More FDIs from Japan expected

MANILA, Philippines - More foreign direct investments from Japan are expected to reach the country as it continues to shy away from China, analytics firm IHS said.

Rajiv Biswas, Asia-Pacific chief economist at IHS, pointed out Japanese investments to the Association of Southeast Asian Nations (Asean) have been increasing amid Japan’s escalating political tensions with China and the rising manufacturing wage costs in coastal China.

“The Asean region offers considerable opportunities for Japanese firms, not only as hubs for manufacturing production, but also because of the large population and fast-growing consumer middle class in some of Asean’s largest economies, including Indonesia, Philippines, and Vietnam,” Biswas said.

 “[Prime Minister] Abe’s Asean pivot is already well under way, and this will generate substantial new FDIs from Japan to Asean over the medium to long term,” he added.

“Meanwhile, Japanese multinationals will continue to use Asean as an important risk mitigator for their regional manufacturing supply chains, notably to reduce vulnerability of their supply chains to China,” Biswas further said.

Biswas recounted that Japanese FDIs into the Asean reached to $22.9 billion in 2013, more than double the $9.3 billion invested in China in the same year.

The “swing” in Japanese FDIs to Asean started in 2012 when riots in China forced Japanese investors to seek alternative locations for their investments, Biswas explained.

“Asean has many ‘pull factors’ that are attractive to Japanese multinationals, such as the region’s combined GDP reaching $2.4 trillion in 2014, with a total population 635 million people and a rapidly growing middle class, representing one of the fastest-growing market opportunities over the next two decades,”  Biswas said. 

Moreover, the removal of trade barriers within the Asean and the upcoming integration of the region are seen attracting more FDIs to the group.

Biswas also pointed out key initiatives being done by each ASEAN member to boost investments and support growth.

For the Philippines, Biswas said “Undergoing economic renaissance under President Beningo Aquino to boost FDI inflows over the medium term, including the introduction of new rules to allow 100 percent foreign ownership of its local banking sector” would drive competitiveness in the country.

In the four months to April, net FDI inflows to the Philippines amounted to $2.449 billion, up 9.1 percent from year-ago levels.

Bangko Sentral ng Pilipinas data also showed net FDI inflows last year surged 20 percent to $3.86 billion, breaching the $2.1-billion assumption.