Thailand And Japan After The Economic Crisis Economics Essay

The relationship between Thailand and Japan were influenced from the get downing chiefly by considerations of trade, and this is still the outstanding characteristic. However, harmonizing to the globalisaton, concern dealingss and trade have expanded and have become progressively intermingled with political personal businesss, economic cooperation, and investing.


To analyze and analyze the advantage and disadvantage of JTEPA to Thailand.

To measure whether the cooperation between Thailand and Japan under the JTEPA model will supply and make common involvements and usher to the more mutualist dealingss.


Upon the vocalizing of the JTEPA, it seems to be that Thailand will closely dependent on Japan, which contradicts the Thai authorities ‘s outlook on JTEPA to be an effectual instrument to develop the unequal patterns and dealingss between the two states.

Research Questions

What are the character of Thai and Nipponese economic dealingss?

What does the Thai authorities expression frontward from JTEPA?

How does JTEPA lend to the change of dealingss between Thailand and Japan?


This research chiefly focuses on Thailand ‘s function and its positions on international policy and dealingss with Japan after the great economic crisis in 1997, peculiarly the instance of JTEPA. This survey will look at the economic dealingss between Thailand and Japan and seek to reply the inquiry of whether JTEPA would lend to the more dependent relationship between these two states.

Conceptual Model

In this research, Realism and Interdependence theories will be used as an international theory to reply the research inquiries and besides to clear up the Thailand and Japan in term of economic dealingss.


Realism, or classical pragmatism, is an attack of the survey and pattern of international dealingss. The nucleus of pragmatism is national and province endurance. As Han J. Morgenthau who was the prima realist mind of the 20th century, was stated that “ Politic is a battle for power over work forces. Power is its immediate end and the manners of geting, keeping, and showing in determines the technique of political action ” ( )

From this theory, the cardinal point of international policy is to protect and support the involvement of the state in the planetary political relations. This intent includes high political concerns of vouching province endurance. Security affairs, every bit good as the low political intents in such countries such as the chase of wealth and economic growing and power. In doing international policy, the governmental decision-makers evaluate each option, and choosing the 1 that maximizes advantage or minimise cost associated with achieving the intent sought.

At the present clip, Thailand is negociating FTA with several states. These FTAs will advantageous for Thailand in term of greater market entree in goods and services due to the decrease of trade barrier, increased investing chances in oversea markets and decreasing of concern costs originating from the dismantlement of duties and non-tariff barrier. JTEPA is a portion of Thai foreign policy toward the Nipponese authorities, particularly the economic system. The national involvement is the important portion in doing foreign policy of province. Thailand has achieved to maximise its national involvement in any state of affairs it faced. Nevertheless, in dialogue of JTEPA which was the economic cooperation that provided shared involvement, the Thai authorities selected the best option that takes advantage of its national involvement without interfering Nipponese involvements. Although, this understanding made shared involvement by heightening cooperation and cut downing the obstructions on trade for Thailand and Japan, it is leery whether both states are so rational in pattern.


Nowadays the universe has become mutualist in economic sciences, in communications and in human aspirations. Mutuality in the planetary political relations refers to state of affairss characterised by mutual effects among states or among histrions in different states. There are two different perceptual experiences that can be adopted for analyzing the costs and benefits of an interdependent relationship. The first perceptual experience focuses on the joint additions and joint loses to parties involved. The 2nd is comparative additions and distributional issue. It is of import to retrieve that mutuality by no agency implies equality. Such uneven dealingss are rather common in modern-day universe political relations, particularly between developed and less develop states. Mutuality may be extremely asymmetrical ; one histrion may depend on another can frequently utilize the interdependent relationship as a beginning of power in bargaining over an issue possibly to impact other issues.

Due to the geographical propinquity of Thailand and Japan, it would be good to develop an economic partnership between them. It will convey economic addition and prosperity to both states. Thailand is expected that JTEPA will beef up and better unjust dealingss between Thailand and Japan. Although Thailand needs equal intervention, it realises that symmetricalness mutuality is hardly possible. When dissymmetry is common in economic mutuality, the inquiry of how much is allowable in a relationship, it should decently be mutuality, instead than one manner dependance. The political relations of economic mutuality involves competition even when big net benefits can be expected from the cooperation.


The method to be applied in the class of making this research was chiefly a documental research. To carry on the research, content and statistic analysis were used. Content and statistic was collected from assorted beginnings to acquire the accurate information. They were used to analyze the alterations of economic dealingss between Thailand and Japan from JTEPA. The statistic of import, investing and ODA were used as a step to entree the grade of dependence between Thailand and Japan. Although dependance will non be eliminated instantly after subscribing the understanding, it should continually diminish. This research will analyze the changing of economic sciences crisis with the dealingss after sign language of the JTEPA.

Thailand and Japan: Post War dealingss

Thailand and Japan dealingss have involved several facets including political relations, economic system and civilization. During the postwar period, the political dealingss between them were non much mentioned since there were no serious struggles between them. Furthermore, during the Cold War both states had joined the free universe under the leading of the United States, and supported each other politically.

