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6 Mar 2017

International Economy

Vietnam May Overtake Malaysia in 2017To Become Thailand’s Top Export Destination in ASEAN (Current Issue No. 2829 Full ed.)

Growth is evident in Thailand's shipments to Vietnam for 2016; the 5.9-percent YoY increase we achieved represents the fourth consecutive year of positive performance to that destination. Given this uptrend, Vietnam should be closely observed as an important export destination for Thailand. This year is viewed by KResearch as another year of gains for our outbound trade sent there, which is expected to reach 5.8 percent growth YoY to a total worth of USD9.98 billion. As such, Vietnam would then overtake Malaysia as Thailand's top export destination in ASEAN. Amid much economic development – supported by high exports – Vietnam still lacks adequate supply chains and mid to upstream industries to satisfy their needs, thus necessitating imports of raw materials and intermediate components that are now 37.8 percent of their total imports. Their capital goods imports have also increased in response to industrial sector demand. With over half their aggregate imports being intermediate and capital goods, Vietnam's current requirements reflect their role as a promising regional industrial production hub.

Looking at Thai exports to Vietnam, that growth has mainly been in automobiles and air conditioners. However, Vietnam's manufacturing capabilities will likely present a challenge to certain products of Thailand in the future. Over the past seven years, Thailand has attained an average annual growth rate of 8.3 percent in exports to Vietnam, which was still below Vietnam's 12.8 percent p.a. average growth in imports during that same period. It is now questioned whether this is the time for serious export restructuring by Thailand vis-à-vis the Vietnamese market. In our view, Thailand should try to retain our export competitiveness through a strategy of integration with Vietnam's supply chains via the export of our intermediate components.

To grasp this opportunity and meet the rising demand of Vietnam's industrial sector, we should upgrade our manufacturing facilities for raw materials and intermediate goods where we are already skillful. Such products would include plastic pellets and electronic components, e.g., PCBs and ICs; they are also among the industries targeted by the Thai government in their Eastern Economic Corridor (EEC) Development Project. The EEC policy is aimed at enhancing “future industries” that will use advanced technologies to produce export-oriented goods, by which we could maintain our product competitiveness in world markets

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International Economy