Thailand And Japan After The OVERALL ECONOMY Economics Essay

The relationship between Thailand and Japan were inspired right from the start primarily by considerations of trade, which is still the remarkable feature. However, in line with the globalisaton, business relations and trade have broadened and have become ever more intermingled with political affairs, economic assistance, and investment.

Objective

To study and analyse the benefit and downside of JTEPA to Thailand.

To evaluate whether the assistance between Thailand and Japan under the JTEPA framework provides and create common hobbies and guide to a lot more interdependent relationships.

Hypothesis

Upon the singing of the JTEPA, it seems to be that Thailand will strongly reliant on Japan, which contradicts the Thai government's expectation on JTEPA to be a highly effective instrument to develop the unequal routines and relations between the two countries.

Research Questions

What will be the personality of Thai and Japanese financial relations?

What does the Thai authorities look onward from JTEPA?

How does JTEPA donate to the alteration of relations between Thailand and Japan?

Scope

This research generally targets Thailand's role and its own perspectives on international coverage and relationships with Japan after the great economic problems in 1997, particularly the circumstance of JTEPA. This study can look at the economical relationships between Thailand and Japan and make an effort to answer the question of whether JTEPA would contribute to the more dependent relationship between both of these countries.

Conceptual Framework

In this research, Realism and Interdependence theories will be utilized as a global theory to answer the study questions and also to clarify the Thailand and Japan in term of monetary relations.

Realism

Realism, or traditional realism, is an approach of the analysis and practice of international relationships. The core of realism is countrywide and state survival. As Han J. Morgenthau who was simply the best realist thinker of the twentieth hundred years, was mentioned that "Politic is challenging for vitality over men. Ability is its immediate goal and the modes of acquiring, preserving, and demonstrating in determines the approach of political action" ()

From this theory, the key point of international policy is to protect and defend the eye of the nation in the global politics. This goal includes high political concerns of guaranteeing status survival. Security concerns, as well as the low political purposes in such areas including the pursuit of riches and economic expansion and power. In making international plan, the governmental decision-makers evaluate each option, and selecting the the one that maximizes benefit or decrease cost associated with attaining the purpose sought.

At the present time, Thailand is negotiating FTA with several countries. These FTAs will advantageous for Thailand in term of greater market access in goods and services due to the reduction of trade barrier, increased investment opportunities in oversea markets and decreasing of business costs due to the dismantling of tariffs and non-tariff barrier. JTEPA is an integral part of Thai foreign insurance plan toward japan authorities, especially the overall economy. The countrywide interest is the significant part to make foreign insurance policy of talk about. Thailand has achieved to maximize its national interest in virtually any situation it experienced. Nevertheless, in negotiation of JTEPA which was the economic co-operation that provided distributed interest, the Thai government selected the best option that takes benefit of its nationwide interest without interfering Japanese pursuits. Although, this contract made shared interest by enhancing cooperation and lowering the obstructions on trade for Thailand and Japan, it is dubious whether both countries are so logical in practice.

Interdependence

Nowadays the globe is becoming interdependent in economics, in communications and in human dreams. Interdependence in the global politics identifies situations characterised by reciprocal results among countries or among celebrities in different countries. You can find two different perceptions that may be implemented for analysing the costs and advantages of an interdependent marriage. The first perception focuses on the joint benefits and joint loses to get-togethers involved. The second is relative benefits and distributional issue. It is important to keep in mind that interdependence by no means indicates equality. Such uneven relations are very common in modern-day world politics, especially between developed and less develop countries. Interdependence may be highly asymmetrical; one actor may depend on another could use the interdependent relationship as a source of power in bargaining over an issue perhaps to have an effect on other issues.

Due to the geographical proximity of Thailand and Japan, it would be beneficial to develop an monetary collaboration between them. It'll bring financial gain and prosperity to both countries. Thailand is expected that JTEPA will bolster and improve unfair relationships between Thailand and Japan. Although Thailand needs equal treatment, it realises that symmetry interdependence is barely possible. When asymmetry is common in monetary interdependence, the question of how much is permissible in a marriage, it should properly be interdependence, rather than one of many ways dependence. The politics of economic interdependence will involve competition even when large online benefits can be expected from the cooperation.

Methodology

The method to be applied throughout repeating this research was mainly a documentary research. To perform the study, content and statistic evaluation were used. Content and statistic was collected from various options to obtain the accurate information. They were used to review the changes of economical relations between Thailand and Japan from JTEPA. The statistic of transfer, investment and ODA were used as a measure to access the degree of dependency between Thailand and Japan. Although dependence will not be eliminated immediately after signing the agreement, it should constantly decrease. This research will examine the changing of economics turmoil with the relationships after signing of the JTEPA.

