工廠搬遷：從參觀中學到的

1、Global Research29 November 2019Equity StrategyAPAC Equity StrategyAsia PacificFactory Relocation: What we learnt on tourData still points to a structural trend of Factory Relocation from ChinaWeve been tracking the China factory relocation theme since late 2017. UBS Evidence Lab surveys continue to

2、point to south Asia and especially Vietnam and India being beneficiaries of outsourcing. Our analysis of the latest World Bank Ease of Doing Business Survey and labour market data underpins this view.What we learned from kicking the tyres on our factory relocation tourWe recently conducted a three d

3、ay tour of Vietnam, Thailand and India to kick the tyres on the factory relocation theme. Broad conclusions were that Vietnam stood out as a likely continued destination of investment by north Asian manufacturers, due to its labour cost advantages. Thailand and India are working hard to attract inve

4、stment (the government pitch was positive in both) with infrastructure and deregulation (and lower taxes in India) also helping. Thailand is trying hard to upscale labour in the face of high costs and poor demographics, while in India, much of the investment story centred on the domestic market oppo

5、rtunity, rather than as a destination for export manufacturing (this could have been biased by our location). Our overall conclusion was much in line with the Evidence Lab surveys, that Vietnam and India were the likely major beneficiaries of regional FDI but with the export focus on Vietnam, while

6、Thailand looks slightly less well placed.FDI has been weaker than expected so far. We expect a pick-up in 2020One thing that the factory tour threw up is that while there is a lot of interest in investment, actual flows have been limited. This is in line with both our recent note on corporate self-h

7、elp that shows capex weak as well as what macro data shows at the country level FDI has been running below trend in ASEAN/India this year. If business uncertainty recedes and/or global demand picks-up, we think this will likely lead to a rapid increase in FDI into south Asia as the factor relocation

8、 theme kicks up a gear. It provides upside risk to our baseline forecasts for growth in ASEAN and India in 2020.Despite excitement around the theme valuations dont seem to be pricing it Both the data form Evidence Lab and the World Bank and our recent tour leave us bullish on the medium term FDI sto

9、ry into ASEAN (especially Vietnam) and India. Our analysis of implied medium term earnings growth for consumer stocks shows that investors have discounted lower growth in India and ASEAN since the trade war started, suggesting that if investors are counting on a medium term FDI pick-up, its not bein

10、g factored into consumer stocks. Data limitations mean we cant do this analysis for Vietnam. But our metric of relative price levels in each economy suggests that faster productivity growth is less likely to have been fully factored-in for Vietnam than for India and Philippines.Niall MacLeodStrategi

11、st HYPERLINK mailto:niall.macleod niall.macleod+852-2971 6186Edward TeatherEconomist HYPERLINK mailto:edward.teather edward.teather+65-6495 5965Gautam ChhaochhariaAnalyst HYPERLINK mailto:gautam.chhaochharia gautam.chhaochharia+91-22-6155 6080Piyanan PanichkulAnalyst HYPERLINK mailto:piyanan.panichk

12、ul piyanan.panichkul+662-613 5753Ian Douglas-Pennant, CFAStrategist HYPERLINK mailto:ian.douglas-pennant ian.douglas-pennant+65-6495 5022 HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGI

13、N ON PAGE 18. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in maki

14、ng their investment decision.What the numbers tell usFactory relocation from China has been happening for some time, and is an issue we have been tracking since late 2017. We have been arguing since last year that the pace of this is likely to quicken. So where will firms relocate supply chains? The

15、re are two sources weve drawn on to answer this question: one, several Evidence Lab surveys of corporates in China and also in Japan, Korea and Taiwan. And secondly, World Economic Forum/World Bank data.Evidence LabOur February survey in conjunction with UBS Evidence Lab showed that 82% of Japanese,

16、 Korean and Taiwanese companies had or were planning to relocate production outside of China. The principal reason given by companies for making these moves were tariff concerns (less so for Korean companies), but the second reason cited was high labour costs in China.Figure 1: Top reasons cited for

17、 relocating production out of ChinaLower risk to trade war/tariffsLower labour cost Better infrastructureMore industrial policy support Easier access to supply chainLower land cost0%10%20%30%40%50%60%Already have production in other Technological expertiseLabour expertise Lower environmental cost/st

