In January, the government of Thailand signed a memorandum of understanding with Japan in a move aimed at boosting Japanese investors’ confidence in the potential of Thailand, as well as enhancing Thailand’s competitiveness and promoting collaboration between Thai and Japanese small- and medium-sized enterprises (SMEs).
It follows an earlier pledge by Japan last year to expand investment in Thailand, especially in high-technology industries; my own observations have been that Thailand’s corporate culture is still grappling with paper-heavy back-office operations that can and should, be fully digitised.
More Japanese tech firms are following the lead from both governments, with our own company Sansan, a technology leader listed on the Tokyo Stock Exchange, bullish on the potential of Thailand as an attractive market within the wider Southeast Asia region for business growth.
To that end, we recently opened a rep office in Thailand and are considering further expanding our operations there from our regional headquarters in Singapore and recent development centre opening in the Philippines.
We see Thailand’s growing digital economy, existing Japan-Thailand business links, and the government-backed push on digital as three reasons for the big opportunity for Japan’s tech leaders more broadly, with many traditional Japanese multinationals already operating in Thailand.
This is all part of the long-term trend of global tech firms trying to capitalise on the rapid growth of Southeast Asia and its population of nearly 700 million, with Singapore serving as a springboard for companies like ours into regional markets like Thailand.
Thailand’s growing digital economy
Thailand’s digital GDP reached ฿2 trillion baht (US$57 billion) in 2021 after posting year-on-year growth of 14.1 per cent, according to a study by the Office of the National Digital Economy and Society Commission released in November 2022.
Digital GDP made up 13 per cent of the national GDP in 2021, up from 11.8 per cent in 2020, which put it on par, if not higher, with the United States on a percentage basis.
By comparison, the US digital economy added US$2.4 trillion in value to the overall US economy in 2021, up from US$2.17 trillion the previous year (on a total US GDP of approximately US$23 trillion the same year).
We believe that digitising back-office paper in Thailand, specifically the corporate invoicing infrastructure, represents a major opportunity for technology providers able to gain an early share of that market as Thailand transitions to a more digital economy.
Existing Japan-Thailand cooperative business links
There is a long history of cooperation between Japan and Thailand with diplomatic relations first established in 1887; today, more than 5,800 Japanese companies are operating in Thailand, mostly in traditional industries such as shipping, maritime, and logistics but increasingly in high-tech sectors as well.
About 16 per cent of all direct investment in Thailand is coming from Japan, based on 2022 figures released by Japan’s Board of Investment, which is larger than that of any other country.
Thailand’s Commerce Ministry in January revealed that the Japanese were the top foreign investors in Thailand last year, with the top five sources of foreign investment coming from Japan (151), Singapore (98), the United States (71), Hong Kong SAR (40), and China (31).
Going back to 2021, the two countries set out their Five-Year Joint Action Plan on Strategic Economic Partnership (2022-2026), cementing mutual cooperation on a range of economic initiatives, including technology.
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Because of these long-standing cultural links, my observation has been that many Japanese businessmen and women are comfortable visiting and living in Thailand – I, too, have been spending much more time in Bangkok over the past few months as we look at ways to expand further into the country.
Government push for digital
The third reason we are bullish on Thailand as an overseas expansion market is due to the government’s ongoing work on a new digital economy policy formulation aimed at ramping up national development efforts in sectors including technology.
For example, the Digital Economy Division Office of the National Digital Economy and Society Commission announced its 2023 Thailand Digital Outlook Study Project a few months ago, which will analyse the overall policy development of the country’s digital economy and innovation.
As an actionable policy and roadmap, the commission will recommend practical measures to guide and develop the digital economy and society.
Japanese technology firms see the current moment as a good window of opportunity to put a flag in the Thai market and begin the hard work of supporting both international and local customers there – as well as winning new ones.
With companies like Apple now moving supply chains out of China and into Southeast Asian markets such as Vietnam, we think it is only a matter of time before the whole region is more firmly on the map of some of the largest technology companies in the world.
Markets like Thailand stand to benefit, and so do the companies who get a head start there this year.
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