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9 Sep 2016

International Economy

GSM CBTA Provides Greater Thailand-Vietnam Trade via R1 (Current Issue No. 2772)

The Greater Mekong Subregion (GMS) member countries—Thailand, China, Vietnam, Cambodia, Lao PDR and Myanmar, ratified all the annexes and protocols of the GMS Cross-Border Transport Agreement (GMS CBTA) by the end of 2015. A Greater Mekong Subregion Cross Border Transport Facilitation Agreement Joint Committee Retreat was then held on July 15, 2016. Key discussions at that meeting included cooperation to amend regulations concerning international transport and an increase in the quota on border-crossing carriage vehicles and international non-regular public transport up to 500 vehicles. R1 (Bangkok to Ho Chi Minh City via Aranyaprathet, Poipet, Phnom Penh and Bavet) will likely benefit from this change the most because only Thailand and Cambodia currently have transport vehicle border quotas at just 40 vehicles along this route.

KResearch expects that the higher vehicular quota and faster customs clearance processing will shorten freight transport transit times on R1 from Thailand to Vietnam by about 8-10 hours, i.e., down to 23-31 hours from 31-41 hours, currently; transport costs will fall by 30.0-35.0 percent. Moreover, this agreement will enhance Thailand's overall cross-border trade to Vietnam via R1. High-potential products include inorganic chemicals, air-conditioners, beverages, auto parts, and fruit. KResearch estimates that Thailand's outbound shipments via the Aranyaprathet Checkpoint on R1 will grow 19.4 percent YoY, amounting to about THB1.5 billion in 2017.

Nonetheless, some other obstacles may affect current freight costs to Vietnam via R1. Therefore, effective cost control over both inbound and outbound transport is much needed for logistics business operators to achieve efficient operations. At the same time, Thai authorities may consider accelerating discussions and ratification concerning international transport treaties with Cambodia and Vietnam to facilitate cross-border trade via R1, which would be beneficial to the overall economy of Thailand.

International Economy