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Bangladesh

Executive Summary

Bangladesh is the most densely populated non-city-state country in the world, with the eighth largest population (over 165 million) within a territory the size of Iowa. Bangladesh is situated in the northeastern corner of the Indian subcontinent, sharing a 4,100 km border with India and a 247-kilometer border with Burma. With sustained economic growth over the past decade, a large, young, and hard-working workforce, strategic location between the large South and Southeast Asian markets, and vibrant private sector, Bangladesh will likely continue to attract increasing investment, despite severe economic headwinds created by the global outbreak of COVID-19.

Buoyed by a young workforce and a growing consumer base, Bangladesh has enjoyed consistent annual GDP growth of more than six percent over the past decade, with the exception of the COVID-induced economic slowdown in 2020. Much of this growth continues to be driven by the ready-made garment (RMG) industry, which exported $35.81 billion of apparel products in fiscal year (FY) 2021, second only to China, and continued remittance inflows, reaching a record $24.77 billion in FY 2021. (Note: The Bangladeshi fiscal year is from July 1 to June 30; fiscal year 2021 ended on June 30, 2021.) The country’s RMG exports increased more than 30 percent year-over-year in FY 2021 as the global demand for apparel products accelerated after the COVID shock.

The Government of Bangladesh (GOB) actively seeks foreign investment. Sectors with active investments from overseas include agribusiness, garment/textiles, leather/leather goods, light manufacturing, power and energy, electronics, light engineering, information and communications technology (ICT), plastic, healthcare, medical equipment, pharmaceutical, ship building, and infrastructure. The GOB offers a range of investment incentives under its industrial policy and export-oriented growth strategy with few formal distinctions between foreign and domestic private investors.

Bangladesh’s Foreign Direct Investment (FDI) stock was $20.87 billion through the end of September 2021, with the United States being the top investing country with $4.1 billion in accumulated investments. Bangladesh received $2.56 billion FDI in 2020, according to data from the United Nations Conference on Trade and Development (UNCTAD). The rate of FDI inflows was only 0.77 percent of GDP, one of the lowest of rates in Asia.

Bangladesh has made gradual progress in reducing some constraints on investment, including taking steps to better ensure reliable electricity, but inadequate infrastructure, limited financing instruments, bureaucratic delays, lax enforcement of labor laws, and corruption continue to hinder foreign investment. Government efforts to improve the business environment in recent years show promise but implementation has yet to materialize. Slow adoption of alternative dispute resolution mechanisms and sluggish judicial processes impede the enforcement of contracts and the resolution of business disputes.

As a traditionally moderate, secular, peaceful, and stable country, Bangladesh experienced a decrease in terrorist activity in recent years, accompanied by an increase in terrorism-related investigations and arrests following the Holey Artisan Bakery terrorist attack in 2016. A December 2018 national election marred by irregularities, violence, and intimidation consolidated the power of Prime Minister Sheikh Hasina and her ruling party, the Awami League. This allowed the government to adopt legislation and policies diminishing space for the political opposition, undermining judicial independence, and threatening freedom of the media and NGOs. Bangladesh continues to host one of the world’s largest refugee populations. According to UN High Commission for Refugees, more than 923,000 Rohingya from Burma were in Bangladesh as of February 2022. This humanitarian crisis will likely require notable financial and political support until a return to Burma in a voluntary and sustainable manner is possible. International retail brands selling Bangladesh-made products and the international community continue to press the Government of Bangladesh to meaningfully address worker rights and factory safety problems in Bangladesh. With unprecedented support from the international community and the private sector, the Bangladesh garment sector has made significant progress on fire and structural safety. Critical work remains on safeguarding workers’ rights to freely associate and bargain collectively, including in Export Processing Zones (EPZs).

The Bangladeshi government has limited resources devoted to intellectual property rights (IPR) protection and counterfeit goods are readily available in Bangladesh. Government policies in the ICT sector are still under development. Current policies grant the government broad powers to intervene in that sector.

Capital markets in Bangladesh are still developing, and the financial sector is still highly dependent on banks.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 147 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 116 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 723 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 2,030 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical Source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2020-21 $354,242 2020 $323,057 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical Source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020-21 $4055 2020 $723 BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2020 $2 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2020-21 5.71% 2020 6.01% UNCTAD data available at

https://unctad.org/topic/investment/world-investment-report

*Host Country Source:  Bangladesh Bank, Bangladesh Bureau of Statistics

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data (December 2020)
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $18,439 100% Total Outward $314 100%
The United States $3,823 20.7% United Kingdom $88 28.0%
The United Kingdom $2,140 11.6% China, P.R. Mainland $49 15.6%
The Netherlands $1,608 8.7% India $47 15.0%
Singapore $1,504 8.2% Nepal $47 15.0%
China, P.R. Mainland $986 5.3% United Arab Emirates $39 12.4%
“0” reflects amounts rounded to +/- USD 500,000.

