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Manufacturers eye new bases around the region

2013-09-06 10:02 China Daily Web Editor: qindexing

The Association of Southeast Asian Nations looks to benefit the most from a regional transfer of industry as China's soaring costs and the phasing-out of super-preferential policies push multinationals to relocate.

Business representatives from ASEAN said they are winning back foreign investors from China by leveraging their large pools of labor, robust domestic markets and utilizing a string of policy incentives.

"It's safe to say that China's monopoly on foreign direct investment is no longer there," said Arturo Cruz Dimaano, project director of the Center for International Trade Expositions and Missions, a government agency of the Philippines.

"While it (China) is still an attractive destination, we have started to see more of a dispersal of investment, notably in the manufacturing sector," he told China Daily during the 10th China-ASEAN Expo, which opened on Tuesday.

He identified rising operational costs as the major cause forcing investors to go to neighboring countries such as the Philippines and Vietnam.

"Back in the 1980s, US and Europe an firms were much more engaged in the Philippines than in China. But they started to relocate during the 1990s when China lured them with favorable conditions and an extremely competitive price. Now the tide is turning and we are seeing them come back," he said.

His remarks were echoed by Pai Thet, assistant executive officer of the Myanmar Industries Association, the country's largest manufacturing union.

According to Thet, the average wage of an ordinary worker in Myanmar is around $70 a month. In contrast, the threshold income in Henan province, China's most populous inland area, ranges from 960 yuan ($157) to 1,240 yuan a month, up to three times the amount in Myanmar.

"Since the outset of last year, we have received groups of Japanese investors who expressed interest in setting up factories in our industrial zones," Thet said.

The majority of them deal with textiles and electronics, he added, with half of them saying they were mulling whether to pull out of China and reinvest in neighboring economies.

Beijing has become more selective in screening FDI projects. It said it intends to shift to higher-value production and to see incomes rise.

For instance, it has grown less tolerant of highly polluting industries and in turn prefers investments related to research and development.

"We are in dire need of upgrades in infrastructure and manufacturing. So perhaps Myanmar is a better option right now for investors," he said.

A report from the United Nations Conference on Trade and Development in 2012 suggested that some countries in ASEAN - Myanmar, the Philippines and Cambodia - appear to be a bright spot when looked at in the light of the overall lackluster global economy.

"Although many countries can now compete with China in terms of labor costs, it is countries elsewhere in Asia, able to take advantage of strong infrastructure and existing supply chain networks, that will be the main beneficiaries of China's move out of low-end manufacturing," Gareth Leather, an Asia specialist at Capital Economics, wrote in a research note.

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