When US-China trade dispute tariffs jolted Chinese tire firm Prinx Chengshan into speeding up foreign investment plans, the company wound up in Thailand, thanks to that nation’s relentless courtship.
With an initial investment of US$300 million, the company is now racing to build a factory to export tires to the US next year, based in a Thai industrial zone reinvigorated by the trade spat.
Multiple visits to China by the Thai Board of Investment helped. So did two personal meetings with Thailand’s top economic policymaker, company manager Ju Xunning (鞠訓寧) said.
“This impressed our company and this is also one of the main reasons for choosing Thailand,” Ju said. “It’s apparent that the government values doing business with us.”
With global economic growth flagging, in part because of US President Donald Trump’s trade dispute with China, competition is growing among Asian nations to win investment from companies moving supply chains to escape higher tariffs.
Tax breaks, promises to slash red tape and trade missions are all on the table.
“Companies have thrown in the towel on the status quo,” IHS Markit Asia-Pacific chief economist Rajiv Biswas said.
Vietnam has benefited most from the shifts in terms of the number of companies moving business, according to independent surveys, but other Asian nations are eager to bring in more business as well, including India and Indonesia.
The trade dispute has breathed new life into Thailand’s Eastern Economic Corridor, where Prinx Chengshan is building its factory. The program was set up under the former military junta to boost growth that has for years lagged regional peers.
Pledged investment for the zone rose nearly fourfold year-on-year to 88 billion baht (US$2.87 billion) in the first half of this year. One of the main drivers was investment from companies trying to escape tariffs.
Thailand’s biggest industrial estate developer WHA, which has nine developments in the area, said Chinese companies account for 43 percent of its land sales, up from less than 3 percent before the trade spat.
Chinese companies are being catered to carefully, WHA chief executive Jareeporn Jarukornsakul said.
“I told one company: ‘This location is very good. You’ll be at the heart of the estate and everyone else will be your tributaries. The feng shui is perfect, you’re the emperor,’” she said.
Hong Kong-listed Prinx Chengshan said it had planned on moving tire production to Malaysia, but wavered after the Malaysian election early last year.
“The government couldn’t fulfill several of the promises made to us and we eventually gave up,” Ju said at his makeshift office near a building site.
Malaysian Deputy Minister of International Trade and Industry Ong Kian Ming (王建民) said that although Prinx Chengshan had gone elsewhere, the nation had attracted another Chinese tire company — Maxtrek Tyres, a subsidiary of Zhaoqing Junhong Corp Ltd — as well as a paper plant and further Chinese investment.
Both Thailand and Malaysia have since sweetened their deals.
Thailand this month offered a new range of “relocation incentives” — including a five-year 50 percent corporate tax cut — while Malaysia set up an investment board to encourage relocations.
“If approvals took three months earlier, now it would take a month,” Ong said. “The trend we see is that many of these strategic investments are reacting to the US-China conflict.”
Foreign direct investment to Malaysia nearly doubled to US$12 billion in the first half of this year and Ong said that he hoped it would accelerate further.
Thailand and Malaysia are competing for higher-end manufacturers, but their wages price them out of labor-intensive work, such as stitching shirts and sneakers that is more likely to go to Bangladesh, Myanmar or Cambodia.
One Bangladeshi factory owner, Faisal Samad, said new orders from the US had pushed his export volumes up 20 percent this year.
Vietnam has taken aim at both the low and high ends, with companies citing relatively low wages, a motivated workforce, relatively simple business procedures and proximity to China.
When Vietnamese industrial park operator DEEP C Industrial Zones set off to China for investment roadshows this month, it saw 180 people sign up this year compared with just 20 last year, head of sales Hank Kerstens said.
Another beneficiary has been Taiwan, whose government is trying to lure back Taiwanese firms in China with incentives on tax, land, water and electricity. Officials hope to get US$16 billion of investment by the end of the year.
A Nomura study of 56 firms relocating production from China between April last year and August, when trade dispute tensions have been highest, showed 26 going to Vietnam, 11 to Taiwan and eight to Thailand.
Just three companies went to India and two to Indonesia — a situation both nations are trying to change.
India wants to woo companies such as Apple Inc, Foxconn Technology Group and Wistron Corp with a charm offensive, according to a source and government document.
A surprise cut to India’s headline corporation tax rate to 22 percent from 30 percent last month could attract smartphone makers, industry executives said.
The Indian Ministry of Commerce and Industry said the cut was meant to draw in investment, but businesses also worry about infrastructure and red tape.
One smartphone company executive, who declined to be identified because of the sensitivity of the matter, compared Vietnam with India, saying: “You meet one guy [in Vietnam] and he takes care of everything from the government side. That is not the case in India.”
Similar concerns are hampering Jakarta, where Indonesian President Joko Widodo this month told Cabinet ministers “we have a problem,” as he pointed to the lack of companies moving production to the nation to escape trade dispute tariffs.
He ordered ministers to identify which regulations were getting in the way of investment.
“It’s a matter of identifying those regulations, fixing them, and making sure no new ones come up,” said Citi Indonesia chief economist Helmi Arman, who cited “ad-hoc regulations” as the main obstacle to attracting trade spat-related relocations.
Indonesian ministries did not respond to a request for comment.
In Thailand, Jareeporn said that she was optimistic that the surge of investment was just the start.
“We now have a shot at becoming the region’s No. 1 and overtaking Vietnam in five years,” she said after closing a land deal with another Chinese business.
Additional reporting by Lee Yimou in Taipei; Orathai Sriring in Bangkok; Krishna Das in Kuala Lumpur; Fanny Potkin and Gayatri Suroyo in Jakarta; Brenda Goh in Shanghai; Serajul Qadir in Dhaka; and Sankalp Phartiyal in Mumbai, India
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