On the economic facets, Thailand has imported a big sum of Nipponese goods and services. Since Thailand had limited capital resources for national development, it had to import capital goods, particularly machinery, transit equipment, chemical, and other industrial stuffs from Japan. Difference in context of development degree, types of merchandise, and monetary value had generated a big trade shortage between Thailand and Japan in favour of the latter, during the 1960 ‘s. ( Dhiravagin, 1983 )

The said trade shortage les to the anti-Japanese motion in the 1970 ‘s harmonizing to the fact of Thai people were terrified of the Nipponese domination of their economic system. The anti Nipponese attitude did come out non merely in Thailand but besides in other states in Southeast Asia, including the Philippines and Indonesia. Therefore, the Fukada Doctrine was declared to develop the economic dealingss between Japan and Southeast Asiatic states, including Thailand. ( Sudo, 1988 ) However, this philosophy was likely to somewhat ease the labored state of affairs, the trade shortage between Thailand and Japan was still about US $ 2 billion or 15 per centum of the entire trade in 1979. ( Akrasanee, 1983 ) Afterward, the Thai authorities demanded for an tantamount intervention on trade by inquiring the Nipponese authorities to foremost open their market to the Thai merchandises ; secondly, to set up the export-oriented industries in Thailand ; and thirdly, to heighten the economic cooperation through more active transportations of engineering. ( Thai MOFA, 2010 ) In the White Paper on the restructuring of the Thai-Japanese economic dealingss, established in June 1985, the Thai authorities requested a reconsideration of the engineering-service conditions on the undertakings funded by the Nipponese authorities, the Oversea Economic Cooperation Fund ( OECF ) and Yen Loan, in order that the Thai contractors could hold more opportunity in command. ( Doner, 1991 ) However, the consequence of this dialogue was unsuccessful for the Thai authorities harmonizing to the Nipponese authorities did non warrant to make anything earnestly.

Thailand started to industrialize its economic system in 1950 ‘s. By ground of, the deficit of engineering and capital, the Thai authorities necessitated foreign direct investing ( FDI ) for its Thailand development undertakings. ( Ismail and Yussof, 2003 ) The Investment Promotion Act 1962 was established for FDI attractive force. Harmonizing to the rapid rise in the pay degree in Japan, labour demanding Nipponese house actively undertook FDI in Thailand and other states in Asiatic states. ( Wannitikul, 1996 ) As a consequence, the Nipponese investors have been one of the most of import direct investors of Thailand, peculiarly in the fabrication country. Importance Nipponese industries were fabrics, conveyance equipment, chemical merchandises, electrical contraptions and cars. Most of the Nipponese registered capital was in the signifier of the joint ventures ; merely 17 per centum of them were in the signifier of entirely owned Nipponese houses.

However, the relationship among staff in their joint ventures did non travel effortlessly. A figure of Thai spouses in the joint ventures complained about the involuntariness of Nipponese staff in the meddlesome technological know-how to the Thai staff. In some companies, the high degree engineering was realised merely among Nipponese technicians and applied scientists. The transportation of direction authorization was another trouble found in Thai-Japanese joint venture houses. The Nipponese head-quarter provide a batch of Nipponese staff to command the managerial places in affiliates, which truly prevented Thai staff from larning the direction know-how. As a consequence, several local spouses had non been able to make their ain concern even after several old ages of joint investing with Nipponese companies. ( Tho, 1991 )

For Official Development Assistance ( ODA ) , Thailand has considered Japan as one of the most important helpers. It had received a large sum of Nipponese ODA for its national development undertakings through several types including grant, loan, and proficient cooperation.

From 1961 to 1986, due to the five national economic and societal development programs, Thailand ‘s development scheme had focused on industrialization plans. Therefore, Thai authorities had to put up sufficient substructure to back up these plans. However, harmonizing to the budget restraint, it was required that Thai authorities had a loan of money from foreign beginnings. The entire abroad loan of Thai authorities during 1961-1986 amounted to 15,529 million dollars, of which 2,851 million dollars or 18.4 per centum came from Japan. ( Tinakorn and Siroros, 1991 ) Apart from bilateral loans, Thailand had besides received proficient aid and grant back uping from the Nipponese authorities. Japan ‘s hankerings loans were concentrated on substructure which was the foundation of industrialization while the grants went to agricultural, educational, scientific, technological, wellness, and community development.

Overall, it seems that Thailand was to a great extent dependent on Japan during the station war epoch. It was clearly seen that Thailand had faced the trade shortage jobs with Japan, it still imported Nipponese capital and industrial goods harmonizing to the demand for industrial development. At the same clip, Nipponese spouses did non carry through the Thai expectancy of technological transportation so Tai staffs must trust on Nipponese technicians in runing high engineering. In add-on, Thailand, at the same clip, still depended on both grants and loan of Nipponese ODA for its domestic development undertakings.