Indonesia

Executive Summary

Indonesia’s 274 million population, USD 1 trillion economy, growing middle class, abundant natural resources, and stable economy are attractive features to U.S. investors; however, investing in Indonesia remains challenging. President Joko (“Jokowi”) Widodo, now in his second five-year term, has prioritized pandemic recovery, infrastructure investment, and human capital development. The government’s marquee reform effort — the 2020 Omnibus Law on Job Creation (Omnibus Law) — was temporarily suspended by a constitutional court ruling, but if fully implemented, is touted by business to improve competitiveness by lowering corporate taxes, reforming labor laws, and reducing bureaucratic and regulatory barriers. The United States does not have a bilateral investment treaty (BIT) with Indonesia.

In February 2021, Indonesia replaced its 2016 Negative Investment List, liberalizing nearly all sectors to foreign investment, except for seven “strategic” sectors reserved for central government oversight. In 2021, the government established the Risk-Based Online Single Submission System (OSS), to streamline the business license and import permit process. Indonesia established a sovereign wealth fund (Indonesian Investment Authority, i.e., INA) in 2021 that has a goal to attract foreign investment for government infrastructure projects in sectors such as transportation, oil and gas, health, tourism, and digital technologies.

Yet, restrictive regulations, legal and regulatory uncertainty, economic nationalism, trade protectionism, and vested interests complicate the investment climate. Foreign investors may be expected to partner with Indonesian companies and to manufacture or purchase goods and services locally. Labor unions have protested new labor policies under the Omnibus Law that they note have weakened labor rights. Restrictions imposed on the authority of the Indonesian Corruption Eradication Commission (KPK) led to a significant decline in investigations and prosecutions. Investors cite corruption as an obstacle to pursuing opportunities in Indonesia.

Other barriers include bureaucratic inefficiency, delays in land acquisition for infrastructure projects, weak enforcement of contracts, and delays in receiving refunds for advance corporate tax overpayments. Investors worry that new regulations are sometimes imprecise and lack stakeholder consultation. Companies report that the energy and mining sectors still face significant foreign investment barriers, and all sectors have a lack of adequate and effective IP protection and enforcement, and restrictions on cross border data flows.

Nonetheless, Indonesia continues to attract significant foreign investment. According to the 2020 IMF Coordinated Direct Investment Survey, Singapore, the United States, the Netherlands, Japan, and China were among the top foreign investment sources (latest available full-year data). Private consumption drives the Indonesian economy that is the largest in ASEAN, making it a promising destination for a wide range of companies, ranging from consumer products and financial services to digital start-ups and e-commerce. Indonesia has ambitious plans to expand access to renewable energy, build mining and mineral downstream industries, improve agriculture production, and enhance infrastructure, including building roads, ports, railways, and airports, as well as telecommunications and broadband networks. Indonesia continues to attract American digital technology companies, financial technology start-ups, franchises, health services producers and consumer product manufacturers.

Indonesia launched the National Women’s Financial Inclusion Strategy in 2020, which aims to empower women through greater access to financial resources and digital skills and to increase financial and investor support for women-owned businesses.

Table 1 
Measure Year Index or Rank Website Address
TI Corruption Perceptions index 2021 96 of 180 https://www.transparency.org/en/cpi/2021/index/idn 
Global Innovation Index 2021 87 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S.  FDI in partner country ($M USD, stock positions) 2020 $18,715 M https://apps.bea.gov/iTable/iTable.cfm?ReqID=2&step=1 
World Bank GNI per capita 2020 $3,870 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=ID

6. Financial Sector

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD)  

2021

$1,187 2020 $1,058 https://data.worldbank.org/
country/Indonesia
Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2021 $2,537.2 2020 $18,715 https://apps.bea.gov/iTable/iTable.cfm?
reqid=2&step=1&isuri=1#reqid=2&step=1&isuri=1
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2020 $461 https://apps.bea.gov/iTable/iTable.cfm?
reqid=2&step=1&isuri=1#reqid=2&step=1&isuri=1
Total inbound stock of FDI as % host GDP 2021 2.6% 2020 22.7% /World Investment Report 2021:
Country-Fact-Sheets

*Indonesia Investment Coordinating Board (BKPM), January 2022

There is a discrepancy between U.S. FDI recorded by BKPM and BEA due to differing methodologies. While BEA recorded transactions in balance of payments, BKPM relies on company realization reports. BKPM also excludes investments in oil and gas, non-bank financial institutions, and insurance.

