This year will be a tough one for Thailand, as both the government and private sectors prepare for full integration under the Asean Economic Community after December 31.
Regional integration at the start of 2016 will offer greater opportunities for Thai businesses that are well prepared, while it will be a challenge for those that are not, or which are less competitive.
Full implementation of the AEC comes with both advantages and some serious challenges for many of the countries involved, including Thailand.
The Nation has put together the following information for readers about the AEC.
According to the Trade Negotia-tions Department, the AEC will have a combined population of over 575 million and total annual trade exceeding US$1.4 trillion (Bt46 trillion).
The Asean vision is to create a stable, prosperous and highly competitive Asean economic region, in which there is a free flow of goods, services, investment and capital, equitable economic development and reduced poverty and socio-economic disparities.
AKP Mochtan, deputy secretary-general of Asean for Community and Corporate Affairs at the Asean Secretariat, said the economic performance of the region remained robust, with Asean’s gross domestic product having expanded 5 per cent in 2013.
While regional economic growth is forecast to soften to around 4.6 per cent last year, it is expected to pick up to 5.3 per cent in 2015, he said, adding that the economy would continue to show stronger growth in the years following regional integration.
The Asean Secretariat will continue to maintain the region’s resilient macroeconomic fundamentals and financial stability, address domestic weaknesses – especially in infrastructure – and deepen economic integration and liberalisation, in order to sustain and improve the region’s competitiveness for trade and investment, he added.
Intra-Asean trade growth leads the way
Intra-Asean trade increased at a faster pace – with annual growth averaging 10.5 per cent – than either overall Asean trade (9.2 per cent) or extra-Asean trade (8.9 per cent) from 1993 to 2013.
The share of intra-Asean trade in overall Asean trade during the period was on an increasing trend, rising from 19.2 per cent in 1993 to 22 per cent in 2000, and to 24.2 per cent in 2013, when it accounted for 25 per cent of the region’s GDP.
Asean, meanwhile, is a very important export market for Thailand, accounting for about 20 per cent of the Kingdom’s trade last year.
Dependency on major trade partners
Some major trading partners from outside the region, although accounting for a small share of overall Asean trade, have continued to play an important role in some commodities.
On the one hand, most major trade partners have focused on commodity items on which Asean is highly dependent, with shares of above 75 per cent of Asean commerce in a particular commodity product.
These include imports of meat and wool from Australia and New Zealand; cobalt ore and concentrates from Canada; peanut oilcake and other solid residues from India; and asbestos from Russia.
On the other hand, in 2013 Asean secured its position as a net exporter of agricultural and manufacturing products, with trade surpluses of $44 billion and $7 billion, respectively.
The region also maintained its position as a net exporter of rice, with a trade surplus of $6.5 billion in the same year.
Foreign direct investment
Data on foreign direct investment (FDI) inflows in Asean showed that from 2000 to 2013, intra-Asean FDI inflows grew at an average annual rate of around 25 per cent, while extra-Asean FDI inflows posted average annual growth of 13 per cent.
Total Asean FDI inflows stood at $122 billion in 2013, with extra-Asean countries providing $101 billion.
Major sources of inward FDI were the European Union, with 22 per cent of the total, Japan (18.7 per cent), Asean member states (17.4 per cent), China (7.1 per cent) and Hong Kong (3.7 per cent).
Economic activities in the services sector accounted for the bulk of FDI inflows to Asean, with an average share of nearly 70 per cent in the last four years, followed by FDI in manufacturing.
What the experts advise
If they have not already done so, experts strongly urge Thai enterprises to urgently prepare themselves for the seamless market, while also looking for greater chances to trade and invest both inside and outside the region.
Somkiat Tangkitvanich, president of the Thailand Development Research Institute, said the AEC would create linkage in terms of trade, investment and the movement of labour.
Although some obstacles would still exist, including non-tariff barriers and customs procedures, the AEC should offer greater opportunities for Thai businesses to adjust themselves, as they cannot avoid the global trend of trade liberalisation, he said.
“The highlights of the AEC are having an almost ten-fold increase in market size by, a nine-fold rise in the labour market, and greater chances for accessing natural resources and other energy sources,” he added.
Somkiat said the most effective way to take advantage of the benefits of the new systems and the greater flow of people, information, trade and business that would come, was by being fully prepared in advance.
Chutinun Siriyananda, director of the Bureau of Trade Measures under the Foreign Trade Department, said Thai businesses, and especially small and medium-sized enterprises, would need to be more aware of non-tariff measures, as many countries would likely impose more of these barriers to protect their domestic markets in the absence of tariffs.
Non-tariff measures will be seen mainly in the areas of environment, labour enforcement and anti-dumping duties, he said.
To ensure market penetration, Chutinun said companies should develop their products and services in accordance with international standards, as well as with the demands of each market, and always be alert to new rules and regulations. –Petchanet Pratruangkrai, The Nation
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