Thailand bets on neighbors' rising incomes to lift exports
A truck approaches a border crossing between Thailand and Laos: Thailand plans new crossings and other infrastructure to deepen trade links with its neighbors. (Photo by Keiichiro Asahara)
BANGKOK -- Thailand is working to increase trade with its neighbors, betting that their rising purchasing power will cushion the blow from exports lost to the U.S.-China trade war.
The Southeast Asian country has set up a Joint Border Trade Committee, or JBTC, with Myanmar to reduce paperwork and smooth logistics at border crossings, according to Adul Chotinisakorn, director-general of the Ministry of Commerce's Foreign Trade Department.
The JBTC "has cut paperwork at the checkpoints along the Thai-Myanmar border," said Adul. It used to take several days for Thai goods to be delivered to Myanmar, but the changes mean the necessary forms can be completed in "half an hour," he said.
Adul added that Thailand plans to set up similar bodies, together with Cambodia, Laos and Malaysia. It also plans to open more border crossings and extend working hours at the crossings by one hour, keeping them open from 5 a.m. t o midnight. At present, the crossings close at 11 p.m.
With the changes in place, the Thai government has set a target for a 15% rise in the value of cross-border trade to 1.5 trillion baht ($45 billion) this year versus 2017. It expects the same rate of growth in 2019. Border trade is becoming more important to Thai exports, thanks to stronger demand from Mekong countries. These countries are experiencing solid economic growth and incomes are rising.
According to the World Bank, Vietnam's gross domestic product grew 6.8% in 2017, and the economy is forecast to grow more than 7% this year. Laos logged growth of 6.89% growth last year, while Myanmar saw an expansion of 6.3%; Malaysia's economy grew 5.9%. Thailand, the second-largest economy in ASEAN behind Indonesia, saw its GDP rise 3.9%.A barge sails on the Mekong River near the borders of Laos, Myanmar and Thailand. The Thai government hopes to lessen the impact of the U.S.-China trade war by encouraging regional trade. Â© Reuters
Economic growth and expanding foreign direct investment in Mekong countries are expected to lift incomes in the region further. Thai products are popular in neighboring countries, particularly Laos and Cambodia, where civil wars in previous decades stunted local industries and inhibited the development of consumer goods.
Thailand is also offering to help its neighbors develop their infrastructure. One example is the expansion of roads and construction of a second bridge and a new border crossing between Thailand's northwestern city Mae Sot and Myanmar's Myawaddy. These are expected to be finished by the end of the year.
Thailand is in talks with Cambodia and Laos over road construction projects and to expand existing trade routes. Trade facilities along the border promote Thai overland exports from Mekong countries to others, especially to southern China, where the Belt and Road Initiative is easing logistics.
These efforts are part of Thailand's strategy to put more emphasis on border trade amid concerns that its exports may be hurt by the intensifying trade war between China and the U.S. Although the dispute has not affected the Thai economy much so far, it has caused problems for some of its trading partners, indirectly cutting Thai exports.
"The trade war has caused uncertainty in trade policies among our trade partners, and that has adverse effects on Thai exports," said Pimchanok Vonkorpon, director-general of the Commerce Ministry's Trade Policy and Strategy Office.
Thailand's exports fell 5.2% on the year in September, the first decline in 19 mont hs. Further falls could slow the economy, as exports account for more than 60% of its GDP.
Pimchanok said the trade promotion office is working closely with Thai commercial diplomats in 64 countries, drawing up plans to prevent exports from falling further, as the trade war is expected to escalate.
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