Thailand Turns to Mekong Neighbors, Myanmar to Diversify Exports

Thai policy makers searching for ways to reverse a slump in exports may have found a solution close to home — a $170 billion market just over the border that’s growing by more than 6 percent a year.

As shipments to China, Europe and the U.S. slow, Thailand’s government is crafting a strategy to deepen links with Cambodia, Laos, Myanmar and Vietnam, an economic bloc known as the CLMV whose population of about 240 million people would make it the world’s fifth-largest if it were a country.

Thailand is spending about $83 billion over the next seven years to build new railways, roads and customs checkpoints to remove bottlenecks that hamper trade with its neighbors. It’s also negotiating with China and Japan to construct high-speed rail networks that may connect the nation’s manufacturing and shipping hubs with buyers and suppliers stretching from Yunnan in southern China to India’s northeastern frontier.

“With these new rail and road links to our neighbors, we will have very strong potential markets,” Commerce Minister Apiradi Tantraporn said in an interview on Oct. 2. “Thailand is in the heart of Asean and Asia, so we have to make the most of the location.”

Thailand needs new export markets because the global slowdown has damped demand for its electronics and cars, while ties with Europe and the U.S. remain strained following a military coup in May last year. The country wasn’t among the dozen Pacific-rim nations that agreed Monday to join the Trans-Pacific Partnership trade accord, and the European Union has said it won’t sign a free-trade agreement with Thailand until democracy is restored. Elections aren’t expected until at least 2017.

Next Year

“We don’t expect world exports will flourish overnight, but we do hope that we get good news next year,” said Apiradi, 66, who worked in the commerce ministry for 36 years and represented Thailand at the World Trade Organization from 1999 to 2002. “The U.S. is improving. The EU is improving. China will be more stable next year.” she said.

Thai exports have fallen for eight straight months this year on an annual basis, and the Bank of Thailand said last month that shipments may contract by 5 percent for the full year. The central bank also pared its expectations for economic growth this year to 2.7 percent from 3 percent.

The CLMV economies are projected to expand at more than twice that pace, according to World Bank data. The fastest-growing, at 8.5 percent, is Myanmar, which emerged in 2010 from half a century of military rule and will hold a general election next month. Imports to the CLMV region rose to about $167 billion last year, according to the bank.

“If Thailand can become the leader of the Mekong region, there will be great potential,” Kyoichi Tanada, head of Toyota Motor Corp.’s unit in Thailand, told reporters Monday at a factory in Samut Prakarn province near Bangkok. Toyota produces more than 600,000 vehicles a year in Thailand, mostly for export. In Indonesia, the biggest economy in Southeast Asia, it makes about 400,000 cars for the local market.

Part of Thailand’s strategy for escaping from the so-called middle-income trap is to become a trade and logistics hub for the CLMV, as well as regions in southern China and areas of India adjacent to Myanmar, Apiradi said.

Silk Road

Thailand is part of China’s planned transport network connecting the capital of southwest China’s Yunnan province with Vietnam, Laos, Cambodia, Thailand and Myanmar. China Railway Construction Corp. will help Thailand lay a track stretching more than 840 kilometers (520 miles) from Kunming to Bangkok and the eastern seaboard, and China will also build Indonesia’s first high-speed railway, beating out a bid from Japan.

Thailand is offering alternative rail projects to Japanese investors, including connections to the north and populous northeast and a route linking Kanchanaburi in western Thailand with Bangkok and Rayong in the east. The project will give Myanmar and India a rail link to Thailand’s Laem Chabang Port, Deputy Prime Minister Somkid Jatusripitak said Monday.

“We don’t put all our eggs in one basket,” said Apiradi, who joined Prime Minister Prayuth Chan-Ocha’s cabinet in August, cutting short her retirement. “We have Japan, which is also a big market. It has been stagnant, but Japan is also a big investor in Thailand.”

Pakistan, Bangladesh

Thailand is negotiating a free-trade agreement with Pakistan, and is also hopeful of benefiting from India’s border trade with Myanmar, Apiradi said. India is seeking to deepen economic partnerships with Asean member states as part of President Narendra Modi’s “act east” policy.

“Thai people are more familiar with China, and we need to introduce and get them familiar with the Indian market,” Apiradi said. “They will find huge opportunity there, and it isn’t only India. It’s Bangladesh and Pakistan.”

Source: Bloom Berg

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