OECD Review of Investment Policies in ASEAN

Executive summary

The Association of Southeast Asian Nations (ASEAN) has demonstrated sustained economic dynamism over recent decades, establishing itself as a major hub for trade and investment. Growth averaged around 3.6% during 2021-2025, consistently outpacing OECD economies and supporting convergence towards middle-income levels. However, the outlook is becoming more uncertain amid rising geopolitical tensions, shifting trade patterns and a more complex global environment. As ASEAN economies develop and demographic trends become less favourable, sustaining growth will increasingly depend on productivity gains and economic upgrading. At the same time, the green and digital transitions are reshaping development pathways, creating both new opportunities and challenges. They offer scope for innovation, diversification and higher value‑added activities, while also requiring significant investment and well‑designed policy frameworks.

In this evolving context, foreign direct investment (FDI) remains a central pillar of ASEAN’s growth model. ASEAN has consolidated its position as a leading destination for FDI, accounting for roughly 15% of global inflows in 2025, a share higher than in other emerging regions. FDI plays a central role in driving structural transformation: about one-third of greenfield investment between 2021 and 2025 was directed towards medium- and high-technology manufacturing, while over half targeted digital sectors. Investment in renewable energy is also expanding, although it remains more modest in scale, accounting for around 8% of total investment. Over the same period, greenfield FDI generated approximately 1.6 million jobs, equivalent to 6% of net employment growth and 13% of global FDI-related job creation. Beyond employment, foreign firms make substantial contributions to productivity, innovation, wages, and skills development, thereby supporting broader economic upgrading.

ASEAN is well positioned to more effectively leverage FDI to support sustainable and resilient growth. Unlocking this potential requires coherent, well-coordinated policy frameworks that align investment flows with sustainable development priorities. This entails shifting the focus from the volume of investment to its quality, ensuring that FDI delivers long-term value, while also managing emerging vulnerabilities to safeguard economic resilience and long-term stability.

Key findings and policy messages

Policy frameworks across the region are evolving in this direction. There is growing alignment between investment strategies and broader development priorities, including those linked to the green and digital transitions. At the same time, policy tools such as tax incentives remain widely used, often in broad‑based forms. While these can support investment attraction, their effectiveness and fiscal implications depend on their design and targeting. Ensuring that such instruments are used strategically, alongside continued improvements in the overall investment climate, can help strengthen their contribution to development outcomes. Greater transparency, co-ordination and evaluation can also support more informed policy choices.

Regulatory environments across AMS have become more open and increasingly aligned with international standards, enhancing the region’s attractiveness to investors. However, restrictions remain in key sectors, particularly services and infrastructure, that are critical for advancing green and digital transitions. Strengthening regulatory clarity, predictability, and coherence would further boost investor confidence, while maintaining a balanced approach that protects investors without limiting governments’ capacity to pursue public policy objectives.

At the same time, a more complex global landscape is bringing new policy considerations to the fore. As geopolitical tensions and technological change reshape the global economy, attention to investment‑related risks is increasing. Across ASEAN, approaches to managing such risks, particularly those linked to critical infrastructure, technologies and supply chains, remain diverse and often rely on existing policy instruments. Ensuring that these frameworks are transparent, proportionate and adaptable may help address evolving risks while preserving an open and attractive investment environment. In this respect, regional dialogue and co-operation can support greater consistency and a shared understanding of emerging challenges.

Alongside these developments, expectations around responsible business conduct are gaining prominence. ASEAN has made progress in developing regional and national initiatives, reflecting a stronger emphasis on environmental, social and governance considerations. However, implementation remains uneven, and gaps persist between policy ambition and practice. Strengthening coherence across frameworks and encouraging wider adoption of risk‑based approaches to due diligence can help ensure that investment contributes to sustainable development objectives while addressing potential adverse impacts. Leveraging existing policy tools more effectively may also support the integration of responsible business practices.