FOREIGN direct investment (FDI) in Southeast Asia continued to grow in 2019 even as global investment flows remained flat, the United Nations Conference on Trade and Development Investment Trends Monitor said.
Southeast Asia was described in the report as the region’s growth engine, registering FDI growth of 19% to $177 billion in 2019.
Globally, FDI fell 1% to $1.39 trillion, which the report attributes to weaker macroeconomic performance and investor uncertainty due to trade tensions.
Removing volatility caused by one-off transactions and intra-firm financial flows, global FDI grew 5%, which the report describes as “a marginal change representing a continuation of the stagnation observed over the decade.”
Philippine Economic Zone Authority (PEZA) Director General Charito B. Plaza told reporters Monday that the Philippines must focus on expanding the investment attractiveness of the countryside to contribute more significantly to Southeast Asian growth.
“As far as PEZA is concerned, we are now very aggressive in inviting the countryside to identify and create economic zones so that we can encourage investors to go to the countryside, especially in areas (that are not) disaster-prone,” she said.
She said the Philippines continues to face challenges that threaten the country’s attractiveness to investors, such as proposals to rationalize tax incentives and the threat of calamities.
Singapore attracted the most FDI in Southeast Asia, with its FDI intake rising 42% to $110 billion led by the information and communications sector.
FDI to Indonesia grew 12% to $24 billion, led by wholesale and retail trade and manufacturing.
“They have no challenges. These are the countries that continuously enhance,” Ms. Plaza said.
“When the US-China trade war happened, they were already stable and already attractive, yet they continued to enhance their attractiveness to investors.”
The report expects moderate growth in global FDI flows in 2020.
“Current projections show the global economy improving somewhat from its weakest performance since the global financial crisis in 2009. GDP growth, gross fixed capital formation and trade are projected to rise, both at the global level and, especially, in several large emerging markets,” the report said.
“Such an improvement in macroeconomic conditions could prompt MNEs to resume investments in productive assets, given also their easy access to cheap money, the fact that corporate profits are expected to remain solid in 2020, and hopes for waning trade tensions between the United States and China.”
But risks to FDI flows remain. The report points to high debt accumulation in developing economies, geopolitical risk, and protectionist policies as challenges. — Jenina P. Ibañez