ASEAN Investment Report 2012 the Changing FDI Landscape
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ASEAN Investment Report 2012 The Changing FDI Landscape one vision one identity one community ASEAN Investment Report 2012 The Changing FDI Landscape The ASEAN Secretariat Jakarta The Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967. The Member States of the Association are Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. The ASEAN Secretariat is based in Jakarta. Indonesia. For inquiries, contact: The ASEAN Secretariat Public Outreach and Civil Society Division 70A Jalan Sisingamangaraja Jakarta 12110, Indonesia Phone : (62 21) 724 3372, 726-2991 Fax : (62-21) 739-8234, 724-3504 Email : [email protected] General information on ASEAN appears online at the ASEAN Website: www.asean.org. Catalogue-in-Publication Data ASEAN Investment Report 2012: “The Changing FDI Landscape”. Jakarta: ASEAN Secretariat, July 2013 332.67395 1. Investment - ASEAN 2. Economic - Foreign Direct Invesment ISBN 978-602-7643-42-0 The text of this publication may be freely quoted or reprinted, provided proper acknowledgement is given and a copy containing the reprinted material is sent to Public Outreach and Civil Society Division of the ASEAN Secretariat, Jakarta. Copyright Association of Southeast Asian Nations (ASEAN) 2013 All rights reserved This publication was prepared by the ASEAN Secretariat and the United Nations Conference on Trade and Development (UNCTAD), and supported by the Australian Agency for International Development (AusAid) through the ASEAN-Australia Development Cooperation Program Phase II (AADCP II). The map in this publication is only indicative and is not drawn to scale. Disclaimer The ASEAN Investment Report is produced to facilitate a better understanding of FDI developments in ASEAN. The findings, interpretations and analysis in the Report should be treated with care, as work on harmonizing and improving FDI data quality across the region is on-going. The ASEAN Secretariat and UNCTAD has taken due diligence in the preparation of this publication. However, it shall not be held liable for any omissions or inaccuracies in the content of this publication. Neither the ASEAN Secretariat, UNCTAD and AusAid accepts any liability for any claims, loss or expenses that may arise or arising from use of information in this publication. Reliance on the information is at the user’s sole risk/responsibility. Preface The ASEAN Investment Report (AIR) as an annual publication of ASEAN aims to provide a better understanding of the trends and developments in foreign direct investment (FDI) in the region. This year, the AIR gives additional focus on the significant contributions of ASEAN’s economic integration efforts to the transformation of the region as an investment destination. In 2011, ASEAN witnessed an all-time high level of FDI inflows amounting to US $114.1 billion, which represents an increase of 24 percent over the FDI inflows recorded in 2010. It is also worth noting that the FDI inflows in 2010 rose by 97 percent compared to the previous year. The two consecutive years of increase in FDI inflows, especially following the global economic slowdown in 2008-2009, suggests the growing confidence on ASEAN as an investment destination. It has also to be recognized that the FDI landscape in ASEAN has gone through significant changes over the past decade due to the dynamics of the ever changing business environment. These changes, amongst others, include a strong FDI growth momentum; the emergence of new sources of FDI; a boost in intra- regional investment and enterprise internationalization by ASEAN companies; increasing maturity of the M&A environment; greater influence of regional integration on FDI location and transnational corporations’ operational strategies; increase in regional production networks activities; and increasing prominence of the region in global value or supply chains. These changes are shaping a new regional FDI landscape with important policy implications for the development of ASEAN. As ASEAN pursues its economic integration goals in the face of changing economic and FDI landscapes, ASEAN must remain vigilant against complacency and ensure that its investment policies continue to be relevant and effective to support sustainability and growth of investment inflows into ASEAN. Le Luong Minh Secretary-General of ASEAN iv ACKNOWLEDGEMENTS The ASEAN Investment Report (AIR) 2012 was prepared under a technical cooperation agreement between ASEAN and the UNCTAD Division on Investment and Enterprise (DIAE). The Report was prepared and written by Wee Kee Hwee and Hafiz Mirza; it was overseen by Lim Hong Hin, Deputy Secretary General, ASEAN Economic Community Department, ASEAN Secretariat and James Zhan, Director, DIAE, UNCTAD, with technical supervision and support from Masataka Fujita, Head, Investment Trends and Issues Branch, DIAE, UNCTAD. The support and contribution of the team in the Services and Investment Division at the ASEAN Secretariat was valuable and very much appreciated. The team includes, Glenda T. Reyes, Madelyn Almazora, Hilvy H. Bratakusuma, Sovyana Putranti and Okti Zendra. The report benefitted from specific inputs provided by members of the ASEAN Coordinating Committee on Investment, and Noordin Azhari, Stuart L. Dean, Ruben Hattari, David Kiu as well as Natalie Ng. Comments at different stages in the preparation of the report were provided by: Chow Hung Hoeng, Subash Bose Pillai, Aladdin D. Rillo, Anna Robeniol, Pitchaya Sirivunnabood, Panadda Dasananda, Ahmad Syaukat, Sarah Firdaus, Lim Li Chuen, Penchan Manawanitkul, Tay Kah Chye and Teo La Mei. Statistical assistance was provided by Elizabeth Alarilla, Bradley Boicourt, Leticia Gennes-Beltran, Michael Hanni, William Speller and Sri Wardhani. Evelyn Benitez assisted in formatting the publication.The financial support of Australian Aid through the ASEAN-Australia Development Cooperation Programme Phase II is gratefully acknowledged. Any correspondences or queries on the content of the AIR should be addressed to: Services and Investment Division Market Integration Directorate ASEAN Economic Community Department ASEAN Secretariat 70A Jl. Sisingamangaraja, Jakarta 12110, Indonesia Email : [email protected] v TABLE OF CONTENTS PREFACE..........................................................................................................................................iv ACKNOWLEDGEMENTS .................................................................................................................v ABBREVIATIONS .............................................................................................................................x OVERVIEW .....................................................................................................................................xiii PART ONE: FDI TRENDS AND POLICY DEVELOPMENTS IN ASEAN CHAPTER I. FDI TRENDS AND DEVELOPMENTS IN 2011 1.1 FDI in 2011 ...............................................................................................................................3 1.2 Cross-border M&As ................................................................................................................10 1.3 FDI outlook .............................................................................................................................13 CHAPTER II. THE INVESTMENT POLICY ENVIRONMENT AND DEVELOPMENT 2.1 Introduction .............................................................................................................................15 2.2 Regional measures.................................................................................................................15 2.3 Individual actions ....................................................................................................................18 2.4 Private sector contributions ....................................................................................................21 PART TWO: THE CHANGING FDI LANDSCAPE CHAPTER III. THE CHANGING FDI LANDSCAPE 3.1 Introduction .............................................................................................................................25 3.2 Strong FDI growth momentum ...............................................................................................25 3.3 New sources of FDI ................................................................................................................29 3.4 Increasing maturity of M&A environment ................................................................................31 3.5 Rise of enterprise regionalization and OFDI...........................................................................33 3.6 Regional integration and its influence on FDI .........................................................................34 3.6.1 Regional influence on FDI decision and value chain arrangements: Selected cases...........................................................................................................36 3.6.1.1 Procter and Gamble ....................................................................................36 3.6.1.2 Toyota .........................................................................................................38 3.6.1.3 Wilmar International ....................................................................................41 3.6.1.4 General Electric .........................................................................................42 3.6.2 Regional production networks: the influence