Thailand-Japan Post-Cold War Relations

In the first half of 1990s, trade between Thailand and Japan continued to increase. With the high rate of economic growing of Thailand, Japan was the largest provider of Thai imports and one of the top marks of Thai exports. Thailand imported capital and industrial merchandises from Japan. These types of merchandises were used for spread outing industrial ability and providing many export industries whereas Japan imported agricultural and consumer merchandises from Thailand. Changes have taken topographic point since the beginning of 1996 harmonizing to the economic recession. Thailand ‘s imports from Japan had been diminishing. ( National Statistical Office, 1992 ) The trade inequality between Thailand and Japan was going slighter. Nevertheless, trade between two states was increasing once more during the recovery of the Thai economic system. Regardless of the altering trade dealingss, trade shortage was still the chief job in the dealingss between Thailand and Japan.

Taking the investing portion into consideration, Thailand was a favourite mark of foreign direct investing harmonizing to its lower labour costs, sensible substructure and stable society, and when Japan faced another period of yen grasp that made the raised production costs. Nipponese investors started beef uping or spread outing their production bases in Thailand trough the production of back uping industries, including basic industries such as steel and petrochemicals. Thailand laid the foundations for its strong investing partnership with Japan. These farther strengthened economic ties between Thailand and Japan ( Japan External Trade Organisation, 2010 ) However, Nipponese investing declined during 1997 harmonizing to the unfavourable environment for foreign investing in Asia in 1997.

The engineering transportation continued to be the trouble of the Thai-Japanese joint ventures companies. On the Thai side, the lacking of engineering work force, peculiarly applied scientists and technicians, and the deficit of capableness to follow and use proficient knowhow and production engineering were the troubles of Nipponese engineering transportation. ( Prayoon, 1990 ) On the Nipponese side, the Nipponese manner of direction, characterized by intra-firm preparation and publicity, the senior status system, and lifetime employment ever consequences in a slow transportation of managerial stations from Nipponese to local staffs. ( Japan ‘s MOFA, 2010 )

With respect to Nipponese ODA, although the Thai economic system swimmingly and progressively grew in the first half of the 1900a, Thailand still obtained proficient aid from Japan of which the sum value amounted to 147.46 billion US dollars. In the 2nd half of the 1990s, Thailand faces a great economic crisis in 1997. ( Glassman, 2001 ) Then, in the thick of the economic crisis, Japan ‘s function as a protagonist was really of import for Thailand because it had provided more than 12.6 billion US dollars for both the fiscal and proficient assistance apart from the 4 billion US dollars in August 1997 under the IMF ‘s support bundle. ( Nipponese MOFA, 2010 )

Thailand had besides received a big sum of fiscal and proficient support from the Nipponese authorities to raise productiveness and fight in Thailand after the economic downswing in 1997. Another Nipponese ODA was the New Miyazawa Initiatives which amounted to 1.9 billion US dollars for forcing the Thai economic system out of the economic crisis.

All in all, since the post-Cold War, the dealingss between Thailand and Japan have improved in an optimistic way. Thailand and Japan have became a good spouses in the good and important minutes ; nevertheless, Thailand has went on confronting the trade shortage with Japan and has still depended on Japan both in term of investing and ODA. They have been important providers for each other. The foreign direct investing is indispensable for the Thai authorities to develop its economic system and society. Nipponese investings have completed some parts of the Thai domestic development programs. Japan was every bit good as an indispensable giver when Thailand in the economic recession. Nevertheless, the Thai authorities has made an effort to develop the dealingss from this to a great extent dependance on Japan to be more mutuality.

Thailand and JTEPA

In the last few decennaries, the planetary and regional context has become more complex, with rise of the People Republic of China and India, and the dislocation of the many-sided understanding on trade and investing under the World Trade Organisation ( WTO ) . Many states in the planetary community, including Thailand and Japan, have been utilizing trade understanding to better fight. Harmonizing to vie in the new type of planetary context and to retain their net incomes in the planetary market, both of Thailand and Japan had to make the strong and effectiveness economic links between the two states, which is suiting that the understanding between them is named the Japan-Thailand Economic Partnership Agreement or JTEPA.

During 1997-2010, in Thailand, there are six authoritiess regulating the state after the economic crisis in 1997. Although, each authorities had its ain economic policy, it is clearly that all of six authoritiess were focused on economic cooperation with other states, develop common involvement and avoided struggle among them. Thailand had completed FTA ( Free Trade Agreement ) with several states including China, Australia. Thailand is besides developing FTA with the indispensable trading states ; such as U.S.A. and Japan. Bing one of Thailand ‘s primary trading spouses, the Nipponese authorities ‘s effort to advance with EPA with Thailand will be advantageous to Thailand.