18、andardCustomers request Easier access to financing RMB depreciationCant say OthersTaiwan Japan KoreaSource: UBS Evidence LabTo us, one of the shocks of the survey was that a high proportion of Japanese and Taiwanese companies intended to shift production back home, rather than moving to lower cost c

19、ountries in south Asia.Figure 2: Destination countries for production relocationsTotalTaiwanJapanKoreaAsia Pacific (NET)98%100%99%96%Taiwan38%59%26%22%Japan33%23%56%21%Hong Kong16%15%13%19%Korea18%13%6%36%India22%20%29%17%Indonesia14%19%10%10%Malaysia13%18%14%4%Philippines11%10%9%14%Singapore17%12%2

20、4%15%Thailand13%13%16%8%Vietnam25%30%18%28%Oceania (including Australasia)2%1%3%1%Rest of Asia2%4%0%1%Americas (NET)36%27%48%38%Brazil10%10%14%6%Canada14%7%18%18%Mexico12%10%18%10%US26%20%33%28%Rest of Americas2%2%1%1%Europe (NET)14%16%11%13%Russia7%7%5%8%Central/Eastern Europe (excluding Russia)4%4

21、%3%4%Western Europe7%9%6%6%Middle East and Africa (NET)8%8%6%10%Africa6%5%5%8%Middle East3%5%1%1%Source: UBS Evidence LabHowever, within south Asia, Vietnam and India were the two most cited countries to which our sample expected to shift production.This data confirms what our China CFO surveys have

22、 also been showing. In our most recent survey, 63% of our respondents indicated that they had already moved some of their production abroad, with roughly half of these moving production in 2018/2019. Beyond this, 57% of export manufacturers were considering further shifts of investment overseas. By

23、destination, Vietnam and India were the most popular destinations for investment.Figure 3: Asked to China CFOs: To which countries/regions have you already moved or planning to move your export production to?VietnamIndia Malaysia Japan PhilippinesKorea Singapore Thailand Canada IndonesiaHong Taiwan

24、MexicoBrazil RussiaUSSep-19 Nov-180%5%10%15%20%25%30%35%40%Source: UBS Evidence LabSome of the other questions in the survey, along with the work that our colleague William Dong conducted in discussion with tech companies, suggests that for higher value manufacturing, north Asia is the likelier dest

25、ination for capital investment, given the need to have supply chains and higher skilled labour present, but that Vietnam and India are the most promising investment destinations outside north Asia.World Economic Forum/World Bank dataTwo of the most prominent metrics of the business environment are t

26、he World Economic Forums Global Competitiveness Index (WEF GIC) and the World Banks Ease of Doing Business report (WB EoDB).Both the WEK GCI and WB EoDB were designed to help policy makers see in what areas policy changes might boost national income. As such it is no surprise that across countries t

27、hey broadly consistent with officially measured national income per capita and higher income countries do better (e.g. Figure 4). The WEF GIC includes a broad range of national wellbeing indicators and opinion surveys. The WB EoDB report uses more granular case studies of the cost and time taken to

28、achieve business outcomes. To answer the specific question which economies might a multinational find attractive to outsource to?, we choose to focus on and tweak the WB EoDB survey.Figure 5 shows the WB EoDB ranks against an EoDB rank we adjusted to be more relevant for a multinational making a dec

29、ision on supply chain location focusing on trading across borders, paying taxes, dealing with construction permits, getting electricity, enforcing contracts, protecting minority investors and registering property 1.1 We exclude the WB EoDB scores on i) starting a business; ii) getting credit and iii

30、) resolving insolvency. We note that topics i) and iii) are potentially important for foreign investors but the case studies seemed unlikely to match the experience of a multinational. We judged topic ii) as less relevant for multinationals operating in foreign countries. .Figure 4: EoDB rank vs GDP

31、 per capitaFigure 5: EoDB rank adjusted for multinationals focusLog of USD GDP per capita relative to US, 2018 (US = 100)SporeEoDB rank adjusted for multinationalsWB EoDB rankEasier to do business18011010090807060MyanmarLaosBrazilMexico Indon.ChinaVietnamKorea MalaysiaThailand16014012010080604020502