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment 2020 Outward Direct Investment 2020
Total Inward 240,507 100% Total Outward  88,847 100%
Singapore 57,994 24.1% Singapore 31,240 35.2%
United States 31,859 13.2% China

(PR Mainland)

24,673 27.8%
Netherlands 31,554 13.1% France 19,432 21.9%
Japan 25,594 10.6% Cayman Islands 3,445 3.9%
China (PR: Hong Kong) 13,577 5.6% British Virgin Islands 2,868 3.2%
“0” reflects amounts rounded to +/- USD 500,000.

Source: IMF Coordinated Direct Investment Survey, 2020 for inward and outward investment data.

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets 2019
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 22,957 100% All Countries 8,757 100% All Countries 14,200 100%
Singapore 16,604 72.3% Singapore 8,06 92.1% Singapore 8,542 60.1%
British Virgin Islands 2,210 9.6% India 450 5.1% British Virgin Islands 2,210 15.6%
United States 950 4.1% Guernsey 81 0.9% United States 948 6.7%
 United Arab Emirates 599 2.6% China

(PR Hong Kong)

59 0.6% United Arab Emirates 599 4.2%
India 457 2.0% Japan 57 0.6% China

(PR Hong Kong)

361 2.5%

Source: IMF Coordinated Portfolio Investment Survey, 2020. Sources of portfolio investment are not tax havens.

The Bank of Indonesia published comparable data.

Singapore

Executive Summary

Singapore maintains an open, heavily trade-dependent economy that plays a critical role in the global supply chain. The government utilized unprecedented levels of public spending to support the economy during the COVID-19 pandemic. Singapore supports predominantly open investment policies and a robust free market economy while actively managing and sustaining Singapore’s economic development. U.S. companies regularly cite transparency, business-friendly laws, tax structure, customs facilitation, intellectual property protection, and well-developed infrastructure as attractive investment climate features. Singapore actively enforces its robust anti-corruption laws and typically ranks as the least corrupt country in Asia. In addition, Transparency International’s 2020 Corruption Perception Index placed Singapore as the fourth-least corrupt nation globally. The U.S.-Singapore Free Trade Agreement (USSFTA), which entered into force in 2004, expanded U.S. market access in goods, services, investment, and government procurement, enhanced intellectual property protection, and provided for cooperation in promoting labor rights and environmental protections.

Singapore has a diversified economy that attracts substantial foreign investment in manufacturing (petrochemical, electronics, pharmaceuticals, machinery, and equipment) and services (financial, trade, and business). The government actively promotes the country as a research and development (R&D) and innovation center for businesses by offering tax incentives, research grants, and partnership opportunities with domestic research agencies. U.S. direct investment (FDI) in Singapore in 2020 totaled $270 billion, primarily in non-bank holding companies, manufacturing, finance, and insurance. Singapore received more than double the U.S. FDI invested in any other Asian nation. The investment outlook was positive due to Singapore’s proximity to Southeast Asia’s developing economies. Singapore remains a regional hub for thousands of multinational companies and continues to maintain its reputation as a world leader in dispute resolution, financing, and project facilitation for regional infrastructure development.

Singapore is poised to attract future foreign investments in digital innovation, pharmaceutical manufacturing, sustainable development, and cybersecurity. The Government of Singapore (hereafter, “the government”) is investing heavily in automation, artificial intelligence, integrated systems, as well as sustainability, and seeks to establish itself as a regional hub for these technologies. Singapore is also a well-established hub for medical research and device manufacturing.

