The chemical industry in South-East Asia-momentum and potential for attracting foreign investment

Southeast Asia has a total population of 0.672 billion people, accounting for 8.4 per cent of the global population, making it the third most populous region in the world. Economic activity in South-East Asia is currently strong, with a GDP of $10.7 trillion at purchasing power parity and an average annual growth rate of 6 per cent. The GDP of ASEAN countries will grow by about 5-6% per year, of which exports will reach 1.9 trillion US dollars and imports will reach 1.8 trillion US dollars in 2022. These figures show that the balance of payments is in surplus due to the trade surplus.

The chemical industry (CNHC) contributes 3.4 percent to the total GDP of Southeast Asian countries. Total chemicals revenues for countries in the region will reach $48.7 billion in 2023, with general polymers and PVC revenues reaching $12.2 billion and $1.4 billion, respectively. The development of chemical production and the increase in chemical exports have made a significant contribution to the GDP of ASEAN countries such as the Philippines and Malaysia, highlighting the importance of the chemical industry to the region's economy. The IT industry here has demonstrated its ability to meet the growth in demand and its potential to create wealth over the next decade. Therefore, Southeast Asia has the ability to become a center for downstream chemical products.

Start engine

the Southeast Asian chemicals market is expected to grow at an average annual rate of 5.3 percent in the coming years, driven by the following trends:

-Reduce chemical imports and increase self-reliance: Southeast Asian countries are working to increase self-reliance, reduce dependence on chemical imports, develop regional production needs and stimulate demand in the chemical industry. Growth in domestic production leads to increased employment, a shift to self-reliance in trade, reduced foreign exchange outflows and increased national income.

-Development as an export hub: South-East Asia is transforming into a major export hub, resulting in increased demand for chemicals, especially in the industrial sector. This development will not only help strengthen the economy by improving the balance of payments, but will also serve as a growth engine for logistics, manufacturing and infrastructure development. The growth of the chemical industry has also contributed to increased industrial activity, job creation and technological progress.

-Improved market access: Improved market access has led to increased FDI flows in the region. The investment funds support the development and growth of CNHC. FDI tends to promote the creation of new industries, the expansion of existing industries and the creation of high-income jobs. Investment flows also stimulated economic activity in construction, services and other supporting industries, thereby further contributing to GDP growth.

-Growth-priority policies: Southeast Asian governments aim to support and create an enabling environment for the growth and development of the chemical industry, including supportive regulations, incentives and infrastructure development. These measures will help reduce operating costs, attract investment and promote the development of domestic industries. The growth of the chemical industry will have a multifaceted impact, promoting the development of agriculture, industrial production, pharmaceuticals and other industries, thereby contributing to the overall growth of GDP.

Potential to attract foreign direct investment

after a difficult 2023 with uncertain prospects for recovery, the global economy in 2024 continues to be affected by war, the tense "economic iron curtain" between China and the United States, and persistent inflation.

However, in recent years, the ten ASEAN countries have achieved some important victories in attracting investment: in 2022, foreign direct investment (FDI) in the ASEAN region reached a record high of US $224 billion billion. In 2023, the FDI attracted by ASEAN countries continued to reach a record high of US $230 billion, of which the manufacturing industry attracted more than US $50 billion.
Today, ASEAN countries are emerging as the world's leading foreign direct investment destinations, indirectly benefiting from the strong development of concentrated production and consumption centers in Asia. At the same time, ASEAN itself is an important engine of economic growth: ASEAN is expected to grow from the fifth largest economic region in the world to the fourth largest economic region by 2030.

ASEAN has also surpassed China as the number one destination for manufacturing investment in OECD countries, as international investors use Southeast Asia to mitigate the risk of US-China tariff retaliation. According to the Boston Consulting Group, ASEAN has the potential to attract $600 billion in investment capital each year to expand production activities.

Against this background, chemical production is also shifting to Asia. Over the past three years, investment flows have shifted from Western Europe to the Asia-Pacific region. As a result, the size of the chemical industry in Southeast Asian countries is expected to grow from $239 billion in 2022 to $448 billion in 2030.

Singapore is one of Asia's Four Little Dragons (the other three are Hong Kong, South Korea and Taiwan) and has a strong attraction for foreign direct investment, especially in the high-tech and R & D fields. Singapore stands out for its high export and import volumes, attracting $141 billion in foreign direct investment, the highest in the region.

At the same time, emerging economies such as Indonesia, Malaysia, the Philippines, Thailand and Vietnam are growing rapidly and are expected to rank among the top in the world by 2030. The Philippines and Vietnam are making huge leaps, with the two countries expected to be the 19th and 20th largest economies in the world by 2050.