Ma Ying-jeou has been reelected as Taiwan’s president for a second term. Despite his victory, he faced close competition from Democratic Progressive Party candidate Tsai Ing-wen. The clip above, from The Wall Street Journal, discusses the impact of Ma Ying-jeou’s reelection on cross-strait relations between Mainland China and Taiwan.
Most Asian countries have maintained strong economic growth in recent months despite the turmoil in global markets; however, significant downside risks threaten the region’s continued performance. In Thailand, floods threaten to undermine the country’s growth and disrupt regional supply chains. In China, a spate of defaults in the informal banking market is casting a shadow over the country’s prospects
- Bangladesh: Bangladesh’s deal with India will likely lead to long-term growth of bilateral trade and improvement of domestic infrastructure
- Cambodia: As Cambodia becomes increasingly integrated into the regional and global economies, it will start drawing significant attention from investors
- China: Multinationals should watch for news of further SME defaults as they could put a drag on Chinese growth
- India: India’s Right to Information Act is beginning to create serious problems for corrupt politicians and businessmen
- Indonesia: Indonesia’s policymakers have shifted their attention from inflation to growth, confident that they have price pressures under control
- Japan: The economy’s slow path to recovery will further decelerate due to the global economic slowdown, rising Yen, and continuing energy issues
- Malaysia: Malaysia has drawn significant FDI so far this year, suggesting that the country remains an attractive destination for manufacturing
- Pakistan: Recent interest rate cuts, which were aimed at promoting growth, are likely to spur already high inflation
- Philippines: A recently announced fiscal stimulus package may create opportunities for multinationals operating in the Philippines
- South Korea: New anti-graft reform measures should help to improve South Korea’s corruption landscape over the medium term
- Taiwan: Taiwan’s business environment will continue to improve as the island’s leaders work proactively to attract investment
- Thailand: The recent floods will impact global supply chains for agricultural goods, automobiles, and consumer electronics until at least Q1 2012
- Vietnam: Pledged foreign direct investment is dropping as growing domestic risks give companies reason to pause
Most Asian countries continue to exhibit strong growth despite the recent turmoil in global markets. However, if there is a full-blown recession in the developed world, some markets will weather the storm better than others. In particular, domestically-oriented countries like India and Indonesia will be much less affected by a downturn in the West than will export-oriented countries like Thailand and Malaysia
- Bangladesh: Bangladesh’s deal with India will likely lead to long-term growth of bilateral trade and improvement of domestic infrastructure
- Cambodia: As Cambodia becomes increasingly integrated into the regional and global economies, it will start drawing significant attention from investors
- China: Signs of weakening consumer demand have appeared in the luxury goods industry, which has seen stellar growth numbers in H1 2011
- India: Continuing interest rate hikes along with inflationary pressures will dampen GDP and industrial growth for the remainder of 2011
- Indonesia: MNCs should ensure that they are effectively taking advantage of Indonesia’s numerous government incentive programs
- Japan: The economy’s slow path to recovery will further decelerate due to the global economic slowdown, rising Yen, and continuing energy issues
- Malaysia: Malaysia is pursuing an unprecedented expansion of its oil infrastructure that may create significant opportunities for multinationals
- Pakistan: Companies should expect price pressures in Pakistan to remain elevated for the foreseeable future
- Philippines: A new agreement with China will bolster bilateral trade and boost foreign direct investment in the Philippines
- South Korea: New anti-graft reform measures should help to improve South Korea’s corruption landscape over the medium term
- Taiwan: Taiwan’s business environment will continue to improve as the island’s leaders work proactively to attract investment
- Thailand: Companies should remain cautious of the political landscape until the country’s new government has established a solid base of support
- Vietnam: The government’s new minimum wage hike will undergird Vietnam’s inflationary spiral, prolonging the pain for multinationals in the country
(Source: Foxconn Website)
Foxconn is one of the most well-known emerging-markets based manufacturers. With labor prices increasing along with a string of suicides in it’s Chinese factories – the Taiwanese firm is looking to Latin America for new production capacity. The following is a cross-post from the China and Latin America blog which details Foxconn’s recent push into Brazil.
On August 6th, the Financial Times featured an article on Taiwan electronics firm, Foxconn (富士康科技集團), and its founder, Terry Gou. Foxconn controls close to half of the world’s outsourced technology products, including a number of Apple favorites (iPads, iPhones, etc).
According to the article, Mr. Gou recently announced a plan to place one million robots on Foxconn’s production lines. Automated production, he believes, will generate growth – the company made $80 billion in revenue last year, but is finding it hard to expand its market share.
