Japan’s economic recovery to benefit Asean – ANZ

MANILA, Philippines - Japan’s economic recovery brought about by growth in corporate profits would benefit South Asia and the Asean member nations, the Australia and New Zealand Bank (ANZ) said in a report.

“Ongoing tensions suggest China will rank low on the list of possible foreign direct investment (FDI) beneficiaries. Asean’s growing importance as a host to off-shored Japanese production in recent years should continue to see South Asia attract the bulk of FDI outflows aligned with a profit recovery in corporate Japan,” ANZ said.

Local banks have been attesting to the benefits reaped from the recent improvement in Japan’s economic performance.

Bank of the Philippine Islands (BPI) executive vice president and corporate banking group head Alfonso L. Salcedo Jr. , for instance said that Japanese locators have been increasing significantly, the bulk of which are small and medium enterprise (SME) partners of major manufacturers.

 â€œThey have expressed interest in locating in Philippine economic zones (ecozones),” Salcedo added.

BDO Unibank Inc., the Metropolitan Bank & Trust Co. (Metrobank), and the Rizal Commercial Banking Corp. (RCBC) have also expressed optimism in the relocation of some Japanese manufacturers and their affiliates to the Philippines.

All four major commercial banks have existing Japanese desks prepared to offer all types of banking services to accommodate the entry of the locators and other FDIs.

Meanwhile, ANZ chief economist for Asia Pacific Glenn Maguire said capital flows within and outside of Asia have clearly been a recent key focus.

One of the interesting dynamics was that the growth in shorter-term and more volatile portfolio flows outstripped the steadier and less volatile FDI flows for the past decade despite growing trade integration in the region.

 â€œThe importance of Japanese FDI for Emerging Asia makes intuitive sense. As seniority based labor systems and the transition to a high income economy has seen Japan’s wages become uncompetitive in a good deal of the manufacturing space, Japan has tended to expand production networks offshore, generally following trade flows,” Maguire said in the report.