Thailand and Japan: Post Warfare relations

Thailand and Japan relationships have included several aspects including politics, market and culture. During the postwar period, the politics relationships between them weren't much pointed out since there have been no serious conflicts between them. Moreover, during the Chilly Conflict both countries had joined up with the free world under the command of the United States, and supported one another politically.

On the economical aspects, Thailand has brought in a huge amount of Japanese goods and services. Since Thailand got limited capital resources for national development, it got to import capital goods, especially machinery, transportation equipment, substance, and other industrial materials from Japan. Difference in framework of development level, types of product, and price experienced generated a large trade deficit between Thailand and Japan and only the latter, through the 1960's. (Dhiravagin, 1983)

The said trade deficit les to the anti-Japanese activity in the 1970's according to the fact of Thai people were terrified of the Japanese domination of these economy. The anti Japanese attitude did come out not only in Thailand but also far away in Southeast Asia, like the Philippines and Indonesia. Therefore, the Fukada Doctrine was declared to build up the economic relationships between Japan and Southeast Asian countries, including Thailand. (Sudo, 1988) However, this doctrine was likely to slightly alleviate the strained situation, the trade deficit between Thailand and Japan was still about US$ 2 billion or 15 percent of the full total trade in 1979. (Akrasanee, 1983) Afterward, the Thai administration demanded for an equal treatment on trade by asking the Japanese government to firstly start their market to the Thai products; second, to establish the export-oriented establishments in Thailand; and thirdly, to enhance the economic assistance through more vigorous transfers of technology. (Thai MOFA, 2010) Inside the White Paper on the restructuring of the Thai-Japanese economic relations, proven in June 1985, the Thai authorities requested a reconsideration of the engineering-service conditions on the tasks funded by the Japanese government, the Oversea Economic Cooperation Finance (OECF) and Yen Loan, to ensure that the Thai contractors could have significantly more chance in bidding. (Doner, 1991) However, the result of this negotiation was unsuccessful for the Thai government in line with the Japanese government did not promise to do anything seriously.

Thailand started to industrialise its overall economy in 1950's. By reason of, the lack of technology and capital, the Thai government necessitated foreign direct investment (FDI) for its Thailand development projects. (Ismail and Yussof, 2003) The Investment Advertising Take action 1962 was set up for FDI interest. Based on the rapid go up in the wage level in Japan, labor demanding Japanese firm actively undertook FDI in Thailand and other countries in Asian countries. (Wannitikul, 1996) As a result, the Japanese investors have been one of the most important direct investors of Thailand, particularly in the making area. Importance Japanese industries were textiles, move equipment, chemical products, electrical gadgets and automobiles. A lot of the Japanese listed capital was by means of the joint projects; only 17 percent of them were by means of wholly owned or operated Japanese firms.

However, the relationship among staff in their joint ventures did not go effortlessly. A number of Thai lovers in the joint ventures complained about the unwillingness of Japanese staff in the interfering scientific know-how to the Thai staff. In a few companies, the advanced technology was realised only among Japanese technicians and technicians. The transfer of management expert was another difficulty within Thai-Japanese jv firms. JAPAN head-quarter give a great deal of Japanese personnel to control the managerial positions in affiliates, which really avoided Thai personnel from learning the management know-how. Because of this, several local companions had not been able to create their own business even after many years of joint investment with Japanese companies. (Tho, 1991)

For Formal Development Assistance (ODA), Thailand has considered Japan among the most significant benefactors. It acquired received a major amount of Japanese ODA for its national development projects through several types including grant, loan, and complex cooperation.

From 1961 to 1986, because of the five national economic and social development plans, Thailand's development strategy had focused on industrialisation programs. Therefore, Thai authorities had to create sufficient infrastructure to aid these programs. However, based on the budget constraint, it was required that Thai government got a loan of money from international sources. The full total international loan of Thai government during 1961-1986 amounted to 15, 529 million us dollars, of which 2, 851 million dollars or 18. 4 percent came from Japan. (Tinakorn and Siroros, 1991) Aside from bilateral loans, Thailand possessed also received technical assistance and grant supporting from japan administration. Japan's yen lending options were focused on infrastructure that was the foundation of industrialisation as the grants visited agricultural, educational, clinical, technical, health, and community development.

Overall, it appears that Thailand was intensely reliant on Japan during the post war age. It was obviously seen that Thailand acquired encountered the trade deficit issues with Japan, it still imported Japanese capital and professional goods based on the requirement for industrial development. At the same time, Japanese partners didn't match the Thai expectation of technological copy so Thai staffs must count on Japanese technicians in operating high technology. Furthermore, Thailand, at exactly the same time, still depended on both grants and loan of Japanese ODA because of its domestic development assignments.

