Striving to become “Asia’s Detroit,” Thailand is calling on Japanese automakers to build hybrids and other fuel-efficient cars there, but political uncertainties are causing concern in the industry.
Bangkok is sweetening the deal by offering tax breaks to automakers which set up plants to make environmentally friendly vehicles.
Japanese manufacturers have adopted a wait-and-see attitude, worried about where Thailand may be headed. In September, a bloodless coup brought down the government of Prime Minister Thaksin Shinawatra, who is accused of corruption and abuse of power.
The carmakers are apparently holding back to see whether Thailand stabilizes or descends into turmoil, although the military takeover appears to have restored calm for now.
Deputy Prime Minister Kosit Panpiamrat traveled to Tokyo to attend an event sponsored by Thai authorities on Nov. 30 aimed at drumming up more direct investment.
“We will continue to invite foreign investment so that our country will host production facilities of manufacturers” from all over the world, Kosit said.
The centerpiece of Thailand’s investment drive is a project to promote the production of environmentally friendly cars.
Under the program, overseas manufacturers will be eligible for a package of tax breaks, including abatement of levies on fixed assets for automakers that within five years begin production of at least 100,000 cars annually with a fuel efficiency of 20 km per liter or higher. Such cars should be able to meet the tougher emissions standards planned by European countries.
Satit Chanjavanakul, secretary general of the Thailand Board of Investment, appeared satisfied with the campaign in Japan, saying, “We talked to representatives from various Japanese manufacturers and they were quite interested in what we had to say.”
Several carmakers, including Toyota Motor Corp. and Honda Motor Co., already have a considerable presence in Thailand. Japanese makes account for more than 70 percent of the roughly 700,000 vehicles built there every year.
Because wages are relatively low, some companies engage in integrated production, building cars from scratch. Toyota, for example, exports pickup trucks built in Thailand to Europe, the Middle East and Africa. Mitsubishi Motors Corp. exports its Thai output to Europe.
Environmentally friendly cars have become popular in the United States and elsewhere due to soaring gasoline prices and tighter environmental regulations.
“We believe that we will become more competitive in overseas markets by producing cars in Thailand rather than Japan if the Thai government grants us tax breaks,” said an official at one of the major automakers.
Questions remain, however, about the new Thai government’s commitment to market principles. Thaksin’s government drew a lot of fire, with opinion leaders criticizing it for giving free rein to market forces and causing suffering among ordinary people. This has given rise to fears in the United States and Europe that Thailand may radically shift economic policy in a way that harms their investments.
In an effort to dispel such concerns, Surayud Chulanon, the new prime minister who was appointed to succeed Thaksin, has stressed that his government is fully aware of the importance of economic growth. “But we should not pursue it at the expense of people’s lives or the environment,” he added.
Prospective foreign investors are still hesitant because the current government is provisional; there is no guarantee that the one that replaces it after elections in about a year will abide by democratic principles and not act arbitrarily.
“Thailand’s economic structure is unlikely to change in any major way,” said a senior executive at a Japanese carmaker. “But we want to wait awhile longer until we are sure that the political situation in Thailand will stabilize.”
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.