The Impact of Defense Alliances on Foreign Direct Investment (FDI) Inflows in Southeast Asia: A Systematic Review

Abstract

Background: The intersection of security and economic policy has become increasingly significant in contemporary international relations, particularly in regions marked by strategic competition such as Southeast Asia. Defense alliances, traditionally viewed as instruments of national security, are now recognized for their potential influence on economic outcomes, including foreign direct investment (FDI) inflows. However, the nature and extent of this relationship remain complex and context-dependent, necessitating a systematic synthesis of existing evidence.
aims: This study aimed to systematically examine the impact of defense alliances on foreign direct investment (FDI) inflows, with a particular focus on Southeast Asia, by identifying key patterns, mechanisms, and contextual factors shaping this relationship.
Methods: A systematic review design was employed following PRISMA guidelines. A comprehensive search was conducted across seven academic databases, namely ScienceDirect, ProQuest, Sage Journals, Web of Science, JSTOR, Taylor & Francis, and Google Scholar, covering publications from 2000 to 2025. Boolean operators and predefined inclusion and exclusion criteria were applied. A total of 64,144 records were identified, with 18,726 retained after applying limiters. Following title and abstract screening, 47 full-text articles were assessed for eligibility. Fourteen studies met the inclusion criteria and were included in the final synthesis. Methodological quality and risk of bias were evaluated using the Joanna Briggs Institute (JBI) Critical Appraisal Tools. Data were analyzed using the Synthesis Without Meta-Analysis (SWiM) approach.
Results: Defense alliances demonstrate dual and conditional effects on FDI inflows. They enhance investor confidence by signaling stability, reducing risk, and strengthening institutional credibility, thereby promoting investment. Conversely, geopolitical tensions, alliance complexities, and strategic competition may deter FDI by increasing uncertainty. The impact of alliances is mediated by geopolitical stability, domestic policy environments, and strategic approaches such as hedging. Integration with broader economic frameworks further amplifies positive outcomes.
Conclusion: Defense alliances are context-dependent determinants of FDI. Their effectiveness relies on strategic alignment within broader economic and geopolitical systems. Policymakers must adopt balanced approaches to maximize economic gains while mitigating geopolitical risks.