Global Investors Eye Investments in ASEAN to Diversify Risk; Cambodia to Gain Benefit

• 6 October 2022
• Local News
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Southeast Asia saw foreign direct investment surge by 42% in 2021, and that trend has continued this year, with some countries seeing record levels of FDI, according to the ASEAN Investment Report 2022.

One of the reasons for the FDI surge is that a majority of investors are looking to spread their risk by diversifying their production bases.

The Association of Southeast Asian Nations – ASEAN – is the second-biggest destination for foreign direct investment in the developing world behind only China.

Aaditya Mattoo, Chief Economist of the World Bank, said that the biggest beneficiary so far of that relocation is Vietnam. The investment diversion and the trade diversion have been to the benefit of Vietnam, to a lesser extent, Malaysia, and Cambodia.

FDI has continued to flow in despite the pandemic and other global headwinds.

Most FDI has been flowing into manufacturing, especially electronics as well as finance and energy, but also, increasingly ICT. The US was the region’s biggest investor, followed by China.

Economists say the region still needs to focus more on attracting investments in green or sustainable industries, improving the skills of their labor forces, and liberalizing rules on investment in services.

Those are the challenges that are going to be crucial for the region to not just divert investment from one country or one area to another, but actually to create and draw in more investment in a way that will set the countries on a path of sustainable growth, said Mattoo.

Cambodia received almost US$3.3 billion for 123 foreign investment projects from January to August this year, according to data from the Council for the Development of Cambodia (CDC).

Lim Heng, Vice President of the Cambodia Chamber of Commerce, said in the Khmer Times that the flow of foreign investment was boosted by the country’s new investment law and trade deals – Cambodia-China Free Trade Agreement, the Regional Comprehensive Economic Partnership, and trade preference schemes and it also reflected the confidence of foreign investors in Cambodia’s development outlook.

“The efficient control of COVID-19 led to resuming of all socio-economic activities, implementation of the Free Trade Agreement between Cambodia and China, and the RCEP agreement,” Heng said.

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