Japanese investors are turning increasingly to Southeast Asia

Yangon, Myanmar  (dpa) – This month Toyota Motors opened its first showroom in downtown Yangon, a clarion call for Japan Inc.'s charge into Myanmar.

Although the amount of Japanese foreign investment in Myanmar remains relatively small, and far behind that of China, the political will is definitely there to make it catch up.

By mid-2015, the first phase of the $180-million Myanmar-Japanese joint venture in the Thilawa Special Economic Zone will be opened on the outskirts of Yangon. It will offer a deep-sea port and facilities for the manufacturing of automobile parts, electrical appliances, garments and processed food.

Japanese investors in the project include Mitsubishi Corp., Marubeni Corp., Sumitomo Corp. and the Japan International Cooperation Agency.

"I think the Japanese government is trying to balance China's influence on Myanmar by getting Japanese companies to invest in all sectors,'' said Masaki Takahara, executive managing director of the Japan External Trade Organization's (JETRO) Yangon office.

China is currently the country's largest investor and trade partner, and was one of the few nations to stand by Myanmar during its years as a pariah state from 1988 to 2010, when it was ruled by a military junta.

Japan Inc.'s renewed interest in South-East Asia is hardly limited to Myanmar. Nor is it motivated solely by geopolitical goals to counter China's growing presence in the region.

Japanese investment in Laos, for instance, hit $405.7 million last year, up 15 percent year-on-year, driven by surging labor costs in China and jitters left in the wake of Thailand's devastating floods in 2011, according to Motoyoshi Suzuki, economic advisor to the Japan International Cooperation Agency.

The economist said that the 2011 floods in Thailand had prompted some of the 7,000 Japanese companies based in the kingdom to look elsewhere, including neighboring Laos.

JETRO, which assists Japanese companies in their overseas operations, plans to open an office in the Lao capital Vientiane this year.

Last year, Japanese foreign investment outflows to the 10-member Association of South-East Asian Nations (ASEAN) hit $13.2 billion, pipping their investments in China, at $12.7 billion, for the first time in decades, according to JETRO figures.

Some $5 billion of the ASEAN investment was due to a one-off purchase of Thailand's Bank of Ayudhaya by Japan's Mitsubishi UFJ Financial Group, JETRO sources in Bangkok said.

Even so, the trend is clearly towards a decline in Japanese investments in China, and an increase in ASEAN.

In 2013, Japan's investment outflows to China were down 32.6 percent, but up 159 percent in ASEAN.

"The nature of FDI in China is changing,'' said Bert Hofman, the World Bank's chief economist for East Asia. "The days of seeing China as a low-cost, labor-intensive production platform are fading.''

That perception, hardly new, has been endorsed by the policy directives of Japanese Prime Minister Shinzo Abe, who is using government agencies such as Japan International Cooperation Agency to promote more Japanese investments in South-East Asia.

Japanese companies are responding. Of some 3,471 companies surveyed by JETRO last year, 74.8 percent said they are considering expanding their business in ASEAN countries, up from 69 percent in 2012.

Meanwhile, 57 percent said they are considering an expansion in China, down from 59.2 percent in 2012.

There are several factors discouraging new investments in China, including rising wages, horrendous pollution in Beijing and other cities, foreign exchange risks and growing anti-Japanese sentiments.

In ASEAN's favor is the growing integration as a region, which will become even more palpable when the ASEAN Economic Community becomes a reality in 2015.

The more developed South-East Asian countries such as Indonesia, with its population of 240 million people, are drawing Japanese investments because of their own attractions, such as an increasingly affluent and growing middle class.

Domestic and foreign investment in Indonesia reached $35 billion in 2013, up 27 percent from the previous year. Of this, $4.7 billion came from Japan, up 90 percent, according to Indonesia's Investment Coordinating Agency.

"Japanese investment is increasing partly because Japanese car manufacturers are expanding production capacities and plants in keeping with rising sales of cars,'' Investment Coordinating Agency chief Mahendra Siregar said.

ASEAN has been a major destination for Japanese investment since the mid-1980s, when the yen appreciated against the dollar, but there appears to be room for more. "They can expand on what they have, shift more car production to Thailand, for example,'' Hofman said. "The market is not limited to Thailand - it includes ASEAN and the rest of Asia.''

http://www.information.myanmaronlinecentre.com/japanese-investors-are-turning-increasingly-to-southeast-asia/