Japan SMEs eye Thailand

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THAI-JAPANESE RELATIONS
Japan SMEs eye Thailand
Erich Parpart
The Nation

Kingdom being viewed as trading hub for Asean region in new wave of investment, seminar hears

BANGKOK: -- A second wave of Japan's investors, especially small and medium-size enterprises (SMEs), are seeking to invest in the Asean region and believe that Thailand could be a trading hub for the region despite the ongoing political conflict.

Prime Minister Shinzo Abe's outward-looking economic policy and Japan's shrinking domestic market are driving locals to look for ventures outside, and Asean is very attractive due to low production costs, high growth potential, the large market and the prospects of the Asean Economic Community (AEC).

Setsuo Iuchi, president of Japan External Trade Organisation (Jetro), commenting on the ongoing political conflict and its impact on foreign investors, said everybody wanted the problems to be solved as soon as possible.

He said many were still looking to invest in Thailand, judging from the rising number of applications with the Board of Investment (BOI).

Iuchi was speaking at a seminar organised by The Nation yesterday, in cooperation with the Yomiuri Shimbun and Japan News. It was sponsored by Toyota, Bank of Ayudhya, Ananda Development, and Thailand Convention and Exhibition Bureau.

Hisamichi Koga, vice president of the Japanese Chamber of Commerce (JCC), said he had seen a dramatic increase in Japanese investors in the region, especially Thailand, over the past few years. The seminar was entitled "Japan's new wave of overseas investment: Thailand and Asean-plus-one".

Koga said that with a depreciating economy in Japan, businesses were looking outside for revenue and production, which has propelled Japan's overseas sales and production ratios to rise by 37.3 per cent and 38.6 per cent respectively in 2013.

Iuchi said Abe's policies promoting investment outside Japan had provided incentives for Japanese companies to look outward, and Thailand remains their favourite destination.

However, he said, in order for the Kingdom to maintain its reputation and achieve sustainable growth, it needs to invest in infrastructure, improve interconnectivity with its neighbours and upgrade its customs procedure.

"Once the AEC is launched, Thailand will become a very important hub for manufacturing in this region, and in order to remain this way it needs to invest in transportation and improve interconnectivity with its neighbours," Iuchi said.

He added that Thailand-based Japanese manufacturers remained largely unaffected by the turmoil and that large-scale investment deals had been signed before the protests began. However, he said, new investors might think twice before venturing into the country this time.

Koga, meanwhile, said the political situation would damage the country's growth in the long run, but there was very minimal effect in the short term because several foreign investors are waiting for BOI approval. He also said that large manufacturers, such as automakers, would find it difficult to leave the Kingdom because they have been here for a long time and have established a strong supply chain. However, if the situation prolongs for another six months or a year, they might think about moving elsewhere.

Jump in investment

Japanese investment in the region jumped 55 per cent in the first six months of last year, equivalent to US$10.29 billion (Bt332.47 billion), compared to the year before. Meanwhile, a recent survey by the Japan Bank for International Cooperation showed that 84 per cent of the respondents had plans to strengthen their overseas operations in the next three years.

According to the International Monetary Fund (IMF), the gross domestic product (GDP) of the "Asean 5" - Indonesia, Malaysia, Philippines, Vietnam and Thailand - are expected to grow by 5.1 per cent.

Koga said JCC in Bangkok had more than 1,500 members, a dramatic increase from 97 companies in the 1990s, adding that 80 per cent of the members came from the automobile industry.

In terms of changing trends, Koga said that Thailand has been a favourite destination for investment in manufacturing for 40 years, and has now grabbed the attention of Japanese SMEs and non-manufacturing firms, especially those in the service sector.

Koga added that non-manufacturing companies investing in Thailand have been overtaking manufacturers, as only 89 manufacturing firms registered in 2013 compared to 185 non-manufacturing firms registering in the same year.

"Thailand is a favourite venture destination because its geographical location puts it at the centre of a growing region," said Kanetsugu Mike, vice chairman of Krungsri Bank and senior managing executive officer of the Bank of Tokyo-Mitsubishi UFJ (BTMU).

Mike explained that the AEC would lift trade barriers and expand the market to 600 million people, offering large potential for market and GDP growth. In addition, the prospects of the Greater Mekong Sub-region (GMS) are also attracting Japanese investors.

Mike explained that an increase in Japanese businesses in Thailand had also increased the demand for Japanese services, such as banking and food, which is why more and more SMEs and non-manufacturing firms are eyeing investment opportunities in the Kingdom.


-- The Nation 2014-03-07

[Thai at Heart]

There is another story I just saw that if thailand doesn't get sorted out, that Japanese business will start to relocate.

[chainarong]

They are also looking at Vietnam ,even Chinese based companies are looking there , Thailand is one of many , Mexico is even starting to look attractive, the wages are lower these days than China and they have the same corporate rules as Nth America, they also make the most LCD TV sets.

[JesseFrank]

A second wave of Japan's investors, especially small and medium-size enterprises (SMEs), are seeking to invest in the Asean region and believe that Thailand could be a trading hub for the region

Might be true, if those SMEs are involved in arms industry.

[PepperMe]

Thailand will become a trading hub of ASEAN. will it?

What with its massive corruption, and its worst record of English speaking record in the world almost. Also the fact it is very difficult to move stuff in and out of the country unless you pay 'overtime' to the customs. Not to mention the worst education system churning out the most uneducated in ASEAN and finally having to come against with and cope with 'Thainess' that throws up obstacles everywhere (huge amount of paperwork for everything and the most bureaucracy I have encountered in any country as far as conducting business is concerned..

Wait till they see the import duty tariffs, if they rely on bringing in materials from outside ASEAN, they will get a shock, also even China which is suppose to be free of duty, you can waive your form E in the air at customs all you want, you still have to pay them a decent amount of tea money to get your stuff.

I would think many other countries will be miles above Thailand as the hub. Singapore for one.

Thailand is a very difficult place to do business.

[Robby nz]

Meanwhile it is reported elsewhere that Toyota and Suzuki have bid for parts of the Thilawai special economic zone in Myanmar.

[smileydude]

Despite the cynicism reflected here on TV Thailand still has something to offer.

Just have to find our power players a place to stand and benefit otherwise they won't stop the ruckus.

Edited March 7, 2014 by smileydude

[GinBoy2]

Thailand will become a trading hub of ASEAN. will it?

What with its massive corruption, and its worst record of English speaking record in the world almost. Also the fact it is very difficult to move stuff in and out of the country unless you pay 'overtime' to the customs. Not to mention the worst education system churning out the most uneducated in ASEAN and finally having to come against with and cope with 'Thainess' that throws up obstacles everywhere (huge amount of paperwork for everything and the most bureaucracy I have encountered in any country as far as conducting business is concerned..

Wait till they see the import duty tariffs, if they rely on bringing in materials from outside ASEAN, they will get a shock, also even China which is suppose to be free of duty, you can waive your form E in the air at customs all you want, you still have to pay them a decent amount of tea money to get your stuff.

I would think many other countries will be miles above Thailand as the hub. Singapore for one.

Thailand is a very difficult place to do business.

Agreed Singapore is an easy place to do business, its also as was reported a couple of days ago the most expensive city in the world, overtaking Tokyo.

Dont discount business' willingness to put up with some inconvenience if they can save $$

[bangon04]

"said everybody wanted the problems to be solved as soon as possible."

not everyone , Grasshopper