Business

Japanese, Chinese and Korean, Companies Flocking to Lower Mekong Sub Region

Published

10 years ago

April 26, 2015

Bchcomber

The Japan-funded Tsubasa Bridge over the Mekong River

The economic zone in the basin of the Mekong River is starting to thrive as a key location for businesses pursuing so-called “China or Thailand Plus One” strategies.

Japanese, Chinese and South Korean companies are flocking to the area to take advantage of inexpensive labor, raising a question of whether they and other foreign companies will leave the zone for the sake of “Mekong Plus One” strategies if local wages rise.

Attractive integration

Ando, a well-established maker of small articles for Japanese kimono in Kyoto, manufactures in Pakse, a major city in southern Laos. To the sound of local popular music, some 60 young women weave braided cords with Japanese looms, sew drawstring purses and examine the quality of products at the Ando plant.

A worker weaves a braided cord for Japanese kimono at Ando’s plant in Pakse, Laos

Operation manuals are written in Japanese. The women workers include nine who have completed a three-month training program in Japan and speak basic Japanese.

Ando built the Laos plant at a cost of some $500,000 and began operating it in 2014. Founded in 1923, Ando already had plants in Kyoto and China but added the Laos plant because, as third-generation CEO Ichiro Ando put it, “We’d be in trouble if something happened in China, and we find the integration of Southeast Asia attractive.”

The comment symbolizes the “China Plus One” strategy. Japanese companies have grown wary of operations in China due to rising wages and anti-Japan sentiment and begun seeking “Plus One” locations.

Ando picked Laos as his company’s Plus One location because factory workers in major cities there earn around $100 a month, compared with more than $500 in Beijing.

He also found the integration of Southeast Asia attractive because of Laos’s geographical features.

Laos is an inland country that borders five countries, including China, Thailand and Vietnam.

When the ASEAN Economic Community starts up at the end of 2015, customs duties will be lowered within the Association of Southeast Asian Nations. Exporters will be able to choose convenient ports, whether in Thailand, Vietnam or other ASEAN members, depending on their products’ destination.

As labor expenses are also rising in Thailand, many businesses recognize the need for a “Thailand Plus One” strategy. Located on the opposite side of the Mekong River, Laos is an attractive alternative to Thailand for companies that want to cut payroll costs.

A plant operated by Nikon, the Japanese manufacturer of optics and imaging products, in Savannakhet, Laos’s second largest city only four hours’ drive from Pakse, is a typical Thailand Plus One operation.

While the plant is responsible for labor-intensive production of parts for single-lens reflex cameras, Nikon brings them to its plant in Thailand for assembling into advanced cameras for sale as popular made-in-Thailand, rather than Laos, products.

The inland location of Laos has been a major disadvantage preventing the country from having sea routes to establish ties with the rest of the world. But the disadvantage will quickly turn into an advantage after the integration of the region.

Recognizing Laos’s strategic location, Toyota Boshoku, Mitsubishi Materials, Aderans and many other Japanese companies have begun operating in the country in recent years.

Drawbacks too

But not everything is rosy in Laos. Unlike Japan, Laos is a socialist country, which poses problems that Japanese companies sometimes struggle with.

According to the 2014 corruption index compiled by Transparency international, a German nongovernmental organization that monitors corporate and political corruption. Of the 174 countries in the ranking, Laos came 145th, much lower than China’s 100th place.

Kolao Group boasts “Korean Technology” on its motorcycles, like the one pictured here in Savannakhet, Laos.

The widespread corruption makes it difficult for foreign businesses to operate smoothly. But Laos’s attractions more than offset its disadvantages.

A large number of South Korean companies have set up shop in Laos. The Kolao Group, for example, has a noticeable presence in Savannakhet. The group’s name combines “Korea” and “Laos” and both countries’ national flags fly in front of its plant’s main entrance.

Kolao was founded by a South Korean and has grown by importing products such as automobiles from Hyundai Motor. Motorcycles produced by Kolao carry a label that says proudly, “Korean Technology.”

