Philippines, Malaysia, Vietnam top investment spots in SEA - Update

Business Asia, March, 2003

The Philippines, Malaysia and Vietnam were the top destinations for foreign investors in South-East Asia in the first half of last year, according to an ASEAN study. The recently released statistics show that the top three locations received US$2.48 billion ($4.1 billion) in net foreign direct investment altogether. In Indonesia, the only nation in the region that has not recovered from the 1997-1998 financial crisis, investors withdrew a net US$1.1 billion in the first half of 2002 and US$3.3 billion in the whole of 2001. Asia's sixth-largest economy is still battling to lure foreign investors following a bomb attack on the island resort of Bali in October that left around 200 people dead. The statistics may not present an accurate picture of investment in South-East Asia, as Singapore and Myanmar are excluded. In addition, investments by the US, the biggest investor in the region, were excluded because Singapore, the biggest recipient of those investments, doesn't release half-yearly statistics. Even so, the report shows the region is struggling to lure investors, whose focus has shifted to China since the nation joined the World Trade Organization more than a year ago. After excluding the US, the top three foreign investors in the region in the first half of last year were Japan with US$740 million, followed by the UK with US$260 million, then Singapore with US$175 million.

* Hong Kong

A devaluation of China's yuan could hurt Hong Kong's economy by making the city less competitive with mainland China, Hong Kong Monetary Authority chief executive Joseph Yam says. Growing economic and financial links between China and Hong Kong have led to speculation about the impact if China lets its currency trade in a wider band against the US dollar. "Hong Kong would be adversely affected in the short term if the yuan devalues," Yam says. He adds that any change in the yuan exchange rate policy which is good for China's economy would no doubt be positive to Hong Kong in the long run. The yuan has traded close to its present level of 8.28 yuan to one US dollar for the past eight years, while the Hong Kong dollar is formally pegged at a rate of HK$7.80 to one US dollar.

* Indonesia

Indonesia's foreign investment approvals fell 34 per cent in January as the country's appeal to overseas investors was undermined by labour costs and the Bali bomb attack. The Government approved US$321.8 million ($532.3 million) of foreign direct investment last month against US$486 million during the same period in 2002, according to the Capital Investment Coordination Board. Domestic investment in January rose 53 per cent to 1.03 trillion rupiah ($191.4 million) from 674 billion rupiah. Overseas investments and sales of state assets are key to Indonesia's effort to spur economic growth and maintain its budget deficit at the 34.4 trillion rupiah forecast for the year, or about 1.8 percent of gross domestic product. Overseas investments into Indonesia have slowed, dropping 35 per cent last year to a nine-year low of US$9.7 billion.

* Japan

Toshihiko Fukui, the choice of Japan's Prime Minister to head the Central Bank, may work more closely with the Government than his predecessor, investors say. He has made it clear, though, that there's no quick fix for a 12-year economic slump. The 67-year-old was nominated by Junichiro Koizumi to replace Masaru Hayami, whose five-year term ended on 19 March. The former deputy governor, who has 40 years experience at the Bank of Japan, said in December that the institution can't revive the country's economy on its own. Koizumi has already moved closer to Fukui's own stance by tempering demands that the central bank adopt inflation targets to end five years of declining prices.

* Korea

South Korean import prices rose for a second month in January because of higher oil costs, according to a report from the Bank of Korea. January import prices rose 0.9 per cent from December after crude oil costs rose 7.1 per cent, the report stated. Prices rose 2.5 per cent from the previous year. Export prices fell 0.5 per cent from December, led by prices of mobile communications equipment. The country's Government says January's trade balance turned to a deficit for the first time in three years because of higher oil costs. Korea, the world's fourth-largest oil importer, has to import all of the crude oil it needs.

* Philippines

Philippine imports rose a fifth in December, marking an 11th straight gain, as electronics manufacturers imported more components and machinery to meet growing exports. Imports rose 20 per cent from a year earlier to US$2.57 billion ($4.2 billion), the National Statistics Office says. Purchases of capital goods and raw materials accounted for four-fifths of the total. A pick-up in exports and manufacturing activity may boost growth in an economy the Government predicts will grow as much as 5.2 per cent this year. Faster growth may increase tax collection and help reduce a budget deficit officials estimate will be 202 billion pesos ($6.1 billion) this year, down from a record 213 billion pesos in 2002. Purchases of capital goods rose for a seventh straight month, increasing 22 per cent to US$1.1 billion. That included US$562 million worth of telecommunications and electrical equipment.