Lean times for Japan's electronics giants used to mean good tidings for Southeast Asia. Often, they foreshadowed the opening of a Japanese factory somewhere in Malaysia, say, or perhaps the Philippines.
Thailand -- where Fujitsu took advantage of a strong yen and low Thai salaries more than a decade ago to start making computer printers and hard-disk drives at an industrial estate outside of Bangkok -- was a popular choice for Japanese companies, too. And over the next decade, Fujitsu poured plenty of investment into the factory, which went from producing roughly 12,000 hard drives a year to churning out more than a million a month.
Until last month, that is, when Fujitsu said it would slash production not only at the disk-drive factory, but also at others in the Philippines and Vietnam as it eliminates 16,400 jobs worldwide in response to deepening losses. Even as some Japanese companies are being forced to close factories at home, much the same process is occurring at their operations around the region. NEC is cutting semiconductor workers in Malaysia. Hitachi, which announced Friday that it was cutting almost 15,000 more jobs, mostly in Japan, is closing computer monitor factories in Malaysia and in Singapore.
On the most elemental level, Japan's cutbacks in Southeast Asia only highlight how the severe slump in demand for technology goods from the US and other industrial nations has reverberated around the world. But the downturn in the electronics industry has also become a powerful catalyst for even more profound shifts in Asia's economic balance. One is the slow but steady retreat by Japan as Southeast Asia's largest investor and financier. The second is the rapid re-emergence of China as the region's principal rival for investment and trade.
"It leaves Southeast Asia in a very precarious position," said William Belchere, head of fixed-income research at Merrill Lynch in Singapore.
Japan's own investment figures illustrate the situation. While Japan's direct investment around the world has fallen by 36 percent in the last 10 years as it grapples with its own economic downturn, its investment in Southeast Asia has been cut in half. Yet its investment in China has more than doubled, Japan's Ministry of Finance reports, making it the top destination in Asia. Japanese electronics companies once favored Malaysia. China now tops their Asian investment rankings.
This signifies Japan's withdrawal from a role it has played almost since China went Communist in 1949. While the US fought in South Korea and then in Vietnam, it left the job of financing development in non-Communist Asia to its World War II-enemy-turned-ally in Tokyo.
Japanese investment in South-east Asia surged further after the 1985 Plaza Accord by the G7 industrialized nations spurred devaluation of the dollar against the yen, making Japanese products more expensive to American consumers. Like Fujitsu in Thailand, Japanese exporters rushed to build factories where land and labor were cheaper. Sanctions by the US against imports of some Japanese electronics products helped put Japanese electronics companies at the forefront of the exodus to Southeast Asia.
This influx of yen helped pay for Asia's "miracle" decade, with Southeast Asia following Japan-style development, compelling citizens to save and channeling their funds through bankers to finance government-sanctioned developments, with exports fueling robust job and income gains.
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