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25 Mar 2015


Thriving Trade between Thailand and CLM Spurs Supply Chains and Economic Growth in Greater Mekong Sub-Region(Current Issue No. 2606 Full Ed.)

The trade value between Thailand and Cambodia, Laos and Myanmar (CLM) has grown steadily, converse with our overall international trade. This has prompted Thai businesses to seek opportunities there to diversify risk amid global economic uncertainties. Factors that have bolstered Thailand's trade with CLM substantially include their thriving economic growth, open-door policies, increased foreign direct investment (FDI) by trade partners, closer links via the ASEAN Free Trade Area (AFTA) and the coming ASEAN Economic Community (AEC). We at KResearch expect that the trade value between Thailand and CLM will grow 4.6 percent during 2015. Thailand's exports to CLM should expand 5.1 percent and imports from there increase 3.7 percent.
Thailand's imports of intermediate goods from CLM have risen steadily in recent years, suggesting expanded supply chains within the sub-region. That increase is attributable to these countries becoming major production base for intermediate goods due to lower labor costs there. Such competitively-priced materials, when used to manufacture more sophisticated consumer products here, can help enhance their competitiveness in global markets.
Meanwhile, Thailand's exports to CLM have been supported by their favorable economic growth and their growing needs for more sophisticated consumer products, plus increased demand for intermediate goods and construction materials. However, some Thai export categories to CLM may decline because many Thai factories, especially labor-intensive ones, have begun to relocate to CLM.

The AEC objectives include promotion of a single regional market/production base. Since Thailand is centrally located within the region, integration with lower-cost neighboring states is imperative towards maintaining our own competitiveness that has deteriorated due to hefty labor costs here. Such integration via transport links and the elimination of trade barriers will also help spur regional supply chains, with Thailand becoming a center for manufacturing and investment, particularly within special economic zones. However, Thai businesses are advised to consider several factors before making forays into CLM, including political risk, insufficient infrastructure and small markets that will make it more difficult for them to benefit from the economies of scale.

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