ASEAN Economic Issues (October 2024)Trade & Investment Unit, ASEAN-Korea Centre

1. Korea’s Trade to ASEAN Countries (as of September 2024)

Unit: 1 million (USD)

Country/Region	September 2024			September 2023	2023
	Export	Import	Total	Total	Total
Total (Korea)	58,775	52,119	110,894	105,623	1,274,977
ASEAN	9,461	6,588	16,048	15,576	187,179
Brunei Darussalam	3	77	80	5	466
Cambodia	49	45	93	85	1,052
Indonesia	594	1,111	1,705	1,745	21,287
Lao PDR	8	5	13	16	194
Malaysia	821	1,045	1,866	1,918	25,005
Myanmar	27	92	119	91	1,240
Philippines	1,044	378	1,422	1,030	13,654
Singapore	1,305	816	2,121	2,384	29,937
Thailand	624	572	1,196	1,124	14,916
Vietnam	4,987	2,448	7,434	7,179	79,428
China	11,686	11,220	22,906	22,140	267,662
Japan	2,492	4,087	6,579	6,318	76,676

Reference: Korea Customs Service

2. ASEAN Investment Report 2024: ASEAN Economic Community 2025 and Foreign Direct Investment (Link)

The “ASEAN Investment Report (AIR) 2024: ASEAN Economic Community 2025 and Foreign Direct Investment” was launched during the ASEAN Business and Investment Summit 2024, which was held on October 9. The AIR is an annual ASEAN publication analyzing investment trends and other related issues in the region. This year’s report provides a special focus on evolution of ASEAN FDI performance and policy environment during the implementation of ASEAN Economic Community 2025 Blueprint. The report reveals that robust FDI growth has significantly contributed to industrialization, integration, technology upgrade, and social inclusion in the region. Businesses have benefited from reduced trade tariffs and more open market access provided by the various ASEAN agreements and national measures.

To maintain FDI performance and to effectively navigate the post-2025 road ahead, the report highlighted the need for ASEAN to continue removing barriers to investment, strengthen intra-regional investment, and enhance regional production networks or supply chain development, such as through promoting closer cooperation between Special Economic Zones (SEZs) and supporting regionalization of Micro, Small and Medium Enterprises (MSMEs). This Report has been prepared under a technical cooperation agreement between the ASEAN Secretariat and the United Nations Trade and Development (UNCTAD), with inputs from members of the ASEAN Coordinating Committee on Investment and support from the Government of Australia through the Australia4ASEAN Futures Program*.

* Aus4ASEAN Futures is the flagship initiative to advance the Comprehensive Strategic Partnership (CSP) between ASEAN and Australia, which was established in the First Annual ASEAN-Australia Summit on 27 October 2021.

 

Recent FDI Trends in ASEAN

Foreign direct investment (FDI) inflows to ASEAN reached a record $230 billion in 2023 (Figure 1). The increase was marginal – less than 1 per cent – but it occurred despite a 10 per cent decline in global FDI. The third consecutive annual increase solidified ASEAN’s position as the largest FDI recipient among developing regions, accounting for 17 per cent of global inflows, up from 16.5 per cent in 2022.

Figure 1. Global FDI flows and in ASEAN, 2021-2023 (Billions of dollars and per cent)

Investment from the top 10 sources constituted 80 per cent of total FDI in 2023, up from 75 per cent in 2022, underscoring the critical role of these investor home countries. FDI from investors in the United States and China stood out, with the highest-ever levels of investment in ASEAN.

Companies from the United States were the biggest investor group, with their FDI more than doubling to $74 billion – one third of total FDI inflows to the region. This investment was highly concentrated by country and industry, with more than 90 per cent of it going to Singapore and about 70 per cent going to finance (including in holding companies by industrial MNEs) and insurance. FDI from Indian investors more than doubled, to $5.6 billion, with more than 80 per cent of it in finance activities. FDI from major sources other than Hong Kong (China) (e.g. intra-ASEAN, Japan, the Republic of Korea, the Netherlands) fell significantly.

