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11 Aug 2010

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Border Trade, 2H10: Growing Amid Obstacles (Business Brief No.2904)

Thailand's border trade with Malaysia, Myanmar, Laos and Cambodia has been growing in 2H10thanks to a high inter-dependence between Thailand and neighboring countries, especially with continued economic growth that has led to high demand for Thai-made products. Thai border trade has also benefited from AFTA tariff privileges.
Elimination of tariffs on normal track products by Thailand and Malaysia – among the founding ASEAN members – came into effect at the beginning of 2010. For Myanmar, Laos and Cambodia –as newer ASEAN members – their products under the inclusion list were subject to tariff reductions of 0-5 percent early this year. AFTA tariff privileges are expected to continue to boost our shipments to neighboring countries in the foreseeable future. As for imports, Thailand will also benefit from cheaper shipments of raw materials and intermediate goods from neighbors using AFTA privileges, as well.
Border trade between Thailand and Malaysia, Laos, Myanmar and Cambodia is likely to continue to thrive in 2H10 thanks to upbeat economies in the region, as well as AFTA tariff benefits. Thailand's border trade in 2010 may be close to the official target of THB700 billion after achieving THB388 billion in 1H10, equivalent to 55 percent of the 2010 full-year target.

Nonetheless, Thai frontier trade may be threatened by the Mae Sot-Myawaddy border closure undertaken by the Burmese government. Fortunately, that closure is not likely to last long given that their people may feel the pinch of higher goods prices due to shortages of Thai products. Another downside would be the current conflicts along the border between Thailand and Cambodia that will need a close watch over the remainder of this year.

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