PRD still at the core of investor sentiment

THE FOCUS HAS been on the Pan Pearl River Delta (pan-PRD or 9+2) regional grouping since its launch in June but the PRD, as its core, remains a vital sub-group despite the emphasis on expanded regional co-operation and industrial migration.

Just as land and labour costs are rising in Guangzhou , Shenzhen and Dongguan, massive highway construction in Guangdong is making it possible for investors to expand to less popular cities such as Huizhou and Jiangmen . The results of the first pan-PRD trade fair in Guangzhou in July demonstrate too well the co-operation is not interesting investors, who continue to put their money into Guangdong, where they feel most comfortable.

'The pan-PRD [partners] have high expectations of investment from Guangdong and migration industries but I feel they do not stand much chance,' said Zheng Tianxiang, of Sun Yat-sen University's Centre for Hong Kong, Macau and PRD Studies.

'Sure, they will get some industries - labour-intensive, energy-intensive, polluting industries can go but the rest will not go so easily unless they get tax breaks. Even then, only the small companies will go. The big ones will stay,' Professor Zheng said.

Hong Kong Chamber of Commerce in China - Guangdong president Sonny Doo echoed Professor Zheng's views but said even small and medium-sized enterprises (SMEs) would continue to go to the PRD.

'The SMEs don't have as much support as the big companies. They need the supply chain so they will still come even it has become more expensive to do business in the PRD,' he said.

'The pan-PRD is still a concept whereas the PRD still has a lot of room for growth, especially in the west with the transport network being put in place.'

Professor Zheng said while it was true some industries had moved out of the Pearl River Delta, they had mostly gone to Qingyuan and Heyuan .

There was still lots of potential outside the traditional magnets of Shenzhen, Dongguan and Guangzhou , where land was scarce and production costs had risen, he said.

Huizhou is a fast-rising star, thanks to the CNOOC-Royal Dutch Shell petrochemical project, which is spinning off opportunities for downstream processing industries, logistics and other services providers.

Huizhou's contracted foreign investment shot up to US$899 million in 2002 from $281 million in 2001 but eased down to $747 million last year. Improving transport is making the Pearl River crossing less a disincentive for Jiangmen and Zhuhai .