Reappraisal in Asia

For more than two decades American investment in the Far East has benefited from a strong U.S. military presence. Confident that their invested dollars were reasonably secure, American corporations have poured in excess of $1 billion since 1964 into new electronic, car assembly and other manufacturing and distributing facilities all along the Pacific rim of Asia. The outlay contributed to rapid economic growth rates--more than 10% in South Korea, Taiwan and the Philippines in 1973--and also to soaring overseas profits for both the multinational companies that pumped in the money and the banks that financed them. Now, in the wake of the Indochina debacle and the uncertainty surrounding U.S. foreign policy elsewhere in Asia, businessmen are starting what President Dorman Commons of the San Francisco-based Natomas Co., an oil firm active in Asia, calls "a major reassessment of the role of U.S. investment in the Pacific."

Privately, several American corporate and banking executives admit that a number of capital outlays in Asia are being quietly deferred; others are being "downgraded" or assigned to higher-risk categories, meaning that bankers scrutinize them more carefully. As a result of the reappraisal and the worldwide recession, total U.S. investment in Asia is expected to slow down. The country that will be affected most is Thailand, where Communist-backed insurgents have already become more aggressive. Some investors there are also dismayed by the Thai government's insistence on reducing the American military presence in order to appease Communist neighbors, a situation aggravated by last week's events off the coast of Cambodia.

In Thailand, American companies have more than $120 million invested, largely in rubber tires, textiles and electronics. Preparing to journey for a firsthand look at the Asian situation, National Semiconductor Corp. President Charles Sporck last week termed his company's Thai assembly plant "a source of concern." He added that despite Thai government assurances that the plant is secure, "to tell you the honest truth, I'm not so sure." In the first quarter of 1975, applications to invest in Thailand from U.S. and other firms fell more than 50% below a year ago. Says Mitsuo Unabara, a Japanese banker in Bangkok: "People are becoming reluctant to invest more because of the situations in Cambodia and Saigon, and they rather like to wait and see."

What they have seen thus far can hardly be reassuring. Although the Thai economy remains strong, stepped-up guerrilla attacks have forced a shutdown of operations by three U.S.-Thai mining companies, an Italian construction concern and an American oil firm. Last week a group of bankers in New York to discuss a new Thai oil-drilling venture had their meeting interrupted by the news that U.S. Air Force planes had sunk Cambodian ships. They adjourned to await further news.

No Guarantees. In Viet Nam, U.S. firms lost about $25 million of invested capital (TIME, April 21). At least part of that eventually may be recouped through insurance from the U.S. Government's Overseas Private Investment Corporation. Nonetheless, the loss reinforced an awareness that the safety of U.S. investments is no longer guaranteed, even implicitly, by American troops, air and sea power. Says Bank of America Executive Vice President Louis Mulkern: "Capital does not come wrapped in a flag any more." That fact almost certainly opens the way for accelerated Japanese business expansion in the region. Japan already has strengthened its commercial ties with North Viet Nam and seems well on its way toward replacing the U.S. as the major financial power in Asia. Says a vice president of Manhattan's First National City Bank somewhat wistfully: "Perhaps we can now learn from the Japanese how to operate with only an economic and not a military presence." The learning process, in fact, may have already begun. Bankers detect a trend toward more U.S.-Japanese and other joint ventures and fewer solo investment efforts. In the long run, they believe that the reappraisal could lead to a healthier investing climate throughout Asia.

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