The growing economies in the Southeast Asian region have caught not just the eyes but also the attention of Prime Minister Shinzo Abe as well as some Japanese firms. More than the attention, Japan has also begun to embark on investment diaspora from China to Southeast Asia. Territorial disputes with the former has only made it more encouraging. Japan even set a record high this year on mergers and acquisitions, more than five-fold compared to the previous year’s total spending.
Abe’s visit to the region – in Malaysia, the Philippines, and Singapore – this week is also a testament to how the prime minister now puts ASEAN members into priority with regard to Japan’s economy. The same can be said to Japanese firms. According to Dealogic, a generous $8.2 billion has been spent so far in Southeast Asia this year. The last time Japanese firms had shelled out extensively on M&A was 7 years ago with $7.6 billion. As for 2012, the $614 million was nowhere close in comparison.
The enormous spending may not be surprising though. According to Toru Nishihama, an economist at the Dai-Ichi Life Research Institute, “Japanese companies have been searching for places to invest in addition to China.” If in the past China held the position as the main investment destination of Japanese firms, Nishihama believes that Southeast Asia now holds the favour and may “continue for the next five to ten years.” Just on Wednesday, carmaker Toyota revealed its intention to invest $230 million in Indonesia as a car engine hub with operations to begin in 2016.
Besides economic ties, Abe has also tried to keep political ties with the region favourable, which in return also lay out better foundation for Japanese companies. “It has become enticing for Japanese businesses to invest in Southeast Asia, with government-affiliated financial institutions,” said the economist, who also finds the Japanese government “very proactive.” Even a $1.8 billion debt of Myanmar was cancelled when Abe visited the country.