Japanese investment will evolve as ASEAN develops
Subject
Japanese investment in South-east Asia.
Significance
Japanese foreign direct investment (FDI) in ASEAN states has become a major component of global FDI flows and also one of the most important forces driving dynamic economic growth in South-east Asia. Japan’s FDI to the region is now undergoing far-reaching structural change. After peaking in 2013 it is now declining, and its focus is shifting from the production of low-cost, labour-intensive products to strengthening regional supply chains, developing ASEAN countries’ domestic markets and significantly increasing local production of technologically advanced products.
Impacts
- Growth of South-east Asia's middle class will boost Japanese FDI in production of goods and services for dynamic local markets.
- New local industrial clusters will emerge, centred on Japanese firms.
- The number of Japanese firms of all sizes will increase.
- Japanese FDI, formerly concentrated in Thailand and Singapore, will expand to target a more diverse set of recipient countries.
- ASEAN states offer an alternative to Japanese firms wishing to diversify to reduce their reliance on China.