Thailand-Japan Post-Cold War Relations

In the first 50 % of 1990s, trade between Thailand and Japan persisted to increase. Together with the high rate of economic development of Thailand, Japan was the major provider of Thai imports and one of the top goals of Thai exports. Thailand imported capital and industrial products from Japan. These kinds of products were used for extending industrial potential and providing many export business whereas Japan imported agricultural and consumer products from Thailand. Changes have taken place because the start of 1996 according to the economic downturn. Thailand's imports from Japan had been decreasing. (Country wide Statistical Office, 1992) The trade inequality between Thailand and Japan was becoming slighter. Nevertheless, trade between two countries was increasing again during the restoration of the Thai economy. Regardless of the changing trade relations, trade deficit was still the key problem in the relationships between Thailand and Japan.

Taking the investment part under consideration, Thailand was a favorite goal of foreign immediate investment according to its lower labor costs, realistic infrastructure and stable society, so when Japan experienced another period of yen gratitude that made the raised development costs. Japanese shareholders started strengthening or increasing their production bases in Thailand trough the development of supporting establishments, including basic market sectors such as material and petrochemicals. Thailand laid the foundations for its strong investment collaboration with Japan. These further strengthened economical ties between Thailand and Japan (Japan External Trade Organisation, 2010) However, Japanese investment dropped during 1997 according to the unfavorable environment for overseas investment in Asia in 1997.

The technology transfer stayed the issue of the Thai-Japanese joint endeavors companies. Around the Thai side, the lacking of technology manpower, specifically engineers and technicians, and the scarcity of capability to adopt and utilize technological knowhow and creation technology were the down sides of Japanese technology copy. (Prayoon, 1990) On the Japanese side, the Japanese design of management, seen as a intra-firm training and advertising, the seniority system, and life-time employment always results in a slow transfer of managerial articles from Japanese to local staffs. (Japan's MOFA, 2010)

With regard to Japanese ODA, although the Thai economy properly and progressively more grew in the first 1 / 2 of the 1900a, Thailand still obtained technological assistance from Japan which the total value amounted to 147. 46 billion US us dollars. In the second one half of the 1990s, Thailand faces a great monetary crisis in 1997. (Glassman, 2001) Then, in the midst of the economic turmoil, Japan's role as a supporter was very very important to Thailand since it experienced provided more than 12. 6 billion US us dollars for both financial and technological aid in addition to the 4 billion All of us us dollars in August 1997 under the IMF's support package. (Japanese MOFA, 2010)

Thailand possessed also received a huge amount of financial and tech support team from the Japanese government to raise production and competitiveness in Thailand after the economic downturn in 1997. Another Japanese ODA was the New Miyazawa Initiatives which amounted to 1 1. 9 billion US us dollars for forcing the Thai overall economy from the economic problems.

All in all, because the post-Cold Warfare, the relations between Thailand and Japan have increased in an positive course. Thailand and Japan have became a good partners in the nice and crucial occasions; however, Thailand has went on facing the trade deficit with Japan and has still depended on Japan both in term of investment and ODA. They are significant suppliers for every other. The international direct investment is essential for the Thai administration to build up its overall economy and world. Japanese ventures have completed some parts of the Thai home development plans. Japan was as well as an essential donor when Thailand in the financial downturn. Nevertheless, the Thai federal government has made an attempt to develop the relations out of this heavily reliance on Japan to become more interdependence.

Thailand and JTEPA

In the last few decades, the global and regional context is becoming more technical, with climb of the individuals Republic of China and India, and the breakdown of the multilateral arrangement on trade and investment under the planet Trade Company (WTO). Many countries in the global community, including Thailand and Japan, have been using trade agreement to boost competitiveness. According to be competitive in the new kind of global context and also to retain their profits in the global market, both of Thailand and Japan needed to create the strong and success economic links between the two countries, which is befitting that the contract between them is known as the Japan-Thailand Economic Collaboration Agreement or JTEPA.

During 1997-2010, in Thailand, there are six government authorities governing the country after the economical problems in 1997. Although, each authorities had its economic insurance policy, it is clearly that of six governments were focused on economic assistance with other countries, develop mutual interest and avoided conflict among them. Thailand acquired completed FTA (Free Trade Arrangement) with several countries including China, Australia. Thailand is also growing FTA with the essential trading countries; such as U. S. A. and Japan. Being one of Thailand's principal trading partners, the Japanese government's attempt to promote with EPA with Thailand will be beneficial to Thailand.

