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: Previous Degrees:

Thai Master of Science Asian Institute of Technology Bangkok, Thailand Bachelor of Communication Arts Sukhothai Thammathirat Open University Nonthaburi, Thailand

Scholarship Donors: RTG Fellowships and AIT Fellowship Scheme

Asian Institute of Technology School of Environment, Resources and Development Bangkok, Thailand December 2008

Acknowledgements The author would like to express his deepest sense of gratitude to his advisor and Chairman Professor Dr. Jayant Kumar Routray, who provided constructive guidance and inspiration throughout the study. The researcher would also like to thank Dr.Mokbul Morshed Ahmad as co-assessor for offering valuable comments to make the study complete. A very special appreciation is extended to Khun Laaiad Wongthong at Office of Information Technology and Communications of the Department of Customs, Thailand for supplying cross-border trade data of Thailand with neighboring countries at exceptional rate. If these data were not made available, the study would have not been possible. Also, I wish to express thanks particularly to Khun Anusit Kanchanapol at Padang Besar Customs House for providing top ten cross-border export and import of commodities of Thailand with neighboring countries at selected border checkpoints as well as insights by sharing informal cross-border trade practices. Lastly, I would like to express my profound thankfulness to my mother, sisters, brothers and friends for their understanding and moral supports for the duration of the study.

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Abstract
The Greater Mekong Sub-region (GMS) regarded as a geo-spatial unit is very important economic bloc due to it shares common culture, religion and linguistic base with a big threshold of population and resources. This region also has great potential for development underpinning by the GMS Development Cooperation and the Ayeyawady-Chao PhrayaMekong Economic Cooperation Strategy (ACMECS). Thailand located at the strategic location of South East Asian region has been intensifying economic interdependence with neighbouring countries through increasing cross-border trade and peoples mobility which made possible by means of greater degree of physical connectivity in the form of economic corridors, continuous trade and investment facilitation. As a result, it opens up new opportunities for Thailand to engage cross-border production and supply chain linkages with neighbouring countries by establishing special border economic zones in prospective locations in order to take advantage of cheap labor from Cambodia, Lao PDR and Myanmar and wider access to their primary markets as well as penetrating to regional and global markets. Robust cross-border trade relations between Thailand and neighbouring countries have been observed over last 13 years in which trading patterns are becoming quite diverse depending on their comparative advantage, division of labor and specialization of production. In general, Thailand mainly exports consumer, intermediate and some capital goods to neighbouring countries, and imports primary goods such as agricultural, fishery products and ranges of resources from neighbouring countries. Cross-border trade gaps between Thailand and individual neighbouring countries greatly vary from one country to another. In addition, cross-border retail trades particularly carried out by rural poor are always conducted at specific allowed border crossings. Though the growth of cross-border trade and commerce is flourishing, it is probable that this progress might lead to some extent variation in regional development impacts. However, Thailand is facing significantly chronic interregional inequalities in which the Northeastern has long been a backward region followed by Northern region as well as obvious intra-regional differences. Out of 30 border provinces, 19 backward border provinces were identified. Taking these cross-border trade interactions and peoples mobility as major factors, it can preliminarily be identified possible eight special border economic zones corresponding with priority manufactured commodities to be created in Thailand linking with neighbouring countries in order to bridge not only intra-regional and interregional disparities within Thailand but also international development gaps with Cambodia, Lao PDR, Malaysia and Myanmar, respectively. Such policy implications for establishing special economic zones in Thailand need to be addressed with awareness in six main aspects: political, economic, social, infrastructural, environmental and institutional. Recommendations to promote special border economic zones have been made centering around exploring more geographical border areas as special border economic zones in Thailand and possible linkages with neigbouring countries, setting up a system for managing and administering special border economic zones, establishing local supply chains networks to link up with the proposed special border economic zones, providing cross-border logistics services, fostering close cooperation and coordination on managing social problems associated with cross-border migration, as well as rendering capacity building for integrated regional and local public administration system.

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Table of Contents Chapter Title Title Page Acknowledgements Abstract Table of Contents List of Tables List of Figures List of Matrix and Maps Abbreviations 1 Introduction 1.1 Background and Rationale of the Study 1.2 Objectives of the Study 1.3 Scope of the Study 1.4 Methodology 1.5 Conceptual Framework International Trade, Border Economics and Special Border Economic Zone 2.1 Concept of International Trade 2.2 Concept of Trade and Development 2.3 Concept of Border Economics 2.4 Concept of Special Border Economic Zone and Applications Overview of Cross-Border Trade and Commerce in Thailand 3.1 Geographical Locations and Physical Linkages of Thailand with Neighbouring Countries 3.2 Transport and Telecommunication Networks 3.3 Types and Number of Nation-Wide Border Checkpoints 3.4 Trade Agreements between Thailand and Neighbouring Countries 3.4.1 Trade Agreements 3.4.2 Trade-Relevant Cooperation 3.5 Thailands Trade Policies with Neighbouring Countries 3.6 Cross-Border Trade and Commerce Relations between Thailand and Neighbouring Countries 3.6.1 Markets of the Neighbouring Countries 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) 3.6.3 State of Cross-Border Trade Relations With Individual Neighbouring Countries 3.7 Peoples Mobility Along the Border 3.7.1 Peoples Movement Through Border Page i ii iii iv vi vii ix x 1 1 2 2 3 3 6 6 6 6 7

11 11 11 16

18 22 23

24 25

32

59

iv

Checkpoints/Border Crossings 3.7.2 Nation-Wide Share of Peoples Movement Through Border Crossings 3.8 Thailands Cross-Border Investments in Four-Neighbouring Countries 3.8.1 Cambodia 3.8.2 Lao PDR 3.8.3 Myanmar 3.8.4 Malaysia 3.9 Impacts of Cross-Border Trade, Commerce and Investments Dealing with Neighbouring Countries on Thai Economy and Society 4 Status of Regional Development in Thailand 4.1 Interregional Disparities 4.2 Intra-Regional Disparities Particularly for the Border Provinces 4.2.1 Eastern Region 4.2.2 Northeastern Region 4.2.3 Northern Region 4.2.4 Western Region 4.2.5 Southern Region 4.3 Existing Industrial Development Along Thai Border Area 4.4 International Development Disparities Between Thailand and Neighbouring Countries

61

63 63 64 64 64

67 67 70 71 72 73 74 76 78

Prospects for Developing Special Border Economic Zones in Thailand 5.1 SWOT Analysis on Prospect for Promoting Special Border Economic Zones 5.2 Potential Geographical Border Areas and Economic Sectors for Cross-Border Development and Cooperation toward Development of Special Border Economic Zones Linking with Neighboring Countries Conclusions and Recommendations 6.1 Conclusions 6.2 Policy Implications for Establishing Special Border Economic Zones in Thailand 6.3 Recommendations References Appendixes

80 80 82

84 84 86 87 89 93

List of Tables Table 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Title Types and Numbers of Border Checkpoints in Thailand Physically Connecting with Neighbouring Countries Numbers of Commodity That Thailand Granted AISP Treatment To CLMV Countries Time Frame For Import Trade Tariff Reductions Cross-Border Trade Gaps Between Thailand and Five-Neighbouring Countries During 1996 To 2008 Top Ten Cross-Border Export Commodities from Cambodia To Thailand Through Aranyaprathet Border Checkpoint in 2007 Top Ten Cross-Border Import Commodities From Cambodia To Thailand Through Aranyaprathet Border Checkpoint in 2007 Top Ten Cross-Border Trade Export Commodities From Thailand To Yunnan Province of Southern China Through Chiangsaen Border Checkpoint in 2007 Top Ten Cross-Border Import Commodities From Yunnan Province of Southern China To Thailand Through Chiangsaen Border Checkpoint in 2007 Top Ten Cross-Border Export Commodities From Thailand To Lao PDR Through Nong Khai Border Checkpoint in 2007 Top Ten Cross-Border Import Commodities From Lao PDR To Thailand Through Nong Khai Border Checkpoint in 2007 Top Ten Cross-Border Export Commodities From Thailand To Myanmar Through Maesod Border Checkpoint in 2007 Top Ten Cross-Border Import Commodities From Myanmar To Thailand Through Maesod Border Checkpoint in 2007 Top Ten Cross-Border Export Commodities From Thailand To Malaysia Through Sadao Border Checkpoint in 2007 Top Ten Cross-Border Import Commodities From Malaysia To Thailand Through Sadao Border Checkpoint A Multi-Facet Impacts of Cross-Border Trade, Commerce and Investment Dealing with Neighbouring Countries on Thai Economy and Society Gross Provincial Product of Eastern Border Provinces Gross Provincial Product of Northeastern Border Provinces Gross Provincial Product of Northern Border Provinces Gross Provincial Product of Western Border Provinces Gross Provincial Product of Southern Border Provinces Potential Geographical Border Areas and Economic Sectors For Developing Special Border Economic Zones in Thailand Page 16 19 22 30 33 35 39

3.8

41

3.9 3.10 3.11 3.12 3.13 3.14 3.15

45 47 51 52 56 57 64

4.1 4.2 4.3 4.4 4.5 5.1

68 69 73 74 75 83

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List of Figures Figure 1.1 2.1 3.1 Title Conceptual Framework Proposed Special Border Economic Zones in Thailand and Its Potential Linkages with Neighbouring Countries Aggregate Cross-Border Trade Export and Import Between Thailand and Four-Neighbouring Countries and Transit Trade To/From China During 1996 To 2008 Aggregate Balance of Cross-Border Trade between Thailand and Four-Neighbouring Countries and Balance of Transit Trade With China Share of Aggregate Cross-Border Trade to International Trade Between Thailand and-Five Neighbouring Countries Cross-Border Export Values From Thailand to Cambodia From 1996 To 2008 Through Major Border Checkpoints Cross-Border Import Values From Thailand to Cambodia From 1996 To 2008 Through Major Border Checkpoints Share of Aggregate Cross-Border Trade to Aggregate International Trade Between Thailand and Cambodia During 1996 To 2008 Cross-Border Export Trade Values through Transit Mode From Thailand to China During 1996 To 2008 Through Major Border Checkpoints Cross-Border Import Trade Values Through Transit Mode From China To Thailand during 1996 To 2008 Through Major Border Checkpoints Share of Border Trade Values Through Transit Mode To International Trade Values Between Thailand and China During 1996 To 2008 Cross-Border Export Values From Thailand To Lao PDR From 1996 To 2008 Through Major Border Checkpoints Cross-Border Trade Import Values from Lao PDR To Thailand From 1996 To 2008 Through Major Border Checkpoints Share of Cross-Border Trade Values To International Trade Values Between Thailand and Lao PDR During 1996 To 2008 Cross-Border Export Values From Thailand To Myanmar During 1996 To 2008 Through Major Border Checkpoints Cross-Border Trade Import Values from Myanmar To Thailand During 1996 To 2008 Through Major Border Checkpoints Share of Cross-Border Trade Values To International Trade Values between Thailand and Myanmar During 1996 To 2008 Cross-Border Export Values From Thailand to Malaysia During 1996 To 2008 Through Major Border Checkpoints Cross-Border Trade Import Values From Malaysia To Thailand From 1996 To 2008 Through Major Border Checkpoints Share of Cross-Border Trade Values To International Trade Values Between Thailand and Malaysia During 1996 To 2008 Page 5 10 27

3.2

29

3.3 3.4 3.5 3.6

31 33 33 37

3.7

39

3.8

41

3.9

43

3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18

44 46 49 50 52 54 55 57 59

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Figure 3.19 3.20

Title

Page 60 62

4.1 4.2 4.3 4.4

Peoples Movement at Major Border Crossings in Thailand During 2002 To 2006 Nation-Wide Share of Peoples Movement Through Border Crossings To Share of People Movement Through Other International Ports of Entry and Exit in Thailand During 2002 To 2006 Gross Regional Product Per Capita in Thailand During the Years 1981 To 2007 Primacy Index of Bangkok and Vicinities During 1999 To 2007 Gross National Income Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries at Current International Price Gross National Income Per Capita Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries

68 69 77 78

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List of Matrix Matrix 3.1 Title Cumulative Cross-Border Trade Values of Thailand With Five-Neighbouring Countries During 1996-2008 (January-April) Page 26

List of Maps Map 3.1 3.2 Title GMS Corridors Network Geographical Distribution of All Types of Key Border Checkpoints in Thailand Connecting With Neighbouring Countries Geographical Cross-Border Trade Relationships Between Thailand and Cambodia Through Aranyaprathet Border Checkpoint in 2007 Geographical Cross-Border Trade Relationships Between Thailand and China Through Chiangsaen Border Checkpoint in 2007 Geographical Cross-Border Trade Relationships Between Thailand and Laos PDR Through Nong Khai Border Checkpoint in 2007 Geographical Cross-Border Trade Relationships Between Thailand and Myanmar Through Maesod Border Checkpoint in 2007 Geographical Cross-Border Trade Relationships Between Thailand and Malaysia Through Sadao Border Checkpoint in 2007 Page 14 17

