OPENING DOORS

Thailand 2017 | ECONOMY | FOCUS: FTAS

Thailand is looking to expand its trade relations with its neighbors and beyond in an effort to boost its economy and international standing, with the AEC being the main thrust of its efforts.

On January 1, 2016, the ASEAN Economic Community (AEC) opened its doors, giving Thai firms unprecedented access to the neighboring 600 million market. From Indonesia to Brunei, Singapore to Myanmar, Thailand's export-driven economy will gain a stronger footing in the Southeast Asian bloc that many hope will one day rival regional giants China and India. Moreover, having already established deep business ties with the aforementioned giants, along with Japan, Korea, the US, and EU states, the integration of ASEAN into a single market will only broaden the country's trading portfolio.

Nonetheless, ongoing instabilities in global markets have pushed Thailand's exports down for a third consecutive year, falling 5.7% in 2015 YoY. As such, authorities have been forced to think creatively and explore fresh trading options—even it means venturing further afield. In an interview with TBY, Thailand's Minister of Commerce, Apiradi Tantraporn outlined this strategy: “Despite Thai firms not having the know-how to access these new markets yet ... this is the time to bring our businesses to the emerging economies."

Step one is to expand the country's list of free trade agreements (FTAs), which currently extend to Japan, Australia, New Zealand, Peru, China, Chile, and, of course, the ASEAN states. With many more in the pipeline—including India and the EU—the government is moving full throttle to develop new trade links for its vast industrial sector.

Next on the list is likely to be Pakistan, Thailand's second biggest partner in South Asia (46th globally). In 2014, bilateral trade between the two topped $1 billion, with Thailand's exports accounting for $874 million. Following the second round of negotiations in January 2016, the two states agreed to formalize an FTA in May 2017 that will not only promote trade and closer cooperation, but also act as a springboard for each state to access the South Asia and ASEAN regions respectively. Evidence of Thailand eyeing South Asia as a key export market lies in recent state visits of Sri Lanka's President and India's Vice President to Bangkok, while a high-profile Thai business delegation visited Bangladesh in February 2016 in a bid to quadruple trading volumes over the next five years to $4.8 billion.

Nonetheless, the government is by no means shortsighted with its “springboard" strategy. In February 2016, Minister Tantraporn and Deputy Prime Minister Dr Somkid Jatusripitak led an official visit to Oman and Iran to help boost trade ties. In Oman, the pair discussed cooperation in the energy sector with their counterparts, while also establishing a committee to study the possibility of a future FTA. In Iran, Thai exporters struck deals worth THB5.3 billion to sell rice and rubber to the country, following years of economic sanctions that prevented earlier trade.

More importantly, such deals could pave the way to new regions and new opportunities. According to Minister Tantraporn, “Oman is a small country, but it is a member of the emerging GCC bloc and can also be a link to the East African countries." Likewise, while she admits Iran is a huge market with great potential following its reintroduction to the global economy, she is also excited by its proximity to the CIS states and the opportunities that could follow. Indeed, the Minister's upcoming visit to Belarus could help cement this ambition. Minister Tantraporn concluded to TBY that country has to keep its traditional partnerships with the likes of the US, China, and the EU. However she also stressed that “there are also new, niche markets where we try to adapt our business, products, and services to suit each of them."