Manufacturers rush to 'revamp' SE Asian bases
Manufacturers rush to 'revamp' SE Asian bases
BANGKOK (Nikkei): Japanese, U.S. and European manufacturers are scrambling to reorganize their production bases in Southeast Asia ahead of a gradual trade liberalization under the planned Asean Free Trade Area, the Nihon Keizai Shimbun reports in its Saturday morning edition.
Members of the Association of Southeast Asian Nations aim to lower tariffs in most parts of the region to 5 percent or less in 2002 and zero by 2010, enabling firms to concentrate production in one nation and export the output to other countries. But at the same time, overlapping production facilities will become a burden for companies, and many are rushing to consolidate them.
U.S., European and South Korean businesses are also setting up new plants and expanding existing ones. Competition is expected to grow in the region, which boasts a total population in excess of 500 million, the second most promising market after China.
The Matsushita Electric Industrial Co. group has calculated the profitability of its 40 or so plants in the region after tariffs are cut, deciding to concentrate production of electronic parts for the information technology industry in Singapore and rice cookers in Thailand.
The group now makes IT electronic parts in two nations and rice cookers in three. It is also considering consolidating output of televisions and home appliances.
Denso Corp., which operates factories in four Asean members, is concentrating output of electrical parts in Malaysia and spark plugs in Indonesia.
Honda Motor Co. will begin local production of its Stream minivan in Indonesia and export it to other Asean nations starting 2002.
The high tariffs imposed by Southeast Asian nations had prompted firms to operate plants for the same products in different countries in order to secure large market shares in each local market.
But Asean states are now aiming to implement a free trade area on fears that foreign investment is being sucked into China. Companies worldwide are aggressively investing in Asean nations to avoid becoming overinvested in China, which is likely to accelerate the trend of manufacturing abandoning Japan.
Firms are also boosting local output in the region. South Korean's LG Electronics Co. is expanding its air conditioner plant in Thailand. It will boost annual output there to 200,000 units by the end of this year, up 10-fold from the previous year, and export the goods to other Southeast Asian nations starting next year. LG now exports air conditioners to the region from South Korea.
U.S. firm Procter & Gamble Co. has invested around 12 billion baht to expand its Thai plant.