Thread: Japanese start looking elsewhere - Higher costs, strong baht taking their toll

Japanese start looking elsewhere

Higher costs, strong baht taking their toll

UMESH PANDEY
Japanese investors, the country's largest single group of investors, are looking at other destinations in the region as Thailand becomes less competitive amid rising costs and an appreciating currency, the Japan External Trade Organisation (Jetro) said yesterday.

''When we asked companies what their future plans were, a majority of the companies responded by saying that they would maintain their position as they were applying a wait-and-see approach,'' Jetro president Yoichi Kato said.

''Japanese companies are now looking for investment destinations such as Vietnam, China and India rather than focusing just on Thailand,'' he said in a clear reference to the shifting trend of companies to consider other countries due to the various negative factors affecting Thailand.

In a veiled reference to the ongoing political drift and strengthening Thai currency, Mr Kato said the stronger baht was taking a toll on Japanese companies that have used Thailand as a manufacturing hub.

''If there was a government through elections as has been promised by the incumbent government, it would send a positive signal to the investment community, as has been evidenced by the sharp increase in the capital markets over the past few days after the government reaffirmed that elections would be held by this year-end,'' he said.

''Japanese companies would like to see the currency hover around 37.25 baht to a dollar although they have budgeted 35.85 in their books,'' Mr Kato said, adding that with the currency at 34.50 to a dollar the companies were under constant strain.

''If it continues this way then companies would need to move to the value-added segment to make higher returns rather than rely on lower cost as a tool to remain competitive,'' he said.

The twice-yearly Jetro survey, conducted from April 27 to May 23, found that the baht's appreciation was the top concern for Japanese companies in Thailand, followed by political instability, economic policies and increasing labour costs.

The survey showed that 64% of respondents thought currency was the key concern, followed by 44% who cited political stability, 43% current economic policies and 40% rising labour costs.

Japanese investors, who account for close to 50% of foreign direct investment (FDI) into the country, have remained sceptical about the country's policies. Changes to the Foreign Business Act spooked many companies that have invested in the country over the past few decades.

Mr Kato said that Jetro's survey of 351 Japanese companies in Thailand showed for the first time in nine years that investment sentiment here had declined.

''This is the first time we are witnessing such a trend,'' he said, adding that close to 58% of respondents said they would maintain their positions and only 17% would expand.

Mr Kato added that most investors were concerned about the foreign exchange fluctuation, while they also feared excessive competition, the continued rise in raw material prices and political instability.
All these factors, he said, had helped countries such as Vietnam, India and China become more attractive destinations for Japanese investment.

source: Bangkok Post 05.07.2007

Originally Posted by William

''Japanese companies would like to see the currency hover around 37.25 baht to a dollar although they have budgeted 35.85 in their books,'' Mr Kato said, adding that with the currency at 34.50 to a dollar the companies were under constant strain.

I wonder what their books will look like when the baht hits 30 to the US$?

The Japanese are actually the main driving force behind the THB appreciation. Not sure why it took them so long to realize what was happening. If you invest massively in a country, you are going to jack up the currency and that's a built-in "penalty" for your investment.

When done with one country, go to the next etc...

Against this backdrop, I still do not see how Thailand will be able to meet the skilled & professional needs of Japanese companies.

With ever-increasing visa difficulties, the entry of Japanese long-term skilled & professionals will decline. Where will Thailand find suitably-skilled local staff? From my experience, they simply do not, in general, exist. Precision & attention to detail are not typical Thai traits, no matter how highly qualified the individual.

Originally Posted by buad hai

I wonder what their books will look like when the baht hits 30 to the US$?

the books will look the same but the directors shorts will turn brown.

^ You paint a pretty gloomy picture.........it aint all doom and gloom out there and things will change. The education system here does not inspire the kind of thinking that technical fields like engineering requires. To simply say that they will fail in the technology arena is quite wrong IMHO.

Originally Posted by watterinja

The general Asian mind is good at copying existing technology (even Japan), but very poor at creating new technology

I dont think companies look to Thailand with their creative problems in mind. Mostly they are here for cheap labour and seem to look for assembly and low skilled production workers.

^ That's correct.

The survey showed that 64% of respondents thought currency was the key concern, followed by 44% who cited political stability, 43% current economic policies and 40% rising labour costs.

Herein lies the rub.

Meanwhile Singapore is thriving. The city has a vibrant expat community (the brains as they call it here), hot women, great food, and handsome entertainment. Just bring your Thai whores there and you are set. Getting a VISA to Singapore has never been easier, if you have something to bring of course.

Thailand always been a shithole, great for whoring and backpacking. They could never pass that stage and they are alienating themselves everytime they get a chance.

The strong THB is not helping.

Originally Posted by Butterfly

Meanwhile Singapore is thriving. The city has a vibrant expat community (the brains as they call it here), hot women, great food, and handsome entertainment. Just bring your Thai whores there and you are set. Getting a VISA to Singapore has never been easier, if you have something to bring of course.

Thailand always been a shithole, great for whoring and backpacking. They could never pass that stage and they are alienating themselves everytime they get a chance.

The strong THB is not helping.

spot on Butty,
maybe somchai ain't the gift from gawd he always thought he was ... feck'im

Originally Posted by watterinja

40% rising labour costs.

Lets take the average Honda factory worker, what are they earning?

8000 baht per month?

The same factory worker would be paid about 110,000 baht in Europe.

Labour costs here are a joke, they are nothing.

Even if labour costs here went up 100% it would not hurt these companies.

^ Labour costs are relative to the local cost of living. If they went up 100%, it would shut down most Thai-Chinese manufacturing companies overnight. Perhaps not so much from a profitability make-break point of view, but the Thai-Chinese overlords would just shut shop in principle & take their loot back to China.

