Global FDI falls, but the digital economy continues to grow – report

1. According to the latest World Investment Report from UNCTAD, global foreign direct investment (FDI) saw an overall increase of 4% in 2024. However, when excluding financial flows through European conduit economies, FDI actually decreased by 11% during the same year.

2. The report also notes the importance of the digital economy, which has grown significantly since 2020, tripling its value to $360bn. The report notes that this growth risks exacerbating inequalities, given that it is highly concentrated in certain countries.

3. While UNCTAD had mentioned the possibility of modest growth in 2025 earlier in the year, it changed its outlook to negative due to high investor uncertainty. It cites “geopolitical tensions and industrial policy goals” as strongly influencing global investment decisions, as well as high borrowing costs and exchange rate volatility.

Is manufacturing making a comeback in the US?

1. When Rosemary Coates, executive director of the nonprofit Reshoring Institute, worked as a supply chain consultant for large companies in the 1990s and early 2000s, the CEOs would invite her into their offices and say, “Just get me to China.”

2. “‘We know it’s cheaper. Our competitors are doing it. It’s what we should do. Let’s just go to China,’” Coates recounted at the Women in Manufacturing Summit in Chicago on Oct. 13. “There wasn’t a whole lot of thought to it. Some may be financial analysis, but by and large, it was simply the strategy to go forward.” 

3. Cut to the 2012 election, before which then-President Barack Obama and presidential candidate Mitt Romney debated over China’s trade practices and bringing jobs back to the United States, or “China bashing.”

4. “They were both saying, ‘It’s all China’s fault. The economy has all gone downhill because of China,’” Coates said. “This is what I was doing for a living, outsourcing, closing plants and factories in the U.S. and pushing all this manufacturing to China.”

5. The debate then had CEOs talking about the potential for reshoring, asking her, “Is it even possible to bring manufacturing back? Can we do it?”

6. Coates then decided to pivot and focus on helping rebuild, reevaluate and find ways to bring manufacturing back to the U.S. by establishing the Reshoring Institute in 2014.

7. So can manufacturing make a comeback? The answer is yes and no, Coates said.

8. “Brace yourself. [Change is] coming if it isn’t already here,” Coates said. “And you need to learn to be flexible and accept that and look to the future.” 

ASEAN+3 in a Fragmenting World

 1. The rules-based multilateral trading system—long the cornerstone of global economic integration and prosperity—is being challenged by the Trump Administration’s unilateral protectionist policy. Rising protectionism, selective trade measures, and weaponization of tariffs are eroding the foundations of the rules-based global trade order. These developments not only jeopardize the economic gains accumulated over decades of globalization but also threaten the stability and prosperity that open trade has long supported across regions.

2. The growing uncertainty has clouded business confidence and undermined investment decisions. Firms in both advanced and emerging economies are rethinking their long-term investment strategies, delaying or canceling plans and redirecting capital in response to fears of abrupt regulatory shifts or market disruptions. Global supply chains, once optimized for cross-border efficiency, are now being reshaped around redundancy, resilience, and protectionism.

3. Amid this flux, the need for a reliable anchor for global trade has rarely been more urgent.

China Still An Attractive FDI Destination

1. The flow of foreign direct investment into China has declined significantly in recent years. Balance-of-payments (BOP) statistics indicate that net FDI inflows plummeted from a peak of $344 billion in 2021 to $51.3 billion in 2023 and further to just $18.6 billion in 2024 — the lowest in three decades.

2. Although this happened amid a global decline in FDIs, the sharp drop has fueled concerns about a potential exodus of foreign capital from China. However, a deeper examination of the data shows the situation is more nuanced than it appears.

3. In contrast to the FDI data in BOP data, utilized FDI, reported by the Chinese Ministry of Commerce, paints a more robust picture. Despite declining from its 2022 peak, utilized FDI stood at $163.3 billion in 2023 and $116.2 billion in 2024, significantly exceeding the FDI figure in the BOP data (Figure 1). While BOP foreign direct investment measures net capital flows (inflows minus outflows), utilized FDI focuses on gross capital inflows but excludes reinvested earnings, retained profits and intra-company debt transactions, making it an important complementary measure of foreign investment activity.

