AFTA drives increase in border trade

Despite a range of political and economic hurdles, trade with neighbouring countries now has great potential for growth.

The lowering of tariffs under the Asean Free Trade Area (Afta) earlier this year has started to increase Thailand's border trade, with local entrepreneurs being encouraged to tap the opportunity, while staying alert to potential pitfalls.

Although border trade slipped slightly in 2009 during the global slowdown, business experts see great growth potential, especially in markets such as Burma.

Trade between Thailand and its neighbours totalled 639.16 billion baht in 2009, down by 10.4% from a year earlier. Thai exports dropped by 10.8% to 366.11 billion baht, while imports fell by 9.8% to 273.04 billion, according to Foreign Trade Department statistics.

But the Commerce Ministry has forecast that Thailand's border trade will reach 1 trillion baht over the next three years, after Afta cut tariffs on thousands of Asean products to between zero and 5% on Jan 1.


About 61% of trading value was attributed to trade with Thailand's leading Asean trading partner, Malaysia. Burma accounted for about 21%, Laos 11% and Cambodia 7%.

The potential for greater border trade has been recognised by most governments and the Thai government has stated that it wants to increase border trade to 1 trillion baht by 2012. Border trade this year is expected to reach 700 billion baht.

But Thailand's chambers of commerce have warned of hazards. They advise Thai entrepreneurs to embark in the sector with great care if they want their businesses to survive in the long term.

Provincial chambers of commerce warn that border traders must be ready to adapt to new free trade agreements prompted by tighter co-operation among Asean members.

Different markets pose different problems, ranging from a political dispute with Cambodia, military rule in Burma, and a competitive threat from manufacturing in Laos.

Burma, which has gradually started to open up to business, offers particular potential for growth as its population continues to need goods and services from Thailand, driving a sharp increase in border trade.
Trade through the Mae Sot border checkpoint soared last year to 25.02 billion baht, up from 18.45 billion in 2008, said Banpot Korkiatcharoen, chairman of the Tak Chamber of Commerce.

Two-way trade through the checkpoint continued to climb in January to 2.58 billion baht, which suggests this year's figure will also increase, he added.

Promotion of Mae Sot as a special zone and the opening of the friendship bridge with Burma are the main factors behind the trend, he said. Automobiles and oil products are the main goods traded, he added.
"If the value reaches 28 billion baht, it would be good," he said.

The southern border trade, which accounts for 61% of Thailand's border trade, is another important growth area.

Surachai Jitpukdeebodintra, president of the Songkhla Chamber of Commerce, said the current situation suggests border trade will grow by at least 10% this year.

Rubber's surge in price to 96 baht a kilogramme, up from an average of about 40 baht last year, will propel border trading, he added.

Rubber-based products are Songkhla's major export goods, accounting for about 60% of total value. Border trade at Songkhla in February was about 55 billion baht, up by 25% from the same period last year.

Malaysia's minimal impact from the global economic downturn has also helped spur Thai border trade with the country.

In the Northeast of Thailand, trade with Laos has shot up, but entrepreneurs have been warned of obstacles ahead.

Kittirat Kultangwattana, secretary-general of the Mukdahan Chamber of Commerce, said border trading with Laos has benefited from more foreign investment into Laos, which has raised demand for high-quality consumer goods from Thailand, including fuel.

"The development of logistics systems is one of the factors to boost Thailand-Laos border trade while trading value will be able to grow continuously this year," said Mr Kittirat.

But Mr Kittirat said Thailand would experience a trade deficit with Laos in the long term due to its neighbour's high investment and development. Imports from Laos are mainly minerals and of high value.
"There are many foreign investments in Laos at present. When these investments are ready to start commercial operations, including the export of electricity - coupled with the output from contract farming in Laos - then Thailand is expected to start to see high trade deficits," he said.

Trade via the Mukdahan checkpoint peaked in value in 2008 at about 24.04 billion baht. Thai exports to Laos were valued at only 10.3 billion baht while imports were worth 13.74 billion, showing a deficit of about 3.44 billion baht, according to official data.

In 2009, Thai exports to Laos were worth 7.87 billion baht and imports were valued at 9.42 billion, leading to a trade deficit of about 1.54 billion. In January the trade deficit continued at 466.56 million baht.

The free trade agreement has also had an impact for provincial entrepreneurs, said Mr Kittirat.
Producers can now send goods directly to Laos via the new friendship bridge and don't need local traders any more, he said.

The opening of hypermarkets around the Thai border has also started to hit small "mom and pop" stores, as shoppers from Laos switch to the outlets.

In the east, the political upheaval between Thailand and Cambodia is taking a toll, causing border trade to halve.

Pramual Kaewkham, secretary-general of the Sa Kaeo Chamber of Commerce, said the value of border trade between Thailand and Cambodia fell as much as 50% after political turmoil broke out between the two countries.

An influx of goods from Vietnam and China is also undercutting Thai products, he said. (source: Bangkok Post)

Back to archive