Prime Minister Abhisit Vejjajiva has led a delegation of Thai ministers and representatives from the private sector on a road show to Japan, February 5-7, 2009. This trip was aimed at restoring Japanese confidence toward trade, investment and tourism with Thailand. Last year, the atmosphere toward Thailand's trade, investment and tourism was overshadowed by domestic political tensions and the drastic global recession.
The Japanese economy has experienced a severe downturn due to a serious export contraction, especially during the final two months of 2008. This has dealt a blow to Thailand's exports to Japan, particularly automobiles, electrical appliances and electronic goods. In 2009, Thailand's exports to Japan, including industrial and agricultural products and processed farm goods will continue to slow down, though they may see some improvement in line with a global economic recovery likely to be seen at the end of the year. Our exports will also benefit from trade liberalization under the auspices of the ASEAN-Japan FTA, which is expected to become effective this year. Among the main beneficiaries would be producers of fish products, processed food, plywood, plus sawn and veneered wood.
For investment, the main Japanese investments in Thailand include automobiles, auto parts, electrical appliances and electronics products, but these industries may continue to slow in 2009 amid the global downturn, especially during 1H09. However, there are several positive factors that may boost Japan's investment here around the end of the year. They would be a Japanese and global economic recovery by this year-end, which would improve consumption and investment, plus a more stable Thai domestic political situation and Thai authorities' investment promotional policies, which will grant the highest privileges to six business categories submitting for BOI promotions in 2009.
Japanese investors are expected to be keen on eco-car and food industries here, among the six businesses entitled to the highest BOI privileges. The stronger Japanese Yen versus the US Dollar, which will lessen Japanese competitiveness in the world market, will exacerbate problems for Japanese exports already crippled by ebbing global demand. This might urge more Japanese entrepreneurs to relocate some production to Thailand to take advantage of cheaper production costs. It is expected that Japanese investors may be interested in various industries. Also, the rising Japanese Yen against the Baht might encourage more Japanese investment in the production of raw materials and intermediate goods in Thailand in order to gain reduced costs and enhanced competitiveness. Japanese subsidiaries here are dependent upon imported raw materials and intermediate assemblies from their parent companies in Japan, and thus have been affected by stronger Yen that has pushed up import costs.
Moreover, the ASEAN-Japan FTA, likely to be enforced in 2009 will help enhance Thai potential as an investment destination for Japan, thanks to the rules of origin (ROO). ROO regulations allow Japanese investors to import raw materials from other ASEAN countries for assembly operations here before re-exporting finished products duty-free to Japan. With this privilege, Japanese investors here are also able to export products to other trade partners that have signed FTA pacts with ASEAN, such as China, India, South Korea, Australia and New Zealand.
As for tourism, the more stable political situation in Thailand will help restore the confidence of foreign tourists, including Japanese. Also, the government's measures to revive tourism in Thailand, such as the exemption on the fee for three-month visas, plus a budget for tourism promotion, will likely help boost tourist arrivals, including those of Japanese tourists.
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