When Southeast Asia has become the new favorite of foreign investment

When you think of the Philippines, you might think that it's just a small country in Southeast Asia, but other than that, your deepest impression of it is probably the dispute with us in the South China Sea.

For many people, the Philippines is a country with a small presence, but as an emerging economy in the Southeast Asian market, it is in a way so important that it is even closely related to each of us.

If you know a little more, the story of the Philippines is more interesting and exciting than we think. For example, it was the first republic in the history of Asia, 13 years before us.

It was from the 1898 republic in the Philippines that Dr. Sun Yat-sen saw the awakening of Asia, and then set off one after another great actions in China.

But the Philippines has also had a long and difficult transition, from its independence in 1898 to the ouster of corrupt President Estrada in 2001.

After the Asian financial crisis in 1997, the economy has long since lost the take-off period of the 1990 era. What many people don't know is that at that time, the Philippines, Thailand, Malaysia, and Indonesia were still regarded as the "Asian Tigers" after the "Asian Tigers".

In the blink of an eye into the 21st century, the small country of the Philippines seems to have once again exploded some potential, of course, thanks to internal forces and to what extent due to external changes in the situation, which is still a question in itself.

However, it is undeniable that behind the rise of the Philippines and even the whole of Southeast Asia, it is precisely the spillover of global supply chain risks and the transfer of foreign capital that is highlighted today.

This in itself is not a game.

01

Dividends never disappear, dividends only transfer

What is a bonus?

For an economy, population is a dividend, the market is a dividend, when an economy is still in the initial stage of the market, then only need to introduce a market economy, let go of restrictions, then people's pursuit of wealth, can form the greatest subjective initiative.

Looking at the world, capital is also chasing profits, where the market labor cost is lower, where the market produces cheaper goods, investment will be flocking at this moment.

In the past, this was true in the United States, Japan, and later in South Korea and Singapore.

And then we, we have the largest population in the world, and we rely on cheap labor, and productivity is quickly converted into commodities that are sold around the world, and then more investment comes in, eager to open the door and participate in the distribution of the market.

Today, with the conscious de-risking of supply chains in Europe and the United States, more and more external investment is turning to alternative markets, and Southeast Asia has become an excellent choice under the superposition of labor costs and safety risk factors.

In the third quarter of this year, foreign investment on the mainland ran a deficit of $11.8 billion, the first time since records began in 1998, according to the Bureau of Statistics.

For us, dividends are waning, but globally, dividends are not disappearing, they are shifting.

Where does foreign capital go after leaving the country?

The answer is Southeast Asia.

Looking at the data, in 2022 alone, Southeast Asian countries attracted a record $222.5 billion in foreign direct investment.

According to Yahoo Finance, in 2021, foreign direct investment in developing countries in Asia was $619 billion. According to the UNCTAD's World Investment Report 2023, in 2022, developing countries in Asia accounted for half of global FDI inflows, reaching US$666.2 billion.

Among them, Vietnam and the Philippines are among the leaders.

Among them, Vietnam has been praised separately by Biden.

In a statement issued after his visit to Vietnam in September, Biden said, "Vietnam has demonstrated good momentum as a partner in ensuring a diverse and resilient semiconductor supply chain." ”

This is a microcosm of the diversification of global supply chains led by the United States and even the European Union.

Immediately after Biden's visit to Vietnam, U.S. chipmaker Marvell Technology and U.S. electronic design automation company Synopsys expressed an urgent desire to invest in Vietnam.

In October this year, Amkor Technology, a U.S. semiconductor packaging and testing company, completed the construction of a semiconductor factory in Bac Ninh Province in northern Vietnam, which is the world's largest manufacturing base of Amkor Technology and creates 10,000 jobs.

In addition, considering the huge manufacturing position of the mainland's "world factory", the adjustment of foreign investment has also accelerated the pace of the transfer of domestic supply chains to the outside world.

Malaysia announced in July that Geely Group would invest US$10 billion in Malaysia to build an automotive production base, and Geely is also considering building a factory to produce electric vehicles in Thailand.

And the rise of Southeast Asia as a global supply chain is not something that has happened only this year.

Since the beginning of the trade war in 2017, the amount of foreign direct investment (FDI) attracted by 11 Southeast Asian countries has also skyrocketed by 40% until 2022.

