According to conventional analysis, the 1997-98 crisis and ensuing reforms have spelled the demise of government efforts to use strategic industrial policies to promote industrialisation. However, this popular narrative is incomplete because Southeast Asian governments have not abandoned efforts to influence sectoral or micro-economic trends in industry.

This chapter substantiates these arguments by examining a key dimension of industrial policy in the ASEAN 4. It focuses on the changing context and content of investment policies, measures that regulate or otherwise influence the investment process. Elements of a new investment policy paradigm are evident throughout the region, and suggest that the scope for positive investment policy in a liberal ownership regime is far greater than commonly assumed. The paper reviews the evolution of investment policy in each of the ASEAN 4.

The case studies examine the use of incentives to implement industrial strategy goals, and consider the four ASEAN governments’ responses to the limitations of export-enclave development. Each national review assesses the institutional framework for investment policy, and details efforts to reform those institutions in response to new challenges posed by the changing investment policy paradigm. ASEAN's experience with investment policy reform points to the considerable complexity of developing countries’ integration into the expanding international division of labour in manufacturing. Investment incentives and other efforts by Southeast Asian governments to shape the investment environment have had partial success at best, but, in aggregate, they have complemented MNCs’ changing strategies and investment patterns. It is likely that active and nuanced policies to shape host-country investment environments will remain important determinants of new investment trends.