Thailand and Japan were negociating the Japan-Thailand Economic Partnership Agreement. This understanding did non concentrate merely on trade but besides other dimensions, including investing, labour, rational belongings rights and so on. It is expected that JTEPA would farther widen and intensify Thai-Japanese dealingss and jointly good cooperation by foreign closer economic dealingss, heightening a more favourable investing clime, and bring forthing greater concern chances through cooperation, liberalization and facilitation in trade and investing between the two states. It is besides considered that JTEPA will descry a new dimension for Thailand-Japan strategic partnership. ( Thai MOFA, 2010 )

In order to finish economic development and industrialization, Thailand severely requires foreign investing and engineering transportation to shore up its flagging economic system ( The Nations online, 2000 ) Japan is non merely an of import trading spouse but besides a cardinal investor and beginning of engineering for Thailand. The Tai authorities understands that the comparative disadvantage if it does non construct up and develop FTA with Japan. From the Thai authorities ‘s point of position, reasoning the free trade understanding with Japan may be one instrument to success the Thai economic development harmonizing to increasing trade value and foreign investing to Thailand. At the same clip, it could besides lend to beef up Thailand-Japan dealingss and better the cooperation between the two states. Since JTEPA will supply more chances for Thai goods and services to capture into the Nipponese market and engineering transportation from Japan, these will back up Thai industrialization and develop Thai capableness. ( Sriratanaban, 2004 )

From Japan ‘s point of position, Japan had realised about its deprived competition in this part as the market portion would be smaller after China concluded their free trade understanding with ASEAN states. ( ASEANWEB, 2010 ) Consequently, Japan was looking to put up and develop economic cooperation with its Asiatic neighbours by offering the Japan-ASEAN Economic Partnership to ASEAN members separately and multilaterally. ( Singh, 2002 ) Japan besides completed the Japan-Singapore Economic Partnership Agreement in 2002. Thailand was the 2nd state in Southeast Asia which Japan supposed to reason the economic understanding after Singapore. It is considered that JTEPA will back up with good conditions for Nipponese investing in Thailand and supply greater entree in Nipponese industrial goods, particularly automotive and steel industry, to Thai markets.

While Tai authorities considers that JTEPA will be advantageous to Thailand-Japan dealingss, particularly in the economic dimension, harmonizing to cut downing obstructions on trade and developing cooperation between them, the research worker does non believe that this understanding will be good to Thailand as it is expected, because of the ground that Thailand is a less developed state with economic position. This research will analyze whether JTEPA would do Thailand and Japan to be more mutualist or frailty versa.

The impact of JTEPA

During the dialogue of the JTEPA, there were several sensitive subjects going a affair of public concern. Harmonizing to Pasuk Phongpaichit ( 2007 ) , there are two points in the dialogue of the JTEPA which indicate what is the impact of this Agreement. In add-on, these cardinal points besides influence whether the JTEPA is later judged an accomplishment or letdown from the Thai position:

1. Procedure

2. Intellectual belongings


The first subject focused on the procedure of JTEPA ‘s dialogue. Bilateral dealingss in trade and investing understanding are created for portion involvements. ( Anderson, 2008 ) Consequently, it means that there is no 1 party able to obtain all of the net incomes and there is no 1 will bear all the loss. General speech production, in international trade understanding, the unfairness of power between the two states can reason the distribution of the additions. ( Phongpaichit, 2007 ) Up to this point, in the dialogue procedure, the accomplishment of the single negotiating parties is really necessary. Due to the procedure of dialogue is close and non-transparent, there ever misunderstand between what the negotiants think advantageous and what the public sentiment see good.

Up to this point, in Thailand, the dialogue ‘s procedure was condemned for the ground of deficient transparence. During the dialogue continued from 2004-2006, several important information was non review visibly available for Thai public sentiment. Sing to Thai jurisprudence, there was non duty for this Agreement to be discussed to Thai parliament. It was merely discussed and debated in the Legislative Assembly, where Tai legislators were given with small information of the Agreement. Furthermore, they had no power to justice and ballot anything on the item of the Agreement. On the other manus, in Japan side, the information on the item of JTEPA submitted through the Nipponese parliament and provided the item of the Agreement to the populace. While there was no public contention in Japan, there were issues left with intuition in Thai society. These left intuitions on the Agreement reflects the best involvement of Thailand, because there was no mechanism to vouch those involvement were suitably articulated and taken into history.

Intellectual belongings

Harmonizing to Thai protecting rational belongings jurisprudence, it is difficult to acquire rational belongings right upon a natural being. Furthermore, under the Agreement on trade-related facets of rational belongings right ( TRIPS ) , each province are authorised to protect themselves by such a jurisprudence. ( WTO, 2010 ) However, by a clause in the Article 130 of the JTEPA states that “ each party shall guarantee that any patent application shall non be rejected entirely on the evidences that the capable affair claimed in the application is related to a of course happening microorganism. ( ) When this issue of the Agreement was disclosed to the populace, this issues was questioned that why a clause on rational belongings rights appeared to give Japan with more advantages than those available in TRIPS. Up to this point, Phongpaichit besides adds in this point that Thailand provided Japan more benefits of rational belongings rights than Japan ‘s EPA was provided by Malaysia. ( 2007 )

In amount, given the strong and effectiveness economic links with Japan for the development of the Thai economic system, it can be said that it is indispensable for Thai economic system to reason an understanding with Japan, particularly in point of the parallel dialogue between the two states. However, sing to this Agreement, it seemed to be that Thailand has become more dependance with Japan. Becoming more dependance with Japan, it gives rise to fear that the weaker parties may be disadvantage in the dialogues.

