The fast-growing mainland economy has not been diverting foreign direct investment (FDI) away from Southeast Asia, Goldman Sachs has concluded, challenging conventional wisdom. The assertion from the United States investment bank runs counter to suggestions from many rival private-sector economists and regional politicians, who have said that China's economic ascendancy is siphoning FDI away from Southeast Asia. The belief has underpinned a perception that the region risks becoming increasingly marginalised as growth and investment rates fall behind those in China. It has also prompted leaders from the 10-member Association of Southeast Asian Nations to explore a free-trade agreement with the mainland in an attempt to integrate their economic fortunes. 'There has been much debate about whether the emergence of China as an economic powerhouse is leading to FDI diversion away from low-cost producers such as Asean. We disagree with this assertion,' Goldman Sachs economist Adam Le Mesurier wrote in a recent research paper. 'The large shift in China's share of Asian FDI occurred in the early 1990s. Indeed, since 1993, China's share of total regional FDI has been remarkably steady . . . Moreover, the main shift downward in Asean's share of regional FDI took place after the 1997 crisis.' He said China had claimed about 60 per cent of regional FDI since the early 1990s, while Asean's portion had held at between 10 per cent and 20 per cent. 'Essentially, Asean made itself uninvestible [during the crisis]. The sharp drop-off in FDI in the last five years was mainly due to Asean's inability to establish new macro- and geopolitical anchors following the crisis,' he said. Goldman argued that with meaningful economic and corporate reform under way, Asean would see its share of FDI rebound to an extra US$10 billion a year in investment flows. Mr Le Mesurier said: 'The somewhat controversial conclusion from our analysis of regional FDI is that as/when Asean starts to re-establish its geopolitical and macro building blocks, we would expect FDI to return to the region. From its current level of 1.5 per cent of GDP, it is reasonable to expect gross FDI to return to the long-term average rate of about 2.5 per cent of GDP.'