Asia to face stiff challenges in luring investments

Asia to face stiff challenges in luring investments

SINGAPORE (AFP): Post-crisis Asian economies face stiff
challenges in securing foreign direct investments as China
pursues its membership bid in the World Trade Organization, an
independent think-tank reported.

Restructuring efforts undertaken in the aftermath of the
regional financial crisis which began mid-1997 have boosted the
level of such foreign inflows into Thailand and South Korea, said
the Political and Economic Risk Consultancy (PERC) in its latest
survey.

It has also improved expatriate businessmen's perceptions of
the extent of discrimination against their investments, the
survey said.

But China's bid for membership in the World Trade Organization
(WTO) "could be the single most important factor influencing
foreign direct investment trends for a number of years to come --
not only in China but elsewhere in Asia as well," it said.

"Increasingly, one of the key challenges for other Asian
countries will be either to compete against China as a site for
foreign investment or to complement investments there.

"Hong Kong, Taiwan and probably (South) Korea will figure into
the latter category. Singapore should also be able to carve out a
niche for itself," PERC said.

It noted that even without membership in the global trade
body, China has been attracting more direct foreign investment in
recent years than the rest of Asia combined.

Foreign direct investment to China is expected to fall US$10
billion this year from $45.5 billion in 1998, but still the
amount is greater than new investments being actually committed
into any other Asian country, it said.

It attributed the drop to Beijing's efforts to more accurately
record such statistics, following the fallout from a scandal
involving China's local investment trust companies.

Malaysia, Thailand and the Philippines, while possessing their
own structural merits, could not consider cheap labor as a
decisive factor attracting foreigners to invest.

"China's entry into the WTO will be coming at a time when
these countries are just emerging from the regional crisis, and
it remains to be seen how well they will face up to the new
competitive challenges that will develop," the report said.

"If China is about to enter a period of rapid policy change
for the better, other countries from India to the Philippines
will have to take even more radical steps," it added.

Indonesia

Foreign investors would keep Indonesia in its sights due to
its large population and wealth of natural resources, "no matter
what happens in China."

"And if the mainland's economy continues to grow strongly, its
demand for the raw materials that Indonesia has to offer could
create a lot of synergies for both countries," PERC said.

"The problem with Indonesia as far as most foreign investors
are concerned is not so much an unwelcome regulatory atmosphere
as it as a nagging suspicion that Indonesia's political and
social problems are far from settled and that more disruptions to
the business environment can therefore be expected," it said.

India's selling points would be its huge population, the large
middle class and its widespread use of English, it added.

The report was part of PERC's survey this year of 500
expatriates and their perceptions of the extent of discrimination
against their investments.

Three of 12 countries surveyed -- Japan, Thailand and South
Korea -- registered improvements in their scores from a year ago.

On a scale of zero to 10, with zero being the best grade
possible, Japan scored 4.38 this year, from 5.71 in 1998,
Thailand 5.00 from 6.38, and South Korea 6.40 from 7.47.

Hong Kong and Singapore, remained the top two with the most
favorable ratings, although their scores slipped to 1.30 in 1999
from 0.79, and 2.36 from 1.36 respectively.

PERC commended their governments for pursuing steps to make
their economies more friendly for foreign investors.

All the other countries surveyed were within the middle range,
with the exception of Vietnam, whose score fell to 7.50 this year
from 5.50 a year ago.