Crisis dams up Japanese investment flow to Asia

Crisis dams up Japanese investment flow to Asia

TOKYO (AFP): Japan's investment in China, India and the United
States is forecast to grow, but Asia's currency turmoil makes
Japanese firms more wary of their cash flow to some countries in
the region, analysts say.

"Despite obvious negative factors existing in the country such
as regulation problems, Japanese firms cannot ignore China as a
key destination of their investment," said Hiroki Sekine, an
analyst at the Export Import Bank of Japan (JEXIM).

Japanese investment in the United States is also seen rising
steadily because of the strong U.S. economy, while a growing
number of Japanese firms are showing strong interest in launching
businesses in India, the analyst said.

According to an annual survey released by the government-owned
bank on Thursday, China remained for the third year in a row the
most promising destination for direct Japanese investment for the
mid-term.

The United States, the largest recipient of Japanese cash,
climbed up to second place from fourth last year, with India
rising from seventh to fifth.

A total of 445 Japanese manufacturing companies with three or
more overseas affiliates responded to the survey, which was
carried out by the bank between July and September.

The poll also showed China, India and the United States were
the top three most promising investment destinations for the long
run, taken as the next decade.

"Particularly, more and more Japanese companies are interested
in India," the bank analyst said.

According to the finance ministry, Japanese direct investment
in India for the year to last March nearly doubled from a year
earlier to 24.7 billion yen ($191 million). Japan's investment in
the country for the six months to September already reached 20.3
billion yen.

ASEAN

On the other hand, analysts said Japanese firms were more
cautious about their investment in some of the Association of
Southeast Asian Nations (ASEAN) nations, particularly Thailand,
Malaysia and Vietnam, in the wake of the currency crisis that has
swept the region since July.

"In the past, Japanese companies considered they wanted to
invest in Asia en bloc, but they have dropped such a rough idea
following the turmoil," said Harunori Yamada, a senior researcher
of Mitsubishi Research Institute Inc.

"Japanese companies will be more serious about selecting the
destination of their investment in the region," Yamada said.

"Gaps over the amount of Japanese investment among Asian
countries will be widening, and this will be more obvious during
the turn of the century," the researcher warned.

ASEAN groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the
Philippines, Singapore, Thailand and Vietnam.

The JEXIM poll showed Thailand slipped to fourth place from
second last year as a promising destination for Japanese direct
investment over the next three years.

The bank said the decline was due to the Thai government's
decision to float the baht in July which triggered hefty
devaluations of neighboring currencies and regional economic
turmoil.

The survey showed Malaysia was downgraded from sixth to eighth
with Vietnam falling from fifth to sixth. Indonesia was unchanged
in third place.

"As for Malaysia, (the) Japanese are concerned about high
labor costs," Sekine said. "As for Vietnam, Japanese firms
realized that the country was too premature to accept investment
smoothly."

The poll also showed Japan's overall foreign direct investment
in fiscal 1997 was estimated to increase 1.4 percent from a year
earlier.

"Although it may be hard to attain the sharp increase observed
in the previous years, the high level of foreign direct
investment flow is expected to continue at the current level,"
the bank said.

Despite Tokyo's cautious stance towards some Asian countries,
Japanese money flows to the entire region have gained steadily.

Japanese direct investment in Asia -- ASEAN members, China,
Hong Kong, Sri Lanka and Pakistan -- jumped 26.4 percent from a
year earlier to 794.4 billion yen ($6.2 billion) for the six
months to September, the finance ministry said.