Manufacturing Foreign Direct Investment and Sustainable Industrial Output in ASEAN-6 Countries

This study examines the relationship between manufacturing-specific foreign direct investment (FDI) and manufacturing output in ASEAN-6 countries over the period 2012–2022. While existing empirical studies largely rely on aggregate FDI measures, such evidence may obscure sector-specific mechanisms through which foreign investment affects production capacity and industrial performance. Focusing on manufacturing-oriented FDI allows for a more direct assessment of how sector-targeted investment is associated with industrial resilience and value-added stability, which represent the economic dimension of sustainability considered in this study. Sustained industrial output performance is proxied by manufacturing value added (GDPm) and interpreted as the manufacturing sector’s ability to maintain and expand value added over time amid macroeconomic volatility and external shocks. Using a balanced panel dataset of six ASEAN economies (ASEAN-6) with 66 country-year observations and a fixed-effects specification selected through standard model-selection tests, the results indicate that manufacturing-specific FDI is positively and statistically significantly associated with manufacturing output at the panel-average level. Manufacturing contribution to GDP also exhibits a strong positive association, while exchange rate movements are negatively associated with manufacturing output. Inflation is positively associated with output during the study period and is interpreted as a context-specific co-movement rather than a normative implication for long-run sustainability. To provide additional insight into shock-period dynamics, the analysis compares pre-COVID (2012–2019) and COVID/post-COVID (2020–2022) sub-period estimates. The positive association between manufacturing-oriented FDI and output is more pronounced before the pandemic. It weakens during the pandemic and early recovery years, consistent with supply-chain disruptions and temporarily reduced absorption capacity. The findings highlight the importance of sector-specific FDI, industrial structure, and macroeconomic stability in supporting manufacturing resilience in ASEAN-6 economies.