Philippines taking steps to become the Mexico of Asia

Manila is making a calculated bet that when Japan realizes the magnitude of its labor shortage, companies there will be more comfortable outsourcing to the Philippines than India.

"Culturally, I think the Philippines has a better chance of being more attached to Japan than others in Asia," Camacho explains. "The Philippines is more of a natural extension of Japan and so I think of the Philippines as a possible Mexico/US type complementarity. We have skilled labor and a culture that's very adaptable and one that the Japanese are very comfortable with."

From all indications here, Japanese officials are lukewarm on the idea. For one thing, the worsening unemployment situation means Tokyo may be loath to loosen its tight immigration laws to import more workers. For another, Tokyo may worry that exporting jobs to the Philippines will damage economic and social stability.

Yet lending credibility to the effort, Arroyo's government has even gotten Rafael Buenaventura, the Philippine central bank governor, on board its we-want-to-be-the-Mexico-of-Asia campaign.

Says Buenaventura: "It's an area of opportunity for us -- and for Japan."