MANILA – More foreign direct investments (FDI) from Japan may soon come to the Philippines as Japanese investors continue to seek alternative locations outside China, according to analytics company IHS.
Rajiv Biswas, Asia-Pacific chief economist at IHS, said there is an increase in Japanese investments to the Association of Southeast Asian Nations (ASEAN) amid Japan’s political tensions with China as well as rising manufacturing wage costs in coastal China.
“The ASEAN region offers considerable opportunities for Japanese firms, not only as hubs for manufacturing production, but also because of the large population and fast-growing consumer middle classes in some of ASEAN's largest economies, including Indonesia, Philippines, and Vietnam,” Biswas said.
“[Prime Minister] Abe's ASEAN pivot is already well under way, and this will generate substantial new FDIs from Japan to ASEAN over the medium- to long-term,” he added.
Biswas also said that Japanese multinationals will continue to use ASEAN as an “important risk mitigator” for regional manufacturing supply chains to reduce vulnerability of their supply chains to China.
Japanese foreign direct investments into the ASEAN hit $22.9 billion in 2013, more than double the $9.3 billion investments into China in the same year.
Biswas noted that the increasing flow of Japanese investments to ASEAN started when riots pushed away Japanese investors from China in 2012.
“ASEAN has many ‘pull factors’ that are attractive to Japanese multinationals, such as the region’s combined GDP reaching US$2.4 trillion in 2014, with a total population 635 million people and a rapidly growing middle class, representing one of the fastest-growing market opportunities over the next two decades,” he said.
Biswas said that the “economic renaissance” under the Aquino administration to improve FDI inflows and new rules on foreign ownership of banks will boost the country’s competitiveness.
In the four months of 2014, net FDI inflows to the Philippines reached $2.45 billion, a 9 percent increase from the same period in 2013.