Thailand and Japan were negotiating the Japan-Thailand Economic Partnership Agreement. This contract did not focus only on trade but also other measurements, including investment, labor, intellectual property rights etc. It is expected that JTEPA would further broaden and deepen Thai-Japanese relationships and jointly beneficial cooperation by foreign closer economic relations, enhancing a more favorable investment climate, and generating higher work at home opportunities through cooperation, liberalisation and facilitation in trade and investment between the two countries. Additionally it is considered that JTEPA will position a new aspect for Thailand-Japan tactical partnership. (Thai MOFA, 2010)

In order to complete economical development and industrialisation, Thailand terribly requires foreign investment and technology copy to shore up its flagging overall economy (The Countries online, 2000) Japan isn't only an important trading partner but also an integral investor and way to obtain technology for Thailand. The Thai federal realizes that the comparative downside if it does not build up and develop FTA with Japan. In the Thai government's point of view, concluding the free trade arrangement with Japan may be one instrument to success the Thai financial development corresponding to increasing trade value and overseas investment to Thailand. At the same time, it might also contribute to strengthen Thailand-Japan relationships and enhance the cooperation between your two countries. Since JTEPA provides more opportunities for Thai goods and services to entrance in to the Japanese market and technology copy from Japan, these will support Thai industrialisation and develop Thai capability. (Sriratanaban, 2004)

From Japan's perspective, Japan possessed realised about its disadvantaged competition in this area as the marketplace talk about would be smaller after China concluded their free trade arrangement with ASEAN countries. (ASEANWEB, 2010) Therefore, Japan was looking to setup and develop economical cooperation using its Asian friends and neighbors by offering the Japan-ASEAN Economic Relationship to ASEAN participants individually and multilaterally. (Singh, 2002) Japan also completed the Japan-Singapore Economic Relationship Agreement in 2002. Thailand was the next nation in Southeast Asia which Japan likely to conclude the economic contract after Singapore. It is considered that JTEPA will support with good conditions for Japanese investment in Thailand and offer greater access in Japanese industrial goods, especially automotive and material industry, to Thai markets.

While Thai administration considers that JTEPA will be beneficial to Thailand-Japan relations, especially in the economical dimension, according to reducing road blocks on trade and expanding co-operation between them, the researcher will not believe that this contract will be beneficial to Thailand as it is expected, due to reason that Thailand is a less developed country with economic status. This research will review whether JTEPA would make Thailand and Japan to become more interdependent or vice versa.

The impact of JTEPA

During the negotiation of the JTEPA, there have been several sensitive topics becoming a matter of public matter. According to Pasuk Phongpaichit (2007), there are two tips in the negotiation of the JTEPA which show what's the impact of this Agreement. In addition, these tips also influence if the JTEPA is subsequently judged an achievements or disappointment from the Thai point of view

1. Process

2. Intellectual property

Process

The first topic focused on the process of JTEPA's negotiation. Bilateral relationships in trade and investment arrangement are manufactured for share passions. (Anderson, 2008) Accordingly, it means that there is no one party able to obtain all the income and there is no one will endure all the loss. Standard speaking, in international trade agreement, the inequity of vitality between the two countries can conclude the circulation of increases in size. (Phongpaichit, 2007) Up up to now, in the negotiation process, the skill of the average person negotiating functions is very necessary. Because of the procedure for negotiation is secretive and non-transparent, there always misunderstand between the particular negotiators think helpful and what the general public judgment consider beneficial.

Up up to now, in Thailand, the negotiation's process was condemned for the reason why of inadequate transparency. During the negotiation persisted from 2004-2006, several significant information was not review visibly designed for Thai public thoughts and opinions. Regarding to Thai rules, there was not obligation because of this Contract to be talked about to Thai parliament. It had been just discussed and debated in the Legislative Assemblage, where Thai legislators received with little information of the Agreement. Moreover, that they had no capacity to judge and vote anything on the details of the Agreement. Alternatively, in Japan area, the info on the aspect of JTEPA posted through the Japanese parliament and provided the details of the Contract to the public. While there is no public controversy in Japan, there were issues remaining with suspicion in Thai modern culture. These left suspicions on the Contract reflects the best interest of Thailand, because there is no mechanism to ensure those interest were correctly articulated and considered.

Intellectual property

According to Thai guarding intellectual property rules, it is hard to get intellectual property right after an all natural organism. Moreover, under the Contract on trade-related aspects of intellectual property right (TRIPS), each condition are authorised to protect themselves by such a regulation. (WTO, 2010) However, by way of a clause in the Article 130 of the JTEPA says that "each party shall ensure that any patent program shall not be declined solely on the grounds that the topic matter said in the application form is related to a naturally developing micro-organism. () When this issue of the Arrangement was disclosed to the public, this issues was questioned that why a clause on intellectual property privileges appeared to give Japan with an increase of advantages than those available in Journeys. Up to this point, Phongpaichit also brings in this aspect that Thailand provided Japan more benefits of intellectual property protection under the law than Japan's EPA was provided by Malaysia. (2007)

In total, given the strong and effectiveness monetary links with Japan for the introduction of the Thai overall economy, it can be said that it's essential for Thai economy to conclude an arrangement with Japan, especially in point of the parallel negotiation between the two countries. However, regarding to this Agreement, it appeared to be that Thailand has become more dependence with Japan. Becoming more dependence with Japan, it gives rise to dread that the weaker gatherings may be disadvantage in the negotiations.

