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21 May 2014

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Indochina Border Trade Booms – Trade Value to Reach THB1 Trillion in 2016 (Current Issue No. 2504 Full Ed.)

Several countries bordering Thailand – Myanmar, Lao PDR and Cambodia (CLM) – have been experiencing significant progress in recent years, thanks to their governmental policies that are quite favorable to foreign direct investment (FDI). They are also backed by other advantages with regard to their workforce, labor costs, abundant natural resources and trade privileges offered by developed nations, e.g., the Generalized System of Preferences (GSP). The CLM countries – as well as Southern China – provide excellent opportunities for Thai businesses trying to spread their wings.
Strategically located in the geographic center of the region, Thailand's borders with these countries stretches over 5,000 kilometers, providing us a number of advantages in border trade. Transportation costs for border trade are low and these markets can help absorb product oversupply in Thailand, as well as helping alleviate the negative effects on Thai businesses during the economic slowdown. On top of that, FDI projects begun in the CLM countries will obviously boost demand for construction materials and other goods; thus lending support for Thai exports.
Since 2011, a global economic crisis has taken a toll on Thai outbound trade, given that lower sales to key trade partners like the US and EU caused our trade balance in Baht to be in deficit for three consecutive years (2011-2013). Burgeoning border trade was the exception, though.
We at KResearch predict that border trade will rise to THB0.95 trillion in 2014 and may reach THB1 trillion by 2016. Meanwhile, cross-border trade is forecast to grow 12 percent this year, bringing the total value of border trade to THB1.1 trillion. Contributors to these stunning numbers include urbanization and a growing middle-class population in the CLM states where Thai products have made a name for their quality.
Over the long run, border trade should be bullish, given that ASEAN member states including Thailand are making adjustments in several areas to accommodate a closer economic integration within the region. The development of border areas, linkages in transportation routes, simplifications of customs procedures, tariff reductions and extended hours of operation at border crossings are all moves vital to a wider presence for Thai products in regional markets.
In addition, numerous bilateral cooperation frameworks, e.g., The Greater Mekong Subregion Economic Cooperation (GMS) and ASEAN Trade in Goods Agreement (ATIGA), can amplify the role of border and cross-border trade in the Thai economy in the years to come. Although it may take some time before all regulations can be fully enforced, Thai merchants should keep track of changes to make the most of market opportunities there, as well as find the means to cut transportation costs.

Operators who have not entered foreign markets should start looking for approaches to do so, perhaps by taking the first step in neighboring countries where it is not too challenging. This should help them secure market shares amid intensifying competition that will likely get tougher after the inception of the AEC.

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