FTA with Japan seen as a threat to SMEs
The Nation, Bangkok
FTA with Japan seen as a threat to SMEs
By Petchanet Pratruangkrai
2 April 2007
The decision of the interim government to sign the Japan-Thailand Economic Partnership Agreement (Jtepa) spells doom for most small and medium-sized enterprises (SMEs), which have low competitiveness compared to Japanese high-technology industries, some key Thai industries say.
Businesses that will certainly be affected by the agreement are steel, automobiles and auto parts, while some businesses that hope to benefit from the pact may not gain as much as they expect, they warn.
The Jtepa signing ceremony is scheduled for tomorrow in Tokyo, but concerned private enterprises and non-governmental organisations have opposed the interim government’s signing of the deal. They call on the government to review details of the pact to ensure there are no negative outcomes.
However, the pact has been welcomed by many Thai industries, including textiles and garments, food, jewellery and agriculture. They said it would significantly increase exports to Japan, by an average of 25 per cent a year. In addition, the deal is expected to boost investment from Japan, which dropped from Bt61 billion in 2001 to Bt25 billion in 2005.
Korrakod Padungjitt, a member of the Iron and Steel Industries Club of the Federation of Thai Industries, said that Thai steel-manufacturers would be critically affected by the pact, due mainly to Japan having higher technology to beat local industries.
The government will lose Bt20 billion a year in tax collected on steel imports from Japan, whereas SMEs will be unable to compete with a flood of Japanese steel, he said. Korrakod asked why Japanese would invest in Thailand as they had already achieved tariff reductions on many products under the agreement. He said Japanese steel, which was of higher quality, would overwhelm Thailand and destroy most SMEs in the steel industry.
The Thai steel industry has a total value about Bt200 billion. Only 30 per cent of the industry, large companies that have joint-venture businesses with Japan, will survive, Korrakod said.
He noted that many industries in Thailand that expected to benefit from the agreement might be disappointed.
Although Japan will provide tariff deductions for Thai products, such as agricultural goods, it will also have the authority to exclude certain products from the agreement. It also has the authority to apply quota limits on products from Thailand. Japan will also restrict its technology transfer to Japan-Thailand joint-venture companies.
"The government should delay the decision so as to ensure that Thai enterprises gain real benefits from the pact," he said, adding that government officials had not revealed details of the agreement to many SMEs and the public.
Only large Thai manufacturers which will benefit from the pact have had a chance to listen to the government explanation, Korrakod added.
Samart Deebhijarn, director of the Thai Auto Part Manufacturers’ Association, said the government should delay signing the agreement for another six months to one year.
He said Thai auto-parts industries had low technology compared to Japan, despite the presence of many Japanese joint ventures and supplier companies.
About 90 per cent of Thai auto-parts manufacturers will not be able to compete with Japanese parts, as the tariff reduction will take effect only on parts for autos larger than 3,000cc, he said.
To ensure businesses survive during the adjustment period, Samart called on the government to give more information to manufacturers, most of whom would be affected by the agreement.
At this stage 520 Thai manufacturers are members of the association, but outside the association remain 2,000 SMEs that lack information about the Jtepa.
Exports of Thai auto parts are forecast to grow at 12-15 per cent this year, to Bt400 billion. The figure is lower than the Export Promotion Department’s target of 20- to 30-per-cent growth, mainly due to the appreciation of the baht.
Chookiat Ophaswongse, president of the Rice Exporters’ Association, said that although some Thai industries would benefit from the agreement, agricultural products would not gain much.
Thai rice is excluded from the Jtepa as it is on Japan’s list of sensitive products. Japan imports only a small amount of Thai rice under the World Trade Organisation agreement.
Rice is Thailand’s major agricultural export. Chookiat said the government should sign the agreement only after serious consideration as long as the economy depended on exports.
