FOREIGN DIRECT INVESTMENT IN ASEAN

Transcription

1 For: Roundtable Seminar on Japanese FDI in ASEAN FOREIGN DIRECT INVESTMENT IN ASEAN September 9, 25 The Bank of Tokyo-Mitsubishi, Ltd. Asian Business Division Masakatsu Fukai 1

2 Table of Contents I. TRENDS IN THE SIX MAIN ASEAN COUNTRIES Overview Investment Profile of Each Country II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Overview Factors of Investment Resurgence Issues Outlook 2

3 I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES Overview (1) 1. Summary Total FDI rose 4.% to US$3.2 Billion, the 2nd consecutive year of increases 2. Country Details Investment growth in 24 compared to the previous year - Philippines (356.4%) - Thailand (54.%) - Vietnam (14.3%) Decrease - Indonesia (-24.4%) - Malaysia (-15.9%) - Singapore (- 4.3%) Chart 1: Approved Foreign Direct Investment (FDI) (US$ mil) (YoY) (FY) Source EDB, MIDA, BOI, BKPM, NSCB, MPI Vietnam (7) Philippines (9) Indonesia (34) Thailand (26) Malaysia (11) Singapore(12) Growth Rate *The percentages for 24 are given in brackets. 3

4 1. Last Decade I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES Overview (2) Slowing FDI to ASEAN - Unstable political situation in Indonesia and the Philippines, which persisted even after the Asian crisis. - Foreign investments surged to China as it developed into an attractive production base. Chart 2: Approved FDI Growth Per Country (YoY) Present Signs of recovery as a whole while disparate in each member country - Shifting investments away from China to mitigate concentration risk. - Surge in large-scale investments in 24 Thailand -the car manufacturing and electronics industry The Philippines - the natural gas industry (YR) Japan i 14j USA i 11j Eur ope i 16j Ot h e r s i 59j 3. Classification by Investor Country Source EDB, MIDA, BOI, BKPM, NSCB, MPI Decrease *The percentages for 24 are given in brackets. - Japan 3.1% - Europe 21.2% - USA (-6.9% 4

5 I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES - Singapore - 1. Overview - S$6 billion, a 4.3% decrease in 24 - Growth has declined consecutively in the past 2 years Chart 3: Approved FDI Historical Trend in Singapore (S$ mil) 1, (YoY) 4 2. By Country Decrease 8, 6, Others - China -India 3. By Industry - Japan (-14.1%) - USA (-4.7%) - Europe (-2.%) 4, 2, Europe USA Japan Growth Rate Decrease (YR) - Electronics - Chemical - Biotechnology medical (due to huge investments in the prior year) (Source) EDB 5

6 I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES - Malaysia - 1. Overview RM13.1billion, a 16.2% decrease in By Country Chart 4: Approved FDI Historical Trend in Malaysia (M$ mil) 3, (YoY) Europe (24.5%) (Mainly from Germany) Decrease - USA (-51.5%) - Japan (-22.1%) 2, 1, Others Europe USA Japan Growth Rate 3. By Industry -4-6 Decrease (FY) - Electronics (Mainly semiconductor) - Paper, Print, Publication (Mainly from pulp manufacture) - Transport Equipment (Source) MIDA 6

7 I.TRENDS ON THE SIX MAIN ASEAN COUNTRIES - Thailand - 1. Overview - THB31.7 billion, a 49.3% increase in 24 - Remarkable recovery to reach levels prior to the Asian financial crisis Chart 5: Approved FDI Historical Trend in Thailand (THB mil) 45 (YoY) 2 2. By Country Japan (29.%) (Mainly Car Industry) - USA (23.7%) (Mainly Electronics) - Europe (7.5%) 3. By Industry (YR) Others Europe USA Japan Growth Rate - Transport Equipment (156.6%) - Chemical (147.1%) - Electronics (112.9%) (Source) BOI 7

