An official website of the United States Government Here's how you know

Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Indonesia

Executive Summary

Indonesia’s population of 268 million, GDP over USD 1 trillion, growing middle class, and stable economy all serve as attractive features to U.S. investors; however, different entities have noted that investing in Indonesia remains challenging.  Since 2014, the Indonesian government under President Joko (“Jokowi”) Widodo, now in his second and final five-year term,  has prioritized boosting infrastructure investment and human capital development to support Indonesia’s economic growth goals.  As he began his second term in October 2019, President Jokowi announced sweeping plans to pass omnibus laws aimed at improving Indonesia’s economic competitiveness by lowering corporate taxes, reforming rigid labor laws, and reducing bureaucratic and regulatory barriers to investment.  However, with the fallout from the Covid-19 pandemic, the government shifted its focus to providing fiscal and monetary stimulus to support the economy.  Regardless of the outcome of further reforms, factors such as a decentralized decision-making process, legal and regulatory uncertainty, economic nationalism, and powerful domestic vested interests in both the private and public sectors, create a complex investment climate.  Other factors relevant to investors include: government requirements, both formal and informal, to partner with Indonesian companies, and to manufacture or purchase goods and services locally; restrictions on some imports and exports; and pressure to make substantial, long-term investment commitments.  Despite recent limits placed on its authority, the Indonesian Corruption Eradication Commission (KPK) continues to investigate and prosecute corruption cases.  However, investors still cite corruption as an obstacle to pursuing opportunities in Indonesia.

Other barriers to foreign investment that have been reported include difficulties in government coordination, the slow rate of land acquisition for infrastructure projects, weak enforcement of contracts, bureaucratic inefficiency, and ambiguous legislation in regards to tax enforcement. Businesses also face difficulty from changes to rules at government discretion with little or no notice and opportunity for comment, and lack of consultation with stakeholders in the development of laws and regulations.  Investors have noted that many new regulations are difficult to understand and often not properly communicated to those affected.  In addition, companies have complained about the complexity of inter-ministerial coordination that continues to delay some processes important to companies, such as securing business licenses and import permits.  In response, in July 2018 the government launched a “one stop shop” for licenses and permits via an online single submission (OSS) system at the Indonesia Investment Coordinating Board (BKPM).  Indonesia restricts foreign investment in some sectors through a Negative Investment List that Indonesian officials have indicated will be scrapped as part of omnibus legislation.  The latest version, issued in 2016, details the sectors in which foreign investment is restricted and outlines the foreign equity limits in a number of other sectors.  The 2016 Negative Investment List allows greater foreign investments in some sectors, including e-commerce, film, tourism, and logistics.  In health care, the 2016 list loosens restrictions on foreign investment in categories such as hospital management services and manufacturing of raw materials for medicines, but tightens restrictions in others such as mental rehabilitation, dental and specialty clinics, nursing services, and the manufacture and distribution of medical devices. Companies have reported that energy and mining still face significant foreign investment barriers.

Indonesia began to abrogate its more than 60 existing Bilateral Investment Treaties (BITs) in 2014, allowing some of the agreements to expire in order to be renegotiated.  The United States does not have a BIT with Indonesia.

Despite the challenges that industry has reported, Indonesia continues to attract significant foreign investment.  Singapore, Netherlands, United States, Japan and Hong Kong were among the top sources of foreign investment in the country in 2018 (latest available full-year data). Private consumption is the backbone of the largest economy in ASEAN, making Indonesia a promising destination for a wide range of companies, ranging from consumer products and financial services, to digital start-ups and franchisors.  Indonesia has ambitious plans to improve its infrastructure with a focus on expanding access to energy, strengthening its maritime transport corridors, which includes building roads, ports, railways and airports, as well as improving agricultural production, telecommunications, and broadband networks throughout the country. Indonesia continues to attract U.S. franchises and consumer product manufacturers.  UN agencies and the World Bank have recommended that Indonesia do more to grow financial and investor support for women-owned businesses, noting obstacles that women-owned business sometimes face in early-stage financing.

Table 1
Measure Year Index or Rank Website Address
TI Corruption Perceptions index 2019 85 of 180 https://www.transparency.org/cpi2019
World Bank’s Doing Business Report “Ease of Doing Business” 2020 73 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2019 85 of 126 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 $11,140 M  https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2018 $3,840 https://data.worldbank.org/indicator/
NY.GNP.PCAP.CD?locations=ID

Malaysia

Executive Summary

Since an unexpected political transition in March, Malaysia’s new government under Prime Minister Muhyiddin Yassin has focused its attention on the unprecedented set of challenges facing Malaysia in 2020, including the COVID-19 pandemic and a sharp drop in global oil prices.  In response to the economic damage wrought by COVID-19 restrictions, the Malaysian government has approved over USD 60 billion in stimulus measures designed to protect Malaysian citizens and businesses, and has laid out plans to prioritize the country’s economic recovery following the lockdown period for the remainder of 2020 and into 2021.

