Battle to woo trade war’s refugees intensifies

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    Trade war. Workers are seen walking on a construction site in Thailand’s Eastern Economic Corridor industrial zone, Chonburi, Thailand. With global economic growth flagging, in part because of US President Donald Trump’s trade war with China, competition is growing among Asian countries to win investment from companies moving supply chains to escape higher tariffs. (Reuters Photo)
    Trade war. Workers are seen walking on a construction site in Thailand’s Eastern Economic Corridor industrial zone, Chonburi, Thailand. With global economic growth flagging, in part because of US President Donald Trump’s trade war with China, competition is growing among Asian countries to win investment from companies moving supply chains to escape higher tariffs. (Reuters Photo)

    By Patpicha Tanakasempipat

    CHONBURI, Thailand- When trade war tariffs jolted Chinese tyre-maker Prinx Chengshan into speeding up foreign investment plans, the company wound up in Thailand, thanks to that country’s relentless courtship.

    With an initial investment of $300 million, the company is now racing to build a factory to export tyres to the United States next year, based in a Thai industrial zone reinvigorated by the trade war.

    Multiple visits to China by Thailand’s Board of Investment helped. So did two personal meetings with Thailand’s top economic policymaker, said Ju Xunning, a company manager.

    “This impressed our company, and this is also one of the main reasons for choosing Thailand,” Ju told Reuters. “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 war with China, competition is growing among Asian countries 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,” said Rajiv Biswas, Asia Pacific chief economist for IHS Markit.

    Vietnam has benefited most from the shifts in terms of the number of companies moving business, according to independent surveys. But other Asian countries are eager to bring in more business as well, including India and Indonesia.

    The trade war has breathed new life into Thailand’s Eastern Economic Corridor (EEC), where Prinx Chengshan is building its factory. The programme 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 four-fold year-on-year to 88 billion baht ($2.9 billion) in the first half of 2019. 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 war.

    Chinese companies are being catered to carefully, the company’s chief executive, Jareeporn Jarukornsakul, told Reuters.

    “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 tyre production to Malaysia, but wavered after the Malaysian election in early 2018.

    “The government couldn’t fulfill several of the promises made to us and we eventually gave up,” Ju said at his makeshift office near the building site.
    Malaysia’s deputy trade and industry minister, Ong Kian Ming, told Reuters that although

    Prinx Chengshan had gone elsewhere, the country had attracted another Chinese tyre 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 $12 billion in the first half of 2019, and Ong said he hoped it would accelerate further.

    Thailand and Malaysia are competing for higher-end manufacturers, but their wages price them out of labour-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 United States 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. – Reuters