Southeast Asia remains a hot spot for global investment, with foreign direct investment (FDI) inflows reaching an all-time high of US$230 billion (S$313.44 billion) in 2023, bucking the global trend.

Manufacturing, infrastructure, real estate, and tourism are among the hottest sectors for FDI in the region, with experts optimistic about the prospects in those areas in the coming year.
 

Manufacturing

In 2024, the lion’s share of FDI inflows to ASEAN remained concentrated in the cornerstone manufacturing sector, which is poised for growth in key areas such as high-value-added electronics and electric vehicles (EVs).

HSBC ASEAN economist Yun Liu pointed out that many ASEAN countries have bounced back from the severe downturn in the global trade cycle between late 2022 and 2023, supporting the manufacturing sector’s recovery.

From 2022 to September 2024, Indonesia emerged as the hot spot, attracting around US$94 billion in manufacturing investment, GlobalData’s FDI database showed. During this period, China (US$59 billion), Taiwan (US$38 billion), and the US (US$33 billion) were the largest contributors in terms of investment source.

GlobalData’s FDI team noted that this is a product of increased trade tensions between China and the US, where multinational companies are venturing beyond “China-plus-one” to “China-plus-n” to further diversify their supply chains and minimise risk. This has resulted in many alternative Southeast Asian markets emerging as prime beneficiaries.

“ASEAN continues to be a major hub for electronics and electrical manufacturing, attracting significant FDI from global tech giants,” said Stephen Bates, partner and head of deal advisory at KPMG in Singapore.

He added that the region saw “significant FDI deals” from electronics manufacturers in production facilities for smartphones and other electronic devices, as well as automakers expanding vehicle assembly and supply chains in the past three years.

Despite elevated geopolitical tensions, experts remain optimistic about the manufacturing sector’s prospects. Liu highlighted the sector has “more room to recover” and expects the positive momentum to continue into 2025.

Bates said that investments in high-value-added electronics manufacturing, such as semiconductors and displays, can drive innovation and economic prosperity.

He also anticipates the rising demand for EVs to present “a significant opportunity” for Southeast Asian countries to develop domestic EV manufacturing capabilities.
 

Infrastructure

Meanwhile, the region’s burgeoning digital economy and its commitment to climate change goals have spurred significant investments in the digital and sustainable infrastructure space.

Examples of such projects include data centres, 5G networks, green buildings, and eco-friendly transportation.

Bates noted that ASEAN countries have actively promoted public-private partnerships, which have proven effective in attracting private capital and accelerating infrastructure development across the region.

Data from private markets specialist Preqin showed that between 2021 and the fourth quarter of 2024 (as at 2 December), 354 deals were recorded in ASEAN’s infrastructure space, with an aggregate deal value of about US$46.3 billion.

During this period, renewable energy projects accounted for about half of the deal volume, with ASEAN countries’ commitment to climate change goals lending crucial support to the growth of renewable energy in the region, said Gerard Minjoot, a research insights analyst at Preqin.

In the same period, the Philippines was the most active country, accounting for one-third of the deal volume. This momentum began under former president Rodrigo Duterte’s administration, which prioritised infrastructure improvements across the nation. The current administration under President Ferdinand Marcos Jr built on previous efforts and expanded to include more and larger projects.

Looking ahead, Bates noted that ASEAN’s infrastructure sector “shows strong potential”, driven by rapid urbanisation, rising middle-class incomes, and government initiatives to improve connectivity.

He identified digital and sustainable infrastructure as key focus areas, with public-private partnerships playing a crucial role in financing large-scale infrastructure projects.

Additionally, Minjoot highlighted that “the renewable energy sector remains dominant in ASEAN”, considering the heavy reliance of most Southeast Asian nations on fossil fuels and natural gas.
 

Real estate

In the real estate space, Vietnam was the frontrunner, as indicated by GlobalData’s FDI database. From 2022 to September 2024, it gathered about US$8 billion in construction and real estate investment.

GlobalData’s FDI team said that political stability, robust economic growth, competitive labour costs and a rising number of trade agreements are among the factors driving FDI inflows to Vietnam.

By investment source, Japan (US$4 billion), South Korea (US$3.2 billion), and Singapore (US$2.2 billion) were in the lead.

Within private markets, Henry Lam, associate vice president of research insights at Preqin, observed more global players sourcing and closing deals in ASEAN, particularly in Singapore.

He cited a recent example of a S$1.6 billion acquisition by Lendlease and US private equity giant Warburg Pincus of a portfolio of industrial assets.

KPMG’s Bates anticipates “continued growth” in the real estate space, driven by urbanisation and rising disposable incomes. He identified opportunities in the logistics and industrial sectors, such as modern warehouses and distribution centres catering to the e-commerce industry.

“Commercial real estate – including office buildings, retail spaces, and mixed-use developments – remains attractive, particularly in major urban centres,” he added.

Preqin’s Lam expects stronger deal flows into Singapore, considering “persistent interest from global players and expectations of further rate cuts”. The retail and hotel sectors are expected to be areas of interest amid the recovery in tourist arrivals.

Tourism

Tourist arrivals are gaining momentum in ASEAN post-pandemic, with the tourism sector receiving increased investment in infrastructure such as airports and hotels, alongside greater focus on sustainable tourism and health and wellness offerings, said Bates.

GlobalData’s FDI database revealed that from 2022 to September 2024, Vietnam was in the pole position, attracting some US$6.3 billion in tourism investment. This was followed by Thailand (US$4.2 billion), Indonesia (US$3.6 billion), and Malaysia (US$3.1 billion).

During this period, the US (US$6.2 billion), France (US$3.9 billion) and the UK (US$2.9 billion) were the largest contributors in terms of investment source.

ASEAN has seen a strong recovery with an influx of tourists, said HSBC’s Liu, adding that Southeast Asian countries’ tourist arrivals in 2024 were equivalent to 70 to 100 per cent of their 2019 levels. This was buoyed by the rapid return of mainland Chinese tourists, on the back of visa waivers with key ASEAN countries.

Both Liu and Bates expect the positive trajectory in ASEAN’s tourism sector to continue in the year ahead.

“Government support through infrastructure investments and destination marketing further bolsters this positive trajectory,” said Bates.

He added that Singapore “presents particularly compelling opportunities”, given its strategic location, cultural diversity, and world-class infrastructure.
 

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