3.3

36

3.4

42

3.5

48

3.6

53

3.7

58

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Abbreviations ACMECS ADB AEC AFTA AISP ASEAN BIMSTEC BOI CBTA CEPT CIQ CLM CLMV CLMT ECS ESB EU GMS GPP GRP GSP IL IMT-GT JTC NAFTA NESDB RTA SBEZ SMEs SSB Ayeyawady - Chao Phraya - Mekong Economic Cooperation Strategy Asian Development Bank ASEAN Economic Community ASEAN Free Trade Area ASEAN Integration System of Preferences Association of South East Asian Nations Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation Board of Investment Cross Border Transport Agreement Common Effective Preferential Tariff Customs, Immigration and Quarantine Cambodia-Lao PDR-Myanmar Cambodia-Lao PDR-Myanmar-Vietnam Cambodia- Lao PDR- Myanmar- Thailand Economic Cooperation Strategy Eastern Seaboard European Union Greater Mekong Sub-region Gross Provincial Product Gross Regional Product Generalized System of Preferences Inclusion List Indonesia-Malaysia-Thailand Growth Triangle Joint Trade Committee North America Free Trade Area Office of the National Economic and Social Development Board Regional Trade Agreement Special Border Economic Zone Small and Medium Enterprises Southern Seaboard

Chapter 1 Introduction 1.1 Background and Rationale of the Study There is underlying reason of what a country chooses to produce such commodities. This is mainly dependent on resource endowments that a country possesses supported by 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 gain from trade as long as the extent of comparing gain and loss of relative costs of production between the two countries are apparently different. This means a country should specialize in products and services in which it has highest return. David Ricardo (1817) called this Theory of Comparative Advantage which is the principal determinant of undertaking international trade. He concludes that a country should select and export commodity which is most comparative advantage, and import such commodity which is least comparative advantage. In the present day, changing economic phenomena within the unique contexts entailed by geo-politics and greater cross-border economic integration in many regions of the world have driven the increasing attention on border economics. One of the key features of the border economics characterized by a population variable which was the exemplarily substantial income differentials between 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). In response to this economic observable fact, Special Border Economic Zone (SBEZ) or Maquiladora or export manufacturing sector has primarily been developed along the border of Mexico and the United States since 1965. Its objectives were to take advantage of available cheap labor in Mexico, proximity to primary markets and regional supply networks in the United States, (Weiler and Zerlentes, 2003). The implementation of the North America Free Trade Agreement (NAFTA), which phases out existing trade barriers between Mexico, Canada and the United States, was expected to increase to the dispersion of Maquiladoras along the northern border of Mexico. In Asian region, this concept has in recent decade been gaining impetus as a fashionable model in realizing economic complementarities between two neighbouring countries which have different stages of development. There have recently been implemented in some bordering countries between North Korea and South Korea. Though this is quite initial stage, the progress of undertaking seems pronounced. In ASEAN region, regional cooperation and integration program is advancing through the ASEAN Economic Community. Wide economic development gaps between ASEAN member countries have opened up vast opportunities, for example between Southern region of Malaysia and Singapore, to cooperate joint-production in the form of Special Border Economic Zones along border areas in order to exploit complementarities. Located at the cross-roads of mainland South East Asian region, Thailand which is regarded as developed pocket similarly shares common border with four-neighbouring countries namely Lao PDR, Cambodia, Myanmar and Malaysia.

Continuously fostered by the regional economic cooperation programs namely the Greater Mekong Sub-region, the Ayeyawady - Chao Phraya - Mekong Economic Cooperation Strategy (ACMECS) and the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), the cross-border trade relations between Thailand and these neighbouring countries have been flourishing since a recent decade and are continuing to increase signifying that the economic interdependence becomes intensified due to better physical connectivity and the gradual effects of several trade agreements signed with neighbouring countries. These can be evident from increased intra-regional trade and investments, and greater peoples mobility. Recognizing the large development disparities with neighbouring countries, Thailand has directed policies toward distributing production bases to border regions in order to internationally cooperate based on sister city and special border economic zone concepts by taking advantages of regional accessibility, good access of quality raw materials, labor and market proximity in neighbouring countries. Simultaneously, Thailand is able to not only bridge intra-regional and interregional disparities within her country but also to strengthen closer ties with neighbouring countries by means of coproduction scheme so that it can help sharing the benefits of economic complementarities, appropriately managing huge numbers of illegally immigrant labor inflows as well as sustainably bridging development divergences. This initiative is considered having significant implications toward changing economic geography of mainland South East Asian region as new regional production platforms for deeper integration with the global supply chains and markets. For this reason, it is necessary to explore the fundamental economic and social rationale for establishing the special border economic zones in Thailand taking cross-border trade and commerce prospects into major consideration in order to help identify the potential geographical border regions resulting from greater connectivity and accessibility and economic sectors to be promoted. In addition, status of regional development and extent of interregional and intra-regional disparities are essential components to be assessed so that insights on state of regional development and identification of backward border regions and needed policies to support the establishment of special border economic zones can be accurately carried out. 1.2 Objectives of the Study The 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 Study This study covered a review of trade and investment agreements as well as trade policies between Thailand and neighbouring countries. It also conducted assessment of

cross-border trade relations between Thailand and four-neighbouring countries and transit trade with China with particular emphasis on Yunnan Province for a 13 year interval during 1996-2008. Particularly for the year 2008, data were available only for four months from January-April which at the time of collecting data was considered as the most complete availability of cross-border statistics maintained by the Customs Department of Thailand. Cross-borders people mobility will also be included. In addition, status of regional development in Thailand will be evaluated incorporated interregional and intra-regional disparities. In addition, international development disparities between Thailand and neighbouring countries will also be highlighted. 1.4 Study Methodology This study is descriptive research. It mainly used time series secondary data source for a 13 year interval on export-import of cross-border trade statistics compared with international trade figures between Thailand and neighbouring countries from the Customs 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 peoples 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 Bank Data analyses techniques applied were (1) quantitative analysis used such as number, mean, percentage, share or ratio, trend analysis using time series data, and are variously presented by graphs, pie diagram, matrix and tables. (2) qualitative analysis of secondary data utilized literature review and SWOT analysis. Mapping techniques were actively employed. 1.5 Conceptual Framework The conceptual framework of this study centers on cross-border trade and commerce in Thailand. It will begin by analyzing overall cross-border trade relations, peoples mobility between Thailand and neighboring countries as well as investigating trade and investments agreements and trade policies which will affect state of cross-border trade between Thailand and neighboring countries. Then it will examine current infrastructure support for enhancing transport and telecommunications linkages and impacts of crossborder trade and commerce on Thai economy and society. Status of regional development in Thailand will be assessed incorporated interregional and intra-regional 3

disparities plus international development disparities between Thailand and neighboring countries. It will also be proposed potential geographical border areas and economic sectors preliminarily suitable to be developed as special border economic zones. Finally, it will recommend policy implications needed for fostering the proposed establishment of special border economic zones. The detail of conceptual framework is illustrated in Figure1.1

Figure 1.1 Conceptual Framework

Cross-Border Trade and Commerce in Thailand

Trade relations with neighbouring countries through export-import of major commodities at key border checkpoints connecting:
Eastern region with Cambodia Northeastern region with Lao PDR Northern region with Myanmar, Lao PDR and Yunnan province of China Southern region with Malaysia

Trade and investment agreements and trade policies with neighbouring countries under
Bilateral agreements GMS agreements ACMECS agreements AFTA agreements WTO agreements

Infrastructure support for enhancing transport and telecommunications linkages through

Land transport River transport Telecommunications networks

Impacts of cross-border trade and commerce in Thailand

Political aspect Economic aspect Social aspect Infrastructural aspect Environmental and natural resources aspect Institutional aspect

Peoples mobility between Thailand and neighbouring countries through major border checkpoints.

Direct Investment from Thailand to Neighbouring Countries

Potential Border Areas and Economic Sectors for Promoting Cross-Border Development Cross-border trade Industry Agriculture Services and Logistics Tourism Policy Implications for Developing Special Border Economic Zones in Thailand 5

Chapter 2 International Trade, Border Economics and Special Border Economic Zone 2.1 Concept of International Trade There is underlying reason of what a country chooses to produce such commodities. This is mainly dependent on resource endowments that a country possesses together with mobilization of key factors of productions. Though two countries all may have absolute advantage over another country, they can in fact gain from trade as long as the extent of comparing gain and loss of relative costs of production between the two countries are apparently different. This means a country should specialize in products and services in which it has highest return. David Ricardo (1817) called this Theory of Comparative Advantage which is the principal determinant of undertaking international trade. He concludes that a country should select and export commodity which is most comparative advantage, and imports such commodity which is least comparative advantage. 2.2 Concept of Trade and Development UN Millennium Project (2005) emphasized that trade openness can be a powerful driver of economic growth, which is indispensable to reduce poverty and foster a countrys development. Trade alone can not induce for achieving development; it should therefore be associated with other institutional, macroeconomic, and microeconomic conditions plus well designed social policies to attain development. On the other hand, opening up markets to international trade may leave local producers flooded with more competitive foreign producers, (Wikipedia, 2008). Sustained strong growth over longer periods is strongly 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 successful development. Continents, countries and sectors that have not developed and remain largely poor have comparative 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 be poverty-reducing. However, low value-added, price instability and unsustainability in these commodity sectors mean they should be used only temporarily as catalyst of the path to economic development. 2.3 Concept of Border Economics Fullerton (2003) argues that border economics is still a new subject area. It has originated from growing recognition to study economic phenomena within the unique

contexts entailed by geo-politics. It is now gaining much attention due to greater crossborder economic integration in many regions of the world. He highlights key features of border 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 Applications The Special Border Economic Zone (SBEZ) concept commonly known as Maquiladoras or export manufacturing sector has primarily been developed along the border of Mexico and the United States since 1965. Its objectives were to take advantage of available cheap labor in Mexico and proximity to primary markets and regional supply networks in the US, (Weiler and Zerlentes, 2003). The implementation of the North American Free Trade Agreement (NAFTA), which phases out existing trade barriers between Mexico, Canada and the United States, was expected to increate to the dispersion of Maquiladoras along the northern border of Mexico.

This concept has increasingly become fashionable in realizing economic complementarities between two countries which have different stages of development in Asia. It is also adopted to create vast jobs as well as attracting foreign investments. In East Asian region, North Korea has joined a collaborative economic development with South Korea in developing Kaesong Industrial Park in 2002. It is located six miles north of the Korean Demilitarized zone with direct road and rail access to South Korea. South Korean firms are taking advantage of cheap labor available in the North to compete with China to produce low-end goods such as shoes, cloths, and watches. By 2012, it is expected that the industrial zone will cover 25 square miles and could create 725,000 jobs. Recently, more than 1,000 South Korean firms are reconsidering planned shifts of production from China and South East Asia region to Kaesong (Wikipedia, 2006). Similarly in South East Asian region, cross-border city pairs cooperation concept is widely 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

explore opportunities to perform cross-border co-production activities with their respective city pairs 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 crossborder 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 its potential linkages with neighbouring countries in Figure 2.1.

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

Chapter 3 Overview of Cross-Border Trade and Commerce in Thailand 3.1 Geographical Locations and Physical Linkages of Thailand With Neighbouring Countries Thailand is located at the strategic crossroads of mainland South East Asian region, in which it shares common land border with four-neighbouring countries with total length of 5,582 kms, (Exim Bank, 2004). In total, there are 30 provinces physically connect with neighbouring countries. The physical linkages with individual countries are as follows: Myanmar: Ten provinces of Northern, Central and Southern regions of Thailand link with Myanmar with longest total length at 2,400 Kms namely: Northern region comprising provinces of Chiang Rai, Chiang Mai, Mae Hong Son, and Tak Western region comprising provinces of Kanchanaburi, Ratchaburi, Phetchaburi, and Prachuapkhirikhan 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: Northern region comprising provinces of Chiang Rai, Phayao, Nan, Uttaradit, and Phitsanulok 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: Northeastern region comprising provinces of Ubon Ratchathani, Si Sa Ket, Buri-Ram and Surin 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 Links NESDB (2007) indicated that Thailand currently has total road length approximately at 179,944.9 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

It is perceived that road transport networks in Thailand are rather well developed both within intra-regional and interregional linkages. In recent decade, Thailand has further expanded road transport connections with major border cities of neighbouring countries in order to facilitate cross-border trade and people mobility. These actions were partly influenced by Thailands participation with the Greater Mekong Sub-region Cooperation Program in order to foster regional transport integration towards multimodal linkages (ADB, 2007). Where there is bordered by rivers, bridge links were then constructed as follows: Thailand-Myanmar Friendship bridges built are as follows: 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. Maesod district, Tak province and Myawaddy city, Myawaddy province crossing Moei river. Thailand-Lao PDR Friendship bridges crossing Mekong river are as follows:

Nong Khai province and Vientiane, capital city of Lao PDR Mukdahan province and Savannakhet province Nakhon Phanom province and Khammouan province. It is now in planning process. 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: Sungai Golok district, Narathiwat province and Rantau Phangan city, Kelantan state Ban Buketa, Wang district, Narathiwat province and Bukit Bunga city, Kelantan state Takbai district, Narathiwat province and Pengkalan Kubo city, Kelantan state. It is currently under planning process. 3.2.2 Rail Transport Thailand has rail network of total length at 4,129 kms covering 47 provinces. This comprises 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 route Bangkok to Thanalang (3.5 kms from Thai border) in Vientiane, Lao PDR. The Trans GMS railway connection so called the Singapore-Kunming Railway Link (SKRL) is under planning process. This route will link Singapore-Kuala Lumpur-BangkokAranyaprathet-Poipet-Srisophon-Phnom Penh-Hochiminh City-Hanoi and terminates in Kunming. In the future, rail mode will play an important role in carrying bulk quantity of commodities, stimulating GMS intra-trade, promoting industrial zones as well as enhancing efficient utilization of the land along the railway line where it passes by the mentioned cities/countries.

