Japanese investors may relocate to Thailand after prolonged border situation

• Some investors are considering relocating their production bases from Cambodia to Thailand to reduce logistics costs and risks.
• The government has introduced investment promotion measures, such as exemptions from import duties on used machinery and tax benefits, to encourage relocation.

Impact on Japan’s supply chain

The prolonged Thai-Cambodian border situation has disrupted the transport of goods between the two countries, resulting in a 5-10-fold increase in transport costs and a 7-day transit time that used to take only half a day.

Many Japanese companies with production lines connecting Thailand and Cambodia have had to divert their transportation routes through Vietnam and Laos, significantly increasing costs and lead times, especially in the electronics industry with complex production processes.

Thailand’s opportunity to attract manufacturing bases

Some investors are beginning to consider relocating their production bases to Thailand due to its highly skilled workforce, well-equipped infrastructure, and better-connected logistics network with ASEAN markets. Despite higher labor costs than Cambodia, the stability and security of its infrastructure are key factors attracting investors’ attention.

Investment incentives

The government has approved investment promotion measures to assist investors affected by the border situation. These include exemptions from import duties on all used machinery, and allows investments in machinery no older than 10 years to be counted towards a 100% corporate income tax exemption.

It also allows some machinery to be relocated from Cambodia to be integrated with existing projects in Thailand within one year after submitting a project amendment request, and a relocation plan must be submitted by the end of 2026.

Perspectives on the future

Although relocating production bases has labor and cost constraints, considering Thailand’s stability and logistics connectivity in the region, relocation may be an attractive solution for investors seeking long-term stability.

Source: Thansettakij