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Consistent with the flow of foreign direct investment (“FDI”) in recent years, as the pace of foreign investment in China has slowed, foreign investors have increasingly looked to other markets across South East Asia.

This week we continue our survey of the investment trends in South East Asia, with a rundown on developments in the emerging markets of Thailand, Vietnam and the Philippines. Consistent with the flow of foreign direct investment (“FDI”) in recent years, as the pace of foreign investment in China has slowed, foreign investors have increasingly looked to other markets across South East Asia. But while the ASEAN 5 economies collectively have accounted for more foreign investment than China for the last few years, there have been distinct winners and losers within the ASEAN region. In particular, over the last year the pace of FDI in Thailand has slowed dramatically while foreign investors have been flocking at a record breaking pace to Vietnam and the Philippines.


The last few years have presented a tough climate for business and investment in Thailand. While the country’s political situation has somewhat stabilized under the control of a military junta, the Thai economy overall has only managed to grow at a sluggish pace. And this year’s forecast of only 3% growth is less than half the rate of growth projected for all of its neighbors along the Mekong Delta – Vietnam, Laos and Cambodia.

Against this political and economic backdrop, FDI in Thailand over the last 18 months has gone into a virtual free fall. In 2015 foreign investment dropped by 78% from the prior year. In part this may have been a self-inflicted wound inasmuch as, in the aftermath of considerable political turmoil, the government had modified its investor incentive programs in order to try and attract investors more towards the high-tech sector. If anything, the collapse is getting worse this year, with the first 6 months of 2016 bringing FDI in Thailand to the lowest level in a decade.

Another factor contributing to the steep decline in FDI may have been the weakness in the Japanese economy in the same time period. Historically Japan has accounted for the lion’s share of direct foreign investment in Thailand, but with Japan facing chronic growth and weak domestic demand, even as the Yen has strengthened over the last six months, Japanese capital seems to be retreating from the Thai market.

Encouragingly though, over 15 percent of all the deals from Asia on Aurigin (formerly BankerBay) come from companies based in Thailand with 40 percent of those seeking to raise capital and 44 percent looking to be acquired. A large chunk of the investors in the region are also keen to pump capital into Thailand.


The economic environment has proved difficult not just for Thailand but also for many of the world’s largest emerging economies, including Russia, Brazil and China. Meanwhile Vietnam’s economy has been booming with the sustained rate of growth, one of the highest in the world, reaching nearly 7% last year and on track to achieve the same this year.

Vietnam’s strong economy has in part been fueled by solid growth in domestic demand – a key element in the face of sluggish export demand. Among other things, the strength in domestic demand has been driven by favorable demographics, with 60% of the population under the age of 35, in sharp contrast to the ageing demographic in other parts of Asia, including China and Japan. It’s also an important part of the reason that Vietnam has been enjoying a boom in foreign direct investment, with particular interest in fast-growing consumer goods sector companies.

In 2015, Vietnamese companies valued at $4.3 billion were acquired, representing a growth of over 40% compared with the previous year. The two leading sectors were finance, which accounted for $1.6 billion, and consumer goods, which accounted for $1.2 billion of the total, according to a recent report by the Institute of Mergers, Acquisitions and Alliances. If anything, the pace of FDI in Vietnam is expected to accelerate further this year, as the communist government has generally been moving to streamline rules for foreign investors. The government has identified 18 industries and opened them up to FDI, including consumer, property, transport, construction and manufacturing. Indeed, Aurigin data shows M&A activity is still booming with over half the Vietnamese deals on the platform are from companies looking to be acquired.

South Korean companies have been major investors in the Vietnamese manufacturing sector, on the back of generous tax incentives and still relatively cheap labor. Additional government changes have permitted foreign investors to buy majority stakes in publicly listed companies, including stock brokerage firms – a move which apparently spurred considerable deal making last year.

The Philippines

The Philippines has emerged alongside Vietnam as another clear recent winner in attracting foreign investment among member nations of ASEAN. According to a recent report for Credit Suisse, FDI inflow to the Philippines in 2015 reached $8 billion, which represents a multi-decade high, up from $6 billion in 2015 and $1 billion just five years ago.

The strong performance comes in the face of some concern about the economic impact resulting from the political ascendance of President Duterte, a relative unknown on the national scene, who swept into power last year. While Duterte’s populist rhetoric had unsettled the Philippines elites, so far his new administration has performed well by keeping economic growth on track while achieving a smooth transition to power. The Philippine economy is projected to grow this year between 6 and 6.5%, which puts it in the upper echelon of growth worldwide.

According to the Credit Suisse report, investment inflows into the Philippines over the last year have been heavily concentrated in the manufacturing and the finance industries, with the U.S. and Japan accounting for a substantial portion of the foreign investor base.