FDI in ASEAN

FDI in ASEAN

Presented by:Amruth Pavan DavuluriChandan Kumar JhaDeepti TripathiKumar AniketNeha KasanaSaptadip Saha

Group-4

FDIForeign Direct Investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased.

The Organization of Economic Cooperation and Development (OECD) defines control as owning 10% or more of the business.

One of the primary advantage of FDI is that it allows money to go freely to whatever business has the best prospects for growth anywhere in the world.

The Association of Southeast Asian Nations(ASEAN) was formed on August 8, 1967 by five member countries: Singapore, Indonesia, Malaysia, Thailand and Philippines.

Today, the membership has grown to ten with the joining of Brunei, Cambodia, Laos, Burma and Vietnam.

The force behind ASEAN was politics at its inception i.e. prevention of external interference in the internal affairs of member countries.

With a population of over 500 million and combined GDP of more than $1 trillion, what happens in ASEAN countries is not only important to Asia and Europe but to the entire globe community.ASEAN

The ASEAN countries were among the first to pursue a strategy of export-led development based partly on foreign direct investment (FDI). They welcomed firms from Japan and the newly industrializing economies like Chinese Taipei, as these firms faced currency appreciation and rising wages at home. They also attracted investment from rest of the OECD, particularly US and EuropeEach member country of ASEAN appears to specialize in attracting FDI in specific sectors, depending on each countrys comparative advantage and natural endowments relative to regional neighbors. Vietnam mainly attracts investments in export-oriented manufacturing industries, and also in the real estate and service sectors. Cambodia focuses on garment manufacturing, financial services and agriculture.Investments in the Laos tend to target the service sector, and in Myanmar the natural resources sector dominates FDI inflows.Indonesia and Thailand continued to attract high levels of investments particularly in the automotive and metals industries. FDI in ASEAN

Over the years,FDI in ASEAN has surpassed the FDI in China.

Trade Agreements in ASEANASEAN is the third largest trade bloc in the world after European Union and NAFTA. ASEAN has largely cancelled all import and export duty taxes on items traded between its member countries.

ASEANs free trade agreement with China allows MNCs and regional companies to place the manufacturing capacity at cheaper locations.

ASEAN also has a series of Comprehensive Economic Partnerships with Japan and FTA with South Korea.

ASEAN also has a combined FTA with New Zealand and Australia. This is known as AANZFTA. It has eliminated tariffs on 67 percent of all traded products between the regions and will expand to 96 percent by 2020.

FDI statistics

Received $128.4 billion in foreign investment in 2013 which was a 7 percent increase from $120 billion in 2012. In Malaysia, FDI strengthened by 19 percent, 17 percent in Indonesia and 5 percent in SingaporeIt fell 12 percent in Thailand as the country grappled with political instability. There was a phenomenal 118 percent increase in FDI in Philippines in the first three quarters. But it took a hit from Typhoon Haiyan towards the end of the year, though Philippines still managed to book a robust 24 percent rise in FDI for the full 2013. Observations on FDI statistics

Singapore has been the greatest recipient of FDI in ASEAN. It is followed at a wide margin by the remaining ASEAN-5 members and Vietnam

Indias Trade with ASEAN Countries

ASEAN has emerged as one of Indias largest trading partners. A majority of India-ASEAN trade is with Singapore, Indonesia, Malaysia, Thailand and Vietnam.

S. No.Name of CountryApril-2010-March-2011April-2011-March-2012April-2012-March-2013%Growth in INR%Growth in US$Value in INR LacsValue in US$ MillionValue in INR LacsValue in US$ MillionValue in INR LacsValue in US$ Million1India Export to BRUNEI10,525.0523.07406,235.77895.4921,830.0640.02-94.63-95.532India Export to CAMBODIA30,483.2366.9447,753.3599.4560,998.60112.2827.7412.903India Export to INDONESIA2,592,440.795,700.783,210,069.616,677.992,899,608.705,331.30-9.67-20.174India Export to LAO PD RP5,943.5113.117,320.3414.9715,712.7128.91114.6493.125India Export to MALAYSIA1,767,721.053,871.171,910,321.003,980.362,414,350.854,444.0726.3811.656India Export to MYANMAR145,903.12320.62264,450.60545.38296,070.66544.6611.96-0.137India Export to PHILIPPINES400,462.19881.10476,321.82992.91646,549.081,187.1935.7419.578India Export to SINGAPORE4,473,173.319,825.448,036,299.9816,857.717,399,496.6313,619.24-7.92-19.219India Export to THAILAND1,034,625.662,274.211,425,353.492,961.012,031,024.163,733.1742.4926.0810India Export to VIETNAM SOC REP1,204,507.362,651.441,808,498.303,719.092,156,284.253,967.3719.236.68Total11,665,785.2725,627.8817,592,624.2736,744.3617,941,925.7133,008.211.99-10.17

Indias Exports to ASEAN

Observations on Indias exports to ASEANMajor chunk of exports goes to Singapore and Indonesia.Over the past 10 years, the share of Indian exports to ASEAN has doubled, reaching 11% at end-2013.Exports were USD 32bn at end-2013. This marks a CAGR of 24% p.a., compared with 22% p.a. over the past 10 years.

