(EGM) Foreign Direct Investment in Southeast Asia - Unido

greater regional collaboration, thereby seeking to replace deteriorating
national location advantages with superior regional advantages. Deeper
economic integration in Southeast Asia should include: i) co-ordination and
harmonisation of FDI regulations and attraction measures; ii) reducing tariff
and non-tariff barriers to intra-regional trade; and iii) increasing
opportunities for intra-industry specialisation. Such efforts should also
prevent unilateral policies that can prompt a ‘race to the bottom’ in terms of
national FDI attraction strategies.
Commentary and discussion
There is a need, Peter Buckley pointed out, for Southeast Asia to differentiate
itself from China when seeking to attract FDI inflows. Notwithstanding
China’s recent track record in attracting considerable foreign investment, the
changing nature of FDI and current problems suggest that China is unlikely
to enjoy a monopoly on FDI inflows in East Asia, particularly as MNEs
typically seek to diversify their operations across multiple locations, so as to
mitigate various risks. As the “world’s workshop”, the concern that China will
ultimately end up making everything, is common. But this prospect is
unlikely to actually transpire, and countries can proactively pursue policies
and strategies that will permit them to harness FDI creation stemming from
the rise of China’s economy. That said, some countries in Southeast Asia are
probably better placed to achieve this than others, at least in terms of the
profile of present capabilities. Singapore, Malaysia and Thailand may be
better positioned, for example, than Indonesia or Vietnam.
It is clear that the types of FDI also need to be differentiated, notably in
terms of MNEs’ motivations. The efficiency-seeking FDI, with its export
orientation that characterised flows to Southeast Asia is shifting to China,
with Hong Kong and Taiwanese investors leading the way. As a
consequence, Southeast Asia is exporting intermediate inputs to China as
Japanese MNEs in particular deepen their VIIT across China and Southeast
Asia. The regional dimension of FDI was repeatedly emphasised as being of
crucial importance to IPAs, as market-seeking FDI increasingly looks to
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