Singapore relies heavily on foreign workers who make up 34 percent of the workforce. The COVID-19 pandemic was initially concentrated in dormitories for low-wage foreign workers in the construction and marine industries, which resulted in strict quarantine measures that brought the construction sector to a near standstill. The government tightened foreign labor policies in 2020 to encourage firms to improve productivity and employ more Singaporean workers, and lowered most companies’ quotas for mid- and low-skilled foreign workers. During the COVID-19 pandemic, the government introduced more programs to partially subsidize wages and the cost to firms of recruiting, hiring, and training local workers

Singapore plans to reach net-zero by or around mid-century but faces alternative energy diversification challenges in setting 2050 net-zero carbon emission targets. Singapore launched its national climate strategy – the Singapore Green Plan 2030 – in February 2021, and focuses on increased sustainability, carbon emissions reductions, fostering job and investment opportunities, and increasing climate resilience and food security.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 4 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 8 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 270,807 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 54,920 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2021 $373,346 2020 $339,998  

 

www.worldbank.org/en/country

 

 

Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020 $370,115 2020 $270,800  

BEA data available at https://apps.bea.gov/international/factsheet/

Host country’s FDI in the United States ($M USD, stock positions) 2020 $26,668 2020 $27,300  

BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data

Total inbound stock of FDI as % host GDP 2020 449.6% 2020 545.7%  

UNCTAD data available at

https://unctad.org/topic/investment/world-investment-report

* Source for Host Country Data: https://www.singstat.gov.sg/ 

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 1,465,070 100% Total Outward 727,627 100%
United States 370,090 25% Mainland China 106,406 15%
Cayman Islands 172,690 12% Netherlands 73,272 10%
British Virgin Islands 114,520 8% India 46,240 6%
Japan 97,930 7% United Kingdom 45,413 6%
United Kingdom 88,900 6% Indonesia 44,589 6%
“0” reflects amounts rounded to +/- USD 500,000.

Thailand

Executive Summary

Thailand is an upper middle-income country with a half-trillion-dollar economy, generally pro-investment policies, and well-developed infrastructure. General Prayut Chan-o-cha was elected by Parliament as Prime Minister on June 5, 2019. Thailand celebrated the coronation of King Maha Vajiralongkorn May 4-6, 2019, formally returning a King to the Head of State of Thailand’s constitutional monarchy. Despite some political uncertainty, Thailand continues to encourage foreign direct investment as a means of promoting economic development, employment, and technology transfer. In recent decades, Thailand has been a major destination for foreign direct investment, and hundreds of U.S. companies have invested in Thailand successfully. Thailand continues to encourage investment from all countries and seeks to avoid dependence on any one country as a source of investment.

The Foreign Business Act (FBA) of 1999 governs most investment activity by non-Thai nationals. Many U.S. businesses also enjoy investment benefits through the U.S.-Thai Treaty of Amity and Economic Relations, signed in 1833 and updated in 1966. The Treaty allows U.S. citizens and U.S. majority-owned businesses incorporated in the United States or Thailand to maintain a majority shareholding or to wholly own a company or branch office located in Thailand, and engage in business on the same basis as Thai companies (national treatment). The Treaty exempts such U.S.-owned businesses from most FBA restrictions on foreign investment, although the Treaty excludes some types of businesses. Notwithstanding their Treaty rights, many U.S. investors choose to form joint ventures with Thai partners who hold a majority stake in the company, leveraging their partner’s knowledge of the Thai economy and local regulations.

The Thai government maintains a regulatory framework that broadly encourages investment. Some investors have nonetheless expressed views that the framework is overly restrictive, with a lack of consistency and transparency in rulemaking and interpretation of law and regulations.

The Board of Investment (BOI), Thailand’s principal investment promotion authority, acts as a primary conduit for investors. BOI offers businesses assistance in navigating Thai regulations and provides investment incentives to qualified domestic and foreign investors through straightforward application procedures. Investment incentives include both tax and non-tax privileges.

The Thai government is actively pursuing foreign investment related to clean energy, electric vehicles, and related industries. Thailand is currently developing a National Energy Plan that will supersede the current Alternative Energy Development Plan that sets a 20 percent target for renewable energy by 2037. Revised plans are expected to increase clean energy targets in line with the Prime Minister’s November 2021 announcement during COP26 that Thailand will increase its climate change targets, as well as domestic policies focused on sustainability, including the “Bio-Circular Green Economy” model.

The government passed laws on cybersecurity and personal data protection in 2019; as of March 2022, the cybersecurity law has been enforced while the personal data protection law is still in the process of drafting implementing regulations. The government unveiled in January 2021 a Made in Thailand (MiT) initiative that will set aside 60 percent of state procurement budget for locally made products. As of March 2022, Federation of Thai Industry registered 31,131 products that should benefits from the MiT initiative.

