five key economic goals were identified for the region: promoting innovation and e-commerce, cultivating a productive regulatory and legal framework, improving ease of trade, expanding current services and investment integration, and strengthening ASEAN international relations.
The Chairman’s Statement further affirmed ASEAN’s commitment to improving the economic climate and growth through continuing research that pinpoints and addresses current challenges–particularly in terms of infrastructure, establishing strategies to narrow the development gap, and attaining a level of development that is sustainable.
Let the statistics do the talking
As a result of the forward-thinking approach of the ASEAN summit, measurable growth can already be seen through the likes of Gross Domestic Product (GDP) and Foreign Direct Investment (FDI). In 2017, statistics showed that the combined GDP of ASEAN rose 5.3% from the previous year, reaching the $2.8 trillion USD mark. According to an Institute of Chartered Accountants in England and Wales (ICAEW) report released in 2018, the year-on-year GDP growth is expected to continue to sit around the 5% mark in 2019.
In terms of FDI, Vietnam, Singapore, and Indonesia combined accounted for approximately 72% of the total investment into the ASEAN nations and investment inflows rose from $123 billion USD in 2016 to $137 billion USD in 2017. That is an all-time high, according to the ASEAN Investment Report 2018.
The role of the digital economy
The report also discusses the rising investment in the digital economy of the region which includes FinTech, venture capital, e-commerce, and other key activities in this sphere. Already, practical steps have been taken to facilitate Southeast Asia’s metamorphosis into a highly competitive global digital hub, and these developments will continue to drive investment in the digital economy.
International corporations are on the move
The shifting of existing foreign businesses to Southeast Asia and the projected growth of existing enterprises are more promising elements of the growing investment climate of the region. As it stands, many production facilities of foreign corporations have shifted from China to escape high levels of taxation from the U.S.
Further to this, the ASEAN Report projects that any multinational enterprises (MNE’s) from the U.S. and European Union that have existing corporations in Southeast Asia plan on increasing their investment, and foresee that their trade will grow over the next five years. Japanese-based corporations in the region forecast expansion of their current operations by 2020.
In a nutshell
With the demonstrated levels of growth, current projections and pledges from the ASEAN to tackle present economic and developmental challenges, it becomes apparent why Southeast Asia has received the top investment accolade in 2019. In light of the burgeoning digital economy and ecosystem, it is likely the investment boom throughout the region will continue to aid in shaping the investment landscape globally.