Source: ANZ Reserch
Foreign direct investment in the CLMV economies
- Over the past few years, the economies of Cambodia, Laos, Myanmar, and Vietnam (CLMV) have been beneficiaries of diversification, and in some cases relocation of production bases out of China. The ongoing reorganisation in regional production networks is set to accelerate due to the US-China trade tensions.
- The CLMV economies will undoubtedly receive renewed FDI interest in coming years, which will help support growth and development. However, there is also increasing awareness about the need to enhance the quality of FDI inflows and benefits accruing to domestic enterprises in the form of spillovers.
- Already, Vietnam has signalled its commitment to reforms that will enhance its ‘absorptive capacity’. Its regional peers will have to follow suit to sustain and grow their investment attractiveness.
- For FX, we continue to expect the Thai baht to outperform its Mekong peers, as domestic growth remains robust and policy normalisation kick-starts. For the rest of the region, we factor in further weakness next year, albeit modestly than in 2018 as domestic fundamentals remain stretched amid tighter global liquidity.
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