Figure 2. ASEAN: Top 10 sources of FDI, 2022-2023 (Billions of dollars)

FDI from firms in the Republic of Korea nearly tripled over the two periods, from an annual average of $3.0 billion during AEC 2015 to $8.7 billion during AEC 2025. Investment from the Republic of Korea was relatively more concentrated, compared with that from the other Dialogue Partners. Three industries (manufacturing, finance, and wholesale and retail trade) accounted for more than 80 per cent of Korean FDI in ASEAN during AEC 2025, up from 71 per cent during AEC 2015. Manufacturing is the overwhelmingly largest recipient (with an annual average of $3.1 billion), accounting for 35 per cent of Korean investment during AEC 2025. Korean FDI in manufacturing more than doubled, with most of it concentrated in a few Member States (e.g. Indonesia and Viet Nam). Korean FDI in finance and in wholesale and retail trade rose by more than 250 per cent between the two AEC periods. Unlike manufacturing FDI, investment in finance is more geographically dispersed, to five Member States.

AEC 2025: FDI, Industrial Development and Regional Integration

FDI in electronics and semiconductors has been a major source of industrial development and regional supply chain development. Average annual greenfield investment announcements in the semiconductor industry more than doubled during AEC 2025 to $5.6 billion, compared to $2.2 billion during AEC 2015. Investment in electronic components grew from $2.5 billion to $4.6 billion. The two industries account for almost 10 per cent of total announced greenfield investments. The world’s largest semiconductor MNEs are in ASEAN; all of the top 25 operate in the region, many in multiple Member States. Suppliers and contract manufacturers have also continued to invest, strengthening the region’s interconnected semiconductor ecosystem.

Furthermore, international investment in the digital economy – in e-commerce, fintech, and digital infrastructure – has continued to rise. Annual announced greenfield investment in communication, data processing and hosting rose more than five-fold to $4.4 billion during AEC 2025, with particularly rapid growth since 2020. Digital infrastructure such as 5G networks and data centres provide the backbone for the growth of the digital economy, Industry 4.0 development and enhanced regional connectivity.

Towards AEC 2035: AN FDI Perspective

The assessment of the region’s FDI performance under AEC 2025 provides a perspective on progress across each of the five pillars of the AEC and on options for future policy orientation:

Regional integration – FDI and the presence of global MNEs have made a major contribution to the growth and development of regional production networks and supply chains, especially in export-oriented manufacturing industries. At the same time, there is room for faster growth of intraregional investment, possibly supported by outward investment promotion mechanisms.

Competitiveness – The high share of FDI in manufacturing and the rapid growth of investment in strategic industries have provided a major boost to the region’s competitiveness and firmly established ASEAN as a global manufacturing hub. Harnessing FDI to further strengthen this role and broaden it to a wider range of emerging industries should remain a major component of the future agenda.

Connectivity – The interconnectedness of regional supply chains and the growth of investment in the digital economy have significantly enhanced regional connectivity. At the same time, there is room to further promote and facilitate international project finance in physical infrastructure.

Inclusiveness – FDI flows within ASEAN remain concentrated in few economies; although this is driven in part by the hub function of Singapore, more distributed flows could benefit smaller economies and communities in the region. Furthermore, the growth of international investment in several sectors is relevant to the Sustainable Development Goals, including water and sanitation, health, rural development, and lags other developing countries.

Global ASEAN – The overall growth of FDI from outside the region and the share of ASEAN in global FDI point to rapid integration of the region in the global economy. The focus on Dialogue Partners contributes to continued concentration of the sources of FDI flows, which could be broadened to include further partner economies.

In conclusion, the post-AEC 2025 agenda should continue to leverage the symbiotic relationship between FDI, industrial development and regional integration. To maintain the FDI momentum achieved during AEC 2025, ASEAN needs to further deepen regional cooperation, develop human resources and skills for emerging industries, attract technology- and knowledge-oriented investment, advance industrial upgrading and strengthen public-private partnerships in industrial ecosystem development.

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ASEAN Economic Issues (September 2024)

1. 2024년 8월 수출입 동향

단위: 백만 불

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