Like Japan, South Korea is struggling with a dwindling birthrate and aging population. With domestic demand stalling, South Korean companies need to develop overseas markets for growth.

In a sense, Kolao symbolizes the situation of South Korea, as it was founded in 1997 when the country was caught in a currency crisis.

The toughest competition involving Japanese and South Korean as well as Chinese companies in the Mekong economic zone is down the river in the Cambodian capital of Phnom Penh.

Cambodia is a leading Plus One candidate as its wage level is almost the same as that of Laos. Japanese retail giant Aeon opened a large-scale shopping center in Phnom Penh last year. Next to the center, hotel chain Toyoko Inn operates a big hotel for businesspeople, reflecting Japanese companies’ entries into Phnom Penh.

Located 20km from the center of the capital is the Phnom Penh Special Economic Zone, featuring corporate and export tax breaks.

Japanese investment firm Zephyr has a 22% interest in the SEZ and 42 of the 78 companies operating there are Japanese companies including Ajinomoto and Denso.

The SEZ will offer shares for training on the Cambodia Securities Exchange this summer and use funds from its initial public offering to develop a new SEZ near the border with Thailand in a bid to lure companies promoting Thailand Plus One strategies.

The CSX, which is owned 45% by the Korea Exchange, has created its trading system and trained the necessary personnel thanks to support from the South Korean bourse. South Korean companies are trying to benefit from Cambodia’s economic growth by establishing close ties with the Cambodian government and business community.

A Korean restaurant facing Phnom Penh International Airport is called Dok Do, the Korean name of South Korea-controlled but Japan-claimed Takeshima island. Though the name of the restaurant was initially believed to be a sign of anti-Japanese sentiment in Cambodia, it more likely suggested the presence of economic tensions between South Korea and Japan.

Cambodian operations

Chinese companies, as the push ahead with overseas business expansion in the face of rising costs at home, are also entering Cambodia. They account for the majority of companies operating in the Sihanoukville Special Economic Zone 210km from the capital’s center. The zone competes with the Phnom Penh SEZ, which is led by Japanese companies.

A bridge, right, built with Japan’s support and another constructed with China’s assistance stand side by side over the Tonle Sap River in Phnom Penh.

The competition between Japan and China is symbolized by two big bridges over the Tonle Sap River in Phnom Penh. The Japan-Cambodia Friendship Bridge, originally built in the 1960s, was destroyed during Cambodia’s civil war. It was later rebuilt with Japanese aid. Right beside it is a similar bridge, recently completed with Chinese support.

Workers recently demonstrated in Phnom Penh, calling for higher wages. The minimum wage in Cambodia has more than doubled over the past three years and will rise further in view of foreign companies’ strong interest in the country.

Laos is in a similar situation. Given its population of nearly 7 million, less than half of Cambodia’s, wages may rise sharply as a result of intense competition for workers.

One is what foreign companies operating in Laos and Cambodia will do when labor cost rises sharply.

Over the past half century, the sewing industry has shifted operations from the U.S. to Japan, South Korea, China and Southeast Asia in a bid to secure inexpensive labor. If companies pull the plug on operations simply because of wage increases, they will meet fierce protests from societies wishing to protect employment. Businesses cannot thrive unless they coexist in the societies where they operate.

Hiroshi Uematsu, CEO of the Phnom Penh SEZ, referred to one Japanese manufacturer’s strategy as an intriguing outlook for the future. The company has no choice but to make products with low added value in the zone for now, but it plans to increase mechanization by stages to manufacture higher value-added products. The company will “never retreat” from Cambodia, Uematsu quoted it as saying.

According to the strategy, the company will transfer the production of low value-added products to countries having inexpensive labor but can justify the payment of high wages in Cambodia on its economic development and maintain employment.

The strategy of contributing to long-term economic growth offers an important clue to companies operating globally as well as countries that accept companies with Plus One strategies.

