Last year inflows to the ten-member Association of South East Asian Nations (ASEAN) were up 11.5%, from US$147 billion in 2017 to $155 billion in 2018, according to new UNCTAD research.
According to the ASEAN Investment Report released on November 3, the services industry was the largest recipient of FDI in ASEAN. In line with the global average, the sector’s share of the bloc’s total FDI grew from 50 percent in 1999 –2003 to 66 percent in 2014 – 2018.
Thailand witnessed a 65 per cent increase in FDI to $13 billion in 2018, building on the 186 per cent rise from 2016 to 2017. The rise was contributed by a considerable increase in FDI in manufacturing, from $2 billion in 2017 to more than $5 billion in 2018. The increase in FDI in finance, real estate, wholesale and retail trade also help pushed up inflows. Manufacturing and two key services industries (finance and real estate) accounted for more than 88 per cent of FDI inflows in the country last year.
The rise in manufacturing FDI was widespread across ASEAN Member States. The majority went to Singapore, Indonesia, Viet Nam and Thailand. The growth was part of the gradual shift of production capacity from China and elsewhere to ASEAN, caused by structural factors (the increase in relative labour costs in China) and accelerated by the United States– China trade tensions.
Focus on healthcare
This year’s ASEAN Investment Report features the FDI in the services sector, with a special focus on health care.
The Report looks into foreign investments and the Multi-National Enterprises (MNEs) in the healthcare industry in ASEAN, as well as the investment environment they thrive in. ASEAN is doing much to strengthen regional health care provision.
Work on improving market opening and investment regime in health care is progressing, along with the implementation of other related sectoral agreements and strategic action plans. It is worth noting that the demand for health care services in ASEAN and the corresponding need for investment in this sector are expected to increase rapidly in the coming years.
This demand is driven by population growth, changing demographics, universal health care programmes and rise in the incidence of non-communicable diseases. Therefore, policies to support the development of private health care are necessary to complement public health care spending in order to keep up with the demand.
Medical tourism has been a factor stimulating private investment in health care industries in some Member States. Medical tourism is rising in Malaysia, Singapore and Thailand, which have become significant destinations because of their high-quality and efficient health care services (table 2). Promoting medical tourism can have positive effects on the attractiveness of the market for private investors, due to its potentially higher returns.
It can help finance better equipment and training and avoid the brain drain of highly qualified medical personnel – all with potential benefits for care services provided to locals, which should remain the primary objective.