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Jetro survey:Japanese firms less optimistic on Thailand


June 25, 2008

Jetro survey: Japanese firms less optimistic on Thailand
Japanese companies, the biggest foreign investors in Thailand, are less optimistic business conditions will improve in the second half of this year due to surging oil prices and political uncertainty, according to a survey report issued Tuesday.

But they were still committed to Thailand and hoped political tensions would be resolved and government policies be implemented as planned, Reuters quoted Japan External Trade Organisation (Jetro) president Yoichi Kato as telling reporters.

Forty-four percent of the 337 Japanese companies polled in May expected business conditions to improve in the second half of this year, down from 49 percent in the first half, the poll said.

Thailand Hotel

The percentage of firms seeing deteriorating conditions also eased to 21 percent from 23 percent in the period.

"We are cautiously optimistic. While the political issue is a concern, we do not expect it to disrupt government policies," Kato said.

"We believe everyone does not want it to happen and is trying to make the situation better," Kato said, when asked whether Japanese firms were worried about a repeat of the September 2006 coup that ousted then Prime Minister Thaksin Shinawatra.

Political tensions increased over the weekend when thousands of mainly middle-class Bangkok residents set up camp outside the seat of government to try to force Prime Minister Samak Sundaravej and his administration from power.

Samak, who faced a largely symbolic no-confidence motion in parliament on Tuesday, has defied the street campaign by the People's Alliance for Democracy, which accuses the government of being an illegitimate proxy of Thaksin.

Despite the uncertainty, Kato said Japanese companies had yet to delay investment plans, judging from a lack of cancellations of bookings for Jetro’s services by potential investors, Kato said.

"This shows demand for investment is still good," he said.

The top two factors affecting the economy and businesses were a rise in oil-related goods prices and higher costs and wages, the survey said.

Currency volatility was the third biggest worry while political confusion ranked seven out of 17, it said.

The value of foreign investment applications dropped 18 percent to 101 billion baht ($3 billion) in the first five months of this year from the same period a year earlier, Board of Investment (BoI) data showed.

The applications by Japanese firms, which accounted for 25 percent of the total, fell 48 percent over the period, according to the BoI, which offers tax breaks and other incentives to foreign and domestic investors.

On Monday, Finance Minister Surapong Suebwonglee said the economy might miss the government's growth target of 6 percent this year if political tensions dragged on.

Inflation soared to near a decade high of 7.6 percent in May, raising expectations of an interest rate rise next month for the first time in two years.

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