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NEWS UPDATES Asean Affairs        17 March 2011

Japanese investments in Thailand may decline

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Japanese financial aid and investment for Thailand may decline, as the bill for the domestic earthquake, tsunami and nuclear recovery continues to mount.

The Thai unit of the Japan Bank for International Cooperation (JBIC) said new loans from that country to finance projects in Thailand might be affected, although policy on international financial schemes remains intact.

"I think we need to reconsider what to offer and set priorities before making any new commitments for projects here," said Hiroshi Hanaoka, the JBIC's chief representative for Thailand, Cambodia, Laos and Burma.

"But for projects we've already committed to, there will be no change. We have a responsibility." He emphasised that actual damage costs of the recent disasters have yet to be determined.

Fukujiro Yamabe, vice-president of the Japanese Chamber of Commerce in Bangkok, said expansion by Japanese investors operating in Thailand would be affected by the catastrophes.

"Most of the companies and joint ventures here depend on raw materials and components from Japanese suppliers. They are planning new investments, but their plans will be very much affected," said Mr Yamabe, who is also the president of the trading firm Mitsubishi Co (Thailand).

"We're trying to measure how big the impact is, but communicating with Japanese headquarters is difficult at the moment. What we can say now is that the damage is not small."

Buddhipongse Punnakanta, an adviser to the industry minister, said the Board of Investment (BoI) had been given seven days to come up with a special short-term package to facilitate direct investment from Japan.

The plan will be subject to final endorsement at an economic ministers' meeting.

"I instructed the BoI to look at both tax and non-tax incentives while speeding up procedures to support Japanese investments arriving in Thailand," said Mr Buddhipongse.

"This could be developed as a special package lasting only three to six months while Japan recovers from what has happened. It would actually be kind of an assistance measure for our long-term partner Japan, as Thailand is a major manufacturing base for Japanese companies." Japanese investors may want to shift more production here, especially since the Japan External Trade Organisation already mooted the possibility before the disasters occurred.

The BoI said Japan was the top foreign investor in Thailand at 111 billion baht last year, up sharply from 70 billion in 2009, out of total foreign investment of 284 billion.

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