July 05, 2007	Thursday	Jamadi-us-Sani 19, 1428

BANGKOK, July 4: Japanese firms in Thailand are beginning to reduce their investments in the kingdom due to the strong baht and negative perceptions about the investment climate, a survey said on Wednesday.

Japan is Thailand's biggest foreign investor, but a survey of the 351 members of the Japanese Chamber of Commerce found that business sentiment in Thailand is “deteriorating” for the first time since 1998.

Firms saying their investments in Thailand would decrease outnumbered those planning to increase capital spending here, according to the poll by the Japan External Trade Organisation (Jetro)

The value of planned Japanese investments in Thailand this year has already fallen 11 per cent from 2006, the survey said.

“It was the first time in nine years that we found those results, with sentiment deteriorating continuously,” Jetro Bangkok president Yoichi Kato told reporters.

“We found the willingness to invest declined compared to a year before,” he added.

The twice-yearly survey, conducted from April 27 to May 23, found the appreciation of the baht was the top concern for Japanese companies in Thailand, following by political instability, economic policies and rising labour costs.

“Japanese firms view that the exchange rate of 37.25 baht to the dollar is a profitable rate. But the current market rate of 34.49 baht makes them lose 7.4 per cent in profits,” Kato said.

Kiyoharu Yukiyoshi, executive director of JCC Bangkok, said Japanese firms have adopted a wait-and-see stance before making new investments in Thailand.

“We will probably wait until the election before making a decision whether to raise investments in Thailand. Hopefully, Thailand will have the election in November as the prime minister promised,” Yukiyoshi told AFP.

“Baht appreciation is our major concern at the moment. There will be a bigger opportunity for us to move to Vietnam if the baht gets stronger,” he added.

Strong economic data released over the last week has helped push the Thai stock market to a 10-year high, but the foreign inflows to the market have sent the baht even higher. The Thai unit was trading at 34.20-21 to the greenback at mid-day Wednesday.

THAI BANK RULES OUT INTERVENTION: The Bank of Thailand on Wednesday ruled out any intervention to slow the rising baht, which was trading at a new 10-year high as foreign capital poured into the Thai bourse.

“The central bank sees no need to intervene in the exchange rate at the current stage. The baht is getting stronger because of the huge amount of capital flowing into the stock market,” BOT deputy governor Atchana Waiquamdee told reporters.

The Stock Exchange of Thailand broke through the 800-point barrier to close at a 10-year high Tuesday. The Thai baht was also trading at a 10-year high of 34.31-33 baht to the dollar at the close of markets Tuesday.

The baht continued to strengthen on Wednesday and was at 34.20-21 in afternoon trade.

The rising baht has drawn complaints from exporters who fear that the exchange rate is making Thai products too expensive overseas.

Exports, the key driver of the Thai economy, have remained robust despite the strength of the baht but the central bank has previously warned of a slump in export growth due to a possible slowdown in the global economy. —AFP