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29 Jan 2009

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ASEAN FTAs: Hope for Thailand’s Exports (Business Brief No.2415)

Important documents in the ASEAN cooperation framework and agreements that were approved by the Thai Parliament on January 27, 2009, will enable Thailand to sign them with other ASEAN member countries per Section 190 of the 2007 constitution. Some of the agreements are due to be signed at the 14th ASEAN Summit to be hosted by Thailand, during February 27-March 1, 2009, at Hua Hin, while other agreements are expected to be signed during the second summit meetings between ASEAN and negotiating partners to be held in April 2009.
Those ASEAN FTAs that are due to be completely signed off this year include the ASEAN-India FTA, ASEAN-Australia-New Zealand FTA, ASEAN-China FTA on investment, and the ASEAN-South Korea FTA on goods and services. These agreements are expected to be gradually enforced since 2Q09 after the FTAs are signed in February and April of this year. They should help increase our exports to the respective FTA partners somewhat. In the near term, however, Thai exports may be hampered by deteriorating demand abroad due to the ongoing impact of the global economic recession, but our prospects should improve over the long term when global economies recover.
KResearch forecasts that Both the ASEAN-India and ASEAN-South Korean FTAs will become effective very soon, especially ASEAN- India FTA, which may be enforced in 2Q09. Hence, Thai exports growth to India are likely to show more satisfactory growth than seen in 2008, when Thai exports to India decreased to 27.7 percent, against the growth of 47 percent achieved in 2007. The export growth rate to that destination had been rather high compared to Thai exports to other countries in 2008.
Also, the ASEAN-South Korea FTA that may be enforced in 3Q09 will enhance the price competitiveness of Thai exports to South Korea on par with other ASEAN members that have already signed on the ASEAN-South Korea trade liberalization pact. Although Thailand will gain the benefit of liberalization with the above trade partners, we may face tough competition from ASEAN members in FTA trade markets because their exports also benefit from liberalization and their price competitiveness has improved as well.

Thai products that will benefit from the ASEAN-India FTA include canned fish, fruit juice, automotive engines, electrical appliances, electronics, etc. Meanwhile, the ASEAN-South Korea FTA will also benefit many other Thai products, e.g., molasses, yarn, chilled/frozen shrimp, cassava, squid, jewelry, etc.

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