Business

PepsiCo Reduces Revenue Projections As North American Snacks And Key International Markets Underperform.

Published

2 months ago

October 8, 2024

Salman

(VOR News) – In the third quarter of this year, Pepsi’s net income was $2.93 billion, which is equivalent to $2.13 per share. This was attributed to the company.

This is in stark contrast to net income of $3.09 billion, which is equivalent to $2.24 per share, during the same period in the previous year. The company’s earnings per share were $2.31 when expenses were excluded.

Net sales decreased by 0.6%, totaling $23.32 billion. Organic sales increased by 1.3% during the quarter when the effects of acquisitions, divestitures, and currency changes are excluded.

Pepsi’s beverage sales fell this quarter.

The most recent report indicates that the beverage and food sectors of the organization experienced a 2% decline in volume. Consumers of all income levels are demonstrating a change in their purchasing habits, as indicated by CEOs’ statements from the previous quarter.

Pepsi’s entire volume was adversely affected by the lackluster demand they encountered in North America. An increasing number of Americans are becoming more frugal, reducing the number of snacks they ingest, and reducing the number of times they purchase at convenience stores.

Furthermore, Laguarta observed that the increase in sales was partially attributed to the election that occurred in Mexico during the month of June.

The most significant decrease in volume was experienced by Quaker Foods North America, which was 13%. In December, the company announced its initial recall in response to a potential salmonella infection.

Due to the probability of an illness, the recall was extended in January. Pepsi officially closed a plant that was implicated in the recalls in June, despite the fact that manufacturing had already been halted.

Jamie Caulfield, the Chief Financial Officer of Pepsi and Laguarta, has indicated that the recalls are beginning to have a lessening effect.

Frito-Lay experienced a 1.5% decline in volume in North America. The company has been striving to improve the value it offers to consumers and the accessibility of its snack line, which includes SunChips, Cheetos, and Stacy’s pita chips, in the retail establishments where it is sold.

Despite the fact that the category as a whole has slowed down in comparison to the results of previous years, the level of activity within the division is progressively increasing.

Pepsi executives issued a statement in which they stated that “Salty and savory snacks have underperformed year-to-date after outperforming packaged food categories in previous years.”

Pepsi will spend more on Doritos and Tostitos in the fall and winter before football season.

The company is currently promoting incentive packets for Tostitos and Ruffles, which contain twenty percent more chips than the standard package.

Pepsi is expanding its product line in order to more effectively target individuals who are health-conscious. The business announced its intention to acquire Siete Foods for a total of $1.2 billion approximately one week ago. The restaurant serves Mexican-American cuisine, which is typically modified to meet the dietary needs of a diverse clientele.

The beverage segment of Pepsi in North America experienced a three percent decrease in volume. Despite the fact that the demand for energy drinks, such as Pepsi’s Rockstar, has decreased as a result of consumers visiting convenience stores, the sales of well-known brands such as Gatorade and Pepsi have seen an increase throughout the quarter.

Laguarta expressed his opinion to the analysts during the company’s conference call, asserting, “I am of the opinion that it is a component of the economic cycle that we are currently experiencing, and that it will reverse itself in the future, once consumers feel better.”

Additionally, it has been noted that the food and beverage markets of South Asia, the Middle East, Latin America, and Africa have experienced a decline in sales volume. The company cut its forecast for organic revenue for the entire year on Tuesday due to the business’s second consecutive quarter of lower-than-anticipated sales.

The company’s performance during the quarter was adversely affected by the Quaker Foods North America recalls, the decrease in demand in the United States, and the interruptions that occurred in specific international markets, as per the statements made by Chief Executive Officer Ramon Laguarta.

Pepsi has revised its forecast for organic sales in 2024, shifting from a 4% growth rate to a low single-digit growth rate. The company reiterated its expectation that the core constant currency profitability per share will increase by a minimum of 8% in comparison to the previous year.

