AEC unlikely to lift intra-regional investment in Asean much beyond current levels, as most businesses lack outward-looking strategy.
The free flow of investment is a cornerstone of regional integration under the Asean Economic Community (AEC), but investments by Asean businesses in other Asean countries are unlikely to expand much beyond current levels, most experts believe.
Southeast Asia is already a powerful magnet attracting funds from across the world, thanks to its central location and various trade agreements, notably with China and India. This trend is likely to continue for many years to come.
But even after the AEC takes effect in 2015 – whether on Jan 1 or Dec 31 is now a matter of conjecture – there will still be a limited number of Southeast Asean businesses with the strategic need or financial resources to invest in neighbouring countries.
As well, more changes in the rules and regulations of individual countries, beyond their governments’ pledges to uphold the goals of the AEC, will be required if intra-regional investment is to take off.
Foreign direct investment (FDI) into Asean has been rising steadily as the region’s attractiveness and infrastructure improve. FDI inflows to Indonesia in the first half of this year totalled 107.6 trillion rupiah, up 28.1% from a year earlier. Despite the blow to confidence delivered by severe floods in Thailand last year, FDI in the first seven months of this year was up 62% year-on-year at 332.2 billion.
Even in countries where FDI declined, such as Vietnam (down 33.1% to $8 billion through July 31), the figures in some cases reflected the high base of the previous year when high-value projects were announced.
Meanwhile, the passage of a new investment law (pending presidential approval) in Myanmar opens up a brand-new…