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3.2.3 River/Water Transport Within the context of the GMS, Chiangsaen River Port, operated in 2003, plays vital role in connecting Northern region of Thailand with southern part of China. The transshipment trend at Chiangsaen River Port is on the rise as in 2004 such throughput were 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 Chiangsaen River Port just about 10 kms downstream away in order to handle movement of goods at maximum 0.524 Million Ton/year. 3.2.4 GMS Corridors Network The GMS adopts area-based approach in the form of economic corridor to spearhead regional development in a transnational fashion. Originally, three major economic corridors were proposed namely the North-South, East-West and Southern Economic Corridors. Later in 2007, six more economic corridors were added to reflect dynamic sub-regional cooperation as well as extending further links to South Asian region immediately connecting with India. Please see details of total nine economic corridors in Map 3.1 below.

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Source: GMS Transport Sector Strategy, Coast to Coast and Mountain to Sea: Towards Integrated Mekong Transport Systems. (2007). Asian Development Bank

Map 3.1: GMS Corridors Network

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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 : NanningBangkok/Laem Chabang

It 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 is challenging on how to convert them into full-fledged economic corridors. Rural development along the corridors could probably be one of the means to respond to these greater 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 coordination could also be made possible for the realization of the GMS economic corridors, (Vries and Priemus, 2003). Also, these key economic corridors are overlapping with the Asian Highway routes crossing the Greater Mekong Sub-region, which will additionally influence toward spearheading faster geographical links of the GMS with South Asian and East Asian regions. 3.2.5 Telecommunications Networks According to the NESDB (2007), the overall telephone network of Thailand from IMD World Competitiveness Year Book 2007 found that in 2005 Thailand had fixed line users per 1,000 populations at approximate 110 numbers which was rather low rate when compared with Malaysia at 168, Japan 453, Korea 492 and Taiwan at 598 numbers, respectively. Even so, the tariff rates of international calls including to neighbouring countries were already at competitive prices facilitating greater convenient business transaction and social contacts regionally and globally. However, there exist reasonable gaps in numbers of fixed line telephone users between rural and urban 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 internet usage, in 2004, the internet users in urban areas were yet higher than rural areas for 2.28 times. Regarding the cooperation of Telecommunications sector under the GMS, this initiative complements and supplements the national missing links as well as strengthening GMSwide network so that it can support regional economic growth. The key projects included GMS Information Superhighway Network (ISN), in which the first phase was finished and is now about to implement. Various services such as voice, internet, international bandwidth and e-government/ e-commerce applications will be offered throughout GMS. Importantly, promoting rural ICT development as a means for reducing poverty has been seriously taken into account, which can help bridging digital divide and promote cross-border trade undertaking, (ADB, 2007).

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3.3 Types and Number of Nation-Wide Border Checkpoints Cross-border trade is transacted through major border checkpoints nation-wide. Department of Foreign Trade (2008) classifies that there are three broad categories of border 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 neighbouring countries. For detailed figures of each type of border checkpoints, it is presented in Table 3.1 below. Table 3.1: Types and Numbers of Border Checkpoints in Thailand Physically Connecting With Neighbouring Countries Neighbouring countries 1. Myanmar International border checkpoints 3 Temporary border checkpoints 1 Local border crossings 10

Remarks
Sangkhlaburi is considered as both temporary and local border crossings.

2.Lao PDR 3.Cambodia 4.Malaysia Total

13 6 8 30

1 2

21 8 39

Source: Division of Foreign Affairs, Ministry of Interior cited in Changhlam, 2005, Promoting ThailandMyanmar 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 2005

In relation to national geographical distribution of all types of border checkpoints in Thailand, it is shown in Map 3.2.

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Source: The Customs Department, Thailand

Map 3.2: Geographical Distribution of All Types of Key Border Checkpoints in Thailand Physically Connecting With Neighbouring Countries

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3.4 Trade Agreements Between Thailand and Neighbouring Countries In the recent two decades, Thailand has undertaken a number of trade agreements and trade-related agreements with neighbouring countries bilaterally and regionally. These consist of the following: 3.4.1 Trade Agreements 1) Bilateral trade and investment agreements Trade agreements between Thailand and neighbouring countries are mostly coordinated by Ministry of Commerce. In 2000, Thailand signed trade agreement with Malaysia in order to develop and strengthen trade facilitation and economic relations on the basis of mutual benefit, (Department of Trade Negotiations, 2000). These agreements were effective for at least 10 years. Through this agreement, a Joint Trade Committee (JTC) was established in order to ensure proper and successful implementation of this agreement as well as acting as a body for resolving trade problems. Presumably, Thailand might have already singed these sorts of agreements with the rest of contiguous countries. Currently, JTC was a useful mechanism in expanding trade relations with bordering countries. Additionally, Thailand through coordination of Ministry of Foreign Affairs has extensively engaged bilateral agreements on promotion and protection of investments with 42 contracting parties all over the world. The primary objectives of these agreements were to create favorable conditions for greater economic cooperation between both States particularly for the investment by investors in another country, (Ministry of Foreign Affairs, 2008). It is recognized that promotion of such investments and the reciprocal protection of investments will be conducive to the stimulation of individual 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 for Protection (C.A.P.) to requesting investors of another contracting party. Normally, these agreements will be effective for at least 20 years, and is extendable upon further decision of both countries. These agreements are also served as broad guidelines for strengthening close cooperation as well as fostering free flows of capital with neighbouring countries. 2) Regional trade agreements (RTAs) In recent decade, regional trade agreements have progressively played more pivotal role in expanding intra-regional trade as tariff barriers are gradually diminished. As a result, member countries could eventually enjoy effects of freer trade flows resulting from multiple trade agreements, which will bring about greater welfare and better quality of life of peoples in participating countries. The key regional trade agreements between Thailand 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

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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

Year 2002 2003 2004 2005

Numbers of Commodity that Thailand granted AISP treatment Cambodia Lao PDR Myanmar Vietnam 48 26 72 49 27 72 309 187 160 340 300 850

19 19 34 63

Source: www.wood4season.com, retrieved on 24 May 2008

As a result of this scheme, Thailand imports key commodities from CLMV countries as follows: 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. 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

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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. 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. 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 ASEAN comprise Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, while the new members countries are Vietnam, Lao PDR, Myanmar and Cambodia. The old member countries will reduce import duties of Inclusion List (IL) within the Common Effective 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 IL within CEPT to 0-5% in 2006 for Vietnam; Lao PDR and Myanmar in 2008; Cambodia in 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 local contents. In any case, if it does not wholly obtain local content materials from an ASEAN member country, a minimum of 40% of local content of F.O.B prices will be accepted as ASEAN product origin. In addition, it can also be calculated cumulative rules of origin within ASEAN member countries with required minimum of combined local content at 20%, (Department of ASEAN Affairs, 2008). It is also compulsory among member countries to concurrently phase out non-tariff barriers so that it can help advance towards ASEAN Economic Community (AEC) within 2015. Thailands total trade with ASEAN expanded significantly after entering into effect of AFTA. For instance, in 2006, the share of Thailands total trade within ASEAN represented at 20.30 % of Thailands total trade with the world. ASEAN-China Free Trade Agreement Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Cooperation between the ASEAN and China has been signed on 29 November 2004 leading to gradual trade liberalization of both parties for two major categories: These are Early Harvest Program and Tariff Reduction for General Commodities Program. Regarding the Early Harvest Program, it consisted of agricultural products within the customs Harmonized Standard numbers 01-08 comprising livestock, meat and other edible parts of animal, fish, dairy products, eggs of chicken and duck, animal products, trees, vegetables and fruits and edible nuts, including specific products which were effective only on bilateral basis.

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Under this agreement, China and old ASEAN member countries started reducing import tariffs on 1 January 2004, and were lowered to zero (0) % by 1 January 2006. The rest of newer ASEAN member countries were given flexible treatment on tariff lines and time frame for tariffs reduction, but there must be zero (0) % by 2010, (Department of Industrial Promotion, 2008). It was conditionally reduced tariffs only within import quotas particularly on onion and garlic. Furthermore, Thailand and China bilaterally accelerated tariff elimination for the Early Harvest Program of the customs Harmonized Standard number 07-08 consisting of vegetables and fruits to become zero (0) % by 1 October 2003. In relation to Tariff Reduction for General Commodities Program, it was divided into 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. Thailands 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 at 1,300 millions or 21 % of world populations, but currently there are limited trade transaction and values among member countries. So, there still have vast opportunities for further cooperation. BIMSTEC is sort of south-south cooperation; it is also a convergence of foreign policies between Look West of Thailand and Look East of India, (Ministry of Foreign Affairs, 2008). Member countries have signed agreement on BIMSTEC Free Trade Area on 8 January 2004, and became effective by 1 July 2006. Its principal objectives were to stimulate trade and investments within intra-BIMSTEC as well as attracting foreign investment into BIMSTEC Free Trade Area. The time frames for gradual tax reduction for goods, which were voluntarily selected by each member

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country, were classified into two groups. These are Fast Track and Normal Track. Its specific 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 country parties 1 July 2006-30 June 2009 1 July 2006-30 June 2011

Countries India, Sri Lanka, and Thailand Bangladesh, Bhutan, Myanmar and Nepal

Time frame for LDC party 1 July 2006-30 June 2007 1 July 2006-30 June 2009

Source: BIMST-EC Secretariat, retrieved from http://www.bimstec.org/, on 22 May 2008

Countries India, Sri Lanka, and Thailand Bangladesh, Bhutan, Myanmar and Nepal

Normal Track Group Time frame for developing countries 1 July 2007-30 June 2012 1 July 2007-30 June 2017

Time frame for LDC party 1 July 2007-30 June 2010 1 July 2007-1 July 2015

Source: 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 Program The GMS was initiated in 1992 to foster regional economic cooperation and integration consisting of six countries namely Cambodia, Lao PDR, Myanmar, Yunnan and Guangxi Zhuang Provinces of China, Thailand and Vietnam. In terms of trade, it promotes and facilitates intra-GMS and extra-GMS trade particularly on agricultural trade, investment and tourism, which are keys to foster economic growth as well as helping alleviate poverty in the GMS. Priority is given to the main economic corridors. This can be done through customs modernization, investment promotion and facilitation of 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 20 annexes was set up in 2003 aiming to deals with speedy facilitation of customs and immigration procedures at the border-crossing points thus resulting in increase trade flow both intra-GMS and extra-GMS. Full implementation of this agreement and its annexes 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, MukdahanSavnnakhet, 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 of Sumatera island of Indonesia. The program aims to establish seamless transportation network and facilitate cross-border trade and extra-IMT-GT trade as well as enhancing

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least cost logistics services. Besides, it also regionally intends to ease greater flows of tourists and labor mobility. 3.5 Thailands Trade Policies With Neighbouring Countries With respect to macro foreign and international economic policies, the Royal Thai Government proactively reaffirms initiatives to expand cooperation and diplomatic ties not only with ASEAN member countries but also toward East Asian and South Asian regions as well as actively engaging with other regions of the world, (Royal Thai Government Statement, 2008). Nevertheless, development partnerships between Thailand and neighbouring countries and other Asian countries are among priority regions. In terms of trade, the Royal Thai Government places significant emphasis on upholding AFTA, promoting trade and investment with neighbouring countries, enhancing cross-border trade toward development of common regional production bases for goods and services in the region. Specifically, the key policies for increasing trade flows with neighbouring countries are as 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 Thailands and coproduction 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 agro23

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 infrastructure development between Thailand and neighbouring countries has to some extent been converging which can help match policy supports for expanding cross-border trade activities and actions for promoting speedy flows of goods and peoples. This can partly generate positive impacts of trade and development and minimize negative impacts on transboundary basis. Also, the existing bilateral and regional trade policies have concertedly facilitated toward the establishment of special border economic zones in Thailand linking with potential border areas in neighbouring countries. 3.6 Cross-Border Trade and Commerce Relations Between Thailand and Neighbouring Countries Cross-border trade is one of the key indicators of closer interdependence between Thailand and neighbouring countries. In 1988, Thailand has proclaimed a policy of turning Indochina battlefields into a marketplace (Chandoevwit, et at. 2005). This, coupled with the GMS Regional Economic Integration Program has further pushed Thailand 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 Countries Thailand has possessed strategic locational advantages at the junction of mainland South East Asian region allowing businesses and private sectors to conduct both crossborder 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 Thailands degree of competiveness of goods.

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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 FiveNeighbouring Countries During 1996 to 2008 (January-April) There is a dichotomy of border trade behaviors. The following analyses are formal or official cross-border trade statistics of Thailand with five-neighbouring countries, whereas the data on extent of informal cross-border trade are unknown. According to a customs official, the trend of informal cross-border trade is declining as a consequence of continued government efforts to formalize such cross-border trading. The data consist of a 13-year interval from 1996-2008. Specifically for the year 2008, the data were only available for four months beginning from January to April. During 1996-2008 (January-April), the cumulative cross-border trade values of Thailand with five-neighbouring countries were significantly amounted at 2,317.53 billion Baht represented at 20.51 % of cumulative trade values of Thailand with fiveneighbouring countries. The cumulative share of cross-border export from Thailand to these neighbouring countries was as high at 59.06 %. While the cumulative share of cross-border import from these neighbouring countries were at 40.94 % divided into 2.31 % for Lao PDR; 17.77 % for Myanmar; 0.52 % for Cambodia; 0.59 % for China and 19.71 % for Malaysia. As a result, Thailand gained significant cumulative balance of cross-border trade at 420.36 billion Baht. Please see details in Matrix 3.1.