Chapter 2

Literature Review

The books and research that related to the Thailand and Japan economical relations topics experienced focused on several aspects, particularly trade, investment and assistance. Those articles layed out the gain and damage that Thailand would obtain from the financial links between the two countries, for example, Japanese investment that helped Thai industrialisation, trade deficit problems, technology transfer problems, the exploitation of learning resource etc. Some writers recommended a resolution to the problems. After the monetary crisis, the financial between the two countries were deepened in view to the fact that Japan became the main element acting professional to help the Thai overall economy from the financial regression. Alternatively, the assistance of Japan in the revival period brought on the based mostly problems between Thailand and Japan to become more obvious. As a result, the Thai federal continued to enhance the economic coverage which increase its national interest and decrease economical problems between two countries.

This clinical tests the Thai international policy towards Japan in the context of JTEPA, with the expectation that agreement is definitely an important factor to develop financial links and decrease financial problems between them. Articles which relate with Thailand and Japan economic relations are evaluated as following

Regarding to Japan was an important trade and investment partner since it resumed economical relations following the World Conflict II, the Thai government focused on attention to improve Thai overseas policy to deal with Japan, particularly economical aspect. Prapat Thepchatree, who composed "Thai-Japanese Economic Relationships", analysed the Thai-Japanese economic relations after the World Battle II (2007). For the trade, He discussed that the trade deficit between Thailand and Japan caused by the nature of trade of both countries was on the same scale in which Thailand exported agricultural goods to Japan while the almost all of Japanese exports to Thailand were capital and commercial goods. Furthermore, the protectionism was the important non-tariff barrier for Thai product that reasoned the trade deficit problems. For the investment, the writer directed that although Japanese investment performed a crucial role to build up Thai professional, Japanese investment caused several problems such as technology transfer. For ODA, he considered that the Japanese ODA did not suit with Thailand's demand, therefore, the Thai problems were not fixed by ODA. Regarding to his research, the economic relations development between Thailand and Japan would be better and as a result trade, investment and cooperation would be increased.

Regarding to Theerawongseri (1990), Although Japan was an integral element in the Thai current economic climate, there were the economic problems between your two countries. It had been definitely that Thailand's economical dependence rooted from the structural imbalance of the economic website link. The Thai authorities hoped that the White Newspaper that proposed to redistribute the Thai-Japanese economic romance would be proper the inequality problems. (Trinidad, 2007) Beneath the White Newspaper, both of the two countries required to restructure its financial structure in the face of the rapidly changing global economical context. Consequently, Thailand needed to pay more focus on enhance its agro-industrial goods to be value-added commodities. Additionally, Thailand should keep the cooperation with japan people and private organization to set-up the common interest and aspiration for the serenity, steadiness, and well-being of the relationships between the two countries. (Theerawongseri, 1990)

For the investment issue, Johzen Takeuchi (1991) layed out the technology transfer between Thailand and Japan in "Technology Tranfer and Japan-Thai Relations". Takeuchi (1991) analysed that Thailand and Japan were misleading in a technology transfer theory and process. Up up to now, Thailand realised that the technology transfer was "a piece of baggage with a bundle of handbook manuals" (Takeuchi, 1991) while the majority of Japanese production considered the idea of technology as so this means accumulative and energetic process. Because of Thailand was an agricultural based mostly country and its financial was condemned as undeveloped (Limskul, 2004), this factor was partially responsible for the lack of inadequate of various skills which was necessitated in the commercial concern. Therefore, Japan did not transfer high technology to Thailand but Thailand didn't understand this point. According to the research of Takeuchi (1991), there are four main reasons that Thailand criticised in the problem of Japanese reluctance to transfer the most advanced technology and the research and development (R&D) portions

1. The range of Japanese businesses was smaller than the Western european and American Firms, particularly in conditions of employment, Therefore, Japan did not have sufficient beneficial effects on employment creation.

2. Japanese forms were uninterested to adopting local materials and intermediate goods, and their business activities did not advantage on national commercial sector.

3. Japanese organization didn't export their products, which revealed that they transferred out of date development systems that lack the potential to gain competitiveness in international market.

4. Japanese companies did not explain the entire handbook manual for procedure and management.

Moreover, the writer (Takeuchi, 1991) also recommended that it might be useful that both of Thailand and Japan to gather more information as well as do more circumstance studies to improve the sympathetic in order to reduce the perception space.

