Despite foreign investment remaining consistently high in the US and China, threats of a trade war between the two countries are nevertheless driving some multinationals to look for low-cost alternative production centers in Southeast Asia.
Southeast Asia is attracting this attention due to its neutrality and relatively low production costs, granting many of the perks China has offered foreign firms in recent decades.
Inflows to Vietnam grew 18% year-on-year in the first three quarters of the year, Bloomberg reports, while Thailand has seen a massive 53% boost from a year previous. Net FDI into manufacturing in the Philippines increased more than six-fold.
Although the prospect of higher tariffs is part of the story, interest in the region as a growing offshore production hub has been building for years.
“Escalated trade tensions only accelerate the ongoing trend,” said Trinh Nguyen, senior economist at Natixis Asia. “Southeast Asia serves both as a great growth market, a place to offshore thanks to lower costs of production and liberalisation of trade, as well as a source of mitigation from geopolitical risks.”