Can We Find Real Thailand through Newspaper?

Finance Committee of JTBF   
H. Motomura (Chairman)/ M. Koyama/ H. Yoshimatsu/ A. Imaki   

The Japanese prominent newspaper Nikkei on January 31, 2007 reported ?gDue to several actions taken against foreign investment in Thailand, Japanese firms?f investment declined by 27%?h. We, the member of JTBF were in deep thought if that was true. The interim government may not be politically powerful enough and the issues such as economic matters may sometimes be too much complicate to be handled. It?fs been mentioned now the Council for National Security (CNS) has a good opportunity to immediately enforce the policies, which have been quite difficult to be implemented under the control of the party politics in the past. It seems, however, that the new government is simply opposing the policies set out by the former government. The adoption of the 30% capital reserve policy has drawn criticism for being the inappropriate action, due to the sharp decline of the capital market.

But, can we simply conclude just as the newspaper has reported ?gThai interim government is pushing forward an inward looking development and limits foreign investment without enough thought?h? Isn't it true that both foreign direct investment and export have been the key drivers of Thai economy up to now, and that recovery of economy after 1997 crisis justifies such long-term policy of Thailand?

We, the members of JTBF were quite keen on clarifying those points this time.

A sudden change is always inconsistent with characteristics of Thai people. We have a good reason to believe that prosperity-seeking, relying too much on monetary power, arrogant behavior, hurrying in application of Western style administration, those things of the prior government may have resulted in the Coup.

On February 5, JTBF Finance Committee had a chance to directly interview with Mr. Pridiyathorn about the adoption of Thai economic policy. Being criticized from all over the world regarding the 30% capital reserve policy, we thought he must have been terribly depressed. However, we found out that he was quite fine and welcomed us livelily.

We started asking him the questions regarding the Nikkei article, ?gIf the article is true, it means that the direct investment from many countries will surely drop. Now Thailand have thrown out the long-time foreign investment policy and shifted to the inward looking attitude? What is the real objective behind this capital reserve policy, and how you foresee that?h?

The Deputy Prime Minister harshly commented from the very beginning. ?gThat is totally incorrect. Though I?fve been preparing to explain everything, Japanese media have never come to interview me at all. They just put pieces of rumors together, while many Western media like CNBC visited me for interview?h.

We herewith quote only the significant part from the letter written by the Deputy Prime Minister for the Wall Street Journal ;

?gThai government welcomes foreign investment and foreign participation in our economic activities. We certainly do not pursue an inward looking development strategy, nor do we want to reverse the direction of foreign investment policy. The first measure was taken by the Bank of Thailand to secure the stability needed for exporters and foreign direct investment. It?fs adverse impact on the capital market is believed to be short term in nature. The second measure was introduced with an intention to bring certainty to the regulatory environment for existing foreign companies. We did not enact the measure any protectionist intent?h

He clearly described, exactly as in the above letter, that Thai government did not change any direction of the foreign investment policy at all. ?gThai Baht rose against the Dollar 17% in 2006. It was far higher than other Asian currencies which rose around 7 ~ 8%. The Thai economy after the Coup is not in normal situation. If the Baht still keeps on rising, it will significantly affect export and FDI, the key drivers of Thai economy.?h

?gThough it shows the negative effect on the capital market, we believe that it is only temporary impact. The Bank of Thailand was forced to make such a difficult decision in order to maintain the stability of the Baht. Importantly, as the policy aims to stabilize the currency, we believe this will not last long. We think that the current on / off shore market will be stabilized very shortly.?h he added.

He also commented in regard to the revision of Foreign Business Act, ?gmarket rumors stand on bunch of misunderstandings and exaggerations. Look at the case of Shin Corp using so-called ?gNominee Company?h to take advantage of the loopholes of the law. The reason of this amendment is simply to block such loopholes.?h

?gApart from that, though the law is currently implemented, many companies issue preferred shares carrying with voting rights to foreign investors. The companies may seem majority owned by Thai shareholders, but in fact, foreigners possess the major voting rights. They, by using the loopholes of the law, even expand into the business sectors legally prohibited to foreigners by nature .?h

?gThe purpose is simply to block the loopholes in existing rules, therefore, manufacturers, exporters and the companies with investment privileges from BOI will never be affected at all. It is surely not ?ganti-foreign investment?h. Even if any company falls under the cases above, they will have a year for correction, as so-called ?ggrand farther?h treatment.

He repeatedly asked us to understand that ?ganti-foreign investment?h was completely misinterpretation, and added that, by clarifying the ambiguous guide-line (definition of ?gforeigner?h), it would help in achieving the good governance from now on.

