[PHNOM PENH POST]
WITH recovery from Japan’s earthquake and tsunami estimated at more than
US$100 billion, the world’s third-largest economy is expected to
withdraw a sizeable portion of its vast wealth from overseas markets to
channel into the rebuilding effort. Or so the theory goes.
If
Japan is in the process of bringing trillions of dollars invested in the
world’s financial market back home, will there be any impact on
Cambodia’s economy?
As with any major economic event the
possible outcomes are complex, but a look at the ways Japan is linked to
the Cambodian economy at least offers some clues on the potential scope
and scale of any fallout.
Japan is currently the single largest
foreign donor to Cambodia pledging $130 million in June last year for
the period up to the end of 2011, or 12 percent of all foreign aid to
the Government.
Following the recent disaster, how willing will Japan be to maintain this level of contribution next year?
Within the private sector, the tourism industry is among those with the largest Japanese influence.
Previously
the biggest source of foreign tourists to Cambodia, the high-spending
Japanese last year ranked fourth with close to 152,000 visitors.
As
thousands of people in Japan dedicate their personal financial
resources to rebuilding homes – many of which are uninsured due to
earthquake risk – foreign travel will surely be off the agenda, at least
in the short term.
In terms of Japanese trade and investment the
picture is more complex. Hiroshi Uematsu, managing director of the
Phnom Penh Special Economic Zone, told The Post yesterday one of his
potential investors operates a factory in the northeastern Miyagi
Prefecture that sustained damage following the tsunami. However, the
unnamed company was still preparing to invest as normal, he said.
Another
potential Japanese investor in Sendai, also in Miyagi Prefecture, will
still go ahead with a business trip to Cambodia next week despite the
disaster, but was due to send a smaller delegation than planned
previously. There had therefore been “no significant impact” on their
plans for Cambodia despite the disaster.
“In fact, in the middle and long term, the disaster in Japan would motivate Japanese manufacturers to
invest
overseas more for the purpose of hedging risk,” he said. The impact on
Cambodia’s main export industry garments could be similar. Japan was the
highest growing market for Cambodian garments and apparel last year
doubling to $56 million.
Ken Loo, secretary general of Garment
Manufacturers Association in Cambodia, told The Post this week that far
from denting prospects for growth, the disaster could fuel Japanese
demand which was already outstripping capacity. Fast Retailing, parent
company of low-priced clothing brand Uniqlo, is among Japanese
manufacturers that have sought to source more from Cambodia,
particularly outer wear, he said.
Given the low-end market position of such products, the disaster is unlikely to curb interest.
“In fact, I wouldn’t be surprised if there was increased demand,” said Loo.
Only
time will tell if optimistic forecasts prove correct. Many analysts
made similarly rosy predictions for Cambodia at the start of the global
economic crisis and were eventually proved wrong. And although not on
the same scale, the Japanese disaster could have a similarly indirect
impact on the Kingdom should global demand fall.
The size and
influence of Japan’s economy should certainly not be underestimated.
Whatever the eventual fallout, Cambodian businesses dealing with Japan
will need to rethink their strategies. If they do not, the chance of a
negative impact on the domestic economy will only rise.
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