PH still among Japan firms’ preferred sites

The Philippines remained among the top 10 countries where Japanese firms plan to put up new factories or expand their operations, according to the latest survey conducted by the Japan Bank for International Cooperation (JBIC).

This was despite security concerns apparently arising from the recent war in Marawi.

JBIC’s Survey Report on Overseas Business Operations by Japanese Manufacturing Companies for 2017, which was released on Nov. 22, showed that the Philippines again ranked eighth among the promising countries and regions for overseas operations over the medium term.

The Philippines has remained in the eight position since 2015. The country ranked No. 11 in 2013 and 2014.

For this year’s survey, 47 or 10.6 percent of the 444 Japanese firms surveyed had said they deemed the Philippines “promising in the medium term.”

China ranked first, followed by India, Vietnam, Thailand, Indonesia, the United States and Mexico.

Behind the Philippines to complete the top 10 were Myanmar as well as Brazil and South Korea, which were tied for the 10th place.

On a per sector basis, Japanese electrical equipment and electronics makers ranked the Philippines seventh; automobile assemblers, ninth, while chemicals and general machinery manufacturers put the country in 10th position.
The top five reasons given by Japanese companies for finding the Philippines promising in the medium term included the future growth potential of the local market; inexpensive labor; current size of the local market; availability of qualified human resources; and the country’s potential as a supply base for assemblers.

But respondents said pressing investor issues included security and social instability, which became the top concern this year from third last year.

Other major investor concerns were intense competition with other companies, difficulty in securing management-level staff, underdeveloped infrastructure, unclear execution of legal system, and rising labor costs, the survey showed.

The issue on security and social instability has become their top concern, up to 43.9 percent from 15.3 percent last year, due to factors such as the clashes between Islamic armed groups and government forces in Mindanao since May 2017. Second place was ‘intense competition with other companies’ (36.6 percent up from 10.4 percent).

While the Philippines last year had the highest ratio of Japanese firms that said “plans do exist” or they have real business plans either for new business forays or additional investments here, the country fell to eighth spot this year.

“In [South] Korea and the Philippines, response rates decreased substantially from the previous year, down 17.1 points and 15 points, respectively. As for the Philippines, the ratio of companies that have business plans was the highest among all countries in fiscal year 2016, but in fiscal year 2017, against the backdrop of the destabilization of its political and social situation, it seems Japanese companies are taking a more cautious stance toward planning business/investment in this country,” the JBIC explained.

In Asean-5, “the response rate of ‘strengthen/expand’ [in the medium term] was the highest in Indonesia (56.8 percent), followed by the Philippines (55.2 percent),” it noted.

“In the Philippines, ‘strengthen/expand’ was in an increasing trend but fell slightly this year. Nevertheless, like in the previous year, it was still higher than that of Thailand,” JBIC added.

Only 3.5 percent of respondents said they might scale down or withdraw their investments here, while 41.3 percent said they would likely maintain present investment levels.

The Philippines nonetheless stayed at 10th place among promising countries/regions over the long term, as well as kept its eighth position among locations seen as promising by midtier as well as small and medium Japanese enterprises over the medium term.

Also, the Philippines ranked ninth among the countries and regions deemed more profitable than Japan.

Japanese manufacturers of metal products also named the Philippines as the country where they had the highest average satisfaction with profits.

Conducted yearly, the 2016 survey is JBIC’s 29th to date.