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20 Oct 2009

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ASEAN-China FTA: Opportunity for Trade with Guangxi (Current Issue No.2185)

The 6th China-ASEAN Expo, a trade exhibition held October 20-24, 2009, in Nanning Prefecture, Guangxi Zhuang autonomous region, represents a vital venture in expanded trade, investment and tourism between China and ASEAN. In particular, Guangxi, which is an important trade gateway between China and ASEAN, is hoped to help boost trade with Thailand, ASEAN and China to grow dramatically.
This is consistent with Thai Ministry of Commerce plans to open a Thailand-China Goods Distribution Center at Nanning, along with the government’s policy of promoting Thailand as a logistic hub for ASEAN in the future. There are important benefits that we should stress during the upcoming ASEAN Summit at Hua Hin, Thailand, October 23-25, 2009, wherein Thailand will propose logistical system improvements linking transportation within ASEAN via three projects using ASEAN-China funds. These projects include the construction of the R12 Highway as a direct link spanning Bangkok to Pingxiang, Guangxi. Completion of the R12 to Guangxi province would be a good opportunity to boost Thailand’s trade with the Chinese market.
At present, ASEAN is the top trade partner with Guangxi by having a 30 percent proportion of the total Guangxi foreign trade. In 2008, the trade between Guangxi and ASEAN had an aggregate value of USD3,987 million, growing more than 37 percent over 2007. Their export value of goods to ASEAN grew 56.8 percent YoY, while the import value from ASEAN grew 8 percent YoY. However, the impact of the global recession hampered Guangxi-ASEAN trade from January to August 2009, falling almost 11 percent YoY. Key imports with slower growth during the period were mining products, peanuts, chemical products, machinery, electronic equipment and parts, etc.
Taking the trade between Guangxi and each individual member of ASEAN into consideration, we found that Vietnam is the No.1 trade partner with Guangxi, followed by Malaysia, Singapore, Thailand and the Philippines. In 2008, the trade value between Vietnam and Guangxi hit USD3,124 million, growing almost 32 percent over 2007, representing 78.3 percent of the total trade between Guangxi and ASEAN. Thailand’s aggregate trade with Guangxi is less than Vietnam, as our trade value was only 3.9 percent of the total trade with Guangxi at USD159 million, growing 37.8 percent over 2007. Thailand’s key exports to Guangxi are farm goods such as vegetables, fruit, rubber, gems and jewelry, electronic products, etc. Vietnam has higher trade with Guangxi than Thailand due to having a common border with Guangxi, which is of course favorable to the passage of freight between Guangxi and Vietnam. They also gain special tariff privileges that China grants to border trade.
However, Thailand’s logistics system development plans toward links with China include the R9 and R12 Highway routes that will be helpful to increase the competitiveness of Thailand and ASEAN trade rivals equally, especially Vietnam, which is Thailand’s main trade rival in such trade. Thailand benefits from becoming a part of the supply chain between ASEAN and Chinese markets. It is expected that trade between Guangxi and ASEAN should improve in the coming months and will show growth in 2010 along with the Chinese economy that should continue healthy growth in 4Q09, after improvements were seen in 2Q09, plus the favorable factor of ASEAN-China trade liberalization that will be fully enforced in 2010. At that time, goods in the FTA Normal List will gain duty-free status on January 1, 2010.
Thai export goods with potential to Guangxi would include fruit, thanks to the substantial growth in Chinese consumer demand. Thai fruit popular with them include durian, pomelo, tangerines, longan, mangosteen, tamarind, mangoes, rambutan and bananas. Other Thai goods likely to be successful in Guangxi include chilled and processed seafood, processed fruit, tapioca products, rubber, vegetable oil, rice, sugar, etc. Aside from Thailand’s trade opportunities in Guangxi as above, opportunities to expand investment, trade and service sectors within ASEAN and lower China exist as well. A supporting factor for Thai entrepreneurial efforts in this would be the development of transportation routes linking ASEAN and China. Thailand’s best potential for investments would most likely lie in processed agricultural products, plus electronics and related parts. Investment opportunities of primary interest in the service sector would be tourism, logistics, retail trade, banking and finance, etc.
KASIKORN RESEARCH CENTER (KResearch) holds the view that the public sector and related agencies should coordinate and expand cooperation with other related ASEAN members with respect to the details regarding freight transportation and Customs procedures to eliminate barriers to trade and facilitate freight shipments reaching their final destinations more efficiently and rapidly.

; Moreover, the state sector should expedite the development of logistics infrastructure and improve Thailand’s transportation facilities. Thai businesses should conduct research and development into product models that would better suit market demand and behavior of consumers in China and ASEAN. They should be mindful of the importance of product quality and further their brand recognition to achieve sustainable success, as well as cooperating with the government to glean whatever useful trade information they can that would help us improve Thai competitiveness and reduce international trade barriers.

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