Chapter 2

Literature Review

The literature and research that related to the Thailand and Japan economic dealingss subjects had focused on several facets, viz. trade, investing and aid. Those articles outlined the addition and loss that Thailand would obtain from the economic links between the two states, for illustration, Nipponese investing that helped Thai industrialization, trade shortage jobs, engineering transportation troubles, the development of resource etc. Some writers recommended a declaration to the jobs. After the economic crisis, the economic between the two states were deepened in position of the fact that Japan became the cardinal histrion to assist the Thai economic system from the economic arrested development. On the other manus, the aid of Japan in the revival period caused the dependent jobs between Thailand and Japan to be more obvious. As a consequence, the Thai authorities continued to better the economic policy which increase its national involvement and diminish economic jobs between two states.

This research surveies the Thai foreign policy towards Japan in the context of JTEPA, with the outlook that this understanding can be an of import factor to develop economic links and diminish economic jobs between them. Articles which relate to Thailand and Japan economic dealingss are reviewed as followers:

Sing to Japan was an of import trade and investing spouse since it resumed economic dealingss after the World War II, the Thai authorities focused on attending to better Thai foreign policy to cover with Japan, peculiarly economic dimension. Prapat Thepchatree, who wrote “ Thai-Japanese Economic Relations ” , analysed the Thai-Japanese economic dealingss after the World War II ( 2007 ) .For the trade, He outlined that the trade shortage between Thailand and Japan caused by the nature of trade of both states was on the same graduated table in which Thailand exported agricultural goods to Japan while the most of Nipponese exports to Thailand were capital and industrial goods. In add-on, the protectionism was the of import non-tariff barrier for Thai merchandise that reasoned the trade shortage jobs. For the investing, the writer pointed that although Nipponese investing played a critical function to develop Thai industrial, Nipponese investing caused several jobs such as engineering transportation. For ODA, he considered that the Nipponese ODA did non suit with Thailand ‘s demand, accordingly, the Thai jobs were non solved by ODA. Sing to his survey, the economic dealingss tendency between Thailand and Japan would be closer and as a consequence trade, investing and cooperation would be increased.

Sing to Theerawongseri ( 1990 ) , Although Japan was a cardinal factor in the Thai economic system, there were the economic jobs between the two states. It was evidently that Thailand ‘s economic dependance rooted from the structural instability of this economic nexus. The Tai authorities hoped that the White Paper that proposed to redistribute the Thai-Japanese economic relationship would be proper the inequality jobs. ( Trinidad, 2007 ) Under the White Paper, both of the two states required to reconstitute its economic construction in the face of the quickly altering planetary economic context. Consequently, Thailand needed to pay more attending to heighten its agro-industrial goods to be value-added trade goods. Furthermore, Thailand should maintain the cooperation with the Nipponese public and private house to make the common involvement and aspiration for the peace, stableness, and wellbeing of the dealingss between the two states. ( Theerawongseri, 1990 )

For the investing issue, Johzen Takeuchi ( 1991 ) outlined the engineering transportation between Thailand and Japan in “ Technology Tranfer and Japan-Thai Relations ” . Takeuchi ( 1991 ) analysed that Thailand and Japan were misdirecting in a engineering transportation construct and procedure. Up to this point, Thailand realised that the engineering transportation was “ a piece of luggage with a package of enchiridion manuals ” ( Takeuchi, 1991 ) while most of Nipponese industry considered the construct of engineering as intending accumulative and dynamic procedure. Due to Thailand was an agricultural based state and its economic was condemned as undeveloped ( Limskul, 2004 ) , this factor was partially responsible for the deficiency of inadequate of assorted accomplishments which was necessitated in the industrial issue. Therefore, Japan did non reassign high engineering to Thailand but Thailand did non understand this point. Harmonizing to the survey of Takeuchi ( 1991 ) , there are four chief grounds that Thailand criticised in the issue of Nipponese reluctance to reassign the latest engineering and the research and development ( R & A ; D ) subdivisions:

1. The graduated table of Nipponese houses was smaller than the European and American Firms, peculiarly in footings of employment, Therefore, Japan did non hold adequate good effects on employment creative activity.

2. Nipponese signifiers were uninterested to following local stuffs and intermediate goods, and their concern activities did non advantage on national industrial sector.

3. Nipponese house did non export their merchandises, which showed that they transferred out of day of the month production systems that lack the potency to derive fight in international market.

4. Nipponese houses did non indicate out the complete enchiridion manual for operation and direction.

Furthermore, the writer ( Takeuchi, 1991 ) besides recommended that it would be utile that both of Thailand and Japan to roll up more information every bit good as make more instance surveies to heighten the sympathetic in order to cut down the perceptual experience spread.

