CROSS-BORDER TRADE AND COMMERCE IN THAILAND: POLICY IMPLICATIONS FOR ESTABLISHING SPECIAL           BORDER ECONOMIC ZONES ...
AcknowledgementsThe author would like to express his deepest sense of gratitude to his advisor andChairman Professor Dr. J...
AbstractThe Greater Mekong Sub-region (GMS) regarded as a geo-spatial unit is very importanteconomic bloc due to it shares...
Table of ContentsChapter   Title                                                       Page          Title Page           ...
Checkpoints/Border Crossings        3.7.2 Nation-Wide Share of Peoples Movement Through                61               Bo...
List of TablesTable   Title                                                            Page3.1     Types and Numbers of Bo...
List of FiguresFigure   Title                                                         Page1.1      Conceptual Framework   ...
Figure   Title                                                            Page3.19     People’s Movement at Major Border C...
List of MatrixMatrix   Title                                                          Page3.1      Cumulative Cross-Border...
AbbreviationsACMECS    Ayeyawady - Chao Phraya - Mekong Economic Cooperation          StrategyADB       Asian Development ...
Chapter 1                                     Introduction1.1 Background and Rationale of the StudyThere is underlying rea...
Continuously fostered by the regional economic cooperation programs namely theGreater Mekong Sub-region, the Ayeyawady - C...
cross-border trade relations between Thailand and four-neighbouring countries andtransit trade with China with particular ...
disparities plus international development disparities between Thailand and neighboringcountries. It will also be proposed...
Figure 1.1 Conceptual Framework                                               Cross-Border Trade and Commerce in ThailandØ...
Chapter 2   International Trade, Border Economics and Special Border Economic Zone2.1 Concept of International TradeThere ...
contexts entailed by geo-politics. It is now gaining much attention due to greater cross-border economic integration in ma...
This concept has increasingly become fashionable in realizing economiccomplementarities between two countries which have d...
explore opportunities to perform cross-border co-production activities with            their respective city pair’s counte...
Figure 2.1 Proposed Special Border Economic Zones in Thailand and Its Potential Linkages With Neighbouring Countries Sourc...
Chapter 3           Overview of Cross-Border Trade and Commerce in Thailand3.1 Geographical Locations and Physical Linkage...
It is perceived that road transport networks in Thailand are rather well developed bothwithin intra-regional and interregi...
3.2.3 River/Water TransportWithin the context of the GMS, Chiangsaen River Port, operated in 2003, plays vitalrole in conn...
Source: GMS Transport Sector Strategy, Coast to Coast and Mountain to Sea: Towards Integrated        Mekong Transport Syst...
Out of nine, six GMS corridors will pass through Thailand consisting of:•   North-South Economic Corridor (NSEC) : Kunming...
3.3 Types and Number of Nation-Wide Border CheckpointsCross-border trade is transacted through major border checkpoints na...
Source: The Customs Department, ThailandMap 3.2: Geographical Distribution of All Types of Key Border Checkpoints in      ...
3.4 Trade Agreements Between Thailand and Neighbouring CountriesIn the recent two decades, Thailand has undertaken a numbe...
and Thailand (CLMT). Its objectives were to reduce trade barriers, improve transport   linkages and upgrade major border c...
fruits, granite stone, marble, juniper, woven artificial fabrics, stocking, woven     made of artificial fiber, textiles (...
Under this agreement, China and old ASEAN member countries started reducing importtariffs on 1 January 2004, and were lowe...
country, were classified into two groups. These are Fast Track and Normal Track. Itsspecific details of time frame are sho...
least cost logistics services. Besides, it also regionally intends to ease greater flows oftourists and labor mobility.3.5...
processing, wood industries, sugar industry, energy, construction, tourism, and hotel  and services.• Actively negotiate o...
3.6.2 Overall Assessment of Cross-border Trade and Commerce Relations             Between Thailand and Five-Neighbouring C...
Matrix 3.1 : Cumulative Cross-Border Trade Values of Thailand With Five-Neighbouring Countries During 1996 to 2008 (Januar...
2) Overall Annual Cross-Border Trade Values Between Thailand                          and Five-Neighbouring CountriesFor t...
regions of Thailand, during 1996-1999, it slowly increased from amounting 24.297billions Baht to 39.660 billions Baht. Aft...
of price for Thai products exported to neighbouring countries markets particularly toCambodia, (Thai Chamber of Commerce, ...
4) Cross-Border Trade Gaps Between Thailand and Five-Neighbouring           CountriesTable 3.4 Cross-Border Trade Gaps Bet...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economi...
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Special Study on Cross Border Trade and Commerce in Thailand : Policy Implications for Establishing Special Border Economic Zones

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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