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NEWS UPDATES Asean Affairs   12 February 2013  

China FDIs seen moving to Asean, India


 India and Asean have been tipped to benefit from China's struggle to keep foreign direct investors (FDIs) in the country, according to the China-Asean Business Council Chinese Secretariat.

Citing a report from The International Business Times, the trade body, through its newsletter, said that China has been the major recipient of foreign direct investment in the developing world over the past 20 years.

This has played a big part in China's rise from being a poor rural backwater to an economic powerhouse, but rising costs due to higher wages and the phasing out of superpreferential tax policies are pushing multinationals, mainly labour-intensive manufacturers, to relocate, it added.

"And China's neighbours India and Southeast Asian countries stand to benefit the most as they have large pools of labour and strong domestic markets," the report stated.

Robert Atkinson, the president of the Information Technology and Innovation Foundation in the US, was quoted in the report as saying that "the Chinese monopoly on foreign direct manufacturing investment is over".

"They are still obviously in a very strong position, but you are going to see more dispersion of those kinds of investments."

The newsletter added that China's FDI fell in 2012 for the first time since the height of the global financial crisis in 2009, according to figures released on January 15 by the country's Ministry of Commerce.

For the full year, inbound FDI registered at US$111.7 billion, 3.7 per cent lower than 2011, which sums up a bad year for global FDI overall, it added.

A new report released by the United Nations Conference on Trade and Development (Unctad) showed that worldwide FDI inflows fell by 18 per cent to an estimated US$1.3 trillion, down from a revised $1.6 trillion in 2011, the trade body said.

This was due mainly to macroeconomic fragility and policy uncertainty among investors, it added.

It also quoted UNCTAD statistics which showed that despite an overall 7 per cent decline in FDI inflows to the Asean member states, some countries in the 10-member regional bloc appear to be on a bright spot with preliminary data showing that inflows to Cambodia, Myanmar, the Philippines, Thailand and Vietnam grew in 2012.

By Unctad's measure, China was still the second largest recipient of FDI in the world after the US, but capital is always searching for the highest return possible, it added.

Although many countries can now compete with China on labor costs, it is countries elsewhere in Asia, which are able to take advantage of strong infrastructure and existing supply chain networks, that will be the main beneficiaries of China's move out of low-end manufacturing, an Asia specialist at Capital Economics, Gareth Leather, was quoted as saying. .

The report also quoted HSBC economist Trinh Nguyen as saying that textile investment inflows into China shrank 18.9 per cent in the first three quarters of 2012, while manufacturing FDI inflows into Indonesia rose 66 per cent.

The report added that wages in China have been rising by double digits every year over the last decade, and China has also become more selective in screening FDI projects.

"The gigantic welcome mat that the Chinese government put out in the early part of the 2000 has been pulled back, certainly somewhat," ITIF's Atkinson was quoted as saying.

China used to welcome any and all FDI, but that started to change over the past couple of years, for instance, the government welcomes investments related to research and development, but it's becoming less tolerant of highly polluting industries, the report said.

"I think companies are feeling that there are other places in Asia that are more welcoming to them and are more interested in their investments," the report quoted Atkinson as saying.

Foreign direct investments to Asean, economies are now almost equal to China's share, at 7.6 per cent versus China's 8.1 per cent, HSBC's Nguyen said in the report.

With relatively better demographic growth, Asean economies' share of global FDI will likely rise in the coming decade, Nguyen added.

However, this is unlikely to be a seamless process as poor road and rail networks deter foreign investment, just as tough restrictions on FDI in India and the Philippines, the report stated.

Indonesia and Vietnam look likely to benefit the most from a cost perspective meanwhile Thailand, with a sound business environment and a linked supply chain, makes for an attractive destination, but risks include politics and wage costs.

"If they want to be the next China, they should be China without all of the problems," Atkinson was quoted as saying.

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More






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