Japan Paves Way for Asian Growth

A framed diploma from a famous Japanese karate school hangs prominently above Professor Suvinai Pornavalai's desk. His black-belt status is one of many fond memories the Thai economist has of his days at Kyoto University. The universal goal for students at prestigious Thammasat University, where the professor teaches, once was a graduate degree from the Sorbonne in Paris or an Ivy League university in the United States. Now they are taking Japanese language classes in record numbers and applying for scholarships at Japan's best schools.

The educational move to the East reflects an underlying economic reality.

``When I was a child, I knew only Singer, Philips, and GE [General Electric],'' Mr. Pornavalai recalls. ``I knew only Oldsmobile and Cadillac. I didn't know about Toyota, Honda, and Sony. But what has happened now?'' He adds: ``Japan has replaced the position that the Americans occupied in the postwar period - rich and helpful.''

Not all Thais would agree. But few deny that Thailand is in the midst of an economic boom that would be impossible without Japan. The growth of the Thai economy in the past three years has been sparked by foreign investment, half of which has come from Japan and more than a quarter from Asia's other rising powers, led by Taiwan.

Last year Thailand recorded an 11 percent growth rate, second only to that of South Korea in Asia. It expects to lead the pack this year with about 9 percent growth. In parallel, Japanese investment rose from $124 million in 1986 to $859 million in 1988.

The investment, Thai economists say, is the market response to the sharp upward revaluation of the yen and the currencies of the other Asian industrial nations, particularly those of Taiwan and South Korea. The currency rise, which began after a September 1985 agreement among major industrial nations, caused the goods of these exporting nations to lose competitiveness.

Businesses in those countries ``had to relocate industries outside to maintain market share,'' says Twatchai Yongkittikul of the Thailand Development Research Institute. Southeast Asia has garnered a significant portion of that shift of industries. And within that, ``Thailand was lucky to be able to absorb [much of] the relocation,'' the economist says.

Japanese electronics companies, automakers, and food processors are setting up shop in Thailand, shipping most of their production to the US, Europe, Asia, and back to Japan.

Sitting in his air-conditioned, wood-paneled office, the suave head of the Japanese Chamber of Commerce explains why Thailand became the chosen land. ``I can give you two reasons - King and Buddhism,'' says Akira Koyama, president of Mitsubishi Company in Thailand.

The Thai monarchy ``is a symbol of political stability and the continuity of economic policies,'' he says. Despite Thailand's history of military coups, the stabilizing influence of the monarchy ensures that politics ``does not swing to either extreme.'' Buddhism is a shorthand for Thai culture, which is ``more understandable for Japanese than others,'' the Japanese businessman says. The largely Islamic culture of Malaysia and Indonesia ``is more alien to the Japanese mind.''

BOTH Japanese and Thai experts point to what political scientist Prasert Chittiwatanapong calls ``a historical pattern of closeness'' between the two countries. Thailand and Japan have a 600-year history of relations, sharing a legacy of being the only Asian nations to successfully resist Western colonialism. While Japan subjected other Asian nations to its own designs before and during World War II, ``we were military allies in the Pacific War,'' the Thammasat University professor says.

But Thailand also has a long history of preserving its independence by balancing carefully between competing powers. In the postwar period, Thailand turned to the West, allying with the US. During the Vietnam War, Thailand was host to American bases and troops, and Bangkok was thronged with GIs.

When the Japanese returned in the 1960s as exporters, they sparked a powerful anti-Japanese movement. The Japanese were accused of being ``economic animals,'' interested only in making profits through trade.

The Thai student movement led a anti-Japanese campaign that culminated in January 1974 when thousands of demonstrators ringed the hotel of visiting Japanese Prime Minister Kakuei Tanaka. But a decade later, when students at Thammasat University, the center of anti-Japanese activity, tried to mount a new campaign, they could only mobilize a few hundred protesters.

``Perceptions have changed considerably,'' says Chulalongkorn University political scientist Surichai Wungaeo. In part, many Thai scholars agree, this is the result of a change in Japanese behavior, as well as a cultural exchange and public relations campaign by Japan's government.

``Before we knew Japan through Japanese goods,'' says Professor Wungaeo. ``Now we know many aspects of the Japanese.'' The Japanese community in Thailand numbers 30,000, not only businessmen but housewives who learn Thai and young people who have immersed themselves in Thai culture.

``The new generation of Japanese are not acting like ex-Imperial Japanese Army,'' says Mitsubishi's Mr. Koyama. ``They are devoid of that kind of arrogance and rudeness.'' But despite the evidence of generational change, the Japanese ``haven't fully overcome the past, their ethno-nationalism,'' Wungaeo warns.

The Japanese executive cites two other reasons for the improvement in feelings toward Japan. ``Thai people have realized that geopolitically, they are placed outside the defense line of the US after the end of the Vietnam War,'' he asserts. ``And economically, Japan is the biggest source of official aid.''

Others see the root of the change simply in the response of private business to the yen revaluation. ``The pressure of the market mechanism is responsible ... rather than the role of the Japanese government,'' says economist Pornavalai.

The establishment of Japanese factories has generated employment for an estimated 100,000 persons, says economist Banyat Surakanvit. Exports from those plants have helped improve Thailand's trade balance, accounting for what he estimates is as much as 20 percent of Thai manufactured goods exports.

But the Japanese-led boom has also generated new problems. Thai businessmen complain that the Japanese make little effort to transfer technology, preferring only to take advantage of abundant cheap labor.

THAI architects and construction companies have protested the use of Japanese companies to carry out projects financed by Japanese aid. Thai companies accuse the Japanese of hiring increasingly scarce supplies of skilled workers, engineers, and managers. And even though Japan's imports from Thailand have increased greatly, Japan's trade surplus with Thailand has also grown rapidly. Japanese experts argue this is temporary, the result of shipments of Japanese equipment for the new factories in Thailand.

Behind these issues lurks the persistent fear of Japanese domination. ``To extremely depend on one country is not good,'' says Professor Surakanvit.

The Thai government is seeking US and European investment, but with little success so far. The real challenge to the Japanese is coming from Hong Kong, Singapore, Taiwan, and Korea.

The potential for renewed Thai-Japan conflict remains.

``So long as the Thai economy is booming, it's fine,'' says Professor Chittiwatanapong. ``But when it goes down, the scenario may change.''

Third in a five-part series, the first two parts of which ran Nov. 6 and 13.