Japanese traders find PH attractive albeit with instability issues

Despite security concerns in some parts of Mindanao, the Philippines remained top of mind among Japanese investors for their overseas ventures.

In the Japan Bank for International Cooperation’s (JBIC) Fiscal Year 2018 Survey Report on Overseas Business Operations by Japanese Manufacturing Companies, the Philippines remained eighth among 10 “promising countries/regions over the medium term.”

China, India, Thailand, Vietnam, Indonesia, the US and Mexico ranked higher than the Philippines, while Myanmar and Malaysia completed the list. Since 2015, the Philippines has been in eighth position, up from 11th place in 2014.

Of the 431 Japanese firms surveyed last year, 43 or 10 percent chose the Philippines, slightly lower than the 40 out of 444 companies (or 10.6 percent of total) that did so in the 2017 survey.

The Philippines nonetheless ranked fifth among promising investment destinations for Japanese electrical equipment and electronics firms; eighth among automotive companies; and ninth among manufacturers of general machinery.

The top five reasons why Japanese investors found the Philippines promising were: future growth potential of local market; inexpensive source of labor; base of export to third countries; current size of local market; and base of export to Japan.

However, Japanese firms were most wary about the perceived security and social instability risks in the Philippines, JBIC said. “Frequent terrorist attacks and clashes with Islamic extremists in the southern part of the country have caused strong security-related concerns.”

The four other major investor issues included underdeveloped infrastructure, intense competition with other companies, difficulty to secure management-level staff, and underdeveloped local supporting industries.