Investment attention turning to ASEAN

Lower labor costs

In the Philippines, Cambodia and Laos, the lower cost of labor is attracting more manufacturing facilities by Chinese companies. This push is encouraged by the rising cost of labor in China, the emergence of viable domestic consumer markets in ASEAN countries and the fact that, according to Moody's Gibson, Chinese exporters have "a lot of cash that they don't want to repatriate, so it is used for investment".

"The longer-term trend is for investment to keep growing, especially with the geopolitical environment," added Gibson.

Li Yao, chief executive officer of the China-ASEAN Investment Cooperation Fund, said it is not always easy to structure a good deal in the region. But the fund, which has already raised the first $1 billion of the $10 billion it will invest, is actively searching for projects.

The private equity fund, which will focus on investments in infrastructure, energy and natural resources in the ASEAN region and China, comprises both Chinese and foreign funds, including the World Bank's International Finance Corporation, which joined as a cornerstone investor in May 2011.

"The region is punctuated by a wide range of economic systems and different levels of economic development," said Li. "At one end you have developed economies such as Singapore and Brunei. At the other end of the spectrum are emerging economies such as Myanmar, Cambodia and Laos.

"This presents a tremendous opportunity as targeting the ASEAN region as a whole allows us to effectively diversify our investments. We are complementary. China and (ASEAN) countries can support each other."

The increasingly visible presence of Chinese investors in ASEAN marks a significant change. The growth of domestic markets in ASEAN and access to a wide range of resources is attracting more Chinese investment, particularly as the costs of manufacturing domestically go up.

By the end of 2011, China had invested a cumulative $13.5 billion in ASEAN. Its direct investment in ASEAN grew by almost 50 percent between 2002 and 2010, David Wong, deputy chief executive at the Bank of China Hong Kong, said at the Asian Financial Forum last December.

China is now the region's largest trading partner, buying and selling a wide range of goods and services.

Nevertheless, the growth of China's investments in ASEAN is slow and low, less than 5 percent of the $322 billion it has invested in other overseas destinations. In 2010, for instance, Chinese investment in ASEAN grew 12 percent, compared with 81 percent growth in the United States, 57 percent in Europe and 59 percent in Africa, according to the Ministry of Commerce.

Speaking at the Eighth China-ASEAN Expo late last year, Vice-Minister of Commerce Gao said bilateral investment between China and ASEAN had hit the $90 billion mark and growth was increasing after the establishment of the free trade area between China and ASEAN.

Significantly, Gao added that China plans to build economic and trade cooperation zones in all ASEAN countries, zones that could act as a platform for Chinese investment in the region.

alfredromann@gmail.com

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