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2 Jun 2005

International Economy

Thailand Visiting India & Bhutan: Fortifying Ties-Push for FTA

India and Bhutan are South Asian countries whose economies are playing a crucial role in the region. This is particularly true for India, which has a high-potential economy that has grown steadily at a remarkable rate. Presently, all eyes are now on India, and it has attracted a great number of investors from around the globe. That country is now among the largest recipients of international investment, thanks to its quality labor force, comparatively low wages and technological advances.
  • Thailand-India ?The Thai-Indian trade value (exports plus imports) has been quite insignificant, so far, accounting for only some 1 percent of Thailand's overall trade. However, this trade value has been rising steadily, from USD800.2 million in 1999 ? accounting for 0.7 percent of Thailand's international trade ? to USD2.049 billion in 2004, representing a rise of 156 percent. Among all South Asian countries, India is Thailand's largest trade partner, accounting for around 70 percent of the total Thai trade with the region.

    In 2005, Thai-Indian trade is likely to increase, and Thailand is set to post trade surplus with India for the first time. Over the first four months of this year, Thai exports to India escalated 105.46 percent, year-on-year, to USD504.6 million, from USD245.6 million. On the import front, Thailand's imports from India exhibited an increase of 3.10 percent to USD471.9 million, over the USD457.7 million for the first four months of these years. As a result, Thailand posted a trade surplus of USD32.7 million with India for the first four months of 2005, against the trade deficit of USD212.1 million over the same period of last year.

    Thailand's exports to India have expanded remarkably, thus turning the country's trade deficit to surplus since early this year. This export growth could be attributed in part to tariff reductions in 82 categories of products under the Early Harvest Scheme (EHS) portion of the prospective Thailand-India FTA accord, effective September 1, 2004. Among Thailand's key exports to India that have recorded healthy growth over the first four months of this year were crude oil; plastic pellets; piston engines and parts thereof; iron, steel and products; automobiles, accessories and parts; radios, TVs and parts thereof; machinery and parts thereof; rubber; gems and jewelry.
  • Trade between Thailand-Bhutan - Although the trade value between the two countries (imports + exports) is rather low (with a proportion of less than 1 percent of all Thailand's international trade), Thailand has always enjoyed a trade surplus with Bhutan. Thai goods that are exported to Bhutan include machinery and parts, microwave ovens and heat-generating electrical appliances, insulated wire, cable, tableware, kitchenware and home utensils, etc. It is expected that trade, investment and tourism between the two countries will increase after the discussions to strengthen relations with this visit of the Thai leader. Moreover, the negotiations to open a free trade area within the BIMST-EC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), where Thailand and Bhutan are both members, along with five other countries, will help stimulate this relationship in mutual trade, investment and tourism to expand in the future.

    KRC views that cooperation and the strengthening of relations between Thailand, India and Bhutan within the framework of BIMST-EC's economic cooperation, as well as bilateral relations ? particularly in the establishment of a Thailand-India FTA ? will have the following benefits for Thailand:
  • As a source of raw materials to produce important Thai export goods such as gems and precious stones, metals and scrap, chemical products and seafood, etc., tariff reductions within the BIMST-EC group will lower raw material costs for Thailand and increase the competitiveness of Thai export products in the world market.
  • Being new export markets, cooperation will help expand Thailand's export markets and reduce problems with the current trade deficit, alleviating dependence on existing major export markets, as Thailand typically faces trade barriers with developed countries that use strict AD (Anti-Dumping measures) or SPS (Sanitary and Phyto-sanitary Measures).

Prime Minister Taksin Shinawatr's visit to India and Bhutan, June 3-6, 2005 will not only help to stimulate mutual trade, investment and tourism to expand, and become a channel to distribute Thai export goods to the South Asian region, it will also help put forward negotiations for FTA between Thailand and India to progress and be completed in 2005, as targeted.

International Economy