Singapore and five other ASEAN countries have received most of the investment flows as companies diversify their supply chains and adopt a China-plus-one strategy, economists said.
Foreign direct investment (FDI) inflows into the ASEAN economies of Indonesia, Malaysia, the Philippines, Thailand, Singapore, and Vietnam have been gaining traction, although there are some differences across sectors and countries, they added.
Inflows into the region rose to US$236 billion (S$318 billion) in 2023, compared with the annual average of US$190 billion from 2020 and 2022.
The major contributors were the United States, Japan, Europe, as well as mainland China and Hong Kong, attracted by the region’s strong domestic reforms, which have led to improving macroeconomic fundamentals.
Many firms have diversified their operations away from China, following the COVID-19 pandemic and amid rising geopolitical tensions between Beijing and Washington.
According to the American Chamber of Commerce in Shanghai, 40 per cent of those surveyed in 2023 had redirected investment or planned to redirect investment originally meant for China.
For these companies, Southeast Asia was the most preferred destination, with technology hardware, software and services companies looking at Singapore. The US was the second most preferred destination, followed by Mexico, the survey showed.
