Philippines: winning Japanese investment at the expense of China

Philippines: winning Japanese investment at the expense of China Japan Sumitomo Corp : Sumitomo Corporation Launches Expansion of Industrial Park in the Philippines The First Philippine Industrial Park, some 50km south of Manila, is already a whopper, accounting for about 3 per cent of the country's total exports. Which is why it is notable that Sumitomo Corporation, the Japanese trading house that owns 30 per cent of it, wants to make it even bigger. By 2014, the 67 companies that currently call it home – including Honda, Canon, Nestle and Philip Morris – could be joined by 20 more, as Sumitomo spends about Y5bn to expand the 349-hectare site by almost a third. The plan confirms two things. First, that Japanese companies will continue to steer funds into faster-growing, more dynamic economies – even as the recent depreciation of the yen makes investment back home that little bit more attractive. The Philippines scores particularly well for its "rich human resources with good levels of English and high hospitality," says Yasushi Fukuda, general manager of Sumitomo's overseas industrial park division, which also runs parks in Vietnam, Indonesia and Thailand. Japan's total FDI stock in the Philippines stood at just over $10bn at the end of 2011, according to government data, more than five times the level of a decade earlier – a rate of growth exceeded only by investment in India (13x), China (8x) and Thailand (6x) over that period, within Asia. The second conclusion to be drawn is that a fair amount of this newer investment by Japan Inc is happening at the expense of China, as companies baulk at spiralling labour costs after the blow-up over a tiny chain of islands in the East China Sea. Osaka-based Funai Electric was hit by wage-hike demands from Chinese workers after anti-Japan demos broke out last year, the Nikkei newspaper reported this week. It is now shifting production to a new site near Manila. China was getting expensive already. Monthly base salaries for manufacturing workers in China grew by roughly 40 per cent over five years to $328 as of October 2012, according to the Japan External Trade Organization. By contrast, workers get $253 in the Philippines, $145 in Vietnam and $53 in Myanmar. This year Japanese companies expect to pay Chinese factory workers 10 per cent more than in 2012, says Jetro – double the equivalent rate of increase in the Philippines. Without naming China in particular, Fukuda of Sumitomo notes that wage hikes and worker shortages are driving many Japanese companies to consider "diversification of production facilities." And where better than the Philippines, where about 97 per cent of Japanese companies with overseas operations are yet to venture? Notably, it is not just the Hondas and Canons that Sumitomo is looking to lure. It says it is considering offering factory facilities for lease, with logistics and procurement support, as a way to encourage small and mid-sized Japanese businesses to set up shop. Although the official sales promotion is yet to begin, "inquiries from prospective customers have been rapidly increasing," says Fukuda. (http://on.ft.com/XKxQHB)