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Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economic Zones

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Cross-Border Trade in the Greater Mekong Sub-region

Cross-Border Trade in the Greater Mekong Sub-region

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  • 1. CROSS-BORDER TRADE AND COMMERCE IN THAILAND: POLICY IMPLICATIONS FOR ESTABLISHING SPECIAL BORDER ECONOMIC ZONES by Choen Krainara A special study submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Regional and Rural Development Planning Examination Committee: Professor Dr. Jayant Kumar Routray (Chairman) Dr. Mokbul Morshed Ahmad (Co-assessor) Nationality: Thai Previous Degree: Master of Science Asian Institute of Technology Bangkok, Thailand Scholarship Donors: RTG Fellowships and AIT Fellowship Scheme Asian Institute of Technology School of Environment, Resources and Development Bangkok, Thailand December 2008
  • 2. AcknowledgementsThe author would like to express his deepest sense of gratitude to his advisor andChairman Professor Dr. Jayant Kumar Routray, who provided constructive guidanceand inspiration throughout the study. The researcher would also like to thankDr.Mokbul Morshed Ahmad as co-assessor for offering valuable comments to make thestudy complete.A very special appreciation is extended to Khun Laaiad Wongthong at Office ofInformation Technology and Communications of the Department of Customs, Thailandfor supplying cross-border trade data of Thailand with neighboring countries atexceptional rate. If these data were not made available, the study would have not beenpossible. Also, I wish to express thanks particularly to Khun Anusit Kanchanapol atPadang Besar Customs House for providing top ten cross-border export and import ofcommodities of Thailand with neighboring countries at selected border checkpoints aswell as insights by sharing informal cross-border trade practices.Lastly, I would like to express my profound thankfulness to my mother, sisters, brothersand friends for their understanding and moral supports for the duration of the study. ii
  • 3. AbstractThe Greater Mekong Sub-region (GMS) regarded as a geo-spatial unit is very importanteconomic bloc due to it shares common culture, religion and linguistic base with a bigthreshold of population and resources. This region also has great potential for developmentunderpinning by the GMS Development Cooperation and the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS). Thailand located at the strategiclocation of South East Asian region has been intensifying economic interdependence withneighbouring countries through increasing cross-border trade and people’s mobility whichmade possible by means of greater degree of physical connectivity in the form of economiccorridors, continuous trade and investment facilitation. As a result, it opens up newopportunities for Thailand to engage cross-border production and supply chain linkageswith neighbouring countries by establishing special border economic zones in prospectivelocations in order to take advantage of cheap labor from Cambodia, Lao PDR and Myanmarand wider access to their primary markets as well as penetrating to regional and globalmarkets.Robust cross-border trade relations between Thailand and neighbouring countries have beenobserved over last 13 years in which trading patterns are becoming quite diversedepending on their comparative advantage, division of labor and specialization ofproduction. In general, Thailand mainly exports consumer, intermediate and some capitalgoods to neighbouring countries, and imports primary goods such as agricultural, fisheryproducts and ranges of resources from neighbouring countries. Cross-border trade gapsbetween Thailand and individual neighbouring countries greatly vary from one country toanother. In addition, cross-border retail trades particularly carried out by rural poor arealways conducted at specific allowed border crossings. Though the growth of cross-bordertrade and commerce is flourishing, it is probable that this progress might lead to someextent variation in regional development impacts. However, Thailand is facing significantlychronic interregional inequalities in which the Northeastern has long been a backwardregion followed by Northern region as well as obvious intra-regional differences. Out of 30border provinces, 19 backward border provinces were identified. Taking these cross-bordertrade interactions and people’s mobility as major factors, it can preliminarily be identifiedpossible eight special border economic zones corresponding with priority manufacturedcommodities to be created in Thailand linking with neighbouring countries in order tobridge not only intra-regional and interregional disparities within Thailand but alsointernational development gaps with Cambodia, Lao PDR, Malaysia and Myanmar,respectively.Such policy implications for establishing special economic zones in Thailand need to beaddressed with awareness in six main aspects: political, economic, social, infrastructural,environmental and institutional. Recommendations to promote special border economiczones have been made centering around exploring more geographical border areas asspecial border economic zones in Thailand and possible linkages with neigbouringcountries, setting up a system for managing and administering special border economiczones, establishing local supply chains networks to link up with the proposed special bordereconomic zones, providing cross-border logistics services, fostering close cooperation andcoordination on managing social problems associated with cross-border migration, as wellas rendering capacity building for integrated regional and local public administrationsystem. iii
  • 4. Table of ContentsChapter Title Page Title Page i Acknowledgements ii Abstract iii Table of Contents iv List of Tables vi List of Figures vii List of Matrix and Maps ix Abbreviations x 1 Introduction 1 1.1 Background and Rationale of the Study 1 1.2 Objectives of the Study 2 1.3 Scope of the Study 2 1.4 Methodology 3 1.5 Conceptual Framework 3 2 International Trade, Border Economics and Special Border 6 Economic Zone 2.1 Concept of International Trade 6 2.2 Concept of Trade and Development 6 2.3 Concept of Border Economics 6 2.4 Concept of Special Border Economic Zone and 7 Applications 3 Overview of Cross-Border Trade and Commerce in Thailand 11 3.1 Geographical Locations and Physical Linkages of 11 Thailand with Neighbouring Countries 3.2 Transport and Telecommunication Networks 11 3.3 Types and Number of Nation-Wide Border Checkpoints 16 3.4 Trade Agreements between Thailand and Neighbouring Countries 3.4.1 Trade Agreements 18 3.4.2 Trade-Relevant Cooperation 22 3.5 Thailand’s Trade Policies with Neighbouring Countries 23 3.6 Cross-Border Trade and Commerce Relations between Thailand and Neighbouring Countries 3.6.1 Markets of the Neighbouring Countries 24 3.6.2 Overall Assessment of Cross-Border Trade and 25 Commerce Relations Between Thailand and Five-Neighbouring Countries (Cambodia, China, Lao PDR, Myanmar and Malaysia) 3.6.3 State of Cross-Border Trade Relations With 32 Individual Neighbouring Countries 3.7 People’s Mobility Along the Border 3.7.1 People’s Movement Through Border 59 iv
  • 5. Checkpoints/Border Crossings 3.7.2 Nation-Wide Share of Peoples Movement Through 61 Border Crossings 3.8 Thailand’s Cross-Border Investments in Four-Neighbouring Countries 3.8.1 Cambodia 63 3.8.2 Lao PDR 63 3.8.3 Myanmar 64 3.8.4 Malaysia 64 3.9 Impacts of Cross-Border Trade, Commerce 64 and Investments Dealing with Neighbouring Countries on Thai Economy and Society4 Status of Regional Development in Thailand 67 4.1 Interregional Disparities 67 4.2 Intra-Regional Disparities Particularly for the Border Provinces 4.2.1 Eastern Region 70 4.2.2 Northeastern Region 71 4.2.3 Northern Region 72 4.2.4 Western Region 73 4.2.5 Southern Region 74 4.3 Existing Industrial Development Along Thai Border Area 76 4.4 International Development Disparities Between Thailand and Neighbouring Countries 785 Prospects for Developing Special Border Economic Zones 80 in Thailand 5.1 SWOT Analysis on Prospect for Promoting 80 Special Border Economic Zones 5.2 Potential Geographical Border Areas and Economic 82 Sectors for Cross-Border Development and Cooperation toward Development of Special Border Economic Zones Linking with Neighboring Countries6 Conclusions and Recommendations 84 6.1 Conclusions 84 6.2 Policy Implications for Establishing Special 86 Border Economic Zones in Thailand 6.3 Recommendations 87 References 89 Appendixes 93 v
  • 6. List of TablesTable Title Page3.1 Types and Numbers of Border Checkpoints in Thailand Physically 16 Connecting with Neighbouring Countries3.2 Numbers of Commodity That Thailand Granted AISP Treatment 19 To CLMV Countries3.3 Time Frame For Import Trade Tariff Reductions 223.4 Cross-Border Trade Gaps Between Thailand and 30 Five-Neighbouring Countries During 1996 To 20083.5 Top Ten Cross-Border Export Commodities from Cambodia To 33 Thailand Through Aranyaprathet Border Checkpoint in 20073.6 Top Ten Cross-Border Import Commodities From Cambodia To 35 Thailand Through Aranyaprathet Border Checkpoint in 20073.7 Top Ten Cross-Border Trade Export Commodities From Thailand 39 To Yunnan Province of Southern China Through Chiangsaen Border Checkpoint in 20073.8 Top Ten Cross-Border Import Commodities From Yunnan 41 Province of Southern China To Thailand Through Chiangsaen Border Checkpoint in 20073.9 Top Ten Cross-Border Export Commodities From Thailand To 45 Lao PDR Through Nong Khai Border Checkpoint in 20073.10 Top Ten Cross-Border Import Commodities From Lao PDR 47 To Thailand Through Nong Khai Border Checkpoint in 20073.11 Top Ten Cross-Border Export Commodities From Thailand To 51 Myanmar Through Maesod Border Checkpoint in 20073.12 Top Ten Cross-Border Import Commodities From Myanmar 52 To Thailand Through Maesod Border Checkpoint in 20073.13 Top Ten Cross-Border Export Commodities From Thailand 56 To Malaysia Through Sadao Border Checkpoint in 20073.14 Top Ten Cross-Border Import Commodities From Malaysia To 57 Thailand Through Sadao Border Checkpoint3.15 A Multi-Facet Impacts of Cross-Border Trade, Commerce 64 and Investment Dealing with Neighbouring Countries on Thai Economy and Society4.1 Gross Provincial Product of Eastern Border Provinces 684.2 Gross Provincial Product of Northeastern Border Provinces 694.3 Gross Provincial Product of Northern Border Provinces 734.4 Gross Provincial Product of Western Border Provinces 744.5 Gross Provincial Product of Southern Border Provinces 755.1 Potential Geographical Border Areas and Economic Sectors 83 For Developing Special Border Economic Zones in Thailand vi
  • 7. List of FiguresFigure Title Page1.1 Conceptual Framework 52.1 Proposed Special Border Economic Zones in Thailand 10 and Its Potential Linkages with Neighbouring Countries3.1 Aggregate Cross-Border Trade Export and Import 27 Between Thailand and Four-Neighbouring Countries and Transit Trade To/From China During 1996 To 20083.2 Aggregate Balance of Cross-Border Trade between 29 Thailand and Four-Neighbouring Countries and Balance of Transit Trade With China3.3 Share of Aggregate Cross-Border Trade to International 31 Trade Between Thailand and-Five Neighbouring Countries3.4 Cross-Border Export Values From Thailand to Cambodia 33 From 1996 To 2008 Through Major Border Checkpoints3.5 Cross-Border Import Values From Thailand to Cambodia 33 From 1996 To 2008 Through Major Border Checkpoints3.6 Share of Aggregate Cross-Border Trade to Aggregate 37 International Trade Between Thailand and Cambodia During 1996 To 20083.7 Cross-Border Export Trade Values through Transit Mode 39 From Thailand to China During 1996 To 2008 Through Major Border Checkpoints3.8 Cross-Border Import Trade Values Through Transit Mode 41 From China To Thailand during 1996 To 2008 Through Major Border Checkpoints3.9 Share of Border Trade Values Through Transit Mode To 43 International Trade Values Between Thailand and China During 1996 To 20083.10 Cross-Border Export Values From Thailand To Lao PDR 44 From 1996 To 2008 Through Major Border Checkpoints3.11 Cross-Border Trade Import Values from Lao PDR To 46 Thailand From 1996 To 2008 Through Major Border Checkpoints3.12 Share of Cross-Border Trade Values To International Trade 49 Values Between Thailand and Lao PDR During 1996 To 20083.13 Cross-Border Export Values From Thailand To Myanmar 50 During 1996 To 2008 Through Major Border Checkpoints3.14 Cross-Border Trade Import Values from Myanmar To Thailand 52 During 1996 To 2008 Through Major Border Checkpoints3.15 Share of Cross-Border Trade Values To International Trade 54 Values between Thailand and Myanmar During 1996 To 20083.16 Cross-Border Export Values From Thailand to Malaysia 55 During 1996 To 2008 Through Major Border Checkpoints3.17 Cross-Border Trade Import Values From Malaysia To Thailand 57 From 1996 To 2008 Through Major Border Checkpoints3.18 Share of Cross-Border Trade Values To International Trade 59 Values Between Thailand and Malaysia During 1996 To 2008 vii
  • 8. Figure Title Page3.19 People’s Movement at Major Border Crossings in Thailand 60 During 2002 To 20063.20 Nation-Wide Share of People’s Movement Through Border 62 Crossings To Share of People Movement Through Other International Ports of Entry and Exit in Thailand During 2002 To 20064.1 Gross Regional Product Per Capita in Thailand During the 68 Years 1981 To 20074.2 Primacy Index of Bangkok and Vicinities During 1999 To 2007 694.3 Gross National Income Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries at Current International Price 774.4 Gross National Income Per Capita Purchasing Power Parity Gaps 78 Between Thailand and Neighbouring Countries viii
  • 9. List of MatrixMatrix Title Page3.1 Cumulative Cross-Border Trade Values of Thailand With 26 Five-Neighbouring Countries During 1996-2008 (January-April) List of MapsMap Title Page3.1 GMS Corridors Network 143.2 Geographical Distribution of All Types of Key Border 17 Checkpoints in Thailand Connecting With Neighbouring Countries3.3 Geographical Cross-Border Trade Relationships Between 36 Thailand and Cambodia Through Aranyaprathet Border Checkpoint in 20073.4 Geographical Cross-Border Trade Relationships Between 42 Thailand and China Through Chiangsaen Border Checkpoint in 20073.5 Geographical Cross-Border Trade Relationships Between 48 Thailand and Laos PDR Through Nong Khai Border Checkpoint in 20073.6 Geographical Cross-Border Trade Relationships Between 53 Thailand and Myanmar Through Maesod Border Checkpoint in 20073.7 Geographical Cross-Border Trade Relationships Between 58 Thailand and Malaysia Through Sadao Border Checkpoint in 2007 ix
  • 10. AbbreviationsACMECS Ayeyawady - Chao Phraya - Mekong Economic Cooperation StrategyADB Asian Development BankAEC ASEAN Economic CommunityAFTA ASEAN Free Trade AreaAISP ASEAN Integration System of PreferencesASEAN Association of South East Asian NationsBIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic CooperationBOI Board of InvestmentCBTA Cross Border Transport AgreementCEPT Common Effective Preferential TariffCIQ Customs, Immigration and QuarantineCLM Cambodia-Lao PDR-MyanmarCLMV Cambodia-Lao PDR-Myanmar-VietnamCLMT Cambodia- Lao PDR- Myanmar- ThailandECS Economic Cooperation StrategyESB Eastern SeaboardEU European UnionGMS Greater Mekong Sub-regionGPP Gross Provincial ProductGRP Gross Regional ProductGSP Generalized System of PreferencesIL Inclusion ListIMT-GT Indonesia-Malaysia-Thailand Growth TriangleJTC Joint Trade CommitteeNAFTA North America Free Trade AreaNESDB Office of the National Economic and Social Development BoardRTA Regional Trade AgreementSBEZ Special Border Economic ZoneSMEs Small and Medium EnterprisesSSB Southern Seaboard x
  • 11. Chapter 1 Introduction1.1 Background and Rationale of the StudyThere is underlying reason of what a country chooses to produce such commodities.This is mainly dependent on resource endowments that a country possesses supportedby key factors of productions. When two countries want to conduct international trade,though they all may have absolute advantage over another country, they can in fact gainfrom trade as long as the extent of comparing gain and loss of relative costs ofproduction between the two countries are apparently different. This means a countryshould specialize in products and services in which it has highest return. David Ricardo(1817) called this “Theory of Comparative Advantage” which is the principaldeterminant of undertaking international trade. He concludes that a country shouldselect and export commodity which is most comparative advantage, and import suchcommodity which is least comparative advantage.In the present day, changing economic phenomena within the unique contexts entailedby geo-politics and greater cross-border economic integration in many regions of theworld have driven the increasing attention on border economics. One of the key featuresof the border economics characterized by a population variable which was theexemplarily substantial income differentials between Mexico and the United States.When accompanied by high rates of joblessness, income disparities between countriesfrequently result in migratory outflows from low earnings regions to higher incomemarkets, (Harris and Todaro, 1970; Borjas, 1994; Durand, Massey, and Zeneno, 2001,cited in Fullerton, 2003).In response to this economic observable fact, Special Border Economic Zone (SBEZ) orMaquiladora or export manufacturing sector has primarily been developed along theborder of Mexico and the United States since 1965. Its objectives were to takeadvantage of available cheap labor in Mexico, proximity to primary markets andregional supply networks in the United States, (Weiler and Zerlentes, 2003). Theimplementation of the North America Free Trade Agreement (NAFTA), which phasesout existing trade barriers between Mexico, Canada and the United States, was expectedto increase to the dispersion of Maquiladoras along the northern border of Mexico. InAsian region, this concept has in recent decade been gaining impetus as a fashionablemodel in realizing economic complementarities between two neighbouring countrieswhich have different stages of development. There have recently been implemented insome bordering countries between North Korea and South Korea. Though this is quiteinitial stage, the progress of undertaking seems pronounced.In ASEAN region, regional cooperation and integration program is advancing throughthe ASEAN Economic Community. Wide economic development gaps betweenASEAN member countries have opened up vast opportunities, for example betweenSouthern region of Malaysia and Singapore, to cooperate joint-production in the form ofSpecial Border Economic Zones along border areas in order to exploitcomplementarities. Located at the cross-roads of mainland South East Asian region,Thailand which is regarded as developed pocket similarly shares common border withfour-neighbouring countries namely Lao PDR, Cambodia, Myanmar and Malaysia. 1
  • 12. Continuously fostered by the regional economic cooperation programs namely theGreater Mekong Sub-region, the Ayeyawady - Chao Phraya - Mekong EconomicCooperation Strategy (ACMECS) and the Indonesia-Malaysia-Thailand GrowthTriangle (IMT-GT), the cross-border trade relations between Thailand and theseneighbouring countries have been flourishing since a recent decade and are continuingto increase signifying that the economic interdependence becomes intensified due tobetter physical connectivity and the gradual effects of several trade agreements signedwith neighbouring countries. These can be evident from increased intra-regional tradeand investments, and greater people’s mobility.Recognizing the large development disparities with neighbouring countries, Thailandhas directed policies toward distributing production bases to border regions in order tointernationally cooperate based on sister city and special border economic zoneconcepts by taking advantages of regional accessibility, good access of quality rawmaterials, labor and market proximity in neighbouring countries. Simultaneously,Thailand is able to not only bridge intra-regional and interregional disparities within hercountry but also to strengthen closer ties with neighbouring countries by means of co-production scheme so that it can help sharing the benefits of economiccomplementarities, appropriately managing huge numbers of illegally immigrant laborinflows as well as sustainably bridging development divergences. This initiative isconsidered having significant implications toward changing economic geography ofmainland South East Asian region as new regional production platforms for deeperintegration with the global supply chains and markets.For this reason, it is necessary to explore the fundamental economic and social rationalefor establishing the special border economic zones in Thailand taking cross-border tradeand commerce prospects into major consideration in order to help identify the potentialgeographical border regions resulting from greater connectivity and accessibility andeconomic sectors to be promoted. In addition, status of regional development and extentof interregional and intra-regional disparities are essential components to be assessed sothat insights on state of regional development and identification of backward borderregions and needed policies to support the establishment of special border economiczones can be accurately carried out.1.2 Objectives of the StudyThe specific objectives of this review research were: 1) To study the factors and the trend of cross-border trade scenarios between Thailand and neighbouring countries. 2) To determine impacts of cross-border trade, commerce and investment dealing with neighbouring countries on Thai economy and society. 3) To identify potential geographical border areas/regions and economic sectors for developing special border economic zones. 4) To recommend policy implications necessary for promoting special border economic zones in Thailand.1.3 Scope of the StudyThis study covered a review of trade and investment agreements as well as tradepolicies between Thailand and neighbouring countries. It also conducted assessment of 2
  • 13. cross-border trade relations between Thailand and four-neighbouring countries andtransit trade with China with particular emphasis on Yunnan Province for a 13 yearinterval during 1996-2008. Particularly for the year 2008, data were available only forfour months from January-April which at the time of collecting data was considered asthe most complete availability of cross-border statistics maintained by the CustomsDepartment of Thailand. Cross-border’s people mobility will also be included. Inaddition, status of regional development in Thailand will be evaluated incorporatedinterregional and intra-regional disparities. In addition, international developmentdisparities between Thailand and neighbouring countries will also be highlighted.1.4 Study MethodologyThis study is descriptive research. It mainly used time series secondary data source for a13 year interval on export-import of cross-border trade statistics compared withinternational trade figures between Thailand and neighbouring countries from theCustoms Department of Thailand which is regarded as official statistics. In addition,various reports, studies, and internet websites are key sources of most up to date data.Particular data are gathered from relevant key agencies as follows:• Overall Greater Mekong Sub-region strategies, sectoral strategies, policies and plans are mainly from the Asian Development Bank.• National development policies and plans, policies for economic cooperation with neighbouring countries, Gross Regional Products (GRP), Gross Provincial Product (GPP) are from Office of the National Economic and Social Development Board.• Trade policies and trade agreements are from Department of Trade Negotiations, Department of Foreign Trade, Ministry of Commerce and Ministry of Foreign Affairs• Cross-border people’s mobility is from Immigration Bureau.• Direct foreign investments from Thailand to neighbouring countries are from the Board of Investment.• ASEAN cooperation and ASEAN statistics are from ASEAN Secretariat.• Gross National Income of neighbouring countries are from the World BankData analyses techniques applied were (1) quantitative analysis used such as number,mean, percentage, share or ratio, trend analysis using time series data, and are variouslypresented by graphs, pie diagram, matrix and tables. (2) qualitative analysis ofsecondary data utilized literature review and SWOT analysis. Mapping techniques wereactively employed.1.5 Conceptual FrameworkThe conceptual framework of this study centers on cross-border trade and commerce inThailand. It will begin by analyzing overall cross-border trade relations, people’smobility between Thailand and neighboring countries as well as investigating trade andinvestments agreements and trade policies which will affect state of cross-border tradebetween Thailand and neighboring countries. Then it will examine current infrastructuresupport for enhancing transport and telecommunications linkages and impacts of cross-border trade and commerce on Thai economy and society. Status of regionaldevelopment in Thailand will be assessed incorporated interregional and intra-regional 3
  • 14. disparities plus international development disparities between Thailand and neighboringcountries. It will also be proposed potential geographical border areas and economicsectors preliminarily suitable to be developed as special border economic zones. Finally,it will recommend policy implications needed for fostering the proposed establishmentof special border economic zones. The detail of conceptual framework is illustrated inFigure1.1 4