8 I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES - Indonesia - 1. Overview US$1.2 billion, a 26.8% decrease in 24 Chart 6: Approved FDI Historical Trend in Indonesia 2. By Country Decrease (US$ mil) 5, 4, (YoY) Europe (54.9%) - Japan (34.%) 3. By Industry - South Korea, Taiwan, and others (-4.3%) - USA (-24.4%) Decrease 3, 2, 1, Others Europe USA Japan Growth Rate - Chemical - Automobile - Paper and Pulp (Large-scale investments already made in the previous year) (YR) (Source) BKPM 8

9 I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES - Philippines - 1. Overview - PHP156 billion, a 356.4% growth in 24 - Turnaround after a seven-year slump 2. By Country - Japan (198.6% ) - Republic of Nauru and the Man island occupy 7% of the share 3. By Industry Decrease - Europe (-35.3%) - USA (-13.7% ) Chart 7: Approved FDI Historical Trend in Philippines (PHP bil) (YoY) Others Europe USA 1 Japan 5 Growth Rate (YR) Decrease (Source) NSCB - Electronic Power - Mining 9

10 I.TRENDS IN THE SIX MAIN ASEAN COUNTRIES - Vietnam - 1. Overview - US$2.2 billion, a 14.3% increase in 24 -Two-digit rise in growth rate for the past two consecutive years 2. By Country - USA (67.6%) - Japan (185.4%) - Taiwan and South Korea (Combined) (8.4%) 3. By Industry Decrease Chart 8: Approved FDI Historical Trend in Vietnam (US$ mil) (YoY) 1, 8 6 8, 4 6, 4, 2 Others Europe USA Japan -2 2, Growth Rate (YR) - Electronics - Nonmetallic mineral - Telecommunication - -Tourism - Textile, Food, Consumer - Products (Source) MPI 1

11 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN ASEAN Overview After the Asian monetary crisis in 1997, investment has decreased relatively compared to China. However, investments in ASEAN has improved significantly in recent years. JAPAN Investment is limited to high value-added products - Electronics company Factory for liquid crystal (Investment Amt: U$5 Mio) - Electronics company Factory for digital camera (U$14 Mio) - Electronics company Factory for LSI (U$13 Bio) - Machinery tool company Factory for construction machine (U$3 Mio) 11

12 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Factors of Investment Resurgence 1. Long Investment History in ASEAN 2. China Plus One 3. Establishment of AFTA 12

13 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Factors of Investment Resurgence 1. Long Investment History in ASEAN History of Japanese companies investment in ASEAN 6 s ~ Establishment of manufacturing base for domestic demand in the region 85~ Appreciation of the yen progress since Plaza Accord Installation of export base for the third country < ASEAN investment boom > 97~ Reorganization of business in the region after introduction of AFTA Amount of accumulated investments from Japan ( 85~ 4) To ASEAN U$1,137 Billion To CHINA U$ 654 Billion ASEAN s value to Japan will remain unchanged 13

14 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN 2. China Plus One China will remain as a favored investment destination for Japanese companies Investor perceived risks in China Complexity of administration procedure Problem of the trademark and the intellectual property right Problem of electric power supply SARS Factors of Investment Resurgence Due to increased risk in concentrating investments in China, Japanese companies are considering diversifying their investments The attractiveness of ASEAN has increased from the viewpoint of the China plus one (diversification of risks) * Parallel production base in China and ASEAN: - Motor manufacturer:the manufacturing and sales of a small motor in both China and Vietnam - Electronics company:the system of production that shifts from the Philippines to China is returned to the Philippines again * Segregation of manufacturing process between China and ASEAN: - China : Production of low-end products - ASEAN : Production of high-end products 14

15 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN 3. Establishment of AFTA Factors of Investment Resurgence Tariff reduction in Southeast Asia - Stimulate economic activity - Creation of a huge market with 5 million population Product specialization within ASEAN (Example) Automobile Company Mutual Supplementation of Part Supply in ASEAN Thailand Dieselengine Steering w heelcolum n B ody panel M alaysia Steering w heellink Engine com puter W iper arm The P hilippines Transm ission Velocity collaboration C om bination sw itch Indonesia G asoline engine D oor lock D oorfram e Clutch Expansion of benefits in ASEAN The importance of ASEAN as an investment destination is continuously high for Japanese enterprises 15

16 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Issues Shortage of skilled worker (or staff) Shortage of parts makers Complex administrative procedure and bureaucracy Inadequate infrastructure Security Graft and corruption Labor issues Issues - Investment Environment - Violation of intellectual property rights Actions Expansion of investment related to infrastructure Improvement in legislation, tax system, administrative procedures 16 etc.

