IN­VESTORS’ EN­THU­SI­ASM

The Gulf Today - Business - - Special Report11 -

In the coastal area east of bustling Bangkok lies Thai­land’s largest in­dus­trial zone, a pro­duc­tion hub where hun­dreds of Ja­panese car- and auto parts mak­ers had once rushed to gain a foothold in South­east Asia.

As Ja­pan and Thai­land mark the 130th an­niver­sary of di­plo­matic re­la­tions, the Thai gov­ern­ment is seiz­ing the mo­ment to re­vive Ja­panese in­vestors’ en­thu­si­asm with its plan to trans­form the in­dus­trial zone into a high-tech cen­tre for mem­ber coun­tries of the As­so­ci­a­tion of South­east Asian Na­tions.

Ear­lier in Septem­ber, the Thai gov­ern­ment in­vited Min­is­ter of Econ­omy, Trade and In­dus­try Hiroshige Seko and more than 570 del­e­gates from the pri­vate and pub­lic sec­tors - in­clud­ing ma­jor firms as well as smaller ones in Tokyo and other re­gions - on a three-day trip to the trop­i­cal coun­try to pro­mote new in­vest­ment op­por­tu­ni­ties.

This ap­proach by Thai­land has been wel­comed by Ja­pan, whose pres­ence in the ASEAN hub has been over­shad­owed by the emer­gence of other in­vestors such as China.

In a gath­er­ing of the largestever busi­ness del­e­ga­tion in­vited to Gov­ern­ment House in Bangkok, Thai Prime Min­is­ter Prayuth Chanocha courted Ja­pan’s in­ter­est in the land­mark “Thai­land 4.0” eco­nomic pro­gramme and re­peat­edly of­fered as­sur­ances that par­tic­i­pants can “trust” Thai­land’s growth po­ten­tial.

The ini­tia­tive is aimed at trans­form­ing Thai­land’s largely agri­cul­tural and man­u­fac­tur­ing econ­omy to­ward a growth model led by high­tech in­dus­try.

To has­ten the eco­nomic shift, the gov­ern­ment has ap­proved the de­vel­op­ment of the Eastern Eco­nomic Cor­ri­dor, a spe­cial in­vest­ment zone set in three coastal prov­inces east of Bangkok - Cha­cho­engsao, Chon Buri and Ray­ong.

The tech­nol­ogy hub will fo­cus pri­mar­ily on 10 “tar­get in­dus­tries” set by the Thai gov­ern­ment. Among them are bio­chem­i­cal, med­i­cal and tourism sec­tors as well as next-gen­er­a­tion au­to­mo­tive in­dus­try, in­clud­ing the elec­tric ve­hi­cles seg­ment. The gov­ern­ment will of­fer strate­gic projects in the EEC with gen­er­ous tax in­cen­tives, in­clud­ing ex­emp­tions from cor­po­rate in­come tax for up to 15 years, if in­vest­ments are deemed par­tic­u­larly ben­e­fi­cial to Thai­land’s in­dus­trial in­no­va­tion.

Bangkok plans to use 1.5 tril­lion baht (5 tril­lion yen) in pub­lic and pri­vate in­vest­ments in the first five years to up­grade the re­gion’s in­dus­try and in­fra­struc­ture. One such project is the ex­pan­sion of the U-tapao civil-mil­i­tary air­port to make it the na­tion’s third-largest com­mer­cial air­port, ca­pa­ble of han­dling up to 60 mil­lion pas­sen­gers per year by 2032. Cur­rently, the air­port has ca­pac­ity for about 3 mil­lion pas­sen­gers per year.

Bangkok’s growth strat­egy is in keep­ing with Ja­pan’s “con­nected in­dus­tries” pol­icy con­cept, which aims to up­grade ex­ist­ing busi­nesses by cre­at­ing a strong net­work across a va­ri­ety of in­dus­tries, Chan-ocha said, adding that Ja­pan-thai­land co­op­er­a­tion in the EEC will make it “one of the most ad­vanced in­dus­trial hubs and land­marks of Asia.”

Bangkok has high ex­pec­ta­tions, as Ja­pan has had a prom­i­nent pres­ence in Thai­land, in­clud­ing 1,748 mem­bers in Bangkok’s Ja­pan Cham­ber of Com­merce as of April. Ja­pan is the largest source of for­eign di­rect in­vest­ment for the South­east Asian coun­try.

As Asian ri­vals deepen their in­flu­ence in ASEAN, Ja­pan may see more rea­sons to ac­cel­er­ate the in­vest­ment.

China and Thai­land will re­port­edly be­gin con­struct­ing a 253-km high-speed rail­way be­tween Bangkok and Nakhon Ratchasima that is likely a part of Bei­jing’s “One Belt, One Road” in­fra­struc­ture ini­tia­tive, in Oc­to­ber. Ja­pan and Thai­land signed a mem­o­ran­dum of un­der­stand­ing in 2016 over build­ing a 700-km rail­way for shinkansen link­ing Bangkok and the north­ern city of Chi­ang Mai. Con­struc­tion of the line is slated to start as early as 2018.