  • 15. Figure 1.1 Conceptual Framework Cross-Border Trade and Commerce in ThailandØ Trade relations with neighbouring Trade and investment agreements and Infrastructure support for enhancing Impacts of cross-border trade and countries through export-import of trade policies with neighbouring transport and telecommunications commerce in Thailand major commodities at key border countries under linkages through • Political aspect checkpoints connecting: • Bilateral agreements • Land transport • Economic aspect • Eastern region with Cambodia • GMS agreements • River transport • Social aspect • Northeastern region with Lao PDR • ACMECS agreements • Telecommunications networks • Infrastructural aspect • Northern region with Myanmar, Lao • AFTA agreements • Environmental and natural PDR and Yunnan province of China • WTO agreements resources aspect • Southern region with Malaysia • Institutional aspectØ People’s mobility between Thailand and neighbouring countries through major border checkpoints. Potential Border Areas and Economic Sectors for Promoting Cross-Border Development • Cross-border tradeDirect Investment from Thailand toNeighbouring Countries • Industry • Agriculture • Services and Logistics • Tourism Policy Implications for Developing Special Border Economic Zones in Thailand 5
  • 16. Chapter 2 International Trade, Border Economics and Special Border Economic Zone2.1 Concept of International TradeThere is underlying reason of what a country chooses to produce such commodities.This is mainly dependent on resource endowments that a country possesses togetherwith mobilization of key factors of productions. Though two countries all may haveabsolute advantage over another country, they can in fact gain from trade as long as theextent of comparing gain and loss of relative costs of production between the twocountries are apparently different. This means a country should specialize in productsand services in which it has highest return. David Ricardo (1817) called this “Theory ofComparative Advantage” which is the principal determinant of undertakinginternational trade. He concludes that a country should select and export commoditywhich is most comparative advantage, and imports such commodity which is leastcomparative advantage.2.2 Concept of Trade and DevelopmentUN Millennium Project (2005) emphasized that trade openness can be a powerful driverof economic growth, which is indispensable to reduce poverty and foster a country’sdevelopment. Trade alone can not induce for achieving development; it should thereforebe associated with other institutional, macroeconomic, and microeconomic conditionsplus well designed social policies to attain development. On the other hand, opening upmarkets to international trade may leave local producers flooded with more competitiveforeign producers, (Wikipedia, 2008). Sustained strong growth over longer periods isstrongly related to poverty reduction, while trade and growth are strongly linked.Countries that develop always enhance their integration with the global economy.Export-led growth strategy has been a key part of many countries’ successfuldevelopment.Continents, countries and sectors that have not developed and remain largely poor havecomparative advantage in three main areas, (Wikipedia, 2008). : • Natural resource exploitation, i.e. natural capital such as rain forest timber; • Low-education labor-intensive manufacturing, due to high population densities and little suitable land per person; • Agriculture, due to low population densities and relatively large areas of suitable land per person.The latter two are labor-intensive, helping to ensure that growth in these sectors will bepoverty-reducing. However, low value-added, price instability and unsustainability inthese commodity sectors mean they should be used only temporarily as catalyst of thepath to economic development.2.3 Concept of Border EconomicsFullerton (2003) argues that border economics is still a new subject area. It hasoriginated from growing recognition to study economic phenomena within the unique 6
  • 17. contexts entailed by geo-politics. It is now gaining much attention due to greater cross-border economic integration in many regions of the world. He highlights key features ofborder economics being undertaken research efforts in the five variables: • Population: Many studies involve border between economies that are characterized by substantial income differentials such as Mexico and the United States. When accompanied by high rates of joblessness, income disparities between countries frequently result in migratory outflows from low earnings regions to higher income markets. (Harris and Todaro, 1970; Borjas, 1994; Durand, Massey, and Zeneno, 2001 cited in Fullerton, 2003). • Business cycle transmission: Economic integration in association with rapid financial and commercial liberalization influence border economic performance including retail border trade. • Exchange rates: Most border economies still conduct business transactions that are affected by exchange rate transaction in addition to the world wide emergence of dominant currencies such as the dollar and the euro. Impacts of currency market fluctuation on retail segments in border contexts have been directly studied. • Industrial development and labor markets: Devaluation of currency can accelerate foreign direct investment for example in Maquiladora or export manufacturing sector which both sides of the border/city pairs gained benefits, it may nevertheless not be the case in other parts of the world. Cross-border industrial linkages influence a wide range of regional economic outcomes (Hanson, 1998b; Love and Lage-Hidalgo, 2000 cited in Fullerton, 2003). • Natural resources economics: Environmental consequences of industrial expansion and economic growth at border regions are one of major concerns particularly on negative externalities. It is challenging to jointly manage and utilize natural resources and public utility e.g. energy services.2.4 Concept of Special Border Economic Zone and ApplicationsThe Special Border Economic Zone (SBEZ) concept commonly known asMaquiladoras or export manufacturing sector has primarily been developed along theborder of Mexico and the United States since 1965. Its objectives were to takeadvantage of available cheap labor in Mexico and proximity to primary markets andregional supply networks in the US, (Weiler and Zerlentes, 2003). The implementationof the North American Free Trade Agreement (NAFTA), which phases out existingtrade barriers between Mexico, Canada and the United States, was expected to increateto the dispersion of Maquiladoras along the northern border of Mexico. 7
  • 18. This concept has increasingly become fashionable in realizing economiccomplementarities between two countries which have different stages of development inAsia. It is also adopted to create vast jobs as well as attracting foreign investments. InEast Asian region, North Korea has joined a collaborative economic development withSouth Korea in developing Kaesong Industrial Park in 2002. It is located six miles northof the Korean Demilitarized zone with direct road and rail access to South Korea. SouthKorean firms are taking advantage of cheap labor available in the North to competewith China to produce low-end goods such as shoes, cloths, and watches. By 2012, it isexpected that the industrial zone will cover 25 square miles and could create 725,000jobs. Recently, more than 1,000 South Korean firms are reconsidering planned shifts ofproduction from China and South East Asia region to Kaesong (Wikipedia, 2006).Similarly in South East Asian region, cross-border city pair’s cooperation concept iswidely recognized and applied as follows: • In 2006, Malaysia has initiated Iskandar Malaysia, an economic, industrial and services cluster, in southern part of Johor Bahru state in order to attract foreign investments particularly from neighbouring Singapore. • Cambodia is being set up a special border economic zone at Poipet, in Banteay Meanchey province expected to cross-border link with Thai side at Aranyaprathet district, Sakaeo province. • Lao PDR has found Savan Seno Special Economic Zones in Savannakhet province in 2003. It has 2 separate sites: Site A at Khanthabouly city in pursuit of networking with Mukdahan city of Thailand, and Site B at Seno town located 28 kms. East from Khanthabouly city. • Myanmar is in planning process in building special border economic zones at least two cities namely Myawaddy and Koh Song for connecting with Maesod and Ranong cities of Thailand. • While Vietnam has directed three SBEZs. The first two SBEZs are at Xamat, 150 kms from the center of Ho Chi Minh city and Moc Bai in Tay Ninh province connecting with neighbouring Cambodia. The third one is at Lao Bao city in Quang Tri Province linking with Dansavan city, Savannakhet province of Lao PDR. All these SBEZs also intended to 8
  • 19. explore opportunities to perform cross-border co-production activities with their respective city pair’s counterparts in neighbouring countries. • Thailand has initially planed to establish special border economic zones in Chiangrai, Tak and Songkhla provinces. A small industrial zone will also be set up in Mukdahan province. There is a question whether Thailand could additionally designate more geographically potential areas towards special border economic zones or not judging from the thriving growth of cross- border trade and commerce relations as well as the immediate requirement to address the continually large illegal immigration of labor from neighbouring countries into Thailand. Therefore, Thailand could probably turn this confronting threat into prospective closer economic and social integration with her neighbouring countries.Please find the locations of proposed special border economic zones in Thailand and itspotential linkages with neighbouring countries in Figure 2.1. 9
  • 20. Figure 2.1 Proposed Special Border Economic Zones in Thailand and Its Potential Linkages With Neighbouring Countries Source: Adapted from Vimolsiri, P. (2008). Subregional Cooperation in GMS, ACMECS, IMT-GT: The Way Forward to Regional Integration, NESDB, Bangkok 10
  • 21. Chapter 3 Overview of Cross-Border Trade and Commerce in Thailand3.1 Geographical Locations and Physical Linkages of Thailand With Neighbouring CountriesThailand is located at the strategic crossroads of mainland South East Asian region, inwhich it shares common land border with four-neighbouring countries with total lengthof 5,582 kms, (Exim Bank, 2004). In total, there are 30 provinces physically connectwith neighbouring countries. The physical linkages with individual countries are asfollows:• Myanmar: Ten provinces of Northern, Central and Southern regions of Thailand link with Myanmar with longest total length at 2,400 Kms namely: Ø Northern region comprising provinces of Chiang Rai, Chiang Mai, Mae Hong Son, and Tak Ø Western region comprising provinces of Kanchanaburi, Ratchaburi, Phetchaburi, and Prachuapkhirikhan Ø Southern region comprising provinces of Chumphon and Ranong• Lao PDR: Eleven provinces of Northern and Northeastern regions of Thailand connect with Lao PDR with total length at 1,810 Kms namely: Ø Northern region comprising provinces of Chiang Rai, Phayao, Nan, Uttaradit, and Phitsanulok Ø Northeastern region comprising provinces of Loei, Nong Khai, Nakhon Phanom, Mukdahan, Amnat Charoen and Ubon Ratchathani• Cambodia: Seven provinces of Northeastern and Eastern regions of Thailand share common border with Cambodia with total length at 725 Kms namely: Ø Northeastern region comprising provinces of Ubon Ratchathani, Si Sa Ket, Buri-Ram and Surin Ø Eastern region comprising provinces of Sakaeo, Chantaburi and Trat• Malaysia: Four provinces of Southern region of Thailand share common border with Malaysia with total length at 647 kms namely Satun, Songkhla, Yala and Narathiwat.3.2 Transport and Telecommunications Networks 3.2.1 Road Transports and Bridge LinksNESDB (2007) indicated that Thailand currently has total road length approximately at179,944.9 kms dividing into: • Special highways at 450 kms • National highways at 51,297 kms • Rural roads at 44,000 kms • Concession highways at 22 kms • Municipal roads at 84,000 kms • Express ways in Bangkok and vicinities at 175.9 kms 11
  • 22. It is perceived that road transport networks in Thailand are rather well developed bothwithin intra-regional and interregional linkages. In recent decade, Thailand has furtherexpanded road transport connections with major border cities of neighbouring countriesin order to facilitate cross-border trade and people mobility. These actions were partlyinfluenced by Thailand’s participation with the Greater Mekong Sub-regionCooperation Program in order to foster regional transport integration towardsmultimodal linkages (ADB, 2007). Where there is bordered by rivers, bridge links werethen constructed as follows:• Thailand-Myanmar Friendship bridges built are as follows: Ø Maesai district, Chiang Rai province and Thachilek city, Thachilek province crossing Maesai river. In addition, another bridge crossing Maesai river in Chiang Rai province linking with Thachilek province of Myanmar already in place. Ø Maesod district, Tak province and Myawaddy city, Myawaddy province crossing Moei river.• Thailand-Lao PDR Friendship bridges crossing Mekong river are as follows: Ø Nong Khai province and Vientiane, capital city of Lao PDR Ø Mukdahan province and Savannakhet province Ø Nakhon Phanom province and Khammouan province. It is now in planning process. Ø Chiang Khong District, Chiang Rai province and Huisai city, Bokeo province. It is now in planning process.• Thailand-Malaysia Bridges crossing Golok river are as follows: Ø Sungai Golok district, Narathiwat province and Rantau Phangan city, Kelantan state Ø Ban Buketa, Wang district, Narathiwat province and Bukit Bunga city, Kelantan state Ø Takbai district, Narathiwat province and Pengkalan Kubo city, Kelantan state. It is currently under planning process. 3.2.2 Rail TransportThailand has rail network of total length at 4,129 kms covering 47 provinces. Thiscomprises single track at 3,881 kms, double track at 165 kms and triple track at 83 kms.The major railway link to neighbouring countries recently operated is the routeBangkok to Thanalang (3.5 kms from Thai border) in Vientiane, Lao PDR. The TransGMS railway connection so called the Singapore-Kunming Railway Link (SKRL) isunder planning process. This route will link Singapore-Kuala Lumpur-Bangkok-Aranyaprathet-Poipet-Srisophon-Phnom Penh-Hochiminh City-Hanoi and terminates inKunming. In the future, rail mode will play an important role in carrying bulk quantityof commodities, stimulating GMS intra-trade, promoting industrial zones as well asenhancing efficient utilization of the land along the railway line where it passes by thementioned cities/countries. 12
  • 23. 3.2.3 River/Water TransportWithin the context of the GMS, Chiangsaen River Port, operated in 2003, plays vitalrole in connecting Northern region of Thailand with southern part of China. Thetransshipment trend at Chiangsaen River Port is on the rise as in 2004 such throughputwere at 74,414 Tons. While in the first half of 2005, it accommodated at 74,742 Tons.In response to this increase, Department of Maritime is building the second ChiangsaenRiver Port just about 10 kms downstream away in order to handle movement of goodsat maximum 0.524 Million Ton/year. 3.2.4 GMS Corridors NetworkThe GMS adopts area-based approach in the form of economic corridor to spearheadregional development in a transnational fashion. Originally, three major economiccorridors were proposed namely the North-South, East-West and Southern EconomicCorridors. Later in 2007, six more economic corridors were added to reflect dynamicsub-regional cooperation as well as extending further links to South Asian regionimmediately connecting with India. Please see details of total nine economic corridorsin Map 3.1 below. 13
  • 24. Source: GMS Transport Sector Strategy, Coast to Coast and Mountain to Sea: Towards Integrated Mekong Transport Systems. (2007). Asian Development BankMap 3.1: GMS Corridors Network 14
  • 25. Out of nine, six GMS corridors will pass through Thailand consisting of:• North-South Economic Corridor (NSEC) : Kunming-Bangkok• East-West Economic Corridor (EWEC) : Danang-Mukdahan-Maesod-Mawlamyine• Southern Corridor : Dawei-Bangkok-Quy Nhon and Dawei-Bangkok-Vung Tau• Southern Coastal Corridor : Bangkok-Nam Can• Central Corridor : Kunming-Sihanoukville/Sattahip• Northeastern Corridor : Nanning–Bangkok/Laem ChabangIt is spatially planned that GMS corridors will connect major urban regions in the GMS.GMS corridors could also influence a certain extent of urbanization process. So it ischallenging on how to convert them into full-fledged economic corridors. Ruraldevelopment along the corridors could probably be one of the means to respond to thesegreater connectivity and accessibility in order to bridge regional disparities in Thailand.In addition, an array of practices including spatial governance, inter-sectoral linkages,cross-border coordination, public-private partnerships and central-local coordinationcould also be made possible for the realization of the GMS economic corridors, (Vriesand Priemus, 2003). Also, these key economic corridors are overlapping with the AsianHighway routes crossing the Greater Mekong Sub-region, which will additionallyinfluence toward spearheading faster geographical links of the GMS with South Asianand East Asian regions. 3.2.5 Telecommunications NetworksAccording to the NESDB (2007), the overall telephone network of Thailand from IMDWorld Competitiveness Year Book 2007 found that in 2005 Thailand had fixed lineusers per 1,000 populations at approximate 110 numbers which was rather low ratewhen compared with Malaysia at 168, Japan 453, Korea 492 and Taiwan at 598numbers, respectively. Even so, the tariff rates of international calls including toneighbouring countries were already at competitive prices facilitating greaterconvenient business transaction and social contacts regionally and globally. However,there exist reasonable gaps in numbers of fixed line telephone users between rural andurban areas. Mobile phone users are quite high at 430 numbers per 1,000 populations,which are good alternative to connect with neighbouring countries. In terms of internetusage, in 2004, the internet users in urban areas were yet higher than rural areas for 2.28times.Regarding the cooperation of Telecommunications sector under the GMS, this initiativecomplements and supplements the national missing links as well as strengthening GMS-wide network so that it can support regional economic growth. The key projectsincluded GMS Information Superhighway Network (ISN), in which the first phase wasfinished and is now about to implement. Various services such as voice, internet,international bandwidth and e-government/ e-commerce applications will be offeredthroughout GMS. Importantly, promoting rural ICT development as a means forreducing poverty has been seriously taken into account, which can help bridging digitaldivide and promote cross-border trade undertaking, (ADB, 2007). 15
  • 26. 3.3 Types and Number of Nation-Wide Border CheckpointsCross-border trade is transacted through major border checkpoints nation-wide.Department of Foreign Trade (2008) classifies that there are three broad categories ofborder checkpoints linking Thailand with neighbouring countries as follows:• International border checkpoint It is internationally opened for people of the two neighbouring countries as well as facilitating trade, tourists and vehicle movements. It must be approved by both governments. In Thailand, it is under the purview of Ministry of Interior with prior approval from the Cabinet.• Temporary border checkpoint It is temporarily opened for specific purposes in a given time period which shall not affect national security. When reached the allowed time period or completed its mission, the temporary border checkpoint shall be immediately closed.• Local border crossing It is opened for cooperating with neighbouring countries for humanitarian reasons as well as extending special treatment for conducting retail border trade e.g. consumer goods and necessary medicines among local rural peoples, which both sides of local authorities have agreed upon. It is under the purview of Provincial Governor with prior approval from Ministry of Interior.There are 71 combined border checkpoints in Thailand linking with four neighbouringcountries. For detailed figures of each type of border checkpoints, it is presented inTable 3.1 below.Table 3.1: Types and Numbers of Border Checkpoints in Thailand PhysicallyConnecting With Neighbouring Countries International Temporary LocalNeighbouring border border border Remarks countries checkpoints checkpoints crossings1. Myanmar 3 1 10 Sangkhlaburi is considered as both temporary and local border crossings.2.Lao PDR 13 1 213.Cambodia 6 - 84.Malaysia 8 - - Total 30 2 39Source: Division of Foreign Affairs, Ministry of Interior cited in Changhlam, 2005, Promoting Thailand- Myanmar border trade: paper presented at the seminar on “Turning new face of Maesod as gateway of East-West Economic Corridor” at Central Maesod Hill Hotel, Maesod district, Tak province on 23 September 2005In relation to national geographical distribution of all types of border checkpoints inThailand, it is shown in Map 3.2. 16
  • 27. Source: The Customs Department, ThailandMap 3.2: Geographical Distribution of All Types of Key Border Checkpoints in Thailand Physically Connecting With Neighbouring Countries 17
  • 28. 3.4 Trade Agreements Between Thailand and Neighbouring CountriesIn the recent two decades, Thailand has undertaken a number of trade agreements andtrade-related agreements with neighbouring countries bilaterally and regionally. Theseconsist of the following: 3.4.1 Trade Agreements 1) Bilateral trade and investment agreementsTrade agreements between Thailand and neighbouring countries are mostly coordinatedby Ministry of Commerce. In 2000, Thailand signed trade agreement with Malaysia inorder to develop and strengthen trade facilitation and economic relations on the basis ofmutual benefit, (Department of Trade Negotiations, 2000). These agreements wereeffective for at least 10 years. Through this agreement, a Joint Trade Committee (JTC)was established in order to ensure proper and successful implementation of thisagreement as well as acting as a body for resolving trade problems. Presumably,Thailand might have already singed these sorts of agreements with the rest ofcontiguous countries. Currently, JTC was a useful mechanism in expanding traderelations with bordering countries.Additionally, Thailand through coordination of Ministry of Foreign Affairs hasextensively engaged bilateral agreements on promotion and protection of investmentswith 42 contracting parties all over the world. The primary objectives of theseagreements were to create favorable conditions for greater economic cooperationbetween both States particularly for the investment by investors in another country,(Ministry of Foreign Affairs, 2008). It is recognized that promotion of such investmentsand the reciprocal protection of investments will be conducive to the stimulation ofindividual business initiative, and will increase prosperity of both States. So far,Thailand has signed these bilateral agreements with four-neighbouring countries,namely Cambodia in 1995; China in 1985; Lao PDR in 1990 and Myanmar in 2008.Under these agreements, both sides will consider to issue Certificate of Approval forProtection (C.A.P.) to requesting investors of another contracting party. Normally, theseagreements will be effective for at least 20 years, and is extendable upon furtherdecision of both countries. These agreements are also served as broad guidelines forstrengthening close cooperation as well as fostering free flows of capital withneighbouring countries. 2) Regional trade agreements (RTAs)In recent decade, regional trade agreements have progressively played more pivotal rolein expanding intra-regional trade as tariff barriers are gradually diminished. As a result,member countries could eventually enjoy effects of freer trade flows resulting frommultiple trade agreements, which will bring about greater welfare and better quality oflife of peoples in participating countries. The key regional trade agreements betweenThailand and neighbouring countries are as follows:• Ayeyawady - Chao Phraya - Mekong Economic Cooperation Strategy (ACMECS) in short called ECS It is a four-nation economic cooperation strategy initiated in 2003. The member countries consisted of Cambodia, Lao PDR, Myanmar 18
  • 29. and Thailand (CLMT). Its objectives were to reduce trade barriers, improve transport linkages and upgrade major border checkpoints. Trade and investment facilitation and agricultural and industrial cooperation are the two important aspects among the five keys strategic areas of cooperation. (Ministry of Foreign Affairs, 2008). In 2004, Thailand implemented a significant project to improve livelihood conditions along border areas of neighbouring CLM through the Contract Farming Initiative by exempting import duties known as “One Way Free Trade” to exporters from CLM into Thailand comprising 11 major agricultural produces. These were sweet corn, corn for livestock, cashew nut, soybean, ground nut, eucalyptus tree, potato, sesame, caster bean, pearl barley, and green gram- bean. In 2008, Thailand planned to import these produces at 1.2 million tons from Cambodia, 0.5 million ton from Lao PDR and 0.2 million ton from Myanmar, (Thairath, 2008). The Thai buyers/importers utilized these commodities as raw material for agro-processing industry both for domestic consumption and exports as well as partly using as sources of energy substitution. This initiative proved rather successful, and the trend of contract farming with neighbouring countries is flourishing.• ASEAN Integration System of Preferences (AISP) It is a measure to grant special treatment from old six countries of ASEAN to new members comprising Cambodia, Lao PDR, Myanmar and Vietnam under Initiative for ASEAN Integration: IAI, which is bilaterally given “One Way Free Trade” basis of import without prior negotiation, (www.wood4season.com). Its key objectives were to promote and expand trade and investments within intra-ASEAN region, as well as reducing development gaps between old and new ASEAN member countries. The time frame for implementing this scheme was at eight years beginning on 1 January 2002 until 31 December 2009. The numbers of commodity that Thailand granted AISP treatment to CLMV from 2004 until at present are shown in Table 3.3.Table 3.2: Cumulative Numbers of Commodities that Thailand Granted AISP Treatment to CLMV Countries Unit: commodity Numbers of Commodity that Thailand granted Year AISP treatment Cambodia Lao PDR Myanmar Vietnam 2002 48 26 72 19 2003 49 27 72 19 2004 309 187 160 34 2005 340 300 850 63Source: www.wood4season.com, retrieved on 24 May 2008As a result of this scheme, Thailand imports key commodities from CLMV countries asfollows: Ø Cambodia : Live cow and buffalo, fish fingerling, prawn (fresh or dried), crab, sweet corn, longan, dry chili, soybean, sesame, lichee, milk bottle, mattress, woven made of artificial fiber, textiles (made of cotton, synthetic thread, artificial fiber and wool), underwear, shoes and metal structure, etc. Ø Lao PDR : Live cow and buffalo, fresh fish, cabbage, nuts, asparagus, sweet corn, lichee, snap bean, longan, fresh or frozen banana, corn, ground nut, canned 19