Thailand to Ease Foreign Business Ownership Rules

1. Thailand is moving to reform its restrictive foreign investment laws. On April 22, 2025, the Cabinet approved urgent revisions to the Foreign Business Act B.E. 2542 (1999), tasking the Ministry of Commerce with drafting amendments. The decision marks a strategic shift toward a more open and competitive investment landscape, in line with Thailand’s broader economic goals.

WHAT’S CHANGING?
1. Thailand’s Foreign Business Act was enacted in 1999 to replace the Alien Business Act of 1972. The Act outlines sectors where foreign ownership is restricted, such as media, agriculture, retail, services, and natural resources. Under the current law, foreigners are generally capped at 49 percent equity in these industries unless they secure a Foreign Business License, a process often criticized for its vagueness and bureaucracy.

How Foreign Investors Can Use Malaysia’s Double Taxation Agreements

 1. Malaysia’s extensive network of Double Taxation Agreements (DTAs) is a central feature of its attractiveness as an investment destination. These treaties provide certainty in the treatment of cross-border income, reduce the risk of double taxation, and establish clear rules for when and how foreign-sourced income will be taxed in Malaysia.

2. For foreign investors, leveraging Malaysia’s DTAs can mean meaningful tax savings and more efficient business structuring.

3. Malaysia has signed 73 comprehensive DTAs with jurisdictions across Asia, Europe, the Middle East, and the Americas, along with several limited agreements that cover specific income types or sectors. These treaties set out mutually agreed-upon rules for the taxation of business profits, dividends, interest, royalties, and other forms of income, ensuring consistent treatment between partner countries.

4. The network also strengthens Malaysia’s position as a regional base for multinational operations by aligning with international tax standards and reducing tax uncertainty for cross-border transactions.

Malaysia Expands SST from July 1: What Businesses Should Know

1. Malaysia will implement a significant expansion of its Sales and Services Tax (SST) framework starting July 1, 2025. Announced as part of the government’s fiscal consolidation strategy under Budget 2025, the revised SST rules are designed to broaden the tax base without burdening essential goods or lower-income households.

2. For businesses, particularly those in the services sector, the SST expansion introduces new compliance obligations, registration requirements, and tax exposure across a wider range of activities.

Should investment promotion agencies focus more on attracting research, development, and innovation?

 1. While tariffs (or the risk of them) dominate headlines, and governments and companies globally fret about the consequences, one simple and obvious fact is worth remembering: tariffs only affect physical goods. Although some services trade and investment will get caught up in the turmoil, the same does not hold true for most cross-border investment into research, development, and innovation (RD&I). RD&I activities involving sensitive technologies may be subject to outbound FDI screening, such as the US Outbound Investment Security Program. Otherwise, companies remain free to conduct research (almost) anywhere in the world.

2. For many investment promotion agencies (IPAs), attracting manufacturing investment remains the ultimate prize. ‘The bigger, the better’ still applies for the investment that many IPAs seek to attract. Large manufacturing projects are prioritized because of their job creation and supply chain impacts and potentially transformative nature.

3. However, manufacturing’s share of global FDI has been declining for decades and represented only 13% of greenfield projects globally between 2020 and 2023 (source: UNCTAD). At the same time, corporate expenditures on R&D have been growing rapidly, with data from the World Intellectual Property Organization (WIPO) showing an increase of roughly 40 percent between 2019 and 2023. In most countries, corporate R&D now significantly exceeds R&D spending by governments and academia, reflecting the importance of innovation for companies of all sizes.

Malacca Emerges as Malaysia’s Electric Vehicle Manufacturing Hub

1. Malacca is stepping into the spotlight as one of Malaysia’s most promising electric vehicle (EV) manufacturing hubs. With billions in investment commitments, growing local job creation, and government-backed incentives, the state is positioning itself as a key driver of Malaysia’s green mobility ambitions under the National Energy Transition Roadmap (NETR).

