Inflows of foreign direct investment (FDI) in ASEAN reached a record $230 billion in 2023, marking a third consecutive annual increase in the midst of a 10 per cent decline in global FDI. This strong performance underscores the resilience of the region and solidifies ASEAN’s position as the largest FDI recipient among developing regions. The region’s share of global FDI inflows rose from 16.5 per cent in 2022 to 17 per cent in 2023.

Figure 1. Global and ASEAN Foreign Direct Investment (FDI) flows, 2021–2023.

Source: ASEAN Investment Report (2024)

FDI inflows varied across Member States, with most witnessed a decline in inflows. Cambodia, the Lao People’s Democratic Republic (PDR), Singapore and Viet Nam saw FDI inflows escalate to all-time highs. Key reasons for the increase were a significant increase in investment in energy and hydropower projects, finance, as well as professional and administrative support services including R&D and regional headquarters.

The number of announced greenfield projects rose for the third consecutive year, from 762 in 2020 to 1,102 in 2022 and 1,568 in 2023. The rise led to a record value ($175 billion) in 2023, which has significant implications for the investment outlook. This upward trend points to favourable investor sentiment and future investment plans in the region. Manufacturing and services, in that order, were the main industrial targets for greenfield investment, accounting for 95 per cent of all projects by value.

International project finance deals in ASEAN, both by number of projects and by value, declined for the second consecutive year. The value fell by nearly half to $72 billion, mirroring the global downturn in international project finance, which decreased by about a quarter, amid concerns over higher interest rates and geopolitical tensions (WIR 2024). Project finance in sectors relevant to the SDGs such as health, education and infrastructure fell.

Cross-border M&As more than doubled in 2023 to $28 billion, driven by a fivefold increase in manufacturing M&As to $23 billion, mainly in the automotive industry. M&As in finance rose 126 per cent to $6.2 billion. These two industries accounted for the bulk of cross-border M&A values.

Investment from the top 10 source countries[1] accounted for 80 per cent of total FDI in 2023, an increase from 75 per cent in 2022. The United States emerged as the leading source country, with inflows more than doubling to $74 billion, making up a third of ASEAN’s total. China also expanded its footprint, particularly in manufacturing, with an average annual growth rate of 33 per cent since 2020. A major and growing source of finance for FDI is the continuous injection of new or additional equity capital to projects which reflects investors’ positive outlook of the region that encourages expansion.

Manufacturing remained a significant FDI destination, receiving more than $50 billion or 22 per cent of total inflows, focusing on strategic sectors such as electronics, semiconductors, and electric vehicles, driven by global supply chain realignment and ASEAN’s positioning as a manufacturing hub. A shift toward high-value services further defined the FDI landscape in 2023. Finance became the top recipient industry, with inflows increasing from $60.2 billion in 2022 to $91.9 billion in 2023.

Investment in professional, scientific, and technical activities rose significantly from just $0.3 billion to $20.7 billion, underscoring the growing importance of knowledge-based services. In contrast, FDI in manufacturing declined from $72.9 billion to $50.5 billion, though it remained a key sector. Wholesale and retail trade, as well as transportation and storage, also saw notable declines, reflecting a broader realignment of investor priorities.

Figure 2. Top 5 Industry Recipients, 2022–2023.

Source: ASEAN Investment Report (2024)

ASEAN’s significance as global FDI host in 2023 confirmed its long-term trend. The region’s share of global FDI averaged 11 per cent during the AEC 2025 period (2016–2023), nearly doubling from the 6 per cent recorded during the previous AEC phase (2006–2015). The sustained flows are supported by increasing investment in high-value and knowledge-intensive services, strong financial sector activity, rising interest from key Dialogue Partners such as the United States and China, and growing investment in digital and renewable energy industries.

ASEAN Agreements on Investment

Investment is an essential element of overall ASEAN economic integration efforts.  Under the outgoing ASEAN Economic Community (AEC) Blueprint 2025 investment is listed under the first characteristic of the AEC as a highly integrated and cohesive economy, while under the upcoming AEC Strategic Plan 2026-2030 investment is also listed under the first strategic goal of an action-oriented community: realising an integrated single market and production base with new sources of competitiveness. In the area of investment, ASEAN’s main objective is to achieve ASEAN as an attractive investment destination, underpinned by the implementation of existing ASEAN investment instruments and leveraging ASEAN’s potential in unlocking opportunities from emerging megatrends, including technological innovation and sustainable development.

The ASEAN Comprehensive Investment Agreement (ACIA) is ASEAN’s main policy lever to achieve the main objective of realising a free and open investment regime in the region. ACIA was signed by ASEAN Economic Ministers (AEM) on 26 February 2009 in Cha-Am, Thailand and entered into force on 29 March 2012. The ACIA aims to create a liberal, facilitative, transparent and competitive investment environment in ASEAN.

ACIA is a comprehensive agreement that covers investment liberalisation, protection, facilitation and promotion. It adopts a single negative list approach and extends automatic Most-Favoured Nation (MFN) treatment to all Member States. It also carries a comprehensive and detailed investor-state dispute settlement mechanism and many more. ACIA is also looking to prohibit performance requirements, and require provision on Senior Management and Board of Directors (SMBD) to encourage inflow of key foreign managerial and senior management personnel. Various works are on-going to effectively implement the ACIA to ensure that the benefits from the Agreement are realised, as well as to continue enhancing the ACIA, as necessary.  To-date, ACIA has been enhanced five times through five amendment Protocols.

To further complement the ACIA in facilitating investment into ASEAN as the region gears up for a post-pandemic environment and taking into account the potential brought about by global supply chain restructuring, in 2021 ASEAN also adopted an ASEAN Investment Facilitation Framework (AIFF) that each Member State will endeavour to put in place in order to: (i) improve accessibility and transparency of measures of general application and information related to investment conducive to increased investment; (ii) streamline and expedite administrative procedures and requirements for the entry, retention and expansion of investment; and (iii) create favourable conditions for investment and doing business.