FDI in ASEAN: What the Tigers and the Cubs can Teach Nigeria
By: Dr Adams Adeiza
Tags: Develoment, Fdi, Competitiveness, Investment, Policy

FDI in ASEAN: What the Tigers and the Cubs can Teach Nigeria

The ASEAN (Association of Southeast Asian Nations) has, for decades, remain a powerful economic block in the world.

They attract not just big ticket investments, but those with real impact on the lives of the citizenry.

According to OECD’s Southeast Asia Investment Policy Review, 2019, the region improved its FDI stocks as a percentage of GDP from 43% in 2006 to 76% in 2016. Poverty and unemployment in the region have been drastically reduced as — but for the recent Covid-19 pandemic — economic growth was expected to be more than 5% over the next few years (OECD, 2017).

Although the ongoing US-China trade war contributes immensely to the region’s recent FDI performance, it is fair to say that the ASEAN countries have historically invested in their capacities to generate high quality investment and thus are actually reaping the rewards of their decade-long preparation.

The current diplomatic row and trade ‘fights’ between the two world largest economies: US and China, only adds a sweet icing to the ASEAN FDI cakes.

However, it has been noted that this merry — this new-found US-China trade war induced FDI blessing — is not going round evenly across the ten (650-million-people) countries.

It seems that only those who saw the wave early and are deliberate in their pursuit are the ones hitting an FDI home run. Recent reports show that Singapore, Vietnam and Indonesia have achieved more than exceptional performances in FDI inflows.

Singapore: the FDI Behemoth

Just as she has done for years, Singapore leads the pack, attracting balanced, relevant, inclusive and sustainable investments into the region.

In 2019 alone, amidst global economic uncertainty, the Singapore’s Economic Development Board reported that the country beat all expectations to pull investment commitments of US$15.2 billion, with chemicals and electronics sectors contributing the highest, 32.2% and 30.2% respectively.

Recent news reports indicate even more cheering scenarios: Facebook is setting up a US$1billion data center in the country; Grab (formerly My Teksi) recently moved its Headquarters (HQ) from Malaysia to Singapore; Alibaba is at the verge of buying the Singapore-based e-commerce giant — Lazada; Rakuten Mobile just moved its global HQ to Singapore; Alibaba, Tencent and ByteDance recently set up a regional HQ in Singapore.

Singapore’s success as a top FDI destination in ASEAN is well-documented: she is pro-business, politically stable and committed to doing the right thing at the highest and all levels to project a great image for herself.

She regulates businesses efficiently, has near zero corruption, near zero taxes, operates a predictable legal system, has an efficient financial market, builds a high quality human capital, makes a sustained investment in critical infrastructure and creates a supportive innovation ecosystem.

All these play critical roles in catapulting this 5.8 million people City-State to where she is today.

Vietnam is gearing up to be the next China

Vietnam, often referred as an Asian Cub (Tiger-Cub), a one-party socialist state, is emerging strongly as the next ‘China’.

The country is now an undisputed global power in audio devices. The top global smart phone makers: Apple and Sumsung have an expanding presence in the country, with investments in factories running into tens of billions of dollars.

The secrets to Vietnam’s recent exploits in FDI include state’s deliberate support for and promotion of start-ups, zero tolerance for corruption, business friendly regulations and low cost labor.

The stable political system and image-boosting activities it embarked on in recent years have helped her tremendously to rack up quality FDIs.

Indonesia is also making a kill

Indeed, Indonesia is another big ASEAN force to reckon with when it comes to FDI attraction.

A member of Goldman Sachs’ Next 11 and Fidelity’s MINT countries, Indonesia recently got Amazon to invest US$950 million in setting up Cloud Computing operation in the country. As reported by Business Journalist Moaz Nair of FMT, SpaceX is setting up a rocket launch site in the country soon. The value of that investment is expected to be in tens of billions of dollars.

Recent news report also indicates that Hyundai is pumping about US$1.55 billion into the country’s manufacturing space over the next decade. And there’s more.

China’s largest maker of lithium-ion batteries, Contemporary Amperex Technology Co. (CATL), is setting up a US$5 billion plant in Indonesia, just as Google Cloud Platform recently opens shop in Jakarta.

Key Lessons for Nigeria

Now, what can Nigeria — a country in desperate need of FDIs, jobs and wealth creation — learn from this ASEAN FDI success?

1. Nigeria needs to get serious about production and development. The country’s lack of seriousness has cost and is costing her so much.

For years, the country has been all about sharing the eggs, and not so much about producing more quality geese.

It’s disheartening that the countries she started import-substitution policy with — Vietnam, Malaysia, Indonesia — have all left her behind and gone multiple stages ahead.

While she still struggles with import-substitution policy, more than 40 years since it was first introduced, her then contemporaries moved on to export-led growth and are now service-knowledge based economies.

2. Invest in innovation and competitiveness: Nigeria needs to allow institutions to work; make (or mobilize) sustained investment for physical and social infrastructure — education, health; and pursue a vigorous ICT-led growth.

She needs to fight sycophancy, operate a merit-based system and institute a culture that rewards hard work, creativity and results.

Nigeria needs to make resources available to support innovation by cutting off herbloated cost of governance.

3. Stop talking about fighting corruption. Start fighting corruption truly, clinically and transparently.

When Nigeria does fight corruption which is so critical to attracting FDIs, she would not need a megaphone to announce it, the world will know and see it.

4. Fix the business environment. The country needs to consolidate recent gains in ease of doing business.

While she celebrates the improved ranking, policy makers at all levels need to be informed that it still takes several days to get a business registered in the country (it takes half a day in Singapore), electric power is still a big headache, credit facilities is still non-existent for many businesses, it still takes months to register properties and get construction permits in many states, it still takes forever and high expense to get justice in business-related cases from the courts, multiplicity of taxes on struggling businesses are still the order of the day, and exporters still need to ‘settle’ a slew of government agencies at the ports to get their goods across borders.

5. Make your export processing, industrial and economic zones work like they do in Vietnam: they work. By that I mean they have the needed infrastructures, business support services and the likes.

By and large, development has become more a science. To succeed, you need to understand the theory, the causes of the effects that you desire.

Serious countries and cities know that the holy grail of sustained economic growth is inward investment and so they pursue it carefully, methodically and jealously. They get serious, work hard and where necessary, fight to earn the confidence of the investment community.

They prepare the ground, sell themselves aggressively, and once investors set foot in their domains, they provide superior aftercare in order to maximize what I call ‘Investors Lifetime Value’.

That is how you grow an economy, create jobs and wealth and keep widespread poverty at bay.

The earlier Nigeria gets serious at creating the right investment environment, and meticulously go after and convert investible leads, the better her economic situation gets. The ASEAN countries offer a solid manual.