The government launched its Eastern Economic Corridor (EEC) development plan in 2017. The EEC is a part of the “Thailand 4.0” economic development strategy introduced in 2016. Many planned infrastructure projects, including a high-speed train linking three airports, U-Tapao Airport commercialization, and Laem Chabang and Mab Ta Phut Port expansion, could provide opportunities for investments and sales of U.S. goods and services. In support of its “Thailand 4.0” strategy, the government offers incentives for investments in twelve targeted industries: next-generation automotive; intelligent electronics; advanced agriculture and biotechnology; food processing; tourism; advanced robotics and automation; digital technology; integrated aviation; medical hub and total healthcare services; biofuels/biochemical; defense manufacturing; and human resource development.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 110 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 43 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 17,450 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 7,040 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2021 $490,297 2020 $501,644 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020 $18,499 2020 $17,450 BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2020 $8,724 2020 $1,810 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2020 59.3% 2019 46.8% UNCTAD data available at

https://stats.unctad.org/handbook/EconomicTrends/Fdi.html

* Source for Host Country Data: Bank of Thailand (http://bot.or.th/)

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $290,774 100% Total Outward $173,437 100%
Japan $94,929 32.7% China, P.R.: Hong Kong $31,836 18.4%
Singapore $53,612 18.4% Singapore $20,910 12.1%
China, P.R.: Hong Kong $35,141  12.1% The Netherlands $12,711   7.3%
United States $18,499   6.4% Indonesia $10,757   6.2%
The Netherlands $13,849   4.8% Vietnam   $9,545   5.5%
“0” reflects amounts rounded to +/- USD 500,000.

The Philippines

Executive Summary

The Philippines remains committed to improving its overall investment climate and recovering from the COVID-19 pandemic. Sovereign credit ratings remain at investment grade based on the country’s historically sound macroeconomic fundamentals, but one credit rating agency has updated its ratings with a negative outlook indicating a possible downgrade within the next year due to increasing public debt and inflationary pressures on the economy. Foreign direct investment (FDI) inflows rebounded to USD 10.5 billion, up 54 percent from USD 6.8 billion in 2020 and surpassing the previous high of USD 10.3 billion in 2017, according to the Bangko Sentral ng Pilipinas (the Philippine Central Bank). While 2021 was a record year for inward FDI, since 2010 the Philippines has lagged behind regional peers in the Association of Southeast Asian Nations (ASEAN) in attracting foreign investment. The Philippines ranked sixth out of ten ASEAN economies for total FDI inflows in 2020, and last among ASEAN-5 economies (which include Indonesia, Malaysia, the Philippines, Singapore, and Thailand) in cumulative FDI inflows from 2010-2020, according to World Bank data. The majority of FDI equity investments in 2021 targeted the manufacturing, energy, financial services, and real estate sectors. (https://www.bsp.gov.ph/SitePages/MediaAndResearch/MediaDisp.aspx?ItemId=6189)

Poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, and corruption are major disincentives to investment. The Philippines’ complex, slow, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes. Traffic in major cities and congestion in the ports remain barriers to doing business. The Philippines made progress in addressing foreign ownership limitations that has constrained investment in many sectors, through legislation such as the amendments to the Public Services Act, the Retail Trade Liberalization Act, and Foreign Investment Act, that were signed into law in 2022.

Amendments to the Public Services Act open previously closed sectors of the economy to 100 percent foreign investment. The amended law maintains foreign ownership restrictions in six “public utilities:” (1) distribution of electricity, (2) transmission of electricity, (3) petroleum and petroleum products pipeline transmission systems, (4) water pipeline distribution systems, (5) seaports, and (6) public utility vehicles. The newly approved Retail Trade Liberalization Act aims to boost foreign direct investment in the retail sector by reducing the minimum per-store investment requirement for foreign-owned retail trade businesses from USD 830,000 to USD 200,000. It will also reduce the quantity of locally manufactured products foreign-owned stores are required to carry. The Foreign Investment Act will ease restrictions on foreigners practicing their professions in the Philippines and grant them access to investment areas that were previously reserved for Philippine nationals, particularly in the education, technology, and retail sectors.

In addition, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act signed in March 2021 reduced the corporate income tax from ASEAN’s highest rate of 30 percent to 25 percent for large firms, and 20 percent for small firms. The rate for large firms will be gradually lowered to 20 percent by 2025. CREATE could attract new business investment, although some foreign investors have concerns about the phase-out of their incentive benefits, which are replaced by the performance-based and time-bound nature of the incentives scheme adopted in the measure.

