As China and Japan fight over uninhabited islands in the East China Sea, Yeap Swee Chuan is benefiting. Yeap is president and chief executive officer of Aapico Hitech, a Thai auto parts maker that supplies Toyota and Honda as well as small and midsize Japanese companies. The company’s stock price has more than doubled in the past year, and Yeap expects his head count to increase by as much as 15 percent in 2013. Japanese executives often talk to Yeap about security concerns over their investments in China. “They like to go to a country where they feel safe,” he says. Thailand “is friendly and warm—and the golf is fantastic.”
Japanese businesses have been in Thailand for decades. Bangkok has several Japanese enclaves, a Japanese school, and plenty of Japanese restaurants. There’s even Soi Thaniya, a red-light district catering to Japanese, with one bar employing women dressed as Singapore Airlines flight attendants who try to lure in Japanese customers.
Now Thailand and other Southeast Asian nations have an added benefit: They’re not China. After Japan bought the disputed islands from a Japanese owner in September, Chinese demonstrators set fire to a Japanese-owned factory and auto dealership, and consumers boycotted Japanese products. On Feb. 4, Japanese officials said that Chinese naval vessels had locked weapons-guiding radar onto ships of the Japanese navy. “China has become less of a friendly market,” says Michael Spencer, chief economist for Asia for Deutsche Bank in Hong Kong. “Anti-Japanese feeling among some Chinese people” is one factor leading Japanese investors to look elsewhere, says Hirokazu Kono, dean of the Keio Business School in Yokohama.
Southeast Asia, where anti-Japanese feelings from World War II are not as strong as in China, offers alternatives. “Some Japanese investors in China feel bullied,” says Katsuaki Nishikawa, a director of the Japan-Vietnam Cultural Interaction Project. “Vietnam feels safe.” Japanese pledges to invest in Vietnam more than doubled last year from 2011, to $5.1 billion.
The region’s economies have shown impressive resilience since the global financial crisis. The Asian Development Bank in December raised its 2013 forecast for Southeast Asian economic expansion from 5.6 percent to 5.9 percent, partly because of increased infrastructure spending and robust consumption.
The Philippines and Vietnam also have territorial disputes with China. That tension is one reason Japanese Prime Minister Shinzo Abe visited Southeast Asia in January. The Japanese “see Southeast Asia as natural allies,” says Thitinan Pongsudhirak, a professor at Chulalongkorn University in Bangkok. “If you don’t like China and China has a problem with the Philippines and Vietnam, don’t you think those would be countries you would want to befriend?” Last year, Japanese exporters sold $129.8 billion in goods to the members of the Association of Southeast Asian Nations (Asean)—that’s a 5.8 percent increase from 2011—while Japanese exports to China dropped 10.4 percent, to $144.7 billion, according to Japan’s Ministry of Finance.
Japanese manufacturing in Southeast Asia is accelerating. Toyota announced in November it will increase production in Indonesia. Bridgestone, the Tokyo-based producer of tires, on Jan. 17 said it plans to spend 3.7 billion yen ($40 million) on a new technical center in Thailand. After its Thai sales hit a record in 2012, Honda said on Feb. 6 it will invest $476 million in a new factory with annual capacity of 120,000 cars. Suzuki announced the same day it will start making trucks in Myanmar in May.
Among the most confident is Nissan, which is investing 11 billion baht ($370 million) to open a second Thai factory. Although Japanese companies do “have a unique situation related to China,” says Takayuki Kimura, head of Nissan’s Asean business, “in Asean the people are very friendly to Japanese products and manufacturers.” Nissan aims to nearly double its sales in the region, to 500,000 vehicles a year, by 2017. It just announced an investment of $34 million in its Thai R&D center.
“For Japanese, Thailand is an easy place to live,” says Masashi Honda, president of Asia-Pacific operations for Fuji Xerox, the Tokyo-based maker of office equipment. Unlike in China, there’s little danger in being pro-Japanese. Pawoot Pongvitayapanu, founder of Thai e-commerce website Tarad.com, is a big fan of Japanese manga. “I grew up on this,” he says. “Japanese culture is in my blood.” Good thing: Japan’s biggest e-commerce company, Rakuten, bought control of Tarad in 2009. When it comes to Thais working with Japanese, “we feel they are not strangers.”