THE Philippines is in peril of losing some investors as a result of multinationals rationalizing their global operations. Trade Secretary Ramon M. Lopez, who revealed this in a recent interview with reporters, admitted the country’s economy is smaller when compared to several nations.
Lopez explained that multinationals are undergoing a rationalization of operations with the worldwide slowdown in merchandise trade. When companies choose which operations to shut down, those situated in the country are vulnerable due to the relatively smaller economy here, he added.
“If you look at the world, we are a small player, a small country compared to the global world demand. You can expect a lot of this rationalization when global headquarters assess their resources. There’s a factor there [of] how major or big a country you are, how important your market is to that company,” Lopez explained.
This is not to say that many will follow the lead of Honda in its decision to abandon its Philippine plant, he added. Lopez argued it will still depend how sensitive the multinational’s operations are, and how important the Philippine market is to them.
“It still depends how sensitive the company is. What I mean there is that the global market is slowing down. It [problem] used to be the US-China trade war, now it’s the coronavirus [spread] that we have yet to know when [it] will be solved,” the trade chief argued.
“It’s their [multinationals] reaction to the world market and market forces. Are you a company that fits with the market segments in the Philippines?” he said, posing aloud a question to investors.
At the end of the day, Lopez said “it’s the competitive stand” that matters to multinationals.
As for Honda, he said the motorcycle segment could be a better business for them here than automobile, which is dominated by two vehicle assemblers combining for over 60 percent of the total market.
“In reality, their motorcycle business is their stronger business here so that’s what they are keeping now. That’s I guess their business decision globally. When things go our way in the overall global economy, then you can see they will be more flexible in expansions, in diversifying their production sources,” Lopez explained.
Honda Cars Philippines Inc. is closing down its manufacturing plant in Santa Rosa, Laguna, in March, a decision made by its parent unit as part of the multinational’s moves to optimize operations. With the decision, over 300 workers in the plant are expected to be jobless once the factory is shut down.