Shiowattana ( 1990 ) besides studied in the issue of engineering transportation between Thailand and Japan but in other context. Harmonizing to her survey, the importance of presenting new of engineering was non the cardinal factor taking to successful industrialisation, but the capableness to larn and better the acquired engineering was much of import in order to guarantee healthy industrial development. Shiowattana ( 1990 ) pointed that the cause of the job was that Thailand lacked the ability in engineering reproduction. Therefore, the Thai authorities became more cognizant of the necessity to advance and beef up the technological capablenesss of industry. On Japan ‘s side, the engineering transportation was determined by the policy of Nipponese MNCs. In add-on, the writer outlined that the Nipponese joint venture had successful records in engineering transportation. As Japan want for ruling as a self-contained web in the Thai economic system, it realised that technological strength was a dynamic force, accordingly, pressing for farther growing of its economic abilities in Thailand.

Xiaodong ( 1994 ) analysed the consequence of Nipponese Investment in Thailand since 1986 in “ What Thailand has gained and lost from Nipponese investing ” . The writer mentioned that Nipponese Direct Investment ( JDI ) after 1986 was a important event which changed the state of affairs in the Thai economic system. Acording to Xioadong ‘s survey, this survey paid much attending on the issue of parts and struggles in the JDI ‘s procedure towards to the Thai economic system. For the part, JDI stimulated economic growing and industrialization in Thailand. For illustration, one fifth of JDI flew into the Thai fabrication export sector, this stimulated Thai exports and supported the promotion of the export construction of Thailand. ( Julian, 2001 ) On the other manus, JDI besides made jobs to Thailand such as the over industrialization and urbanization, big trade shortage, low quality of engineering transportation. ( Julian, 2001 and Hussey, 1993 ) Due to there were many flews of JDI to Thailand, Xiaodong ( 1994 ) studied about how Thailand could pull off to incorporate JDI into the Thai economic system more aptly and lessen the job. Consequently, he pointed out that the Thai authorities should pull JDI in to Agro-industry and the service sector. Although JDI played as an of import function in Thai industry, the Thai authorities should non anticipate much on engineering transportation and should happen other beginning of capital with the intent of decrease overdependence on JDI.

In the issue of the development of Thai agricultural merchandises to run into Nipponese criterions, the article of Cost of conformity on nutrient safety ordinance: instance of Thailand ‘s Mangifera indica exporting to Japan was researched by Phanit Chairungrojbanya. ( 2006 ) Chairungrojbanya ( 2006 ) studied the cultivation of Mangifera indica for export, Thai Mangifera indica ‘s export market and the nutrient safety step of both Thailand and Japan. Furthermore, the writer besides researched the cost of conformity on nutrient safety direction that export to Japan, from the husbandman and the export sector. She hold the position that the cost of conformity on Japan nutrient safety ordinance divided into three parts, which are the bar costs, the assessment, and the failure cost. The nutrient safety step between the two states were non much different but Nipponese step was stricter that Thailand, peculiarly the chemical taint. Although the conformity on nutrient safety raised the cost of Thai ‘s Mangifera indica ‘s export but the Thai husbandmans were willing to make it because they could export them at a sensible monetary value.

In amount, from the literature on Thailand and Japan economic dealingss that were reappraisal aforementioned, the writers concentrated on the addition and lost that Thailand got from the economic dealingss with Japan. There were no articles that precisely focused on the unequal dealingss between Thailand and Japan, peculiarly the dependence. The function of Thai authorities to develop the unequal economic dealingss between both states was non the chief aim in those issues. Therefore this research surveies the Thai foreign policy toward Japan in item, the economic dimension. The mainstream of research addresses the economic nature of the two states that roots Thailand to be more dependent than Japan. This research surveies that the ordinances in context of JTEPA can supply and make shared involvement, diminish the economic jobs, develop the Thai economic system ‘s construction and work out the unequal dealingss after JTEPA goes into force or non.

Chapter 3

JTEPA-Thai-Japanese Economic Relationss: The uneven dealingss?

It can be said that the economic nexus between Thailand and Japan were uneven in the period of pre-JTEPA because of the economic disparity, peculiarly in the issue of industrial development. These dealingss have become labored because Thailand has been overly dependent on Japan, at the same clip, the latter has been less dependent on the former. The Tai authorities was feared that Japan ‘s dominant place which might do jobs between the two states. Therefore, the authorities had set up policies to cut down dependance, including the import permutation policy in the 1960s, the export oriented policy in the 1970s etc. Furthermore, the Thai authorities had besides understand that economic mutuality was a cardinal factor for more interaction and that it may make common involvement between Thailand and Japan.

This chapter of the research outlines the economic dealingss between the two states in three dimension, including trade, investing, and ODA, from the postwar period. The chapter besides shows the causes which create jobs between two states were analysed and the execution of Thailand ‘s economic policies from the postwar to the economic crisis in 1997.