17 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Issues - Financial System - Issues Occurrence of another Asian monetary crisis Actions Development of a stable financial system Financial cooperation among countries - Secure short-term flow capital e.g. Chiang Mai Initiative (2) - Secure long-term funding e.g. Creation of an Asian Bond market Measures to be taken - Enactment of capital restrictions - of the foreign reserves - Formation of a sound forex system Deregulation of financial markets Encourage inflow of capital investment while maintaining an orderly financial structure 17

18 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Issues Issues - AFTA - Actions The ratio of the trade using the CEPT (Common Effective Preferential Tariff) scheme in ASEAN region is limited to about 1% on average. * The requirement of CEPT is not satisfied. (Especially 4% value-added rule) * High dependency on trade with countries outside ASEAN How to promote CEPT Necessary to simplify and speed up the application procedures * Introduction of unified tariff code and application of new standard * Simplification of * Expansion and easing of the rule of origin * Importation of certain parts and raw materials are already tax-free 18

19 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Outlook Survey to Japanese Company The mid-term promising country in business development FY Survey FY 1 Survey FY 2 Survey FY 3 Survey FY 4 Survey Ranking Country Response Response Response Response Response Country Country Country Country Rate (%) Rate (%) Rate (%) Rate (%) Rate (%) 1 China 65 China 82 China 89 China 93 China 91 2 USA 41 USA 32 Thailand 28 Thailand 29 Thailand 3 3 Thailand 24 Thailand 25 USA 26 USA 22 India 24 4 Indonesia 15 Indonesia 14 Indonesia 15 Vietnam 18 Vietnam 22 5 Malaysia 12 India 13 Vietnam 15 India 14 USA 2 6 Taiwan 11 Vietnam 12 India 13 Indonesia 13 Russia 1 7 India 1 Taiwan 11 Korea 8 Korea 9 Indonesia 1 8 Vietnam 9 Korea 8 Taiwan 8 Taiwan 7 Korea 9 9 Korea 9 Malaysia 8 Malaysia 8 Malaysia 6 Taiwan 8 1 Philippine 8 Singapore 6 Brazil 5 Russia 5 Malaysia 6 (Source) JBIC 19

20 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Outlook Promising Countries:Thailand, Vietnam, Indonesia, and Malaysia Survey to Japanese Company Investment factors Thailand (146 companies) Vietnam (18 companies) Indonesia (45 companies) M alaysia (26 companies) Growth Stability of Cheap Cheap potentialof 56.8% 75.9% 68.9% politics and 38.5% m anpower m anpower market social Cheap m anpower Stability of politics and social environm ent 43.9% 39.7% Growth potentialof market Top-class personnel 48.1% 35.2% Growth potentialof market The third country exportbase 62.2% Growth potential ofmarket Cheap m anpower 3.8% 26.7% Enhancem entof 26.9% infrastructure (Source) JBIC 2

21 II. JAPANESE INVESTMENT RESURGENCE IN ASEAN Outlook Major investment considerations in Thailand, Vietnam, Indonesia, and Malaysia Growth in domestic markets - Total population of 4 million in four countries Existence of a potential market - Promising industries in consumer purchasing power (ex) Retail (food), fiber, steel, chemical, Cheap manpower Service industry (finance, tourism, consulting, game, amusement etc.) - ASEAN will remain popular for labor-intensive industries. 21

22 Questions & Answers 22

23 Presenter s s Contact Details Masakatsu Fukai General Manager Asian Business Division The Bank of Tokyo-Mitsubishi, Ltd fukai@btmspr.com.sg 23

24 Thank you. 24