I also believe that each worker should earn a living wage & in proportion to his/her input. The problems here is that there are so few technical types that are really worthy of a high salary. Perhaps many are under-privileged in that they've never had decent opportunities? Others are perhaps a little too laid back.

I try to give emergent technical types an opportunity to learn - some take up on it, others duck & dive, others don't bother. My policy is to train them to be able to find a good position anywhere in Thailand, or abroad. Ironically, I have lost a few good ones who learned enough to bargain for better wages with their Thai-Chinese overlords - who turned them down. They ended up working for the opposition. Good for Thailand - bad for the local overlords.

The real success rate for techno-types is very, very low in Thailand.

Originally Posted by buad hai

Originally Posted by William

''Japanese companies would like to see the currency hover around 37.25 baht to a dollar although they have budgeted 35.85 in their books,'' Mr Kato said, adding that with the currency at 34.50 to a dollar the companies were under constant strain.

I wonder what their books will look like when the baht hits 30 to the US$?

By then they will pulled out of LOS and gone to Viet Nam.
The writing is on the wall and no one here is reading it. by the time they figure out what is happening it will be to late for Thailand.

Originally Posted by Spin

Originally Posted by watterinja

40% rising labour costs.

Lets take the average Honda factory worker, what are they earning?

8000 baht per month?

The same factory worker would be paid about 110,000 baht in Europe.

Labour costs here are a joke, they are nothing.

Even if labour costs here went up 100% it would not hurt these companies.

The bottom line is the almighty Dollar

Have to agree with Watterninja.
Been employed as an expat in high tech industry here for over 15 years.
No incentive to be a doer or brainstormer, as the GM will steal the idea, no incentive to bend your back, as they will leave you on a pile of rubbish if you inhure yourself.
I would not work any harder than any Thai for what they get paid, I have tried to get pay increases for intelligent and hard workers, only to see them abuse the promation and back slide.
No simple answers, but to rid the country of the "experts" will hurt them dearly.
I often see a whole department formed to take the place of one expat, and it still cannot maintain a solid output of work.
Also they are totally brain dead when it comes to working out a problem, unless they have been shown the exact same problem solving process.

Anyone tried to so a Thai tradesman a better way of doing something?
Forget it, once they learn a method, they will not change ever.

Originally Posted by Ban Saray

I often see a whole department formed to take the place of one expat, and it still cannot maintain a solid output of work.

I've estimated the falang support ratio in excess of at least 10 Thais to one falang. Between a Japanese colleague & myself we carry around 20 direct Thais & another 100 odd, especially as new products are finding companies.

The interesting thing is that most of this new work seems to have come when visiting foreign companies spot the rare western/japanese face in the group. In all, a group of over 10,000 employees has at most 4 foreign advisers - one of whom is part-time. The foreign advisers have no authority & can only advise.

One large automotive concern asked the following issue when reviewing the design process: "What happens when you leave?" How do you answer that?

Also they are totally brain dead when it comes to working out a problem, unless they have been shown the exact same problem solving process.

This shows their utter lack of creative thinking skills. Following a pre-determined path which has been developed by a falang, is not creative. I've begun to find it ridiculous, but, until a decent offshore assignment comes up, I'm biding my time, making far more from offshore consulting.

I try & get them to think out-of-the-box, but, in general, it is totally impossible. The Japanese have seemingly tried to understand the Thai way of thinking (Jetro have visited a number of times), but, in many places, I think they've begun to give up.

Look at what they have done to Internet in this country, ADSL,,SAT,, What ever you have in mind, they can buy the equipment, same stuff that is used the world over and most places charge $25 or so dollars a month, and you get 300 KB/sec download,, here I pay $40 and just did a 4.80 KB download and averaged 9.0 KB/sec.

This place does not have one craftsman in 1000 workers and never will have because they are unteachable and unlearnable..

I have came here for many years and the only improvement I can see since 1965 is in the quality of the way the whores dress.

Originally Posted by blackgang

This place does not have one craftsman in 1000 workers and never will have because they are unteachable and unlearnable..

This is a profound truth - I concur completely. It's like the ears block, the eyes glaze & zip goes into the cranial cavity - like someone turned off the 'on' button.

Originally Posted by Ban Saray

Also they are totally brain dead when it comes to working out a problem, unless they have been shown the exact same problem solving process

Yeah, I hate that. It's like you have to explain them very basic problem solving skills. There is a turd on the road, what do you do ? step on it or go around it ? no answer, blank stare. Hopeless.

Originally Posted by blackgang

I have came here for many years and the only improvement I can see since 1965 is in the quality of the way the whores dress.

LOL. Good one and so true. The city is a fucking dump, they are 40 years behind for that level of opportunities they had in the past. And yet, it's a third world country. At least Vietnam has an excuse for being third world. What is Thailand excuse ?

^or, alternatively, your explanation was crap

If Thai society has any fault, it is two-fold: on the one hand, I genuinely believe there is a certain conscious movement not to educate people, for fear they make ask questions. On the other hand, [and this may be changing] Thailand is not built on a meritocracy. Being the best at something doesn't guarantee you anything. It is a society where you fill dead men's shoes. And if you want to make sure you have a chance of filling the dead men's shoes, best not ask too many questions, and thus we return, on this wonderful merry-go-round, to problem 1.

It is why (a) no Thai driver can ever fucking work out how to drive round a roundabout; and (b) almost all Thai workers who are able to think outside of the box (and, I have met some) don't live in Thailand (esp. if they are under 40 years of age).

That said, I have met some very clever Thai lawyers. Problem is, lawyers create fuck all. If anything, we destroy.

My 2 cents worth.

~W~