ASEAN: Regional Trends in Economic Integration, Export ... - USITC

Inbound Investment
The investment environment in the ASEAN region has been significantly liberalized
within the ASEAN-6 countries, 79 as identified in the Roadmap, and most ASEAN
member countries are actively seeking foreign direct investment (FDI) in their auto parts
industries. The investment environment for the auto parts industry is, for the most part,
open and unrestricted, with 100 percent foreign ownership permitted. According to the
U.S. Chamber of Commerce, the creation of a single market would likely stimulate
greater industry investment because of the opportunities it would offer to reach a large
common market and to manufacture with scale economies. 80
Through their investment policies, most governments are seeking ways to make it easier
for foreign investors to enter and leave the market. 81 Thailand, for example, offers
corporate income tax holidays, reduction or exemption of import duties on machinery and
raw materials, land ownership rights for foreign investors, and other privileges. 82 Both
Thailand and Malaysia are offering incentives to automakers and parts producers to
jump-start their green vehicle initiatives.
ASEAN investment trends by source and destination continue to reflect the production
patterns already established in the region. Because Japanese automakers and parts
producers are ingrained in this region, Japan will likely continue as the leading investor
in the ASEAN auto parts sector. Toyota, for example, reportedly considers the ASEAN
region to be its “second mother country.” 83 Japan accounted for 62 percent of the total
investment in the ASEAN auto components industry, with investments of nearly $1.6
billion since 2003 in 123 projects. 84 Of Japan’s 1.1 trillion yen ($10.6 billion) investment
in the transportation sector worldwide in 2008 (on a balance of payments basis), ASEAN
accounted for 10 percent (112 billion yen or $1.1 billion), which exceeded Japan’s
investments in China (nearly 102 billion yen, or $987 million). 85
U.S. investment in the region totaled $139 million, with most of that investment
occurring in the last two years in Thailand and Vietnam. Investment by Germany totaled
$450 million and was more diverse in its destinations, covering all four major ASEAN
auto parts-producing countries and, to a lesser extent, Cambodia, Singapore, and
Vietnam. Only one project was reported by China, a $14 million project in Malaysia
implemented by the Shanghai Automotive Industry Corporation. 86 In terms of completed
mergers and acquisitions as reported by Zephyr, 87 investment was concentrated in
Vietnam, Malaysia, Thailand, and Singapore.
79 The Roadmap identifies staggered timelines for compliance with the measure to eliminate investment
restrictions for sensitive industry sectors: 2010 for the ASEAN-6; 2013 for Vietnam; and 2015 for the
remaining ASEAN countries.
80 U.S. Chamber of Commerce, written submission to the USITC, March 12, 2010, 4.
81 Industry official, interview by USITC staff, Singapore, March 9, 2010.
82 ASIAtalk, “Thailand: Auto Parts,” September 2008.
83 The Nation, “Major firms see ASEAN as second investment base,” October 27, 2009.
84 Data collected by USITC staff from FDIMarkets database (accessed January 10, 2010).
85 Japan’s net outflow of investment focused on Thailand and Indonesia, which accounted for 63 percent
and 21 percent, respectively, of the total. Malaysia, the Philippines, and Vietnam were secondary FDI
recipients. Ministry of Finance, “Japan’s FDI Flows.”
86 Data collected by USITC staff from FDIMarkets database (accessed January 10, 2010).
87 Zephyr is a database of mergers and acquisitions, initial public offerings, and venture capital deals.
Zephyr database (accessed January 10, 2010).
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