Competing for Business: Sustainable Development Impacts of Investment Incentives in Southeast Asia

The report analyzes the impact of investment incentives on economic growth, employment, and technology transfer in Southeast Asia. It finds that while incentives helped attract FDI in countries like Singapore, Malaysia, and Thailand, they are not sufficient on their own, as factors like political stability and infrastructure are equally critical. The document notes that technology spillovers vary by national capacity and that the 'China effect' on FDI diversion is often overestimated. It concludes that region-wide regulations and transparency are needed to prevent costly bidding wars and ensure sustainable development.

• Investment incentives, particularly tax incentives and reduced duties on capital goods and raw materials for export production, have proliferated in Southeast Asia, a trend initiated by Singapore in the 1960s.
• While incentives in Singapore, Malaysia, and Thailand helped attract FDI and spur export growth, they are not a sufficient condition for attracting investment; political stability, infrastructure, the macroeconomic environment, and institutional development are equally or more important.
• The ability of FDI to provide new technology and know-how depends on local capacities and domestic linkages; these spillovers are significant in Singapore and Malaysia but limited in the region's least-developed countries.
• FDI has contributed to job creation in Southeast Asia, especially in manufacturing, though employment gains are reduced when investments are capital-intensive or have limited local economic linkages.
• Concerns that China diverts FDI from Southeast Asia have driven investment regime liberalization, but evidence suggests the 'China effect' is often overestimated and that China's growth has sometimes helped attract investment to Southeast Asian countries within regional production networks.
• To avoid costly bidding wars and competition distortions, the region requires region-wide regulations, increased transparency, and coordination of incentive schemes.

APA

Baumüller,, H. (2009). Competing for Business: Sustainable Development Impacts of Investment Incentives in Southeast Asia. International Institute for Sustainable Development. https://www.iisd.org/publications/report/competing-business-sustainable-development-impacts-investment-incentives

Chicago

Baumüller,, Heike. Competing for Business: Sustainable Development Impacts of Investment Incentives in Southeast Asia. International Institute for Sustainable Development, 2009. https://www.iisd.org/publications/report/competing-business-sustainable-development-impacts-investment-incentives.

Wikipedia

{{cite report |last1=Baumüller, |first1=Heike |title=Competing for Business: Sustainable Development Impacts of Investment Incentives in Southeast Asia |publisher=International Institute for Sustainable Development |date=6 March 2009 |url=https://www.iisd.org/publications/report/competing-business-sustainable-development-impacts-investment-incentives |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{baumller2009competing, author = {Baumüller,, Heike}, title = {{Competing for Business: Sustainable Development Impacts of Investment Incentives in Southeast Asia}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = mar, url = {https://www.iisd.org/publications/report/competing-business-sustainable-development-impacts-investment-incentives}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }