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ASEAN—FDI inflows up despite difficult global investment environment
Global foreign direct investment (FDI) fell 11% to US$1.5 trillion in 2024, absent financial flows to a handful of European conduit economies, marking a second consecutive year of double-digit contraction. International project finance—critical for large-scale infrastructure and development—registered the steepest decline, falling 26%. Economic volatility and policy uncertainty will continue to challenge the global FDI outlook given downward revisions to key FDI determinants; global GDP, capital formation and trade growth. Persistent high debt levels and borrowing costs, coupled with geopolitical instability and greater exchange rate volatility, will also weigh on FDI. Indeed, investor confidence indicators have softened in key capital-exporting countries and Q1 data indicate record low project announcements.
That said, developing Asia remains the largest FDI recipient region, attracting 70% of total developing economy inflows and 40% of global inflows in 2024, with particularly strong growth in the digital economy and metal production. While flows to China dropped 29%, Southeast Asia continued to serve as an engine of FDI growth, with inflows up 10%. Significant increases in flows to Indonesia, Malaysia, Singapore, Thailand and Vietnam saw ASEAN inflows reach a record US$225 billion. Chinese exporters reorganising supply chains to avoid US tariffs and investors searching for new markets may drive continued strong regional FDI. India will also benefit from its large domestic market, while Malaysia is attracting strong tech-driven FDI.
Strong inbound FDI is both a consequence of economic growth and a creator of it. While Australia’s direct investment into Asia remains small as a proportion of total outbound direct investment (Chart), the region’s continued economic outperformance, alongside our geographical proximity and strong people links, bode well for increasing investment and export opportunities. Including for traditional resources, critical minerals, food and beverages, education, healthcare and professional services.
