(EGM) Foreign Direct Investment in Southeast Asia - Unido

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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 36
Southeast Asia as an integrated market and workable manifestation of AFTA. This regionalism calls for greater and more rapid harmonisation and co- ordination of policy instruments (especially those directly related to incentives) as a function of the diversity and different stages of industrial development across the region. The wider regional issues, related to the ‘ASEAN+3’ initiative, and which concern policy harmonisation between ASEAN and China, encapsulate strategic FDI and trade policy with respect to both China’s inflows and outflows of FDI. Second presentation summary The complex dynamics of competition and/or complementarity in ASEAN– China FDI relations were highlighted by Hafiz Mirza, noting that at national and corporate levels pertinent questions -- such as which economies are competing and which are complementary -- need asking. Answers, in relation to policy objectives and policy instruments, would define the effectiveness of investment policies. It is crucial for investment policy to recognise that competition for FDI is intra-regional, whereas complementarity in FDI is inter- (and intra-) MNEs. This reality, which reflects the integrated global factory concept, carries profound implications for policy craft. Whereas the ‘footprint’ of MNEs across Asia is a function of the international location and relocation of production; the integrated global factory is defined by the corporate management of GVCs. Also, whereas FDI to Asia is inter-regional (e.g. EU to Asia); ASEAN FDI is characterised by a high degree of intra-ASEAN focus. Reflecting the dynamics of SDPNs enunciated in an earlier presentation, MNEs are pursuing new ‘deverticalised’ global strategies which emphasise flexible manufacturing services and regional manufacturing platforms. Enabled by ICT, this pattern is exemplified by relocations of Japanese manufacturing FDI with shifts from relatively high cost locations to localities with competitive productivity adjusted cost of labour. 37
Page 3: Foreign Direct Investment in Southe
Page 6 and 7: Abbreviations and Acronyms ADB Asia
Page 8 and 9: thinkers and writers on FDI and mat
Page 10 and 11: The realignment of structural facto
Page 12 and 13: Recent years have seen increasing c
Page 14 and 15: overlap according to production pro
Page 16 and 17: enchmark rankings should be one aim
Page 18 and 19: Theme 2 FDI and National Experience
Page 20 and 21: ‘pipeline’ of harmonising legis
Page 22 and 23: major determinant of success. This
Page 24 and 25: and viii) general foreign investor
Page 26 and 27: Investment policy craft -- creating
Page 28 and 29: policies, as they would treat forei
Page 30 and 31: It appears that the advantages and
Page 32 and 33: seeking to attract FDI? Examining t
Page 34 and 35: attractiveness of the region to inv
Page 36 and 37: Theme 4 FDI and the China Dimension
Page 40 and 41: The increasing significance of outs
Page 42 and 43: aise their own finance like any oth
Page 44 and 45: Notwithstanding the dynamics of ris
Page 46 and 47: The logistics of the UNIDO ITPO Del
Page 48 and 49: no longer be an appropriate indicat
Page 50 and 51: FDI lens. Consequently, some IPAs h
Page 52 and 53: Select References Bartels F.L. and
Page 54 and 55: Annex 2: Participants at the EGM Co
Page 56 and 57: Appendix I: Thematic Programme of t
Page 58 and 59: 12.30-14.0 Lunch Plenary Discussion
Page 60 and 61: Appendix II: Opening Statement by t
Page 62 and 63: Appendix III: Opening Statement by
Page 64 and 65: and practitioners in other developi
Page 66 and 67: The themes of the EGM have been car
Page 68 and 69: Appendix V: EGM Working Paper EF Un
Page 70 and 71: ABSTRACT This working paper discuss
Page 72 and 73: In recent years, we have seen incre
Page 74 and 75: usiness domestically (improving int
Page 76 and 77: intra-industry trade, which account
Page 78 and 79: The agglomeration of markets and di
Page 80 and 81: These patterns are characterised by
Page 82 and 83: etween locations and maximises the
Page 84 and 85: ecome insiders and thus avoid being
Page 86 and 87: (iv) Those that relate to the “pu
Page 88 and 89:
their indicators 50 of industrial p
Page 90 and 91:
evolve more rapidly to account for
Page 92 and 93:
changing morphology of MNEs with a
Page 94 and 95:
92 Appendix I - Doing Business in A
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94 Appendix II - ASEAN Investment C
Page 98 and 99:
96 Appendix III - Ranking of Econom
Page 100 and 101:
Buckley P. J., Carter M. J., 2004,
Page 102 and 103:
McKinsey & Company, 2003, New Horiz
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(EGM) Foreign Direct Investment in Southeast Asia - Unido

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