Aftercare by investment promotion agencies – overlooked or overrated?

1. Aftercare by investment promotion agencies – overlooked or overrated?  

2. Aftercare is key function of investment promotion agencies (IPAs) and most IPAs claim to provide some level of support to existing foreign investors in their location. IPAs should approach aftercare in a targeted way to use their resources effectively and generate the greatest results.

3. There are good reasons for IPAs to focus on aftercare. Helping existing investors to expand can sometimes be easier than attracting new ones, resulting in higher returns on the IPA’s efforts compared to bringing in new investors. Positive relationships with existing investors can lead to “repeat business”, as companies continue to add new (and often higher value) activities to their operations with the IPA’s support. Satisfied investors can also be valuable allies for attracting new investors, by providing testimonials or even referrals to their own corporate networks. In some cases, aftercare interventions by IPAs can prevent companies from leaving or at least mitigate the impact of relocations or closures.

4. Despite the many benefits, our experience shows that only few IPAs place significant emphasis on aftercare. Attracting and supporting new investors typically consumes most of an agency’s resources while aftercare is often done sporadically, when time allows or when changes in the investment environment make focusing on existing investors expedient (for example, during a pandemic).

5. Are IPAs missing an opportunity by not focusing more on aftercare? The answer depends on how an IPA approaches aftercare and what results it wishes to achieve.

What Foreigners Need to Know About Taxable Income in Malaysia

Malaysia operates a territorial tax system, meaning income derived from within the country is subject to taxation. For foreigners living or working in Malaysia, understanding taxable income is crucial to ensure compliance and avoid unnecessary liabilities.

Using off-the-shelf AI solutions for investment promotion

1. Artificial intelligence (AI) has rapidly emerged as a technology that is expected to transform the way we work and live. Companies across every industry are scrambling to adopt AI and harness its potential for exponential productivity gains. Investment Promotion Agencies (IPAs) are also exploring the different ways in which AI can enhance their performance. 

2. While some IPAs are seeking to develop in-house tools, this requires technical skills, access to data, and financial resources that are beyond the reach of many agencies. As an alternative to developing their own tools, IPAs can make use of a growing number of AI-powered solutions available in the market, which can serve as a cost-effective gateway to test new technologies. In this article, we provide examples of off-the shelf tools that IPAs can apply to different areas of their day-to-day work.

Sustaining Malaysia’s FDI Rebound: Promotion is Good, Facilitation Better by FULCRUM

1. Malaysia has always valued foreign direct investments (FDI) as it contributes toward employment, exports and technology transfer, besides enabling the country to join regional production networks. It is therefore not surprising that the remarkable rebound in FDI in 2021 was celebrated with much media fanfare, especially since FDI has been on the decline since 2016. 

Global FDI in the Food Industry

 1. Between 2019 and 2023, the food sector was the twelfth largest FDI sector in terms of the number of greenfield investments. The food sector accounts for 3.3% of global greenfield FDI projects.

2. Greenfield foreign direct investment is when a company invests abroad to establish a new physical presence or expand an existing operation. Greenfield investments create jobs and/or involve a capital investment into the foreign location. Other forms of FDI, such as mergers and acquisitions, are not included as part of this definition.

3. Combined, the top ten destination countries account for 52.6% of total food FDI projects.

Global FDI in the Biotechnology Industry

 1. Between 2019 and 2023, the biotechnology sector was the twenty-fifth largest FDI sector in terms of the number of greenfield investments. The biotechnology sector accounts for 0.6% of global greenfield FDI projects.

2. Greenfield foreign direct investment is when a company invests abroad to establish a new physical presence or expand an existing operation. Greenfield investments create jobs and/or involve a capital investment into the foreign location. Other forms of FDI, such as mergers and acquisitions, are not included as part of this definition.