Shiowattana (1990) also examined in the problem of technology transfer between Thailand and Japan but in other context. Regarding to her research, the value of bringing out new of technology had not been the key factor resulting in successful industrialization, however the capability to learn and improve the purchased technology was much important to be able to ensure healthy industrial development. Shiowattana (1990) pointed that the reason for the problem was that Thailand lacked the power in technology duplication. Therefore, the Thai administration became more alert to the necessity to market and fortify the technological functions of industry. On Japan's aspect, the technology copy was dependant on the insurance policy of Japanese MNCs. In addition, the author outlined that the Japanese joint venture possessed successful data in technology transfer. As Japan wish for dominating as a self-contained network in the Thai economy, it realised that technical power was a vibrant force, therefore, pressing for even more expansion of its economical skills in Thailand.

Xiaodong (1994) analysed the result of Japanese Investment in Thailand since 1986 in "What Thailand has gained and lost from Japanese investment". The author mentioned that Japanese Direct Investment (JDI) after 1986 was a significant event which transformed the problem in the Thai current economic climate. Acording to Xioadong's analysis, this research paid much attention on the problem of efforts and issues in the JDI's process towards to the Thai overall economy. For the contribution, JDI activated economic development and industrialisation in Thailand. For instance, one fifth of JDI flew in to the Thai processing export sector, this activated Thai exports and reinforced the growth of the export composition of Thailand. (Julian, 2001) Alternatively, JDI also made problems to Thailand such as the over industrialisation and urbanisation, large trade deficit, poor of technology copy. (Julian, 2001 and Hussey, 1993) Due to there have been many flews of JDI to Thailand, Xiaodong (1994) researched about how precisely Thailand could manage to integrate JDI into the Thai current economic climate more competently and lower the problem. Accordingly, he pointed out that the Thai federal should catch the attention of JDI directly into Agro-industry and the service sector. Although JDI enjoyed as an important role in Thai industry, the Thai authorities should not expect much on technology copy and should find other source of capital with the goal of lowering overdependence on JDI.

In the problem of the introduction of Thai agricultural products to meet Japanese benchmarks, the article of Cost of compliance on food safe practices regulation: case of Thailand's mango exporting to Japan was investigated by Phanit Chairungrojbanya. (2006) Chairungrojbanya (2006) researched the cultivation of mango for export, Thai mango's export market and the food safety way of measuring both Thailand and Japan. Additionally, the author also researched the price tag on compliance on food security instruction that export to Japan, from the farmer and the export sector. She contain the view that the cost of compliance on Japan food safe practices regulation divided into three parts, which will be the elimination costs, the appraisal, and the failure cost. The meals safety measure between the two countries were not much different but Japanese solution was stricter that Thailand, particularly the chemical contamination. However the compliance on food security raised the expense of Thai's mango's export however the Thai farmers were eager to do it because they could export them at a reasonable price.

In sum, from the literature on Thailand and Japan economic relations that were review aforementioned, the authors concentrated on the gain and lost that Thailand got from the financial relationships with Japan. There have been no articles that exactly focused on the unequal relationships between Thailand and Japan, specially the dependency. The role of Thai federal government to develop the unequal economic relationships between both countries was not the main goal in those issues. Therefore this research studies the Thai international coverage toward Japan in detail, the economic sizing. The mainstream of research addresses the economic nature of the two countries that root base Thailand to become more centered than Japan. This research studies that the restrictions in framework of JTEPA can provide and create shared interest, reduce the monetary problems, develop the Thai economy's framework and solve the unequal relations after JTEPA switches into drive or not.

Chapter 3

JTEPA-Thai-Japanese Economic Relationships: The unequal relations?

It can be said that the economic link between Thailand and Japan were unequal in the period of pre-JTEPA as a result of economic disparity, especially in the problem of commercial development. These relations have become strained because Thailand has been excessively dependent on Japan, at the same time, the latter has been less reliant on the former. The Thai administration was feared that Japan's dominating position which can cause problems between your two countries. Therefore, the government had establish policies to lessen dependence, like the import substitution plan in the 1960s, the export oriented coverage in the 1970s etc. Moreover, the Thai administration had also understand that economical interdependence was an integral factor to get more interaction and this it may create common interest between Thailand and Japan.

This chapter of the research outlines the economic relations between your two countries in three dimension, including trade, investment, and ODA, from the postwar period. The section also shows the causes which create problems between two countries were analysed and the execution of Thailand's monetary insurance policies from the postwar to the monetary crisis in 1997.

