Thailand+1: key step for Japan producers

Economy July 09, 2014 00:00

By Pichaya Changsorn
The Nation

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Japanese companies can adopt the "Thailand+1" strategy to tap the growing opportunities in the Greater Mekong Subregion, an investment seminar was told yesterday.

Kiminori Iwama, economic minister of the Japanese Embassy in Bangkok, told the seminar organised by the Board of Investment and Nikkei Business Publication that 
the National Council for Peace and Order had given importance to 
economic issues and now there were many positive signs such as improving consumer confidence, while there is a revival of interest in the country among foreign investors.
However, as higher wages and labour shortages continue to be of concern to Japanese investors, “Thailand+1” has emerged as a new strategy deployed by Japanese companies to relocate their labour-intensive businesses from Thailand to its neighbouring countries and develop linkages with their major production bases here.
Udom Wongviwatchai, secretary-general of the BoI, said the extension of parts and raw materials sourcing networks to neighbouring countries under the Thailand+1 strategy would help strengthen the competitiveness of Thai industries, which have already been an important production base for Japanese companies.
Hiroyuki Aitani, managing director of Abeam Consulting Thailand, said Japanese companies should use Thailand as their base to expand to Cambodia, Laos, Myanmar and Vietnam (CLMV) and form joint ventures with Thai companies to invest in CLMV countries rather than going there alone. 
CLMV countries shared many similarities with Thailand, including culture and religion, while their consumers – many of whom go to work in Thailand – are also very familiar with Thai products. 
Investors should not look at just the macroeconomic figures, as that would give the wrong picture on the true potential of Thailand and CLMV economies.
“The averaged figures are going to mislead you. Don’t just look at the tip of the iceberg,” he said.
In Thailand’s case, there are shoppers having problems finding enough taxis at Asiatique, the new luxury shopping mall called Central Embassy and the aggressive expansion of the Lawson convenience store chain.
Bangkok has already succeeded Tokyo in shops per population with a ratio of 24:15 in 7-Eleven convenience stores. Honda dealers are also close to Tokyo at 1.2:0.7. The consumer confidence index, after plunging to a 12-year low a month ago, has also recovered to 75.1 points in June.
But with its ageing society, Thailand has to increase its research and development spending from 0.25 per cent of gross domestic product.
“With the minimum wage [raised], we can’t secure labour forces [if they can’t work more productively],” he said.
Tomonao Iwasaki, general manager of Yusen Logistics (Thailand), said Japanese retailer Aeon recently opened its mall in Phnom Penh, which would import about half of its goods from Thailand.
There is still “a long way to go” to materialise the economic integration vision for the CLMV region, he said, citing road conditions, customs regulations and other logistics obstacles persisting in the countries.
“[Despite the] economic corridor [vision], we have no industrial road. We need special economic zones but local people are against them. We are still far on the way to [economic] integration,” he said.