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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 Country
CBT 1.Thailand 2.Lao PDR 3.Myanmar 4.Cambodia 5.China (Yunnan Province ) 6.Malaysia Total IT Total CBT IT Total CBT IT Total CBT IT Total CBT IT Total CBT IT Total
1,849.0 8 X X X

Lao PDR

Myanmar

Cambodia

China

Malaysia
CBT

Total
IT
3,971.6 2 24.45 55.16 0.83 3,113.8 9 1,815.9 2 8,981.8 7

Total

X 53.75 412.01 12.14

X 24.45 55.16 0.83 3,113. 89 1,815. 92 5,010. 25

X 78.20 467.17 12.98

230.96 X X X

47.08 X X X

278.04 X X X

143.19 X X X

101.44 X X X

244.64 X X X

192.32 X X X

118.62 X X X

310.94 X X X

158.08 X X X

2,499.79 X X X

2,657.88 X X X

644.39 X X X

1,204.69 X X X

1,368.94 53.75 412.01 12.14

5,340.57 78.20 467.17 12.98

13.70 456.98 948.58

3,127.59 2,272.91 5,958.83

X X 230.96

X X 47.08

X X 278.04

X X 143.19

X X 101.44

X X 244.64

X X 192.32

X X 118.62

X X 310.94

X X 158.08

X X 2,499.79

X X 2,657.88

X X 644.39

X X 1,204.69

X X 1,849.0 8

13.70 456.98 2,317.53

3,127.59 2,272.91 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.

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2) Overall Annual Cross-Border Trade Values Between Thailand and Five-Neighbouring Countries For the sake of simplifying such comparisons, trading categories between Thailand and neighbouring countries are purposively divided into (1) cross-border trade and (2) international trade which consists of export and import of goods through sea-borne and air-borne mode of transportation. Transit trade relations between Thailand and China are regrouping under cross-border trade category in order to collectively present significant picture of total trade values between Thailand and five-neighbouring countries. Cross-border trade has played steadily significant role in bridging closer relations between Thailand and neighbouring countries reflecting greater extent of interdependence in the GMS. Due to cross proximity, coupled with multiple regional trade agreements effects with bordering countries and gradually convenient transport networks, 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 (JanApril)

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 China

Source: Cross-border trades statistics for various years, The Department of Customs, Thailand

Figure 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 (JanuaryApril) In relation to the aggregate border trade values with five-neighbouring countries, it steadily 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 in 2007. The average annual cross-border trade growth of goods during 1996-2007 was at 26 %. With respect to export of goods originated both from border regions and other

27

regions of Thailand, during 1996-1999, it slowly increased from amounting 24.297 billions Baht to 39.660 billions Baht. After that, it rather steeply surged from 73.113 billions Baht in 2000 to 235.630 billions Baht in 2007, which accounted for as high growth at 222.28 %. The average annual cross-border export growth of goods from 1996-2007 was at 25%. Regarding import of goods, it was quite similar trend with the latter, but the base value of 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 165.729 billions Baht in 2007, which represented at distinct growth rate at 398.79 %. The average 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 the average cross-border export growth at 1.2 times reflecting strong economic interdependence between Thailand and five neighbouring countries. In 2006, the aggregate cross-border trade values between Thailand and five-neighbouring countries accounted for 22.59 % of Thailands total trade with ASEAN, or at 3.83 % of Thailands total trade with the world. This is considered as high performance of both cross-border export and import due to it can constantly keep pace of growth strongly revealing continuous efforts made by the Royal Thai Government, neighbouring countries governments, ADB and development partners in realizing economic and cross-border trade prospects in the GMS. It is difficult to quantify specific factors or determinants of such growth. Rather, the achievement was presumably upheld by multiple-effects of regional trade agreements ranging from AFTA and ASEAN-China in general, and one way free trade initiative in pursuit of reducing development disparities among countries in the GMS in particular. It should be noted that Thailand has conducted cross-border trade directly with fourneighbouring countries namely Cambodia, Lao PDR, Myanmar and Malaysia; trading with 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, which partly can help sustain macroeconomic growth. This growth may somehow contribute to regional development toward the improvement of better quality of life of all Thai and neighbouring countries citizens including to some extent those rural poor and marginalized groups residing along border areas. 3) Aggregate Balance of Cross-Border Trade Between Thailand and FourNeighbouring Countries and Transit Trade Balance With Yunnan Province of China Indeed, aggregate balance of cross-border trade in goods was somewhat striking as it revealed with positive and negative trade balance scenarios. In general, Thailand has gained favorable trade balances with bordering partner countries, which were rather reasonable 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, from 39.887 billion Baht in 2000 to 69.901 billions Baht in 2007 reflecting as high growth at 34 % during this period. Yet, Thailand acquired most positive balance of cross-border trade with Lao PDR, followed by Cambodia, Malaysia and China, respectively. The average annual growth rate of balance of cross-border trade from 1996-2007 was at 28.5%, which is regarded as high performance due to certain uncontrollable factor intervened; that is the fluctuation of the Thai Baht currency resulting in a 10 % increase

28

of price for Thai products exported to neighbouring countries markets particularly to Cambodia, (Thai Chamber of Commerce, 2007). However, it appears that Thailand is still slightly gaining favorable balance of cross-border trade with five-neighbouring countries. 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 (JanApr)

-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 ith China Aggregate Cross-Border Trade V alues Between Thailand and Four-Neighbouring Countries and Transit Trade V alues With China

Source: The Customs Department, Thailand

Figure 3.2: Aggregate Balance of Cross-Border Trade Between Thailand and Four-Neighbouring Countries and Balance of Transit Trade With China On the contrary, balance of cross-border trade between Thailand and Myanmar has been represented somewhat high extent of interdependence between these two countries. During 1996-2000s, Thailand had secured favorable trade balance with Myanmar with slightly large amount ranging from 2.090-6.671 billions Baht with average annual growth rate as high at 49.5%. However, when started importing a large amount of natural gas from Myanmar for domestic electricity generation in 2001 through Sangklaburi local border crossing, since then Thailand has been confronting persistently deficit balance of cross-border trade. During 2001-2007, it jumped from -22.261 billions Baht to -54.861 billions Baht showing average annual negative balance of cross-border trade at -62.75 %. The average balance of cross-border trade between Thailand and Myanmar during 1996-2007 was as much negative at -21.81%, and the tendency may be increasing depending on the likelihood of economic growth in Thailand.

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4) Cross-Border Trade Gaps Between Thailand and Five-Neighbouring Countries Table 3.4 Cross-Border Trade Gaps Between Thailand and Five-Neighbouring Countries During 1996-2008 (January-April)
Unit: Number of time

Countries
1996 1997 1998 1999 2000 2001

Year
2002 2003 2004 2005 2006 2007 2008 (JanApril) 3.31 -3.18 21.55 16.26

1.Lao PDR 2.Myanmar

3. Cambodia 4. China (Yunnan Province) 5.Malaysia

3 4.9 1.21 10.31

3.46 7.61 1.05 8.63

6.4 3.72 3.44 1.13

3.76 4.47 4.85 1.4

4.49 2.14 28.92 4.53

4.31 -3.4 30.9 4.84

4.12 -4.84 36.21 9.35

4.21 -2.53 34.58 8.58

4.9 -2.84 22.1 9.27

5.44 -3.41 22.52 13.45

3.6 -4.56 25.8 16.3

3.29 -3.58 19.56 15.03

1.92

2.16

1.89

1.42

1.61

1.52

1.22

1.4

1.39

1.27

1.34

1.32

1.46

Source: The Customs Department, Thailand

As mentioned previously, Thailand generally gained significant balance of cross-border trade with neighbouring countries. Consequently, there has been emerging of considerable trade gaps. This is mainly resulted from different stages of development, diverse extent of government supports on cross-border trade undertaking and divergent degree of entrepreneurship. During 1996-2008 (January-April), the average annual cross-border trade gaps between Thailand and neighboring countries greatly varied from one country to another. Cambodia has been experiencing such fluctuating trade gaps with Thailand, in which the cross-border export of goods from Cambodia to Thailand were much lower than that of cross-border import of goods from Thailand to Cambodia for the annual average of 19.43 times. As a result, Cambodia ranked first of neighbouring countries with highest widening cross-border trade gaps. It then followed by Yunnan province of China with cross-border trade gaps at annual average at 9.16 times. 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 trade gaps at reasonable annual average at 1.53 times. On the other hand, Thailand has been facing 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 crossborder trade with least developed and developing neighbouring countries leaving the tendency of cross-border trade gaps to be existed at steady state. Therefore, one of the means to bring down these persisting trade gaps can be fostered through enhancing closer cross-border supply chain networks between Thailand and these neighboring countries.

5) Share of Aggregate Cross-Border Trade To International Trade

Between Thailand and Five-Neighbouring Countries Trade data are disaggregated into two categories: these are (1) share of aggregate crossborder trade and (2) share of international trade. From this assessment, it to some extent

30

indicates a diverging trend of trading pattern comprehensively meaning that the share of aggregate cross-border trade tends to be growing, while the share of aggregate international trade is likely to be declining, which corresponds to the greater physical connectivity and accessibility in the GMS. This can be justified that the share of crossborder export fluctuated from 19.49 % in 1996 to 21.16 % in 1999; it then varied from 26.56% in 2000 to 26.08% in 2007. And the trend is likely to move upward. Similarly, the share of aggregate cross-border import rose from 7.22% in 1996 to 17.76 % in 2001; it then varied from 17.65 % in 2002 to 17.18 % in 2007. And the trend tends to be slightly rising. Please see details in Figure 3.3.

% 100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Share of total export of border trade Share of total export of international trade

Share of total im port of border trade Share of total im port of international trade

Source: The Customs Department, Thailand

Figure 3.3: Share of Aggregate Cross-Border Trade to International Trade Between Thailand and-Five Neighbouring Countries In contrast, the share of export of international trade slightly decreased from 80.51 % in 1996 to 73.05% in 2001, and then varied to 73.92 5 in 2007. And the trend is likely to move downward. Likewise, the share of import of international trade little diminished from 92.8 % in 1996 to 82.4 % in 2001; it then fluctuated to 82.82 % in 2007. And the trend is likely to weaken. This has implications that cross-border trade between Thailand and five-neighbouring countries are gaining momentum resulting from greater physical connectivity and apparently conducive regional trade and investment liberalization and facilitation efforts. However, it is important to ensure that those wellconnected border nodes/gateways will have regionally equal opportunity in generating potential production not just being gateways so that local sustainable livelihoods and better quality of life can be strengthened. If this is not well aware, it otherwise will negatively lead to back wash effects, in which local people massively emigrate from communities searching for jobs in border nodes or large cities, which will subsequently be associated with some environmental and social problems.

31

3.6.3 State of Cross-Border Trade Relations With Individual Neighbouring Countries This assessment found that the patterns of cross-border trade and commerce between Thailand and neighbouring countries greatly varied from one country to another depending on its particular comparative advantage, division of labor and specialization of production. Thailand mainly exported consumer and intermediate goods, motorcycles and cars and its spare parts, oils, and some capital goods to neighbouring countries, and imported primary goods such as agricultural and fishery products, natural gas, and intermediate goods from neighbouring countries. In addition, cross-border retail trades are always conducted at the specific allowed border crossings. The state of cross-border trade relations with individual neighbouring country is as follows: 1) Cambodia During 1996-2007, the average annual cross-border trade export was higher than its import for 2.40 times. In 2007, the share of aggregate cross-border trade values between Thailand and Cambodia accounted for 8.43 % of aggregate cross-border trade values between Thailand and five-neighbouring countries. Cross-Border Export Values From Thailand To Cambodia The aggregate cross-border export to Cambodia increased substantially from 1.260 billions Baht in 1996 to 32.203 billions Baht in 2007. In recent decade, the average annual cross-border export growth was at 42.81 %, which is regarded at soaring rate. In 2007, Aranyaprathet border checkpoint was the most important gateway linking with Cambodia, which was responsible for as high about half of total cross-border trade export values, followed by Klongyai at 36% and Chantaburi border check points at 4 %, respectively. Aranyaprathet district also hosts a large second-hand garment wholesale market so called Rong Kluer market. The rest 13 % of cross-border export values represented by four remaining border checkpoints, which provide channels for border retail trade of consumer goods among local peoples residing along border areas of both countries. Please see details in Figure 3.4.

