Compared to Vietnam, Thailand is far bigger, being the largest economy in the Mekong region and the second biggest in the ASEAN. It is also the country which received the most FDI from Japan (Hong 2018), with the total capital amounting to around 86 billion US dollars, between 1985 and 2016 (Nicolas 2018). Due to these investments, Thailand has historically been considered part of Japan’s backyard,
however, today the situation is changing. Although Japan is still the prime investor and has the most infrastructure projects, its domination is waning with the recent increase of Chinese investors (Nicolas 2018). Richer than the other countries discussed throughout this paper, its demand for basic infrastructure has also decreased. Nevertheless, the launching of the recent Thailand 4.0 to transform the country into a more competitive and modern economy, has led to a new surge in investment (Yuwa 2019). Japan has
answered to the demand through the development of railways and of Thailand’s East Economic Corridor
(EEC).
Projects:
Japan has been investing in two railway programs, not only investing in an HSR between Chang Mai and Bangkok but also urban railway projects within the Bangkok area (JapanGov 2018; Nicolas 2018). Japan has been investing in HSRs throughout the Mekong (Hong 2018), the Northern line between Chang Mai and Bangkok exemplifying this. The project was finalized through joint participation with the Thai government with the use of concessional loans from the JICA (Jiang 2019). Although Japan has a comparative advantage due to their know-how and Shinkansen technology, the competition is strong in this sector, with China pledging funds to a railway network from Kunming to the Gulf of Thailand (Jikkham 2015).
Secondly, Japan has also been investing in a railway development project, in the Thai capital of Bangkok,
through the Purple line (JapanGov 2018). Although smaller than the HSR network, Japan’s insistence on
quality and sustainability can once again be seen when looking at the reports from their government (JapanGov 2018). In addition, other lines, such as the red line most of these projects will be financed directly by Japanese companies mainly Mitsubishi, Hatsushi, and Sumitomo Corp, rather than state
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investment (Kyozuka 2016). However, although not making direct investments, Japan has pledged to offer technical assistance for a mass transit system in the greater Bangkok area (Nicolas 2018).
The other sector seeing a large quantity of investment in Thailand is the East Economic Corridor (EEC). The EEC is an ambitious project following the Thailand 4.0 policy, this policy is aimed around modernizing the country from a manufacturing one into an innovation-based one (Nicolas 2018). To achieve this, the EEC aims in building a new industrial basin for Thailand, through several different infrastructure projects to attract foreign companies. When looking at data from the JETRO, one sees rapidly that Japanese companies completely dominate it, investing over half of the total foreign capital, and building projects (JETRO 2018).
Japanese interests:
Investing in Thailand is very interesting mainly due to economic benefits. With so many Japanese companies in the country, maintaining good relations and increasing connectivity is crucial for the economy of the country (Nicolas 2018).
Both sectors where investments are present illustrate this. The HSR between Bangkok and Chiang Mai may be very profitable for Japan in terms of connectivity and limiting transport costs. With most of Japan’s
companies concentrated in Bangkok and to the northeast around Chiang Mai, these lines will connect
Japan’s industrial bases (Jiang 2019). Investments in the EEC, and the creation of a new industrial basin,
and commercial hub allows more Japanese companies to not only penetrate the Thai market, but also the whole Mekong region (Nicolas 2018).
In terms of geopolitics, Thailand is the most powerful nation in the Mekong, therefore, maintaining positive relations means further influence in the surrounding countries, such as Vietnam or Myanmar. Besides being part of the ASEAN, Thailand has a say in the ruling on restricting the Chinese claims in the South China Sea, meaning Japan could use it as a brake to China's expansion (AMTI 2018).
Dependence:
Ass for dependence, Japanese investors consisted of over 40% of FDI between 2005 and 2015 and the country remains the leading foreign investor, despite some variations (Nicolas 2018). Between 1985 and 2016 Japanese investments amounted to 86 billion, which was the double of the second investor the United
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States. As for FDI from their rival China, although increasing faster than Japan, these last years remains relatively smaller (Nicolas 2018).
However once again it is hard to argue that this dependence is used as a strategy of influence. With Japanese companies and governments insisting on profitability. An example of this is Japan insistence on the fact that the HSR line must be cut in two, because of economic feasibility. Japan is searching for profits from Thailand rather than loans (Jiang 2019).
In terms of development railway programs specifically, Thailand is not highly dependent on Japan, with China eager to build similar railways and offering lower prices in theory (Hong 2018). Although not certain yet, Thai and Chinese officials have been discussing, the construction of an 874 km railway, being part of a larger Pan Asian Railway project (Tanagsempipat &Wongcha Um 2019). However, Japanese companies dominate investments for the EEC when looking at projects and invested capital (JETRO 2018).
