Investments in productive assets, tangible and intangible, are critical to a country’s development. And for developing countries, in particular, foreign direct investment (FDI) is key. FDI brings with it not only capital funding but new technology, managerial expertise, know-how and skills — important for the development of local human capital. It also helps position emerging countries as part of the global supply chain and, in the process, open up new markets. In addition, FDI is often a catalyst for domestic investments, when local businesses expand the ecosystem to support-complement the initial FDI — thus creating more jobs and opportunities for the people.
Last week, we looked at statistics on FDI flows globally. We showed that Asia remains the premier destination for FDI, outside of the developed world (primarily the US and Europe). And contrary to some narratives, Asean continues to attract huge capital inflows — despite rising competition from other regions. Most notably, Singapore, Vietnam and Indonesia recorded robust foreign capital inflows, especially over the past decade. On the other hand, Malaysia has been one of the biggest losers in the FDI race (see Chart 1).
