Head of Jetro reveals fresh concerns
While Japanese companies are committed to Thailand, Mr Ichiro says they are concerned about the border dispute. Somchai Poomlard
Japanese companies operating in Thailand have voiced concerns regarding the country’s prolonged border conflict with Cambodia and sluggish domestic demand, calling on the government to launch new stimulus to prop up the economy.
In an interview with the Bangkok Post, Abe Ichiro, president of the Japan External Trade Organization (Jetro), said Japanese companies have seen their logistic costs increase due to the border dispute.
“Japanese industries have supply chains across borders in the Greater Mekong Subregion, with some trading between Thailand and Cambodia. Now the border is closed, so they use maritime or air routes, but those cost a lot more,” said Mr Ichiro, who took office in Bangkok in mid-July.
In addition, the firms are not confident these alternative logistics options are sustainable, he said.
According to Japanese government data, there are more than 6,000 Japanese companies in Thailand, 1,660 of which are members of the Japanese Chamber of Commerce (JCC).
According to a JCC survey conducted by Jetro, “sluggish domestic demand for durable goods” is a major concern among members.
Other significant challenges for Japanese companies are increasing labour costs, surging prices for raw materials and parts, and severe competition.
“Especially since last year, demand in the Thai market has been a little weak,” Mr Ichiro said, citing findings from the latest survey.
Recent data revealed the Thai economy grew at the lowest rate within Southeast Asia, expanding 2.8% year-on-year in the second quarter of this year. That compares unfavourably with Malaysia and Singapore’s growth rate of 4.4%, Indonesia at 5.1%, the Philippines at 5.5%, and Vietnam at 7.96%.
“A stimulus package to lift domestic consumption is the most interesting option to Japanese companies here because demand is weak, especially for durable goods,” he said.
Mr Ichiro said the Thai government could make the country more appealing to Japanese investors by improving predictability and transparency of policy changes, which would help industry feel more secure.
ROADMAP NEEDED
While Japanese companies want short-term stimulus measures, he said they also are keen to see a roadmap for Thai economic expansion, especially considering the demographic challenges Japan is facing, which Thailand also faces to a lesser extent.
“If the government identified the challenges and indicated some sort of solutions, industry could consider how to help resolve these issues,” said Mr Ichiro, adding that productivity enhancement could help address a shrinking population and wage hikes.
For example, Japanese companies would like to hear what Thai government measures are expected to mitigate the impacts of US tariffs affecting local manufacturers, he said.
With the 19% US import tariff on Thai exports, Japanese companies are expecting their shipments to be affected, while domestic sales suffer from imports from other countries and locally-made goods.
However, Mr Ichiro brushed aside the likelihood that Japanese firms would spend less to expand their production here, investing more in Japan as the US slapped a 15% tariff on its exports.
“Tariff issues are important, but they are unlikely to affect investment decisions because the difference is just four percentage points between Japan and Thailand,” he said.
Japanese exports from Thailand mainly serve demand in other Asian countries and Australia, said Mr Ichiro.
Japanese companies invest here partly because they want to be close to the market, as Thailand has an abundant supply chain, he said.
AloJapan.com