  • 30. fruits, granite stone, marble, juniper, woven artificial fabrics, stocking, woven made of artificial fiber, textiles (made of cotton, synthetic thread, artificial fiber and wool), underwear, wood furniture, reed furniture and bamboo made from ceramics, etc. Ø Myanmar : Ornamental fish, crab, prawn, fish, mussel (fresh or dried) chicken and duck egg, honey, bird nest, nuts, onion, barley rice, sorghum, corn flour, guava, mangosteen, sunflower seed, fat and vegetable fat, bread, fruit juices, soft drink, liquor, fragrance, mosquito repellent, shampoo, motorcycle tyres, school bags, tableware and kitchenware made from woods, woven fabrics (made of cotton, synthetic thread, artificial fiber and wool), woods, carpet, textiles (made of cotton, synthetic thread, artificial fiber and wool), stocking, underwear, shoes and circuit board, etc. Ø Vietnam: Chili, seeds of anise, cashew nut, diamond cutter or polishing machines, woodfree paper, leather and bovine leather products, print circuit board, and parts of footwear, etc.• ASEAN Free Trade Area (AFTA) The old six member countries of ASEANcomprise Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, whilethe new members’ countries are Vietnam, Lao PDR, Myanmar and Cambodia. The oldmember countries will reduce import duties of Inclusion List (IL) within the CommonEffective Preferential Tariff Scheme (CEPT) to 0-5 % within 2003 and to become zero(0) % within 2010. Whereas the newer member countries will lower import duties of ILwithin CEPT to 0-5% in 2006 for Vietnam; Lao PDR and Myanmar in 2008; Cambodiain 2010 and all four countries to become zero (0)% in 2015.The list of commodities under CEPT covers 105,123 items, (ASEAN Secretariat, 2008).To be eligible for these trade benefits, export commodities must totally be used localcontents. In any case, if it does not wholly obtain local content materials from anASEAN member country, a minimum of 40% of local content of F.O.B prices will beaccepted as ASEAN product origin. In addition, it can also be calculated cumulativerules of origin within ASEAN member countries with required minimum of combinedlocal content at 20%, (Department of ASEAN Affairs, 2008). It is also compulsoryamong member countries to concurrently phase out non-tariff barriers so that it can helpadvance towards ASEAN Economic Community (AEC) within 2015. Thailand’s totaltrade with ASEAN expanded significantly after entering into effect of AFTA. Forinstance, in 2006, the share of Thailand’s total trade within ASEAN represented at20.30 % of Thailand’s total trade with the world.• ASEAN-China Free Trade AgreementAgreement on Trade in Goods of the Framework Agreement on ComprehensiveEconomic Cooperation between the ASEAN and China has been signed on 29November 2004 leading to gradual trade liberalization of both parties for two majorcategories: These are Early Harvest Program and Tariff Reduction for GeneralCommodities Program. Regarding the Early Harvest Program, it consisted ofagricultural products within the customs Harmonized Standard numbers 01-08comprising livestock, meat and other edible parts of animal, fish, dairy products, eggs ofchicken and duck, animal products, trees, vegetables and fruits and edible nuts,including specific products which were effective only on bilateral basis. 20
  • 31. Under this agreement, China and old ASEAN member countries started reducing importtariffs on 1 January 2004, and were lowered to zero (0) % by 1 January 2006. The restof newer ASEAN member countries were given flexible treatment on tariff lines andtime frame for tariffs reduction, but there must be zero (0) % by 2010, (Department ofIndustrial Promotion, 2008). It was conditionally reduced tariffs only within importquotas particularly on onion and garlic. Furthermore, Thailand and China bilaterallyaccelerated tariff elimination for the Early Harvest Program of the customs HarmonizedStandard number 07-08 consisting of vegetables and fruits to become zero (0) % by 1October 2003.In relation to Tariff Reduction for General Commodities Program, it was dividedinto 2 tracks; these are Normal Track and Sensitive Track.• Normal Track It was agreed to reduce tariffs which were higher than 20% to become 20% by 1 January 2005. If there is already lower than 20 %, it shall be reduced periodically. And tariff rate of all commodities will be reduced to zero (0) % by 1 January 2010 (5 years). There are 150 commodities to be granted flexibility to reduce tariff at zero (0) % until 2012. Thailand’s flexible commodities were wool, cotton, textile materials, synthetic fibers, etc. In addition, it should increase commodities which were having tariff at 0-5 % from 40% to 60 % by 2007.• Sensitive Track There will not be over 400 commodities and not over 10% of import values. It was agreed that tariff will be reduced to be 20% by 2012, and will be final tariff at 0-5 % in 2018. For Highly Sensitive Track, it was initially agreed to be not over 40 % or 100 commodities out of total sensitive list. It should be selected such criteria for having least numbers of commodities, and then reduce tariff to become 50 % by 2015. Rules of Origin are applied which some commodities should be wholly obtained, while others should compulsorily be used minimum 40 % of local contents. Both sides also agreed, upon facing trade dispute, to use safeguard measures effective for at least four years during transitional implementation of specific products. These can be done in the form of anti-dumping measure in order to counter influx of commodities as well as protecting specific domestic industries.• Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)BIMSTEC consisted of seven countries namely India, Sri Lanka,Thailand, Bangladesh, Bhutan, Myanmar and Nepal. It has a combined population at1,300 millions or 21 % of world populations, but currently there are limited tradetransaction and values among member countries. So, there still have vast opportunitiesfor further cooperation. BIMSTEC is sort of south-south cooperation; it is also aconvergence of foreign policies between “Look West” of Thailand and “Look East” ofIndia, (Ministry of Foreign Affairs, 2008). Member countries have signed agreement onBIMSTEC Free Trade Area on 8 January 2004, and became effective by 1 July 2006. Itsprincipal objectives were to stimulate trade and investments within intra-BIMSTEC aswell as attracting foreign investment into BIMSTEC Free Trade Area. The time framesfor gradual tax reduction for goods, which were voluntarily selected by each member 21
  • 32. country, were classified into two groups. These are Fast Track and Normal Track. Itsspecific details of time frame are shown in Table 3.3.Table 3.3: Time Frame for Import Trade Tariff Reductions Fast Track Group Time frame for developing Time frame for LDC Countries country parties partyIndia, Sri Lanka, and 1 July 2006-30 June 2009 1 July 2006-30 June 2007ThailandBangladesh, Bhutan, 1 July 2006-30 June 2011 1 July 2006-30 June 2009Myanmar and NepalSource: BIMST-EC Secretariat, retrieved from http://www.bimstec.org/, on 22 May 2008 Normal Track Group Time frame for developing Time frame for LDC Countries countries party India, Sri Lanka, and 1 July 2007-30 June 2012 1 July 2007-30 June 2010 Thailand Bangladesh, Bhutan, 1 July 2007-30 June 2017 1 July 2007-1 July 2015 Myanmar and NepalSource: BIMST-EC Secretariat, retrieved from http://www.bimstec.org/, on 22 May 2008 3.4.2 Trade-Relevant Cooperation• Greater Mekong Sub-region Development Cooperation ProgramThe GMS was initiated in 1992 to foster regional economic cooperation and integrationconsisting of six countries namely Cambodia, Lao PDR, Myanmar, Yunnan andGuangxi Zhuang Provinces of China, Thailand and Vietnam. In terms of trade, itpromotes and facilitates intra-GMS and extra-GMS trade particularly on agriculturaltrade, investment and tourism, which are keys to foster economic growth as well ashelping alleviate poverty in the GMS. Priority is given to the main economic corridors.This can be done through customs modernization, investment promotion and facilitationof cross-border trade as well as mobility of tourists and business peoples, (ADB. 2007).To materialize this initiative, Cross-Border Transport Agreement (CBTA) with total 20annexes was set up in 2003 aiming to deals with speedy facilitation of customs andimmigration procedures at the border-crossing points thus resulting in increase tradeflow both intra-GMS and extra-GMS. Full implementation of this agreement and itsannexes and protocols is expected to complete by 2009, but in fact it will face a delay.The pilot border crossings are Lao Bao-Dansavanh, Poipet-Aranyaprathet, Mukdahan-Savnnakhet, Bavet-Mocbai, Maesod-Myawaddy, Maesai-Tachilek, and Hekou-Lao Cai,(Tsuneishi, 2008).• Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT)This economic cooperation framework covers fourteen southern provinces of Thailand,eight northern states of Malaysia and ten provinces of almost the whole area ofSumatera island of Indonesia. The program aims to establish seamless transportationnetwork and facilitate cross-border trade and extra-IMT-GT trade as well as enhancing 22
  • 33. least cost logistics services. Besides, it also regionally intends to ease greater flows oftourists and labor mobility.3.5 Thailand’s Trade Policies With Neighbouring CountriesWith respect to macro foreign and international economic policies, the Royal ThaiGovernment proactively reaffirms initiatives to expand cooperation and diplomatic tiesnot only with ASEAN member countries but also toward East Asian and South Asianregions as well as actively engaging with other regions of the world, (Royal ThaiGovernment Statement, 2008). Nevertheless, development partnerships betweenThailand and neighbouring countries and other Asian countries are among priorityregions. In terms of trade, the Royal Thai Government places significant emphasis onupholding AFTA, promoting trade and investment with neighbouring countries,enhancing cross-border trade toward development of common regional production basesfor goods and services in the region.Specifically, the key policies for increasing trade flows with neighbouring countries areas follows:• Increase volume and values of cross-border trade and transit trade in order to continuously keep pace with the growth of GMS regional economy.• Undergo cross-border trade reform towards international standard system so that it can solve cross-border trade problems, improve faster customs procedures, as well as extending assistance to develop necessary infrastructure in linking with neighbouring countries. This will help facilitate trade, reduce production cost as well as boosting degree of national competitiveness.• Explore new markets. And cross-border markets will not only be confined to border areas but will also link up with the rest of domestic markets of neighbouring countries as well as further transiting to the nearby large neighbouring countries markets. This will therefore open up new markets access for Thailand’s and co- production products.• Establish special border economic zones along GMS economic corridors by adopting co-production and cross-border supply chains schemes with city pairs as well as seriously taking cooperation on labor management with neighbouring countries into account. This will become new regional production networks in ASEAN, widen up market access to neighbouring countries as well as facilitating transit trade to large nearby markets in China, South East Asian, South Asian and East Asian regions, and global market at large.• Promote contract farming in neighbouring countries in order to increase supply of raw materials for industrial and energy sectors both along border areas and in respective inner regions of Thailand as well.• Relocate some industrial, agricultural and services investments to neighbouring countries in order to help generate jobs, distribute income and narrow development gaps between Thailand and neighbouring countries in parallel with sharing of natural resources, labor, capital, technology and expertise. The target industries are agro- 23
  • 34. processing, wood industries, sugar industry, energy, construction, tourism, and hotel and services.• Actively negotiate on transit trade regime with neighbouring countries e.g. Lao PDR, Myanmar and Vietnam to facilitate freer flow of goods to nearby neighbouring countries markets in South East Asian, South Asian, and East Asian regions.It is remarkable that the trade policies and progress of physical infrastructuredevelopment between Thailand and neighbouring countries has to some extent beenconverging which can help match policy supports for expanding cross-border tradeactivities and actions for promoting speedy flows of goods and peoples. This can partlygenerate positive impacts of trade and development and minimize negative impacts ontransboundary basis. Also, the existing bilateral and regional trade policies haveconcertedly facilitated toward the establishment of special border economic zones inThailand linking with potential border areas in neighbouring countries.3.6 Cross-Border Trade and Commerce Relations Between Thailand and Neighbouring CountriesCross-border trade is one of the key indicators of closer interdependence betweenThailand and neighbouring countries. In 1988, Thailand has proclaimed a policy ofturning “Indochina battlefields into a marketplace” (Chandoevwit, et at. 2005). This,coupled with the GMS Regional Economic Integration Program has further pushedThailand to deepen economic relationships with neighbouring countries. Since then,cross-border trade is flourishing despite occasional political conflicts. As a result,greater flows of goods and people mobility are evident. 3.6.1 Markets of Neighbouring CountriesThailand has possessed strategic locational advantages at the junction of mainlandSouth East Asian region allowing businesses and private sectors to conduct both cross-border trade and transit trade. The market can be divided into two groups namely:• Neighbouring countries markets which can be transacted through cross-border trade with total prospective consumers at 93.22 million populations, (Population Division of the Department of Economic and Social Affairs, 2008). This can break down into Malaysia 25.65 millions, Myanmar 47.96 millions, Lao PDR 5.66 millions and Cambodia 13.95 millions.• Nearby neighbouring countries markets which can be transacted through transit trade with total prospective consumers at 2.689 billion populations, (Population Division of the Department of Economic and Social Affairs, 2008). This can classify their populations into Vietnam 85.02 millions, India 1,134.40 millions, Bangladesh 153.28 millions, China 1,312.97 millions, and Singapore 4.32 millions. To reach these nearby markets, Thailand is able to use land transport for onward movement of commodities passing her border checkpoints through respective neighbouring countries destinations which can significantly shorten travel distance resulting in a reduction of logistics cost as well as enhancing Thailand’s degree of competiveness of goods. 24
  • 35. 3.6.2 Overall Assessment of Cross-border Trade and Commerce Relations Between Thailand and Five-Neighbouring Countries (Cambodia, China, Lao PDR, Myanmar and Malaysia) 1) Cumulative Cross-Border Trade Values of Thailand With Five- Neighbouring Countries During 1996 to 2008 (January-April)There is a dichotomy of border trade behaviors. The following analyses are formal orofficial cross-border trade statistics of Thailand with five-neighbouring countries,whereas the data on extent of informal cross-border trade are unknown. According to acustoms official, the trend of informal cross-border trade is declining as a consequenceof continued government efforts to formalize such cross-border trading. The dataconsist of a 13-year interval from 1996-2008. Specifically for the year 2008, the datawere only available for four months beginning from January to April.During 1996-2008 (January-April), the cumulative cross-border trade values ofThailand with five-neighbouring countries were significantly amounted at 2,317.53billion Baht represented at 20.51 % of cumulative trade values of Thailand with five-neighbouring countries. The cumulative share of cross-border export from Thailand tothese neighbouring countries was as high at 59.06 %. While the cumulative share ofcross-border import from these neighbouring countries were at 40.94 % divided into2.31 % for Lao PDR; 17.77 % for Myanmar; 0.52 % for Cambodia; 0.59 % for Chinaand 19.71 % for Malaysia. As a result, Thailand gained significant cumulative balanceof cross-border trade at 420.36 billion Baht. Please see details in Matrix 3.1. 25
  • 36. Matrix 3.1 : Cumulative Cross-Border Trade Values of Thailand With Five-Neighbouring Countries During 1996 to 2008 (January-April) Unit: Billions of Baht Thailand Lao PDR Myanmar Cambodia China Malaysia Total Country CBT IT Total CBT IT Total CBT IT Total CBT IT Total CBT IT Total CBT IT Total CBT IT Total 1,849.0 3,971.61.Thailand X X X 230.96 47.08 278.04 143.19 101.44 244.64 192.32 118.62 310.94 158.08 2,499.79 2,657.88 644.39 1,204.69 8 1,368.94 2 5,340.572.Lao PDR 53.75 24.45 78.20 X X X X X X X X X X X X X X X 53.75 24.45 78.203.Myanmar 412.01 55.16 467.17 X X X X X X X X X X X X X X X 412.01 55.16 467.174.Cambodia 12.14 0.83 12.98 X X X X X X X X X X X X X X X 12.14 0.83 12.985.China(Yunnan 3,113. 3,113.8Province ) 13.70 89 3,127.59 X X X X X X X X X X X X X X X 13.70 9 3,127.59 1,815. 1,815.96.Malaysia 456.98 92 2,272.91 X X X X X X X X X X X X X X X 456.98 2 2,272.91 5,010. 1,849.0 8,981.8 Total 948.58 25 5,958.83 230.96 47.08 278.04 143.19 101.44 244.64 192.32 118.62 310.94 158.08 2,499.79 2,657.88 644.39 1,204.69 8 2,317.53 7 11,299.40 Source: The Customs Department, Thailand Remarks: CBT refers to cross-border trade of Thailand with five-neighbouring countries. IT refers to international trade of Thailand with five-neighbouring countries. 26
  • 37. 2) Overall Annual Cross-Border Trade Values Between Thailand and Five-Neighbouring CountriesFor the sake of simplifying such comparisons, trading categories between Thailand andneighbouring countries are purposively divided into (1) cross-border trade and (2)international trade which consists of export and import of goods through sea-borne andair-borne mode of transportation. Transit trade relations between Thailand and Chinaare regrouping under cross-border trade category in order to collectively presentsignificant picture of total trade values between Thailand and five-neighbouringcountries. Cross-border trade has played steadily significant role in bridging closerrelations between Thailand and neighbouring countries reflecting greater extent ofinterdependence in the GMS. Due to cross proximity, coupled with multiple regionaltrade agreements effects with bordering countries and gradually convenient transportnetworks, cross-border trade has shown on the rising trend as appears in Figure 3.1. Unit: Millions of Baht 450,000 Million Baht 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- April) Aggregate cross-border trade export values from Thailnd to four-neighbouring countries and transit trade to China Aggregate cross-border import values from four-neighbouring countries and transit trade from China to Thailand Aggregate cross-border trade values between Thailand and four-neighbouring countries and transit trade with ChinaSource: Cross-border trades statistics for various years, The Department of Customs, ThailandFigure 3.1: Aggregate Annual Cross-Border Trade Export and Import Between Thailand and Four-Neighbouring Countries and Transit Trade To/From Yunnan Province of China During 1996-2008 (January- April)In relation to the aggregate border trade values with five-neighbouring countries, itsteadily increased from 34.916 billions Baht in 1996 to 60.495 billions Baht in 1999.Later, it steeply rose from 106.423 billion Baht in 2000 up to 401.360 billions Baht in2007. The average annual cross-border trade growth of goods during 1996-2007 was at26 %. With respect to export of goods originated both from border regions and other 27
  • 38. regions of Thailand, during 1996-1999, it slowly increased from amounting 24.297billions Baht to 39.660 billions Baht. After that, it rather steeply surged from 73.113billions Baht in 2000 to 235.630 billions Baht in 2007, which accounted for as highgrowth at 222.28 %. The average annual cross-border export growth of goods from1996-2007 was at 25%.Regarding import of goods, it was quite similar trend with the latter, but the base valueof import was much lower than export values. It steadily increased during 1996-1999,and then it quickly rose from amounting 33.226 billions Baht in 2000 to 165.729billions Baht in 2007, which represented at distinct growth rate at 398.79 %. Theaverage annual cross-border import growth of goods from 1996-2007 was at 30 %. So,the average annual cross-border import growth in recent decade was higher than that theaverage cross-border export growth at 1.2 times reflecting strong economicinterdependence between Thailand and five neighbouring countries. In 2006, theaggregate cross-border trade values between Thailand and five-neighbouring countriesaccounted for 22.59 % of Thailand’s total trade with ASEAN, or at 3.83 % ofThailand’s total trade with the world.This is considered as high performance of both cross-border export and import due to itcan constantly keep pace of growth strongly revealing continuous efforts made by theRoyal Thai Government, neighbouring countries governments, ADB and developmentpartners in realizing economic and cross-border trade prospects in the GMS. It isdifficult to quantify specific factors or determinants of such growth. Rather, theachievement was presumably upheld by multiple-effects of regional trade agreementsranging from AFTA and ASEAN-China in general, and one way free trade initiative inpursuit of reducing development disparities among countries in the GMS in particular. Itshould be noted that Thailand has conducted cross-border trade directly with four-neighbouring countries namely Cambodia, Lao PDR, Myanmar and Malaysia; tradingwith Yunnan province of Southern China is in the form of transit arrangement. Overall,it is optimistically indicating that the trend of cross-border trade keeps increasing, whichpartly can help sustain macroeconomic growth. This growth may somehow contributeto regional development toward the improvement of better quality of life of all Thai andneighbouring countries citizens including to some extent those rural poor andmarginalized groups residing along border areas. 3) Aggregate Balance of Cross-Border Trade Between Thailand and Four- Neighbouring Countries and Transit Trade Balance With Yunnan Province of ChinaIndeed, aggregate balance of cross-border trade in goods was somewhat striking as itrevealed with positive and negative trade balance scenarios. In general, Thailand hasgained favorable trade balances with bordering partner countries, which were ratherreasonable amount from 13.678 billions Baht in 1996 to 18.827 billions Baht in 1999.Later, it steeply escalated, despite facing negative trade balance with Myanmar, from39.887 billion Baht in 2000 to 69.901 billions Baht in 2007 reflecting as high growth at34 % during this period. Yet, Thailand acquired most positive balance of cross-bordertrade with Lao PDR, followed by Cambodia, Malaysia and China, respectively. Theaverage annual growth rate of balance of cross-border trade from 1996-2007 was at28.5%, which is regarded as high performance due to certain uncontrollable factorintervened; that is the fluctuation of the Thai Baht currency resulting in a 10 % increase 28
  • 39. of price for Thai products exported to neighbouring countries markets particularly toCambodia, (Thai Chamber of Commerce, 2007). However, it appears that Thailand isstill slightly gaining favorable balance of cross-border trade with five-neighbouringcountries. Please see details in Figure 3.2. Unit: Millions of Baht 435,000 Million Baht 385,000 335,000 285,000 235,000 185,000 135,000 85,000 35,000 -15,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) -65,000 Malaysia China Cam bodia Lao PDR Myanmar Aggregate Balance of Cross-Border Trade Between Thailand and Four-Neighbouring Countries and Balance of Transit Trade W China ith Aggregate Cross-Border Trade V alues Between Thailand and Four-Neighbouring Countries and Transit Trade Values With ChinaSource: The Customs Department, ThailandFigure 3.2: Aggregate Balance of Cross-Border Trade Between Thailand and Four-Neighbouring Countries and Balance of Transit Trade With ChinaOn the contrary, balance of cross-border trade between Thailand and Myanmar has beenrepresented somewhat high extent of interdependence between these two countries.During 1996-2000s, Thailand had secured favorable trade balance with Myanmar withslightly large amount ranging from 2.090-6.671 billions Baht with average annualgrowth rate as high at 49.5%. However, when started importing a large amount ofnatural gas from Myanmar for domestic electricity generation in 2001 throughSangklaburi local border crossing, since then Thailand has been confronting persistentlydeficit balance of cross-border trade. During 2001-2007, it jumped from -22.261billions Baht to -54.861 billions Baht showing average annual negative balance ofcross-border trade at -62.75 %. The average balance of cross-border trade betweenThailand and Myanmar during 1996-2007 was as much negative at -21.81%, and thetendency may be increasing depending on the likelihood of economic growth inThailand. 29
