Foreign Direct Investment

Written by: BUSINESS

Top Southeast Asian Nations for Foreign Direct Investment

The multinational corporations & investors in every nook and corner of the world are flushed with cash, and Southeast Asian countries are making efforts to secure some of their money through FDI (Foreign Direct Investment).

Some Asian nations have a wealth of natural assets. Many have a rich consumer-market and tech-savvy talent pool, and several countries in Asia are alluring global investors with remarkable policy enhancements.

So, each country has its own set of pros, but which ones have the winning formula for your venture to succeed?

This article outlined the top three Southeast Asian countries that promote Foreign Direct Investment. Read on to understand their FDI policies.

1. Indonesia

Compared to other ASEAN countries, the contribution of Foreign Direct Investment to Indonesia’s gross fixed capital formation is reasonably good. FDI has created jobs, boosted productivity growth, and increased access to the global market.

Indonesia has not been open to foreign direct investment in its industries, until 2016 when they updated their list of industries and sectors where FDI is allowed to upscale regional competitiveness and bring foreign investment while maintaining protections.

In November 2018, Indonesia’s authorities announced plans to remove 54 industries from restricted FDI and give a green signal to full foreign ownership in 25 segments.

Presently, Indonesia Allow 100% FDI in the Following Sectors:-

  • E-commerce
  • Cold Storage
  • Pharmaceuticals
  • Manufacturing

40% FDI is allowed in the banking and insurance sector, while 95% for palm oil production.

You need to know that these FDI caps are flexible according to specific circumstances. The most significant FDI sectors in Indonesia are electricity, gas & water, followed by industrial estates, offices & houses.

Indonesia

2. Vietnam

Recent data by the Foreign Investment Agency in 2019 reported that FDI in Vietnam reached the mark of US$38.2 billion, which is a whopping increase of 7.2% from the same period in 2018.

It is all because of Vietnam’s efforts to improve its legal framework, bring more transparency, and ease the business policy for investors worldwide.

The US-China trade war has played a favourable role in drawing a high FDI share in Asia.

Under the current regulations, there are foreign investment ratio caps in the public sector, which are either specified by the Vietnam laws or International treaties signed by the Vietnamese government; the maximum FDI is 49%.

For the private sector, Vietnam allows 100% foreign investment in most industries, and Wholly Foreign-Owned Enterprise (WFOE) is the most preferred business structure. International investors can reach out to a local partner for launching a Joint Venture Company with local-foreign ownership.

3. Philippines

The Philippines is an extremely business-friendly country. Over the years, the Filipino government has taken bold steps —such as favourable tax reforms— to make the Philippines business environment more conducive for interaction between investors & entrepreneurs.

Traditionally, the Philippines were known for restricting foreign investment up to 40%, while 60% has been reversed for its citizens. However, the government has relaxed this FDI restriction to attract foreign investors and fuel its economy.

For domestic operations and export businesses, 100% foreign investment is allowed—up to 40% FDI in the manufacturing sector.

Conclusion

Before you make plans of starting a business in Indonesia, the Philippines, or Vietnam, you must consult a local business expert to guide you through the process of foreign ownership. The rules & regulations are continually updating, and you need someone who has the latest information and vast knowledge of the market.

Last modified: February 24, 2021