SE Asian firms urged to merge

SE Asian firms urged to merge

MANILA (Reuters): The Philippines on Thursday urged Southeast Asian companies to merge, become multinationals and exploit planned tariff cuts to grow in the own regional market.

"We have to be neighbor-oriented and look at the 500 million strong ASEAN market," Trade Secretary Jose Pardo said, referring to the combined population of the nine-member Association of Southeast Asian Nations.

"Companies should look into opportunities of the markets of our neighbors and take advantage of our preferential tariff treatment," Pardo told members of the Makati Business Club, an influential group of Philippine business leaders.

Mergers between companies in ASEAN should be encouraged so that they could form regional multinationals, he said.

Pardo made the remarks as the Philippines faced a series of plant closures by Western multinationals.

Members of ASEAN have agreed to progressively reduce tariffs on 85 percent of all products traded within the region to between zero and 5.0 percent from January 2000.

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

Pardo said joint ventures and mergers among ASEAN companies would create economies of scale and help them cope with the competition from western firms.

"It is hoped that in the end, ASEAN companies will attain multinational status," Pardo said.

He also noted that some multinational corporations were trimming their operations in the Philippines.

Among these are pharmaceutical firms Warner Lambert and Abbott Laboratories, athletic-apparel makers Nike and Reebok, and consumer goods concerns Johnson & Johnson and Colgate-Palmolive.

He stressed, however, that the government was not alarmed by these closures. He cited other companies, such as Switzerland- based Nestle and Anglo-Dutch conglomerate Unilever, entering the country through joint ventures.

The two pharmaceutical firms said separately that the closures were part of the regional realignment of operations.

Ebb Hinchliffe, director of the American Chamber of Commerce of the Philippines, said the closures would not drastically raise the number of unemployed because some of the companies would continue to subcontract up to 70 percent of their products with local firms.

Pardo said that the trade department had appealed in writing to the head offices of Nike and Johnson & Johnson but a much- publicized labor dispute within Philippine Airlines and news of its militant labor force had "dampened our prospects."