Published on November 1, 2007
The Japan-Thailand Economic Partnership Agreement (Jtepa), which comes into effect today, will greatly expand trade and investment between the two countries, both of which have a strategic interest to team up economically to fully exploit opportunities presented by globalisation. Japan has always been the biggest foreign investor in this country and the Jtepa is the most comprehensive among Japan's four Asian free-trade agreement (FTA) partners. Thailand needs this agreement as much as Japan does because the strategic economic interests of both countries have been so intertwined as to be inseparable.
Privileges under Jtepa to be enjoyed by Thai exporters include immediate tariff elimination for chilled, frozen or preserved shrimps and prawns, tropical fruits, textiles and apparel, petroleum and petrochemical products, plastics and jewellery. Already Thai exporters have expressed overwhelming interest in exploiting the new opportunities that will present themselves under the agreement, according to the Foreign Trade Department. Indeed the department says it has received many more applications for rule-of-origin certification for exporting to Japan, which is Thailand's second-biggest export market after the United States. The Commerce Ministry expects exports to Japan to grow by 12 per cent to US$19.3 billion next year as the result of the Jtepa implementation.
The bilateral trade pact will also enhance Thailand's position as a regional hub for the Japanese investment network in the Southeast Asian region, especially in the automotive sector. The agreement is expected to open the door to a new wave of Japanese investors who want to take advantage of privileges in terms of facilitation of bilateral trade. We can expect to see more direct investment by Japan's medium-sized enterprises or joint ventures between Thai and Japanese companies. That will improve Thailand's competitive edge because such investments and joint ventures will lead to technological transfer that help Thai entrepreneurs upgrade their manufacturing processes.
But there will have to be give and take. The Customs Department has already issued an announcement to put into effect zero import tariffs on targeted goods totalling 40 per cent of product lists under Jtepa. These apply to Japanese goods including apples, peaches, pears, prunes, chemicals, textiles and garments, hot-rolled steel, passenger buses, golf carts, ambulances and bicycles. Additionally, the agreement also provides for the facilitation of mutual recognition, the protection of intellectual property, the enhancement of cooperation in the field of government procurement and the promotion of fair business competition. As partners under the agreement, Thailand and Japan will be a good match because virtually none of their export products are similar in nature, nor do they compete directly against one another. Thailand imports from Japan are mostly high-value, high-technology products such as motor engines, electrical appliances and electronic equipment. Now it is up to the Thai private sector to make the best use of the trade agreement. Thai exporters should be able to compete more effectively to penetrate Japan's huge domestic market, while Thai entrepreneurs must seize the opportunity to link up with Japanese investors in joint ventures or as partners.
The interim Surayud government did the right thing to go ahead with the signing and implementation of the Jtepa rather than deferring the decision to the next democratically elected government.
Although the historic agreement was signed and implemented in the absence of an elected Parliament to scrutinise and ratify it, careful cost-benefit analysis has been conducted and there is overwhelming evidence to show that potential advantages far outweigh possible drawbacks. Besides, Thailand badly needs to win back the confidence of foreign investors who were upset by the September 19, 2006 military coup that toppled the Thaksin Shinawtra government.
Many foreign investors were also taken aback by certain policies of the interim government that were widely misconstrued as anti-foreign or unfriendly to investors, like the strict capital-control measures and the stiffening of the enforcement of the Foreign Business Act. The implementation of the Jtepa sends a clear message that Thailand, which will revert to full democracy after the December 23 general election, is set to improve the foreign investment climate and to fully re-engage and compete in the global economy.