But work needed to improve infrastructure connectivity and simplify
customs procedures, says Jetro
“Asean is the most attractive
destination in the eyes of Japanese investors at this time. More and more new
players are showing interest in investing here,” says Setsuo Iuchi, the
president of Jetro’s Bangkok office.
“The region has abundant natural
resources and low-cost labour, and therefore it will continue to be our
priority in foreign investment in the coming years.”
Each country in Asean has its own
strengths in specific areas, and the investment models vary from one place to
the next, said Mr Iuchi, who is also the chief representative for Asean and
South Asia of the Japan External Trade Organisation (Jetro).
But as a single entity, the
region has been gaining momentum, capacity and credibility in world
competitiveness. Japanese foreign direct investment in Southeast Asia last year
was between 600 billion and 700 billion yen (220-260 billion baht) — more than
what Japanese companies invested in China.
In the first half of this year,
according to the Board of Investment (BoI), Japanese investors applied for
incentives for projects worth a total of 130 billion baht for incentives.
“Half of the Japanese investors
visiting my office for advice and guidance are interested in investing in
Thailand,” said Mr Iuchi. “The environment and the workers here are very warm
and welcoming. And importantly, Thailand has a very fine location is being the
centre of this region”.
The number of investors visiting
the Jetro office now averages 100 a month, outstripping the figures before last
year’s flooding. Automotive parts and electronics remain the key focus of
Japanese investors. More than 50% of the products made in Thailand are exported
back to Japan and elsewhere. However, a shortage of both skilled and unskilled
workers in the country remains a worry for Japanese investors.
“The mismatch in the labour
market is empirically supported from both the perspectives of employers and employees
in Thailand,” said Mr Iuchi. “Firms pay large wage premiums to college
graduates; therefore it leads to high levels of excess demand for labour to
hold such qualifications.”
In short, talented vocational
graduates are in short supply for jobs for which a bachelor’s degree is not
needed.
At the same time, Mr Iuchi
advises, Thailand needs to broaden and deepen the intellectual infrastructure
for industry. More research and development needs to be promoted so that
businesses can add value to offset higher costs of labour and other inputs.
Thailand needs to move to the
next level because Vietnam, the Philippines and Indonesia have been attracting
a lot more Japanese manufacturing FDI thanks to their cheaper labour and rich
natural resources. However, exporting is not a priority for Japanese investors
in these countries.
“The local markets in these three
countries are huge, especially those 240 million in Indonesia,” Mr Iuchi said.
“Unlike Thailand, the Japanese invest in these countries and sell the products
mainly to the domestic markets.”
With growing confidence in the
government and the upgrade in the credit rating of Southeast Asia’s largest
economy, Japan sees a lot of opportunities in Indonesia for low-cost
manufacturing. More than 1,000 Japanese companies in Indonesia now employ up to
300,000 workers. However, the lack of infrastructure is a concern, as are
transparency, laws and regulations. Like all investors, the Japanese dislike
uncertainty.
Japan is also Vietnam’s largest
foreign investor, with ventures valued at US$4.16 billion, or 65% of the
country’s total FDI, in the first half. The recent Tokyu real estate project in
southern Binh Duong province, worth up to US$1.2 billion, underlined Japanese
investors’ strong interest.
The less developed economies of
Asean are also on Japanese radar, according to Mr Iuchi.
“For Cambodia, Laos and Myanmar,
Japanese investors believe these countries hold a number of advantages in their
natural resources and strategic positions in the emerging Mekong region,” he
said.
Infrastructure improvement,
agriculture, power generation and construction all have more potential in
Asean’s emerging economies. Political stability, labour-intensive export
processing and domestic market import substitution are attractive factors for investors.
Despite a rapid increase in
recent years, Japan’s investments in Cambodia, Laos and Myanmar are still low
compared with those of Thailand, China and South Korea.
“Significant changes that we want
to see in Asean are the improvement of customs procedures and higher levels of
connectivity between Asean member nations both in terms of trade promotion and
logistics links,” Mr Iuchi told Asia Focus.
Simplifying the region’s customs
procedures and harmonising product standards — two key goals of the Asean
Economic Community — would stimulate trade with Japan. The region needs a
tariff information database so that all Harmonised System codes are consistent,
and better digital systems for filing import and export documents.
Development of hard infrastructure
including rail systems and seaports to improve logistics links remains a big
challenge for the region, as is electricity supply in some area.
Nithi Kaveevivitchai
Business & Investment Opportunities
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