I. Trade

Thailand and Japan trade dealingss were re-established in 1952, and since so Japan was the chief beginning of Thailand imports and an of import finish of Thai exports. Although the authorities of Thailand recognised that Japan was the of import trade spouse, trade inequality between the two states was Thailand ‘s chief jobs. Most of trade shortage between Thailand and Japan are caused by the construction of economic system differences, viz. the different degree of economic development and industrialization. Thailand was an agricultural based economic system whilst Nipponese economic system was based on industry, so so the two states produced and exported the different types of merchandises. Consequently, the construct of Thailand ‘s trade with Japan has been an export of natural stuff, particularly in agricultural goodss, and import of manufactured merchandises from Japan. It is clearly that Thailand which has been supplier of natural stuff spouse in a trading relationship that by and large has a disadvantage under Japan which has been the industrialized state. Similar to most developing states which have exported the agricultural goods and imported industrial merchandises, Thailand gained less from its exports than what was required to pay for imports. As a consequence, Thailand ‘s trade job has been increasing overcome. ( See table 3.1 )

Table 3.1

Thai-Japanese Trade Relations during 1955-1970

Beginning: Nipponese Chamber of Commerce, Bangkok, 1987.

There were many trade shortages between the two states caused by Thai economic policies. First, the Thai authorities established an economic development with foregrounding on substructure buildup because the authorities realised that holding high quality substructure would profit the development of the Thai economic system and the state. Second, in order to diminish importing, the Thai authorities implemented an import permutation policy in the sixtiess. This policy supported local industry to bring forth the imports. However, the public presentations of these policies were non being able to work out trade shortages as the authorities had anticipated. Due to the Thailand has been an agricultural based state, it does non hold sufficiently capableness in industrialization. Consequently, Thailand must import intermediate inputs, progress engineering and machinery from foreign for heightening its state and industrial. In Thailand ‘s position, Japan was an of import provider of capital goods for going an industrialized state. More that 80 per centum of imported goods from Japan were machinery, metal and chemical merchandises. Although the import permutation policy was purposed to cut down importing, it made a serious trade job because of the importing of high volume of intermediate stuffs and machinery. In add-on, the execution of these policies caused Thailand more dependent on Nipponese industrial goods to put up its substructure and support Thai industry.

Thailand ‘s economic policy in the 1970s, which had changed to the export oriented policy, had besides raised trade shortage between the two states. Thailand had started to critically prosecute the policy of export publicity, non merely of agricultural goods, but besides of processed ingestion goods. ( Viraphol, 1976 ) The Tai authorities anticipated that the policy would advance Thai export to Nipponese market every bit good as it would cut down trade inequality between the two states. After achievement of this policy, the export of fabrication merchandises became in field sight, such as electronic, electronic constituents, electronic contraptions and fabrics. Fabric was the major Thai export in the 1970 ‘s. ( Nipponese Studies Center, 1986 ) Although Thailand exported more merchandises to Japan, Thailand had to import intermediate merchandises for Thai industrial goods production. As a consequence, the trade shortage continued the Thai economic system ‘s job.

It was non merely the Thai authorities that concerned in the issues of trade shortage but Thai public sentiment, which are Thai pupils and researches, were besides worried with these issues. They concerned that Thailand would depend on Nipponese industrial goods until it became the economically dominate. Tai pupils solved this job by holding presentations. During 1972-1985, there were 5 anti-Japanese motions in Thailand under the leading of the pupils. ( Jittiwattanapong, 1999 ) Up to this point, the unfavorable judgment in resistance to Nipponese economic domination did non come merely from the pupils but besides intellectuals, administrative officials, members of Thai parliament expressed in several seminars and publications. ( Sudo, 1988 ) They expected that the anti-Japanese motion would beef up the Thai authorities ‘s bargaining power in negociating trade affair with Japan. ( Sudo, 1988 ) In response of 5 presentations, Japan promised to take importance measure to better the trade instability. First, the authorities of Japan announced the Fukuda Doctrine to relieve economic dealingss between Japan and ASEAN members, including Thailand. However, the intent of this Doctrine was to make prosperity in Southeast Asia, it did non concentrate on the issue of work outing trade shortage jobs. ( Akrasanee and Dhiravegin, 1983 ) As a consequence, trade shortage between the two states still raised every twelvemonth since the Fukuda Doctrine was launched in 1977. TABLE 3.2

Second, the White Paper was published in June 1985 to reconstitute Thai-Japanese economic dealingss, viz. , Thailand requested Japan to diminish trade instability between them by importing more Tai merchandises. Nevertheless, the consequence of dialogue might non been every bit fruitful as Thailand hoped since Japan did non officially react to this petition. Trade instability between the two states did non better and, besides, Thailand continued to confront a raising trade shortage with Japan. ( See figure 3.1 )


The trade shortage job was non caused by Thailand ‘s economic policy, Nipponese economic policy besides caused the trade shortage job serious. The Nipponese protectionism was the chief ground for trade shortage between the two states. There were several barriers to forestall foreign merchandises to come in into the Nipponese market. Japan obliged high duty and quota limitations on primary merchandises which were competitory with Nipponese merchandises. Nevertheless, Japan besides created quality and quarantine limitations, these barriers caused it hard for export Thai merchandises to come in the Nipponese market. ( Akrasanee and Dhiravegin, 1983 ) Many Thai business communities criticized about Japan ‘s trade patterns which made it hard for Thai bargainers to export to Japan. Although the quality and monetary value of Thai agricultural goods could vie with local merchandises in the Nipponese market, these barriers were the cardinal obstruction for Thai merchandises to come in into the Nipponese market.

