Posted on 12/19/2001 2:21:46 PM PST by super175
Southeast Asia's growing reputation for violence and lawlessness is scaring foreign investors away, and towards China, even though most of the region is profitable and peaceful, according to analysts.
Kidnappings in the Philippines, ethnic unrest in Indonesia and attacks on a foreign supermarket chain in Thailand are giving the region a bad name that even orderly Singapore and Malaysia are finding hard to shake.
China's entry into the World Trade Organisation opens more attractive trade and investment opportunities. Analysts said the rule of law was seen as stronger in China, even if the long-term future of the political system might be in question.
According to latest United Nations figures, China, including Hong Kong, drew a net US$105 billion in foreign direct investment (FDI) last year, up 62 per cent on the previous year.
Thailand, Singapore, Malaysia, Indonesia and the Philippines drew a combined net FDI of US$11.3 billion, down 8 per cent.
Indonesia saw a US$4.55 billion net outflow of FDI last year, as the country grappled with ethnic and separatist violence.
This year investors have shunned the Philippines.
High-profile kidnappings of foreigners, the removal of a president in January, an attempted coup d'etat in Manila on May 1, and an insurrection by Muslim rebels in the south of the country has ravaged investor confidence, according to business leaders.
Thailand has grabbed international headlines for a series of grenade and shooting attacks on superstores owned by British firm Tesco.
Investors have also been following the trial of the suspected killers of an Australian accountant who was shot in 1999 after being hired to help restructure a Thai firm.
However, foreign business leaders said much of the news from the region created a false impression abroad.
Many big foreign firms were confident enough to expand in the region and were making good profits, they said.
"Walking on the streets or down the aisle of Tesco, you get a different picture to someone reading the Times in London," said Peter Van Haren, chairman of the Joint Foreign Chambers of Commerce in Thailand.
"I'd like to tell people reading newspapers or watching TV [abroad], it's actually a safe place to be," he said.
Analysts said isolated incidents in Malaysia had unfairly hurt the image of the country as a safe place to do business.
Malaysian authorities this year arrested 16 supporters of an Islamic opposition party, whom they accused of being part of an Afghan-inspired militant organisation.
"There's absolutely no fear of any Islamic takeover threat for politically stable environments like Malaysia - it's way off the radar screen," said Dominic Armstrong, head of Singapore and Malaysian equities at ABN Amro Asia Securities.
Analysts said investors were lumping very diverse countries in the region together.
"The risk premium on Singapore has been increased a bit too harshly," said V. Anantha-Nageswaran, director and regional head of investment consulting at Credit Suisse Private Banking.
"In the short-term, it is going to face the burden of being in the wrong neighbourhood."
Foreign investors said the chances of their factories and offices being bombed or burned down even in the most dangerous areas of Southeast Asia were slim.
However, the failure of authorities to maintain law and order in many cases has served to highlight broader concerns about legal protection for investment and corruption.
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