TOKYO - Japanese firms have renewed their focus on Southeast Asian countries as investment destinations, as they increasingly seek to disperse their business bases from China amid bilateral tensions stemming from a territorial dispute.
China has long been one of the hottest overseas investment hubs for Japanese firms, with plenty of business opportunities since they started eagerly investing in the country in the early 1990s. But Southeast Asia has becoming comparatively more attractive in light of the rising costs and difficulties of doing business in China, analysts say.
Around 100 companies last week participated in an event to encourage Japanese companies to invest in Singapore and other members of the Association of Southeast Asian Nations, which was co-organized by the Singapore Business Federation and major Japanese office rental agency Crosscoop Singapore Pte., while around 200 people also joined in a similar event held last week organized by the federation and the Japanese Chamber of Commerce and Industry in Singapore.
A guest swims in the infinity pool at the Marina Bay Sands hotel in Singapore. Photo by Vivek Prakash, Reuters
The number of participants in the first event almost doubled from a similar seminar held before anti-Japan protests and ensuing boycotts of Japanese products erupted in China, said Motofumi Shoji, managing director at Crosscoop.
"I hear that consumer backlash against Japan is still quite strong (in China). More and more companies are now coming to Singapore to offset such risks," he said.
According to the Bank of Japan's data, Japanese direct investment in ASEAN countries in the April to June period rose around 40 percent from a year earlier to 380.2 billion yen, exceeding 300.5 billion yen in China, on the back of Japanese firms' stance to refrain from heavily concentrating business operations in China amid increasing labor disputes and rising labor costs there.
In 2011, direct investments in ASEAN doubled from the previous year to 1.5 trillion yen and the trend will likely remain the same down the road, financial sources said.
Around 82 percent of Japanese firms operating in China said they would withdraw or downsize their businesses in China due to cost increases, compared to around 39 percent of companies operating in ASEAN countries, according to data compiled by the Japan External Trade organization in fiscal 2011.
"Since last year, Japanese companies have started to turn their eyes again to Southeast Asia. The territorial dispute over the Senkaku islands is also pushing them (to look for production bases in countries other than China,)" said Yosuke Oishi, manager at the Singapore Tourism Board's Japanese branch, which co-sponsored the event.
Among the participants in the event, Chieko Hashimoto, executive producer at sales promotion agency Hiromori Inc., said that the company is planning to open an office in Singapore as its corporate clients are shifting their business focus from China to Southeast Asian countries.
"The adverse affect is tremendous. I think the impact (of the boycott of Japanese products) will last for the time being," Hashimoto said.
Amid strained bilateral economic ties between Japan and China, ASEAN countries are also eager to attract more investments from Japan.
The Department of Trade and Industry of the Philippines has recently sounded out dozens of Japanese firms doing business in China on relocating their operations to the Philippines under its tax break, while Lim Siang Chai, deputy finance minister of Malaysia, said shrinking Japanese investments in China can be a good opportunity for Malaysia to attract more Japanese businesses.
Joshua Ong, director of the Singapore Business Federation's industry development division, said "many companies and investments are now looking into Southeast Asia to expand their markets and opportunities," adding that Japanese firms would benefit from using Singapore as a business platform for making inroads into the region.