Firms excited about FTA opportunities

By Ding Qingfen (China Daily)
Updated: 2006-10-31 06:29

NANNING: Co-operation between China and members of the ASEAN will mean opportunities for Chinese companies, but government help is still needed, industry insiders say.

"If it materializes, the China-ASEAN Free Trade Area (FTA) will become the largest economic entity in the world, with market size expected to reach more than US$3,000 trillion," said Liu Yonghao, president of Sichuan New Hope Group.

"This undoubtedly creates incredible opportunities for Chinese private firms," Liu said.

New Hope has annual sales revenues of US$2.5 billion, and Liu says it now plans to increase the number of factories in ASEAN nations to 10.

But he would not put a figure on the investment.

"We've set up six factories overseas, including Viet Nam where we have gained great popularity. We hope annual sales from the 10 factories will reach US$200 million, (and become) a new growth point for us," said Liu.

The company also announced this July that it will set up an "O-Park," a trade, logistics and industrial processing centre, connecting Kunming and Nanning in South China and Ho Chi Minh City in Viet Nam.

And it is not only privately-owned companies that are excited about ASEAN.

In 2005, State-owned multi-industry China General Technology (Group) Holding Ltd (Genertec) began to strategically target the ASEAN market, general manager Li Dang told China Daily.

Last April, China National Technical Import & Export Corp, a subsidiary of Genertec, signed a US$1 billion agreement with the Philippines National Railway Corp on construction of the first phase of the 540-kilometre-long South Philippines Railway Project.

Last June, China and the Philippines signed a co-operation memorandum on the construction of the railway.

Another Genertec subsidiary is involved in the bidding for a coal-fired power plant project for Indonesia National Electric Power Corp.

Despite the proximity of China to ASEAN in both geography and culture, Chinese companies have met challenges in laws, business regulations and language.

"It would help if the Chinese Government could provide us with financial support and business-friendly policies," Li said.

Liu concurred: "New Hope's experience proves that you need good knowledge of the risks of investing in the overseas market, like exchange rate fluctuation, finance and taxes, before you carry out a development strategy.

"Preferential government policies could save us effort by helping us reduce or even sidestep the risks."

Preferential financial policies, according to Li, could include measures to help Chinese companies hedge the risks from exchange rates, such as special loans or insurance.

Li added that the government could consider simplifying investment procedures, enlarge the policy-directed credit scale, lower loan ratios, and improve export insurance services.

This help may be on the way, as it is reported China Eximbank will today sign a strategic partnership framework with China Council for the Promotion of International Trade on providing preferential rates for good-performing companies to invest in ASEAN.

But financial support is no guarantee of success.

"You need good management and financial systems, the best people, and perfect understanding of the local market," Liu said.