Chaos spook Japan industry; Thailand's prolonged political protests

[webfact]

JAPAN CONFIDENCE
Chaos spook Japan industry
Erich Parpart
The Nation


Setsuo Iuchi, chairman of JCC

BANGKOK: -- Japan's financial and parts industries are concerned over Thailand's prolonged political protests, which could drag down investment, said Deloitte Touche Tohmatsu Jaiyos.

The company also points to the country's bad debts, corruption and high wages as Japanese investors' perceived Thai weaknesses for direct investment.

Meanwhile, the Japanese Chamber of Commerce Bangkok (JCCB) has predicted Thai business sentiment for the first half of the year will improve from the second half of 2013, although its forecast does not include the "Bangkok shutdown" and the recent escalation of violence in its calculation, said Setsuo Iuchi, chairman of JCC-Economic Survey.

Looking at the results of its business sentiment survey - conducted on 412 companies from November 13 to December 12 - the JCCB expects positive sentiment under its Diffusion Index for the first half of 2014, since the global economy is improving and firms anticipate an increase in their exports and overall sales.

While 37 per cent of surveyed companies initially reported that their business performance was improving, Iuchi said business sentiment would definitely decrease when taking into account the development of the domestic political conflict since the survey was completed.

However, he declined to put an actual figure on it, since more research needed to be done.

"As of now, the production and manufacturing process of Japanese firms is still largely unaffected by the political situation, and the effect on the consumption side is still unclear," he said.

"The JCCB hopes the situation will be resolved soon, and we do not think that the negative effect from the current political situation will be as severe as the impact of the major flooding in 2012 - as long as the manufacturing sector remains intact and operating," Iuchi added.

On the investment side, the JCCB predicts fewer ventures from Japanese firms this year, as many companies invested heavily in 2012 and 2013 due to flood damage, and most will slow down new investment because of current uncertainty.

In terms of the concerns of Japanese businesses in Thailand, the top three challenges are severe competition (68 per cent), increases in labour costs (54 per cent) and a lack of human resources at the managerial level (54 per cent).

Although Japanese investors still see Thailand as an attractive investment base, they are worried about the country's prolonged political crisis, which could erode confidence and delay additional investment, said Subhasakdi Krishnamra, managing partner of Deloitte Touche Tohmatsu Jaiyos - commonly known as Deloitte Thailand.

"Most Japanese investors concede they are concerned over the [caretaker] government's stability and prolonged political unrest," he said, noting that they are worried about rises in the country's bad debts as a result of the economic slowdown, higher minimum wages and bureaucratic processes, and inspection committees' roles.

Thailand's financial strength lies in the Bank of Thailand with its prudent risk management, said Subhasakdi.

He noted that Japanese investors had expanded their automobile and parts' production capacities in Thailand, and that strong domestic purchasing power and being Southeast Asia's manufacturing base for exports remained the country's strengths. Weaknesses include domestic political instability, inventory management, internal audits and corruption.

Despite political developments, PwC Thailand chief executive officer Sira Intarakumthornchai said CEOs ranked Thailand as eighth among 10 countries outside the BRIC (Brazil, Russia, India and China) group in terms of their attraction for investment in the next three to five years.

"Although Thailand's political climate has given concern to most investors in the past two to three months, we believe the country's fundamentals remain strong. The performance of companies in several sectors reflects long-term growth. Even though foreign investment may have been on hold, I believe existing investment will continue," he said.

The 10 most attractive non-BRIC countries in PwC's "Global CEO Survey" this year are the United States, Indonesia, Germany, Mexico, the United Kingdom, Turkey, Japan, Thailand, Australia and Vietnam.

"The confidence of CEOs across the world has turned around this year. We see good signs from the Western economies like the US and Europe. Several [CEOs] have positive views on the world economy, with expected improvement in their revenue growth this year," Sira said.

About 39 per cent of CEOs surveyed expressed high confidence in their revenue growth.

"Looking at only Asean, about 85 per cent of CEOs in Asean are interested in mergers and acquisitions, viewing Southeast Asia as the main target for M&As [2013 figure: 56 per cent]. Such a high figure is attributed to the Asean Economic Community, which will take shape soon," said the chief executive.


-- The Nation 2014-01-29

[terryp]

they have given up on Thailand already the largest recipient of Japanese DFI 2013 was .........INDO

[Cylon]

Vios manufacture moving to Indonesia,who will pull out of Thailand next.

[NongKhaiKid]

Thais have a simple ' head in the sand ' attitude when it's something they don't like but this is something that cannot be ignored.

When giants like Toyota say they are re-considering a US$600 million investment and may move out completely other Japanese firms will pay close attention.