S. No.Name of CountryApril-2010-March-2011April-2011-March-2012April-2012-March-2013%Growth in INR%Growth in US$Value in INR LacsValue in US$ MillionValue in INR LacsValue in US$ MillionValue in INR LacsValue in US$ Million1India Import from BRUNEI106,485.70234.17285,369.97605.02440,597.91814.8054.4034.672India Import from CAMBODIA3,637.698.013,463.667.276,469.5211.9086.7863.693India Import from INDONESIA4,513,629.309,918.637,041,989.6214,765.938,096,569.7614,879.4914.980.774India Import from LAO PD RP100.530.2244,065.0789.2676,479.58138.6473.5655.325India Import from MALAYSIA2,974,590.446,523.584,538,502.779,473.645,419,876.339,951.0619.425.046India Import from MYANMAR465,115.401,017.67661,401.331,381.15770,118.211,412.6916.442.287India Import from PHILIPPINES195,046.60429.39212,544.32441.38274,358.42504.0029.0814.198India Import from SINGAPORE3,254,576.757,139.313,970,847.558,388.494,076,395.097,486.382.66-10.759India Import from THAILAND1,945,991.144,272.092,532,484.415,283.842,911,298.105,352.6114.961.3010India Import from VIETNAM SOC REP484,759.061,064.90832,325.931,722.871,259,442.242,314.7851.3234.36Total13,943,932.6030,607.9620,122,994.6342,158.8423,331,605.1742,866.3615.941.68

Indias Imports from ASEAN

Observations on Indias exports to ASEANIndia imports maximum from Indonesia and Vietnam, followed by Singapore.The imports have risen significantly from 4.39 billion USD to 43.6 billion USD over the course of ten years.

India-Singapore

Indias largest trade and investment partner in the ASEAN is Singapore.

It accounts for a third of Indias overall trade with ASEAN.

The bilateral trade has grown significantly from US$ 8.8 billion in 2005-06 to US$ 21.1 billion in 2013.Singapore has emerged as the seventh largest trade partner of India globally with US$ 19.3 billion of bilateral trade in 2013-14 . Singapore acts as a key offshore logistics and financial hub of many Indian companies. Nine Indian banks operate in Singapore- Indian overseas Bank, UCO Bank, Indian Bank, Bank of India, Axis Bank, ICICI Bank, Bank of Baroda, Exim Bank and State Bank of India.India signed Comprehensive Economic Cooperation Agreement (CECA) with Singapore, the first such agreement to be signed by India with any country. This integrates agreements on trade in goods and services, economic cooperation and investment protection in fields like science & technology, education and intellectual property

India-Indonesia

Indonesia is the second largest trading partner of India among ASEAN countries. The bilateral trade has increased to US$ 20.1 billion in 2012-13 from US$ 6.9 billion in 2007-08.

India is the largest buyer of crude palm oil from Indonesia and imports minerals, coal, pulp and paper rubber and hydrocarbons reserves.

India exports maize, refined petroleum products, commercial vehicles, oil seeds , cotton, animal feed, telecommunication equipment, plastics and steel products and to Indonesia. Also, India exports pharmaceuticals in bulk and formulations to Indonesia.

ConclusionFDI in ASEAN has boomed surpassing the pre-crisis levels.ASEAN-5( Indonesia, Philippines, Malaysia, Singapore and Thailand) attracted more foreign direct investment than China in 2013.ASEAN accounts for 38 percent of Asias market for initial public offerings, thus becoming a launch pad for new companies.The ten member states of ASEAN despite their distinct cultures, share a common focus on jobs and prosperity. The region is fast transforming into the next frontier of consumer growth as the household purchasing power is rising. To maintain the current trajectory, it will require enormous investment in infrastructure and human-capital development. The implementation of ASEAN Economic Community offers an opportunity to create a seamless regional market and production base. This will make ASEAN a case where the whole actually does exceed the sum of its part.