I. Trade

Thailand and Japan trade relations were re-established in 1952, and since then Japan was the key source of Thailand imports and an important destination of Thai exports. Although the government of Thailand recognised that Japan was the important trade partner, trade inequality between the two countries was Thailand's main problems. The majority of trade deficit between Thailand and Japan are induced by the framework of economy variances, namely different level of monetary development and industrialisation. Thailand was an agricultural based overall economy whilst Japanese economy was based on industry, so then the two countries produced and exported different types of products. Accordingly, the concept of Thailand's trade with Japan has been an export of fresh material, especially in agricultural goodss, and transfer of created products from Japan. It really is clearly that Thailand which has been company of raw material partner in a trading romantic relationship that generally has a disadvantage under Japan which has been the industrialised country. Similar to most developing countries that have exported the agricultural goods and imported industrial products, Thailand gained less from its exports than what was required to pay for imports. Because of this, Thailand's trade problem has been increasing overcome. (See table 3. 1)

Table 3. 1

Thai-Japanese Trade Relationships during 1955-1970

Source: Japanese Chamber of Business, Bangkok, 1987.

There were many trade deficits between the two countries triggered by Thai financial policies. First of all, the Thai federal established an financial development with highlighting on infrastructure buildup because the federal government realised that having high quality infrastructure would gain the introduction of the Thai economy and the country. Secondly, to be able to decrease importation, the Thai federal government implemented an transfer substitution insurance policy in the 1960s. This plan recognized local industry to create the imports. Nevertheless, the performances of these policies were not being able to solve trade deficits as the federal government had anticipated. Due to the Thailand has been an agricultural centered country, it does not have sufficiently capability in industrialisation. Consequently, Thailand must import intermediate inputs, advance technology and machinery from international for boosting its country and commercial. In Thailand's point of view, Japan was an important supplier of capital goods for becoming an industrialised country. More that 80 percent of brought in goods from Japan were equipment, metal and substance products. Although import substitution policy was purposed to lessen importation, it made a significant trade problem as a result of importation of high volume of intermediate materials and machinery. Furthermore, the implementation of the policies induced Thailand more reliant on Japanese professional goods to create its infrastructure and support Thai industry.

Thailand's economic policy in the 1970s, which got altered to the export focused policy, had also elevated trade deficit between your two countries. Thailand experienced began to critically follow the coverage of export campaign, not only of agricultural goods, but also of refined consumption goods. (Viraphol, 1976) The Thai authorities anticipated that the policy would promote Thai export to Japanese market as well as it would reduce trade inequality between the two countries. After success of this plan, the export of making products became in plain look, such as electronic digital, electronic components, electric equipment and textiles. Textile was the major Thai export in the 1970's. (Japanese Studies Center, 1986) Although Thailand exported more products to Japan, Thailand were required to transfer intermediate products for Thai industrial goods production. Because of this, the trade deficit sustained the Thai economy's problem.

It was not only the Thai administration that worried in the issues of trade deficit but Thai general public opinion, that are Thai students and studies, were also bothered with these issues. They worried that Thailand would depend on Japanese industrial goods until it became the economically dominate. Thai students fixed this problem insurance agencies demonstrations. During 1972-1985, there were 5 anti-Japanese motions in Thailand under the command of the students. (Jittiwattanapong, 1999) Up to this point, the criticism in opposition to Japanese financial domination did not come only from the students but also intellectuals, bureaucrats, customers of Thai parliament indicated in several seminars and publications. (Sudo, 1988) They expected that the anti-Japanese activity would fortify the Thai government's bargaining electric power in negotiating trade subject with Japan. (Sudo, 1988) In response of 5 demonstrations, Japan promised to adopt importance step to improve the trade imbalance. First of all, the federal government of Japan released the Fukuda Doctrine to alleviate economic relations between Japan and ASEAN members, including Thailand. However, the goal of this Doctrine was to create success in Southeast Asia, it did not concentrate on the issue of resolving trade deficit problems. (Akrasanee and Dhiravegin, 1983) Because of this, trade deficit between the two countries still raised every year since the Fukuda Doctrine was launched in 1977. TABLE 3. 2

Secondly, the White Newspaper was shared in June 1985 to restructure Thai-Japanese monetary relations, namely, Thailand requested Japan to decrease trade imbalance between them by importing more Thai products. Nevertheless, the result of negotiation may not been as fruitful as Thailand hoped since Japan did not formally react to this submission. Trade imbalance between your two countries did not improve and, also, Thailand extended to face a bringing up trade deficit with Japan. (See physique 3. 1)

Table

The trade deficit problem was not induced by Thailand's economical policy, Japanese monetary policy also triggered the trade deficit problem serious. The Japanese protectionism was the primary reason behind trade deficit between the two countries. There were several barriers to prevent foreign products to enter japan market. Japan obliged high tariff and quota limitations on most important products which were competitive with Japanese products. Nevertheless, Japan also created quality and quarantine limitations, these barriers brought on it difficult for export Thai products to go into the Japanese market. (Akrasanee and Dhiravegin, 1983) Many Thai businessmen criticized about Japan's trade procedures which managed to get difficult for Thai investors to export to Japan. Although the product quality and price of Thai agricultural goods could compete with local products in the Japanese market, these barriers were the key blockage for Thai products to enter japan market.

