Japanese investors recently downgraded Thailand in terms of investment confidence, placing it in the same league as the Philippines and Indonesia, due largely to the persistent political upheaval that has affected their investment decisions, caretaker Deputy Prime Minister Somkid Jatusripitak was told yesterday.

Following a meeting with top executives of the Japan External Trade Organisation (Jetro), Somkid said they had informed him Japanese investors used to rank Thailand in the top league along with Singapore. But now the country's rating has dropped to about what it was in 1997 during the financial crisis.

While Japanese confidence in 1997 declined because of economic turmoil, this time it is being eroded by the prolonged political situation in the Kingdom.

Diminishing Japanese confidence was highlighted in the latest Japanese Chamber of Commerce in Thailand survey, which showed political instability rising from No 18 on a list of concerns to No 6.

"Thailand's political disorder has become the main factor affecting Japanese investors' confidence," said Somkid.

"They [the Japanese] perceive Thailand as having returned to the category of TIP [Thailand-Indonesia-Philippines], which is of course not sound; this perception is based on feelings, not on facts. Thais must help each other, otherwise our image and the [foreign] confidence will return to what it was in the past," Somkid said after meeting with the new Jetro president in Thailand, whose name the Jetro office requested be withheld until the official announcement.

The Japanese Chamber of Commerce in Thailand conducted the quarterly survey in May and June, in which Japanese investors anticipated better business sentiment in the second half of the year. However, the recent political crisis was listed as a major worry.

Somkid said he tried to explain to his Japanese counterpart that Thailand's situation remained under control, telling him the problem would soon be solved. He said the new election would help eliminate the problem completely.

Thailand has been one of the most active investment destinations for Japanese, who used to rank the Kingdom at the top of their favourites list, on a par with Singapore and ahead of Malaysia.

"It should not be possible for Thailand's ranking to fall. We must increase foreign investors' confidence," he said.

However, Japanese investors now rank the country lower than both Singapore and Malaysia, thanks to the domestic political crisis.

That crisis began in February, when Prime Minister Thaksin Shinawatra dissolved the House. Although the Thai Rak Thai Party won the April 2 general election, a court annulled the results, citing irregular activities involved in the poll. So far, it is not clear when a new election will be held.

Somkid earlier this week voiced his own concerns that Thailand had lost its attractiveness with American investors, citing the recent decision by Seagate Technology, the world's largest maker of hard-disk drives, to expand its facilities in Malaysia instead of in Thailand.

Somkid, who also chairs the Board of Investment, said Thailand had been short-listed for expansion by Seagate, but Malaysia simply offered better incentives - plus Thailand's prolonged political quagmire also scared the company away.

Caretaker Finance Minister Thanong Bidaya conceded that Japanese investors were worried about the political situation here. As for Seagate's decision, Thanong said the issue was a topic at this week's Tuesday Cabinet meeting.

"It was clear that Seagate moved to Malaysia because we lacked qualified human resources," he said.

Petchanet Pratruangkrai

 The Nation