SE Asia seen losing foreign investment pull

SE Asia seen losing foreign investment pull

SINGAPORE (AFP): Southeast Asia's attraction for foreign
direct investments will wane due to its debilitating financial
crisis, benefiting the Greater China region, a report said
Wednesday.

The Political and Economic Risk Consultancy Ltd. (PERC) also
said in its report that the source of future foreign investments
in the region would shift from Overseas Chinese and Japanese
companies to North American and European firms.

PERC warned that the economic crisis gripping Asia was going
to reduce the inflow of foreign direct investment to the region
significantly in 1999.

More importantly, the pattern of foreign investment would also
change, it said.

"Southeast Asia will decline as a destination for direct
investment, while proportionately more direct investment is
likely to flow to Greater China ..., the report said.

"China is the land of opportunity, while Hong Kong and Taiwan
(Singapore as well, if you want to consider it part of Greater
China) offer ease of access.

"This is a perfect fit for many businesses and is likely to
insure that Greater China attracts an increasing share of the
direct investment flowing to Asia from the West in the coming
year," PERC said in the report entitled "direct investment
climate."

The Hong Kong-based PERC said assuming China was able to keep
ahead of its systemic shortcomings, it should be able to continue
to attract the lion's share of direct investments flowing to
Asia.

"This leaves the smaller countries of Southeast Asia in a very
difficult position," it said.

PERC felt Indonesia would be shunned by almost all direct
investors because of its highly unstable political situation
while Vietnam's business environment was still way too difficult
to interest many foreign investors.

Malaysia still welcomes many types of direct investment, but
many foreigners had been put off by Prime Minister Mahathir
Mohamad's positioning during the regional financial crisis
triggered off in mid-1997, it said.

Thailand, PERC said, would have to pass bills on bankruptcy,
foreclosure, and land ownership if it was to have any chance of
attracting significant levels of new foreign investment.

However, PERC suspected that more foreign investment would
flow to Thailand than to other Southeast Asian countries apart
from Singapore "but the magnitude of this investment will still
be disappointing."

The Philippines could give Thailand a good run for its money
"but for the Philippines really to take off it will have to
somehow carve out a niche for itself in servicing the Greater
China region more than is currently the case," the report said.

PERC also said there seemed to be a false assumption that,
stimulated by radical currency depreciations in Asia, Western
investors were going to flock to the region to invest in export-
oriented production facilities.

"We think winners and losers will be distinguished mainly by
their ability to offer domestic market potential and the
transparency and "user-friendliness" of their systems.

"Those countries offering the biggest market potential can
afford, if they chose, to be more selective in the foreign
investors they admit," PERC said, naming China and Japan as most
prominent examples.

PERC also carried in its report a survey of expatriates
working for foreign-invested enterprises in the region showing
Hong Kong and Singapore as the most hospitable sites for foreign
investors.