In amount, it seemed that instability trade between the two states rooted from economic structural instability. Although the Thai authorities launched several policies to better this state of affairs, the trade shortage could non be solved expeditiously due to the deficiency of ability for the Thai side. The execution of each policy made Thailand to be dependent on Japan in term of import engineering and industrial merchandises.

II. Investing

As Thailand has been an agricultural based and developing state with low engineering accomplishment, it has been ineluctable to depend on both foreign engineering and foreign capital in economic industrialization. Consequently, the Thai economic policy toward foreign capital influx was reasonably welcomed when Thailand began to industrialize the Thai economic system in the fiftiess. FDI seemed to be the most indispensable option which could reassign hardware and package engineering alongside with fiscal capitals to Thailand. Although the Thai authorities had changed and adopted a policy of pulling foreign investing into the state, the FDI had easy flown into Thailand ‘s economic system. As a consequence, Thai authorities set another Investment Promotion Act in 1962 to advance investing and it established the Board of investing ( BOI ) to implement this act. ( Wannitikul, 1996 )

After Thai authorities launched the industrialized policy in the sixtiess, FDI from many states, such as the United States, some European states and Japan, flew into the Thai economic system. Importantly, Japan was one of the most important foreign direct investors in the Thai fabrication industry. In term of both Numberss and sum, 40 per centum of FDI flown to Thailand came from Japan. ( Yoshihara, 1978 ) Although Nipponese investing supported the development of Thai industrialization, it caused Thailand depend on Nipponese finance, capital and engineering.

The execution of an import permutation policy in the sixtiess provided motive for investing in import permutation industries. The Tai authorities supported private investing by offering advantages ; such as, the freedom import responsibilities on machinery and intermediate goods, duty protection, etc. Japan as a major investor in the Thai economic system was interested in these benefits, as a consequence, in invests to a great extent in production for the national market and small in export-oriented endeavors. It seemed that Nipponese investing during this period had contributed to the development of import permutation industries in Thailand. However, the trading behaviour of Nipponese affiliates that imported stuff and intermediate merchandises from Japan alternatively of securing them locally raised dependence between the two states and widened the trade shortage between them. As a consequence, the Thai authorities changed the policy following decennary.

The Thai authorities announced an export oriented policy in the 1970s to back up betterment of the export industry. To implement this policy, Thailand required a large sum of finance and high accomplishment of engineering. Consequently, the Thai authorities offer particular revenue enhancement privileges and extended the income revenue enhancement exclusion period for foreign investing. These privileges attracted Nipponese investing into Thailand while Japan faced the rapid addition in pay degrees and oil crises in the seventiess. Japan recognised that the high monetary value of production would do the disadvantage to Nipponese merchandises in competition with others in the planetary market. As a consequence, Nipponese labour-intensive industries, particularly fabrics, and other fabricating industries such as electronic, electrical contraptions, and electronic equipment actively undertook FDI to Thailand. Although Nipponese investing in the 1970s supported the development of the Thai export industry, Thailand still had the same job as the last decennary. As Thailand could non back up capital goods and engineering to assist its production procedure, Nipponese houses or Thailand-Japan joint venture companies had to import these merchandises from Japan.

Although Thailand tried to diminish the dependance upon the investing from Japan, there were factors from the two states that support Nipponese investing in Thailand in the 1980s. On Thailand ‘s side, the Fifth and Sixth National Economic and Social Development Plans during 1982-1991 concentrated on the issue of economic development, peculiarly industrial construction development. Sing to the deficiency of accomplishment and finance, Thai authorities necessitated FDI to back up its programs. At the same clip, the Nipponese authorities got the job of Yen grasp and high rewards in 1985, as a consequence, Nipponese companies repositioned their production base to aboard for cut downing its production cost. As Thailand had good investing environment such as economic and political stableness, low pay and rational substructure, Thailand has been an attractive FDI mark in the Southeast Asia part. Consequently, many Nipponese companies decided to put in several sectors of Thai industry including chemical, fabric, car, and electronic merchandises etc. Particularly the car industry, Thailand has been the biggest car production base in the Southeast Asia part. Harmonizing to the fact that Japan invested in the industry that Thailand had the least accomplishment and could non supply the natural stuff, the importing of engineering and capital from Japan was indispensable for production procedure in Nipponese companies. However, Nipponese investing after 1985 to pre-JTEPA was still purposed at the national market and to a great extent dependent on imported stuffs and capital goods. That was the ground why trade shortage between the two states could non be improved and the spread was made wider.

Table 3.4

Due to the fact that Thailand required bettering its economic system, the most importance outlook that Thailand had from Nipponese investing was engineering transportation ; nevertheless, it did non travel every bit swimmingly as expected. The job might come from the tradition of Nipponese direction manner. The Nipponese manner of direction is about the central offices are reluctance to reassign high engineering to its abroad subordinates in order to protect their advantages. Consequently, this was one of the grounds that the Japanese was criticised from the