FDI Sensitivity to Policy Shifts in ASEAN: A Predictive Analysis in the Context of the Global Minimum Tax

In light of the Global Minimum Tax (GMT) implementation initiated by the OECD, ASEAN countries, where tax incentives have been a critical tool for attracting foreign direct investment (FDI), face a key challenge of adjusting domestic policies to maintain investment attractiveness while complying with GMT framework. This study introduces the novel Policy Adjustment Score (PAS) index to quantify the proactiveness, scale, and depth of policy responses in ASEAN countries under GMT regime, addressing an empirical gap in post-GMT FDI dynamics by integrating tax, non-tax, and institutional reforms, unlike prior studies focused solely on tax incentives. It aims to analyze the relationship between policy adjustments and FDI inflows in Vietnam, Thailand, Indonesia, Malaysia, and Singapore (2000–2024), assess FDI sensitivity to GMT, and forecast FDI trends for 2025–2030 to guide sustainable investment strategies for developing economies. A mixed-methods approach is employed: qualitative analysis uses NVivo to code policy documents, constructing the PAS index based on three pillars (40% tax, 30% non-tax, 30% institutional reforms); quantitative analysis applies panel data regression (125 observations, SPSS) with LnFDI as the dependent variable and PAS, GDP growth, and policy stability as independents. Results show a significant positive PAS-FDI relationship (β = 0.614, p < 0.001), with a 1-unit PAS increase boosting FDI by 84.7%; GDP growth (β = 0.035, p = 0.001) and policy stability (β = 0.009, p = 0.004) also positively influence FDI (R2 = 0.790). Forecasts indicate a positive scenario with strong FDI growth (Vietnam $35.13 billion, Singapore $185.53 billion by 2030) versus a passive scenario with stagnation (Vietnam $27.03 billion, Singapore $152.78 billion by 2030), highlighting that timely reforms mitigate GMT impacts. PAS offers policymakers a tool to prioritize non-tax reforms like SEZs and digitalization, etc., with findings replicable for emerging economies globally.