Diversity and Development: Foreign Direct Investment in Southeast Asia

Abstract

Significant foreign direct investment (FDI) inflows to maritime Southeast Asia (and more recently Vietnam) have been the key factor behind the economic development and in the integration into the global economy of the countries located in that region. Southeast Asia’s prospects as a destination for foreign direct investment are bright, and over the last decade, FDI stock per capita in the region has increased five-fold from USD$500 in 2000 to nearly USD$ 2,500 in 2013.1 In this same period, regional real GDP per capita grew only 1.6 times to reach USD$ 2,255 in 2013.2 Using the latest UNCTAD statistics on bilateral foreign direct investment flows into nine Southeast Asian economies, this Perspective will look at what FDI flows tell us about two of the major strategic concerns of Southeast Asian states and of ASEAN: 1. The significance of the relationship for each Southeast Asian state and the region as a whole, between economic development, global economic integration and dependence on (or autonomy from) major extra-regional powers. The growing trade dependence of Southeast Asian economies on China and China’s growing influence in Southeast Asia are the current focus of this foundational regional concern. 2. Further strengthening of integration among Southeast Asian economies and through this reducing the development gap between them. This regional economic virtuous circle is seen to be particularly important for supporting ASEAN unity and centrality.