  • 40. 4) Cross-Border Trade Gaps Between Thailand and Five-Neighbouring CountriesTable 3.4 Cross-Border Trade Gaps Between Thailand and Five-Neighbouring Countries During 1996-2008 (January-April) Unit: Number of timeCountries Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- April)1.Lao PDR 3 3.46 6.4 3.76 4.49 4.31 4.12 4.21 4.9 5.44 3.6 3.29 3.312.Myanmar 4.9 7.61 3.72 4.47 2.14 -3.4 -4.84 -2.53 -2.84 -3.41 -4.56 -3.58 -3.183. Cambodia 1.21 1.05 3.44 4.85 28.92 30.9 36.21 34.58 22.1 22.52 25.8 19.56 21.554. China 10.31 8.63 1.13 1.4 4.53 4.84 9.35 8.58 9.27 13.45 16.3 15.03 16.26(YunnanProvince)5.Malaysia 1.92 2.16 1.89 1.42 1.61 1.52 1.22 1.4 1.39 1.27 1.34 1.32 1.46Source: The Customs Department, ThailandAs mentioned previously, Thailand generally gained significant balance of cross-bordertrade with neighbouring countries. Consequently, there has been emerging ofconsiderable trade gaps. This is mainly resulted from different stages of development,diverse extent of government supports on cross-border trade undertaking and divergentdegree of entrepreneurship. During 1996-2008 (January-April), the average annualcross-border trade gaps between Thailand and neighboring countries greatly varied fromone country to another. Cambodia has been experiencing such fluctuating trade gapswith Thailand, in which the cross-border export of goods from Cambodia to Thailandwere much lower than that of cross-border import of goods from Thailand to Cambodiafor the annual average of 19.43 times. As a result, Cambodia ranked first ofneighbouring countries with highest widening cross-border trade gaps. It then followedby Yunnan province of China with cross-border trade gaps at annual average at 9.16times. Lao PDR came third with cross-border trade gaps at annual average at 4.17 times,which is still considered as high inequality. Malaysia ran fourth with cross-border tradegaps at reasonable annual average at 1.53 times. On the other hand, Thailand has beenfacing substantial negative cross-border trade gaps with Myanmar at annual average at -0.42 time. Thailand alone seems likely to constantly secure favorable balance of cross-border trade with least developed and developing neighbouring countries leaving thetendency of cross-border trade gaps to be existed at steady state. Therefore, one of themeans to bring down these persisting trade gaps can be fostered through enhancingcloser cross-border supply chain networks between Thailand and these neighboringcountries. 5) Share of Aggregate Cross-Border Trade To International Trade Between Thailand and Five-Neighbouring CountriesTrade data are disaggregated into two categories: these are (1) share of aggregate cross-border trade and (2) share of international trade. From this assessment, it to some extent 30
  • 41. indicates a diverging trend of trading pattern comprehensively meaning that the shareof aggregate cross-border trade tends to be growing, while the share of aggregateinternational trade is likely to be declining, which corresponds to the greater physicalconnectivity and accessibility in the GMS. This can be justified that the share of cross-border export fluctuated from 19.49 % in 1996 to 21.16 % in 1999; it then varied from26.56% in 2000 to 26.08% in 2007. And the trend is likely to move upward. Similarly,the share of aggregate cross-border import rose from 7.22% in 1996 to 17.76 % in 2001;it then varied from 17.65 % in 2002 to 17.18 % in 2007. And the trend tends to beslightly rising. Please see details in Figure 3.3. % 100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Share of total export of border trade Share of total import of border trade Share of total export of international trade Share of total import of international tradeSource: The Customs Department, ThailandFigure 3.3: Share of Aggregate Cross-Border Trade to International Trade Between Thailand and-Five Neighbouring CountriesIn contrast, the share of export of international trade slightly decreased from 80.51 % in1996 to 73.05% in 2001, and then varied to 73.92 5 in 2007. And the trend is likely tomove downward. Likewise, the share of import of international trade little diminishedfrom 92.8 % in 1996 to 82.4 % in 2001; it then fluctuated to 82.82 % in 2007. And thetrend is likely to weaken. This has implications that cross-border trade betweenThailand and five-neighbouring countries are gaining momentum resulting from greaterphysical connectivity and apparently conducive regional trade and investmentliberalization and facilitation efforts. However, it is important to ensure that those well-connected border nodes/gateways will have regionally equal opportunity in generatingpotential production not just being gateways so that local sustainable livelihoods andbetter quality of life can be strengthened. If this is not well aware, it otherwise willnegatively lead to “back wash effects”, in which local people massively emigrate fromcommunities searching for jobs in border nodes or large cities, which will subsequentlybe associated with some environmental and social problems. 31
  • 42. 3.6.3 State of Cross-Border Trade Relations With Individual Neighbouring CountriesThis assessment found that the patterns of cross-border trade and commerce betweenThailand and neighbouring countries greatly varied from one country to anotherdepending on its particular comparative advantage, division of labor and specializationof production. Thailand mainly exported consumer and intermediate goods, motorcyclesand cars and its spare parts, oils, and some capital goods to neighbouring countries, andimported primary goods such as agricultural and fishery products, natural gas, andintermediate goods from neighbouring countries. In addition, cross-border retail tradesare always conducted at the specific allowed border crossings. The state of cross-bordertrade relations with individual neighbouring country is as follows: 1) CambodiaDuring 1996-2007, the average annual cross-border trade export was higher than itsimport for 2.40 times. In 2007, the share of aggregate cross-border trade values betweenThailand and Cambodia accounted for 8.43 % of aggregate cross-border trade valuesbetween Thailand and five-neighbouring countries.Ø Cross-Border Export Values From Thailand To CambodiaThe aggregate cross-border export to Cambodia increased substantially from 1.260billions Baht in 1996 to 32.203 billions Baht in 2007. In recent decade, the averageannual cross-border export growth was at 42.81 %, which is regarded at soaring rate. In2007, Aranyaprathet border checkpoint was the most important gateway linking withCambodia, which was responsible for as high about half of total cross-border tradeexport values, followed by Klongyai at 36% and Chantaburi border check points at 4 %,respectively. Aranyaprathet district also hosts a large second-hand garment wholesalemarket so called Rong Kluer market. The rest 13 % of cross-border export valuesrepresented by four remaining border checkpoints, which provide channels for borderretail trade of consumer goods among local peoples residing along border areas of bothcountries. Please see details in Figure 3.4. 32
  • 43. Unit: Millions of Baht 35,000 Million Baht 30,000 25,000 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Aranyaprathet Klongyai Chantaburi Chongchom Piboonmangsaharn Khaodin Tapraya Total E port of B x order Trade Total E port of International Trade xSource: The Customs Department, ThailandFigure 3.4: Cross-Border Export Values From Thailand To Cambodia During 1996 To 2008 Through Major Border CheckpointsIn terms of key commodities transacted through Aranyaprathet border checkpoint in2007, they are shown in Table 3.5.Table 3.5: Top Ten Cross-Border Export Commodities From Cambodia To Thailand Through Aranyaprathet Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Motorcycles 1,443.04 8.412.Cement 1,069.54 6.233.Engines 937.68 5.464.Livestock feed 839.01 4.895.Motorcycle parts 835.98 4.876. Gas petroleum 537.45 3.137.Woven fabrics 436.95 2.558.Printed textiles 347.67 2.039.Gourmet powder 310.49 1.8110.Chemical fertilizers 265.24 1.5511. Others 10,138.48 59.08 Grand total 17,161.53 100.00Source: The Customs Department, Thailand 33
  • 44. It can be articulated that Cambodia is currently under reconstruction period after endinglong domestic conflict. So they may need to construct physical infrastructure e.g. roadas, urban development, etc. Motorcycles associated with its engines and parts are alsoimportant vehicles for daily mobility both in rural and urban areas in Cambodia. Inaddition, Cambodian market also demands various intermediate products from Thailande.g. raw material for textile industry, animal feeds, agricultural machines, chemicalfertilizers, as well as consumer goods. Therefore, there is vast potential for Thaimanufacturers to expand marketing and sales in response to these increasing needs.Ø Cross-Border Import Values From Cambodia To ThailandThe total cross-border trade import from Cambodia somewhat fluctuated from 1.034billions Baht in 1996 to 1.646 billions Baht in 2007. In recent decade, the averageannual cross-border import growth was at 20 %, which is regarded at moderate andreasonable rate. But it is questionable in terms of such value of trade that should havebeen higher than the stated value. This may result from limited diversification ofCambodian economy as well as having rather low level of industrial development orperhaps in an initial stage of industrialization. In 2007, Aranyaprathet border checkpointwas the most important gateway linking with Cambodia, which was responsible for ashigh at 67 % of total cross-border import values, followed by Chantaburi at 22 % andKlongyai border check points at 7 %, respectively. The rest 4 % stood for fourremaining border checkpoints, which provide channels for border retail trades ofconsumer goods. Please see details in Figure 3.5. 34
  • 45. Unit: Millions of Baht2,500 Million Baht2,0001,5001,000 500 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Aranyaprathet Klongyai Chantaburi Chongchom Piboonmangsaharn Khaodin Tapraya Total Import of Border Trade Total Import of International TradeSource: The Customs Department, ThailandFigure 3.5: Cross-Border Import Values From Thailand To Cambodia During 1996 To 2008 Through Major Border CheckpointsRelating to the key commodities transacted through Aranyaprathet border checkpoint in2007, they are shown in Table 3.6.Table 3.6: Top Ten Cross-Border Import Commodities From Cambodia To Thailand Through Aranyaprathet Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Remnant of iron 336.29 25.732.Second-hand clothes 176.98 13.543.Remnant of aluminum 175.07 13.404.Corn for livestock feed 159.2 12.185.Soybean grain 128.32 9.826.Remnant of paper 84.22 6.447.Exported goods 52.65 4.038.Remnant of copper 41.16 3.159.Ready made clothes 36.59 2.8010.Tapioca 17.16 1.3111.Others 99.12 7.59 Grand total 1,306.76 100.00 35
  • 46. Source: The Customs Department, ThailandAccording to the above list, it can be inferred that Cambodia is specialized in arrangingvarious types of metal scrap and papers. Agricultural produces e.g. corn for livestockand soybean grain also earns foreign exchange to Cambodia. It can be construed thatthese products might be partly resulted from the Contract Farming initiative along Thai-Cambodian border. Aranyaprathet district alone also imports second-hand garment tosell at its border wholesale market. Moreover, this market plays crucial role inimporting ready made clothing products as well as further distributing either onwholesale or retail basis to garment clusters in Bangkok e.g. Bo Bae and Pratunam andother regions in Thailand. This means there is in place of strong cross-border supplychain linkages for garment products and marketing between Cambodia and strategicgarment clusters/markets in Thailand. For geographical cross-border trade relationshipsbetween Thailand and Cambodia particularly conducting through Aranyaprathet bordercheckpoint, it appears in Map 3.3.Map 3.3: Geographical Cross-Border Trade Relationships Between Thailand and Cambodia Through Aranyaprathet Border Checkpoint in 2007 Motorcycles, 1,443, 8% Motorcycles, 1,443, 8% Cement, 1,070, 6% Cement, 1,070, 6% Engines, 938, 5% Engines, 938, 5% Livestock feed, 839, 5% Livestock feed, 839, 5% Others, 10,138, 59% Others, 10,138, 59% Motorcycle parts, 836, 5% Motorcycle parts, 836, 5% Petroleum gas, 537, 3% Petroleum gas, 537, 3% Woven fabrics, 437, 3% Woven fabrics, 437, 3% Printed textiles, 348, 2% Gourmet powder, 310, 2% Printed textiles, 348, 2% Gourmet powder, 310, Chemical fertilizers, 2% 265, 2% Chemical fertilizers, 265, 2% T apioca, 17, 1% T apioca, 17, 1% Ready made clothes, 37, 3% Ready made clothes, Others, 99, 8% 37, 3% Others, 99, 8% Remnant of copper, 41, 3% Remnant of copper, 41, 3% Exported goods, 53, Exported4% goods, 53, Remnant of iron, 4% 336, 26% Remnant of iron, 336, 26% Remnant of paper, 84, 6% Remnant of paper, 84, 6% Soybean grain, 128, Second-hand clothes, Soybean 10% 128, grain, 177, 14% Second-hand clothes, 10% 177, 14% Corn for livestock feed, Corn for Remnant of livestock feed, aluminium, 175, 13% Remnant of aluminium, 175, 13% 36
  • 47. Source: The Customs Department, ThailandØ Share of Cross-Border Trade Values To International Trade Values Between Thailand and Cambodia During 1996-2008The share of aggregate cross-border export gradually fluctuated from 13.81 % in 1996to 19.70 % in 1999. Then it jumped to 51.32 % in 2000, and further moved up to 68.21% in 2007. Similarly, the share of aggregate cross-border import steadily escalated from85.40 % in 1996 to 97.50 % in 2007. This means it was a converging trend of bothcross-border export and import trade due to greater physical connectivity offering fullcarrying transportation capacity with large volume at least cost for delivery products tofinal customer destinations. In contrast, the share of aggregate export of internationaltrade sharply declined from 86.19% in 1996 to 30.80 % in 2007. Likewise, theaggregate import of international trade little by little dropped from 14.60% in 1996 to2.50 % in 2007 indicating that international trade will play less significant role inexpanding trade relations between Thailand and Cambodia. It is therefore necessary tojointly develop cross-border logistics cooperation and management in order toefficiently offer customers with least cost of operation. Please see details in Figure 3.6 %100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Share of total export of border trade Share of total import of border trade Share of total export of international trade Share of total import of international tradeSource: The Customs Department, ThailandFigure 3.6: Share of Aggregate Cross-Border Trade To Aggregate International Trade Between Thailand and Cambodia During 1996-2008 2) ChinaThailand does not share common border with China. Cross-border trade is performed onthe basis of transit arrangement mainly facilitated to/from nation-wide key bordercheckpoints. In 2007, the aggregate cross-border trade values through transit meansbetween Thailand and China were at 39.580 billions Baht accounted for 9.86 % ofaggregate cross-border trade values of Thailand with five-neighbouring countries. 37
  • 48. During 1996-2007, the average annual growth of aggregate cross-border trade valuesthrough transit form between Thailand and China was at 42 %. And the average cross-border trade export values were higher than its import values for 1.13 times.Ø Cross-Border Export Values Through Transit Arrangement To ChinaThe aggregate cross-border trade export through transit mode from Thailand to Yunnanprovince of Southern part of China rose steadily from 1.413 billions Baht in 1996 toamounting at 36.872 billions Baht in 2007. In recent decade, the average annual growthof cross-border trade export through transit form from Thailand to Yunnan province ofChina was as high at 50 %. In 2007, Padang Besar border checkpoint, located inSouthern region, was the most important gateway for facilitating transit goods operatedby rail routing Bangkok-Hat Yai-Padang Besar (Thailand)–Penang (Malaysia) towardChinese destinations, which was responsible for as high at 69 % of total cross-bordertrade export values, followed by Chiangsaen at 13% or 4.619 billions Baht, carriedgoods by vessels cruise upstream of Mekong river directly to Yunnan province ofSouthern China taken travel time as long at three days (www.chiangmainews.co.th),Sadao in Songkhla province at 4 %, Prachuap Khiri Khan at 2.4 %, and Betong in Yalaprovince at 0.4 %, respectively. The rest of cross-border trade exports to China wereconducted customs formalities in both Northern region at Maesai, Chiangkhong, andNortheastern region at Nongkhai and Mukdahan border checkpoints, respectively.It is notable that cross-border trade exports to China handled by many bordercheckpoints in diverse regions depending on location of productions/origins and finaldestinations. If there are high volumes, it will be exported through Padang Besar andSadao border checkpoints. For specific Yunnan province destination of Southern China,there was increasingly transported through Chiangsaen by river vessels and by landtransport through other border checkpoints in the Northern and Northeastern regions ofThailand. For this reason, it is so far rather complex undertaking of logistics services forreaching Southern Chinese markets. Nevertheless, such difficulty will soon beovercome when the ongoing road links between Chiang Rai province and Kunming cityof Yunnan province so called the construction of R3 West (through Myanmar) and R3East (through Lao PDR) routes are to be materialized in the next few years. The trendof cross-border trade export volumes through transit form to China particularly throughChiangsaen still tends to progressively increase. Please see details of diverse cross-border export channels to China in Figure 3.7. 38
  • 49. Unit: Millions of Baht 45,000 40,000 35,000 30,000 Million Baht 25,000 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Nongkhai Maesai Chiangsaen Chiangkhong Sadao Padang Besar Betong Prachuap Khiri Khan Mukdaharn Total cross-border export values through transit mode Total cross-border trade values through transit modeSource: The Customs Department, ThailandFigure 3.7: Cross-Border Export Values Through Transit Arrangement From Thailand To China During 1996 To 2008 Through Major Border CheckpointsRelating to key commodities transacted through Chiangsaen border checkpoint in 2007,they are shown in Table 3.7.Table 3.7: Top Ten Cross-Border Trade Export Commodities from Thailand to Yunnan Province of Southern Part of China Through Chiangsaen Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Rubber smoked sheets 1,361.05 24.052.Dried longan 1,006.2 17.783.Palm oil 560.26 9.904.Elastic thread 366.87 6.485.Crepe sheets 283.49 5.016.Vegetable oil 252.65 4.477.Gourmet powder 136.94 2.428.Block rubber 136.13 2.419.Other non-alcoholic beverages 120.69 2.1310.Diesel oil 85.38 1.5111.Others 1,348.46 23.83 Grand total 5,658.12 100.00Source: The Customs Department, Thailand 39
  • 50. In relation to the above list, Thailand comparatively exported tropical goods originatedfrom all over the country to Yunnan province led by natural rubber products consistingof rubber smoked sheets, crepes sheets, block rubber and elastic thread. Direct marketpenetration of Thailand’s northern region produces can be evidenced from selling oflarge amount of dried longan, a tropical fruit, which can optimistically help expandmarket for a large number of longan farmers in Thailand. Food and beverage-relatedproducts e.g. vegetable oil, palm oil, gourmet powder, and non-alcoholic beverageswere also significant exporting products upholding the national development strategy tobecome kitchen of the world. In addition, Thailand sold a small amount of diesel oil toYunnan province. The propensity of cross-border trade export to China in general andYunnan province in particular is likely to be fast expanding attributable to the effectiveimplementation of both Thailand-China Free Trade Agreement and ASEAN-China FreeTrade Agreement.Ø Cross-Border Import Values Through Transit Arrangement From China To ThailandThe aggregate cross-border trade import through transit arrangement from China toThailand went up steadily from amounting 0.137 billion Baht in 1996 to 2.708 billionsBaht in 2007. In recent decade, the average annual growth of cross-border trade importthrough transit arrangement from China to Thailand was as high at 43.60 %. In 2007,Padang Besar was still the key entry point for importing transit goods from Chinathrough Malaysia, which was accountable for as high at 42 % of total cross-border tradeimport values, followed by Chiangsaen at 32 %, carried goods by vessels cruisedownstream of Mekong river directly from Yunnan province of Southern China takentravel time for one day (www.chiangmainews.co.th), Mukdahan at 21 % andChiangkhong at 3 %, respectively. The rest of cross-border trade imports wereconducted customs formalities at Maesai and Nongkhai border checkpoints. It can beobserved that border checkpoints of Chiangsaen in the Northern region and Mukdahanin Northeastern region have been performing increasing role in expanding traderelations between Thailand and Yunnan province of Southern China due to greatercross-border physical connectivity in the GMS. Furthermore, the trend of cross-bordertrade import through transit form from China to Thailand continues to grow rapidly.Please see details in Figure 3.8. 40
  • 51. Unit: Millions of Baht 45,000 40,000 35,000 30,000 Million Baht 25,000 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Nongkhai Maesai Chiangsaen Chiangkhong Mukdaharn Sadao Total cross-border import values through transit mode Total cross-border trade values through transit modeSource: The Customs Department, ThailandFigure 3.8: Cross-Border Import Trade Values Through Transit Arrangement From China To Thailand During 1996 To 2008 Through Major Border CheckpointsRelating to the cross-border key import commodities from Yunnan province ofSouthern China, they are shown in Table 3.8.Table 3.8: Top Ten Cross-Border Import Commodities From Yunnan Province of Southern China To Thailand Through Chiangsaen Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Fresh vegetables 298 29.582.Apple 125.7 12.483.Chinese pear 85.68 8.504.Pomegranate 73.91 7.345.Garlic 64.39 6.396.Processed woods 37.87 3.767.Sunflower seed 33.63 3.348.Hydrocarbon ferromanganese 26.25 2.619.Multiplier Onion 18.4 1.8310.White pumpkin seed 10.83 1.0711.Others 232.83 23.11 Grand total 1,007.49 100.00Source: The Customs Department, ThailandAccording to the above list, it implied that most of import agricultural commoditieswere mainly in line with the already in effect of both Thailand-China Free TradeAgreement and under the ASEAN-China Free Trade agreement. These led by fresh 41
  • 52. vegetables, winter fruits e.g. apple, Chinese pear, pomegranate. In addition, otheragricultural produces e.g. garlic, sunflower seed, multiplier onion and white pumpkinseeds play important role among major import commodities. Apart from this, it includedquite significant amount of processed woods and intermediate industrial product e.g.hydrocarbon ferromanganese. In the near future, the tendency of importation of winterfruits originating from Yunnan province is likely to rise following the implementationof the above mentioned free trade agreements, coupled with more efficient cross-borderlogistics provisions and management between Northern region of Thailand and Yunnanprovince of Southern region of China. For geographical cross-border trade relationshipsbetween Thailand and Yunnan province of Southern China particularly conductingthrough Chiangsaen border checkpoint, it appears in Map 3.4.Map 3.4: Geographical Cross-Border Trade Relationships Between Thailand and Yunnan Province of Southern Region of China Through Chiangsaen Border Checkpoint in 2007 Others, 233, 23% Fresh vegetables, 298, 30% White pumkin seed, 11, 1% Multiplier Onion, 18, 2% Hydrocarbon Fer Manganese, 26, 3% Sunflower seed, 34, 3% Apple, 126, 12% Processed woods, 38, 4% Chinese pear, 86, 9% Garlic, 64, 6% Pomegranate, 74, 7% Others, 1,348, 24% Rubber smoked sheets, 1,361, 25% Diesel oil, 85, 2% Other non- alcoholic beverages, Block Rubber, 136, 2% Dry longan, 1,006, 18% Gourmet powder, 137, 2% Vegetable oil, 253, 4% Crepe sheets, 283, 5% Palm oil, 560, 10% Rubber thread, 367, 6% 42
  • 53. Source: The Customs Department, ThailandØ Share of Cross-Border Trade Values Through Transit Arrangement To International Trade Values Between Thailand and China During 1996 To 2008The share of cross-border trade export values through transit arrangement gradually rosefrom 2.99 % in 1996 to 7.98 % in 2007. Similarly, the share of cross-border tradeimport values through transit arrangement slowly increased from 0.28 % in 1996 to 0.48% in 2007, which expanded at very much slower pace compared with those previouscross-border trade exports to China. This implies that both cross-border trade export andparticularly on import sector have yet been facing physical constraints limitingopportunity to facilitate faster trade expansion. Nevertheless, the share of internationaltrade export slightly decreased from 97.01 % in 1996 to 92.02 % in 2007. Likewise, theshare of international trade import declined at a snail’s pace from 99.72% in 1996 to99.52 % in 2007. However, its share of international trade import could be sharplyfallen when cross-border logistics between Thailand and China are improved by theoperation of the R3 road links (East and West) routes. Please see details in Figure 3.9. % 100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Share of total export of border trade Share of total import of border trade Share of total export of international trade Share of total import of international tradeSource: The Customs Department, ThailandFigure 3.9: Share of Border Trade Values Through Transit Arrangement To International Trade Values Between Thailand and China During 1996- 2008 (January-April) 43
