ASEAN region attracts soaring overseas business interest

ASEAN region attracts soaring overseas business interest

Foreign direct investment surges as businesses seek ASEAN expansion.

Despite ongoing global economic uncertainties, businesses from Southeast Asia and Greater China are not only managing to stay afloat but are also actively looking to expand their reach, with a particular focus on the ASEAN region. 

Jimmy Koh, Head of Network Partnerships and Strategic Marketing, Group Foreign Direct Investment Advisory at UOB, said that this trend is underscored by a significant surge in foreign direct investment (FDI) into ASEAN, marking the region as an epicentre for international business activity.

"I think what we are seeing is the whole global arena that is changing. What we say is that we are now in the era whereby the best of globalisation is probably behind us, what we saw over the last 30 years, the next 30 years will be very different," Koh remarked. He noted that from 2015 to 2022, while global FDI fell by about 35%, FDI into ASEAN rose almost 90% over the same period.

"And that reflects how ASEAN is becoming the alternate supply chain globally. And also, we're seeing corporates coming down into Southeast Asia, to ride on the middle-income rise in the region," Koh added.

The appeal of ASEAN is also strengthened by geopolitical shifts, particularly the tensions between China and the US, which have prompted businesses to diversify their manufacturing hubs outside of China, with many choosing ASEAN countries due to their historical role as robust manufacturing bases. 

"And if you look at that before 2001, most of the ASEAN countries were actually very strong manufacturing hubs for global production, so that we are beginning to see some of them coming back again, as a result of some of these geopolitics," Koh explained.

With about 650 million people, nearly half of whom are classified as middle-income and above, ASEAN presents a new consumer base and potential growth engine. "We are seeing corporates coming down into ASEAN today to ride on the rise in the middle income to look for new sources of engine of growth, new consumers to diversify out what we see in the world globally," stated Koh.

However, expanding into ASEAN is not without its challenges. Koh highlighted the diversity within the region, where each country has distinct rules, regulations, languages, and cultural contexts. Businesses face hurdles such as connecting with government agencies for tax incentives, integrating into local supply chains, and managing diverse workforces.

Despite these challenges, entities like UOB are pivotal in assisting companies to navigate these complexities. "We're helping customers coming into ASEAN to connect with government agencies, connect with local business associations, so that they are part of the global, local supply chain," he said. These efforts are crucial for businesses to have a consistent and successful expansion experience across Southeast Asia.

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