What are 5 business trends emerging from Southeast Asia’s foreign investment boom?

In 2023, Southeast Asia attracted record foreign direct investment (FDI) inflows of US$230 billion, even as global FDI declined by 10 per cent. Rising trade tensions and supply chain disruptions have driven businesses to rethink their strategies, leading to moves around relocation and risk diversification.

However, beyond these push factors, Southeast Asia has its own allure. This lies in its inherent strengths, with multinational corporations (MNCs) increasingly drawn to the region’s opportunities. Singapore has solidified its position as the gateway to the region’s growth, commanding nearly 70 per cent of inward investments in 2023 – up from 62 per cent in 2022. The city-state saw an increase in regional headquarters, R&D and innovation, and other strategic investments, reinforcing Singapore’s hub status.

Here are five highlights from the Asean Investment Report 2024 that showcase why MNCs continue to choose Southeast Asia and Singapore.
 

1. More Advanced and Strategic Projects

Southeast Asia is increasingly becoming a hub for high-value and strategic investments. MNCs are boosting their spending on R&D and innovation, advanced manufacturing, and the adoption of Industry 4.0 technologies.

Singapore – which ranks 1^st for innovation capabilities in Asia (WIPO’s Global Innovation Index 2024) – has seen an increase in innovation activities, in line with efforts to build new growth areas and anchor more innovation activities.

Singapore offers a strong IP regime which protects companies’ investment in R&D, while companies can tap our national technology translation platforms, research ecosystem, and government innovation platforms.

BIOTRONIK has established the region’s first Asia-Pacific Manufacturing and Research Hub for cardiac rhythm management in Singapore, while Reckitt Benckiser, has a new R&D centre to drive innovations in sustainable product formulation and packaging.
 

2. More Global Companies, More Startups, More Capital Flows

The report noted that Southeast Asia hosts over 80 percent of Global Fortune 500 companies and 5,000 regional headquarters. The region is also a hotbed for startups with a growing private equity and venture capital assets under management, marking a 130 per cent increase from 2017 to 2023. Southeast Asia boasts over 60 unicorns, ranking fourth globally, and many are involved in cross-border operations to scale and expand markets. The thriving ecosystem has enabled many MNCs and startups to establish and scale their operations.

In October 2024, the Singapore government announced it would invest an additional S$440 million to attract more venture capital firms to invest in local deep tech startups. This expands the total amount of government funding under the Startup SG Equity scheme to over S$1 billion with the aim to back innovative and Singapore-based deep tech startups capable of scaling internationally.

EDB is also committed to driving corporate venturing and supporting companies to spin-off new high-potential businesses. In August 2024, EDB launched the third edition of the Corporate Venture Launchpad programme to empower businesses create spin-offs and collaborate with startups. Since the launch of the first edition in May 2021, EDB has supported 24 companies in launching 14 new ventures.
 

3. Stronger Regional Supply Chains

The growing presence of global MNCs has catalysed the development of regional production networks and supply chains, especially in export-oriented manufacturing industries. This interconnectedness has not only supported single industry ecosystems but also strengthened inter-industry supply chains.

The ASEAN Investment Report 2024 identified Rolls-Royce for its robust manufacturing and services presence across Southeast Asia. Its relationship first began in Singapore in the early 1930s and today, it operates a cutting-edge facility for fan-blade manufacturing, assembly, and testing. The fan cases for airplane engines are shipped from UMW Aerospace, a first-tier supplier in Malaysia. In Indonesia, Rolls-Royce operates an office and maintains an airline support team, while in Thailand, it collaborates with a network of manufacturing suppliers and deploys a dedicated airline support team. In Vietnam, it delivers services to flagship carriers such as Vietnam Airlines and Vietjet.
 

4. Higher Earnings for FDI

Southeast Asia is a profitable destination for FDI. It has consistently outperformed global averages. The ASEAN Economic Community (AEC) 2015 revealed that the region’s FDI rate of return stood at 10.1 per cent, compared to the global average of 8.2 per cent. While profitability has slightly declined to 7.7 per cent in AEC 2025, the region remains above the global average of 6.9 per cent.

According to Bain & Company’s Southeast Asia Outlook 2024-34, the region will likely grow faster than the last decade, with higher GDP growth and higher total FDI than China. Southeast Asia’s growth will be driven by stronger domestic economies and the resurgence in investment catalysed by “China +1” supply chain shifts.

This momentum is underpinned by Southeast Asia’s strong fundamentals: a dynamic region home to approximately 670 million people, a young burgeoning middle-income population, and a thriving digitally-savvy workforce.
 

5. Enhanced connectivity in the renewable energy supply chain

Southeast Asia has seen an investment surge in the renewable energy supply chain across the entire value chain, from the mining and processing of critical minerals to renewable energy generation. According to the ASEAN Investment Report 2024, renewable energy-related industries have attracted an average of over US$27 billion annually between 2020 and 2023 – accounting for about 25 per cent of all announced greenfield investment activities in the region.

The region has been building its renewable energy connectivity through intraregional efforts such as the ASEAN power grid in providing green electricity. This has opened doors for international investments and for more companies across various industries to ride the green wave.

The ASEAN Investment Report 2024 highlighted how some semiconductor companies are leveraging this connectivity through manufacturing and supplying key components essential for renewable energy applications to the region. For example, Infineon is producing semiconductors critical for photovoltaics, energy storage, and electric vehicles, and TF-AMD is supplying technologies and advanced computing solutions to companies in the region.