Session 7. The Analysis of BRICS Business in Southeast Asia FDI from the BRICS This collection was collated by Yuriy Zaytsev as teaching material on the FDI from the BRICS course at the Institute of Development Studies.

Questions of the session The factors, which determine international business modes of engagement for development in Southeast Asia; To what extent do the BRICS (as a group) differ in their approach to investment compared with investors from industrial countries in Southeast Asia? The volumes of FDI among investors, the regions, sectors and markets of engagement and concentration in countries of Southeast Asia; The determinants of BRICS business modes of engagement and market accession, and mechanisms to overcome capital market imperfections in countries of Southeast Asia; BRICS business influence on the socioeconomic development of the poorest nations in Southeast Asia.

Investments flows Capital inflows and volatility Source: ADB estimates using data from CEIC Data Company (accessed 22 August 2013) Source: Foreign Investment Agency – Ministry of Planning and Investment. New investments in Viet Nam, 2011– Top 20 source countries By investing country and region FDI inflows in selected ASEAN economies, USD million Source: Bank Indonesia and World Bank.

Effects of FDI on investment in individual developing countries, 1970–20066 Crowding inNeutral effect Republic of KoreaChina PakistanIndonesia ThailandMalaysia Philippines Sri Lanka FDI regimes in Asia have remained the least liberal in the developing world Several Asian countries still practice screening of investment applications and grant differential incentives to different firms; Some types of investment have remained prohibited for most of the period under review;

Investment climate (1) Note: Indicators range from –2.5 to 2.5 with higher numbers denoting better governance quality. Regional score is the simple average of the country scores. Governance indicators in developing Asia relative to the OECD Source: ADB estimates using data from Hulme, D., A. Savoia, and K. Sen Governance as a Global Development Goal? Towards Measures for the Post 2015 Development Agenda. Effective States and Inclusive Development Working Paper. University of Manchester. World Governance Indicators, 2011 Source: ADB estimates using data from World Bank, World Governance Indicators online database (accessed 6 September 2013).

Investment Climate (2) Development indicators in Asia and the Pacific Sources: United Nations Development Programm Human Development Indicators online database; World Bank. World Development Indicators online database; World Economic Forum. Global Competitiveness Index data platform (all accessed 20 September 2013). Source: Asian Development Outlook database Inflation, South Asia

The main stakeholders Current and emerging opportunities New Zealand AANZFTA provides for the progressive reduction or, for most products, elimination of tariffs facing Australian goods exports to ASEAN countries over a transition period, and the elimination of all Australian tariffs on imports from AANZFTA parties. AANZFTA affects all goods and services imports, exports and investments between Australia, New Zealand and the ten ASEAN countries. It is recommended that Victorian companies familiarise themselves with how their products and services are impacted by the FTA and what benefits and responsibilities are required from them when doing business in the region.

Prospects for BRICS business Specific sector opportunities: Financial Services: – funds management, Islamic finance and banking services: Key markets: Malaysia, Singapore, and Indonesia. Automotive industry: – components, research and development (technical collaborations), and engineering and design services. Key markets: Malaysia, Indonesia, Thailand, Singapore. Food and Beverage: – dairy nutriceuticals, meat and meat processing (including halal), and tradable services: Key markets: Indonesia, Malaysia, Philippines, Vietnam. International Education: – vocational education and training, ELICOS, and higher education: Key markets: Vietnam, Malaysia, Indonesia, Thailand. Information and Communications Technology: – e-Learning, wireless and broadband technology, mobile software and applications, and telecommunications Key markets: Malaysia and Singapore. Infrastructure and Services: – infrastructure, building and construction, urbanisation, corporate capacity building (business services), transport and logistics services, water technology, and oil and gas industry (technology supply and services): Key markets: Malaysia, Singapore, Indonesia and Vietnam.

Problems Infrastructure investment will continue to play a major role and have a major impact on ongoing economic growth across ASEAN: – During 2006–2015 the ASEAN countries would require infrastructure investments amounting to USD500 billion with an average investment of USD50 billion+ per year. (Asian Development Bank Institute).