32

Unit: Millions of Baht

35,000 M illion Baht

30,000

25,000

20,000

15,000

10,000

5,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Aranyaprathet C hongchom Tapraya

K longyai Piboonm angsaharn Total E x port of B order Trade

C hantaburi K haodin Total E x port of International Trade

Source: The Customs Department, Thailand

Figure 3.4: Cross-Border Export Values From Thailand To Cambodia During 1996 To 2008 Through Major Border Checkpoints In terms of key commodities transacted through Aranyaprathet border checkpoint in 2007, they are shown in Table 3.5. Table 3.5: Top Ten Cross-Border Export Commodities From Cambodia To Thailand Through Aranyaprathet Border Checkpoint in 2007 Commodities 1.Motorcycles 2.Cement 3.Engines 4.Livestock feed 5.Motorcycle parts 6. Gas petroleum 7.Woven fabrics 8.Printed textiles 9.Gourmet powder 10.Chemical fertilizers 11. Others Grand total Value (Millions of Baht) 1,443.04 1,069.54 937.68 839.01 835.98 537.45 436.95 347.67 310.49 265.24 10,138.48 17,161.53 Share (%) 8.41 6.23 5.46 4.89 4.87 3.13 2.55 2.03 1.81 1.55 59.08 100.00

Source: The Customs Department, Thailand

33

It can be articulated that Cambodia is currently under reconstruction period after ending long domestic conflict. So they may need to construct physical infrastructure e.g. road as, urban development, etc. Motorcycles associated with its engines and parts are also important vehicles for daily mobility both in rural and urban areas in Cambodia. In addition, Cambodian market also demands various intermediate products from Thailand e.g. raw material for textile industry, animal feeds, agricultural machines, chemical fertilizers, as well as consumer goods. Therefore, there is vast potential for Thai manufacturers to expand marketing and sales in response to these increasing needs. Cross-Border Import Values From Cambodia To Thailand The total cross-border trade import from Cambodia somewhat fluctuated from 1.034 billions Baht in 1996 to 1.646 billions Baht in 2007. In recent decade, the average annual cross-border import growth was at 20 %, which is regarded at moderate and reasonable rate. But it is questionable in terms of such value of trade that should have been higher than the stated value. This may result from limited diversification of Cambodian economy as well as having rather low level of industrial development or perhaps in an initial stage of industrialization. In 2007, Aranyaprathet border checkpoint was the most important gateway linking with Cambodia, which was responsible for as high at 67 % of total cross-border import values, followed by Chantaburi at 22 % and Klongyai border check points at 7 %, respectively. The rest 4 % stood for four remaining border checkpoints, which provide channels for border retail trades of consumer goods. Please see details in Figure 3.5.

34

Unit: Millions of Baht

2,500 M illion Baht

2,000

1,500

1,000

500

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Aranyaprathet C hongchom Tapraya

K longyai Piboonm angsaharn Total Im port of B order Trade

C hantaburi K haodin Total Im port of International Trade

Source: The Customs Department, Thailand

Figure 3.5: Cross-Border Import Values From Thailand To Cambodia During 1996 To 2008 Through Major Border Checkpoints Relating to the key commodities transacted through Aranyaprathet border checkpoint in 2007, they are shown in Table 3.6. Table 3.6: Top Ten Cross-Border Import Commodities From Cambodia To Thailand Through Aranyaprathet Border Checkpoint in 2007 Commodities Value (Millions of Baht) Share (%) 1.Remnant of iron 336.29 25.73 2.Second-hand clothes 176.98 13.54 3.Remnant of aluminum 175.07 13.40 4.Corn for livestock feed 159.2 12.18 5.Soybean grain 128.32 9.82 6.Remnant of paper 84.22 6.44 7.Exported goods 52.65 4.03 8.Remnant of copper 41.16 3.15 9.Ready made clothes 36.59 2.80 10.Tapioca 17.16 1.31 7.59 11.Others 99.12 Grand total 1,306.76 100.00

35

Source: The Customs Department, Thailand

According to the above list, it can be inferred that Cambodia is specialized in arranging various types of metal scrap and papers. Agricultural produces e.g. corn for livestock and soybean grain also earns foreign exchange to Cambodia. It can be construed that these products might be partly resulted from the Contract Farming initiative along ThaiCambodian border. Aranyaprathet district alone also imports second-hand garment to sell at its border wholesale market. Moreover, this market plays crucial role in importing ready made clothing products as well as further distributing either on wholesale or retail basis to garment clusters in Bangkok e.g. Bo Bae and Pratunam and other regions in Thailand. This means there is in place of strong cross-border supply chain linkages for garment products and marketing between Cambodia and strategic garment clusters/markets in Thailand. For geographical cross-border trade relationships between Thailand and Cambodia particularly conducting through Aranyaprathet border checkpoint, it appears in Map 3.3. Map 3.3: Geographical Cross-Border Trade Relationships Between Thailand and Cambodia Through Aranyaprathet Border Checkpoint in 2007

Motorcycles, 1,443, 8% Motorcycles, 1,443, 8% Cement, 1,070, 6% Cement, 1,070, 6%

Engines, 938, 5% Engines, 938, 5% Livestock feed, 839, 5% Livestock feed, 839, 5% Others, 10,138, 59% Others, 10,138, 59% Motorcycle parts, 836, 5% Motorcycle parts, 836, 5% Petroleum gas, 537, 3% Petroleum gas, 537, 3% Woven fabrics, 437, 3% Woven fabrics, 437, 3% Printed textiles, 348, 2% Gourmet Printed powder, textiles, 310, 348, 2% 2% Gourmet powder, 310, 2%

Chemical fertilizers, 265, 2% Chemical fertilizers, 265, 2%

T apioca, 17, 1% T apioca, 17, 1% Ready made clothes, 37, 3% Ready made clothes, 37, 3% Remnant of copper, 41, 3% Remnant of copper, 41, 3% Exported goods, 53, Exported4% goods, 53, 4% Remnant of paper, 84,of 6% Remnant paper, 84, 6% Soybean grain, 128, Soybean 10% grain, 128, 10% Others, 99, 8% Others, 99, 8%

Remnant of iron, 336, of 26% Remnant iron, 336, 26%

Second-hand clothes, 177, 14% Second-hand clothes, 177, 14%

Corn for livestock feed, Corn for livestock feed,

Remnant of aluminium, 175, Remnant of 13% aluminium, 175, 13%

36

Source: The Customs Department, Thailand

Share of Cross-Border Trade Values To International Trade Values Between Thailand and Cambodia During 1996-2008 The share of aggregate cross-border export gradually fluctuated from 13.81 % in 1996 to 19.70 % in 1999. Then it jumped to 51.32 % in 2000, and further moved up to 68.21 % in 2007. Similarly, the share of aggregate cross-border import steadily escalated from 85.40 % in 1996 to 97.50 % in 2007. This means it was a converging trend of both cross-border export and import trade due to greater physical connectivity offering full carrying transportation capacity with large volume at least cost for delivery products to final customer destinations. In contrast, the share of aggregate export of international trade sharply declined from 86.19% in 1996 to 30.80 % in 2007. Likewise, the aggregate import of international trade little by little dropped from 14.60% in 1996 to 2.50 % in 2007 indicating that international trade will play less significant role in expanding trade relations between Thailand and Cambodia. It is therefore necessary to jointly develop cross-border logistics cooperation and management in order to efficiently offer customers with least cost of operation. Please see details in Figure 3.6

% 100 90 80 70 60 50 40 30 20 10 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Share of total export of border trade Share of total export of international trade

Share of total im port of border trade Share of total im port of international trade

Source: The Customs Department, Thailand

Figure 3.6: Share of Aggregate Cross-Border Trade To Aggregate International Trade Between Thailand and Cambodia During 1996-2008 2) China Thailand does not share common border with China. Cross-border trade is performed on the basis of transit arrangement mainly facilitated to/from nation-wide key border checkpoints. In 2007, the aggregate cross-border trade values through transit means between Thailand and China were at 39.580 billions Baht accounted for 9.86 % of aggregate cross-border trade values of Thailand with five-neighbouring countries.

37

During 1996-2007, the average annual growth of aggregate cross-border trade values through transit form between Thailand and China was at 42 %. And the average crossborder trade export values were higher than its import values for 1.13 times. Cross-Border Export Values Through Transit Arrangement To China The aggregate cross-border trade export through transit mode from Thailand to Yunnan province of Southern part of China rose steadily from 1.413 billions Baht in 1996 to amounting at 36.872 billions Baht in 2007. In recent decade, the average annual growth of cross-border trade export through transit form from Thailand to Yunnan province of China was as high at 50 %. In 2007, Padang Besar border checkpoint, located in Southern region, was the most important gateway for facilitating transit goods operated by rail routing Bangkok-Hat Yai-Padang Besar (Thailand)Penang (Malaysia) toward Chinese destinations, which was responsible for as high at 69 % of total cross-border trade export values, followed by Chiangsaen at 13% or 4.619 billions Baht, carried goods by vessels cruise upstream of Mekong river directly to Yunnan province of Southern China taken travel time as long at three days (www.chiangmainews.co.th), Sadao in Songkhla province at 4 %, Prachuap Khiri Khan at 2.4 %, and Betong in Yala province at 0.4 %, respectively. The rest of cross-border trade exports to China were conducted customs formalities in both Northern region at Maesai, Chiangkhong, and Northeastern region at Nongkhai and Mukdahan border checkpoints, respectively. It is notable that cross-border trade exports to China handled by many border checkpoints in diverse regions depending on location of productions/origins and final destinations. If there are high volumes, it will be exported through Padang Besar and Sadao border checkpoints. For specific Yunnan province destination of Southern China, there was increasingly transported through Chiangsaen by river vessels and by land transport through other border checkpoints in the Northern and Northeastern regions of Thailand. For this reason, it is so far rather complex undertaking of logistics services for reaching Southern Chinese markets. Nevertheless, such difficulty will soon be overcome when the ongoing road links between Chiang Rai province and Kunming city of Yunnan province so called the construction of R3 West (through Myanmar) and R3 East (through Lao PDR) routes are to be materialized in the next few years. The trend of cross-border trade export volumes through transit form to China particularly through Chiangsaen still tends to progressively increase. Please see details of diverse crossborder export channels to China in Figure 3.7.

38

Unit: Millions of Baht

45,000

40,000

35,000

30,000

Million Baht

25,000

20,000

15,000

10,000

5,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Nongkhai Chiangsaen Sadao Betong Mukdaharn Total cross-border trade values through transit m ode

Maesai Chiangkhong Padang Besar Prachuap Khiri Khan Total cross-border export values through transit mode

Source: The Customs Department, Thailand

Figure 3.7: Cross-Border Export Values Through Transit Arrangement From Thailand To China During 1996 To 2008 Through Major Border Checkpoints Relating to key commodities transacted through Chiangsaen border checkpoint in 2007, they are shown in Table 3.7. Table 3.7: Top Ten Cross-Border Trade Export Commodities from Thailand to Yunnan Province of Southern Part of China Through Chiangsaen Border Checkpoint in 2007 Share (%) Commodities Value (Millions of Baht) 1.Rubber smoked sheets 1,361.05 24.05 2.Dried longan 1,006.2 17.78 3.Palm oil 560.26 9.90 4.Elastic thread 366.87 6.48 5.Crepe sheets 283.49 5.01 6.Vegetable oil 252.65 4.47 7.Gourmet powder 136.94 2.42 8.Block rubber 136.13 2.41 9.Other non-alcoholic beverages 120.69 2.13 10.Diesel oil 85.38 1.51 11.Others 1,348.46 23.83 100.00 Grand total 5,658.12
Source: The Customs Department, Thailand

39

In relation to the above list, Thailand comparatively exported tropical goods originated from all over the country to Yunnan province led by natural rubber products consisting of rubber smoked sheets, crepes sheets, block rubber and elastic thread. Direct market penetration of Thailands northern region produces can be evidenced from selling of large amount of dried longan, a tropical fruit, which can optimistically help expand market for a large number of longan farmers in Thailand. Food and beverage-related products e.g. vegetable oil, palm oil, gourmet powder, and non-alcoholic beverages were also significant exporting products upholding the national development strategy to become kitchen of the world. In addition, Thailand sold a small amount of diesel oil to Yunnan province. The propensity of cross-border trade export to China in general and Yunnan province in particular is likely to be fast expanding attributable to the effective implementation of both Thailand-China Free Trade Agreement and ASEAN-China Free Trade Agreement. Cross-Border Import Values Through Transit Arrangement From China To Thailand The aggregate cross-border trade import through transit arrangement from China to Thailand went up steadily from amounting 0.137 billion Baht in 1996 to 2.708 billions Baht in 2007. In recent decade, the average annual growth of cross-border trade import through transit arrangement from China to Thailand was as high at 43.60 %. In 2007, Padang Besar was still the key entry point for importing transit goods from China through Malaysia, which was accountable for as high at 42 % of total cross-border trade import values, followed by Chiangsaen at 32 %, carried goods by vessels cruise downstream of Mekong river directly from Yunnan province of Southern China taken travel time for one day (www.chiangmainews.co.th), Mukdahan at 21 % and Chiangkhong at 3 %, respectively. The rest of cross-border trade imports were conducted customs formalities at Maesai and Nongkhai border checkpoints. It can be observed that border checkpoints of Chiangsaen in the Northern region and Mukdahan in Northeastern region have been performing increasing role in expanding trade relations between Thailand and Yunnan province of Southern China due to greater cross-border physical connectivity in the GMS. Furthermore, the trend of cross-border trade import through transit form from China to Thailand continues to grow rapidly. Please see details in Figure 3.8.