The Malaysian government has traditionally encouraged foreign direct investment (FDI), and the Prime Minister and many cabinet ministers have signaled their openness to foreign investment since taking office.  Government officials have called for investments in high technology and research and development, focusing on artificial intelligence, Internet of Things device design and manufacturing, smart cities, electric vehicles, automation of the manufacturing industry, telecommunications infrastructure, and other “catalytic sub-sectors,” such as aerospace.  The government also seeks to further develop traditional sectors such as oil and gas; palm oil and rubber; wholesale and retail operations, including e-commerce; financial services; tourism; electrical and electronics (E&E); business services; communications content and infrastructure; education; agriculture; and health care.

Under the previous administration, inbound FDI had been steady in nominal terms, though Malaysia’s performance in attracting FDI relative to both earlier decades and the rest of the Association of Southeast Asian Nations (ASEAN) had slowed.  According to the 2013 Organization for Economic Cooperation and Development (OECD) Investment Policy Review of Malaysia, FDI to Malaysia began to decline in 1992, and private investment overall started to slide in 1997 following the Asian financial crises.  In the intervening years, domestic demand has increasingly been the source of Malaysia’s economic performance, with foreign investment receding as a driver of GDP growth.  The OECD concluded in its Review that Malaysia’s FDI levels in recent years had reached record high levels in absolute terms but were at low levels as a percentage of GDP.  The current government estimates that GDP will shrink 0.5 percent in 2020.

The business climate in Malaysia is generally conducive to U.S. investment.  Increased transparency and structural reforms that will prevent future corrupt practices could make Malaysia a more attractive destination for FDI in the long run.  The largest U.S. investments are in the oil and gas sector, manufacturing, and financial services.  Firms with significant investment in Malaysia’s oil and gas and petrochemical sectors include ExxonMobil, Caltex, ConocoPhillips, Hess Oil, Halliburton, Dow Chemical and Eastman Chemicals.  Major semiconductor manufacturers, including ON Semiconductor, Texas Instruments, Intel, and others have substantial operations in Malaysia, as do electronics manufacturers Western Digital, Honeywell, St. Jude Medical Operations (medical devices), and Motorola.  In recent years Malaysia has attracted significant investment in the production of solar panels, including from U.S. firms.  Many of the major Japanese consumer electronics firms (Sony, Fuji, Panasonic, Matsushita, etc.) have facilities in Malaysia.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 51 of 183 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 12 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 35 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $13,581 https://www.bea.gov/system/
files/2019-07/fdici0719.pdf
World Bank GNI per capita 2018 $10,591 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

Thailand

Executive Summary

Thailand, the second largest economy in the Association of Southeast Asian Nations (ASEAN), is an upper middle-income country with pro-investment policies and well-developed infrastructure. General Prayut Chan-o-cha was elected by Parliament as Prime Minister on June 5, 2019. Thailand celebrated the coronation of King Maha Vajiralongkorn May 4-6, 2019, formally returning a King to the Head of State of Thailand’s constitutional monarchy. Despite some political uncertainty, Thailand continues to encourage foreign direct investment as a means of promoting economic development, employment, and technology transfer. In recent decades, Thailand has been a major destination for foreign direct investment, and hundreds of U.S. companies have invested in Thailand successfully. Thailand continues to encourage investment from all countries and seeks to avoid dependence on any one country as a source of investment.

The Foreign Business Act (FBA) of 1999 governs most investment activity by non-Thai nationals. Many U.S. businesses also enjoy investment benefits through the U.S.-Thai Treaty of Amity and Economic Relations, signed in 1833 and updated in 1966. The Treaty allows U.S. citizens and U.S. majority-owned businesses incorporated in the United States or Thailand to maintain a majority shareholding or to wholly own a company, branch office, or representative office located in Thailand, and engage in business on the same basis as Thai companies (national treatment). The Treaty exempts such U.S.-owned businesses from most FBA restrictions on foreign investment, although the Treaty excludes some types of business. Notwithstanding their Treaty rights, many U.S. investors choose to form joint ventures with Thai partners who hold a majority stake in the company, leveraging their partner’s knowledge of the Thai economy and local regulations.

The Thai government maintains a regulatory framework that broadly encourages investment. Some investors have nonetheless expressed views that the framework is overly restrictive, with a lack of consistency and transparency in rule-making and interpretation of law and regulations.

The Board of Investment (BOI), Thailand’s principal investment promotion authority, acts as a primary conduit for investors. BOI offers businesses assistance in navigating Thai regulations and provides investment incentives to qualified domestic and foreign investors through straightforward application procedures. Investment incentives include both tax and non-tax privileges.