Ja­pan once ex­erted strong eco­nomic power in Thai­land thanks to au­tomak­ers such as Toy­ota Mo­tor Corp. and Honda Mo­tor Co., but its dom­i­nance has waned re­cently due to the rise of Chi­nese and South Korean elec­tron­ics giants, said Sing­tong Lapisatepun, direc­torgen­eral of the de­part­ment of East Asian af­fairs in Thai­land’s for­eign min­istry.

“Take smart­phones, for ex­am­ple. We con­stantly hear about brand names like Oppo and Huawei of China and Samsung (of South Korea). Un­for­tu­nately, how­ever, we don’t hear Ja­panese names in this area,” he said.

Ja­panese in­vest­ment in Thai­land lost its mo­men­tum in re­cent years.

Last year, Ja­panese com­pa­nies in­vested 79.6 bil­lion baht to Thai­land, ac­cord­ing to the Ja­pan Ex­ter­nal Trade Or­ga­ni­za­tion. The amount was about 23 per cent of a 348.4 bil­lion baht in­vest­ment made in 2012.

Ja­panese in­vestors har­bour con­cerns over Thai­land’s slug­gish eco­nomic growth. The coun­try has been strug­gling to es­cape the so-called mid­dle-in­come trap, where the pace of ex­pan­sion slows af­ter the econ­omy achieves mid­dle-in­come sta­tus and the in­creas­ing cost of labour lim­its in­vest­ment from abroad. Thai­land’s rapidly gray­ing pop­u­la­tion is also ex­pected to ham­per growth.

Another con­cern is com­pe­ti­tion from other ASEAN coun­tries, in­clud­ing Viet­nam, which of­fer cheaper labour rel­a­tive to Thai­land. Viet­nam recorded 6.21 per cent eco­nomic growth in 2016 com­pared with Thai­land’s 3.2 per cent, ac­cord­ing to the for­eign min­istry.

The Thai gov­ern­ment hopes its new ini­tia­tive will fur­ther stim­u­late the econ­omy.

At a busi­ness sym­po­sium held on the sec­ond day of the trip, Tokyo and Bangkok con­cluded seven mem­o­ran­dums of un­der­stand­ing to ac­cel­er­ate mu­tual co­op­er­a­tion for the de­vel­op­ment of the EEC. Two par­ties also signed a mem­o­ran­dum of in­tent in June and agreed to work to­gether for the project.

At a news con­fer­ence, Seko and Thai­land’s deputy prime min­is­ter, Somkid Ja­tus­rip­i­tak, a key per­son for the coun­try’s eco­nomic pol­icy, agreed that fur­ther co­op­er­a­tion in the EEC will bring about ben­e­fits for both Tokyo and Bangkok.

“For Ja­panese com­pa­nies, Thai­land is a sig­nif­i­cant core of ASEAN coun­tries and its fur­ther growth as a hub of the Mekong area is ex­tremely im­por­tant for them,” Seko said. “I be­lieve there is much room to con­trib­ute for Ja­panese com­pa­nies, which have played im­por­tant roles in Thai­land’s in­dus­trial clus­ter, to be­come a part of its fur­ther growth.”

In re­sponse, Ja­tus­rip­i­tak said the two coun­tries “have great pos­si­bil­i­ties” in work­ing to­gether to de­velop hu­man re­sources and busi­nesses in the eco­nomic zone, urg­ing more dis­cus­sions to seek for fur­ther col­lab­o­ra­tive op­por­tu­ni­ties.

Bangkok con­sid­ers Ja­pan a sig­nif­i­cant part­ner in trade, in­vest­ment and tourism as well as a close Asian ally with a rock-solid friend­ship not only at the di­plo­matic level, but also at the grass-roots level, Thai for­eign min­istry’s Lapisatepun said

“The friend­ship be­tween Ja­pan and Thai­land is backed up by 130 years of diplo­macy, a re­la­tion­ship that has con­tin­ued for 600 years,” he said.

“Now is a very im­por­tant time for Thai­land’s econ­omy, and there is no rea­son for Ja­pan to miss this op­por­tu­nity to be­come a part of it,” Lapisatepun said.

From the per­spec­tive of Ja­panese com­pa­nies, ex­pan­sion into South­east Asia is one main rea­son to in­vest in Thai­land.

Toshiya Mat­suo, a di­rec­tor at Transcos­mos (Thai­land) Co., said, “Thai­land is the core of other South­east Asian coun­tries, and suc­cess here will, with­out doubt, sig­nif­i­cantly in­crease our pres­ence in the re­gion and help us to ex­pand our busi­ness in other Asian coun­tries.”

Transcos­mos, a Tokyo-based in­ter­net out­sourc­ing ser­vice, has been do­ing busi­ness in the coun­try since 2008. The com­pany de­cided to launch its new e-com­merce ser­vice in Thai­land be­fore ex­pand­ing to other South­east Asian coun­tries, be­cause Thai­land’s strong in­dus­trial base makes it the least risky mar­ket for a new ser­vice, Mat­suo said.

“I be­lieve our (on­line) ser­vice will be a good match to what the Thai gov­ern­ment wants to achieve through the Thai­land 4.0 pol­icy,” he said, adding that Transcos­mos plans to in­crease in­vest­ment in the Thai mar­ket.

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