40

Unit: Millions of Baht

45,000 40,000 35,000 30,000 Million Baht 25,000 20,000 15,000 10,000 5,000 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Nongkhai Chiangsaen Mukdaharn Total cross-border import values through transit mode

Maesai Chiangkhong Sadao Total cross-border trade values through transit mode

Source: The Customs Department, Thailand

Figure 3.8: Cross-Border Import Trade Values Through Transit Arrangement From China To Thailand During 1996 To 2008 Through Major Border Checkpoints Relating to the cross-border key import commodities from Yunnan province of Southern China, they are shown in Table 3.8. Table 3.8: Top Ten Cross-Border Import Commodities From Yunnan Province of Southern China To Thailand Through Chiangsaen Border Checkpoint in 2007 Commodities 1.Fresh vegetables 2.Apple 3.Chinese pear 4.Pomegranate 5.Garlic 6.Processed woods 7.Sunflower seed 8.Hydrocarbon ferromanganese 9.Multiplier Onion 10.White pumpkin seed 11.Others Grand total Value (Millions of Baht) 298 125.7 85.68 73.91 64.39 37.87 33.63 26.25 18.4 10.83 232.83 1,007.49 Share (%) 29.58 12.48 8.50 7.34 6.39 3.76 3.34 2.61 1.83 1.07 23.11 100.00

Source: The Customs Department, Thailand

According to the above list, it implied that most of import agricultural commodities were mainly in line with the already in effect of both Thailand-China Free Trade Agreement and under the ASEAN-China Free Trade agreement. These led by fresh 41

vegetables, winter fruits e.g. apple, Chinese pear, pomegranate. In addition, other agricultural produces e.g. garlic, sunflower seed, multiplier onion and white pumpkin seeds play important role among major import commodities. Apart from this, it included quite significant amount of processed woods and intermediate industrial product e.g. hydrocarbon ferromanganese. In the near future, the tendency of importation of winter fruits originating from Yunnan province is likely to rise following the implementation of the above mentioned free trade agreements, coupled with more efficient cross-border logistics provisions and management between Northern region of Thailand and Yunnan province of Southern region of China. For geographical cross-border trade relationships between Thailand and Yunnan province of Southern China particularly conducting through Chiangsaen border checkpoint, it appears in Map 3.4. Map 3.4: Geographical Cross-Border Trade Relationships Between Thailand and Yunnan Province of Southern Region of China Through Chiangsaen Border Checkpoint in 2007

Others, 233, 23% Fresh vegetables, 298, 30% White pumkin seed, 11, 1% Multiplier Onion, 18, 2% Hydrocarbon Fer Manganese, 26, 3% Sunflower seed, 34, 3% Processed woods, 38, 4% Chinese pear, 86, 9%

Apple, 126, 12%

Garlic, 64, 6%

Pomegranate, 74, 7%

Others, 1,348, 24%

Rubber smoked sheets, 1,361, 25%

Diesel oil, 85, 2%

Other nonalcoholic beverages, Block Rubber, 136, 2% Dry longan, 1,006, 18%

Gourmet powder, 137, 2%

Vegetable oil, 253, 4%

Crepe sheets, 283, 5%

Palm oil, 560, 10%

Rubber thread, 367, 6%

42

Source: The Customs Department, Thailand

Share of Cross-Border Trade Values Through Transit Arrangement To International Trade Values Between Thailand and China During 1996 To 2008 The share of cross-border trade export values through transit arrangement gradually rose from 2.99 % in 1996 to 7.98 % in 2007. Similarly, the share of cross-border trade import values through transit arrangement slowly increased from 0.28 % in 1996 to 0.48 % in 2007, which expanded at very much slower pace compared with those previous cross-border trade exports to China. This implies that both cross-border trade export and particularly on import sector have yet been facing physical constraints limiting opportunity to facilitate faster trade expansion. Nevertheless, the share of international trade export slightly decreased from 97.01 % in 1996 to 92.02 % in 2007. Likewise, the share of international trade import declined at a snails pace from 99.72% in 1996 to 99.52 % in 2007. However, its share of international trade import could be sharply fallen when cross-border logistics between Thailand and China are improved by the operation of the R3 road links (East and West) routes. Please see details in Figure 3.9.

% 100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Share of total export of border trade Share of total export of international trade

Share of total im port of border trade Share of total im port of international trade

Source: The Customs Department, Thailand

Figure 3.9: Share of Border Trade Values Through Transit Arrangement To International Trade Values Between Thailand and China During 19962008 (January-April)

43

3) Lao PDR During 1996-2007, Thailand gained favorable balance of cross-border trade, and the aggregate cross-border export was higher than the aggregate cross-border import at 1.1 times. In 2007, the aggregate cross-border trade values between Thailand and Lao PDR accounted for 11.75 % of aggregate cross-border trade values of Thailand with fiveneighbouring countries. Cross-Border Trade Export Values From Thailand To Lao PDR The aggregate cross-border export to Lao PDR gradually increased from 5.190 billions Baht in 1996 to 38.970 billions Baht in 2007. In recent decade, the average annual cross-border export growth was at 21 %, which regarded at obvious rate. In 2007, Nongkhai border checkpoint was the most important gateway linking with Lao PDR, which was responsible for as high about half of total cross-border export values, followed by border checkpoints of Mukdahan at 14 % and Bungkarn and Piboonmangsaharn each at 9 % and Nakhonpanom at 7%, respectively. Also, Nongkhai city is a popular cross-border shopping destination either on retail or wholesale segments for neighbouring Vientianes populations of Lao PDR by just travelling through Mekong bridge. The rest 5.85 % belonged to two remaining border checkpoints, which provide channels for border retail trade of consumer goods among local peoples residing along both sides of border areas including the rural poor. Please see details in Figure 3.10. Unit: Millions of Baht
45,000

M illion baht

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanA pr)

Nongkhai Mukdaharn Chiangsan Total Export of International Trade

Bungkarn Thalee Chiangkhong

Nakhonpanom Piboonmangsaharn Total Export of Border Trade

Source: The Customs Department, Thailand

Figure 3.10: Cross-Border Export Values From Thailand To Lao PDR From 1996 To 2008 Through Major Border Checkpoints 44

Relating to key commodities transacted through Nongkhai border checkpoint in 2007, they are shown in Table 3.9. Table 3.9: Top Ten Cross-Border Export Commodities From Thailand To Lao PDR Through Nong Khai Border Checkpoint in 2007 Commodities 1.Oil products 2.Cars 3.Pellet cement 4.Woven fabrics 5.Knitted fabrics 6.Medical equipments 7.Digger 8.Polymers of ethylene 9.Tiles 10.Tyres 11.Others Grand total Value (Millions of Baht) 3,627.75 1,632.14 813.49 553.87 240.61 173.96 133.23 129.29 128.93 126.77 12,796.96 20,357.00 Share (%) 17.82 8.02 4.00 2.72 1.18 0.85 0.65 0.64 0.63 0.62 62.86 100.00

Source: The Customs Department, Thailand

It can be articulated that Lao PDR is currently in the stage of rapid economic growth due to they vastly need intermediate and capital goods e.g. oils, automobiles, construction materials, heavy machines and medical equipments from Thailand for driving the growing domestic economy. It is likely that Lao PDR is urbanizing indicating by a large amount of home decoration materials are in great demand. In addition, such requirements of raw materials for industrial development are pronounced. Cross-border exports from Thailand approximately serve half of Lao PDRs national populations who are mostly residing along Thai-Lao border areas. In this regard, there are still more rooms to deepen marketing activities for Thai products in capturing the increasing varied needs. Thus, cross-border trade plays even more vital role in penetrating Thai products to their market as well as widening Laotians rural poor to gain greater access to consumer products. Cross-Border Import Values From Lao PDR To Thailand The aggregate cross-border import from Lao PDR went up from 1.730 billions Baht in 1996 to 7.778 billions Baht in 2007. In recent decade, the average annual cross-border import growth was at 19 %, which regarded at reasonable rate if compared with their small size of five million populations. In 2007, Mukdahan border checkpoint was, in contrast with Nongkhai as major export gateway, the most important gateway which was responsible for as high at 55 % of total cross-border import values, Nong Khai border check point came second at 14 %, followed by Thalee at 9 %, Chiankhong at 8 %, and Piboonmangsaharn at 6 %, respectively. The rest belonged to two remaining border checkpoints of Chiangsaen and Bunkarn, which provide channels for border retail trade of daily consumption products. Please see details in Figure 3.11. It is remarkable that there is a diversion on exporting and importing roles among key border checkpoints. This signifies that import products from Lao PDR may be originating from diverse cities/locations. Among others, Mukdahan plays increasing importance as

45

another key border entry point on the East-end of Thailands section along the East West Economic Corridor.
Unit: Millions of Baht
12,000

Million Baht

10,000

8,000

6,000

4,000

2,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Nongkhai Mukdaharn Chiangsan Total Im port of International Trade

Bungkarn Thalee Chiangkhong

Nakhonpanom Piboonm angsaharn Total Im port of Border Trade

Source: The Customs Department, Thailand

Figure 3.11: Cross-Border Trade Import Values From Lao PDR To Thailand During 1996 To 2008 Through Major Border Checkpoints Relating to key commodities transacted through Nong Khai border checkpoint in 2007, they are shown in Table 3.10.

46

Table 3.10: Top Ten Cross-Border Import Commodities From Lao PDR To Thailand Through Nong Khai Border Checkpoint in 2007 Share (%) Commodities Value (Millions of Baht) 1.Processed wood 566.73 52.57 2.Ignition wiring sets used in vehicles 85.46 7.93 3.Parquet 41.32 3.83 4.Live wire 27.65 2.56 5.Resistor 18.32 1.70 6.Underwear for men and boys 17.67 1.64 7.Zinc ore 16.84 1.56 8.Uniforms 15.79 1.46 9.Papers 13.69 1.27 10.Men and boy's clothes 11.81 1.10 11.Others 262.72 24.37 100.00 Grand total 1,078.00
Source: The Customs Department, Thailand

According to the above list, it can be inferred that Lao PDR is yet abundant with various types of woods and woods-related products, which are scarce and high demand for house construction and decoration in Thailand. As a result, it became dominant export commodities to Thailand. Thailand also imports a lot of intermediate industrial inputs e.g. ignition wiring sets used in vehicles, live wire and resistor. Lao PDR is becoming specialized exporter in textile/garment industry due to low labor cost of production as well as receiving Normal Trade Relations (NTR) to access the US market as well as being granted Generalized System of Preferences (GSP) from major countries e.g. EU, Japan and Canada (Kasikorn Research Center, 2006). Textile products were likewise major commodities penetrating into Thai market. As a result of their specialization, there were some cross-border outsourcing activities in making uniform clothes from Thailand to Lao PDR to some extent demonstrating cross-border supply chain linkages in this industry. In addition, Zinc ore was another essential imported mineral resource as it is still rich in Lao PDR. For geographical cross-border trade relationships between Thailand and Lao PDR particularly conducting through Nong Khai border checkpoint, it appears in Map 3.5.

47

Map 3.5: Geographical Cross-Border Trade Relationships Between Thailand and Lao PDR Through Nong Khai Border Checkpoint in 2007

Others, 263, 24%

Men and boy's clothes, 12, 1% Papers, 14, 1% Uniforms, 16, 1% Zinc ore, 17, 2% Underwear for men and boys, 18, Resist or, 18, 2% Live wire, 28, 3% Parquet, 41, 4% Ignition wiring sets used in vehicles, 85, 8%
Oil products, 3,628 , 17%

Processed wood, 567, 52%

Cars, 1,632 , 8%

Others, 12,797 , 62%

Pellet cement, 813 , 4%

Woven fabrics, 554 , 3% Knitted fabrics, 241 , 1% Medical equipments, 174 , 1% Digger, 133 , 1% Tiles, 129 , 1% Polymers Of Ethylene, 129 , 1%

Tyres, 127 , 1%

Source: The Customs Department, Thailand

Share of Cross-Border Trade Values To International Trade Values Between Thailand and Lao PDR During 1996-2008 The share of aggregate cross-border export gradually fluctuated from 56.64 % in 1996 to 50.99 % in 1999. Then it jumped to 87.18 % in 2000, and further kept maintained at 86.33 % in 2007. In contrast, the share of aggregate cross-border import slightly declined from 99.69 % in 1996 to 97.27 % in 2004. Then it sharply dropped to 47.73 % in 2007. And the tendency quickly moves upward in 2008. This means it is a diverging trend of cross-border export and import due to the Lao PDRs economy is in transition or adjustment for integrating with regional and global economy. This implies that crossborder trade has yet kept playing central role between Thailand and Lao PDRs trade relationships. Whereas, the share of aggregate export of international trade slightly increased from 43.6 % in 1996 to 49.01 % in 1999, and sharply declined to 12.82 % in 2000. Then, it fluctuated around 13.67 % in 2007, and the trend is likely to decline. On the other hand, the share of aggregate import of international trade slightly fluctuated from 0.31 % in

48

1996 to 2.73 % in 2004, and then it quickly surged to 52.27 % in 2007. And the trend seems likely to be at steady state as Thailand may continue to import a larger amount of electricity generated by hydro-power sources from Lao PDR. Please see details in Figure 3.12.
100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr) %

Share of total export of border trade Share of total export of international trade

Share of total im port of border trade Share of total im port of international trade

Source: The Customs Department, Thailand

Figure 3.12: Share of Cross-Border Trade Values To International Trade Values Between Thailand and Lao PDR During 1996 To 2008 4) Myanmar During 1996-2007, Thailand faced deficit balance of cross-border trade with Myanmar. As a result, the aggregate cross-border import was higher than the aggregate crossborder export at three times. In 2007, the aggregate border trade values between Thailand and Myanmar accounted for 24.5 % of aggregate border trade values of Thailand with five-neighbouring countries. Cross-Border Export Values From Thailand To Myanmar During 1996 To 2008 The aggregate cross-border export to Myanmar gradually increased from 2.625 billions Baht in 1996 to 21.253 billions Baht in 2007. In recent decade, the average annual cross-border export growth was at 32 %, which regarded at evident rate. In 2007, Maesod border checkpoint was the most important entry-exit point located at the westend of Thailands section of the East West Economic Corridor, which was responsible for as high about half of total cross-border export values with Myanmar. Then it followed by border checkpoints of Ranong in the Southern region at 26 %, Maesai at 12 % and Chiangsaen at 7%, respectively. Maesod, Ranong and Masai are leading border cities, which are popular cross-border shopping destinations either on retail or wholesale segments for neighbouring Myanmars populations. The rest 3 % went to three remaining border checkpoints, which mainly provide channels for border retail

49

trade of consumer goods among local people including the rural poor residing along both sides of border areas. Please see details in Figure 3.13.
Unit: Millions of Baht
25,000

Million Baht

20,000

15,000

10,000

5,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

M aesai M aesod Total Export of Border Trade

Chiangsan Ranong Total Export of International Trade

M aesariang Sangkhlaburi

Source: The Customs Department, Thailand

Figure 3.13: Cross-Border Export Values From Thailand To Myanmar During 1996 To 2008 Through Major Border Checkpoints Relating to key commodities transacted through Maesod border checkpoint in 2007, they are shown in Table 3.11.

