...the Japanese investment

Japan to pour more investments in PH

External trade survey rates the country ‘least problematic’

By Gil C. Cabacungan
Philippine Daily Inquirer

Sunday, March 18th, 2012

The Japanese are back and a euphoric President Benigno Aquino III says he expects the wave of Japanese investments currently pouring into the country to continue for some time.


After Japan’s power, infrastructure and supply chain were laid waste by the devastating earthquake, tsunami and nuclear accident exactly a year ago this month, Japan’s businessmen are looking to expand outside their country and are taking a very strong interest in the Philippines, Mr. Aquino said.

The President’s bullish expectations are supported by the country’s businessmen who believe that Japan’s renewed interest in the Philippines will pave the way for other foreign investors to follow.

“Japan has 50 nuclear reactors and of the 50, only three are still operating. It’s no joke to lose almost 50 nuclear plants and that is a major factor in [businesses] moving some of their operations out of Japan and bringing them here. I believe Japan will continue to be one of our biggest investors,” Mr. Aquino said in an interview.

The President is anchoring this rosy outlook on Japanese investments on last year’s data on foreign direct investments (FDI) which surged to P256.1 billion, 30.6 percent higher than the P196.1 billion registered in 2010. It was also the highest since the P241.1 billion notched three administrations ago in 1996.

The National Statistics Coordination Board reported that Japan was the top source of foreign capital pledges with a 30.2-percent share, ahead of the United States (27.5 percent) and the Netherlands (11.1 percent).

Mr. Aquino noted that Japanese companies operating in the Philippines were among the most enthusiastic endorsers of the country.

“For example, a manufacturer of (automotive) wire harnesses has induced cable manufacturers (from Japan) to move their plants here because of the volume. I think this is what’s happening now not only for small industries but big ones like steel manufacturing,” said the President who hinted that a major steel maker from Japan was keen to set up shop here.

He said the Philippines was already the fourth-largest shipbuilder in the world after China, South Korea and Japan, and the establishment of a steel plant in the country could push the Philippines higher in the rankings in this basic sector.

The President said his administration’s efforts to sell the Philippines as an ideal foreign investment site had paid off with most Japanese businessmen rating the country as having the most “hospitable” environment for business expansion.

He cited a recent survey by Japan External Trade Organization (Jetro) among Japanese-affiliated businesses in the Asia and Oceania regions.

“Their questions were on the negative side, like what were the problems they (businessmen) encountered in recruiting labor, recruiting supervisory personnel, land acquisition or rental. And in all of the business concerns, the Philippines was practically rated as having the least problems for businessmen. The way to look at that is that is a positive for us,” said Mr. Aquino.

The Jetro survey, which was conducted from August to September 2011, covered 731 Japanese manufacturing and service firms with operations in the Philippines, Indonesia, Vietnam, Burma (also known as Myanmar), India, Thailand, Malaysia and China.

PH least problematic

In the survey, the Philippines had the least problems when it comes to increasing financial costs (China and Malaysia were the worst), rising prices or shortage of land or office (India and Vietnam were the worst), and skyrocketing payroll costs (Thailand and Vietnam were the worst).

The Philippines was rated as having the least problems in terms of recruiting general staff (Vietnam and Malaysia were the worst), recruiting executives (Burma and Vietnam were the worst), low rate of employment retention (Vietnam and Malaysia were the worst), problems in workers competency (Burma and Vietnam were the worst), and difficulty in quality control (India and China were the worst).

In terms of labor costs, the Philippines had the least problems in salary base rate (Vietnam and India were the worst) although it ranked slightly higher in terms of salaries for managers and engineers.

Trade Secretary Gregory Domingo said that the lingering effects of Japan’s triple disasters in 2011 were not the only reason driving Japanese investors to the Philippines.

“It’s our improved competitiveness as well in terms of labor cost and quality of work force. A lot of Japanese investors are coming in, including the big ones such as Brother and Canon, and there are a lot who are seriously looking right now,” said Domingo in a text message.

Domingo was one of the Cabinet members who was in Tokyo just a month before the disaster struck in Japan on March 11, 2011. The Philippine officials were in Japan for an investor roadshow aimed at highlighting the reforms being done under the Aquino administration such as a commitment to cut bureaucratic red tape and clamp down on corruption.

‘VIP’

Domingo said the recent visit of the Keidanren (the Japan Business Federation), considered the most influential of Japan’s major economic organizations, was proof of the strong level of interest in the Philippines.

“Its delegation consisted of the chairs and CEOs of the largest Japanese conglomerates, there were about 20 of them. That level of participation has not happened in a long time,” he said.

Ramon del Rosario Jr., chair of the Makati Business Club, confirmed the President’s claim that the Philippines was “back on the radar screen of Japanese investors.”

“Just last Thursday, at a farewell lunch for the Mitsubishi country head, Nobuya Ichiki, who is also a leader of the Japanese Chamber of Commerce in the Philippines, [he] told us that the present focus of Japanese investors is VIP—for Vietnam, Indonesia, and the Philippines,” Del Rosario said in a text message.

“This is our best shot at Japanese investments in our manufacturing sector since we missed out in 1989 because of the tremendously destructive coup attempt that year. But we need to get our act together and present the best investment options, with Vietnam and Burma aggressively pursuing Japanese investments as well,” Del Rosario said.

Francis Chua, chair of the Philippine Chamber of Commerce and Industry, said that the resurgence in Japanese investments was part of the growing trend of companies exiting from China, which had sucked out most of the manufacturing jobs in the Philippines more than a decade ago with the globalization of trade and investments.

With labor costs shooting up in China, foreign investors are looking to returning to the other countries that they abandoned like the Philippines, said Chua.

“We’re elated by the surge in Japanese investments but we should not lose sight of getting other foreign investors like the Chinese who also want to escape China’s escalating labor costs,” he said in a phone interview.

Not keen on tax perks


Unlike previous administrations, Mr. Aquino said he was not too keen about making tax perks the main tool in attracting Japanese and other foreign investors into the country as he had promised to end the government’s deficit spending.

“We’re doing it differently now and we are attracting them to come here for fundamental business reasons like quality labor and less graft and not because we give the highest incentives,” he said.