By
Stuart Grudgings
PHNOM PENH, Nov 6 (Reuters) - Hiroshi Uematsu had a tough start in Cambodia, where he heads an economic zone that
aims to attract business from his native Japan. He arrived just before the
global financial crisis sent the Asian economic minnow's exports into a
tailspin and dried up investment interest.
Now,
though, business is looking up.
About
a third of the lots on the 365-hectare (900-acre) site on the outskirts of the
capital Phnom Penh
remain vacant and overgrown, roamed by scrawny cattle. But they are being
snapped up by household Japanese company names such as Yamaha Motor , food
maker Ajinomoto and electronics firm Minebea.
Next
to Uematsu's office, a convenience store sells several brands of sake, "Tokyo burgers" and a
variety of Japanese savoury treats for homesick executives.
The
turnaround in Uematsu's fortunes mirrors a broad trend of surging Japanese
investment in Southeast Asia as China's
appeal is undermined by rising wage costs and spiking tensions with its
neighbour over territorial disputes.
"China used to be the factory of the world,"
said Uematsu, a 45-year-old from Japan's
mountainous Gifu
prefecture who says he gets calls every day from companies interested in the
Phnom Penh Special Economic Zone. "We can't say so anymore."
CHINA RE-THINK
Almost
a quarter of Japanese manufacturers are re-thinking their China investment
plans, according to a Reuters Corporate Survey carried out after the recent
tensions between the nations over disputed islands.
Japan's tsunami disaster and flooding in Thailand last
year provided another sharp reminder of the need to diversify operations to
avoid another rupture in global supply chains.
Japan's net foreign direct investment (FDI)
into the 10-country Association of Southeast Asian Nations (ASEAN) more than
doubled last year to a record 1.55 trillion yen ($19.5 billion), data from Japan's Finance
Ministry shows. Japan's net
FDI into China
is still rising, jumping 60 percent in 2011 to a record 1 trillion yen.
But
Japanese firms, encouraged to expand abroad by a strong yen, are increasingly
using Southeast Asia as an alternative manufacturing base to balance their China risks.
Japanese government and business leaders have also been among the fastest to
tap the potential of Myanmar's
dramatic opening, pouring in billions of dollars in infrastructure spending,
debt forgiveness and refinancing.
NOT
JUST CHEAP
It's
not just about cheap wages. The region of 600 million people also offers a
growing source of demand for Japanese cars, electronics and services as robust
growth expands the middle class. Malaysia
and the Philippines, where
wages are higher than Vietnam
or Cambodia,
have also seen rising Japanese interest.
Infrastructure
investment in railways and roads is booming and ASEAN is working towards
establishing a European Union style single market by the end of 2015, making it
easier for multinationals to link up their cross-border operations. The
region's economies have been resilient this year to weak growth in the United States, Europe and China.
Japan's net investment in ASEAN came to
418 billion yen in January-August, finance ministry data show, but those
figures may not reflect many pledged deals. In the April-June quarter, net FDI
in ASEAN rose 37 percent from a year ago.
ASEAN
countries' latest FDI data also suggest the trend of strong Japanese investment
is intact.
In
Vietnam,
for example, Japanese pledged investments jumped to $4.9 billion in
January-October, double the total for all of last year, government data show.
"In
2011, Japanese companies were given a lesson from two disasters," said
Hirokazu Yamaoka, Hanoi chief representative for
Japan's
JETRO trade promotion agency. "This year, the risk of China has been
recognized and they study more about risk sharing for manufacturing."
ASEAN
GROWTH
Approved
Japanese investments in Thailand
nearly tripled in January-September to around $8.1 billion, data from the Board
of Investment of Thailand show. Nissan Motor Co, which aims to more than triple
its ASEAN sales to 500,000 vehicles by 2017, said on Friday it will build a
second assembly plant in Thailand
for $358 million.
"The
reason we're investing in Thailand
more is because we trust in the growth in the ASEAN region and Thailand,"
Nissan Executive Vice President Hiroto Saikawa said. "China's economy
is Slowing down, but is still growing and is a very important market for
us."
In
Indonesia, Southeast Asia's
largest economy, Japan's
net direct investment is on course for a record year after surging to 288
billion yen in 2011 from 41 billion yen in 2010. In the first eight months of
this year, net Japanese investment already totalled 237 billion yen, according
to Japan's
Finance Ministry.
Japan said last month it plans to provide
$13 billion in funding for infrastructure projects in Indonesia,
where the growing wealth of the 220 million population makes for a huge
domestic consumer market.
Car
makers Honda Motor Co and Suzuki Motor Corp have announced major expansion
plans in Indonesia
this year, and Toyota Motor Corp is considering building a third car plant as
it aims to triple annual output there to 300,000 vehicles, according to
Japanese media reports.
THAI
FLOOD WARNING
Japanese
companies are also diversifying within Southeast Asia, prompted by last year's
severe floods in Thailand,
which has long been their favoured regional manufacturing hub.
Malaysia's northern Penang
state, which aims to become a regional logistics hub, and surrounding areas
near the Thai border have seen an influx of Japanese firms in recent years.
The
Philippines
is winning higher-tech Japanese investments in areas such as laser printers and
advanced lenses for digital cameras. Japan's net FDI flows there doubled
in 2011 to 81 billion yen.
The
Thai floods also gave a shot in the arm to Cambodia's burgeoning manufacturing
industry, where wages can be up to a quarter of those in China, although the
country remains focused on relatively low-tech assembly work for now.
Minebea,
for example, trucks components from Thailand
to be assembled at the Phnom Penh economic zone
before transporting them back to Thailand for higher-end work. The
company, which makes tiny motors used in electronic gadgets, recently bought up
a second factory lot to expand its capacity in Cambodia, and expects to have 8,000
workers by the end of next year.
"Japanese
investors are hard to convince, but once they are they move very fast,"
said Peter Brimble, the Asian Development Bank's senior country economist for Cambodia.
On
Cambodia,
he said, they have "made the decision," despite concerns over a lack
of qualified labour and weak transport infrastructure in one of the region's
poorest countries. Japanese investment in Cambodia is already at $300 million
this year, up from $75 million in 2011, Cambodian figures show.
Uematsu
said interest among Japanese firms in producing in Cambodia
picked up in 2010, rose after anti-Japan protests in China that year and surged again
after a fresh wave of protests in September. China, Uematsu said, has also become
a "headache" for Japanese firms because of sharply rising wages and
sometimes testy labour relations.
"Young
Chinese people don't want to work in a factory any more. There are many other
opportunities," he said.
Japanese
companies increasingly see Thailand,
Cambodia and Vietnam as a single production corridor, he
said, comparing the Mekong region to the main
industrial cities in his home country.
"It's
getting to be nonsense to divide it into three countries. It's one
region," he said. "Bangkok is Tokyo, Phnom Penh is Nagoya and Ho Chi Minh is Osaka." (Additional reporting by Kaori
Kaneko and Yoko Kubota in TOKYO, Prak Chan Thul in PHNOM PENH, Rosemarie
Francisco in MANILA, Ngo Chau in HANOI, Neil Chatterjee in Jakarta, Jason Szep
and Sinsiri Tiwutanond in BANGKOK; Editing by Ian Geoghegan)
Source:
Reuters
