BoI targets relocations from China, Japan

BoI targets relocations from China, Japan

Agency seeks to gain from trade dispute

Honda cars await export at Laem Chabang port in Chon Buri. Amid the US-China trade row, Japan still ranks first in terms of foreign direct investment in Thailand. (Photo by Thiti Wannamontha)
Honda cars await export at Laem Chabang port in Chon Buri. Amid the US-China trade row, Japan still ranks first in terms of foreign direct investment in Thailand. (Photo by Thiti Wannamontha)

The Board of Investment (BoI) has been ordered to establish special task forces to rev up investment from Japan and China, which are expected to relocate their production bases to other countries like Thailand.

According to Deputy Prime Minister Somkid Jatusripitak, high-tech industries like IT and electronics are likely to move out of China amid the heightened trade row between that country and the US.

"The BoI needs to play a more proactive role in tapping foreign investors, especially those from Japan and China ravaged by the ongoing trade row, who are expected to relocate their production bases out of China," he said.

According to Mr Somkid, the BoI has also been instructed to improve investment policies to promote investment in community businesses.

Existing perks are not attractive enough to lure large companies to invest in community businesses, he said.

Thosaporn Sirisamphand, secretary-general of the National Economic and Social Development Council (NESDC), urged the government last month to come up with special investment packages to encourage foreign firms affected by the trade war to relocate to Thailand.

The investment policies should be attractive enough to entice them to choose Thailand as a base, not solely for factory relocation but also for production capacity expansion, Mr Thosaporn said.

An NESDC study found that the trade squabbles between the US and China since 2018 have led various factories to consider relocating their production bases to other countries.

He cited a recent survey by the American Chamber of Commerce in China (AmCham China) that showed the increased tariffs between Washington and Beijing hurting the competitiveness of US firms operating in China.

Many are moving or planning to relocate their factories elsewhere in the world, the survey said.

On May 22, AmCham China said in a report that US companies were facing increased government inspections, slower customs clearance and slower licence approvals.

Nearly 75% of the 250 companies that responded to the group's survey said the recent tariff hikes by the US and China were having a negative effect on their business.

The survey was conducted after China and the US raised tariffs on each other's imports earlier this month.

More than 40% were considering moving their manufacturing facilities out of China or had already done so, AmCham China said.

Their preferred destinations were Southeast Asia and Mexico. Less than 6% of respondents said they were considering moving to the US.

Mr Thosaporn said the trade war is likely to change the production base of the world for electronics products from China to Southeast Asia.

The relocation would become especially visible in the latter half of this year when the trade war is expected to become heightened.

According to the latest report by the BoI, foreign direct investment (FDI) amounted to 104.88 billion baht in the first four months of this year, a surge of 187.06% from 36.5 billion baht in the same period last year.

Japan still ranked first in terms of FDI, with 30.7 billion baht for the period, up from 14.6 billion baht in the same period last year.

Switzerland came second, with 11.1 billion baht, up from 5 billion, followed by China at 9.39 billion, up from 3.11 billion, Singapore at 6.2 billion, up from 5.6 billion, and Hong Kong at 3.69 billion, up from 3.2 billion.

Fiscal Policy Office director-general Lavaron Sangsnit said tensions surrounding the US-China trade spat are likely to improve after the leaders of the two powers meet at the G20 summit later this month. Most analysts expect a fruitful negotiation, he said.

Since exports are a crucial part of Thailand's economy, an export recovery will drive the country's growth momentum, Mr Lavaron said.

Do you like the content of this article?
COMMENT (4)