BusinessWorld | November 7, 2001 | By May Czarina A. Baetiong
First of two parts
During a recent press briefing by a local electronics group, grim-faced officials took turns in explaining why the once double-digit strong sector would end up with a 15% drop in revenues this year.
The slump in the electronics and semiconductor industry - as explained by the Semiconductor and Electronics Industries in the Philippines, Inc. - was inevitable given global economic conditions. Some businessmen even say a 15% drop is still optimistic as the projected fall is seen to be at least 18% to 20%. But more than the export volume decline, what scares businessmen is the length of waiting time for the sector's recovery: third quarter 2002 or even longer.
By then, emerging global economic giant People's Republic of China is a full-pledged member of the World Trade Organization (WTO) and enjoying the benefits of free-trade access, making even more daunting the task to revive the electronics industry.
China's participation in global trade, which is expected to be formalized at the WTO ministerial meeting in Doha, Qatar this weekend, appears to overshadow the more important issue on whether there will be a new round of WTO talks. China's intimidating impact on the global economy, particularly on Southeast Asian countries, outshines the difficulty of heads of different WTO member nations in pulling their acts together for a new round of talks after the failed Seattle ministerial meeting in November 1999. Several studies by regional economists never fail to mention Southeast Asian countries, including the Philippines, as those that will suffer as China joins WTO, for a reason.
China's allure to foreign investors has always been its huge domestic market, which, unfortunately, no one in Southeast Asia has. And it does not take an expert to figure out what a 1.2-billion opened Chinese market means in the era of competition. Also, China offers relatively cheap labor with its huge population.
"As the attractiveness of China to foreign investors increases after (its) entry to WTO, foreign investments could be diverted to China, which could pose a threat to some Southeast Asian countries," the Hong Kong Trade Development Council said in its executive summary. "To this extent, Southeast Asian countries may become victims of China's WTO entry if they fail to improve their investment environment to maintain foreign investor interest."
Even Trade and Industry Secretary Manuel A. Roxas II, whenever asked about China's WTO membership, would say the sleeping economic giant is capable of sucking foreign direct investments that could otherwise go to Southeast Asia.
In the early '90s, China got around only 20% of foreign direct investments bound for East Asia, while Southeast Asian countries chalked up 50%. Now, reports state the situation is reversed, with China getting the lion's share and Southeast Asia, the crumbs.
One need not look far to realize that investors are, indeed, flocking to China. Filipino conglomerates - mostly owned by businessmen of Chinese origin - are looking to their ancestral homeland for opportunities. Universal Robina Corp. of tycoon John Gokongwei, Jr., a native of Xiamen, is mulling establishing two manufacturing plants for its snacks and chocolate products in China - Shanghai and Panyu province.
Ditto with local fastfood chain Jollibee Foods Corp. of Tony Tan Caktiong, who initially used Hong Kong as gateway to China, but is now looking at putting up another outlet on top of the existing store in Xiamen.BusinessWorld:
