Business Facilities -November 2008

the relationship of Asian economies to the West rather than each other,” Rabin says. “This shift toward activity in the region, combined with the general trend of opportunities shifting from ‘supply’ (i.e. making things there for here) to ‘demand’ (i.e. generating revenues within these economies themselves) has significant implications for U.S. corporations and investors.” Two Southeast Asian nations noteworthy for economic growth are Vietnam and Indonesia. Vietnam has become an attractive destination for foreign direct investment (FDI) in light of government reforms of the past 10 years. Economic activity has remained robust with help from export growth and high commodity prices. And while declines are now being seen in its stock and property markets, along with downward pressure on the local currency, Vietnam is listed sixth among the top future destinations for FDI by the largest transnational corporations. A recent survey by the United Nations Conference on Trade and Development has Vietnam behind only China, India, the U.S., the Russian Federation and Brazil as attractive for future FDI. Indonesia is ranked eighth as an investment location, with companies looking at factors such as market size and growth, and access to international and regional markets. Indonesia made a strong recovery from the 1997 financial crisis, and in recent years suffered a series of natural disasters including the December 2004 tsunami, but World Bank funding and far-reaching government reforms have helped to increase economic growth. Its economy hit a 10-year high with 6.3 percent growth in 2007, slowing to six percent this year. The nation has drawn strength from investment, as well as external and consumer demand. High commodity prices have helped the economy, as exports of oil, gas, coal, copper and crude palm oil continued to grow at double-digit rates. Meanwhile, investment in 2007 reached nearly 25 percent of GDP, according to the World Bank, which expected “ One can also obtain the world-class infrastructure, other advantages of services, quality of life and Singapore with the cost savings of operating in Indonesia. —Keith W. Rabin ” Indonesia to weather the global slowdown reasonably well. The Riau Island/Batam special economic zone (SEZ), located in Indonesia 14 miles off the coast of Singapore, has attracted many large foreign companies in recent years. Batam, in particular, went from a fishing village of about 5,000 people in the late 1970s to a thriving industrial center home to more than 600 companies, including AT&T, McDermott International, PerkinElmer, Bechtel, Holiday Inn, Babcock & Wilcox, Hitachi, Hyundai and Sony. The newly expanded special economic zone, including the islands of Bintan and Karimun in addition to Batam, offer tariff and other SEZ benefits, and easy access to Southeast Asian markets. “One can also obtain the worldclass infrastructure, services, quality of life and other advantages of Singapore…with the cost savings of operating in Indonesia,” Rabin says. “That is roughly equivalent to accessing resources in Manhattan from a factory, logistical hub or back office on Staten Island.” The nations in South and East Asia have made strong economic gains, but with the financial turmoil that thickened throughout the year, growth has slowed and will continue to do so next year. Advanced economies already are moving into recessions, while emerging ones also are expected to weaken. According to the International Monetary Fund (IMF), growth for Southeast Asia’s five biggest developing economies, Malaysia, Thailand, Indonesia, the Philippines and Vietnam, will be reduced from an average 5.5 percent this year to 4.9 percent in 2009, as opposed to the previously forecasted 5.6 and 5.9 percent. “The economic cycle started to turn in early 2008, and more weakness is expected ahead in response to slowing demand from advanced economies and growing strains in regional financial markets,” the IMF says in its latest world outlook report. While Asian countries try to weather the global financial storm, there is one area of business that will continue to be a boon for many of them, and that is offshoring by foreign companies. In recent years, more than one million U.S. jobs have been moved overseas, and projections show millions more being outsourced to a growing number of Asian countries in the years ahead. XMG, a Canada-based think tank and consulting service, says the offBUSINESS FACILITIES 33

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Business Facilities -November 2008 Contents First Word Sanpshots Corporate Moves: Utah Kodak Develops a Megasite in Upstate New York Anatomy of a Deal: Studley Finds a New Space for Myspace Metro Spotlight: Johnson City, TN A Renaissance of Growth in Medical Plastics The Lone Star State Flexes Its Muscles Asia: A Portrait of Growth Sky's the Limit for High-tech in Arizona Corporate Moves: Pennsylvania Ohio Leads the Way Alabama's Tide Rolls to the Future IEDC 2008 Award Winners Advertiser Index Introducing Navigator Livexchange

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