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PHL may benefit as firms look into reducing ‘overdependence’ on China

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THE Philippines may potentially attract manufacturers who are seeking to set up shop outside of China — the epicenter of the on-going coronavirus disease (COVID-19) outbreak.

In a briefing on Thursday, Rizal Commercial Banking Corp. (RCBC) Treasurer Horacio E. Cebrero III noted some “potential concentration risks” for global manufacturers, which may push them to expand beyond China and other affected locations.

“We (The Philippines) could potentially get some of those manufacturers… So there could be an opportunity in which the banks and private sector here could be focusing on,” Mr. Cebrero said.

Apart from the COVID-19 outbreak, the on-going US-China trade war is another major consideration for some manufacturing firms to look into reducing their “overdependence on China,” according to Maybank Kim Eng.

“The COVID-19 virus outbreak will likely reinforce the shifts in manufacturing supply chains from China,” the firm said in a note sent to reporters on Friday.

It cited multinational corporations such as Toyota Motor Corp., Honda Motor Company, and Samsung Group to be among those considering to speed up relocation plans as the outbreak drags on.




Maybank KE said that the Association of Southeast Asian Nations (ASEAN) region will see some bright spots from the “structural shift” caused by both the US-China trade war and the COVID-19 outbreak.

“We think that ASEAN will benefit from this structural shift, as MNCs (multinational corporations) adopt a ‘China+1’ strategy and look for alternative bases to diversify their risks,” the report said.

The “China+1” strategy is the practice of doing international business in mainland China while also maintaining a second facility in another economy, most likely also an Asian country.

Security Bank Corp. Chief Economist Robert Dan J. Roces said that the Philippines, being one of the “least affected” compared to peers in terms of economic fallout from the outbreak, has a good chance of attracting manufacturers looking to transfer their operations.

“We have to be able to put our domestic supply chain and logistical infrastructure in order, as foreign investors are sensitive to logistical challenges,” he said in an emailed response.

Mr. Roces cited regulatory risks, ease of doing business, and tax incentives as factors the Philippines should work on to attract investments.

Data from the Philippine Statistics Authority showed that foreign investments in the form of approved commitments surged 112.8% to P390.11 billion in 2019, which is the highest since at least 1996.

However, foreign direct investments (FDI) inflows in the Philippines has been slashed by nearly a third (29.9%) in the 11 months through November to $6.413 billion, according to data from the central bank.

“If the impact dictates that the Chinese economy is rendered damaged and may take a longer time to recover, the likelihood of manufacturing firms’ transfer to the Philippines is higher,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a text message.

However, the Philippines will have to compete with Vietnam.

“Between Vietnam and the Philippines, locators may go to Vietnam easily. We can be competitive versus Thailand and Malaysia,” Mr. Asuncion said. — Luz Wendy T. Noble









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