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23 Nov 2006

International Economy

Vietnamese and Thai goods compete to welcome WTO 2007 (Business Brief No.1900)


Vietnam's considerable success economically at the same time as stepping into the arena of the global economy and world trade is truly their New Year's gift. It is projected that Vietnam's economy will exhibit a steadily bright trend in 2007 after receiving their full WTO membership at the beginning of next year. Definitely, it will benefit Vietnamese exports in regard to import tariff reductions they will receive from WTO trade partners, which will increase the Vietnamese trade advantage in the global market. It is projected that Vietnam's exports will continue growing steadily at an average of 20 percent next year, against their growth target of 19 percent set for 2006. Vietnam's exports are growing rapidly, while Thailand's exports will grow at around 12-15 percent in 2007, decelerating from the forecast export growth of around 17 percent this year.

KASIKORN RESEARCH CENTER (KResearch) holds the view that the Vietnamese exports that have the potential to compete with Thai goods are divided into 2 groups, comprising those that Vietnam already has an advantage over Thai goods, and those that Thai producers should observe caution in the near future:

1. Vietnamese goods that have an advantage over Thai goods – Formerly many Vietnamese export items already had an advantage over Thailand before Vietnam gained WTO membership. After they become a full WTO member, these items will have an even greater edge over Thai goods because other WTO members that are Vietnam's trade partners will open their markets more to Vietnam by canceling quotas and reducing import tariffs on Vietnamese goods. Items that have clearly earned a favorable edge over Thai goods include garments, shoes, seafood and wooden products which are the top-ranked exports of Vietnam that directly compete with Thai goods because they are in the same categories sent to global markets.

2. Thai producers that should observe caution – Vietnamese exports that have the potential to compete, though will not likely surpass Thai products in the near future (and should thus not be disregarded) include some types of agricultural and industrial products, e.g., rice, rubber, electronic products and plastic products.

The world trade situation is tending toward greater globalization within the framework of the World Trade Organization and bilateral treaties between trade partner countries. This will be a positive factor toward more market expansion in products and services. Meanwhile, it will also drive competition to new levels. If Thailand and Vietnam export the same types of products to compete in the world arena, both countries should cooperate to enhance their competitiveness in the world market. In addition, this would add value to Thai and Vietnamese products and derive greater benefits for the economies of both people.

Thailand and Vietnam show high potential in the production of agricultural and agro-industrial products that are compatible with each other, such as the development of fisheries by depending on the abundance of aquatic breeding stock of Vietnam and the proficiency in production and processing of seafood in Thailand. These two complementary factors in the fishery and processed seafood industries of both countries need more development.

Moreover, Thailand and Vietnam should also cooperate to develop alternative energy from vegetable oil because Vietnam can grow plants that produce high volumes of oil. This can be used as a raw material for bio-diesel, as well. When utilized with Thai technology, it is expected that development of alternative energy would progress faster toward more extensive use.

Moreover, the synergies between Thailand and Vietnam show strength as the first- and second-ranked rice exporting countries, respectively, and the mutual competencies in production and exportation of foodstuffs, including vegetables and fruit as our strengths. Both countries should apply these strengths to form a strategy of becoming the ;World's Kitchen” in coordination. This would expand the role of Thai and Vietnamese agricultural produce toward greater significance in the world arena in the future.

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International Economy