(FORTUNE Magazine) – ONE GOOD WAY to check on the battle between the U.S. and Japan for Asia's growing markets is to look closely at a Southeast Asian country. And if that country is Thailand, a microcosm of the region's fast-growing economies, then Americans had better hightail it there to catch up. For every Thai hired by an American, at least three get paychecks from the Japanese. Even in the headquarters of Siam Cement, Thailand's oldest and largest conglomerate, instructions on faucets in the restroom are in Japanese. It was not ever thus. U.S. companies invested in Thailand about as heavily as their Japanese rivals for years, and America forged close ties with the country during the Cold War -- and especially during the Vietnam war. But starting eight years ago, as the yen's rise pushed Japanese companies overseas seeking cheaper production facilities, they began displacing American businesses as Thailand's largest foreign investors. The tally today: Japanese companies have invested $3.9 billion in Thailand since 1978, vs. $1.9 billion by U.S. companies. The Americans are No. 2, but not far ahead of entrepreneurs from Hong Kong, Singapore, and Taiwan. Now more American companies are waking up to Thailand's opportunities. U.S. firms last year invested more than their Japanese competitors for the first time since 1985 -- $129 million, or 38% more. But Japan's predominance is too large to be reversed rapidly. Says Nobuaki Tanaka, economic attache at the Japanese embassy in Bangkok: ''The reason Japanese investment has begun to slow is that almost everyone is already here.'' Japanese companies thrive in Thailand only partly because of the billions they have poured into it. They also pay close attention to training and culture. Minebea, a Japanese ball-bearing manufacturer, bought a Boeing 707 to ferry Thai workers to Tokyo for training. So far, one-quarter of the work force has made the trip. Like most big Japanese companies, Minebea is getting by in tough times at home, but its Thai factories are highly profitable. Sales should grow 11% this year. Japanese business practices naturally fit Thailand. Like the Japanese, Thais hate conflict and rely heavily on personal relationships. They complain that Americans are too legalistic and less willing to be flexible. Says Pramon Sutivong, senior vice president of Siam Cement, which has joint ventures with Japanese and American companies: ''The Japanese don't mind even if you pair up with their competitors. But with Americans, it's either you love me or you hate me.'' Not that Japanese companies haven't had to adjust their management styles. While Americans agonize over Thais who don't take initiative or make decisions, the Japanese struggle with Thai workers changing jobs or refusing to put in overtime. Asked to characterize his Thai employees, Hiroshi Imai, senior managing director at Toyota, rattles off a list: ''They are not punctual. They do not follow rules. They are not disciplined. And they have no organization.'' He then adds, as if to remind himself: ''That is not bad. But it is different.'' Like Japan, Thailand started with textiles and running shoes and is moving up the technology ladder. Japanese garment, electronics, and appliance makers have successfully exported the work Japan has outgrown, though electronics giants like Toshiba find it tough to make products much more sophisticated than television tubes in Thailand. Says Toshiba Semiconductor's slightly exasperated vice president, Ikuo Satoh: ''Every time the electricity goes out for even a second, we have to throw out thousands of transistors.'' But the losses haven't been bad enough for Toshiba to install a generator.

SOME AMERICAN companies committed to the Thai market have done well. Exxon, which goes by Esso there, supplies 25% of the country's energy and puts up 40 new service stations a year. Exxon's biggest new investment in the world is a $1 billion refinery expansion south of Bangkok to keep up with Thailand's galloping energy demand. The company also owns 20% of a $400 million pipeline being built north of Bangkok. Exxon has succeeded partly because it beat many competitors to Thailand when it set up its first refinery there in 1967. Even five years ago only five other oil companies were there, vs. 20 today. Another help: Exxon's willingness to transfer 12.5% of Esso's shares to Thailand's Ministry of Finance as part of the refinery expansion deal there. Sometimes heavy Japanese investment in Thailand creates business for U.S. companies. Auto parts manufacturers like Dana and TRW followed their Japanese clients to Bangkok. Dow Chemical plans to invest $60 million in a new plant to make polystyrene -- a plastic used in videocassette cases and parts of VCRs and TVs primarily by Japanese electronics makers. Whirlpool has grabbed 12% of Thailand's refrigerator market in just three years. How? It buys fridges from its Japanese competitor, slaps a Whirlpool label on them, and then sells them against the same company. GM expects to sell twice as many cars in Thailand this year as in 1992. But that will be only 1,000 Opels from Germany and Holdens from Australia sold by a Thai distributor. Says GM's representative in Thailand, Richard Papscoe: ''There is only one direction to go -- up.'' GM and all those other companies are there because up is emphatically the way things are headed in Thailand and the rest of Southeast Asia. Manufacturing in Thailand accounts for one-third of GDP, as it does for Malaysia and Singapore. Yet Thailand is far larger, with a population of 57 million -- 20 times Singapore's, three times Malaysia's. Besides being one of Southeast Asia's largest economies (estimated 1993 GDP: $117 billion), Thailand is also growing with breathtaking speed. Thais complain that their economy may grow a mere 7.5% this year. From 1988 to 1992 it averaged 10.5% annually, even with a series of coups d'etat. No other industrializing Asian country, including China, can match that record. The country is an economy under construction. Bangkok executives marvel at a panorama of rising skyscrapers as they wait in gridlock, sometimes for hours, to cross town. Consumers are becoming impressively richer. The average Thai income jumped from $710 a year in 1985 to $1,803 in 1992, adjusted for inflation of around 5% a year. Some estimate the average annual income in Bangkok is as high as $5,000. Automakers, almost all Japanese, sold 360,000 cars and trucks worth at least $5.7 billion in 1992. Forecasters estimate almost 500,000 vehicles will be sold in 1993. To understand how lucrative business in Thailand can be, just ask Toyota, which makes vehicles there for the Thai market and ships some trucks to nearby Laos. Thailand is the company's second-largest overseas production base after the U.S., yet Toyota plans to more than double capacity, to 200,000 units per year by 1997. In light of the Japanese advantage, should American laggards just forget about Thailand and go for other Southeast Asian markets? Says Steve Tsitouris, the head of AT&T in Thailand: ''Your competitors will be wherever you go.'' And latecomers can crack the market. Although AT&T took five years to get a government contract, the company is supplying one-quarter of the two million phone lines to be installed in Bangkok by 1997. AT&T might have done better if it had come to Thailand in the late 1950s, when NEC did. Still, a $10 million or so contract isn't bad and could help the company get some of the $8 billion of telecommunications projects Thailand is planning. Besides, no one stays king of the mountain forever, especially in a rapidly industrializing economy. Even Toyota doesn't take for granted its position as the top automotive company, as demand shifts from trucks to passenger cars. Says Takuma Sato, president of the Thai unit: ''If we don't invest appropriately, we could easily lose our place.'' Well, maybe not easily.

AMERICAN COMPANIES know they have to take Thailand more seriously, but entry is hardly getting easier. Japanese companies now ask the Thai government to consider Japan's strong commitment before giving breaks to American newcomers. And the Thais are keenly aware of their country's value in a world with few rapidly growing markets. Says Phisit Pakkasem, head of the National Economic and Social Development Board, which writes the nation's five-year economic plans: ''We are not crawling on our knees to beg for foreign investment.'' On the contrary: American companies that wait might have to do a little crawling to get in.

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