Some 1,000 mid-sized Japan firms eye Thai bases
More than 1,000 medium-sized Japanese companies are planning to expand their business and invest in Thailand this year, the highest number for seven years, Kasikornbank said yesterday.Songpol Chevapanyaroj, executive vice president of KBank, which has joined forces with 15 Japanese partner banks that take care of financial matters for Japanese companies investing in Thailand, said the investment size of each company was estimated at between Bt50 million and Bt100 million. This implies an overall investment value of Bt50 billion to Bt100 billion. At present, some 8,000 mid-sized Japanese companies have operations in the Kingdom.
The bulk of Thai investment by Japanese firms in the past has come from larger companies. Songpol said most of the mid-sized Japanese enterprises now interested in Thailand are in high-technology sectors such as vehicle engines and service sectors, as they have confidence in the quality of Thai facilities and do not believe the country will violate their know-how.
Some of the 1,000 medium-sized companies want to shift investment from China to Thailand, he said.
"Thailand in Japanese companies' eyes has completed facilities and infrastructure for operating business, and the country is a gateway to Asean. Start-up companies are able to run businesses rapidly here," he said.
The official visit by Japanese Prime Minister Shinzo Abe today is a clear sign that Thailand is a place for Japanese investment, and can help Japanese business reap benefits in Southeast Asia ahead of the Asean Economic Community, he added.
KBank expects to benefit from transactional services thanks to the arrival of a larger number of Japanese companies. The bank will assist Thai business operators through business-matching activities between the two countries, Songpol said.
The bank is, however, concerned about the shortage of manpower in Thailand and whether there will be enough suitable labour to cope with the expected rise in foreign investment.
This issue and the baht's appreciation should be major risk-management factors for business operators in Thailand, Songpol said.
Commenting on the current strengthening of the baht against the US dollar, he expected the trend to continue as long as there was a major influx of capital from abroad.
The volatility of the unit against the dollar is between 50 satang and Bt1, similar to last year's level, he said, adding that the recent appreciation was considered manageable because of the Kingdom's trade balance.
Import value remains higher than export value as infrastructure investment is attracting more machinery and raw materials into the country, besides which the offshore investment by large companies could help ease the baht's volatility, he said.
Small and medium-sized enterprises in the import and export sector are less affected by the baht's strength because there are more SME importers than exporters, he said.
Last year, about 20 per cent of KBank's business customers hedged their foreign-exchange risk. The volume decreased because the baht's appreciation was not considered as serious for business as previously, while some operators considered there was a chance for taking high profits, said the executive.
KBank expects the baht to trade in a range of 29-31 against the dollar this year.