The business sector is concerned foreign investment in Thailand will come to a halt if the country does not join the Trans-Pacific Partnership (TPP), says a source in the automotive industry.
A senior executive of an auto parts company who requested anonymity said foreign investors, especially Japanese companies, are worried their businesses will be affected if Thailand does not join the TPP, the largest global trade pact.
The TPP was ratified by 12 Pacific Rim countries comprising the US, Canada, Mexico, Peru, Chile, Australia, New Zealand, Japan, Singapore, Malaysia, Vietnam and Brunei. Their economies account for around 40% of the world’s GDP and world trade.
“Japanese firms, especially those in the automotive sector, have signalled to the Thai business sector that they are worried about the country’s competitiveness in many industries, particularly the automotive and auto parts sectors as Thailand is their production hub,” said the source.
“Foreign investors are watching the Thai government closely to see if it will join the TPP. If not, they have clearly indicated they may move production to countries that can benefit from the TPP.
“Vietnam and Malaysia could benefit as they are very attractive in the eyes of foreigners. Thailand remains the major hub, and relocation of a whole production line is not that easy or cheap. The Thai government should make it clear it plans to join the TPP the next round.”
Thailand’s business sector is still unsure whether the country should join the TPP based on a Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) survey.
The leading private sector organisation found one-third of 38 industries want the country to join the pact, while five disagree with the pact. The rest are still unsure.
The industries that want to join the TPP include cosmetics, steel and iron, plastics, renewable energy and electrical goods, as they believe it benefits Thailand in terms of overseas market expansion and they are concerned Thailand will lose competitiveness in export markets if it declines.
The industries that disagree with the pact include packaged tuna, food processing, chemicals and pharmaceuticals, saying the country should take time to study the details of the pact thoroughly before making a decision.
Supant Mongkolsuthree, chairman of JSCCIB, said foreign investors, especially the Japanese, Americans and Europeans, were concerned they might lose an advantage with their future expansion and new investments if Thailand did not become a TPP signatory.
“Part of the business sector wants Thailand to join the TPP because it is the largest trade pact in the world,” said Mr Supant.
Isara Vongkusolkit, chairman of the Thai Chamber of Commerce, said initial JSCCIB research on the impact of TPP membership on the Thai economy found it could raise GDP by 0.7%. If the populous Philippines and Indonesia also join the TPP, Thailand’s GDP could expand by 1.06%.
He suggested Thailand should join the pact and prepare relief measures for industries that might be negatively affected by the TPP.
The 12 TPP members account for 40% of Thailand’s total trade and 45% of foreign direct investments into Thailand annually.