The number of tourists arriving from East Asia dropped by 7.3 percent in the first two months of the year, compared to the same period in 2006, the Tourism Authority of Thailand (TAT) said.

"Sensitive Asian tourists, from Japan for example, have been scared away from Bangkok due to security concerns," said Pornthip Samerton, managing director of travel agent Destination Asia.

The TAT numbers showed a general drop-off in February among tourists from around the world, as overall arrivals fell six percent from January. Arrivals were still slightly up from the year before.

Pornthip said that many tourists may have reconsidered their travel plans following the deadly New Year's Eve bomb blasts in Bangkok that killed three and injured dozens.

Since then, several foreign embassies have upgraded their travel warnings for Bangkok, citing the threat of more blasts.

Meanwhile, a separatist insurgency in southern Thailand has sharply escalated, and the junta that took power in a coup last September has threatened to invoke a state of emergency in Bangkok over political protests.

"After the bombs, the political situation and the insurgency in the south have added to tourists' concerns. Meanwhile, changing regulations regarding foreign investments have had an impact on business arrivals," said TAT spokesman Chattan Kunjara na Ayudhya.

Foreign investment has dropped off since the Bangkok of Thailand imposed tough currency controls in December, and the government in January proposed tightening foreign business rules.

"Those factors led to a decline of arrivals, and those from Asia fell short of our targets," he told AFP.

Tourism is a key money spinner for Thailand, generating about six percent of gross domestic product.

Las Vegas-based tourism consultant Globalyis said that Thailand could still expect to see an 8.0 percent increase in overall arrivals this year to 14.9 million -- assuming there is no more political turmoil.

"Any further incident in the country's capital or another popular tourist destination could trigger panic and drive away many tourists who may be concerned for their safety," the consultancy said in a recent paper.

"Traditionally in the region, tourism revenues are directly correlated with political stability," Globalyis warned.

"Reduced foreign investment could see Thailand lose out on tourism development in the coming years in favor of its competitive neighbours in the region," it added.

Southeast Asia has seen increasing competition for tourist dollars, especially among Malaysia, Vietnam, Singapore and Hong Kong.

Tourism groups have also warned that Thailand could see its annual expected tourism earnings of 800 billion baht (22.85 billion dollars) slashed by 10 percent because of a proposal to tighten rules on alcohol sales.

The new bill, which is awaiting approval from the military-installed parliament, bans alcohol sales within 500 metres of schools, temples and government offices.

That would prevent many bars and restaurants from selling alcohol, which means tourists might spend less money or just pack up for a neighbouring country, the Federation of Thai Tourism Associations said.

Agence France-Presse