Before Terry Gou ever announced his fondness for robo-employees, Foxconn was already seeking greater efficiency and market access through global expansion. In addition to production facilities in “greater China” (where it employs nearly one million people), Foxconn also operates in Europe, Australia, the United States, and Latin America. The company’s relatively new Latin American ventures (currently limited to Brazil and Mexico) provide greater access to local markets and close proximity to North American consumers.
Foxconn is now contemplating an additional investment of $12 billion in Brazil, which was first announced by President Dilma Rousseff during her visit to mainland China in April of this year. The company already operates at a limited capacity in the South American country, but the proposed investment would significantly expand production capabilities. New investments would offer Foxconn direct access to Brazil’s market and a means of avoiding the country’s notoriously high tariffs.
If the deal goes through, it would be Foxconn’s largest global investment. But the company’s leadership has hesitated in recent months. Mr. Gou expressed concern about a culture in which “there’s all that dancing” and “as soon as they hear ‘soccer,’ they stop working.” Foxconn has asked the Brazilian government for certain labor and infrastructure guarantees and may eventually reduce the amount it is willing to invest.
Foxconn’s Mexico production is based near Ciudad Juarez. Its massive facility employs approximately 8,000 workers from nearby towns. The company’s presence was warmly welcomed by politicians in both Chihuahua and New Mexico, but faced controversy after a disgruntled worker set fire to the facility’s activities center.
Further expansion into Latin America – though certainly welcome – isn’t guaranteed. Foxconn’s founder seems to prefer Chinese manufacturing, even despite rising labor costs and the recent Shenzhen tragedy. Chinese laborers are thought to be very skilled, to tolerate more, and to work longer hours than many of their foreign counterparts. Mr. Gou believes that rising labor costs can be offset by a move to China’s cheaper inland provinces.
China’s remarkable distribution network is yet another advantage – shipments from China to the US are generally cheaper even than shipments from Brazil.
But as Foxconn and other firms look to expand market share, Latin America’s emerging markets are bound to receive more attention. Although fresh foreign investment in the country’s stock market has slowed (especially in the investor exodus this week), foreign direct investment in Brazil has increased steadily over the past year. As one of the fastest growing BRICS countries, its consumer market is attractive to investors. The country’s Mercosur affiliation also allows for tax-free export of certain goods to other member countries.
Mexico, for its part, boasts proximity to the US and a skilled labor force. Its manufacturing sector grew thirty percent in the first three months of this year and its share of US imports is also on the rise.
As for Mr. Gou’s cultural bias: if he ultimately decides to replace many of Foxconn’s workers with robots, futebol (fútbol) fanaticism and a proclivity for dancing should no longer be of tremendous concern.
The original post is titled: “Mr. Gou Goes to Latin America” and can be found here
Regulatory changes in several countries are impacting the investment environment. In China, new policies may give foreign companies greater access to a US$1 trillion market. In Indonesia and Malaysia, regulatory changes will improve the business environment across several sectors. In Thailand, the government is pursuing policies that may unleash consumer spending along with inflation
- Bangladesh: Multinationals should monitor Bangladesh’s budgetary spending as it will impact the country’s ability to support industrial development
- Cambodia: Shortages of skilled workers may create a drag on Cambodia’s rapid growth in the coming years
- China: Recent changes to Beijing’s “indigenous innovation” rules may allow greater access to China’s enormous government procurement market
- India: New Delhi is poised to give multinationals greater access to an untapped portion of India’s massive retail market
- Indonesia: A new “tax holiday” policy will stimulate investment in several industries and lower the cost of expanding into Indonesia’s rural areas
- Japan: Power shortages currently plaguing Japan will become more severe in the coming months as the country continues to shut down reactors
- Malaysia: A new initiative to remove foreign equity restrictions in certain sectors has the potential to dramatically improve Malaysia’s business environment
- Pakistan: Efforts to boost economic development in Pakistan will be marred by worsening relations with the US
- Philippines: Manila’s new export development plan may create investment opportunities for companies in the IT, electronics, and agribusiness industries
- South Korea: High levels of household debt and rising interest rates will undermine South Korea’s consumer demand growth for the next 12-18 months
- Taiwan: Taiwan will face increasing competition in Europe, its fourth largest export market, as a result of a new FTA between the EU and South Korea
- Thailand: Companies should monitor government announcements about a variety of new policies that will impact Thailand’s investment environment
- Vietnam: If Hanoi continues to dither on raising interest rates, inflation may exceed the government’s new target, setting the stage for lower growth
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