Thailand+1 business model a major step forward


The economic minister of the Japanese Embassy said at a seminar held in Bangkok and organised by the Board of Investment that the National Council for Peace and Order, given their drive to improve the Thai economy, will be pleased that there are many positive signs in consumer confidence amid a revival of interest of foreign investors. The Thailand+1 model Japanese investors was recommended is aimed at increasing Thailand’s foreign investment.

Thailand+1 is a business model in which Japanese companies operating in the industrial sector can transfer labour-intensive divisions of their production to special economic zones to Myanmar, Cambodia and Laos near to Thailand’s borders. Both Thailand and its neighbours would benefit from such an arrangement.

Statistics show that the Japanese remain the biggest foreign investors in the country and a survey found that over 70 per cent of japanese companies based in Thailand were worried about rising labour costs. Thai and Japanese governments discussed the direction of Thailand+1and reasoned that Thailand would have more high-tech companies coming into the country and could therefore offer lower wages be able to develop links with major production bases.

The secretary-general of Thailand’s BoI said the extension of parts and raw materials sourcing to neighbouring countries under the Thailand+1 strategy would help strengthen the competitiveness of Thailand’s industrial sector and that these countries offered many similarities, such as culture and religion, while their consumers were already familiar with Thai products.

Bangkok has already exceeded Tokyo in shops per population and the consumer confidence index, after plunging to a 12-year low last month, but has since recovered. The vice-president of CP Group said business confidence was returning and it was expected that US and EU reactions would be positive. He also noted that Thailand was a crucial link in the Japanese automotive supply chain.

World Bank estimates are that Thai economic growth will be 2.5% this year and 4.5% the next but the Bank of Thailand predicts even higher levels of 3.4% and 5.5%. With an ageing population, Thailand must increase its research and development and spend at least a quarter of a per cent of gross domestic product to maintain its strength.

With the minimum wage raised, Thailand will be unable to secure its labour forces if it remains at the current rate of productivity. There is still a long way to go to realise the economic integration initiative of using neighbouring countries in this manner, including customs regulations and logistics obstacles, but despite the economic ideas presented, there is a need for special economic zones, which could work well with the economic integration of Asean at the end of next year.