  • 54. 3) Lao PDRDuring 1996-2007, Thailand gained favorable balance of cross-border trade, and theaggregate cross-border export was higher than the aggregate cross-border import at 1.1times. In 2007, the aggregate cross-border trade values between Thailand and Lao PDRaccounted for 11.75 % of aggregate cross-border trade values of Thailand with five-neighbouring countries.Ø Cross-Border Trade Export Values From Thailand To Lao PDRThe aggregate cross-border export to Lao PDR gradually increased from 5.190 billionsBaht in 1996 to 38.970 billions Baht in 2007. In recent decade, the average annualcross-border export growth was at 21 %, which regarded at obvious rate. In 2007,Nongkhai border checkpoint was the most important gateway linking with Lao PDR,which was responsible for as high about half of total cross-border export values,followed by border checkpoints of Mukdahan at 14 % and Bungkarn andPiboonmangsaharn each at 9 % and Nakhonpanom at 7%, respectively. Also, Nongkhaicity is a popular cross-border shopping destination either on retail or wholesalesegments for neighbouring Vientiane’s populations of Lao PDR by just travellingthrough Mekong bridge. The rest 5.85 % belonged to two remaining bordercheckpoints, which provide channels for border retail trade of consumer goods amonglocal peoples residing along both sides of border areas including the rural poor. Pleasesee details in Figure 3.10. Unit: Millions of Baht 45,000 Million baht 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- A pr) Nongkhai Bungkarn Nakhonpanom Mukdaharn Thalee Piboonmangsaharn Chiangsan Chiangkhong Total Export of Border Trade Total Export of International TradeSource: The Customs Department, ThailandFigure 3.10: Cross-Border Export Values From Thailand To Lao PDR From 1996 To 2008 Through Major Border Checkpoints 44
  • 55. Relating to key commodities transacted through Nongkhai border checkpoint in 2007,they are shown in Table 3.9.Table 3.9: Top Ten Cross-Border Export Commodities From Thailand To Lao PDR Through Nong Khai Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Oil products 3,627.75 17.822.Cars 1,632.14 8.023.Pellet cement 813.49 4.004.Woven fabrics 553.87 2.725.Knitted fabrics 240.61 1.186.Medical equipments 173.96 0.857.Digger 133.23 0.658.Polymers of ethylene 129.29 0.649.Tiles 128.93 0.6310.Tyres 126.77 0.6211.Others 12,796.96 62.86 Grand total 20,357.00 100.00Source: The Customs Department, ThailandIt can be articulated that Lao PDR is currently in the stage of rapid economic growthdue to they vastly need intermediate and capital goods e.g. oils, automobiles,construction materials, heavy machines and medical equipments from Thailand fordriving the growing domestic economy. It is likely that Lao PDR is urbanizingindicating by a large amount of home decoration materials are in great demand. Inaddition, such requirements of raw materials for industrial development are pronounced.Cross-border exports from Thailand approximately serve half of Lao PDR’s nationalpopulations who are mostly residing along Thai-Lao border areas. In this regard, thereare still more rooms to deepen marketing activities for Thai products in capturing theincreasing varied needs. Thus, cross-border trade plays even more vital role inpenetrating Thai products to their market as well as widening Laotians’ rural poor togain greater access to consumer products.Ø Cross-Border Import Values From Lao PDR To ThailandThe aggregate cross-border import from Lao PDR went up from 1.730 billions Baht in1996 to 7.778 billions Baht in 2007. In recent decade, the average annual cross-borderimport growth was at 19 %, which regarded at reasonable rate if compared with theirsmall size of five million populations. In 2007, Mukdahan border checkpoint was, incontrast with Nongkhai as major export gateway, the most important gateway whichwas responsible for as high at 55 % of total cross-border import values, Nong Khaiborder check point came second at 14 %, followed by Thalee at 9 %, Chiankhong at 8%, and Piboonmangsaharn at 6 %, respectively. The rest belonged to two remainingborder checkpoints of Chiangsaen and Bunkarn, which provide channels for borderretail trade of daily consumption products. Please see details in Figure 3.11. It isremarkable that there is a diversion on exporting and importing roles among key bordercheckpoints. This signifies that import products from Lao PDR may be originating fromdiverse cities/locations. Among others, Mukdahan plays increasing importance as 45
  • 56. another key border entry point on the East-end of Thailand’s section along the EastWest Economic Corridor. Unit: Millions of Baht12,000 Million Baht10,000 8,000 6,000 4,000 2,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Nongkhai Bungkarn Nakhonpanom Mukdaharn Thalee Piboonm angsaharn Chiangsan Chiangkhong Total Import of Border Trade Total Import of International TradeSource: The Customs Department, ThailandFigure 3.11: Cross-Border Trade Import Values From Lao PDR To Thailand During 1996 To 2008 Through Major Border CheckpointsRelating to key commodities transacted through Nong Khai border checkpoint in 2007,they are shown in Table 3.10. 46
  • 57. Table 3.10: Top Ten Cross-Border Import Commodities From Lao PDR To Thailand Through Nong Khai Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Processed wood 566.73 52.572.Ignition wiring sets used in vehicles 85.46 7.933.Parquet 41.32 3.834.Live wire 27.65 2.565.Resistor 18.32 1.706.Underwear for men and boys 17.67 1.647.Zinc ore 16.84 1.568.Uniforms 15.79 1.469.Papers 13.69 1.2710.Men and boys clothes 11.81 1.1011.Others 262.72 24.37 Grand total 1,078.00 100.00Source: The Customs Department, ThailandAccording to the above list, it can be inferred that Lao PDR is yet abundant with varioustypes of woods and woods-related products, which are scarce and high demand forhouse construction and decoration in Thailand. As a result, it became dominant exportcommodities to Thailand. Thailand also imports a lot of intermediate industrial inputse.g. ignition wiring sets used in vehicles, live wire and resistor. Lao PDR is becomingspecialized exporter in textile/garment industry due to low labor cost of production aswell as receiving Normal Trade Relations (NTR) to access the US market as well asbeing granted Generalized System of Preferences (GSP) from major countries e.g. EU,Japan and Canada (Kasikorn Research Center, 2006). Textile products were likewisemajor commodities penetrating into Thai market. As a result of their specialization,there were some cross-border outsourcing activities in making uniform clothes fromThailand to Lao PDR to some extent demonstrating cross-border supply chain linkagesin this industry. In addition, Zinc ore was another essential imported mineral resourceas it is still rich in Lao PDR. For geographical cross-border trade relationships betweenThailand and Lao PDR particularly conducting through Nong Khai border checkpoint, itappears in Map 3.5. 47
  • 58. Map 3.5: Geographical Cross-Border Trade Relationships Between Thailand and Lao PDR Through Nong Khai Border Checkpoint in 2007 Others, 263, 24% Men and boys clothes, 12, 1% Papers, 14, 1% Uniforms, 16, 1% Zinc ore, 17, 2% Processed wood, Underwear for 567, 52% men and boys, 18, Resist or, 18, 2% Live wire, 28, 3% Parquet, 41, 4% Ignition wiring sets used in vehicles, 85, 8% Oil products, 3,628 , 17% Cars, 1,632 , 8% Others, 12,797 , 62% Pellet cement, 813 , 4% Woven fabrics, 554 , 3% Knitted fabrics, 241 , 1% Medical equipments, 174 , 1% Digger, 133 , 1% Tiles, 129 , 1% Polymers Of Ethylene, 129 , Tyres, 127 , 1% 1%Source: The Customs Department, ThailandØ Share of Cross-Border Trade Values To International Trade Values Between Thailand and Lao PDR During 1996-2008The share of aggregate cross-border export gradually fluctuated from 56.64 % in 1996to 50.99 % in 1999. Then it jumped to 87.18 % in 2000, and further kept maintained at86.33 % in 2007. In contrast, the share of aggregate cross-border import slightlydeclined from 99.69 % in 1996 to 97.27 % in 2004. Then it sharply dropped to 47.73 %in 2007. And the tendency quickly moves upward in 2008. This means it is a divergingtrend of cross-border export and import due to the Lao PDR’s economy is in transitionor adjustment for integrating with regional and global economy. This implies that cross-border trade has yet kept playing central role between Thailand and Lao PDR’s traderelationships.Whereas, the share of aggregate export of international trade slightly increased from43.6 % in 1996 to 49.01 % in 1999, and sharply declined to 12.82 % in 2000. Then, itfluctuated around 13.67 % in 2007, and the trend is likely to decline. On the other hand,the share of aggregate import of international trade slightly fluctuated from 0.31 % in 48
  • 59. 1996 to 2.73 % in 2004, and then it quickly surged to 52.27 % in 2007. And the trendseems likely to be at steady state as Thailand may continue to import a larger amount ofelectricity generated by hydro-power sources from Lao PDR. Please see details inFigure 3.12.100 % 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Share of total export of border trade Share of total import of border trade Share of total export of international trade Share of total import of international tradeSource: The Customs Department, ThailandFigure 3.12: Share of Cross-Border Trade Values To International Trade Values Between Thailand and Lao PDR During 1996 To 2008 4) MyanmarDuring 1996-2007, Thailand faced deficit balance of cross-border trade with Myanmar.As a result, the aggregate cross-border import was higher than the aggregate cross-border export at three times. In 2007, the aggregate border trade values betweenThailand and Myanmar accounted for 24.5 % of aggregate border trade values ofThailand with five-neighbouring countries.Ø Cross-Border Export Values From Thailand To Myanmar During 1996 To 2008The aggregate cross-border export to Myanmar gradually increased from 2.625 billionsBaht in 1996 to 21.253 billions Baht in 2007. In recent decade, the average annualcross-border export growth was at 32 %, which regarded at evident rate. In 2007,Maesod border checkpoint was the most important entry-exit point located at the west-end of Thailand’s section of the East West Economic Corridor, which was responsiblefor as high about half of total cross-border export values with Myanmar. Then itfollowed by border checkpoints of Ranong in the Southern region at 26 %, Maesai at 12% and Chiangsaen at 7%, respectively. Maesod, Ranong and Masai are leading bordercities, which are popular cross-border shopping destinations either on retail orwholesale segments for neighbouring Myanmar’s populations. The rest 3 % went tothree remaining border checkpoints, which mainly provide channels for border retail 49
  • 60. trade of consumer goods among local people including the rural poor residing alongboth sides of border areas. Please see details in Figure 3.13. Unit: Millions of Baht 25,000 Million Baht 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Maesai Chiangsan Maesariang Maesod Ranong Sangkhlaburi Total Export of Border Trade Total Export of International TradeSource: The Customs Department, ThailandFigure 3.13: Cross-Border Export Values From Thailand To Myanmar During 1996 To 2008 Through Major Border CheckpointsRelating to key commodities transacted through Maesod border checkpoint in 2007,they are shown in Table 3.11. 50
  • 61. Table 3.11: Top Ten Cross-Border Export Commodities From Thailand To Myanmar Through Maesod Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Gourmet powder 396.46 3.742.Diesel oil 384.55 3.633.Vegetable oil 305.18 2.884.Motorcycles 289.02 2.735.Woven cloth with various colors 269.22 2.546.Lead Acid 224.27 2.127.Benzene oil 220.77 2.088.Fishing net 189.98 1.799.Human drugs 170.76 1.6110.Non-sweetened milk 123.81 1.1711.Others 8,027.98 75.72 Grand total 10,602.00 100.00Source: The Customs Department, ThailandAccording to the above list, it can be interpreted that Myanmar relies significantly onThailand for importing consumer goods ranging from food-related products, vegetableoil, milk, clothes, medical products, etc. This might be resulted from limited economicand industrial diversifications and distribution in their domestic market. Ranges of fuel,motorcycles, and machinery parts are also in vast demands. Myanmar still needs basicfishing gear e.g. fishing net for harvesting range of fishes in their large coastal sea.Maesod city becomes a key distribution center of Thailand into Myanmar market. In thenear future, there is huge prospect for Thailand to further conduct transit trade withIndia and other South Asian markets when the main road linking Myanmar and India isimproved. Therefore, the trend of cross-border export through Maesod city is absolutelypromising.Ø Cross-Border Import Values From Myanmar To ThailandThe aggregate cross-border import values from Myanmar during 1996-1999 steadilyincreased. Later it sharply surged from 5.849 billions Baht in 1996 to 76.114 billionsBaht in 2007 mainly resulting from large amount importation of natural gas used forgenerating electricity in Thailand. As a result, the average annual cross- border importgrowth in recent decade was at 99 % which regarded at particularly distinct rate. In2007, Sangklaburi temporary border checkpoint alone was, in contrast with Maesod asmajor export gateway, the most important gateway for largely importing natural gas atexceptionally high at 94.65 % of total cross-border import values, Ranong border checkpoint ran second at 2.1 %, followed by Maesod at 1.29 %, and Maesai at 0.4 %,respectively. The rest 1.56 % consisting of three border checkpoints provides sites forborder retail trade mainly for consumer goods to rural people along both sides of borderareas. Please see details in Figure 3.14. Consequently, different geographical settingsinfluence varying importance of key entry/exits of border checkpoints particularlyconnecting with Myanmar. The tendency of cross-border import continues to increase. 51
  • 62. Unit: Millions of Baht90,000 Million Baht80,00070,00060,00050,00040,00030,00020,00010,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- A pr) Maesai Chiangsan Maesariang Maesod Ranong Sangkhlaburi Total Import of Border Trade Total Import of International TradeSource: The Customs Department, ThailandFigure 3.14: Cross-Border Trade Import Values From Myanmar To Thailand During 1996 To 2008 Through Major Border CheckpointsRegarding the key commodities transacted through Maesod border checkpoint in 2007,they are shown in Table 3.12.Table 3.12: Top Ten Cross-Border Import Commodities From Myanmar To Thailand Through Maesod Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Wood works 320.61 32.382.Crab 186.54 18.843.Mixed fish 125.06 12.634. Live cow and buffalo 65.79 6.655. Cashew nut 43.04 4.356. Mixed prawn shell 31.95 3.237. Dried fish maw 20.36 2.068. Black matpe beans 19.88 2.019. Bamboo 18.81 1.9010.Prawn 16.83 1.7011.Others 141.13 14.26 Grand total 990.00 100.00Source: The Customs Department, ThailandAccording to the above list, it can be rationalized that Myanmar is still affluent of forestresources particularly for wood-related products and bamboo, which are scarce and highdemand for house construction and decoration in Thailand. As a result, it becomes 52
  • 63. dominant export commodities to Thailand in addition to natural gas. Aquatic products e.g. prawn, crab, sea fishes were other major importing commodities. So they provide raw materials for processing various types of foods in Thailand. A great number of live animals especially cow and buffalo were imported as beef cattle as well as utilizing its muscle energy in farming activities. Black Matpe beans possibly resulted from the Contract Farming Initiative between Thailand and Myanmar also plays essential import values, which can help generate jobs for rural people residing along Thailand-Myanmar border areas. For geographical cross-border trade relationships between Thailand and Myanmar particularly conducting through Maesod border checkpoint, it appears in Map 3.6. Map 3.6: Geographical Cross-Border Trade Relationships Between Thailand and Myanmar Through Maesod Border Checkpoint in 2007 Others, 141, 14% Prawn, 17, 2% Bamboo, 19, 2% Black matpe beans, Wood works, 321, Gourmet powder, 396, 3% 20, 2% 32% Dies el oil, 385, 4%Dry fish maw, 20, Vegetable oil, 305, 3% 2%Mixed prawn shell, Motorcycles , 289, 3% W oven cloth with various 32, 3% colours, 269, 3% Cashew nut , 43, 4% L ead Acid, 224, 2% Live cow and Benzene oil, 221, 2% buffalo, 66, 7% Fis hing net, 190, 2% Crab, 187, 19% H uman drugs , 171, 2% Non-s weetened milk, 124, 1% Mixed fish, 125, 13% Others, 8,028, 75% Source: The Customs Department, Thailand 53
  • 64. Ø Share of Cross-Border Trade Values To International Trade Values Between Thailand and Myanmar During 1996 To 2008The share of aggregate cross-border export slowly varied from 32.58 % in 1996 to31.35 % in 1999. Then it expanded to 62 % in 2000, and slightly rose at 64.52% in2007. Correspondingly, the share of aggregate cross-border import slightly grew from16.26 % in 1996 to 24.39 % in 1999. Then it sharply proliferated to 55.88 % in 2000,and moved quickly forward at 95.05 % as a result of surging cross-border import ofnatural gas. The tendency of cross-border export and import are converging indicatingthat cross-border trade will still be playing very important role for intensifying traderelations between Thailand and Myanmar. On a contrary, the share of aggregate cross-border export of international trade slightly declined from 67.42 % in 1996 to 35.48 %in 2007. In the same way, the aggregate import of international trade strikinglydecreased from 83.74 % in 1996 to 4.95 % in 2007. And the trend of both export andimport of international trades seem likely to be further dropping. Please see details ofdiverging patterns of cross-border trade and international trade between Thailand andMyanmar in Figure 3.15.100 % 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Share of total export of border trade Share of total import of border trade Share of total export of international trade Share of total import of international tradeSource: The Customs Department, ThailandFigure 3.15: Share of Cross-Border Trade Values To International Trade Values Between Thailand and Myanmar During 1996 To 2008 54
  • 65. 5) MalaysiaDuring 1996-2007, Thailand gained favorable balance of cross-border trade withMalaysia, and the aggregate cross-border export was higher than the aggregate cross-border import at 1.27 times. In 2007, the aggregate cross-border trade values betweenThailand and Malaysia accounted for 179.958 billions Baht represented as high at44.83 % of aggregate border trade values of Thailand with five-neighbouring countries.Ø Cross-Border Export Values From Thailand To Malaysia During 1996 To 2008The aggregate cross-border trade export to Malaysia sharply escalated from 13.809billions Baht in 1996 to 102.476 billions Baht in 2007. In recent decade, the averageannual cross-border export growth was at 22 %, which was regarded at marked rate. In2007, Sadao border checkpoint was the key entry-exit located at the strategic highwaylinking Thailand-Malaysia and Singapore, which was responsible for such very high at74% of total cross-border export values, followed by Padang Besar at 21.50 %, Betongat 2.50 % and Sungai-Golok at 1.35 %, respectively. Above all, Hat Yai, Sadao andSungai-Golok are popular cross-border tourism and shopping destinations forMalaysians and some Singaporeans. The rest of two border checkpoints mainly providelocations for border retail trade of consumer goods among local people including therural poor residing along both sides of border areas. Please see details in Figure 3.16. Unit: Millions of Baht 180,000 Million Baht 155,000 130,000 105,000 80,000 55,000 30,000 5,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- A pr) -20,000 Sadao Padang Besar Takbai Sungai-Golok Betong Wangprachan Satun Total Export of Border Trade Total Export of International TradeSource: The Customs Department, ThailandFigure 3.16: Cross-Border Export Values From Thailand To Malaysia During 1996 To 2008 Through Major Border Checkpoints 55
  • 66. Concerning the key commodities transacted through Sadao border checkpoint in 2007,they are shown in Table 3.13.Table 3.13: Top Ten Cross-Border Export Commodities From Thailand To Malaysia Through Sadao Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Natural rubber 26,182.80 26.712.Parts and accessories of machinery 16,660.98 17.003.Mixed rubber 2,813.13 2.874.Electromagnetic 2,404.26 2.455.Other products made from steels 2,064.53 2.116.Processed parawoods 1,836.40 1.877.Particle Board 1,794.31 1.838.Magnetic tapes 1,300.16 1.339.Rubber hand glove 1,382.96 1.4110.Print circuit board 1,294.61 1.3211.Others 40,298.31 41.11 Grand total 98,032.45 100.00Source: The Customs Department, ThailandAccording to the above list, it can be substantiated that leading goods mostly originatedfrom Southern part of Thailand were exported to Malaysia through Sadao bordercheckpoint due to a convenient transportation route. These products center aroundnatural rubbers, mixed rubbers, processed woods, particle boards, rubber hand glovesrepresenting a great extent of reliance on regional resource endowments. Otherindustrial products might be made both from other regions in the country and fromSouthern region. Most goods passing through this border checkpoint is kept incontainers. Sadao border checkpoint linking with Bukit Kayu Hitam of Malaysia is themost developed customs house in Thailand in terms of advanced physical infrastructureand Customs, Immigration and Quarantine (CIQ) facilities as well as pioneering anadoption of single stop inspection for easing cross-border customs formalities betweenThailand and Malaysia. For this reason, the movement of cross-border trade exportthrough this gateway usually continues to rise.Ø Cross-Border Import Values From Malaysia To Thailand During 1996-2008The aggregate cross-border import from Malaysia also sharply increased from 7.184billions Baht in 1996 to 77.482 billions Baht in 2007. In recent decade, the averageannual cross-border import from Malaysia to Thailand was at 25%, which was regardedas rather high rate. In 2007, Sadao border checkpoint remained the key entry location,which was responsible for as high at 77% of total cross-border import values, PadangBesar border check point ran second at 20 %, followed by Sungai-Golok and Takbai inNarathiwat province at 2 % and 0.50 %, respectively. The remaining two bordercheckpoints of Betong and particularly for Wangprachan act as sites for arrangingweekend markets to conduct border retail and wholesale segments of agriculturalproduces and consumer goods for local villagers and SMEs business persons residingon both sides of border areas. Please see details in Figure 3.17. 56
  • 67. Unit: Millions of Baht Million Baht 250,000 200,000 150,000 100,000 50,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Sadao Padang Besar Takbai Sungai-Golok Betong Wangprachan Satun Total Import of Border Trade Total Import of International TradeSource: The Customs Department, ThailandFigure 3.17: Cross-Border Trade Import Values from Malaysia To Thailand From 1996 To 2008 Through Major Border CheckpointsRegarding the key commodities transacted through Sadao border checkpoint in 2007,they are shown in Table 3.14.Table 3.14: Top Ten Cross-Border Import Commodities From Malaysia To Thailand Through Sadao Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%)1.Magnetic tapes 20,899.26 22.222.Parts and accessories of machinery 15,289.11 16.263.Print circuit board 14,232.51 15.144.Other products made from steels 5,467.60 5.815.Auto processors 3,972.78 4.226.Other products made from plastics 2,173.11 2.317.Synthetic rubber 1,587.60 1.698.Exported goods 1,177.31 1.259.Mineral or chemical fertilizers 1,189.45 1.2610.Nails, screws, bolts of iron or steel 1,241.36 1.3211.Others 26,805.05 28.51 Grand total 94,035.14 100.00Source: The Customs Department, Thailand 57
  • 68. According to the list above, it should be noted that Thailand imported various advancedindustrial and capital goods from Malaysia. These range from information technology-based goods e.g. magnetic tapes, print circuit board and auto processors, industrialmachines and parts, steel products, etc. These goods may mainly be used in Southernregion, while another large portion may be onward transported to other industrializingregions in Thailand. Intermediate goods e.g. synthetic rubber was utilized for addingvalue to natural rubber products. Mineral and chemical fertilizers were largely used inthe rubber plantation, orchard and farming activities. The latter helps sustain degree ofcompetitiveness of the southern economy. For geographical cross-border traderelationships between Thailand and Malaysia particularly conducting through Sadaoborder checkpoint, it appears in Map 3.7.Map 3.7: Geographical Cross-Border Trade Relationships Between Thailand and Malaysia Through Sadao Border Checkpoint in 2007 Natural rubber, 26,183, 27% Others, 40,298, 42% Magnetic tapes , Others, 26,805 , 20,899 , 22% 30% Parts and accessories of Machinery, 16,661, 17% Nails,screws, bolt s of iron or P art s and accessories st eel, 1,241 , 1% of Machinery, Mineral or 15,289 , 16% chemical fertilizers, 1,189 , Print Circuit Board , 1,295, 1% Export ed goods , 1,177 , 1% Rubber hand glove, 1,383, 1% Ot her product s Magnetic tapes , 1,300, 1% Mixed rubber, 2,813, 3% made from plast ic, 2,173 , 2% P rint Circuit Board , Particle Board, 1,794, 2% Synt het ic rubber, 14,233 , 15% Processed parawoods, 1,836, Electromagnetic , 2,404, 2% 1,588 , 2% Aut o processors, 2% Other products made from 3,973 , 4% Ot her products steels, 2,065, 2% made from steels, 5,468 , 6%Source: The Customs Department, Thailand 58
