Are Japanese Companies Leaving Thailand After Devastating Flood Damage?

by on October 5th, 2010
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BANGKOK — In the first of what may be a devastating pullout by Japanese firms from Thailand, Sanyo Semiconductor announced today it’s closing its factory and leaving and, honestly, you can’t blame them. After spending three months with their factory, on a Thai industrial park, nonoperational and inundated by floods, Sanyo said the money needed to renovate and rebuild is more than they can afford. Their plant will remain closed, and 2,000 people in Thailand will lose their jobs. Thais are worried Sanyo is just the first of many.

Two main problems have occurred with Japanese-owned companies and the flooding in Thailand — two problems that haven’t affected factories owned by other international companies nearly as much, but that devastated Japanese firms.

First, Japanese companies were already reeling from the massive cost of the March earthquake and tsunami in Japan. Add onto that the loss of income and cost of renovating after Thailand’s three months of floods and, if it was you, you’d probably say “Enough” too. Toyota just announced their annual profits are only 50 percent of what they should be — 200 billion yen, instead of the 450 billion expected. They haven’t said if they’ll be remaining in Thailand or not yet.

Even worse for the Japanese, using typical “Japanese efficiency” actually harmed them in a way being less efficient helped other foreign-owned and Thai-owned companies. Put simply, while other companies had their factories and distribution systems all over the place, Japanese companies consolidated everything into one spot. Perfect for the cheapest and fastest distribution in Thailand. A logistical and financial nightmare when that one massive factory you own, which runs all your business endeavors in the entire country, ends up under nine feet of water — overnight.

In my neighborhood of northern Bangkok, Japanese-owned restaurant chain Hachiban is now in their third month with all 85 of their Thailand restaurants closed. Like others, all their food came from one factory located on a flooded Thai industrial park. With no food and no restaurants, 10 weeks later that equals no income.

7-Eleven stores are the most popular Japanese-owned store in Thailand with 6,000 in the country and 3,000 in Bangkok alone. All four 7-Elevens within two blocks of me (yes, there are four) have had barely anything to buy for six weeks now. The floods that hit my area disappeared long ago but, three and a half weeks later, and none of my neighborhood 7-Elevens can get even simple things like Lay’s potato chips, dried noodles, soy milk, toilet paper, milk, cookies and coffee.

Last night, I had to go to all four 7-Elevens, just to pick up the snack foods I’d normally buy at one. It took me an hour. Next week, I’ll give all of them a miss and take the bus to a local supermarket instead. It’s simply too much hassle.

Of course, with typical Thai optimism or, what westerners might call ‘naivete’, Commerce Minister Kittiratt Na-Ranong said today, even though Sanyo Semiconductor is shutting up shop, large foreign companies will not leave Thailand. He believes flood prevention plans being created right now will give more confidence to Japanese and other foreign companies, ultimately causing them to stay.

The problem is, many Thais don’t even believe in these new “flood prevention plans”, so why on earth would the Japanese?


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