A growing number of Japanese companies might re-examine their investment strategies in Thailand because of the negative impact of anti-government rallies in Bangkok, according to Japanese newspaper Yomiuri.
Many Japanese investors regard Thailand as a vital production base, but if they feel they must move elsewhere, it could spell disaster for the Kingdom's export sector, which is already in bad shape.
According to the Thai Board of Investment, Japan is the largest investing country in Thailand. For Japanese automakers and electrical-appliance manufacturers, this country is a leading production base.
The Japan External Trade Organisation reported that 1,458 Japanese companies were operating in Thailand as of April. In 2012, Japanese companies made 761 investments worth a total of Bt348.4 billion.
But if political instability drags on in Thailand, Japanese companies might become reluctant to invest here and take their business elsewhere.
On the tourism front too, there are signs that that the number Japanese visitors to Thailand has declined since the beginning of the demonstrations.
Yomiuri reported that many tourists who had planned to depart for Thailand in December or January had postponed their trips, forcing Japanese travel agencies to scramble for more information about the conditions here.
Keiichiro Oizumi, a senior research fellow of the Japan Research Institute, said Japanese companies would likely continue to re-evaluate their operations in Thailand. "Moves to transfer some production processes to other countries with lower labour costs while keeping production bases in Thailand will also accelerate," Oizumi said.
Nobuyuki Ishii, secretary-general of the Japanese Chamber of Commerce in Bangkok, expressed concern about the possible impact of the political unrest.
"If the anti-government demonstrations last much longer, adverse effects will appear in, for example, automobile sales. We can only hope the situation calms down as quickly as possible," he said.
Chubu Economic Federation chairman Toshio Mita, who is also chairman of Chubu Electric Power Co, said at a press conference on Monday: "The supply of parts to manufacturing plants may be stopped, and the movement of people may be obstructed. I hope the situation will return to normal as soon as possible."
To minimise the negative repercussions from the rallies, the Thai Commerce Ministry has opened new service counters for issuing certificates of origin.
According to Yomiuri, the Japanese Embassy in Thailand told the newspaper there had been no problems in the issuance of work permits, visas, customs clearance and other matters since Thai officials had become more lenient.
Some Japanese companies have already moved or plan to move operational bases from Thailand to nearby countries, such as Cambodia and Laos. In October, Nikon established a new plant that makes single-lens-reflex cameras in Laos and transferred |part of its Thai production processes there.