Thai coup puts FTA, investment in doubt
Japan Times, Tokyo
Thai coup puts FTA, investment in doubt
Big business waits as Tokyo frets future of trade deal with Shinawatra
22 September 2006
Tuesday’s bloodless coup in Thailand has left a free-trade agreement negotiated between Tokyo and Bangkok up in the air, a senior Japanese official said Thursday as businesses waited for the dust to settle.
Japan had planned to sign the pact soon after the Thai parliamentary elections in mid-October, but the coup has thrown it into doubt, Vice Economy, Trade and Industry Minister Takao Kitabata said at a news conference.
"Japan remains committed to promoting the agreement with Thailand, but the latest developments could have unforeseeable effects on the pact," he said.
The Thai military overthrew Prime Minister Thaksin Shinawatra on Tuesday while he was in the United States. No blood was shed.
Because Thaksin had taken the lead in brokering the FTA, it may be reviewed by the new government. Thailand is reportedly dissatisfied with Japan’s limited liberalization of farm imports under the pact.
Japan and Thailand began FTA talks in February 2004 and reached a framework on the deal in August 2005.
The document sealing the trade agreement, which is hundreds of pages long, was scheduled to be signed in April but postponed after the Thai prime minister was delayed by a scandal.
Thailand is Japan’s largest trading partner in the 10-country Association of Southeast Asian Nations.
The pact, which eliminates Japanese steel and auto parts tariffs, is expected to expand Japan’s exports to Thailand.
Japanese businesses, however, had no choice but to take a wait-and-see attitude on the economic impact of the coup.
Thailand has attracted strong amounts of foreign investment thanks to its political and social stability, but Tuesday’s coup, although reportedly backed by the majority of Thais, could spoil the environment and discourage new investment, analysts said.
Thailand is one of the world’s largest business centers for Japan, and some 3,600 Japanese companies operate there, according to the Japan External Trade Organization.
Japanese automakers have been looking to turn Thailand into a global export base under Shinawatra’s government. It was even being referred to as a "Detroit in Asia."
Despite the concern, Toyota Motor Corp. President Katsuaki Watanabe said Wednesday that more time is needed to assess the situation.
"We cannot figure out the effects (of the coup) unless we see how things go for a while," Watanabe said.
The political and social stability of Thailand is the biggest reason for active Japanese investment, according to a JETRO survey. The transparency of investment-related laws and improved infrastructure are among others.