Lastly, although having a far smaller GDP than Japan, Thailand is still a far richer and a more powerful country, when compared to Vietnam or Laos. Meaning that creating dependence is far more complicated (WorldBank 2019).
Bandwidth:
Due to the history and quantity of Japanese investments in the Thai Kingdom, both nations have developed several bilateral forums of cooperation, increasing the Bandwidth of ties between the two countries (MFA Thailand 2018). The Japan-Thailand Memorandum of Understanding (MOU) in 2017, for example, came with the promotion of several investments (Nicolas 2018), while The Japan Thailand Economic Partnership (JTEP) focused directly on promoting development and investment between the two countries.
The number of organizations shows not only the depth of ties between the two countries but also that Thailand has become more than a simple recipient for investments becoming more of a partner with Japan for investment in the Mekong. The strategic tie between the JICA and the Thailand International Cooperation Agency and the Neighboring Countries Economic Development Cooperation Agency, show this new relation. With both groups cooperating in development programs in Ayeyawady, Myanmar for example (MFA Thailand 2018). Finally, future cooperation is also growing with both governments consulting each other to create new organizations such as the MIDV and METI (Wallace 2019).
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As stated multiple times throughout this essay, Japan has insisted on quality investment through technical support. To fulfil this promise, Japan has opened different Human Resource development programs in the host countries, such as in Thailand with the IHRCHI (MFA Thailand 2018; Wallace 2019). These organizations allow Japan to promote influence indirectly, through opening exchanges at the micro-level. Through the formation of engineers, and businessman around Japanese models, Japan can promote their ideals and closer ties can develop between the two countries (Wallace 2019).
In terms of multilateralism, both countries are members of investment and development related organizations, such as the ADB and ASEAN+3. Although not part of the TPP, Thailand said they were considering joining following a discussion on Japanese interest in investment in the EEC (MOFA b 2018).
Nevertheless, Thailand’s strategy of cooperation is very government to government, bilateral rather than multilateral. In this respect infrastructure investments tend mostly to be done through direct bilateral accords with the governments, rather than through an international open bidding system (Jiang 2019).
Policy convergence:
When looking at the situation on the surface, Japan seems to have a strong influence in Thailand.
Following data from IPSOS, used by Japan’s foreign embassy, it is stated that 83% of Thai’s see Japan as a
reliable and friendly country compared to the 73 % mean in the ASEAN. More specifically, 42 per cent of
Thais view Japan as very reliable. Albeit these results, the same data states Thai’s consider China as reliable
as Japan. This, therefore, shows the difficulty of Japan to keep Thailand in its sphere and does not show a strong policy convergence (IPSOS 2016).
When looking at tensions in the South China Sea, the Thai government, while not endorsing China’s claims
has been rather supportive. Back in 2016 following sightings of Chinese ships near the Philippines coast,
the Thai government stated that “it supports China’s efforts to maintain maritime peace in the region”
(Reuters Editorial 2016). The support of a direct Japanese rival shows a strong policy divergence.
Limits:
Therefore, following prior information, one can state that there is a lack of policy convergence between Thailand and Japan. This can be explained by several factors limiting influence through investment. First, Thailand is significantly richer and more developed than the other countries, therefore, it is far more complicated to exert influence on it or develop any form of Hirschmanesque relation through economic
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dependence (WorldBank 2017). This also explains why Thailand today is seen more as an economic partner to Japan rather than a recipient to their investments. This is especially visible when looking at the "Thailand plus one strategy", where Thai and Japanese companies are investing in the surrounding Mekong. This is in order mainly to outsource Thai costly labour to poorer countries (EIC 2016). In the long term, however, this could also mean Thailand would become a direct competitor of Japan as an FDI source in the Mekong. Secondly, Chinese competition has been very high compared to other ASEAN countries, with Japan already losing several projects in the area (Hong 2018; Nicolas 2018). However, in the long run, this might not be an issue with rivalry in infrastructure investment not being the only possible outcome. Sino-Japanese collaboration is more and more discussed and might offer an interesting contrast and show the limits of ideas in classic realism. This strategy is exemplified through the 7 billion joint projects the two countries will be working on (Wallace 2019).
Finally, there are also domestic factors not discussed earlier. The recent political change in the country and empowerment of the military junta through a coup in 2014, has caused a shift in relations. While Japanese investments had been growing since 2010, in 2016 following a deterioration in relations between the two countries investments dropped (Hartley 2017). Even though investment levels have somewhat recovered, the loss of influence has been important with the new government developing new ties with China (Jory 2017).