  • 69. Ø Share of Cross-Border Trade Values To International Trade Values Between Thailand and Malaysia During 1996 To 2008The share of aggregate cross-border trade export gradually grew from 27.10 % in 1996to 33.20 % in 2007. Correspondingly, the share of aggregate cross-border trade importslightly grew from 7.86 % in 1996 to 25.69 % in 2007. So the trend of cross bordertrade export and import are now converging. On a contrary, the share of aggregateexport of international trade slightly declined from 72.90 % in 1996 to 61.80 % in 2007.In the same way, the aggregate import of international trade steadily decreased from92.14 % in 1996 to 74.31 % in 2007. And the trend of both international export andimport seems likely to be gradually falling. Therefore, the tendency of aggregate cross-border trade to aggregate international trade between Thailand and Malaysia are indiverging fashion. Please see details in Figure 3.18. 100 % 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Jan- Apr) Share of total export of border trade Share of total import of border trade Share of total export of international trade Share of total import of international tradeSource: The Customs Department, ThailandFigure 3.18: Share of Cross-Border Trade Values To International Trade Values Between Thailand and Malaysia During 1996 To 20083.7 People’s Mobility Along the Border 3.7.1 People’s Movement Through Border CrossingsBorder checkpoints/border crossings physically play crucial role as gateways forfacilitating people mobility not only for Thai nationals but also neighbouring countriesnationals as well as other foreign nationals. Through this movement, it has driven cross-border tourism and trade activities including strengthening of people to people contacts,exchanging of cultural interactions as well as enhancing mutual understanding betweenneighbouring countries. There are 30 border crossings that process immigrationformalities. The aggregate people movement of all nationals using passports and borderpasses through nation-wide border crossing points increased from 5.19 millions persons 59
  • 70. in 2002 to as high at 9.50 millions persons in 2006. The average annual growth rate oftotal people’s movement in this period was at 16.4 %, which were at marked proportion.Please see detailed statistics of people movement distribution at different bordercrossings in Thailand in Appendix A. This growth partly helps sustain national tourismpolicies paving the way to become a tourism gateway to Asia, (Ministry of Tourism andSports, 2008). Hence, the trend of cross-border people movement seems to beprominent.There are two broad categories of people movement: These consist of Thai nationalsand foreigners. The total Thai nationals’ movement through nation-wide border crossingpoints expanded from 1.92 millions persons in 2002 to 5.32 % millions persons in 2006.The average annual growth rate during this period was soaring at 30%, which were atclearly distinct magnitude and higher than the average foreign nationals’ movement at4.34 times. This implies that out-flows of Thai tourists/business persons to neighbouringcountries destinations/markets are significant. While the total foreign nationals’movement through nation-wide border crossing points grew from 3.27 millions personsin 2002 to 4.18 millions persons in 2006. Unfortunately, deeper analysis on extent ofcross-border people’s movement of individual neighbouring countries to/from Thailandbecomes limited due to inaccessible of data. This category consists of tourists, cross-border business persons and migrant labor. The average annual growth rate during thisperiod was at 6.9 %. This was regarded somewhat low expansion rate attributable to thesometimes temporary closure of border checkpoints in neighbouring countries as aresult of either political sensitivity within particular neighbouring country or betweenThailand and particular neighbouring country. Please see details of people’s movementthrough border crossings in Figure 3.19. Unit: Million Persons 10 Million persons 9 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 Total people movement of all nationals through all border crossing points nation-wide Total Thai nationals movement through all border crossing points nation-wide Total foreign nationals movement through all border crossing points nation-wide Sadao Aranyaprathet Maesai Nong Khai ChiangsaenSource: Cross-border people movement statistics from Thailand Immigration Office, retrieved fromhttp://www.thailand-immigration.com/home.asp, on 5 June 2008Figure 3.19: People’s Movement at Major Border Crossings in Thailand During 2002 To 2006 60
  • 71. Out of 30, they are five key border crossings in different regions of Thailand, whichhave long been connected transportation networks with four-neighbouring countries. In2006, Aranyaprathet border checkpoint, which accounted for 28 % of total people’smovement along border ranked first with a total of 2.64 millions persons represented by76 % of Thai nationals and 24 % of foreign nationals. A large number of foreignnationals were cross-border Cambodian migrant labor seeking for job opportunities inThailand. Sadao came second with total border movement of people at 2.36 millionspersons classifying into Thai nationals at 34 % and foreign nationals at 66 %. Thus,Sadao was the main entry for facilitating a vast number of tourists/business persons intoThailand. Nong Khai placed third with total border movement of people at 1.04millions persons, which Thai and foreign nationals shares almost equal proportion at 47% and 53 %, respectively. Maesai was the chief entryway to Myanmar with totalmovement of people at 0.22 million person with almost all of them were foreignnationals, which were quite similar pattern with Chiangsaen border crossing. It isinteresting to note that there might be underreporting of actual numbers on movement ofpeople from Myanmar due to a huge number of Myanmarneses illegally enter intoThailand as recurring immigrants in pursuit of job opportunities not only in bordercities but also in other regional growth centers including Bangkok metropolitan.3.7.2 Share of People’s Movement Through Nation-Wide Border CrossingsAs physical connectivity between Thailand and its neighbouring countries being moreadvanced over recent decade and currently underway, this makes cross-bordermovement of people easy. There have been evident from the share of Thai nationalspeople movement through border checkpoints nation-wide reasonably increased from37 % in 2002 to 56% in 2006, and the trend shows a mounting movement. In contrast,the share of foreign nationals movement through border checkpoints nation-wide rathervaried and appeared dropping from 56% in 2002 to 44 % in 2006. It is noteworthy thatthe share of foreign nationals movement in a couple years could be higher than theregistered figures. Nevertheless, the share of the latter became shrunk owing to manypeople from Myanmar, Cambodia and Lao PDR intentionally came into Thailand asillegal immigrants pushed by economic reason. Please see details in Figure 3.20. 61
  • 72. 100 % 90 80 70 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 Share of Thai nationals passing through all border crossing points nation-wide Share of foreign nationals passing through all border crossing points nation-wide Share of people movem through all border crossing points nation-wide ent Share of people movem through all international ports of entry/exit nation-wide entSource: Cross-border people movement statistics from Thailand Immigration Office, retrieved fromhttp://www.thailand-immigration.com/home.asp, on 5 June 2008Figure 3.20: Share of People Movement Through Border Crossings Nation-Wide To Share of People Movement Through Other International Ports of Entry and Exit in Thailand During 2002 To 2006In terms of comparison between aggregate cross-border and international movements,the share of people movement through nation-wide border crossing points steadily wentup from 20 % (5.18 millions persons) in 2002 to 26 % in 2006 (9.47 millions persons).And the slope seems likely to increase as a result of better improvement of landtransportation linkages, in association with the implementation of CBTA in the GMSand the effects of single visa arrangements that Thailand signed with Cambodia andVietnam, (Tshuneishi, 2008). Interestingly, the share of international movement withair-borne and sea-borne modes of arrival/departure from countries, which do not sharecommon border with Thailand was in a gradually diverging fashion evidencing from itslightly declined from 80% (20.46 millions persons) in 2002 to 74% (27.42 millionspersons) in 2006. It is notable that though the numbers of international movement ofpeople keep increasing, its annual growth rate was much slower than the aggregatecross-border movement of people. However, these two categories of movementeventually complement each other in upholding the Royal Thai policies to become ahub of trade and investment in ASEAN as well as a tourism gateway to Asia. Moreover,the tendency of cross-border trade and people’s movement have been demonstrating asimilarly upward direction possibly resulting from greater degree of physicalconnectivity combined with more openness of policies and related agreements on cross-border and regional trades, tourism and labor cooperation.3.8 Thailand’s Cross-Border Investments in Four-Neighbouring CountriesIn 2004, the Board of Investment (BOI) formulated a strategy for promoting Thailand’outward foreign direct investment in order to enhance degree of competiveness for 62
  • 73. Thai’ industry and export. The BOI (2004) also designated targeted industries forinvestment abroad into three groups namely (1) Industries which boost Thailand asregional hub and support national development comprising petrochemicals, petroleum,natural gas, energy, agro-processing industries, electronics parts, (2) Industries whichwere limited in Thailand comprising fisheries, garment, textiles, livestock, jewelry andaccessories and (3) Industries which Thailand has potentials for penetrating newmarkets consisting of construction, animal feed, sugar, plastics, telecommunications,leather, tourism and services e.g. Thai restaurant, hotel, health business and beauty.Accordingly, neighbouring countries were then the immediate target investmentdestinations.To implement this strategy, Thailand has actively promoted cross-border investment inneighbouring countries as an integral part of ACEMECS Initiative, which placedparticular emphasis on agro-processing industries, tourism, and services. This initiativeaimed to explore additional sources of raw materials, distribute income to neighbouringcountries in order to mitigate problems concerning massive illegal immigration of labor,as well as helping solve widespread of narcotics along the border areas, (BOI, 2005).Furthermore, Thai investors sought market expansion for goods directly produced inneighbouring countries. During 1998-2006 (January), the combined direct investmentsfrom Thailand to Cambodia, Lao PDR and Myanmar were roughly at 3.887 billions US$ or equivalent to 128.303 billions Baht. Once included investments in Malaysia during2000-2007 at 2.861 billions Baht, it totally stood at 131.164 billions Baht. The tendencyof capital investment out-flows from Thailand to neighbouring countries appears to beintensifying as a result of greater trade and investment openness in the Greater MekongSub-region. The BOI (2005) summarized investment progress of the Thai’s companiesin four-neighbouring countries as follows: 3.8.1 CambodiaDuring 1 August 1994-30 September 2004, an accumulative amount of 135.15 millionsUS $ capital was invested in Cambodia in 16 business categories. Please see detailedstatistics of Thailand’s foreign direct investment in Cambodia in Appendix B. The topfive investment projects led by hotel at seven projects amounting 48.38 millions US $,followed by processed woods at three projects totaling 33.29 millions US $,telecommunications at two projects totaling 14.8 millions US $, textiles at sevenprojects totaling 7.72 millions US $ and food processing industries at nine projectstotaling 5.76 millions US $. In 2003, Thailand ranked fourth among foreign investors inCambodia, which was behind China, Malaysia and Singapore. 3.8.2 Lao PDRDuring 1988-2005, Thailand ranked first among foreign investors with accumulativeamount of 2.407 billions US $ capital at 330 approved investment projects. Please seedetailed statistics of Thailand’s foreign direct investment in Lao PDR in Appendix C.The top five investment projects were hydro power plant at six projects aiming to exportto Thailand amounting 1.127 billions US $ accounted for 46.84%. Then followed bytelecommunications and transport at nine projects amounting 6.373 billions US $represented 22.40 %, hotel and tourism 13 projects amounting 2.879 billions US $ 63
  • 74. represented 10.12%, industries and handicraft at 90 projects amounting 1.014 billionsUS $ and agro-industries at 44 project amounting 61.7 millions US $. 3.8.3 MyanmarDuring 1988-2006 (January), an accumulative amount of 1.345 billions US $ capital at56 projects was invested in Myanmar in nine business categories. Thailand shared 17%of total FDI investment capital flowed into Myanmar throughout the above mentionedperiod. Please see detailed statistics of Thailand’s foreign direct investment in Myanmarin Appendix D. The top five investment projects were industrial production at 16projects amounting 6.146 billions US $ accounted for 47.5 %. Then followed by hoteland tourism at 12 projects amounting 2.286 billions US $ represented 17.0 %, fisheriesat seven projects amounting 1.710 billions US $, mining at eight projects amounting1.212 billions US $ and transport at four projects amounting 1.073 billions US $.Myanmar applied import-substitution industrialization policy attracting Thai investorsto carry out investments in hotel, garments and foods sectors. 3.8.4 MalaysiaThe total direct investment from Thailand to Malaysia during 2000-2007 was amountedat 2.861 billions Baht with average annual growth rate at 51.2 %. On the contrary,Malaysia was a major investor in Thailand, with an investment capital inflow of 3.6billions Baht in 2003, and 5.9 billions Baht in 2005, (Tshuneishi, 2008). Unfortunately,there was inaccessible data on Thailand’s direct investment to China.3.9 Impacts of Cross-Border Trade, Commerce and Investments Dealing WithNeighbouring Countries on Thai Economy and SocietyUsually, cross-border trade and commerce with neighbouring countries have broughtabout increased extent of interdependency and economic integration over time in termsof exchanging of goods and services, sharing resources, labor and expertise as well asfostering investment flows, which may partly have certain implications to regionaldevelopment throughout Greater Mekong and IMT-GT Sub-regions. All these effortswere directed toward generating mutual benefits and improved public welfare of allpeoples in the mentioned areas. Nevertheless, there existed a multi-facet of impactsinherently associated with cross-border trade, commerce and investment activities onThai economy and society, which can be summarized in Table 3.15.Table 3.15: Multi-Faceted Impacts of Cross-Border Trade, Commerce and Investments Dealing with Neighbouring Countries on Thai Economy and Society Impacts Features Positive Impacts Negative Impacts1. Political Aspect • Strong and continued • Political sensitivity within particular political will to support neighbouring country sometimes leads to one- regional economic sided closure of border checkpoints for certain integration has favorably period. As a result, Thai commodities lose created conducive business market shares to other countries/competitors. and investment • Political and border conflicts between Thailand environment in the Greater and particular neighbouring country, for Mekong and IMT-GT sub- example a conflict on co-management issues of regions. the Prasat Praviharn along Thai-Cambodian border, affect cross-border trade and business 64
  • 75. environment and dilute trust and confidence among local people along border areas. • Current political disruption within Thailand disturbs cross-border trade and business environment.2. Economic • Greater increase of cross- • Government partly loses revenues from ongoingAspect border trade and importing and exporting of illegal trade along investments signify higher the border. The volume of illegal trade is degree of border openness. possibly higher than official record for twice • Pave the way toward times for Myanmar, (Changhlam, 2005). For the regional economic rest, it is probably equal to formal trade, integration. (Tsuneishi, 2008) • Local people from both • Occasional volatility of Thai Baht currency sides gain wider access to affects purchasing power in neighbouring consumer products and countries and Thai products may lose market essentials for daily shares. In turn, currencies of three neighbouring consumption from retail countries are sometimes not stabilized. border trade. • Trade discrimination measures imposed by neighbouring countries caused more difficult to Thai traders for penetrating their markets. • Low trade performance from one-way free trade privilege due to complex procedures either from Thailand or neighbouring countries sides resulted in continued shortage of raw agricultural materials in Thailand. • Ongoing intra-regional and interregional disparities within Thailand. • Concerns over how much benefits of cross- border trade openness will contribute to regional and local economic development. • Some local peoples are afraid of being marginalized.3.Social Aspect • Increasing people mobility • Labor cost in Thailand is higher than Myanmar, of both Thai and foreign Lao PDR and Cambodia at approximate 5-7 nationals crossing border times (NESDB, 2003). Currently, Thailand checkpoints which bring alone is home to 1.5-2 millions migrants from closer economic and social the Greater Mekong Sub-region, of which 1.2 ties. million were registered in the 2004 drive. • Greater cross-border local Approximately three-quarters of the registered to local people contacts migrants are from Myanmar, with the rest split deepen mutual more or less equally from Lao PDR and understanding. Cambodia, (World Bank, 2006). Ministry of • Positive role migrant Labor (2007) expected that there are about 1 workers played in the Thai million of them have still not registered, but are economy. All foreign illegally working in Thailand. This created workers contribute around social problems and to some extent affected 0.5 percent of total GDP national security. It is now becoming a national per annum, (TDRI cited in agenda on how to properly manage migrant World Bank, 2006). labor in order to balance economic growth and societal goals. • Ongoing practices of illegal activities along border areas ranging from smuggling of goods and narcotics, illegal weapon, crimes, and human trafficking. This partly affects national economic system, biodiversity and national security. • Occurrence of disappeared diseases e.g. Malaria, AIDS, tuberculosis, elephantiasis, epidemics , which are associated with migrant labors as well as shortage of social services 65
  • 76. delivery not only for Thai nationals but also for cross-border peoples and migrants along border areas 4.Infrastructural • Greater connectivity • Under-developed infrastructure in some parts of Aspect facilitates increased volume three neighbouring countries in GMS limits of cross-border trade and cross-border trade expansion. more people mobility. • Concerns over there will cause backwash effects • Developed infrastructure by massive emigration of peoples to particular drives rapid urbanization border nodes/gateways. and industrialization along • Concerns over road safety and response to road border areas. accidents. • Convenient connectivity • Inadequate urban infrastructure, land use plan creates more markets for and urban planning in response to rapid rural farmers. industrialization and urbanization in some cities along border areas. • Still weak collaboration among local private sectors in providing efficient cross-border logistics services. 5. Environmental • Biodiversity conservation • Increased forest encroachment due to rapid and Natural corridors serve as industrialization and urbanization along major Resources Aspect development strategy to border areas. reduce threats on natural • Emerging urban environmental problems i.e. resources and environment. solid waste, waste water, traffic congestion and • Local capacity building in air pollution at major border areas. planning and managing • Ongoing illegal trade of wildlife animals. natural resources will be enhanced particularly for the rural poor people and government staff. 6. Institutional • Regional cooperation and • Problems related to complex and changing Aspect integration e.g. GMS and financial system and relevant rules and ACMECS open up regulations as well as money transfer procedures opportunities to harmonize in neighbouring countries affect cross-border rules and regulations on trade environment. trade and investments. • Three neighbouring GMS countries namely Lao PDR, Cambodia and Myanmar lack of practices in international trade and limited authorized banks. Border trade mostly transacted on informal manner relying on mutual trust. This affected trust and confidence diluting business environment and trade expansion among cross- border traders. So it needs to be upgraded toward international standard.Source:Asian Development Bank. (2005). Greater Mekong Sub-region Biodiversity Conservation Initiative:Strategic Framework and Technical Assessment 2005-2014, Manila, ADBChanghlam, A. (2005). Promoting Thailand-Myanmar border trade: paper presented at the seminar on“Turning Maesod as gateway of East-West Economic Corridor” at Central Maesod Hill Hotel, Maesoddistrict, Tak province on 23 September 2005Office of the National Economic and Social Development Board. (1998). Direction for border areaseconomic development, Bophit Printing, BangkokWorld Bank. (2006) Labor Migration in the Greater Mekong Sub-region, Synthesis Report: Phase I 66
  • 77. Chapter 4 Status of Regional Development in ThailandIt is worth examining the progress and trend of regional development in Thailand inorder to gain insightful development patterns. This can also lead to better understandingon extent of existing interregional and intra-regional gaps as well as internationaldevelopment disparities especially with neighbouring countries so that the regionaleconomic integration and appropriate regional development policies could subsequentlybe proposed.4.1 Interregional DisparitiesRegional disparity is a matter of development concern for over a 26-year interval. Therewas clearly existent of core and periphery development pattern in Thailand. Bangkokand vicinities and the Eastern region represent the core regions in which denseeconomic activities are concentrated. Whereas other regions are regarded as peripheryexemplified by lower economic development activities, which are further lessdeveloped in border regions through out the country. In terms extent of regionalvariation, in 1981, the Gross Regional Product (GRP) Per Capita differential ofBangkok and vicinities were higher than that of the average of the whole kingdom at3.06 times, furthermore its growth were well advanced than the Northeastern andNorthern regions for 7.93 and 4.85 times, respectively. Then the GRP Per Capita keptincreasing and widening due to adoption of a combination of import-substitutionindustrialization and export-oriented industrialization strategies complemented withpromotion of inward foreign direct investments.Until 1997, Thailand faced economic crisis that negatively affected the regional growthpatterns. As a result, in 1999, it brought the regional per capita disparities of Bangkokand vicinities down to 2.83 times higher than the average of whole kingdom. Thisresulted from such dense concentration of economic activities including local andforeign direct investments were mainly still concentrated in Bangkok and vicinities andthe Eastern Seaboard region. On the contrary, the difference of GRP Per Capita ofBangkok and Vicinities remained even higher than that of Northeastern and Northernregions as high at 8.79 and 5.7 times, respectively. Interestingly, the growth of GRPPer Capita in Eastern region was also higher than the Northeastern and Northern regionsfor as high at 5.77 and 4.01 times, respectively. Please see the trend of GRP Per Capitain Figure 4.1. 67
  • 78. (Unit: Baht) 1981 2007p1350,000 1982 2006p 1983 300,000 2005 1984 250,000 2004 1985 200,000 150,000 2003 1986 100,000 2002 50,000 1987 0 2001 1988 2000 1989 1999 1990 1998 1991 1997 1992 1996 1993 1995 1994 Whole Kingdom Northeastern Northern Southern Eastern Western Central Bangkok and VicinitiesSource: Gross Regional Product for the Year 1981-2007, Office of the National Economic and Social Development BoardFigure 4.1: Gross Regional Product Per Capita in Thailand During the Years 1981 To 2007In 2007, the disparities of GRP Per Capita between Bangkok and vicinities and thewhole kingdom steadily declined, but surprisingly the differences of Bangkok andvicinities and the Northeastern and Northern regions remained almost at slightlylower points as it were in 1981. This distinctly resulted from the GRP Per Capitaof the two growth magnets consisting of Bangkok and vicinities and the Easternregion have been converging since 2006, and the growths of these areas togetherremain increasing signifying a warning of wider regional disparities. This isprobably substantiated by the increasing degree of primacy of Bangkok and vicinitiessince 2001. Please see details in Figure 4.2. 68
  • 79. 1.32 Index 1.3 1.3 8 1.2 7 1.28 1.2 6 6 6 1.2 1.2 1.2 5 1.26 1.2 4 1.2 1.24 2 1.2 1.22 1.2 Year 1.18 1999 2000 2001 2002 2003 2004 2005 2006 2007Source: Population Registration, Department of Local Administration, Ministry of InteriorFigure 4.2: Primacy Index of Bangkok and Vicinities During 1999 To 2007It was additionally remarkable that the growth of GRP Per Capita in Eastern region wasstill higher than the Northeastern and Northern regions for a peak at 7.77 and a high at4.92 times, respectively, which were apparently higher than the points as it were in1981. Even so, Central region performed well above national average, and its tendencyhas continued to expand since 1994. Northeastern was yet the most backward region,followed by Northern region. While Southern and Western regions together went alongwith moderate level of development. From this explanation, interregional disparitieshave long been alarmed, and will continue to expand. Therefore, it is internallychallenging for Thailand on how to timely bring regionally balanced development ofrural and urban areas toward countering the stark magnet of Bangkok and vicinitiesthrough enhancing hierarchical diffusion of economic activities as well as promotinginterdependently integrated system of cities in Thailand. This should also be carried outin conjunction with actively responding to the external forces of spatially and sectorallycloser economic integration frameworks with the neighboring countries under the GMS,ACMECS, IMT-GT and BIMSTEC.4.2 Intra-Regional DisparitiesAlthough much efforts have been made by both public and private sectors to advancedevelopment in border regions over a recent decade, supplemented by continuedpromising cross-border trade growth, it however appears that these areas havepersistently been lagging behind comparing with other regions in the countryevidencing from there exists apparent intra-regional disparities measured by GRP PerCapita, Gross Provincial Product (GPP) and GPP Per Capita. This may significantly beresulted from low degree of hierarchical diffusion of economic activities from the heartof capital city of Bangkok metropolitan to the hinterland in the respective five-borderregions. 69
