The recent hiking of tariffs by both the US and China against each other has evolved into a full-blown trade war. This has disrupted global supply chains and multinationals companies are either in the process or have already shifted their production lines to a region that is welcoming Foreign Direct Investment (FDI) with open arms: South-East Asia.
The Business Standard has reported that Vietnam saw an 18 per cent jump manufacturing investment activity during the first nine months of 2018. However, Thailand trumped this with a more impressive performance. Between January and July, the country saw its net FDI rise to 53 per cent from a year earlier. Also, overall manufacturing inflows grew by almost 500 per cent.
If these statistics aren’t impressive enough, consider this. Net FDI investment in manufacturing grew from $144 million to a massive $861 million in a single year. The country? The Philippines.
“The US-China trade war may be attracting more firms to set up shop in Asean to circumvent the tariffs,” Maybank economists Chua Hak Bin and Lee Ju Ye said in the note. “Sectors such as consumer products, industrial, technology & telecom hardware, automotive and chemicals have indicated interest in Southeast Asia.
This doesn’t bode well for India, which is competing with South-East Asian economies for FDI investment. With wages rising in China and global companies looking for alternatives, South-East Asia and India are locked in a fight to earn the moniker of ‘The factory of the world.’ It is also widely understood that jobs created in the manufacturing sector are not only more productive but also less prone to volatility when compared to agriculture.
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