3. Combined, the top ten destination countries account for 69.4% of total biotechnology FDI projects.

UNCTAD: FDI trends in H1 2024

 1. In the first six months of 2024, UNCTAD's preliminary data shows there was a slight (1%) increase in global foreign direct investment (FDI).

2. UNCTAD’s Global Investment Trends Monitor suggests global FDI has remained weak in the first six months of 2024. Excluding European conduit economies that hold investment funds before these reach their final destination, global FDI rose by just 1%.  

3. The value and number of international project finance deals decreased by 30%, keeping aligned with 2023’s downward trend. The value of cross-border mergers and acquisitions also decreased by 5%. High financing costs and inflationary pressures were the main drivers of the weak figures. The marginal 1% increase, at least, halts the downward slide of the past two years and signals a more optimistic outlook on the future of financial conditions.

4. The trends differed across regions and economies, where some were bolstered by a surge in global semiconductor investment.  

Malaysia-Canada Trade Surges 41% Amid Strengthening Economic Ties, as Malaysia Explores New Free Trade Deals to Mitigate Geopolitical Risks

1. Malaysia and Canada are deepening their economic ties, with bilateral trade reaching RM8.05 billion as of August 2024, marking a significant 41 per cent increase year-on-year, according to the Ministry of Investment, Trade and Industry (MITI).

2. MITI reported that bilateral trade surged by 25 per cent following Canada’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which also facilitates duty-free access for goods, eliminating tariffs on Canada’s key exports.

3. “This growth was driven by a 68.1 per cent surge in Malaysian exports to Canada and a 16.8 per cent rise in imports from Canada, with key sectors such as clean technology, agriculture, and aerospace fostering closer trade relations,” the ministry said in a statement to Bernama, here.

Bắc Ninh: Vietnam’s Top FDI Location and Emerging Industrial Real Estate Hub

1. In the first nine months of 2024, Bắc Ninh province has established itself as a frontrunner in attracting foreign direct investment (FDI) within Vietnam, achieving over US$4.2 billion in investments.

2. This notable influx is largely credited to a robust investment climate characterized by advanced infrastructure and a skilled labor force, which positions Bắc Ninh as a highly appealing destination for foreign investors. 

3. The provincial Department of Planning and Investment reported that foreign investors committed US$1.56 billion to 339 projects, marking an impressive year-on-year increase of 82.2% in total investment and a 28.4% rise in project numbers.

4. Further reinforcing its investment appeal, Bắc Ninh saw 147 FDI projects adjusting their capital expenditures over the same period, leading to an additional allocation of US$2.68 billion. This flexibility demonstrates the province’s proactive approach to fostering business growth and optimizing the operational environment for foreign enterprises. 

UAE Sees 33% Surge in Greenfield FDI Capital Inflows in 2023 and takes second place globally in new FDI projects at 1,323

1. The UAE ranked second globally in greenfield FDI projects in 2023, with 1,323 project announcements, showing a 33% rise compared to 2022, according to the UNCTAD 2024 World Investment Report.

2. FDI inflows into the UAE reached $30.688 billion in 2023, marking a 35% year-on-year increase, while FDI outflows decreased to $22.328 billion.

3. Key sectors driving the growth of greenfield investments included business services, software, and IT, contributing to a 7.5% rise in jobs and a 37% increase in capital inflows, according to UAE Ministry of Investment officials.

Global FDI in the pharmaceuticals industry

 1. The US is the leading destination market for greenfield pharmaceuticals FDI, while it is also the top source market. 

2. Between 2019 and 2023, the pharmaceuticals sector was the fourteenth largest FDI sector in terms of the number of greenfield investments. The pharmaceuticals sector accounts for 2% of global greenfield FDI projects.

3. Greenfield foreign direct investment is when a company invests abroad to establish a new physical presence or expand an existing operation. 

4. Greenfield investments create jobs and/or involve a capital investment into the foreign location. Other forms of FDI, such as mergers and acquisitions, are not included as part of this definition.

5. Combined, the top ten destination countries account for 57.1% of total pharmaceuticals FDI projects.