32、01151Camb.101Phils.51India01Ease of doing business rank, 2019Source: UBS, WBSource: UBS, WBOur adjusted index puts Asian economies into three groups.The first set, China, Malaysia, Thailand, Korea, Taiwan and Singapore are already highly integrated into global supply chains.The second, India, Indone

33、sia, Philippines and Vietnam are considerably behind the first in terms of rankings but are relatively closely grouped although our adjusted EoDB ranks put Vietnam ahead of the others.The third, which includes economies like the much less developed economies of Cambodia, Myanmar and Bangladesh is mu

34、ch further behind again.However, these measures of efficiency have to be weighed against other metrics of cost. In particular labour costs. We find that labour market flexibility, along with labour costs, are key topics of conversation among investors and corporate decision makers. The World Bank Eo

35、DB does include labour market flexibility metrics but explicitly excludes them from its ranking process since relative merits of protection for workers versus flexible labour markets are hotly debated. Figure 9 highlights that Indonesia and India have less flexible labour markets in many areas.Becau

36、se observing the labour and non-labour regulations is costly, multinationals could be put off from operating supply chains out of Indonesia and India. A crucial compensation is that wages in India and Indonesia are lower than in other potential supply chain locations. Figure 6 shows minimum wages ac

37、ross the region against survey data from the Japanese External Trade Organisation on manufacturing wages paid by Japanese firms across the region.Figure 6: Minimum wages and Japanese firm manufacturing worker salariesUSD, Log scale 64000Annual salary, US$ (inc. benefits, sopcial sec. etc.;Manufactur

38、ing: Worker)Monthly minimum wage, USD annualised32000160008000400020001000500Source: UBS, JETRO, World BankAnnual salary is from JETRO survey of Japanese firms in respective country. Reflects regular general manufacturing workers with 3 years of work experience, not including contract-based and prob

39、ationary workers. Total liability for an employee (the total of annual base salary, benefits, social security, overtime allowances, and bonuses, excluding severance benefits); Minimum wage is from World Bank Doing Business Database. Reflects cashier in supermarket or grocery store, full time employe

40、e not unionised.The challenge with all these metrics is that their relative weight for decision makers will vary with the global economic environment.In the recent past, Vietnams low labour costs combined with the moderate ease of doing business has led to impressive gains in export market share (Fi

41、gure 7). To be sure 29% of that was due to (Samsung) mobile phones over 2013-2017. However, since 2017, the performance now appears to be broader (Figure 8).But that performance is backward looking. The global business environment is changing. Will the same trade-off of cost and efficiency continue

42、to hold for Vietnam and other economies in the region?Figure 7: Vietnam has been getting the mix rightFigure 8: and its not all just phonesUSD exports, USDbn 3mma annualised 64032016080Dec 10Dec 12Dec 14Dec 16Dec 18Korea India Taiwan Vietnam Thailand Malaysia Indonesia Singapore2017 vs. 201312m to O

43、ct 2019 vs. 2017Share of Vietnamese export growth by product 40%30%20%10%0%-10%Source: UBS, HaverSource: UBS, HaverFigure 9: World Bank Doing Business: Flexibility of employment regulation and redundancy costsPhilippinesThailandSingaporeMalaysiaIndonesiaVietnamIndiaHiringFixed-term contracts prohibi

44、ted for permanent tasks?NoYesNoNoYesNoNoMaximum length of a single fixed-term contract (months)No limitNo limitNo limitNo limit24.036.0No limitMaximum length of fixed-term contracts, including renewals(months)No limitNo limitNo limitNo limit36.072.0No limitMinimum wage applicable to the worker assum

45、ed in the casestudy (US$/month)295.7248.70.0262.9276.5183.3143.5Ratio of minimum wage to value added per worker0.60.30.00.20.60.60.6Maximum length of probationary period (months)6.00.0n.a.n.a.3.01.03.0Working hoursStandard workday8.08.08.08.08.08.09.0Maximum number of working days per week6.06.06.06

46、.06.06.06.0Premium for night work (% of hourly pay)10.00.00.00.00.030.00.0Premium for work on weekly rest day (% of hourly pay)30.00.0100.0100.00.00.0100.0Premium for overtime work (% of hourly pay)25.050.050.050.075.050.0100.0Restrictions on night work?NoNoNoNoNoNoYesRestrictions on weekly holiday?