50

Table 3.11: Top Ten Cross-Border Export Commodities From Thailand To Myanmar Through Maesod Border Checkpoint in 2007 Commodities 1.Gourmet powder 2.Diesel oil 3.Vegetable oil 4.Motorcycles 5.Woven cloth with various colors 6.Lead Acid 7.Benzene oil 8.Fishing net 9.Human drugs 10.Non-sweetened milk 11.Others Grand total
Source: The Customs Department, Thailand

Value (Millions of Baht) 396.46 384.55 305.18 289.02 269.22 224.27 220.77 189.98 170.76 123.81 8,027.98 10,602.00

Share (%) 3.74 3.63 2.88 2.73 2.54 2.12 2.08 1.79 1.61 1.17 75.72 100.00

According to the above list, it can be interpreted that Myanmar relies significantly on Thailand for importing consumer goods ranging from food-related products, vegetable oil, milk, clothes, medical products, etc. This might be resulted from limited economic and industrial diversifications and distribution in their domestic market. Ranges of fuel, motorcycles, and machinery parts are also in vast demands. Myanmar still needs basic fishing gear e.g. fishing net for harvesting range of fishes in their large coastal sea. Maesod city becomes a key distribution center of Thailand into Myanmar market. In the near future, there is huge prospect for Thailand to further conduct transit trade with India and other South Asian markets when the main road linking Myanmar and India is improved. Therefore, the trend of cross-border export through Maesod city is absolutely promising. Cross-Border Import Values From Myanmar To Thailand The aggregate cross-border import values from Myanmar during 1996-1999 steadily increased. Later it sharply surged from 5.849 billions Baht in 1996 to 76.114 billions Baht in 2007 mainly resulting from large amount importation of natural gas used for generating electricity in Thailand. As a result, the average annual cross- border import growth in recent decade was at 99 % which regarded at particularly distinct rate. In 2007, Sangklaburi temporary border checkpoint alone was, in contrast with Maesod as major export gateway, the most important gateway for largely importing natural gas at exceptionally high at 94.65 % of total cross-border import values, Ranong border check point ran second at 2.1 %, followed by Maesod at 1.29 %, and Maesai at 0.4 %, respectively. The rest 1.56 % consisting of three border checkpoints provides sites for border retail trade mainly for consumer goods to rural people along both sides of border areas. Please see details in Figure 3.14. Consequently, different geographical settings influence varying importance of key entry/exits of border checkpoints particularly connecting with Myanmar. The tendency of cross-border import continues to increase.

51

Unit: Millions of Baht

90,000

M illion Baht

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanA pr)

Maesai Maesariang Ranong Total Import of Border Trade

Chiangsan Maesod Sangkhlaburi Total Import of International Trade

Source: The Customs Department, Thailand

Figure 3.14: Cross-Border Trade Import Values From Myanmar To Thailand During 1996 To 2008 Through Major Border Checkpoints Regarding the key commodities transacted through Maesod border checkpoint in 2007, they are shown in Table 3.12. Table 3.12: Top Ten Cross-Border Import Commodities From Myanmar To Thailand Through Maesod Border Checkpoint in 2007 Commodities 1.Wood works 2.Crab 3.Mixed fish 4. Live cow and buffalo 5. Cashew nut 6. Mixed prawn shell 7. Dried fish maw 8. Black matpe beans 9. Bamboo 10.Prawn 11.Others Grand total Value (Millions of Baht) 320.61 186.54 125.06 65.79 43.04 31.95 20.36 19.88 18.81 16.83 141.13 990.00 Share (%) 32.38 18.84 12.63 6.65 4.35 3.23 2.06 2.01 1.90 1.70 14.26 100.00

Source: The Customs Department, Thailand

According to the above list, it can be rationalized that Myanmar is still affluent of forest resources particularly for wood-related products and bamboo, which are scarce and high demand for house construction and decoration in Thailand. As a result, it becomes 52

dominant export commodities to Thailand in addition to natural gas. Aquatic products e.g. prawn, crab, sea fishes were other major importing commodities. So they provide raw materials for processing various types of foods in Thailand. A great number of live animals especially cow and buffalo were imported as beef cattle as well as utilizing its muscle energy in farming activities. Black Matpe beans possibly resulted from the Contract Farming Initiative between Thailand and Myanmar also plays essential import values, which can help generate jobs for rural people residing along Thailand-Myanmar border areas. For geographical cross-border trade relationships between Thailand and Myanmar particularly conducting through Maesod border checkpoint, it appears in Map 3.6. Map 3.6: Geographical Cross-Border Trade Relationships Between Thailand and Myanmar Through Maesod Border Checkpoint in 2007

Others, 141, 14% Prawn, 17, 2% Bamboo, 19, 2% Black matpe beans, 20, 2% Dry fish maw, 20, 2% Mixed prawn shell, 32, 3% Cashew nut , 43, 4% Live cow and buffalo, 66, 7% Crab, 187, 19% Mixed fish, 125, 13%

Wood works, 321, 32%

Gourmet powder, 396, 3% Dies el oil, 385, 4% Vegetable oil, 305, 3% Motorcycles , 289, 3% W oven cloth with various colours, 269, 3% L ead Acid, 224, 2% Benzene oil, 221, 2% Fis hing net, 190, 2% H uman drugs , 171, 2% Non-s weetened milk, 124, 1%

Others, 8,028, 75%

Source: The Customs Department, Thailand

53

 Share of Cross-Border Trade Values To International Trade Values Between Thailand and Myanmar During 1996 To 2008 The share of aggregate cross-border export slowly varied from 32.58 % in 1996 to 31.35 % in 1999. Then it expanded to 62 % in 2000, and slightly rose at 64.52% in 2007. Correspondingly, the share of aggregate cross-border import slightly grew from 16.26 % in 1996 to 24.39 % in 1999. Then it sharply proliferated to 55.88 % in 2000, and moved quickly forward at 95.05 % as a result of surging cross-border import of natural gas. The tendency of cross-border export and import are converging indicating that cross-border trade will still be playing very important role for intensifying trade relations between Thailand and Myanmar. On a contrary, the share of aggregate crossborder export of international trade slightly declined from 67.42 % in 1996 to 35.48 % in 2007. In the same way, the aggregate import of international trade strikingly decreased from 83.74 % in 1996 to 4.95 % in 2007. And the trend of both export and import of international trades seem likely to be further dropping. Please see details of diverging patterns of cross-border trade and international trade between Thailand and Myanmar in Figure 3.15.
100 90 80 70 60 50 40 30 20 10 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Share of total export of border trade Share of total export of international trade

Share of total im port of border trade Share of total im port of international trade

Source: The Customs Department, Thailand

Figure 3.15: Share of Cross-Border Trade Values To International Trade Values Between Thailand and Myanmar During 1996 To 2008

54

5) Malaysia During 1996-2007, Thailand gained favorable balance of cross-border trade with Malaysia, and the aggregate cross-border export was higher than the aggregate crossborder import at 1.27 times. In 2007, the aggregate cross-border trade values between Thailand and Malaysia accounted for 179.958 billions Baht represented as high at 44.83 % of aggregate border trade values of Thailand with five-neighbouring countries. Cross-Border Export Values From Thailand To Malaysia During 1996 To 2008 The aggregate cross-border trade export to Malaysia sharply escalated from 13.809 billions Baht in 1996 to 102.476 billions Baht in 2007. In recent decade, the average annual cross-border export growth was at 22 %, which was regarded at marked rate. In 2007, Sadao border checkpoint was the key entry-exit located at the strategic highway linking Thailand-Malaysia and Singapore, which was responsible for such very high at 74% of total cross-border export values, followed by Padang Besar at 21.50 %, Betong at 2.50 % and Sungai-Golok at 1.35 %, respectively. Above all, Hat Yai, Sadao and Sungai-Golok are popular cross-border tourism and shopping destinations for Malaysians and some Singaporeans. The rest of two border checkpoints mainly provide locations for border retail trade of consumer goods among local people including the rural poor residing along both sides of border areas. Please see details in Figure 3.16.
Unit: Millions of Baht
180,000

M illion Baht

155,000

130,000

105,000

80,000

55,000

30,000

5,000 1996 -20,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanA pr)

Sadao Sungai-G olok Satun

Padang Besar Betong Total Export of Border Trade

Takbai W angprachan Total Export of International Trade

Source: The Customs Department, Thailand

Figure 3.16: Cross-Border Export Values From Thailand To Malaysia During 1996 To 2008 Through Major Border Checkpoints

55

Concerning the key commodities transacted through Sadao border checkpoint in 2007, they are shown in Table 3.13. Table 3.13: Top Ten Cross-Border Export Commodities From Thailand To Malaysia Through Sadao Border Checkpoint in 2007 Commodities Value (Millions of Baht) 1.Natural rubber 26,182.80 2.Parts and accessories of machinery 16,660.98 3.Mixed rubber 2,813.13 4.Electromagnetic 2,404.26 5.Other products made from steels 2,064.53 6.Processed parawoods 1,836.40 7.Particle Board 1,794.31 8.Magnetic tapes 1,300.16 9.Rubber hand glove 1,382.96 10.Print circuit board 1,294.61 11.Others 40,298.31 Grand total 98,032.45
Source: The Customs Department, Thailand

Share (%) 26.71 17.00 2.87 2.45 2.11 1.87 1.83 1.33 1.41 1.32 41.11 100.00

According to the above list, it can be substantiated that leading goods mostly originated from Southern part of Thailand were exported to Malaysia through Sadao border checkpoint due to a convenient transportation route. These products center around natural rubbers, mixed rubbers, processed woods, particle boards, rubber hand gloves representing a great extent of reliance on regional resource endowments. Other industrial products might be made both from other regions in the country and from Southern region. Most goods passing through this border checkpoint is kept in containers. Sadao border checkpoint linking with Bukit Kayu Hitam of Malaysia is the most developed customs house in Thailand in terms of advanced physical infrastructure and Customs, Immigration and Quarantine (CIQ) facilities as well as pioneering an adoption of single stop inspection for easing cross-border customs formalities between Thailand and Malaysia. For this reason, the movement of cross-border trade export through this gateway usually continues to rise. Cross-Border Import Values From Malaysia To Thailand During 1996-2008 The aggregate cross-border import from Malaysia also sharply increased from 7.184 billions Baht in 1996 to 77.482 billions Baht in 2007. In recent decade, the average annual cross-border import from Malaysia to Thailand was at 25%, which was regarded as rather high rate. In 2007, Sadao border checkpoint remained the key entry location, which was responsible for as high at 77% of total cross-border import values, Padang Besar border check point ran second at 20 %, followed by Sungai-Golok and Takbai in Narathiwat province at 2 % and 0.50 %, respectively. The remaining two border checkpoints of Betong and particularly for Wangprachan act as sites for arranging weekend markets to conduct border retail and wholesale segments of agricultural produces and consumer goods for local villagers and SMEs business persons residing on both sides of border areas. Please see details in Figure 3.17.

