The writer is managing partner of KW Group, and a consultant supporting UN ESCAP’s trade, investment and innovation division.

The rapid rise of the Asia-Pacific (Apac) digital landscape is indisputable. Research by Mastercard shows the region witnessed a 69% surge in digital payment usage in the year to August 2022, leaving North America’s 52% and Europe’s 48% in its wake. Digital wallets will account for three-quarters of e-commerce sales and half of point-of-sale transactions in Apac by 2026, according to Statista. Apac’s digital revolution — fuelled by its population which represents 60% of the global population — is not confined to a specific sector. It permeates every facet of domestic and regional development. 

Asean goes high-tech

Of particular note is the Association of South-east Asian Nations (Asean), which is positioning itself to become the world’s fourth-largest economy by 2030. This is not just a vision; it’s a clarion call for investors to seize the moment, recognising the unique convergence of talent, innovation, infrastructure, and technology propelling Asean to the forefront of global economic growth. Only a few years ago, Asean was considered the secondary option in foreign investors’ China+1 strategy. Now, the 10-country bloc is a genuine and growing alternative to China, particularly in high-tech sectors affected by Beijing’s geopolitical tensions with the US.

Over nearly two decades, I’ve seen Asean leverage improvements in infrastructure, cultivate resilient supply chains, maintain relative political stability and emerge as a beneficiary of escalating US–China competition. A vibrant, tech-savvy population, coupled with a supportive regulatory environment, has helped the region transform into a digital FDI hub. Asean’s growing pool of graduates — particularly in science, technology, engineering and mathematics — and increasing gender diversity are not just statistics. They’re the driving force behind its innovation ecosystem’s development. 

Data from fDi Markets shows that announced FDI into Asean data centres has grown exponentially over the past two decades to hit $15.9bn in 2023 — more than double the previous record. The region’s commitment to a digital economy is exemplified by Malaysia, which is aiming for a 25.5% contribution to the country’s gross domestic product and creating over 500,000 jobs by 2025. The inaugural Asean Investment Forum in September 2023 — which brought together the region’s investment promotion communities, investors and business leaders — echoed the bloc’s appetite for growth and focus on digital FDI. 

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Digital imperatives

Despite the remarkable growth story of Apac’s digitisation, persistent challenges require attention. Talent retention faces the looming threat of brain drain, particularly in developing economies. Regulatory complexities, ownership restrictions, currency fluctuations and anti-foreign sentiment (which can be particularly pronounced around elections) also complicate the attraction of talent from abroad.

At KW Group, we’ve collaborated with the UN’s Economic and Social Commission for Asia and the Pacific (Escap) and the Board of Investment of Sri Lanka to unveil the untapped potential of Apac’s emerging markets. We recently worked together to deliver a programme on ICT private sector digital investment. We now have a second project scheduled for April targeting the sector’s foreign investment attraction and internationalisation. This is crucial, as within the region’s emerging economies, there is a critical need for increased capital flow and investment from abroad due to limited local liquidity.

A broader issue is the potential gaps in how the region’s investment promotion agencies (IPAs) target FDI and institutional investors. In a recent IPA workshop, hosted by KW Group under the leadership of Escap, just three of the 15 Apac IPAs in attendance said they had successfully developed investor-ready project pipelines. 

I advocate for a paradigm shift in Apac towards proactive investment promotion strategies, as well as for governments to embrace public-private collaboration, fostering an environment conducive to investor attraction. Additionally, addressing liveability concerns is not just a suggestion; it’s a plea to regional governments to take tangible steps to enhance the region’s appeal to senior international talent and investors. 

The journey through Apac’s digital FDI landscape is complex and multifaceted. By delving into the nuances, acknowledging challenges, and advocating for strategic imperatives, we can collectively propel Asean and the broader region into a new era of digital innovation and economic prosperity.

This isn’t just a vision. It’s a call to action for stakeholders to shape the narrative of Apac’s digital future and its position on the world stage.

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