Increase in ASEAN FDI outpaces Global FDI for two consecutive years

1. The Eighth AIA Council met in Vientiane, Lao PDR on 27 September 2005 to review developments in the AIA during the past year. The Council was pleased to note the sustained increase in ASEAN FDI for 2004, which reached US$25.6 billion, a 39% year-on-year increase, with the 1st Quarter of 2005 amounting to US$5.8 billion.

2. The Council noted that increases of FDI into ASEAN have outpaced the increase in global FDI in 2004.  This suggests that ASEAN remains a preferred destination for investors despite challenges in the region, such as international terrorism and the outbreak of communicable diseases.

Figure 1: ASEAN and Global FDI Trend

Source:  ASEAN Secretariat: ASEAN FDI Database, 2005
UNCTAD, Press Release 11/01/2005

3. The top five investors into ASEAN in 2004 were the United States (20%), Japan (10%), intra-ASEAN (9.5%), the Netherlands (9%), and the United Kingdom (7%).

4. The Council noted that the Manufacturing sector remains a prominent FDI recipient (45%) where Japan and EU are the major investors. This is followed by Financial Intermediation and related services, including insurance (30%) where the US was the principal investor for the sector.  The remaining 25% includes sectors such as Trade/Commerce, Real Estates, Services, Agriculture, Fishery and Forestry, Mining and Quarrying, and Construction.

5. In tandem with the overall improvement in ASEAN FDI, approved manufacturing FDI in 2004 increased to US$20.8 billion, representing a 13.4% year-on-year growth from the amount of US$18.3 billion recorded in 2003. The increase reinforces the region as a growing and important manufacturing base. The top five FDI sectors in manufacturing were electrical and electronics, chemical and chemicals products, fabricated metals products, food product and beverages, and machinery and equipment.

Harnessing Regional Production Network – increase in Intra-ASEAN FDI

6. The Council also continues to place emphasis on promoting and encouraging intra-ASEAN FDI, the value of which has consistently been over US$2 billion since 2001.

7. In 2004, intra-ASEAN FDI stood at US$2.4 billion, an increase of 5.7% over 2003.  The Council was encouraged by this positive development as it demonstrated that companies in ASEAN are continuing to leverage on the individual Member Countries’ strengths, to take advantage of preferential tariffs accorded in ASEAN Free Trade Area (AFTA), and harnessing synergies by utilizing regional production networks.

Progress in Advancing an Integrated ASEAN Investment Area

8. The Council was encouraged by the continued progress in advancing the AIA process through enhancing its external linkages with Dialogue Partners and undertaking joint consultations with the private sector.  In addition, initiatives under the AIA process was further supported by capacity building programmes, as well as efforts towards implementing measures in the ASEAN 11 Priority Integration Sectors.

9. The Council believes that the 11 Priority Sectors represents an integral component in efforts to enhance ASEAN economic integration and attracting FDI into ASEAN.   In this regard, the Council agreed on the importance of strengthening cooperation with ASEAN’s Dialogue Partners in these sectors through encouragement of investment promotion and capacity-building activities.

10. The 8th AIA Council endorsed the release of the 7th Edition of “Statistics of Foreign Direct Investment in ASEAN”.  A “Guidebook for investing in ASEAN: Update 2004” to assist potential investors has been released in English and Japanese languages.

Looking Forward

11.  Recognizing the global competition ASEAN faces in attracting FDI, the Council has agreed that ASEAN’s investment and trade policies should work in tandem to ensure ASEAN’s competitiveness. To this end, the Council has tasked the relevant ASEAN officials to follow-up.


Attendance:

The Eighth AIA Council Meeting was chaired by H.E. Soulivong Daravong, Minister of Commerce, Lao PDR and attended by:

H.E. Pehin Dato Lim Jock Seng
Second Minister of Foreign Affairs and Trade
Ministry of Foreign Affairs and Trade
Brunei Darussalam

H.E. Mr. Sok Chenda
Secretary General
Council for Development of Cambodia
Cambodia

Mr. Hidayatullah Suralaga
Deputy Chairman
For Investment Promotion
Investment Coordinating Board
Indonesia

Dato’ Sidek Hassan
Secretary General
Ministry of International Trade and Industry
Malaysia

H.E. U Soe Tha
Minister
Ministry of National Planning and Economic Development
Myanmar

H.E. Mr. Elmer C. Hernandez
Undersecretary of Trade and Industry
Philippines

Mr. Peter Ong
Permanent Secretary
Ministry of Trade and Industry
Singapore

Mr. Chakramon Phasukavanich
Permanent Secretary
Ministry of Industry
Thailand

H.E. Mr. Phan Huu Thang
Director General
Foreign Investment Agency
Ministry of Planning and Investment
Viet Nam

H.E. Mr. Ong Keng Yong
Secretary-General of ASEAN