Manufacturers eye new bases around the region
The Association of Southeast Asian Nations looks to benefit the most from a regional transfer of industry as China's soaring costs and the phasing-out of super-preferential policies push multinationals to relocate.
Business representatives from ASEAN said they are winning back foreign investors from China by leveraging their large pools of labor, robust domestic markets and utilizing a string of policy incentives.
"It's safe to say that China's monopoly on foreign direct investment is no longer there," said Arturo Cruz Dimaano, project director of the Center for International Trade Expositions and Missions, a government agency of the Philippines.
"While it (China) is still an attractive destination, we have started to see more of a dispersal of investment, notably in the manufacturing sector," he told China Daily during the 10th China-ASEAN Expo, which opened on Tuesday.
He identified rising operational costs as the major cause forcing investors to go to neighboring countries such as the Philippines and Vietnam.
"Back in the 1980s, US and European firms were much more engaged in the Philippines than in China. But they started to relocate during the 1990s when China lured them with favorable conditions and an extremely competitive price. Now the tide is turning and we are seeing them come back," he said.
His remarks were echoed by Pai Thet, assistant executive officer of the Myanmar Industries Association, the country's largest manufacturing union.
According to Thet, the average wage of an ordinary worker in Myanmar is around $70 a month. In contrast, the threshold income in Henan province, China's most populous inland area, ranges from 960 yuan ($157) to 1,240 yuan a month, up to three times the amount in Myanmar.
"Since the outset of last year, we have received groups of Japanese investors who expressed interest in setting up factories in our industrial zones," Thet said.
The majority of them deal with textiles and electronics, he added, with half of them saying they were mulling whether to pull out of China and reinvest in neighboring economies.
Beijing has become more selective in screening FDI projects. It said it intends to shift to higher-value production and to see incomes rise.
For instance, it has grown less tolerant of highly polluting industries and in turn prefers investments related to research and development.
"We are in dire need of upgrades in infrastructure and manufacturing. So perhaps Myanmar is a better option right now for investors," he said.
A report from the United Nations Conference on Trade and Development in 2012 suggested that some countries in ASEAN - Myanmar, the Philippines and Cambodia - appear to be a bright spot when looked at in the light of the overall lackluster global economy.
"Although many countries can now compete with China in terms of labor costs, it is countries elsewhere in Asia, able to take advantage of strong infrastructure and existing supply chain networks, that will be the main beneficiaries of China's move out of low-end manufacturing," Gareth Leather, an Asia specialist at Capital Economics, wrote in a research note.
Countries are well equipped to roll out plans to draw investors in. Malaysia aims to develop its largely untapped east coast areas by inviting foreign companies to settle there, said Lim Pei Yun, an officer with the nation's East Coast Economic Region Development, which is under the supervision of the central government.
The Malaysian government is committed to putting in place physical, transportation and other infrastructure projects to support the development initiatives and specific incentives, including customized income tax exemption based on the merits of individual cases, to spur investment in the cost-competitive business hub.
She added that Malaysia has all the right ingredients to thrive: strong demographics, a large domestic market and an English-speaking population.
The Philippines is well-poised to host these manufacturing-oriented companies through the Philippine Investments Promotion Plan, a blueprint to synchronize strategies among various government organs to achieve "a world-class brand image" for the country, Dimaano said.
The project, with preferred investment focused on manufacturing, infrastructure, agriculture and tourism, provides registered enterprises an income-tax holiday from four to six years.
Companies may also qualify for a deduction in labor expenses in taxable incomes and are exempt from taxes and duties on raw materials.
Meanwhile, China is also trying to encourage foreign direct investment inland. In a pavilion tour during the expo, Premier Li Keqiang emphasized the importance of the vast inland areas as "the biggest room" for the country's development.
"I think developing the inland fits well into China's plan to let the region take over low-skill manufacturing and embark on urbanization, so that the coastal areas can be freed up to attend to more value-added work," said Sun Lijian, professor of economics at Fudan University in Shanghai.
"It's safe to say that China's monopoly on foreign direct investment is no longer there," said Arturo Cruz Dimaano, project director of the Center for International Trade Expositions and Missions, a government agency of the Philippines.
"While it (China) is still an attractive destination, we have started to see more of a dispersal of investment, notably in the manufacturing sector," he told China Daily during the 10th China-ASEAN Expo, which opened on Tuesday.
He identified rising operational costs as the major cause forcing investors to go to neighboring countries such as the Philippines and Vietnam.
"Back in the 1980s, US and European firms were much more engaged in the Philippines than in China. But they started to relocate during the 1990s when China lured them with favorable conditions and an extremely competitive price. Now the tide is turning and we are seeing them come back," he said.
His remarks were echoed by Pai Thet, assistant executive officer of the Myanmar Industries Association, the country's largest manufacturing union.
According to Thet, the average wage of an ordinary worker in Myanmar is around $70 a month. In contrast, the threshold income in Henan province, China's most populous inland area, ranges from 960 yuan ($157) to 1,240 yuan a month, up to three times the amount in Myanmar.
"Since the outset of last year, we have received groups of Japanese investors who expressed interest in setting up factories in our industrial zones," Thet said.
The majority of them deal with textiles and electronics, he added, with half of them saying they were mulling whether to pull out of China and reinvest in neighboring economies.
Beijing has become more selective in screening FDI projects. It said it intends to shift to higher-value production and to see incomes rise.
For instance, it has grown less tolerant of highly polluting industries and in turn prefers investments related to research and development.
"We are in dire need of upgrades in infrastructure and manufacturing. So perhaps Myanmar is a better option right now for investors," he said.
A report from the United Nations Conference on Trade and Development in 2012 suggested that some countries in ASEAN - Myanmar, the Philippines and Cambodia - appear to be a bright spot when looked at in the light of the overall lackluster global economy.
"Although many countries can now compete with China in terms of labor costs, it is countries elsewhere in Asia, able to take advantage of strong infrastructure and existing supply chain networks, that will be the main beneficiaries of China's move out of low-end manufacturing," Gareth Leather, an Asia specialist at Capital Economics, wrote in a research note.
Countries are well equipped to roll out plans to draw investors in. Malaysia aims to develop its largely untapped east coast areas by inviting foreign companies to settle there, said Lim Pei Yun, an officer with the nation's East Coast Economic Region Development, which is under the supervision of the central government.
The Malaysian government is committed to putting in place physical, transportation and other infrastructure projects to support the development initiatives and specific incentives, including customized income tax exemption based on the merits of individual cases, to spur investment in the cost-competitive business hub.
She added that Malaysia has all the right ingredients to thrive: strong demographics, a large domestic market and an English-speaking population.
The Philippines is well-poised to host these manufacturing-oriented companies through the Philippine Investments Promotion Plan, a blueprint to synchronize strategies among various government organs to achieve "a world-class brand image" for the country, Dimaano said.
The project, with preferred investment focused on manufacturing, infrastructure, agriculture and tourism, provides registered enterprises an income-tax holiday from four to six years.
Companies may also qualify for a deduction in labor expenses in taxable incomes and are exempt from taxes and duties on raw materials.
Meanwhile, China is also trying to encourage foreign direct investment inland. In a pavilion tour during the expo, Premier Li Keqiang emphasized the importance of the vast inland areas as "the biggest room" for the country's development.
"I think developing the inland fits well into China's plan to let the region take over low-skill manufacturing and embark on urbanization, so that the coastal areas can be freed up to attend to more value-added work," said Sun Lijian, professor of economics at Fudan University in Shanghai.