The company’s shares declined by less than one percent during premarket trading. The following discrepancies between the company’s report and the projections of Wall Street were identified by LSEG in a survey of analysts:

SOURCE: CNBC

Business

Old National Bank And Infosys Broaden Their Strategic Partnership.

Published

2 months ago

October 8, 2024

Salman

(VOR News) – Old National Bank, a commercial bank with its headquarters in the Midwest, and Infosys, a firm that specializes in information technology, have recently entered into a strategic expansion of their link, which has been in place for the past four years.

This expansion is more likely to take place sooner rather than later, with the likelihood being higher.

For the purpose of making it possible for Old National Bank to make use of the services, solutions, and platforms that are offered by Infosys, the objective of this expansion is to make it possible for the bank to transform its operations and processes through the application of automation and GenAI, as well as to change significant business areas.

This lets the bank leverage Infosys’ services, solutions, and platforms.

Old National Bank Chairman and CEO Jim Ryan said, “At Old National, we are committed to creating exceptional experiences for both our customers and our fellow employees.”

This statement is applicable to Old National Bank. Infosys is carefully managing the business process innovations that it is putting us through, putting a strong emphasis on efficiency and value growth throughout the process to ensure that it is carried out efficiently.

This is a routine occurrence throughout the entire operation. Because of Infosys’ dedication to our development and success, we are incredibly appreciative of the assistance they have provided.

Old National has been receiving assistance from Infosys in the process of updating its digital environment since the year 2020, according to the aforementioned company.

Ever since that time, the company has been providing assistance. The provision of this assistance has been accomplished through the utilization of a model that is not only powerful but also capable of functioning on its own power.

Infosys currently ranks Old National thirty-first out of the top thirty US banks.

This ranking is based on the fact that Old National is the nation’s largest banking corporation.

It is estimated that the total value of the company’s assets is approximately fifty-three billion dollars, while the assets that are currently being managed by the organization are valued at thirty billion dollars.

Dennis Gada, the Executive Vice President and Global Head of Banking and Financial Services, stated that “Old National Bank and Infosys possess a robust cultural and strategic alignment in the development, management, and enhancement of enterprise-scale solutions to transform the bank’s operations and facilitate growth.”

This remark referenced the exceptional cultural and strategic synergy between the two organizations. Dennis Gada is the one who asserted this claim. This was articulated explicitly concerning the exceptional cultural congruence and strategy alignment of the two organizations.

We are pleased to announce that the implementation of Infosys Topaz will substantially expedite the transformation of Old National Bank’s business processes and customer service protocols. We are exceedingly enthusiastic about this matter. We are quite thrilled about this specific component of the scenario.

Medium-sized banks operating regionally will continue to benefit from our substantial expertise in the sector, technology, and operations. This specific market segment of Infosys will persist in benefiting from our extensive experience. This phenomenon will enable this market sector to sustain substantial growth and efficiency benefits.

SOURCE: THBL

Business

American Water, The Largest Water Utility In US, Is Targeted By A Cyberattack

Published

2 months ago

October 8, 2024

kiaragrace

The largest regulated water and wastewater utility company in the United States stated Monday that it had been the target of a cyberattack, forcing the company to halt invoicing to consumers.

American Water, The Largest Water Utility In US, Is Targeted By A Cyberattack

American Water, based in New Jersey and serving over 14 million people in 14 states and 18 military facilities, said it learned of the unauthorized activity on Thursday and quickly took precautions, including shutting down certain systems. The business does not believe the attack had an impact on its facilities or operations and said employees were working “around the clock” to determine the origin and scale of the attack.

water

The corporation stated that it has alerted legal enforcement and is cooperating with them. It also stated that consumers will not be charged late fees while its systems are unavailable.

According to their website, American Water operates over 500 water and wastewater systems in around 1,700 communities across California, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Maryland, Missouri, New Jersey, Pennsylvania, Tennessee, Virginia, and West Virginia.

SOURCE | AP