The disaster in Japan is expected to affect economies in Southeast Asia, but economists say the damage is likely to be limited. They say the region may even see increased investments from Japan as companies seek to diversify away from areas at higher risk from natural disasters.

Japan supplies Southeast Asia factories with components and parts put into cars, electronics, and other products for export, including back to Japan.

That supply chain was disrupted when the earthquake and tsunami hit Japan’s northeast, damaging a nuclear plant and forcing many factories to stop production.

Tokyo Japan
The disaster in Japan is expected to affect economies in Southeast Asia, but economists say the damage is likely to be limited. They say the region may even see increased investments from Japan as companies seek to diversify away from areas at higher risk from natural disasters.

Many Southeast Asian countries export to Japan. The Japanese market accounts for about 20 percent of Indonesia’s exports and 17 percent of what the Philippines sends abroad, down to smaller amounts from countries including Cambodia, Laos, and Singapore.

Regional economists say exports may suffer this year. But with Japanese damage assessments and the situation at the nuclear plant uncertain, estimates of the cost to trade are tentative.

Tim Condon, the chief Asia economist for ING Financial Markets in Singapore, said a worst-case scenario would be similar to the 2008 global financial crisis, when Japan’s imports dropped by nearly half.

“If the earthquake damage is that severe we could see damage on the order of 0.7 percent of GDP in Indonesia, about half that in the case of Philippines, and then something even lower than that in the rest of the Southeast Asian economies. So, it ranges from a chunky number in the case of Indonesia, to kind of a negligible figure in the others.”

via Japanese Quake Has Limited Effect on Southeast Asia Economies | Asia | English.

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