Japanese investors will likely move their investments from Thailand to other Asean members if the political turmoil drags on for another 6-12 months, damaging the economy as a whole.
Hisamichi Koga, vice-president of the Japanese Chamber of Commerce in Bangkok, speaks at a seminar on Thursday entitled ‘Japan’s New Wave of Overseas Investment: Thailand and Asean-Plus-One’. (Photo by Somchai Poomlard)
Speaking on Thursday at a Bangkok conference on Japanese investment trends, executives said a prolonged conflict would affect Thailand's development of flood prevention and other major infrastructure projects.
Priorities for Thailand are to facilitate investments in the service sector and to improve the education system to cash in on the trend of Japanese companies expanding outside their home base, they said.
"The turmoil has prompted Japanese investors to look for alternative investment destinations such as Indonesia and the Philippines," said Hisamichi Koga, vice-president of the Japanese Chamber of Commerce in Bangkok.
"If the situation is prolonged into the next six months to one year, they might shift investments from Thailand to other countries."
Citing information from the Japan Bank for International Cooperation, he said Japanese firms are increasing investments abroad to cope with long-term appreciation of the yen and shrinking demand at home.
"They are expanding in Asia, especially Thailand and Asean, where the population is big at 600 million people and still growing," Mr Koga said.
Japanese investments in Southeast Asia rose 55% in the first six months of 2013 to US$10.3 billion.
Investors' confidence has been affected because the political vacuum has delayed the appointment of the new Board of Investment (BoI) and approval of large projects that require endorsement from the main BoI board, said Setsuo Iuchi, president of the Japan External Trade Organization in Bangkok.
Investors are looking at opportunities across Asean because the situation in Thailand makes everybody frustrated and political risks have changed, he said.
Kanetsugu Mike, senior managing executive officer of the Bank of Tokyo-Mitsubishi UFJ, said Thailand and Indonesia have remained preferred investment destinations for Japanese companies.
Despite the political turmoil, Thailand's well-developed infrastructure gives it a competitive advantage, while Indonesia has a large economy, he said.
Mr Koga said more Japanese non-manufacturing companies are coming to Thailand, so more government help is needed in areas such as the Foreign Business Act.
As protest sites have been reduced to a single location, confidence has begun to pick up, said Sumate Sudasna, a board member of the Thailand Convention and Exhibition Bureau, adding that lifting the emergency decree would help to restore the tourism sector's image.