  • 80. A comparison with an eight year interval between 2002 and 2007, the tendency of structure of outputs in all border regions were recently in reversing trend toward more emphasis on agriculture sector due to unexpectedly increasing global demand of many agricultural products. As a result, this has generated more job opportunities for Thai famers since 2007. Though expanding with high economic growth rate during recent an eight-year period, widening gaps of GRP Per Capita and GPP Per Capita were still present in five-border regions. In 2004, these border regions characterized by remoteness and majority of people engaged in agricultural sector and lived in rural areas, which were homes of 21.8 millions accounted for 34.6 % of the whole country population. The total numbers of people below poverty line were at 3.42 millions. The ratio of poverty incidence was at 15.70 %, or 1.40 times above national ratio of poverty, which was 11.25%. Despite the fact that border regions were habitats of one-third of national population, its share of poverty incidence was as extreme at almost half (48.4%) of aggregate numbers of those nation-wide poor people. Please see national poverty line and ratio of poverty in Appendix E. Most of daily minimum wages in border provinces were lower than Bangkok and vicinities (203 Baht/day) for 1.20-1.36 times. The socially and economically dynamic structures of individual border regions are as follows: 4.2.1 Eastern region Economic compositions in three-eastern border provinces were diverse. Comparing between 2000 and 2007, economic structure of Trat province, an agricultural base, remained unchanged with non-agriculture sector shared slightly higher proportion at 54% than agriculture reflecting a very narrow agro-processing industries in this province. Chantaburi and Sa Kaeo provinces together had a rather similar movement, in which agriculture sector turned around from the share at around 24-26 % in 2000 to 28- 35 % in 2007 in order to respond to an increasing demand of agricultural commodities in global market. Please see details in Table 4.1. The daily minimum wages in Eastern region ranged from 156-163 Baht/day. Please see details in Appendix F. Table 4.1: Gross Provincial Product of Eastern Border Provinces at Current Market Prices Structure of Outputs (%) Gross Provincial Product Gross Provincial Product Border Provinces Non- (Million Baht) Per Capita (Baht) Agriculture Agriculture Growth Growth 2000 2007p1 2000 2007p1 2000 2007p1 2000 2007p1 (%) (%)Eastern Region1.Sa Kaeo 26 28 74 72 16,496 28,593 73 33,209 53,758 622.Chanthaburi 24 35 76 65 21,174 38,126 80 43,208 72,392 683.Trat 46 46 54 54 13,508 21,473 59 60,288 89,601 49GRP of 3 Borderprovinces 51,178 88,192 72GRP Per capita of 3Border provinces 45,568 71,917 58 Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board 70
  • 81. Nevertheless, non-agriculture sector comprising industry and services including cross- border trade with Cambodia still played major role in this regional border economy. Especially, cross-border trade, retail and wholesale trading as well as industrial development contributed significantly to the GPP of Sa Kaeo province; the growth of GPP and GPP Per Capita rose at acceptable rate. Nonetheless, intra-regional disparities in these three provinces appeared to increase from 3.5 times below GRP Per Capita of Eastern region in 2000 to 4.55 times in 2007. Sakaeo and Trat provinces had ratio of poverty above national rate at 1.22 and 1.10 times, respectively. So, Sa Kaeo province faced the problem of most widening gaps, which was below the GRP Per Capita of Eastern region at 5.8 times in 2007; special attention and much development efforts should consequently be placed to this province. 4.2.2 Northeastern region Economic structures in nine-border provinces also known as populous yet resource scarce region were also different features. Comparing between 2000 and 2007, economic structure of Ubon Ratchathani province, a regional growth center, remained unchanged with non-agriculture sector shared as high proportion at 84 %, while agriculture shared a much smaller proportion at 16%. Border provinces of Si Sa Ket, Nakhon Phanom, Loei and Nong Khai had experienced expanding share of agriculture sector between 2000 and 2007 ranging from 11-14 %. Whereas the share of agriculture sector in Surin, Buriram, Amnat Charoen and Mukdahan provinces slightly grew at approximate 2-7 % between above period. Please see details in Table 4.2. The daily minimum wages in Northeastern region ranged from 150-162 Baht/day. Table 4.2: Gross Provincial Product of Northeastern Border Provinces at Current Market Prices Structure of Outputs (%) Gross Provincial Product Gross Provincial Product Border Provinces Non- (Million Baht) Per Capita (Baht) Agriculture Agriculture Growth Growth 2000 2007p1 2000 2007p1 2000 2007p1 2000 2007p1 (%) (%)Northeastern Region1.Nakhon Phanom 22 34 78 66 14,808 23,229 57 21,147 31,468 492.Nong Khai 19 30 81 70 17,858 34,285 92 19,796 35,800 813.Si Sa Ket 20 34 80 66 25,661 49,254 92 17,872 32,517 824.Buri Ram 21 25 79 75 30,260 51,094 69 19,830 31,497 595.Surin 20 22 80 78 26,700 43,601 63 19,696 30,645 566.Ubon Ratchathani 16 16 84 84 41,162 66,720 62 23,837 29,474 247.Amnat Charoen 25 30 75 70 6,853 11,567 69 18,549 36,317 968.Loei 25 37 75 63 16,739 33,942 103 26,915 51,992 939.Mukdahan 17 24 83 76 7,968 12,639 59 24,827 37,426 51GRP of 9 BorderProvinces 188,009 326,331 74GRP Per Capita of 9Border Provinces 21,386 35,237 65 Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board 71
  • 82. Comparing within non-agriculture sector, limited share of manufacturing developmentwas noticeable. Nakhonpanom was the least industrial activity province at 3 %, whileBuriram, Nong Khai and Mukdahan provinces had more industrial development at16.22, 13.51 % and 13.39 %, respectively. The shares of retail and wholesale trading aswell as cross-border trade were vital proportion in all border provinces ranging from 20% to 34.32 %. Though presently located in the most backward region, intra-regionaldisparities in these nine border provinces yet appeared to steadily increase from 1.2times below GRP Per Capita of Northeastern region in 2000 to 1.38 times in 2007.Ubon Rachathani, Surin, Buriram and Nakhon Phanom provinces faced the problem ofexacerbating gaps. The ratios of poverty in seven border provinces excluded UbonRatchatani and Nong Khai were higher than that national ratio ranging from 1.06 times(Amnat Charoen) to 3.01 times (Surin).As a result, the northeastern border provinces were most long exposed to widespreadincidence of poverty in Thailand. To cope with these phenomena, some rural peopledecided to seasonally and circularly migrate for seeking jobs either in BangkokMetropolitan, the Eastern Seaboard region, other regional growth centers or abroad.Thus such development initiatives and policy interventions should be suitably targetedtoward poverty eradication as well as bringing intra-regional income equality inparticular and equitable interregional development in general. 4.2.3 Northern regionEconomic structures of eight-northern border provinces were not much diversified.Similar to other border regions, agriculture sector drove backward between 2002 and2007 at around 12-20 % in Uttaradit, Nan, Phayao, Chiang Rai, Maehongson and Takprovinces and at 6-10% in Chiangmai and Phitsanulok provinces, which both areregional growth centers. Please see details in Table 4.3.The daily minimum wages inNorthern border provinces ranged from 149-168 Baht/day. 72
  • 83. Table 4.3: Gross Provincial Product of Northern Border Provinces at Current Market Prices Structure of Outputs (%) Gross Provincial Product Gross Provincial Product Border Provinces Non- (Million Baht) Per Capita (Baht) Agriculture Agriculture Growth Growth 2000 2007p1 2000 2007p1 2000 2007p1 2000 2007p1 (%) (%)Northern Region1.Phitsanulok 20 26 80 74 35,175 54,304 54 43,445 64,793 492.Uttaradit 20 31 80 69 15,545 27,253 75 32,736 56,052 713.Nan 20 34 80 66 12,214 21,259 74 26,092 43,861 684.Phayao 22 32 78 68 13,206 23,279 76 25,664 43,960 715.Chiang Rai 21 32 79 68 31,531 53,157 69 27,364 44,505 636.Chiang Mai 11 17 89 83 72,483 120,972 67 47,365 76,388 617.Mae Hong Son 17 38 83 62 5,871 10,142 73 27,045 44,511 658.Tak 15 33 85 67 17,230 36,190 110 34,589 69,601 101GRP of 8 Borderprovinces 203,255 346,556 71GRP Per capita of 8Border provinces 33,038 55,459 68 Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board Comparing within non-agriculture sector, in 2007, limited share of manufacturing development was obvious. Chiang Rai province was the least industrial activity at 5.85 %, while Uttaradit, Tak and Phitsanulok provinces had higher level of industrial development at 18.25, 18.16 % and 11.52 %, respectively. The shares of retail and wholesale trading as well as cross-border trade were at meaningful proportion in all border provinces ranging from 16.47 % to 25.68 %. Still, intra-regional disparities in these eight border provinces slightly increased from 1.36 times below GRP Per Capita of Northern region in 2000 to 1.37 times in 2007. Chiangrai province most encountered continuing intra-regional gaps. The ratios of poverty in eight border provinces widely varied, which were higher than national ratio ranging from 1.06 times (Phitsanulok) to 3.01 times (Mae Hong Son). As a result, the Northern border provinces ranked second on widespread incidence of poverty in Thailand. Therefore, priority development polices and programs should be consistently addressed this divergence. 4.2.4 Western region Unlike other regions, economic structures of four- western border provinces rather well developed. Even so, a small reversal of agriculture sector between 2000 and 2007 at around 3-16% was perceived reviving the significant contribution of this sector to the regional economy of respective border provinces. Comparing within non-agriculture sector, in 2007, significant share of manufacturing development progress in these border provinces were rather equally evident. Prachuapkhirikhan province was the least industrial activity at 23.34 %, while Ratchaburi, Kanchanaburi and Phetchaburi provinces maintained higher level of industrial development at 33.6, 27.46 % and 25.95 73
  • 84. %, respectively. Ratchaburi alone also generated a great amount of electricity at a large share of 26.69 % of GPP. The shares of retail and wholesale trading as well as cross- border trade accounted for quite high particularly in Kanchanaburi province; it ranged from 11.74-24.23 % in these four-border provinces. Please see details in Table 4.4. The daily minimum wages in Western border provinces ranged from 160-165 Baht/day. Table 4.4: Gross Provincial Product of Western Border Provinces at Current Market Prices Structure of Outputs (%) Gross Provincial Product Gross Provincial Product Border Provinces Non- (Million Baht) Per Capita (Baht) Agriculture Agriculture Growth Growth 2000 2007p1 2000 2007p1 2000 2007p1 2000 2007p1 (%) (%)Western Region1.Kanchanaburi 15 22 85 78 43,531 69,025 59 58,841 89,178 522.Ratchaburi 14 17 86 83 55,100 105,955 92 68,193 128,358 883.Phetchaburi 10 25 90 75 31,673 53,241 68 71,175 117,131 654.Prachuapkhirikhan 22 28 78 72 30,084 55,215 84 65,543 116,395 78GRP of 4 BorderProvinces 160,388 283,436 77GRP Per Capita of 4Border Provinces 65,938 112,766 71 Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board It is notable that a minor intra-regional income disparities among these four-border provinces was only seen in Kanchaburi province at 1.10 times below GRP Per Capita of Western region in 2007. Three other western border provinces performed well in alleviating poverty down to about half of national ratio, except Kanchanaburi province which had ratio of poverty at 1.50 above national ratio. Therefore, priority development polices and programs should be directed toward Kanchanaburi province in particular and the Western region in general. 4.2.5 Southern region Economic structures of six- southern border provinces known as resource rich region somewhat developed but slightly behind Western border region. Despite that, significant reversal of agriculture sector between 2000 and 2007 at around 3-16% in Ranong, Satun, Songkhla and Chumphon provinces and approximately as high at 21 % in Yala province and 25% in Narathiwat province were observed. These turnarounds pushed the share of agriculture sector back as tall at 49-59 % in respective five- provinces, excluding Songkhla province at 29 %. Please see details in Table 4.5. The daily minimum wage in Southern region ranged from 153-169 Baht/day. 74
  • 85. Table 4.5: Gross Provincial Product of Southern Border Provinces at Current Market Prices Structure of Outputs (%) Gross Provincial Product Gross Provincial Product Border Provinces Non- (Million Baht) Per Capita (Baht) Agriculture Agriculture Growth Growth 2000 2007p1 2000 2007p1 2000 2007p1 2000 2007p1 (%) (%)Southern Region1.Chumphon 38 49 62 51 22,692 45,580 101 49,763 92,192 852.Ranong 46 49 54 51 11,504 17,309 50 69,304 94,640 373 Satun 50 53 50 47 17,973 27,217 51 70,482 97,164 384.Songkhla 24 29 76 71 101,780 168,611 66 79,461 119,620 515.Yala 28 49 72 51 17,631 39,198 122 41,485 84,164 1036.Narathiwat 34 59 66 41 20,187 46,468 130 29,774 62,625 110GRP of 6 BorderProvinces 191,767 344,383 80GRP Per Capita of 6Border provinces 56,712 91,734 62 Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board Comparing within non-agriculture sector, between 2000 and 2007, dissimilar changes in particular provinces noticed. Ranong province clearly increased share of manufacturing and retail and wholesale trade as well as cross-border trade. Chumphon and Songkhla provinces faced a slight decrease of manufacturing and trade activities. Satun province demonstrated slight decrease share of manufacturing activities, but received slight increase of trading movements. The two Southern most border provinces of Yala and Narathiwat, which were under unrest situation for almost four years apparently encountered economic downturn. The shares of retail and wholesale trading as well as cross-border trade were negatively affected ranging from -6.48 % in Yala and -11.55 % in Narathiwat provinces. The share of manufacturing development decreased at -3.1 % in Yala province, but it increased 1% in Narathiwat province. Only Narathiwat province did find having ratio of poverty above national ratio at 1.61 times, whereas incidence of poverty dropped significantly approximate half of national ratio in the rest of Southern border provinces. It is clearly shown that the ongoing unrest circumstances has pessimistically distressed the economic growth and the state of human well-being of the people in three border provinces including Pattani in particular and the other two neighboring provinces of Songkhla and Satun. For that reason, while restoring peace and public order in the affected areas, aggressive and broad-based local economic development as well as strongly linking with regional and national economy should be proactively undertaken in response to specific economic and social needs of the local border people. 75
  • 86. 4.3 Existing Industrial Development Along Thai Border AreaRapid industrialization has also associated with city primacy particularly in Bangkokand its vicinities. Bangkok metropolitan plays important roles as both commercial andadministrative centers of Thailand. The growth of Bangkok and its vicinities havebecome abnormal central place causing highly imbalanced spatial and economicdevelopment. In addressing this challenge, Royal Thai Government has implementedpolicies on investment promotion since 1993. The specific objectives were to equitablydisperse economic activities to regional provinces. The Board of Investment (BOI,2008) has spatially divided into three Investment Zones based on economic factors.These are: • Zone 1 consists of central provinces with high income and good infrastructure. They are Bangkok, Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi and Nakhon Pathom. • Zone 2 comprises of 12 provinces. They are Samut Songkhram, Ratchaburi, Kanchaburi, Suphanburi, Ang Thong, Ayutthaya, Saraburi, Nakhon Nayok, Chachoengsao, Chonburi, Rayong and Phuket • Zone 3 includes the remaining 58 provinces with low income and less developed infrastructure. All border provinces are located in this zone.Priority activities were designated by BOI placing emphasis on agriculture andagricultural products, technological and human resource development, infrastructure,public utilities and basic services, environmental protection and conservation, as wellas targeted industries. A wide range of privileges on reduction of import duty onmachinery, corporate income tax exemption for a certain period was granted toinvestors. Despite much policy attempts have been in place, approximate 80 % ofcapital investment was even now converged in Bangkok and vicinities, the EasternSeaboard region and other 10 provinces surrounding Bangkok in the first nine monthsof 2003 owing to investors enjoy positive advantages of agglomeration economies inthese regions, (NESDB and ADB, 2005). Consequently, actual investment in the borderprovinces has been far behind causing out migration of Thai labor to these stronggrowth areas as well as worsening interregional disparities in Thailand.Nevertheless, there is a prominent investment platform along Thailand-Myanmar borderarea. It is located in Maesod district, Tak province, which plays a significant role asmajor industrial development location in Northern part of Thailand. Maesod district ishome to labor-intensive industry particularly for garment productions. In 2003, Takprovince had 464 factories. Maesod alone hosted 235 factories, which accounted for51% of the whole province with total investment capital at 1,500 millions Baht, and itgenerated export values at 3,100 millions Baht per year, (NESDB). The key labor-intensive industries were textile and garment, canned food, wood furnitures, jewelry andaccessories. In addition, there was increasing emergence of service industries e.g.garage and car maintenance shops, etc. The principal reason for investors in locatingthese industrial plants in Maesod was to take advantage of cheap labor from Myanmar.In 2003, approximate 10,000 Myanmarnese workers were employed in Maesod district. 76
  • 87. 4.4 International Development Disparities Between Thailand and Neighbouring CountriesIn addition, significant different stages of economic and social development betweenThailand and neighbouring countries have been observed, which can be measured byGross National Income and Gross National Income Per Capita. These internationaldisparities open a wide range of possibilities to foster sectoral and spatial developmentcooperation among bordering countries within the GMS in order to mutually share thebenefits/growths of regionalization and globalization.4.4.1 Gross National Income Purchasing Power Parity Gaps Between Thailand and Neighbouring CountriesAlmost a recent decade, the tendency of differences on relative size of economybetween Thailand and particular neighbouring countries as represented by GrossNational Income Purchasing Power Parity have steadily been declining, yet there arewide gaps. Lao PDR faced the widest development divergences. The size of Thai’seconomy had larger than Lao PDR’s economy for 46.98 times in 2006, and the trend ofdisparity was fluctuating. Then, it followed by Cambodia. The differences between theCambodian to Thai’s economy gradually diminished, but there existed that the Thai’seconomy had bigger than Cambodian’s economy for 21.4 times in 2006. Myanmarranked third, in which the Thai’s economy had greater than 13.05 times in 2000. Unit: Number of Time 50 45 40 GNI PPP Gaps (Times) 35 30 25 20 15 10 5 0 2000 2005 2006 Lao PDR Malaysia Myanmar CambodiaSource: World Development Indicators database, April 2008, World BankNote: Data for Myanmar was not available for the year 2005 and 2006.Figure 4.3: Gross National Income Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries at Current International Price 77
  • 88. For the subsequent years, data were not available, but the trend of divergence wasprobably varied similar to that of Lao PDR. Malaysia, which was more advanced thanThailand in terms of technology and capital accumulation came fourth with the Thai’seconomy had large than Malaysian’s economy at 1.48 times in 2006. Please see detailson the trend of dwindling development gaps between Thailand and neighbouringcountries in Figure 4.3. However, it is clearly shown that there remain such largedevelopment gaps between Thailand and Lao PDR, Cambodia and Myanmar inparticular and with Malaysia in general. It is therefore necessary to find means forintervening/narrowing these international development disparities. In this regard,creating special border economic zones of Thailand with potential linkages withneighbouring countries could be one of the key solutions.4.4.2 Gross National Income Per Capita Purchasing Power Parity Gaps Between Thailand and Neighbouring CountriesThe international differences of Gross National Income Per Capita between Thailandand neighbouring countries have shown at distinct gaps, in which the patterns ofdisparities in some countries were somewhat reverse from the above Gross NationalIncome. It is likely that the tendency of these income disparities will be slowlyweakened in all neighbouring countries. Thailand’s income had higher than Myanmar at9.8 times in 2000, while data on the subsequent years were not available. And thetrend might be little by little shrinking. In 2006, Cambodia came second, in whichThailand had higher income at 4.8 times. Lao PDR ranked third, in which Thailand hadhigher income at 4.27 times. On the other hand, Malaysia had higher income thanThailand at 1.63 times. Please see details in Figure 4.4. Unit: Number of Time 12 10 GNI Per Capita PPP Gaps (Times) 8 6 4 2 0 2000 2005 2006 Lao PDR Malaysia Myanmar CambodiaSource: World Development Indicators Database, April 2008, World BankNote: Data for Myanmar was not available for the year 2005 and 2006.Figure 4.4: Gross National Income Per Capita Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries 78
  • 89. As a result, this becomes a major influencing factor for a large number of people fromneighbouring countries particularly from Myanmar, Cambodia and Lao PDR bothillegally and legally immigrates in order to seek for jobs in Thailand. In contrast, asignificant number of southernmost provinces people also searches for works inMalaysia. For that reason, closer cross-border cooperation and development in the formof special border economic zones in Thailand could partly help bridge internationalincome disparities in particular and international development disparities in generalbetween Thailand and these neighbouring countries. 79
  • 90. Chapter 5 Prospects for Developing Special Border Economic Zones in ThailandThailand is strategically placed at the intersection of mainland South East Asian region.Thailand’s participation in regional cooperation and integration programs i.e., the GMS,ACMECS, IMT-GT and BIMSTEC have driven meaningful spatial implications inpursuit of fostering equitable regional and rural development. It is widely recognizedthat major transnational economic corridors are important means to potentially spurgrowth to the hinterland areas. In this regard, it also placed particular opportunity toexploit economic complementarities of sister cities or city pairs toward developingspecial border economic zones at the key cross-border areas as well as other potentialgateways linking with neighboring countries. Therefore, it is necessary to take stockand assess the feasibility and pro and cons of establishing special border economiczones in Thailand.5.1 SWOT Analysis on Prospect for Promoting Special Border Economic Zones 5.1.1 Strengths • Existing macroeconomic policies supports on regional economic and social integration frameworks i.e. GMS, AECMECS, IMT-GT, and BIMSTEC help streamline the direction of cross-border development cooperation. • Royal Thai Government has strongly determined to promote sister cities program, and in which there is greater potential, it will play larger role as special border economic zones linking with neighboring countries. • Thailand has already organized important arrangements for administering special border economic zones by simplifying rules/regulations/procedures and tax and non-tax investment privileges, one stop service center, labor management and foreign currency services to attract investments to selected border regions. • Thailand has now extended MFN and AISP trade privileges to four-neighboring countries namely Lao PDR, Cambodia, Myanmar and Vietnam. This can facilitate greater flow-in of agricultural and intermediate goods from these neighbouring countries to Thailand for either further processing, consumption or export.5.1.2 Weaknesses • Thailand encountered some trade discriminations measures introduced by neighboring countries, which affected market penetration of Thai products. • It takes sometimes to harmonize or simplify different rules/regulations on trade and investments in respective neighboring countries. • Many efforts are needed to ensure that special border economic zones will have lesser degree of enclave development along border areas. Otherwise, greater physical connectivity along economic corridors may induce “back wash effects” in the border regions. • The three Southern most provinces of Thailand have been facing turmoil hindering socio-economic development as well as affecting the state of well- being and human security. 80
