Southeast Asia not destination of US firms planning to quit China

Analyst Phua Lee Kerk says Malaysia’s tough labour laws may make things difficult for some US firms. (Bernama pic)

PETALING JAYA: An analyst has agreed with the findings of a US-based global consultant that Southeast Asian countries will not benefit from the US-China trade dispute which could see the exit of multinational companies from China.

Bain & Co told CNBC that the multinationals would not move in to the region as they prefer to set up base closer to their supply chain.

Phua Lee Kerk, chief strategist at Philipp Mutual Bhd, agreed, saying there are a few factors that companies would take into consideration when setting up their factories.

“For instance, fashion and apparel companies will set up shops close to their customers due to the frequent changes in consumer trends,” Phua told FMT.

He said similarly, mobile phone makers also have their own criteria in choosing a location.

He gave the example of different requirements of labour during peak and off-peak seasons, saying Malaysia’s labour laws may not work well with some companies who may be forced to downsize their staff.

“These companies may require 200,000 workers during peak season and maybe only 80,000 workers during their off-peak season. It may not be feasible to locate their factories in a jurisdiction such as Malaysia due to the tough labour laws,” Phua said.

Bain & Co in its survey of 200 high-level executives of US firms found that a majority of them were ready to adjust their strategies, including moving factories producing goods meant for non-Chinese consumers closer to their target markets.

But it said the recipients of the new investments would not be Southeast Asia.

“We don’t think Southeast Asia will become the factory of the world in the way China did two decades ago,” Bain & Co vice-president Gerry Mattios told CNBC.