Japan shifting investment to Southeast Asia
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But flood-prone Thailand may not see benefits
Japanese manufacturers and other domestic firms are shifting foreign investment from China to Asean, hoping to develop new markets and avoid anti-Japan riots.
Although Thailand has so far been the primary recipient of Japan’s investment in Asean, Indonesia, with its potentially huge domestic market, is seeing more capital every year.
Indonesia boasts the world’s fourth-largest population at about 240 million people, fuelling an auto market of more than 1 million vehicle sales per year, and is seen as perfect for “local production for local consumption”.
A Mitsubishi Motors assembly plant in Jakarta is running at full capacity, churning out trucks and the popular Outlander Sport. The plant last year assembled a record 120,000 vehicles, and is predicted to produce at least 135,000 units this year.
“We’re bullish about growth in automobile sales,” said Kunitoshi Akimoto, vice president of the Mitsubishi subsidiary that manages the plant.
Toyota Motors has announced plans to build a new engine factory in Indonesia, and Daihatsu Motor Company intends to expand its existing production capacity.
Indonesia’s importance is also rising among food makers. Mitsubishi Corp, which recently acquired seasoning giant Kirin Kyowa Foods Co for about ¥30 billion (Bt9.8 billion) plans to make its factory in Lampung Province its core Asian plant to capitalise on the growing demand for food products.
Tadashi Kinoshita, president of Kirin Kyowa’s local subsidiary, said the company is even looking to export products to the Middle East.
According to Finance Ministry data on the international balance of payments, direct investment in Asean countries in January-June 2013 was ¥999 billion (Bt328.5 billion) – about a fourfold increase from the same period last year.
This was 2.1 times the level of investment in China, which declined 18 per cent to ¥470 billion amid troubles over anti-Japan riots and rising wages.
Investment growth was particularly strong in Thailand, where it rose 80 per cent to ¥178 billion in the well-established manufacturing base for many Japanese firms, and in Indonesia, which saw a jump of 40 per cent to ¥224 billion.
An increasing number of companies have expanded their businesses in Indonesia to avoid over-concentration in Thailand, which has been plagued by floods and other problems in recent years.
A major issue when doing business in Indonesia is its poor infrastructure. Road maintenance is often slow and traffic jams are constant, which hinders the transport of parts and products. Wages have also risen sharply recently.
