Japan firms see market growth

THE PHILIPPINES climbed to eighth place among the most “promising” countries where Japanese manufacturers, including automotive assemblers, might expand in the next three years on the back of a growing economy and expanding market, the latest survey of the Japan Bank for International Cooperation (JBIC) showed.

Potential new investors as well as expansion activities of existing Japanese locators, however, remained deterred by the lack of infrastructure in the country, according to JBIC’s Fiscal Year 2015 Survey Report on Overseas Business Operations by Japanese Manufacturing Companies released last week.

In this year’s rankings of promising countries or regions providing medium-term investment or expansion prospects among Japanese firms, the Philippines placed just behind India, Indonesia, China, Thailand, Vietnam, Mexico and the United States.

Last year, the Philippines ranked 11th. In this year’s survey, the country surpassed Brazil, Burma (Myanmar) and Russia, which last year ranked higher.

“Though the number of companies citing the Philippines was the same as the previous survey (50 companies), the percentage share increased from 10 percent in the previous survey to 11.5 percent, thus resulting in it entering the top 10 countries for the first time,” JBIC noted. This year, JBIC surveyed a total of 433 companies, fewer than the 499 polled last year.

According to JBIC, the top reason why the Philippines was cited as promising by Japanese manufacturers was “future growth potential of local market” (64.6 percent of respondents), which the bank noted “is in an upward trend.”

“Second place was ‘inexpensive source of labor’ (47.9 percent), which among the Asean nations in the top 10 countries was highest behind Burma and Vietnam. And third place was ‘supply base for assemblers’ (25 percent), which indicates that the Philippines is regarded as a supply base,” JBIC added.

However, the most pressing concern of Japanese investors in the Philippines was its “underdeveloped infrastructure,” according to 40.9 percent of survey respondents.

“Among the Asean nations in the top 10 countries, [underdeveloped infrastructure] was highest behind Burma in terms of response ratio,” JBIC said.

The other top issues against investing in the Philippines were difficulty to secure management-level staff (according to 34.1 percent of respondents), which JBIC said “indicates the shortage of management-level staff despite the high marks for the Philippines as an inexpensive source of labor,” as well as security/social instability (22.7 percent). JBIC noted that security/social instability used to be the topmost concern of respondents since the 2011 survey, but this year “has seen a large drop in response ratio.”

Also, JBIC noted the greater interest among Japanese manufacturers to increase their presence across Asean. “A look at the top 10 countries shows that, in addition to Indonesia (2nd place), Thailand (4th place) and Vietnam (5th place), the Philippines ranked 8th place, up from 11th place in the previous survey. The top 20 countries include more Asean countries, such as Malaysia (11th place), Singapore (13th place), Cambodia (17th place) and Laos (20th place). This is an indication of the growing presence of Asean countries as promising countries/regions,” it said.