Foreign Direct Investment Links between Hong Kong and Southeast Asia

This paper examines the role played by Hong Kong in foreign direct investment (FDI) flows to Southeast Asia. Recently, round-tripping and trans-shipping of capital were suggested as an explanation for the extraordinarily high ranking of Hong Kong on UNCTAD’s Outward FDI Performance Index. While Hong Kong’s particular position in terms of round tripping and trans-shipping vis-a-vis China has received much attention, the same roles played by Hong Kong vis-a-vis Southeast Asia has not yet been explored. To understand the round tripping and transshipping activities in Hong Kong in relation to Southeast Asia, our project established a database of 250 Hong Kong companies from detailed internet and library research, and enquiries with consulates and companies. We then investigated investment in Cambodia, Indonesia, Malaysia, Thailand and Vietnam from these companies. We also examined reasons underlying the trans-shipping and round tripping activities through in-depth interviews with professionals who offered us their expert opinions. This paper presents detailed information on the source of capital, round-tripping and transshipping activities of the companies in our database. In addition, the qualitative data we obtained from key informants have enabled us to shed light on the reasons for SEA investors to use Hong Kong as a host for round tripping activities and trans-shipping. These include taxation system, legal and institutional setting for property right protection, financial service and political stability.