The business sentiment Japanese companies have for Thailand has been the lowest among five Asean countries for three consecutive months, says the Japan External Trade Organization (Jetro).
Jetro each month compiles a diffusion index (DI) to gauge business performances of five Asean countries _ Thailand, Singapore, Malaysia, Indonesia and the Philippines _ in the eyes of the Japanese.
If the DI, the month-on-month difference between the ratio of positive (''better'') and negative (''worse'') responses, is above the zero or neutral level, it signifies that business performances are improving.
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Thailand has scored the lowest among the five countries since last November, due to political instability, baht appreciation and rising oil prices, inflation and interest rates, said Yoichi Kato, president of Jetro Bangkok.
Mr Kato noted the score of Thailand in January this year was -12.9, compared with 13.1 for highest-ranked Singapore.
''The DI score of Thailand would have been lower if the effects of New Year's Eve bombings in Bangkok, the amended Foreign Business Act and the measures against baht speculation of the Bank of Thailand had been taken into the consideration in the questionnaire,'' he said.
But the index is unlikely to cause Japanese decision-makers to immediately withdraw their investments in Thailand since they are part of the business plans drawn two or three years earlier.
Nevertheless, their parent companies in Japan might relocate their offshore operations from Thailand in the longer term if Thailand's scores continue to deteriorate and trail others, said Mr Kato.
''Possibly, Malaysia seems to be a more preferable investment destination than Thailand for Japanese electrical equipment exporters to the Middle East who are considering additional investments under the current situation,'' he said.
As well, parent companies in Japan may withdraw their investments from Thailand if the baht's value remains at 36 to a US dollar.
''It's better to put their money in Japan if their investments in Thailand only generate small profits,'' said Mr Kato.
Based on the survey of business sentiment on Japanese corporations in Thailand. which drew responses from 341 Japanese firms with local operations, the amount of planned capital investment in the manufacturing sector in 2007 would decrease by 26.5% from 2006, according to Mr Kato.
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'This is the first time since the Asian financial crisis in 1997-98 that the number of firms reportedly planing to increase their capital investment in the country (66) was less than those reporting a decrease (72).''
Many are starting to wake up.
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