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Southeast Asia is becoming a magnet for foreign direct investment

The member countries of the Association of Southeast Asian Nations (ASEAN) together attracted US $ 149 billion in direct investment in 2018, more than China. The funds invested thus increased by 3 percent compared to 2017, while direct investments worldwide fell for the third year in a row. The reasons for this are uncertainties caused by trade conflicts and a corporate tax reform in the USA. This led to capital repatriation to the USA. China continues to be the second recipient of direct investment worldwide, but interest in alternatives is increasing, due to US tariffs and a slowdown in growth in the "Middle Kingdom".

German direct investments in Southeast Asia have doubled

The stocks of German direct investments in the ASEAN region doubled between 2007 and 2017, to 28.1 billion euros. The region has thus significantly increased its share of total German foreign investment, but at around 2.4 percent, the value is still well below China, which accounts for around 7 percent. Recently especially popular with German companies (high growth rates): Vietnam and Thailand.

The ten countries of Southeast Asia - Brunei, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam - form one of the most dynamic regions of the world. Taken together, they could become the fifth largest economy in the world by 2025, with an average annual growth in gross domestic product of 5 percent.

This is attracting the interest of foreign investors. These include, for example, relocations of production from other Asian countries. For example, Cambodia's clothing industry has benefited greatly from it. The trade conflict between the US and China is accelerating this trend, with the relocation of labor-intensive processes going on for years. In addition, the intra-ASEAN flows grew, even if they often flowed into real estate and financial investments.

Singapore remains the largest investment magnet in the region and, according to UNCTAD, was in fourth place worldwide for FDI inflows after the USA, China and the Hong Kong Special Administrative Region in 2018, just as in the previous year. Above all, the city-state is a location for companies to structure their investments in the region. In many countries, Singapore is once again the largest source of direct investment - not infrequently diverted money from multinational corporations.

Largest German investment portfolios in Singapore, Malaysia and Thailand

Singapore is also the top destination for German companies. Together with Malaysia in second place, the two represented more than two thirds of the German investment stocks in the region in 2017, according to the latest statistics from the Bundesbank. However, its importance decreased between 2007 and 2017, the two countries had the lowest increases. Indonesia, the Philippines and Thailand developed more strongly as target countries. The growth in investment in Vietnam has almost exploded: from just 94 million euros in 2007 to 820 million, the value has increased more than eightfold.


The dynamics have changed over the years: while Indonesia was able to convince German investors between 2007 and 2012 in particular, stocks between 2012 and 2017 were rather meager for the emerging market. The situation is different in Vietnam, which showed the strongest dynamic during this period. However, in 2017 the country was still the ASEAN 6 member with the lowest German direct investment stocks, with only 820 million euros. The Bundesbank does not publish such statistics for smaller, less developed countries such as Cambodia, Laos and Myanmar.

German companies are increasingly interested in Thailand and Vietnam

Despite the politically difficult situation, every second German euro in the region went to Thailand between 2014 and 2017. At the end of 2017, the German holdings there amounted to 3.8 billion euros. Thailand has thus overtaken Indonesia in terms of German stocks and is in third place. In the greater Bangkok area and the so-called Eastern Economic Corridor, major players in the German automotive and mechanical engineering industries have settled.

Vietnam has got around among the emerging countries in the region as a cheap and good production location and offers an alternative to China for companies in the clothing and electronics industry. More than half of the investors come from neighboring East Asian countries. For German companies, it is often about sourcing from contract manufacturers. However, some auto suppliers and medical accessories manufacturers also produce for export. Most recently, investments in Vietnam have also targeted the domestic market, such as gypsum board production by Knauff in 2016 or the opening of a Tetra Pak plant in July 2019.

The countries are improving their business environment in many ways and that has an attractive effect on foreign companies. The best example is Vietnam: while the country took last place in the FDI Restrictiveness Index of the OECD in the 1980s, the country improved significantly until 2017 and is now considered to be rather open. This went hand in hand with a significantly increased importance of foreign investments. According to the OECD, the Philippines and Indonesia, but also China, are among the most discriminatory markets in relation to foreign investors.

While Southeast Asia is still widely seen as a low-wage location, investments in research and development (R&D) are also increasing, especially in the electronics sector. Some German companies have an R&D center in Singapore. In Malaysia, for example, Osram Opto Semiconductor has set up an office. Samsung does R&D in Vietnam and Apple in Indonesia.

Japan remains the largest investor in Southeast Asia, around 20 percent of the holdings in the region can be assigned to the East Asian country, according to calculations by the Financial Times from 2018. China has caught up a lot and is in third place, with accumulated intra-regional investments being rated second.

Basically, the less developed countries in the region mainly receive money from neighboring countries and China, while emerging countries such as Thailand and Malaysia get the majority of their investments from outside ASEAN. For example, over half of Thailand's direct investment stocks come from the US and Japan.

Further information on the Southeast Asia region can be found at