In amount, it looked that imbalance trade between your two countries rooted from economic structural imbalance. Although the Thai administration launched several plans to improve this situation, the trade deficit cannot be solved successfully due to the inabiility for the Thai part. The implementation of each plan made Thailand to be dependent on Japan in term of import technology and industrial products.

II. Investment

As Thailand has been an agricultural established and growing country with low technology skill, it's been unavoidable to be based upon both overseas technology and foreign capital in economic industrialisation. Subsequently, the Thai economical policy toward foreign capital inflow was moderately welcomed when Thailand started out to industrialise the Thai current economic climate in the 1950s. FDI appeared to be the most essential option which could transfer hardware and software technology alongside with financial capitals to Thailand. Even though the Thai government experienced changed and adopted a policy of attracting overseas investment in to the country, the FDI possessed slowly but surely flown into Thailand's overall economy. As a result, Thai government placed another Investment Promotion Function in 1962 to market investment and it founded the Board of investment (BOI) to execute this action. (Wannitikul, 1996)

After Thai administration launched the industrialised coverage in the 1960s, FDI from many countries, like the USA, some Europe and Japan, flew in to the Thai economy. Notably, Japan was one of many foreign direct shareholders in the Thai creation industry. In term of both figures and amount, forty percent of FDI flown to Thailand came from Japan. (Yoshihara, 1978) Although Japanese investment supported the development of Thai industrialisation, it triggered Thailand be based upon Japanese funding, capital and technology.

The implementation of your import substitution coverage in the 1960s provided drive for investment in transfer substitution companies. The Thai authorities backed private investment by offering advantages; such as, the exemption transfer duties on machinery and intermediate goods, tariff protection, etc. Japan as a significant entrepreneur in the Thai market was interested in these benefits, as a result, in invests closely in creation for the nationwide market and little in export-oriented companies. It seemed that Japanese investment during this period had contributed to the development of import substitution market sectors in Thailand. However, the trading action of Japanese affiliates that imported material and intermediate products from Japan instead of procuring them locally brought up dependency between your two countries and widened the trade deficit between them. As a result, the Thai federal government changed the plan following ten years.

The Thai administration declared an export focused coverage in the 1970s to support improvement of the export industry. To put into practice this insurance plan, Thailand required a major amount of fund and high skill of technology. As a result, the Thai authorities offer special taxes privileges and prolonged the income tax exception period for overseas investment. These privileges drawn Japanese investment into Thailand while Japan confronted the rapid increase in wage levels and essential oil crises in the 1970s. Japan recognised that the high price of creation would cause the drawback to Japanese products in competition with others in the global market. Because of this, Japanese labor-intensive companies, especially textiles, and other developing industries such as electronic, electrical devices, and digital equipment positively undertook FDI to Thailand. Although Japanese investment in the 1970s supported the development of the Thai export industry, Thailand still experienced the same problem as the previous ten years. As Thailand could not support capital goods and technology to helped its creation process, Japanese companies or Thailand-Japan jv companies had to import the products from Japan.

Although Thailand tried out to decrease the dependence upon the investment from Japan, there were factors from both countries that support Japanese investment in Thailand in the 1980s. On Thailand's part, the Fifth and Sixth National Economic and Community Development Ideas during 1982-1991 focused on the issue of monetary development, particularly professional structure development. Regarding to the lack of skill and money, Thai federal necessitated FDI to support its plans. At the same time, the Japanese authorities got the problem of Yen gratitude and high income in 1985, because of this, Japanese companies repositioned their production bottom to aboard for minimizing its production cost. As Thailand experienced good investment environment such as financial and political stableness, low wage and logical infrastructure, Thailand has been a stylish FDI focus on in the Southeast Asia region. Appropriately, many Japanese companies decided to invest in several areas of Thai industry including chemical, textile, car, and electronic products etc. Especially the automobile industry, Thailand has been the biggest automobile production bottom part in the Southeast Asia region. According to the undeniable fact that Japan invested in the industry that Thailand possessed the least skill and could not provide the raw material, the importation of technology and capital from Japan was essential for production process in Japanese companies. Nevertheless, Japanese investment after 1985 to pre-JTEPA was still purposed at the nationwide market and closely dependent on imported materials and capital goods. That was the key reason why trade deficit between the two countries cannot be upgraded and the space was made wider.

Table 3. 4

Due to the actual fact that Thailand required improving its overall economy, the most importance expectation that Thailand got from Japanese investment was technology copy; however, it did not go as efficiently as expected. The trouble might result from the custom of Japanese management style. JAPAN design of management is approximately the head office are reluctance to copy high technology to its overseas subsidiaries to be able to safeguard their advantages. Accordingly, this is one of the reason why that the Japanese was criticised from the

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