The Thai government in 2019 passed new laws and regulations on cybersecurity and personal data protection that have raised concerns about Thai authorities’ broad power to potentially demand confidential and sensitive information, introducing new uncertainties in the technology sector. IT operators and analysts have expressed concern with private companies’ legal protections, ability to appeal, or ability to limit such access. As of March 2020, the government is still in the process of considering and implementing regulations to enforce laws on Cyber Security and Personal Data Protection.

Gratuity payments to civil servants responsible for regulatory oversight and enforcement remain a common practice. Firms that refuse to make such payments can be placed at a competitive disadvantage to other firms that do engage in such practices. The government launched its Eastern Economic Corridor (EEC) development plan in 2017. The EEC is a part of the “Thailand 4.0” economic development strategy introduced in 2016. Many planned infrastructure projects, including a high-speed train linking three airports, U-Tapao Airport commercialization, and Laem Chabang Port expansion, could provide opportunities for investments and sales of U.S. goods and services. In support of its “Thailand 4.0” strategy, the government offers incentives for investments in twelve targeted industries: next-generation automotive; intelligent electronics; advanced agriculture and biotechnology; food processing; tourism; advanced robotics and automation; digital technology; integrated aviation; medical hub and total healthcare services; biofuels/biochemical; defense manufacturing; and human resource development.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 36/ 101 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 21 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 43 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 USD 17,667 http://www.bea.gov/intl-trade-investment/
direct-investment-country-and-industry
World Bank GNI per capita 2018 USD 6,610 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

Vietnam

Executive Summary

Vietnam continues to welcome foreign direct investment (FDI) and the government has policies in place that are broadly conducive to U.S. investment. Factors that attract foreign investment to Vietnam include ongoing economic reforms, new free trade agreements, a young and increasingly urbanized population, political stability, and inexpensive labor costs.

Vietnam attracted USD 143 billion in cumulative FDI over the past 10 years (2010-2019 inclusive). Of this, 59 percent went into manufacturing – especially in the electronics, textiles, footwear, and automobile parts industries – as many companies shifted supply chains to Vietnam. In 2019, Vietnam attracted USD 20.3 billion in FDI. The government approved the following significant FDI projects in 2019: Beerco Limited’s USD 3.9 billion acquisition of Vietnam Beverage; Center of Techtronic Tools’ project to develop a USD 650 million research and development center in Ho Chi Minh City; Charmvit’s USD 420 million for an amusement park and horse racing field in Hanoi; and LG Display’s USD 410 million expansion.

In 2019, Vietnam advanced some reforms to make the country more FDI-friendly. In particular, the government issued Resolution 55, which aims to attract USD 50 billion of foreign investment by 2030 by amending regulations that inhibit foreign investments and by codifying quality, efficiency, advanced technology, and environmental protection criteria. In addition, Vietnam passed the 2019 Securities Law, which states the government’s intention to remove foreign ownership limits (but does not give specifics) and the 2019 Labor Code, which adds flexibility for labor contracts.

Despite the comparatively high level of FDI inflows as a percentage of the GDP (8 percent in 2019), significant challenges remain in the business climate. These include corruption, a weak legal infrastructure and judicial system, poor enforcement of intellectual property rights (IPR), a shortage of skilled labor, restrictive labor practices, impediments to infrastructure investments, and the government’s slow decision-making process.

Although Vietnam jumped 10 spots – from 77 to 67 – in the World Economic Forum’s (WEF) 2019 Global Competitiveness Index, WEF recommends that Vietnam continue reforms to improve its attractiveness to foreign investors by simplifying legal procedures and streamlining the bureaucratic process related to decision making.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into force in Vietnam on January 14, 2019, and Vietnamese officials have said they will approve the EU-Vietnam Free Trade Agreement (EVFTA) in late 2020. These agreements will facilitate FDI inflows into Vietnam, provide better market access for Vietnamese exports, and encourage reforms that will help all foreign investors. However, while these agreements lower trade and investment barriers for participating countries, they may make it more difficult for U.S. companies to compete.

COVID-19 buffeted Vietnam’s economy in early 2020, resulting in layoffs and unemployment, decreased consumption, and a projected decrease in the country’s growth rate. In March 2020, the government started enacting fiscal and monetary policies to counter the effects of the pandemic, including a stimulus worth USD 30 billion and monetary policy designed to inject upwards of USD 11 billion into the economy.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 96 of 175 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 70 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 42 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 2,010 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 USD 2,360 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD
Investment Climate Statements
Edit Your Custom Report

01 / Select A Year

02 / Select Sections

03 / Select Countries You can add more than one country or area.

U.S. Department of State

The Lessons of 1989: Freedom and Our Future