Published on September 3, 2010
Political turmoil, unskilled labour, Map Ta Phut chaos may be reasons why investors are looking elsewhere
Thailand could lose out on new Japanese investments; we need to identify what is wrong with our business climate and urgently put things right.
According to Watchara Panchet, the Thai Trade Representative, it is possible that Thailand could miss out on a new wave of Japanese foreign investment. Watchara was commenting after a recent Japanese trip during which he was told that Thailand is not on Japan's list of public-private partnership (PPP) priorities. The list encourages Japanese investors to engage in infrastructure development projects in other countries.
Watchara, quoted by Thai Rath newspaper, says that Tokyo has listed nine countries under its PPP initiative, including our Southeast Asian neighbours Indonesia, the Philippines, Vietnam and Malaysia. He admitted it was alarming indeed to find out that Thailand was not part of Japan's immediate foreign investment plans.
Japan has long been one of the biggest investors in Thailand. Over the years, the Japanese investment record here has been demonstrably impressive, with long-term interest a priority factor, along with a solid commitment to continually transfer technology to local staff. One of the successes has been the Thai automobile assembly industry, which has successfully developed because of the presence of Japanese car companies since the 1970s. At that time it became too expensive for Japanese investors to keep certain manufacturing facilities at home, so they looked to promising investment opportunities abroad - of which Thailand was one.
Since the yen has strengthened recently to 84 versus the US dollar, it makes sense again for Japanese investors to look overseas. With the yen rising to a 15-year high, the Japanese now see continuing cooperation with developing countries as essential to maintaining competitiveness.
Aside from relocating industrial plants to more competitive locations, the Japanese government's cooperation in infrastructure projects also provides opportunities for its companies to engage in infrastructure development in emerging economies. Other Asean members such as Vietnam and Malaysia are aware of this and have been vigorously attracting Japanese investment, because they see technology development as national priorities.
If Thailand is really losing its charm for Japanese investors, that would be bad news indeed. Over the past 40 years, Thailand has successfully followed Japan's "flying geese" development model, and has taken great strides up the technological ladder. Thais have become familiar with the Japanese business culture, and have welcomed the employment security that this culture has traditionally brought with it. The new wave of Japanese investment suggests that Japanese businesses are moving towards environment-friendly operations, energy efficiency and effective waste management. These are areas in which Thailand has a strongly shared interest with Japan.
Thailand may now have to ask the question: What has gone wrong in the economic relationship with Japan? Possible answers include under-qualified human resources - an issue often raised by the Japanese Chamber of Commerce in Thailand, and a reason why some investors shy away from these shores. Another recent factor is the unpredictable political environment which, as we have seen, has been severely disruptive to business operations. Yet another problem is political and legal indecisiveness in dealing with issues that are critical for foreign investment. The most obvious current example is the stalled expansion of the Map Ta Phut industrial estate.
Watchara's Japanese counterparts told him that Thailand's absence from the PPP list is because the two countries already have well-established business connections, and the Japanese feel that Thailand might not require new initiatives in the form of PPP. Watchara replied that Thailand is still open for foreigners to participate in industrial and infrastructure projects.
If the exclusion of Thailand from Japan's PPP list is indeed because our existing business and economic ties are well-established and solid, then we might not have to worry too much about losing out to our regional competitors. But if the case is otherwise, then we need to find out why Japanese investors might be losing confidence, and then urgently put in place measures to rectify the situation.
The answer to the above question will tell us not simply how to continue to attract Japanese investment; it should also reveal more deep-rooted problems in our economic environment and existing business practices. If we can identify the symptoms, we must then come up with solutions as to how Thailand can still attract sustainable investment that is not detrimental to the environment and which creates meaningful, long-term employment opportunities for Thais.
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September 10, 2010 01:00 am (Thai local time)
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