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10 Aug 2016

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2H16 Exports to CLMV May Recover – Nong Khai Must be Enhanced as Export Point to Laos (Current Issue No. 2761 Full Ed.)

คะแนนเฉลี่ย
In 1H16, Thai outward trade contracted 1.6 percent YoY because our exports to key markets have not fully recovered. In addition, our cargoes sent to the CLMV (Cambodia, Laos, Myanmar, Vietnam) shrank for the first time in eight years to 3.8 percent growth YoY, raising a question as to whether these markets have the potential to sustain our export growth ahead or not.
We at KResearch are of the view that the contraction in Thai exports to CLMV is attributable to a commodity price cycle (slumping oil prices) and structural changes within CLMV. Rapid declines in oil prices from late in 2015 through to mid-2016 crimped demand for one of our key export categories, i.e., refined petroleum products, normally sent there. Also, structural changes in those states - resulting from their economic developments that have bolstered domestic markets and advancements in manufacturing sectors - have forced them to import less Thai products, e.g., beverages and cement. Nevertheless, since oil prices should improve in 2H16, it is expected that the value of Thai exports to CLMV will improve.
KResearch expects that our shipments to the CLMV will contract perhaps 2.5 percent YoY to USD21.73 billion in 2016. However, close attention must be paid to the trend of production relocation into the CLMV, e.g., in consumer goods and construction materials that they were previously heavily dependent on us for. Since these relocations may reduce the long-term sustainability of our exports to CLMV, Thai businesses must find the means to cope with such changes.

Although CLMV are undergoing structural changes as a result of that production relocation trend, it is seen that Laos remains an important market for Thailand because its manufacturing industry is not diverse and remains in an infant stage, thus making it worthwhile for them to import from Thailand rather than develop manufacturing resources to meet demand at home. To bolster our exports there, Nong Khai should be enhanced further as our main cross-border export point into Vientiane and other border provinces near there.

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