47、NoNoNoNoNoNoNoRestrictions on overtime work?NoNoNoNoNoNoYesPaid annual leave for a worker with 1 year of tenure (workingdays)5.06.07.08.012.012.018.0Paid annual leave for a worker with 5 years of tenure (workingdays)5.06.011.016.012.013.018.0Paid annual leave for a worker with 10 years of tenure (wo

48、rkingdays)5.06.014.016.012.014.018.0Paid annual leave (average for workers with 1, 5 and 10 years oftenure, in working days)5.06.010.713.312.013.018.0Redundancy rulesDismissal due to redundancy allowed by law?YesYesYesYesYesYesYesThird-party notification if one worker is dismissed?YesNoNoNoYesNoYesT

49、hird-party approval if one worker is dismissed?NoNoNoNoYesNoNoThird-party notification if nine workers are dismissed?YesNoYesYesYesYesYesThird-party approval if nine workers are dismissed?NoNoNoNoYesYesNoRetraining or reassignment obligation before redundancy?NoNoNoNoYesYesNoPriority rules for redun

50、dancies?YesNoNoNoNoNoYesPriority rules for reemployment?NoNoNoNoNoNoYesRedundancy costNotice period for redundancy dismissal for a worker with 1 yearof tenure (weeks of salary)4.34.31.04.00.00.04.3Notice period for redundancy dismissal for a worker with 5 yearsof tenure (weeks of salary)4.34.34.08.0

51、0.00.04.3Notice period for redundancy dismissal for a worker with 10years of tenure (weeks of salary)4.34.34.08.00.00.04.3Notice period for redundancy dismissal (average for workers with1, 5 and 10 years of tenure, in weeks of salary)4.34.33.06.70.00.04.3Severance pay for redundancy dismissal for a

52、worker with 1 yearof tenure (weeks of salary)4.315.00.01.717.38.72.1Severance pay for redundancy dismissal for a worker with 5 yearsof tenure (weeks of salary)21.730.00.016.760.721.710.7Severance pay for redundancy dismissal for a worker with 10years of tenure (weeks of salary)43.350.00.033.395.343.

53、321.4Severance pay for redundancy dismissal (average for workerswith 1, 5 and 10 years of tenure, in weeks of salary)23.131.70.017.257.824.611.4Unemployment protection after one year of employment?NoYesNoYesNoYesNoSource: World Bank Ease of Doing Business Report 2020. Data in bolded red shows econom

54、ies where relevant indicator in less flexible or more costly than median of economies shown India data relates to Mumbai, Indonesia to SurabayaWhat did we learn from the tour?Our Evidence Lab surveys, tech research and the World Bank all threw up some interesting data: Vietnam and India stand out as

55、 likely destinations for FDI. Armed with this we decided to kick the tyres, with a three day, factory relocation tour of Vietnam, Thailand and India.We met with a variety of companies that had relocated production around the region, Government investment agencies, chambers of commerce, labour market

56、 experts, industrial park operators as well as representatives from the Japanese and Korean external trade organisations.One day in each country is clearly not nearly enough to form complete opinions. There were also biases in the locations we visited (for example Delhi rather than the coastal regio

57、ns in India; Ho Chi Minh City rather than Hanoi where many of the large scale Korean manufacturers are based), and industries that we talked with (mainly consumer electronics, where labour skill requirements might be higher than say in textiles). With these caveats, our key observations are:Investme

58、nt interest from China, but limited actual activityOur big takeaway was that while there was a lot of interest in relocation from China, the degree that is taking place is limited right now, with one likely reason being the fear of capex spending into a potential cyclical downturn.While ongoing FDI

59、is seen in Vietnam, this is not purely due to the trade war. In Thailand firms and officials we spoke to gave us the impression there was serious interest (e.g. delegations from China) but no major shift in production as yet. A electronics manufacturer we spoke to stated that the uncertain internati

60、onal economy environment was depressing investment across the board.Palpable difference in government agendasVietnamese officials appeared to be focused on facilitating the export expansion via infrastructure and seizing foreign market opening opportunities (trade deals). Vietnams membership of the