?gOh, I see ?c?h the explanation of the Deputy Prime Minister enlightened all members. It seems that Japanese newspapers keen on using sensational expressions. For big companies having many information channels, they will be able to make an objective judgment regarding such matter. However, for those SMEs only having limited sources of information, they must completely believe in any articles in the papers without doubt. In Japan, unfortunately, people tend to believe in any news, just because that was ?gmentioned in the papers?h or ?gbroadcasted on the TV?h.

Consequently, it is necessary that the media should check out the fact as much as possible, interview key executives and report from the neutral point of view, without any bias. We could easily recall a recent inappropriate information given by one of the TV health programs in Japan.

?gJapanese firms?f investment declined by 27%?h, the number itself may not be wrong. However, we wonder if it gives the exact perception. It seems that the article let the readers to simply understand ?ganti-foreign investment?h policy results in the decreasing number, though the number itself came from Japanese Chamber of Commerce in Thailand in last November. We believe we have to have more precise information, explanation as to this.

According to Mr. Thamlong, the Vice President of BOI, there were several extra-large scaled projects in steel mills, transportation, auto-manufacturing, etc. in 2005 including the one by Toyota and the other by Honda. But the total sum applied to BOI?fs ?gTarget Industries?h , excluding such one-shot extra-large scaled projects, tends to continuously increase as 391bil. Bahts in 2004, 484bil. Bahts in 2005 and 514bil. Bahts in 2006.

For the exporters and / or manufacturers having operation in Thailand, it may be difficult to afford the sudden fluctuation of the exchange rate in short time. There might be no other choice but applying the reserve policy to protect the stability of the Baht at that time. It might be too easy for the outsiders to irresponsibly criticize by saying that the interest reduction policy should be taken instead. The adoption of the capital control policy could be considered as an appropriate resolution to prevent the aforementioned key drivers, the export and FDI, from falling into the worst situation. It can't be denied though that if communication with the market had been smoother, the adoption of such policy could probably been easier.

The mission left the Deputy Prime Minister?fs office with his enthusiastically smiling face and his warm farewell note. After that, the members had a meeting with Dr. Apichai and his staffs of EXIM Bank. In that meeting JTBF raised ; 1) Thailand could play a significant role in the Indochina countries due to its geographic advantage. Especially, the second Mae-Khong Bridge completed in 2006 with Japanese support will have a lot of significances for logistics system which tend to cause huge shift in the distributing system. Thai firms and / or Thai-Japanese JVs could provide capital investment support to the neighboring countries such as Laos, Cambodia, Vietnam and Myanmar. Also, EXIM Bank, in order to promote investments, could plan to deliver various financial services. 2) In Japan, over 7 million of baby boomers are reaching their retirement age. Many of them are pretty much interested in the long-stay program in Thailand. Thailand and Japan could jointly pursue such project.

As to the above, Dr. Apichai commented ; 1) No changes on FDI policy. And the reserve policy was the only choice to protect Thai export at that moment. The object of the amendment of FBA is simply to block the loopholes that have been used by the companies being in the restricted business sectors. 2) As to the Greater Mae-Khong project, Thailand plans to be actively supportive in capital investment towards the neighboring countries. At the moment, EXIM bank is working out to promote ?gInvestment Fair?h in the nearest future. 3) EXIM Bank is paying attention to those logistic of the region. Thailand is very much interested in any talk to strengthen such logistic sector. 4) In regard to the credit granting for direct investment in the neighboring countries, EXIM Bank plans to make a flexible judgment based upon the nature of the project, profiles of the company etc. It might surely be less strict than the Japanese banks. 5) Quite interested in the long-stay project and would appreciate to further proceed the matter with JTBF. (His message will be delivered to Mr. Katono, Chairman of JTBF Long-Stay Committee.)

It was truly nice to have been able to directly communicate with such respected and responsible executives to clarify and confirm various points to further strengthen relationship between Thailand and Japan. And JTBF mission recognizes that it is really necessary, by telling the real figure of the country, to fill the knowledge gap Japanese SMEs may fall into , as those SMEs often believe in the pessimistic medias and start feeling the uncertainty of Thailand.

During my stay in Bangkok, I had a chance to have a lunch with a businesswoman working for one of the Japanese manufacturing companies in Thailand. She was really bright, and said ?gTerrorism, oh, that?fs not correct. It was just an action done by the crazy guys?h. Her words echoed to me again and again. What a difference with that sensational expressions of newspapers.

Reported by H. Motomura