Some posters suggest the production of the Prius model has already moved to Indonesia.

If the Japanese start to follow Toyota's lead then it won't go unnoticed. The government made promises about flooding and didn't keep them so will need more than glib assurances if the current situation continues and may well be worse after Sunday.

[trogers]

The company also points to the country's bad debts

Everyone knows this country has accummulated lots of debts, esp from the rice scam, but how did these debts become bad?

[draftvader]

The company also points to the country's bad debts

Everyone knows this country has accummulated lots of debts, esp from the rice scam, but how did these debts become bad?

As big industry looks to pull out the amount of investors looking to "cash out" increases and values fall. These values represent how lenders view the countries general credit-worthiness as much are your personal credit rating does (ever heard of countries losing their 'AA' status?). This will then reflect on the consumer credit industry and everything goes free fall. With the amount of credit running about in this country (simply compare average wage to the average family vehicle value for a crass analysis) this will not be pretty at all.

If the country can't secure lending to cover the rice deal we can all be sure that this particular house of cards is about to tumble. Question is "Is this engineered to benefit an individual or just plain arrogant stupidity?". The former would be allowing the country to be devalued and allow a keen business mind to assemble a new bunch of investors who are clearly on side. Wonder who that might be.....

[alant]

The company also points to the country's bad debts

Everyone knows this country has accummulated lots of debts, esp from the rice scam, but how did these debts become bad?

Interesting point, I guess there are bad debts and bad debt provision and I am not sure the later is accounted here.

A similar post on the TV newsletter had a farmer talking of selling his tractor as he has payments of approx 150,000 thb per year on it to make. Can he just sell it? I have seen cases where this has happened but the bank has still had the debt. Is that bad debt.

It is an area that I have yet to get to grips with as a westerner.

[sprq]

Note to The Nation editor: chaos is singular, industry should be plural; change headline to "Chaos spooks Japan industries". My invoice is in the post.

Edited January 29, 2014 by sprq

[englishoak]

Note to The Nation editor: chaos is singular, industry should be plural; change headline to "Chaos spooks Japan industries". My invoice is in the post.

It wont be plural for long if they keep this circus up

[webfact]

Japanese investors yearn for political stability in Thailand
By Digital Content



BANGKOK, Jan 29 – The Japanese business community in Thailand has called on the caretaker government to urgently end the political turmoil and warned that prolonged conflicts will affect spending and investment in the public sector.

Setsuo Iuchi, economic survey chairman of the Japan Chamber of Commerce, said the unfavourable political climate would pose a negative psychological impact on the tourism industry.

The Japanese private sector, which has been a business partner with Thailand over the years, is hoping for urgent resolution of the political stalemate so that mutual economic development will not be disrupted, he said.

Thailand's political unrest has affected the tourism and hotel industries, but coordination with the public sector on customs and other procedures remains unaffected.

According to a survey on economic trends in the first half of this year, 73 per cent of Japanese joint venture companies called on the government to return political stability to the country, 46 per cent urged the public sector to improve the customs and taxation system, 44 per cent said the public utility system in Bangkok and outlying areas should be improved, and 36 per cent called for more serious government action on flood prevention.

The majority of Japanese businessmen were optimistic on business and industrial development in Thailand in the first six months of the year, especially in metal and non-metal industries, machinery for the transport industry and non-production transport industry.

Japanese businessmen forecast an improved trend in almost all industries particularly in the trading and retail business, with 62 per cent of them predicted a total sales growth and 86 per cent of them said they would make pre-tax profit.

Losing companies predicted dwindling losses and balanced performance with investment in factory construction and machinery for expanded production.

Regarding export trend in the first half of the year, 41 per cent were optimistic about market expansion in Indonesia, Vietnam and Myanmar while non-manufacturing industries will have a bright future in Cambodia and Laos.

The survey found that 54 per cent of Japanese investors have yet to expand their business to other countries under the Thailand Plus One concept, 28 per cent have launched it and 19 per cent were considering if they would do it. Targeted countries for business penetration are Indonesia, Vietnam and Myanmar.

Fifty-two per cent said they have encountered labour shortages and 64 per cent said the shortage was personnel at the managerial level. (MCOT online news)


-- TNA 2014-01-29

[umbanda]

It is not new that Indonesia was on the list of candidates to change the BRIC for BRICI.....Makes sense. Cheap labor country too..but closer to better markets for Japanese products.....Singapore, Australia.and Dubai...

[Thai at Heart]

The company also points to the country's bad debts

Everyone knows this country has accummulated lots of debts, esp from the rice scam, but how did these debts become bad?

Bad debts would refer to personal or corporate lending, not government.

Plenty of car repos going on.