  • 91. 5.1.3 Opportunities • Flourishing growth rate of cross-border trade with neighboring countries rationalize to establish industrial and investment platforms along potential border areas in order to take advantage of close proximity to potential markets and regional supply networks in respective neighboring countries. • Hierarchically distribute growth and prosperity to the border regions toward reducing interregional and intra-regional disparities within Thailand. • Sharing of resources i.e. labor, raw materials, infrastructure, capitals and technology for co-production arrangements. This is directed toward fostering closer economic, social and cultural relations as well as reducing stage of development gaps between Thailand and neighboring countries. • Boosting people and tourist flows between Thailand and neighboring countries. • Efficiently managing problems on illegal immigration into Thailand, control communicable diseases and epidemics, smuggling, illegal cross-border trade of goods and animals. • Greater penetration of Thai’s products to neighboring countries and nearby countries markets i.e. China, Vietnam, Singapore, India, Bangladesh, Nepal and Bhutan through transit trade. • Engaging cross-border regional production networks, outsourcing as well as integrating special border economic zones into global supply chain networks.5.1.4 Threats • Political sensitivity within particular neighboring country or occasional border conflicts between Thailand and particular neighboring country likely affected business and investment environment along border areas in particular and the whole conflicting countries in general. • Spread of narcotics and human trafficking could be increased.5.2 Potential Geographical Border Areas and Economic Sectors for Cross-Border Development and Cooperation Toward Development of Special Border Economic Zones Linking With Neighboring CountriesBy combining relevant Royal Thai Government policies and priorities developmentareas with analytical judgments from this study, which are substantiated by economicrationales e.g. connectivity, accessibility, level of economic development of borderregions preferably the backward regions/provinces, there are eight provinces that havepreliminarily high potentials to develop toward special border economic zones inThailand for economically, socially and culturally linking with neighbouring countries.The details of geographical areas and prospective economic sectors appear in Table 5.1. 81
  • 92. Table 5.1: Potential Geographical Border Areas and Economic Sectors for Developing Special Border Economic Zones in Thailand Preliminary potentials for cross-border development toward Border Provinces creating special border economic zones in Thailand Cross-border trade Industry Agriculture Tourism Logistics services1.Chiang Rai province 1.1 Maesai district ü Contract farming to supply Golden triangle, historical Distribution center for food and agro-processed tourism, agro and eco- industries for domestic and tourism international markets. 1.2 Chiangsaen Historical and cultural Distribution center district ü tourism 1.3 Chiangkhong Logistics services and district ü Agro-processed industries, Contract farming to supply distribution center canned fruits, jewelry and for food and agro-processed precious stones, garments, industries for domestic and assembly electronic parts and international markets. electric appliances, machines, agricultural machines, medical equipments, human drugs, printing and file producing.2. Tak province ü -Resource-based industries Contract farming to supply Nature-based or soft Logistics servicesMaesod, Maeramad and e.g. garments, textiles, agro- for food and agro-processed adventure link with e.g. warehouses,Pobpra Districts processed industries, jewelry industries for domestic and Myanmar distribution center and and precious stones, international markets. packing services processed woods and furnitures 82
  • 93. Preliminary potentials for cross-border development toward Border regions creating special border economic zones in Thailand Cross-border trade Industry Agriculture Tourism Logistics services -New industries e.g. electronic parts and electric appliances, as well as market- led industries to penetrate South-Asian countries e.g. consumer goods, agricultural machines, construction materials, ceramics, plastic, auto parts, toys, shoes, and handicrafts. 3.Kanchanaburi ü ü ü Three pagodas pass and province historical tourism 4. Ranong province ü Fishery and rubber industriesNatural rubber Agro and eco-tourism Sea port and multimodal plantation transportation 5.Mukdahan province ü Light industries and packing Contract farming ü logistics center services 6.Aranyaprathet ü ü district, Sakaeo province 7. Trat province ü 8.Songkhla province, ü Rubber industries, auto parts, Rubber plantation Cultural tourism, border Cross-border logistics Sadao, Hat Yai and processed sea food, frozen shopping at Sadao and Hat services, distribution Muang districts food Yai cities centerSource: International Economic Strategy Unit, Office of the National Economic and Social Development Board. (2005). Progress Report on Establishment of Special Border Economic Zone inChiang Rai provinceOffice of the National Economic and Social Development Board. No year of publication. Development of Special Border Economic Zone in Tak ProvinceOffice of the National Economic and Social Development Board. (2006). Final Report on Feasibility Study on the Establishment of Special Border Economic Zone in Sadao District, Song KhlaProvince linking with Bukit Kayu Hitam, Kedah State of Malaysia prepared by Chula Unisearch, Chulalongkorn UniversityTsuneishi, T. (2008). IDE discussion paper no.153, Development of border economic zones in Thailand: Expansion of border trade and formation of border economic zones, Chiba, Institute ofDeveloping Economies (IDE), JETRORemarks: ü Refers to there exists of prospective economic activities. 83
  • 94. Chapter 6 Conclusions and Recommendations6.1 ConclusionsThe Greater Mekong Sub-region regarded as a geo-spatial unit is very importanteconomic bloc due to it shares common culture, religion and linguistic base with a bigthreshold of population and resources. This region also has great potential fordevelopment underpinning by the GMS and ACMECS Development CooperationPrograms. Thailand located at the strategic location of South East Asian region has beenintensifying economic interdependence with neighbouring countries through increasingcross-border trade and people’s mobility, which made possible by means of greaterdegree of physical connectivity in the form of economic corridors and continuous tradeand investment facilitation. As a result, it opens up new opportunity for Thailand toengage cross-border production and supply chain linkages with neighbouring countriesby establishing special border economic zones in prospective locations in order to takeadvantage of cheap labor from Cambodia, Lao PDR and Myanmar and wider access totheir primary markets, regional supply networks as well as penetrating to regional andglobal markets.Robust cross-border trade relations between Thailand and neighbouring countries havebeen observing since the last decade, which trading patterns are becoming quite diversedepending on their comparative advantage, division of labor and specialization ofproduction. In general, Thailand mainly exports consumer, intermediate and somecapital goods to neighbouring countries, and imports primary goods such as agriculturaland fishery products and ranges of resources from neighbouring countries. Cross-bordertrade gaps between Thailand and individual neighbouring countries greatly varied fromone country to another. In addition, cross-border retail trades particularly carried out byrural poor are always conducted at the specific allowed border crossings. It is notablethat three neighbouring countries-Cambodia, Lao PDR and Myanmar- are rapidlyurbanizing.The trend of capital investment out-flows from Thailand to these neighbouring countriesappears to be intensifying as a result of greater trade and investment openness in theGreater Mekong Sub-region. Cross-border trade, commerce, investments as wellpeople’s mobility triggered a multi-facet of impacts on Thai economy and societycomprising six aspects: political, economic, social, infrastructural, environmental andinstitutional characteristics. These need to be addressed with awareness. Though thegrowth of cross-border trade and commerce is flourishing, it is probable that thisprogress might to some extent lead to variation on regional development impacts.However, Thailand is facing significantly chronic interregional and intra-regionaldisparities, in which the Northeastern has long been a backward region followed byNorthern region. In addition, the degree of primacy of Bangkok and vicinities continueto steadily expand substantiating the existence of regional variations. There existobvious intra-regional disparities. Out of 30 provinces, 19 backward border provincesidentified were Sa Kaeo and Chantaburi (Eastern region); Ubon Ratchathani, Surin,Buriram and Nakhon Phanom (Northeastern region); Chiangrai, Uttaradit, Nan, Phayao,Chiang Mai, Mae Hong Son and Tak (Northern region); Kanchanaburi (Westernregion); Narathiwat, Yala, Chumphon and Ranong (Southern region). 84
  • 95. Taking these cross-border trade interactions and people’s mobility as major factors, itcan preliminarily be identified possible special border economic zones to be createdbetween Thailand and individual neighbouring countries in order to bridge not onlyintra-regional and interregional disparities within Thailand but also to narrowinternational development gaps with respective neighbouring countries as follows: • CambodiaThe priority locations to develop special border economic zones could be:Ø Aranyaprathet district, Sakaeo province, (Thailand) linking with Poipet city,Banteay Meanchey province, (Cambodia)Ø Trat province, (Thailand) linking with Koh Kong, (Cambodia)The priority commodities to be produced at the proposed SBEZ are motorcycles and itsparts, cement, engines, livestock feed, gas for household cooking, woven fabrics,printed textiles, gourmet powder, and chemical fertilizers, etc. • Lao PDRThe priority location to develop a special border economic zone could be at Mukdahanprovince, (Thailand) linking with Savannakhet province, (Lao PDR). The prioritycommodities to be manufactured at the proposed SBEZ are oil products, cars, pelletcement woven fabrics, knitted fabrics, medical equipments, digger, polymers ofethylene, tiles, tyres, etc. • MalaysiaThe priority location to develop a special border economic zone could be at Sadao, HatYai and Muang districts, Songkhla province, (Thailand) linking with Bukit Kayu Hitam,Kedah state (Malaysia). The priority commodities to be manufactured at the proposedSBEZ are parts and accessories of machinery, mixed rubber, electromagnetic, otherproducts made from steels, processed parawoods, particle board, magnetic tapes, rubberhand glove, print circuit board, etc. • MyanmarThe priority locations to develop as special border economic zones could be at:Ø Chiang Rai province consists of Maesai, Chiangsaen and Chiangkhong districts,(Thailand) linking with Tachilek province (Myanmar).Ø Tak province comprises of Maesod, Maeramad and Pobpra districts, (Thailand)linking with Myawaddy province, (Myanmar)Ø Ranong province, (Thailand) linking with Koh Song province, (Myanmar)Ø Kanchanaburi province, (Thailand) linking with Dawei province, (Myanmar)The priority commodities to be produced at the proposed SBEZs are gourment powder,diesel oil, vegetable oil, motorcycles, woven cloth with various colors, lead acid,Benzene oil, fishing net, human drugs, non-sweetened milk, etc. 85
  • 96. 6.2 Policy Implications for Establishing Special Border Economic Zones in Thailand 6.2.1 Political Aspect • Strengthen strong political ties between Thailand and neighbouring countries nationally and regionally. It acts as a central basis for stabilizing political relations and mutual trust with neighbouring countries, which will subsequently affect other development cooperation aspects. This also helps keep peace and national security along border areas conducive to a range of development collaborations. 6.2.2 Economic Aspect • Properly manage the stability of Thai Baht currency. This will keep sustaining pace of cross-border trade flows between Thailand and neighbouring countries as well as enhancing their purchasing power. • Rationally relocate specific type of industries, which Thailand is held least comparative and competitive advantages due to increasing labor cost to potential border areas in order to take advantage of cheap labor in neighbouring countries. At the same time, it provides opportunity to cooperate and coordinate cross-border spatial development and production as well as managing problems of illegal immigration of labor. • Employ special border economic zone as a means to bridge both internal interregional and intra-regional gaps in Thailand and to narrow international development disparities with neighbouring countries. This can be done through two-ways linkages of growth from border nodes to the hinterland and vice versa in order to bring regionally balanced development by actively promoting regional and rural development placing particular emphasis on poverty alleviation along major economic corridors. Then establish cross- border co-production, outsourcing and cross-border supply chain networks in order to promote cross-border spill over effects, which can help reduce the development gaps between Thailand and respective neighbouring countries. 6.2.3 Social Aspect • Proactively negotiate and manage problems of illegal immigration of labor and associated social consequences of cross-border migration. This will appropriately deal with the sharing of regional human capital together with enhancing cross-border human development priorities through provisions of social infrastructure and jointly utilized with neighbouring countries, where it is necessary. • Strengthen cross-border social and cultural engagements in order to foster closer ties, mutual trust and confidence between Thailand and neighbouring countries. This will be a solid basis for increasing social and cultural interactions between Thailand and neighbouring countries, which can help bring sustainable peace and harmony to the GMS at large. 86
  • 97. 6.2.4 Infrastructural Aspect • Provide adequate economic and urban infrastructure including land use planning in response to rapid industrialization and urbanization along potential border areas. This will facilitate the implementation of special border economic zones as well as upholding the joint utilization of key facilities e.g. air port and river port, etc. as well as promoting cross-border trade of energy services. 6.2.5 Environmental Aspect • Comprehensively develop cross-border integrated environmental and natural resources management and protection plans for potential border areas by actively promoting public participation. Provide local capacity building for managing and protecting natural resources to local officials and local people as well as maintaining livelihood opportunities e.g. community forestry from available natural resources to local people particularly for the rural poor. 6.2.6 Institutional Aspect • Strengthen institutional capacity building for advancing cross-border development via special border economic zones. This will cover various aspects needed to support flows of goods, people, capital and technology ranging from standard financial system and its rules and regulation harmonization, a range of cross-border initiatives and coordination including investment and trade polices, public-private partnerships, logistics provisions and management and spatial planning.6.3 Recommendations 6.3.1 Explore more geographical border areas, which have high potential todevelop as special border economic zones in Thailand. The objective is to investigategeographical border areas in different regions of Thailand on possibility to undertakecross-border development and cooperation with respective neighbouring countries.Active public participation in this preparatory process should be encouraged. 6.3.2 Set up a system for managing and administering special border economiczones.It can promote potential border areas as “special industrial development regions” instead of full fledged special border economic zone if it is constrained by national legalprocedure. 6.3.3 Establish local supply chains networks to link with the proposed specialborder economic zones. It is necessary to ensure that local communities andenterprises have equal opportunity to gain benefits from these industrial developmentregions by fostering local supply chains in providing raw material, labor, and equitableemployment opportunities as well as networking with rural industries enterprises andparticular rural industrial clusters in order to expand market access to neighbouring 87
  • 98. countries, regional and global markets. As well, active rural and communitydevelopment planning should be aggressively taken into account so that localsustainable livelihoods enhancement and necessary capacity building required canappropriately be supported. 6.3.4 Cross-border logistics services provisions should be established. It isimportant to promote local direct investments in providing cross-border logisticsservices at competitive price and efficient operation. This can strengthen local businessenvironment in competing with multinational logistics providers. In addition, collectiveefforts in nurturing local entrepreneurship should be initiated. 6.3.5 Close cooperation and coordination on managing social problemsassociated with cross-border illegal immigration should be put in place. This is toproactively respond to the increasing problems resulted from cross-border people’smobility e.g. the need to address communicable diseases i.e., tuberculosis, elephantiasis,AIDS, human trafficking, smuggling of goods and wildlife animals and illegalimmigration of labor into Thailand. A broad-based public involvement in counteringthese problems should be fostered. 6.3.6 Institutional capacity building for regional and local public administrationsystem should be promoted. As special border economic zone concept is newlyadopted in Thailand, a wide range of capacity building schemes for regional and localpublic administration system in order to efficiently deal with a multi-facet issues oncross-border cooperation and coordination ranging from harmonization of rules andregulations on cross-border trade, cross-border logistics provisions and managementand cross-border spatial planning, environmental and natural resources management,traffic management and road safety, etc. 88
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  • 103. Appendixes
  • 104. 93
  • 105. Appendix B: Statistics of Foreign Direct Investments From Thailand To Cambodia During 1 August 1994 To 30 September 2004 Unit: Millions of $ US Total Thai NumberNo. Category Total registered capital investment of project capital 1. Hotel 7 123.4 48.38 2. Processed woods 3 38 33.92 3. Telecommunications 2 16 14.8 4. Textiles 7 8.05 7.72 5. Processed foods 9 7.66 5.76 6. Construction 5 7.33 4.53 7. Agro-industries 5 11.29 4.39 8. Plastics 3 4.3 3.26 9. Medias 4 2.76 2.69 10. Mining 3 3.04 2.52 11. Air traffic control 1 2.5 2.25 12. Assembly plant 1 2.0 2.0 13. Chemicals 2 1.4 0.89 14. Petroleum 3 1.55 0.82 15. Packaging 1 0.65 0.65 16. Entertainment 1 5.0 0.50 Total 57 234.93 135.15Source: Cambodia Investment Board (CIB) retrieved fromhttp://www.thaiset.com/thaiset/news/270147/new01.htm, on 10 June 2008 94
  • 106. Appendix C: Statistics of foreign direct investments From Thailand To Lao PDR During 1988-2005 Unit: Millions of $ US Number Total Thai Share No. Category of investment (%) project capital 1. Hydro-power plant 6 1,127.5 46.83 2. Telecommunications and transport 9 637.3 26.47 3. Hotel and tourism 13 287.9 11.95 4. Industry and handicraft 90 101.4 4.21 5. Agri-business 44 61.7 2.56 6. Banking and insurance 6 50.8 2.11 7. Trading 46 33.8 1.41 8. Textiles and garments 38 29.8 1.24 9. Services 34 25.3 1.06 10. Construction 17 23.1 0.96 11. Mining 8 15.7 0.66 12. Wood industries and wood furnitures 17 10.5 0.44 13. Consultancy services 2 2.4 0.10 Total 330 2,407.2 100Source: Department for the promotion and management of Domestic and Foreign Investment, retrieved fromhttp://www.thaiset.com/thaiset/news/270147/new01.htm, on 10 June 2008 95
  • 107. Appendix D: Statistics of Foreign Direct Investments From Thailand To Myanmar During 1988 To 2006 (January) Unit: Millions of $ US Number Total Thai Share No. Category of investment (%) project capital 1. Industrial production 16 614.6 45.7 2. Hotel 12 228.6 17 3. Fisheries 7 171 12.7 4. Mining 8 121.2 9.0 5. Transport 4 107.3 8.0 6. Oil and gas exploration 5 48.4 3.6 7. Construction 2 37.8 2.8 8. Real estate 1 14 1.0 9. Agriculture 1 2.7 0.2 Total 56 1,345.6 100Source: Myanmar Investment Commission (MIC), retrieved fromhttp://www.thaiset.com/thaiset/news/270147/new01.htm, on 10 June 2008 96
  • 108. Appendix E: Poverty line, Ratio of Poverty, Poverty Headcount (Income side) Divided by Regions and Provinces for the Year 2004 Number of Poverty line Ratio of Number of Poverty Regions Provinces Baht/person/ Poverty Population Headcount month (%) (x1,000) (x1,000)1.Bangkok Bangkok 1,853 1.64 108.4 6,608.2metropolitan metropolitan Total 1,853 1.64 108.4 6,608.22.Central Nakhon Pathom 1,321 2.36 20.2 857.7region Nonthaburi 1,368 0.57 5.6 982.1 Pathum Thani 1,308 - - 835.8 Samut Prakan 1,464 0.31 3.4 1,088.2 Samut Sakhon 1,374 1.68 8.5 508.8 Chai Nat 1,321 10.74 38.5 357.0 Phra Nakhon Si 1,362 3.50 25.0 713.8 Ayutthaya Lop Buri 1,278 8.60 61.8 718.2 Saraburi 1,321 4.32 26.8 620.0 Sing Buri 1,344 10.49 24.3 231.6 Ang Thong 1,313 3.28 8.9 271.9 Chantaburi* 1,347 4.14 21.2 513.6 Chachoengsao 1,304 3.18 20.4 642.9 Cholburi 1,422 1.30 14.0 1,080.0 Trat* 1,315 12.45 29.2 234.1 Nakhon Nayok 1,277 10.67 26.2 245.4 Prachin Buri 1,272 7.61 31.4 412.5 Rayong 1,364 5.60 29.4 525.9 Sa Kaeo* 1,297 13.75 68.8 500.1 Ratchaburi* 1,334 5.55 44.0 792.2 Kanchanaburi* 1,276 16.94 134.8 795.4 Suphan Buri 1,278 5.79 50.1 866.3 Samut 1324 4.86 10.3 211.4 Songkhram Phetchaburi* 1,342 5.17 22.5 435.5 Prachuap 1,343 7.17 32.2 448.7 Khiri Khan* Total 1,339 5.09 757.4 14,889.4 97
  • 109. Ratio Poverty line Number of Number of of Regions Provinces Baht/person/ Poverty Population Poverty month Headcount (Thousand) (%)3.Northern Chiang Mai* 1,156 18.59 286.2 1,539.7region Lamphun 1,170 5.75 24.1 419.4 Lampang 1,152 16.54 129.8 784.7 Uttaradit* 1,124 14.16 66.7 470.8 Phrae 1,142 5.01 24.8 494.2 Nan* 1,133 19.33 91.8 474.9 Phayao* 1,159 19.52 99.6 510.1 Chiang Rai* 1,135 15.18 179.6 1,183.4 Mae Hong 1,090 33.95 84.9 250.1 Son* Nakhon Sawan 1,151 17.06 183.2 1,073.8 Uthai Thani 1,099 21.62 66.4 307.0 Kamphaengphet 1,075 6.81 46.9 689.0 Tak* 1,113 29.60 175.8 594.0 Sukhothai 1,140 14.53 87.0 599.0 Phitsanulok* 1,134 11.96 94.9 793.7 Phichit 1,121 11.07 63.2 570.5 Phetchabun 1,084 20.39 202.3 992.1 Total 1,131 16.24 1,907.4 11,746.54.Northeastern Nakhon 1,708 15.63 402.7 2,576.2region Ratchasima Buri Ram* 1,065 21.69 327.7 1,510.7 Surin* 1,057 33.97 458.6 1,349.8 Si Sa Ket* 1,081 19.29 276.6 1,433.0 Ubon 1,061 7.03 121.4 1,726.0 Ratchathani* Yasothon 1,069 10.67 60.4 565.9 Chaiyaphum 1,077 22.57 251.7 1,115.5 Amnat 1,079 12.01 43.7 364.4 Charoen* Nong Bua Lam 1,074 29.46 145.2 492.8 Phu Khon Kaen 1,108 9.03 159.5 1,765.9 Udon Thani 1,085 15.14 226.1 1,493.9 Loei* 1,088 17.27 110.0 637.2 Nong Khai* 1,089 10.78 98.4 912.4 Maha Sarakham 1,062 9.51 91.7 964.4 Roi Et 1,077 8.21 107.0 1,304.2 Kalasin 1,102 15.36 147.9 962.9 Sakon Nakhon 1,064 30.16 322.6 1,069.5 Nakhon 1,069 32.27 224.5 695.5 Phanom* Mukdahan* 1,085 22.26 75.0 337.0 Total 1,078 17.16 3,650.8 21,279.3 98
  • 110. Ratio Number of Poverty line Number of of Poverty Regions Provinces Baht/person/ Population Poverty Headcount month (x1,000) (%) (x1,000)4.Southern Nakhon Si 1,147 13.04 201.8 1,547.6region Thammarat Krabi 1,166 6.76 23.8 351.5 Phang Nga 1,160 .55 1.3 328.3 Phuket 1,176 0.21 0.6 307.7 Surat Thani 1,186 - - 889.4 Ranong* 1,173 5.42 9.4 173.0 Chumphon* 1,201 5.60 25.6 457.6 Songkhla* 1,239 2.61 33.7 1,290.9 Satun* 1,129 6.63 17.2 259.2 Trang 1,151 2.16 13.2 610.5 Phatthalung 1,190 3.34 16.9 504.4 Pattani 1,106 22.96 143.3 624.0 Yala* 1,104 10.00 43.4 434.4 Narathiwat* 1,100 18.15 124.8 687.9 Total 1,164 7.82 655.0 8.3764Nation-wide 1,242 11.25 7,079.0 62.8998Source: Table of data on poverty and income distribution, 2007, Office of Community EnterpriseDevelopment and Income Distribution, Office of the National Economic and Social DevelopmentBoardRemark: The bold provinces with an asterisk (*) are those which share common land border withneighboring countries. 99
  • 111. Appendix F: Table of Daily Minimum Wage Rate Nation-Wide Announced by Ministry of Labor Effective on 1 June 2008 Minimum wage rate Provinces (Baht) 203 Bangkok metropolitan, Nakhon Pathom, Nonthaburi, Pathum Thani, Samut Prakan and Samut Sakhon 197 Phuket 180 Cholburi 179 Saraburi 173 Chachoengsao, Phra Nakhon Si Ayutthaya and Rayong 170 Nakhon Ratchasima 169 Ranong 168 Phangnga and Chiang Mai 165 Krabi and Kanchanaburi 164 Phetchaburi and Ratchaburi 163 Chantaburi, Prachin Buri, and Lop Buri 162 Loei 161 Singburi and Ang Thong 160 Prachuap Khiri Khan, Samut Songkhram and Sa Kaeo 158 Chumphon and Uthai Thani 157 Chiang Rai, Trang, Songkhla, Nong Khai and Udon Thani 156 Kamphaengphet, Trat, Nakhon Nayok, and Lamphun 155 Kalasin, Nakhon Si Thammarat, Nakhon Sawan, Buri Ram, Pattani, Phattalung, Phetchabun, Yasothon, Yala, Sakon Nakhon, Satun, and Surat Thani 154 Khon Kaen, Chai Nat, Roi Et, Lampang, Suphan Buri, Nong Bua Lam Phu and Ubon Ratchathani 153 Nakhon Phanom, Narathiwat, Mukdahan and Amnat Charoen 152 Phitsanulok 151 Tak, Nan, Maha Sarakham, Sukhothai and Surin 150 Phayao, Phichit, Phrae and Si Sa Ket 149 Uttaradit 148 ChaiyaphumSource: Ministry of Labor, retrieved from http://www.mol.go.th/statistic_01.html, on 25 May 2008 100

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