Thailand’s competitiveness has declined enormously in the eyes of Japanese investors, with the country now ranking fourth as an investment choice, says the Saha Group.
Boonsithi Chokwatana, chair of the consumer products giant, yesterday said lingering political uncertainty has knocked Thailand out of the favoured position it previously held for three years.
Vietnam is now the top choice of Japanese investors, followed by Myanmar and Indonesia, he said.
The only two factors in Thailand that continue to draw foreign investment interest are the country’s good infrastructure and the market potential of its 70 million population.
“I believe if Thai politics can stabilise, then the country can regain that top position. But if it worsens, then Myanmar will overtake Thailand in terms of the level of Japanese investment within the next 10 years,” said Boonsithi.
Japanese investors came here looking for production bases with cheap labour, exporting the products back to Japan or elsewhere.
But now their strategy is changing, with greater importance placed on market potential, which could include Indonesia, Vietnam and the Philippines.
Moreover, Thailand still suffers from a labour shortage and the effects from the daily minimum wage hike to 300 baht in five major provinces including Bangkok.
Boonsithi said these factors have prompted many foreign investors to look at neighbouring countries instead.
“The Saha Group has been dealing with a labour shortage for a few years. We’re resolving it by relying more on automated machinery,” he said.
But despite the country suffering from lower competitiveness, the Thai economy is improving and with it, people’s purchasing power.
Boonsithi said purchasing power should continue strengthening into next year if the government can only control the exchange rate and keep interest rates low.
A suitable level for inflation would be 1-2 percent, he said.
The Saha Group will continue to invest about 1 billion baht locally on average each year, on its own or through joint ventures.
“We’re not worried about effects from the European debt crisis, as we were vaccinated by the tom yum kung crisis of 1997,” said Boonsithi.
But Saha too is thinking of investing in Vietnam, Indonesia and the Philippines to cash in on new opportunities that will arise under the Asean Economic Community (AEC) from 2015.
The group’s biggest potential is in the food sector, particularly its Mama instant noodles.
“We’ll test the market response after exporting our products to those three countries, then evaluate the possibilities and form joint ventures with local partners,” said Boonsithi.
He said if Thai investors do not take advantage of the AEC to go out and invest in other countries, then businesspeople from those nations will come to Thailand.
Saha’s food business has grown the most among all its interests in the first half of this year, while its footwear operation has not fared very well, as much of its output is exported to the US and the EU.