Tokyo’s huge trade mission to Bangkok highlights contest for economic weight.
A RECENT massive Japanese trade mission to Thailand involving 570 investors and a senior cabinet minister has left many in Thailand wondering why Japanese businesspeople are so keen on investment opportunities in Thailand.
The trade mission, led by Hiroshige Seko, head of the Japanese Ministry for the Economy, Trade and Industry (METI), included a close look at Chon Buri, Rayong and Chachoengsao in the Eastern Economic Corridor (EEC).
Japanese journalists who accompanied the trade mission often asked questions about whether Chinese investors would overtake Japanese investment in Thailand.
The questions indicated that Japanese investors were concerned about losing its pre-eminent role in foreign direct investment (FDI) in Thailand.
There are alarming signs as China has aggressively promoted its One Belt, One Road initiative, which would connect China more closely to overseas markets. China has secured major agreements for investment in high-speed rail in Laos, Thailand and Indonesia.
China is obviously making an aggressive move into Asean. Among Chinese investors, Jack Ma, founder of giant online trading platform Alibaba, is making the Chinese influence felt around the world and the company has expressed its intent to invest in the EEC.
China has moved aggressively as the United States, the world largest economy, has threatened to impose trade restrictions on products made in the country.
The Chinese government has also made it easier for state enterprises and private investors to increase investment abroad as part of its strategy to counter the US move and to create its own sphere of influence.
In contrast, Japanese investors have not yet made a big splash to match multi-billion-baht high-speed rail lines and the activities of Alibaba.
Yet the METI trade mission suggested Japan has moved to counter and compete with China’s actions. Seko sent a strong message about “connected industries”, an initiative of Prime Minister Shinzo Abe, and Japan is upgrading its production base around the world by introducing automation, robotics and the Internet of Things to manufacturing.
Japan is still the largest foreign investor in Thailand, accounting for 36.2 per cent of total FDI by year-end 2016, followed by Singapore and the EU representing 14.8 and 14.3 per cent respectively, according to Bank of Thailand data.
“While Japanese investors remain on top, Chinese investors are increasing,” said Hirunya Suchinai, secretary-general of the Board of Investment of Thailand (BOI).
Hiroyuki Ishige, chairman and CEO of Japan External Trade Organisation, said a recent investment survey had found that 53.6 per cent of Japanese investors thought the EEC was strategically important and 78.6 per cent said investment incentives for EEC projects were effective.
Chinese and Japanese direct investment would make generally EEC investment more attractive.
Saowaruj Rattanakhamfu, a researcher at Thailand Development Research Institute, said she was optimistic. She said the EEC was attractive because the government would build infrastructure projects, airports, seaports, high-speed rail and motorways to bridge Thailand with other countries in the region.
“The hard part may be the soft infrastructure – how the government can effectively deliver one-stop services for investors. How the Food and Drug Administration can speed up its approval process for licensing requested by investors," she said.
The government will submit the EEC bill to the National legislative Assembly this week following Cabinet approval last week, bringing the EEC a step closer to implementation after delays.
Critics, however, have questioned the huge tax privileges offered by the BOI. Padma Gehl Sampath, an economist at the United Nations Conference on Trade and Development, has argued that the excessive tax privileges could affect government revenues.
Other questions also remain. Some Japanese investors have worried about a shortage of skilled labour, while Ishige has also pointed to the downward trend of Japanese automotive investments in Thailand, with new investment instead going to Vietnam, Philippines and Malaysia.
According to the BOI, foreign investors have applied for investment privileges in Thailand totalling Bt119 billion in the first half of this year, up 5 per cent from the same period last year. Japanese investors ranked first with plans worth Bt65.4 billion, followed by Singapore and China with Bt15.3 billion and Bt 7.1 billion respectively.