Data from the United Nations Conference on Trade and Development (UNCTAD) also show that Southeast Asian countries have attracted more FDI than China, Latin America and Africa during this period.

In this wave of trade war, Southeast Asia can be described as "lying to win".

As I have expressed in my previous article, dividends will not disappear, and as long as globalization continues and trade continues, the new opportunities and jobs created by investment and supply chains will simply shift without will, rather than disappear completely.

02

Ultimately, the supply chain is a zero-sum game

What is a zero-sum game?

Under strict competition, the gains of one party must mean the losses of the other, which is the so-called zero-sum game.

Globalization is of course for all economies to benefit from it, especially us, from nothing more than 40 years ago to today's food and clothing, although the pressure and anxiety are greater than before, but the source of stress and anxiety mainly comes from the greater possibility of the future, and this possibility itself is also given to us by globalization and the market economy.

However, from the perspective of supply chain, under globalization, the transfer of supply chain is still a zero-sum game.

For example, if our foreign investment decreases, then the inflow of foreign capital in Southeast Asia is increasing, which is a basic plate where you have more and I have less, and I have less and you have more.

Of course, consumption in Europe and the United States may grow strongly, but considering that today's consumption power in Europe and the United States is still the strongest in the world, this also leads to the fact that no matter how good the economic growth momentum of developed economies is, it is impossible to grow by 10% or 5% a year, so when the consumption base remains largely unchanged, it is a zero-sum game among all manufacturing economies in the world.

The U.S. is the global leader in capital investment projects in Southeast Asia, spending $74.3 billion on factories and other projects in the region between 2018 and 2022, according to the Financial Times' FDI Cross-Border Tracker.

In addition, we have increased our investment in Southeast Asia, which reached US$68.5 billion during the same period.

Southeast Asia has become a fragrant bun for us and for Europe and the United States.

Why?

The main purpose of U.S. companies accelerating their investment in Southeast Asia is to reduce their over-reliance on our supply chains, diversify their supply chains, and "make friendly countries," which is where U.S. Treasury Secretary Janet Yellen proposes sourcing.

We are investing in Southeast Asia in the hope that we will be able to maintain exports to the United States and Europe through our factories in Southeast Asia due to the complicated relationship with Europe and the United States.

Therefore, we have seen that one of the biggest trends in recent years is not only foreign investment in Southeast Asia, but also large domestic companies, which are also going out.

Why go out?

Because for a company, profitability is its "first principle".

With so many places in the world, why is Southeast Asia the best choice?

It is more likely that in addition to labor costs and stability, Southeast Asia also has a huge advantage, that is, it is not far from the supply chain base of the mainland, and the society is relatively stable, and the total population of Southeast Asia is as high as 600 million, which is also a huge market in itself.

Against the backdrop of a complex global situation, Southeast Asia has benefited a lot.

For Southeast Asia, the location is sandwiched between two large economies, more like a "neutral zone", with a sort of balance cleverly maintained.

In addition to geographical factors and labor costs, Southeast Asian societies actually have another similarity with Europe and the United States, that is, the unique social culture of Southeast Asia.

There is never a pie in the sky, and for Southeast Asia, there is no possibility of lying down to win.

In the Philippines, for example, in 1986, two days after Philippine President Ferdinand Marcos declared victory, the U.S. State Department issued a position statement condemning fraud and violence, a statement that changed the previous neutral attitude of the United States.

After that, as a result of a large-scale nonviolent movement and violent confrontation, the three major elites in the Philippines (the merchant class, the church, and the United States) all sided with the protest movement, and in the following days, Marcos, who was abandoned by the United States, was forced to leave Manila and take refuge in Hawaii.

It took Marcos 21 years to shape the Philippines into a society that was very distinctive at the time, and after its collapse, the Philippines was reinvigorated.

Southeast Asia, as an important geographical indication in Asia, is not only special in terms of geographical location, but also looks back at the transformation history of several countries in Southeast Asia, which has also become an important factor in attracting foreign investment from Europe and the United States in a sense.

And this change in trend is not good news internally.

end.

Author: Luo sir, the workplace reference of the new youth. Concerned about the logic behind the development of things, optimistic pessimists. Follow me and grind the knowledge to you.