The recent devastating floods in Thailand caused record-breaking damages to Japanese business in Thailand and consequently affected production output supplying auto-parts to automotive plants in Asia, Europe and North America, as well as likely resulting in a drop in hard disk drive inventories globally in 2012.
Given such severe damage and a subsequent unfavorable investment atmosphere in Thailand, KResearch estimates that Japanese investors, particularly those in the automotive and electronic industries with large production facilities in Thailand, may consider diversifying production to other locations.
Over the past five years, rivals with smaller foreign investments than our country have shown rapid development in infrastructure and adopted more investment-friendly regulations. Those rivals include ASEAN members that show adjustment prior to becoming members of the ASEAN Economic Community (AEC) in 2015, thus presenting Japanese investors with more choices for investment.
Amid more challenging investment conditions, the Thai government should urgently eliminate bottlenecks in infrastructure and skilled worker shortages as well as installing more effective flood protection systems for industrial zones. Meanwhile, the authorities should give clarity on revised BOI investment promotion after 2014 and strengthen infrastructure to match the needs of new advanced technology industries, e.g., those involved in the food, bio-plastic and renewable energy industries by developing worker's knowledge and skills to add value to our production potential in line with Thailand's long-term strategic goals for the economy and industry.
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