ASEAN KEY DESTINATIONS
Relocation trend a challenge
Outward investment by Japanese companies in Thailand is unlikely to abate in the near future, considering the strength of the yen, ageing demographics in Japan and the cost advantages of moving production closer to Asean's growing market of middle-class consumers, particularly as the region moves to deepen economic ties.
Payungsak Chartsutipol, the chairman of the Federation of Thai Industries, said this month's devastating earthquake and tsunami in Japan could also hasten moves by Japanese companies to relocate their production to reduce risks.
Asean and its 600-million population is a key target for Japanese businesses, particularly small- and medium-sized companies, he said.
"The point is that we need to have a plan to help maximise the benefits for Thailand from this trend. Otherwise the result will be Japanese companies shifting their production here only to become new competitors to Thai small- and medium-sized businesses," Mr Payungsak said.
Other business leaders, speaking at an economics conference on Friday at the Sasin Graduate Institute of Business Administration, offered similar thoughts. Chatchai Boonyarit,
vice-chairman of the Thai Chamber of Commerce, said the earthquake would force many Japanese companies to restructure their operations, including moving production facilities offshore to diversify against future risk.
"I think one very dangerous competitor [to Thailand for Japanese investment] is Vietnam. Their workers are more hard-working than ours. The main problem for Vietnam today is the lack of basic infrastructure," he said.
"I'm quite certain than even 10 years from now, Vietnam will not catch up with us. But what we are lacking are skilled human resources, which in turn reflects the quality of our education system."
According to the Japan External Trade Organisation, Thailand attracted $2.24 billion worth of foreign direct investment from Japan last year, second only to Singapore among Asean. Japanese investment flows to Vietnam were worth $748 million, based on the balance of payments.
Finance Minister Korn Chatikavanij said strengthening Thailand's competitiveness and attractiveness to investors required a multi-pronged approach, including easing investment regulations and reducing the role of the state in the overall economy. "The more rules and regulations we have, the greater the opportunities for corruption or economic rent-seeking," Mr. Korn said.
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