Hiroyuki Ishige, Chairman and CEO, Japan External Trade Organisation : Interview

Interview : Hiroyuki Ishige

How can Japan capitalise on strong bilateral ties with Thailand to create business opportunities?

Hiroyuki Ishige In 2017 we celebrated the 130th year of diplomatic relations between Thailand and Japan, and Thailand has been a major investment destination over the years; at the end of 2016 foreign direct investment (FDI) stock from Japan reached $71.5bn, which accounts for 40% of foreign investment in Thailand.

Many Japanese-affiliated companies in Thailand have jurisdiction over operations throughout the Greater Mekong Subregion, specifically in Cambodia, Laos and Myanmar. Japanese firms also tend to see the future marketability of Vietnam and the other countries as promising. In this regard, we appreciate the efforts Thailand has made to improve connectivity in the region.

In terms of hard infrastructure, the development of the Eastern Economic Corridor (EEC) is set to improve access to Cambodia and Vietnam. Meanwhile, soft infrastructure incentives have been introduced for companies using Thailand as a business centre, such as the International Headquarters and International Trading Centre introduced in 2015. So far, measures introduced by the Thai government and the investment behaviour of Japanese companies have been in sync.

What role do you see Thailand and the EEC playing in regional supply chains for Japanese businesses?

ISHIGE: Thailand has been the centre of supply chains in ASEAN, particularly in the automobile industry. Furthermore, there are industry fields, such as hard disk drive manufacturing, that form the core of global supply chains. To expand regional supply chains, I believe simultaneous efforts have to be made in increasing the operational capacity utilisation of factories. By that, firms are encouraged to divide production between countries again. Furthermore, domestic industrial facilities need upgrading, and an advanced infrastructure and regulatory framework is required to establish flexible supply chains between Thailand and neighbouring countries. The development of the EEC highlights Thailand’s advantages, and will help advance its infrastructure and regulatory framework, especially in terms of its connection to the Southern Economic Corridor.

In what ways can Thailand improve its attractiveness for FDI in priority industries?

ISHIGE: While the amount of direct investment from Japan to Thailand in 2017 was high, 2012 remains the peak year for this investment. Given Japanese companies’ recent reluctance to invest overseas, it is vital to continuously deliver a clear and strong message to boost investor confidence. For Thailand, the most important message would be consistent government policies targeting industrial sophistication, as well as in-depth administrative support, including deregulation and various incentives. Thailand should clarify the cost of doing business under the current policies so foreign firms can predict and adjust their processes accordingly.

How can Thailand benefit from Japan’s advanced technologies to enhance its industrial output?

ISHIGE: Thailand is aiming to become a developed country with its 20-year National Strategy (2017-36) by modernising its industries under Thailand 4.0, which includes efforts to nurture start-ups and draw direct investment to targeted industries with the aim of creating new industrial innovations. Where Japan could contribute would be in making existing industries in Thailand more sophisticated through its position as the largest contributor to domestic supply chains.

Nurturing the development of micro-, small and medium-sized enterprises (MSMEs) is also critical to upgrading industries. Digital literacy skills are necessary for this innovation era, and efforts to match MSMEs with advanced technologies should be further strengthened. Japanese companies are considering increasing local procurement ratios to reduce costs and lead time, and they are working with local companies to do so.