Thailand's Benefits from FTAs
At the Association of Southeast Asian Nations (ASEAN) meeting in Bangkok in August 2009, Thailand achieved two benefits from the new FTA between ASEAN countries, which will be effective in January 1, 2010.
1. FTA will help Thai investment in China
Thai businesses operating in fields such as retailing, hospitality, restaurants, spas, tour companies, logistics and education are set to benefit most from the ASEAN FTA negotiations. There has been an ongoing Asean-China Free Trade Area negotiations to liberalize the service sectors. China’s service sector, which grew 7.4% in the first quarter of 2009 with a total value of 29 billion yuan, offers a potential market for many Thai firms. Despite slowing economic growth, the Chinese service sector is likely to improve during the second half, due to government measures to stimulate the economy and domestic purchasing power. Furthermore, in the longer term, the sector will benefit from the growing income of both urban and rural populations, as well as the national development plan, which aims to raise the service sector’s contribution to the economy from 40% to 50% by 2020.
The China-ASEAN FTA is expected to benefit Thai businesses enabling them to tap the potential of China’s expanding market, reported the Bangkok Post newspaper. In addition to being a tourism hub, Thai spas, with their medicinal herbs and natural products, are among the service industries with high potential to expand into China. The FTA has relaxed regulations on investing in China’s service sector, which includes these sectors. Thai entrepreneurs will also be more able to expand their businesses to China after the completion of the second round of negotiations, which is expected to open up 12 more service industries.
At the same time, Chinese investors will gain from the FTA agreements as they are likely to expand their businesses in Thailand, for example: investment in Thai construction and shipping.
2. Reduced Tariffs on Products with India
The India-ASEAN FTA would eliminate tariffs on products including electronics, chemicals, machinery and textiles, or 80% of total trade in goods between India and ASEAN countries. The agreement will be effective from Jan 1, 2010, and tariffs would be reduced to zero between 2013 and 2016. Thai Commerce Minister Porntiva Nakasai told Bangkok Post that because of the ASEAN-India FTA, the value of trade between Thailand and India could rise to $10 billion in 2010, from an estimated $6 billion in 2008.
Major exports from India to Thailand include gemstones, metal ores, chemicals, steel and products, vegetables and pharmaceutical products. The major imports from Thailand to India include electric and electrical goods, crude oil and products, television receivers, air-conditioning machinery and parts, and plastic products.
Meanwhile, India has been negotiating an FTA with Thailand for even longer than the 6-years with ASEAN (link to India FTA with ASEAN to learn more). With the India-ASEAN FTA now signed in Bangkok, the likelihood of finalizing a bilateral FTA with Thailand should improve.
India’s exports to Thailand, implemented under an early harvest program in September 2004, have grown from $901.4 million in 2004-05 to $1.8 billion in 2007-08. Meanwhile, Thailand’s exports to India climbed from $865 million to $2.3 billion in the same period — tripling in value while India’s exports only doubled. However, the early harvest program only covered about 82 items such as fresh mangoes, apple, grapes, crabs, semiprecious stones, jewellery, chromium ores, refrigerators, certain machinery items and TV tubes.
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