Introduction

The focus of this chapter is on foreign direct investment (FDI) in ASEAN, including Vietnam, which joined the grouping in July 1995. The treatment of the other Southeast Asian countries of Cambodia, Laos, and Myanmar is very brief as investment information on these countries is not readily available or comparable with that of ASEAN.

The rest of the chapter is divided into four sections. Section II outlines the global and regional trends in FDI. Section III surveys the trends and patterns of FDI in Southeast Asia. Section IV examines ASEAN's investment strategies and is followed by the concluding section.

Global and Regional Trends in FDI

Volume and Direction of Investments

In 1995 global FDI flows reached an all-time high of US$315 billion (UNCTAD 1996). This represents a continuing recovery from the FDI recession of 1991-92, reflecting the economic recovery of major home economies, rise in mergers and acquisitions, growing international competition, and advances in communication technology that led to increasing globalization of production, further liberalization of the regulatory regimes for FDI and trade, privatization of state-owned enterprises, and new investment opportunities in infrastructure.

The Triad (the United States, the European Union, and Japan) remained the major sources of the world's FDI stocks and flows, although the Asian newly industrializing economies (NIEs) of Hong Kong, Singapore, South Korea, and Taiwan are rapidly emerging as significant foreign investors in East Asia. The United States lost its position as the world's leading foreign investor to Japan during 1988-90, but regained that position since 1991. In 1995 its FDI stock stood at US$706 billion or one-quarter of the world's stock, and its FDI outflow (balance of payments basis) stood at US$96 billion, or 30 per cent of the world outflows. The United States was also the world's single largest FDI recipient, with US$60 billion of inflows in 1995. For Japan, outward FDI stock reached US$306 billion and outflows reached US$21 billion in 1995, the latter showing a sharp recovery but remaining significantly below the 1989-91 levels.