While the Philippine bureaucracy can be slow and opaque in its processes, the business environment is notably better within the special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority (PEZA), known for its regulatory transparency, no red-tape policy, and one-stop shop services for investors. Finally, the Philippines’ infrastructure spending under the Duterte Administration’s “Build, Build, Build” infrastructure program is estimated to have exceeded USD100 billion over the 2017-2022 period.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 117 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 51 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 5,199 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD3,430 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

Vietnam

Executive Summary

Foreign direct investment (FDI) continues to be of vital importance to Vietnam, as a means to support post-COVID economic recovery and drive the government’s aspirations to achieve middle-income status by 2045. As a result, the government has policies in place that are broadly conducive to U.S. investment. Factors that attract foreign investment include government commitments to fight climate change issues, free trade agreements, political stability, ongoing economic reforms, a young and increasingly urbanized and educated population, and competitive labor costs. According to the Ministry of Planning and Investment (MPI), which oversees investment activities, at the end of December 2021 Vietnam had cumulatively received $241.6 billion in FDI.

In 2021, Vietnam’s once successful “Zero COVID” approach was overwhelmed by an April outbreak that led to lengthy shutdowns, especially in manufacturing, and steep economic costs. However, the government reacted quickly to launch a successful national vaccination campaign, which enabled the country to switch from strict lockdowns to a “living with COVID” policy by the end of the year. The Government of Vietnam’s fiscal stimulus, combined with global supply chain shifts, resulted in Vietnam receiving $19.74 billion in FDI in 2021 – a 1.2 percent decrease over the same period in 2020. Of the 2021 investments, 59 percent went into manufacturing – especially in electronics, textiles, footwear, and automobile parts industries; 8 percent in utilities and energy; 15 percent in real estate; and smaller percentages in other industries. The government approved the following major FDI projects in 2021: Long An I and II LNG Power Plant Project ($3.1 billion); LG Display Project in Hai Phong ($2.15 billion); O Mon II Thermal Power Plant Factory in Can Tho ($1.31 billion); Kraft Vina Paper Factory in Vinh Phuc ($611.4 million); Polytex Far Eastern Vietnam Co., Ltd Factory Project ($610 million).

At the 26th United Nations Climate Change Conference (COP26) Vietnam’s Prime Minister Pham Minh Chinh made an ambitious pledge to reach net zero emissions by 2050, by increasing use of clean energy and phasing out coal-fueled power generation. In January 2022 Vietnam introduced new regulations that place responsibility on producers and importers to manage waste associated with the full life cycle of their products. The Government also issued a decree on greenhouse gas mitigation, ozone layer protection, and carbon market development in Vietnam.

Vietnam’s recent moves forward on free trade agreements make it easier to attract FDI by providing better market access for Vietnamese exports and encouraging investor-friendly reforms. The EU-Vietnam Free Trade Agreement (EVFTA) entered into force August 1, 2020. Vietnam signed the UK-Vietnam Free Trade Agreement entered into force May 1, 2021. The Regional Comprehensive Economic Partnership (RCEP) entered into force January 1, 2022 for ten countries, including Vietnam. These agreements may benefit U.S. companies operating in Vietnam by reducing barriers to inputs from and exports to participating countries, but also make it more challenging for U.S. exports to Vietnam to compete against competitors benefiting from preferential treatment.

In February 2021, the 13th Party Congress of the Communist Party approved a ten-year economic strategy that calls for shifting foreign investments to high-tech industries and ensuring those investments include provisions relating to environmental protection. On January 1, 2021, Vietnam’s Securities Law and new Labor Code Law, which the National Assembly originally approved in 2019, came into force. The Securities Law formally states the government’s intention to remove foreign ownership limits for investments in most industries. The new Labor Code includes several updated provisions including greater contract flexibility, formal recognition of a greater part of the workforce, and allowing workers to join independent workers’ rights organizations, though key implementing decrees remain pending. On June 17, 2020, Vietnam passed a revised Law of Investment and a new Public Private Partnership Law, both designed to encourage foreign investment into large infrastructure projects, reduce the burden on the government to finance such projects, and increase linkages between foreign investors and the Vietnamese private sector.

Despite a comparatively high level of FDI inflow as a percentage of GDP – 7.3 percent in 2020 – significant challenges remain in Vietnam’s investment climate. These include widespread corruption, entrenched State Owned Enterprises (SOE), regulatory uncertainty in key sectors like digital economy and energy, weak legal infrastructure, poor enforcement of intellectual property rights (IPR), a shortage of skilled labor, restrictive labor practices, and the government’s slow decision-making process.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 44 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 2,820 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 2,650 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

Investment Climate Statements
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