56

Unit: Millions of Baht

M illion Baht

250,000

200,000

150,000

100,000

50,000

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr)

Sadao Sungai-G olok Satun

Padang Besar Betong Total Im port of Border Trade

Takbai W angprachan Total Im port of International Trade

Source: The Customs Department, Thailand

Figure 3.17: Cross-Border Trade Import Values from Malaysia To Thailand From 1996 To 2008 Through Major Border Checkpoints Regarding the key commodities transacted through Sadao border checkpoint in 2007, they are shown in Table 3.14. Table 3.14: Top Ten Cross-Border Import Commodities From Malaysia To Thailand Through Sadao Border Checkpoint in 2007 Commodities Value (Millions of Baht) 1.Magnetic tapes 20,899.26 2.Parts and accessories of machinery 15,289.11 3.Print circuit board 14,232.51 4.Other products made from steels 5,467.60 5.Auto processors 3,972.78 6.Other products made from plastics 2,173.11 7.Synthetic rubber 1,587.60 8.Exported goods 1,177.31 9.Mineral or chemical fertilizers 1,189.45 10.Nails, screws, bolts of iron or steel 1,241.36 11.Others 26,805.05 Grand total 94,035.14
Source: The Customs Department, Thailand

Share (%) 22.22 16.26 15.14 5.81 4.22 2.31 1.69 1.25 1.26 1.32 28.51 100.00

57

According to the list above, it should be noted that Thailand imported various advanced industrial and capital goods from Malaysia. These range from information technologybased goods e.g. magnetic tapes, print circuit board and auto processors, industrial machines and parts, steel products, etc. These goods may mainly be used in Southern region, while another large portion may be onward transported to other industrializing regions in Thailand. Intermediate goods e.g. synthetic rubber was utilized for adding value to natural rubber products. Mineral and chemical fertilizers were largely used in the rubber plantation, orchard and farming activities. The latter helps sustain degree of competitiveness of the southern economy. For geographical cross-border trade relationships between Thailand and Malaysia particularly conducting through Sadao border checkpoint, it appears in Map 3.7. Map 3.7: Geographical Cross-Border Trade Relationships Between Thailand and Malaysia Through Sadao Border Checkpoint in 2007

Natural rubber, 26,183, 27%

Others, 40,298, 42%

Others, 26,805 , 30%

Magnetic tapes , 20,899 , 22%

Parts and accessories of Machinery, 16,661, 17%

Print Circuit Board , 1,295, 1% Rubber hand glove, 1,383, 1% Magnetic tapes , 1,300, 1% Particle Board, 1,794, 2% Processed parawoods, 1,836, 2% Other products made from steels, 2,065, 2% Electromagnetic , 2,404, 2% Mixed rubber, 2,813, 3%

Nails,screws, bolt s of iron or st eel, 1,241 , 1% Mineral or chemical fertilizers, 1,189 , Export ed goods , 1,177 , 1% Ot her product s made from plast ic, 2,173 , 2% Synt het ic rubber, 1,588 , 2% Aut o processors, 3,973 , 4% Ot her products made from steels, 5,468 , 6%

P art s and accessories of Machinery, 15,289 , 16%

P rint Circuit Board , 14,233 , 15%

Source: The Customs Department, Thailand

58

 Share of Cross-Border Trade Values To International Trade Values Between Thailand and Malaysia During 1996 To 2008 The share of aggregate cross-border trade export gradually grew from 27.10 % in 1996 to 33.20 % in 2007. Correspondingly, the share of aggregate cross-border trade import slightly grew from 7.86 % in 1996 to 25.69 % in 2007. So the trend of cross border trade export and import are now converging. On a contrary, the share of aggregate export of international trade slightly declined from 72.90 % in 1996 to 61.80 % in 2007. In the same way, the aggregate import of international trade steadily decreased from 92.14 % in 1996 to 74.31 % in 2007. And the trend of both international export and import seems likely to be gradually falling. Therefore, the tendency of aggregate crossborder trade to aggregate international trade between Thailand and Malaysia are in diverging fashion. Please see details in Figure 3.18.
100 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (JanApr) %

Share of total export of border trade Share of total export of international trade

Share of total import of border trade Share of total import of international trade

Source: The Customs Department, Thailand

Figure 3.18: Share of Cross-Border Trade Values To International Trade Values Between Thailand and Malaysia During 1996 To 2008 3.7 Peoples Mobility Along the Border 3.7.1 Peoples Movement Through Border Crossings Border checkpoints/border crossings physically play crucial role as gateways for facilitating people mobility not only for Thai nationals but also neighbouring countries nationals as well as other foreign nationals. Through this movement, it has driven crossborder tourism and trade activities including strengthening of people to people contacts, exchanging of cultural interactions as well as enhancing mutual understanding between neighbouring countries. There are 30 border crossings that process immigration formalities. The aggregate people movement of all nationals using passports and border passes through nation-wide border crossing points increased from 5.19 millions persons

59

in 2002 to as high at 9.50 millions persons in 2006. The average annual growth rate of total peoples movement in this period was at 16.4 %, which were at marked proportion. Please see detailed statistics of people movement distribution at different border crossings in Thailand in Appendix A. This growth partly helps sustain national tourism policies paving the way to become a tourism gateway to Asia, (Ministry of Tourism and Sports, 2008). Hence, the trend of cross-border people movement seems to be prominent. There are two broad categories of people movement: These consist of Thai nationals and foreigners. The total Thai nationals movement through nation-wide border crossing points expanded from 1.92 millions persons in 2002 to 5.32 % millions persons in 2006. The average annual growth rate during this period was soaring at 30%, which were at clearly distinct magnitude and higher than the average foreign nationals movement at 4.34 times. This implies that out-flows of Thai tourists/business persons to neighbouring countries destinations/markets are significant. While the total foreign nationals movement through nation-wide border crossing points grew from 3.27 millions persons in 2002 to 4.18 millions persons in 2006. Unfortunately, deeper analysis on extent of cross-border peoples movement of individual neighbouring countries to/from Thailand becomes limited due to inaccessible of data. This category consists of tourists, crossborder business persons and migrant labor. The average annual growth rate during this period was at 6.9 %. This was regarded somewhat low expansion rate attributable to the sometimes temporary closure of border checkpoints in neighbouring countries as a result of either political sensitivity within particular neighbouring country or between Thailand and particular neighbouring country. Please see details of peoples movement through border crossings in Figure 3.19.
Unit: Million Persons
10 9 8 7 6 5 4 3 2 1 0
Million persons

2002

2003

2004

2005

2006

Total people movement of all nationals through all border crossing points nation-wide Total foreign nationals movement through all border crossing points nation-wide Aranyaprathet Nong Khai

Total Thai nationals movement through all border crossing points nation-wide Sadao Maesai Chiangsaen

Source: Cross-border people movement statistics from Thailand Immigration Office, retrieved from http://www.thailand-immigration.com/home.asp, on 5 June 2008

Figure 3.19: Peoples Movement at Major Border Crossings in Thailand During 2002 To 2006

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Out of 30, they are five key border crossings in different regions of Thailand, which have long been connected transportation networks with four-neighbouring countries. In 2006, Aranyaprathet border checkpoint, which accounted for 28 % of total peoples movement along border ranked first with a total of 2.64 millions persons represented by 76 % of Thai nationals and 24 % of foreign nationals. A large number of foreign nationals were cross-border Cambodian migrant labor seeking for job opportunities in Thailand. Sadao came second with total border movement of people at 2.36 millions persons classifying into Thai nationals at 34 % and foreign nationals at 66 %. Thus, Sadao was the main entry for facilitating a vast number of tourists/business persons into Thailand. Nong Khai placed third with total border movement of people at 1.04 millions persons, which Thai and foreign nationals shares almost equal proportion at 47 % and 53 %, respectively. Maesai was the chief entryway to Myanmar with total movement of people at 0.22 million person with almost all of them were foreign nationals, which were quite similar pattern with Chiangsaen border crossing. It is interesting to note that there might be underreporting of actual numbers on movement of people from Myanmar due to a huge number of Myanmarneses illegally enter into Thailand as recurring immigrants in pursuit of job opportunities not only in border cities but also in other regional growth centers including Bangkok metropolitan. 3.7.2 Share of Peoples Movement Through Nation-Wide Border Crossings As physical connectivity between Thailand and its neighbouring countries being more advanced over recent decade and currently underway, this makes cross-border movement of people easy. There have been evident from the share of Thai nationals people movement through border checkpoints nation-wide reasonably increased from 37 % in 2002 to 56% in 2006, and the trend shows a mounting movement. In contrast, the share of foreign nationals movement through border checkpoints nation-wide rather varied and appeared dropping from 56% in 2002 to 44 % in 2006. It is noteworthy that the share of foreign nationals movement in a couple years could be higher than the registered figures. Nevertheless, the share of the latter became shrunk owing to many people from Myanmar, Cambodia and Lao PDR intentionally came into Thailand as illegal immigrants pushed by economic reason. Please see details in Figure 3.20.

61

100 90 80 70 60 50 40 30 20 10 0

2002

2003

2004

2005

2006

Share of Thai nationals passing through all border crossing points nation-wide Share of foreign nationals passing through all border crossing points nation-wide Share of people m ovem ent through all border crossing points nation-wide Share of people m ovem ent through all international ports of entry/exit nation-wide

Source: Cross-border people movement statistics from Thailand Immigration Office, retrieved from http://www.thailand-immigration.com/home.asp, on 5 June 2008

Figure 3.20: Share of People Movement Through Border Crossings Nation-Wide To Share of People Movement Through Other International Ports of Entry and Exit in Thailand During 2002 To 2006 In terms of comparison between aggregate cross-border and international movements, the share of people movement through nation-wide border crossing points steadily went up from 20 % (5.18 millions persons) in 2002 to 26 % in 2006 (9.47 millions persons). And the slope seems likely to increase as a result of better improvement of land transportation linkages, in association with the implementation of CBTA in the GMS and the effects of single visa arrangements that Thailand signed with Cambodia and Vietnam, (Tshuneishi, 2008). Interestingly, the share of international movement with air-borne and sea-borne modes of arrival/departure from countries, which do not share common border with Thailand was in a gradually diverging fashion evidencing from it slightly declined from 80% (20.46 millions persons) in 2002 to 74% (27.42 millions persons) in 2006. It is notable that though the numbers of international movement of people keep increasing, its annual growth rate was much slower than the aggregate cross-border movement of people. However, these two categories of movement eventually complement each other in upholding the Royal Thai policies to become a hub of trade and investment in ASEAN as well as a tourism gateway to Asia. Moreover, the tendency of cross-border trade and peoples movement have been demonstrating a similarly upward direction possibly resulting from greater degree of physical connectivity combined with more openness of policies and related agreements on crossborder and regional trades, tourism and labor cooperation. 3.8 Thailands Cross-Border Investments in Four-Neighbouring Countries In 2004, the Board of Investment (BOI) formulated a strategy for promoting Thailand outward foreign direct investment in order to enhance degree of competiveness for

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Thai industry and export. The BOI (2004) also designated targeted industries for investment abroad into three groups namely (1) Industries which boost Thailand as regional hub and support national development comprising petrochemicals, petroleum, natural gas, energy, agro-processing industries, electronics parts, (2) Industries which were limited in Thailand comprising fisheries, garment, textiles, livestock, jewelry and accessories and (3) Industries which Thailand has potentials for penetrating new markets consisting of construction, animal feed, sugar, plastics, telecommunications, leather, tourism and services e.g. Thai restaurant, hotel, health business and beauty. Accordingly, neighbouring countries were then the immediate target investment destinations. To implement this strategy, Thailand has actively promoted cross-border investment in neighbouring countries as an integral part of ACEMECS Initiative, which placed particular emphasis on agro-processing industries, tourism, and services. This initiative aimed to explore additional sources of raw materials, distribute income to neighbouring countries in order to mitigate problems concerning massive illegal immigration of labor, as well as helping solve widespread of narcotics along the border areas, (BOI, 2005). Furthermore, Thai investors sought market expansion for goods directly produced in neighbouring countries. During 1998-2006 (January), the combined direct investments from Thailand to Cambodia, Lao PDR and Myanmar were roughly at 3.887 billions US $ or equivalent to 128.303 billions Baht. Once included investments in Malaysia during 2000-2007 at 2.861 billions Baht, it totally stood at 131.164 billions Baht. The tendency of capital investment out-flows from Thailand to neighbouring countries appears to be intensifying as a result of greater trade and investment openness in the Greater Mekong Sub-region. The BOI (2005) summarized investment progress of the Thais companies in four-neighbouring countries as follows: 3.8.1 Cambodia During 1 August 1994-30 September 2004, an accumulative amount of 135.15 millions US $ capital was invested in Cambodia in 16 business categories. Please see detailed statistics of Thailands foreign direct investment in Cambodia in Appendix B. The top five investment projects led by hotel at seven projects amounting 48.38 millions US $, followed by processed woods at three projects totaling 33.29 millions US $, telecommunications at two projects totaling 14.8 millions US $, textiles at seven projects totaling 7.72 millions US $ and food processing industries at nine projects totaling 5.76 millions US $. In 2003, Thailand ranked fourth among foreign investors in Cambodia, which was behind China, Malaysia and Singapore. 3.8.2 Lao PDR During 1988-2005, Thailand ranked first among foreign investors with accumulative amount of 2.407 billions US $ capital at 330 approved investment projects. Please see detailed statistics of Thailands foreign direct investment in Lao PDR in Appendix C. The top five investment projects were hydro power plant at six projects aiming to export to Thailand amounting 1.127 billions US $ accounted for 46.84%. Then followed by telecommunications and transport at nine projects amounting 6.373 billions US $ represented 22.40 %, hotel and tourism 13 projects amounting 2.879 billions US $

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represented 10.12%, industries and handicraft at 90 projects amounting 1.014 billions US $ and agro-industries at 44 project amounting 61.7 millions US $. 3.8.3 Myanmar During 1988-2006 (January), an accumulative amount of 1.345 billions US $ capital at 56 projects was invested in Myanmar in nine business categories. Thailand shared 17% of total FDI investment capital flowed into Myanmar throughout the above mentioned period. Please see detailed statistics of Thailands foreign direct investment in Myanmar in Appendix D. The top five investment projects were industrial production at 16 projects amounting 6.146 billions US $ accounted for 47.5 %. Then followed by hotel and tourism at 12 projects amounting 2.286 billions US $ represented 17.0 %, fisheries at seven projects amounting 1.710 billions US $, mining at eight projects amounting 1.212 billions US $ and transport at four projects amounting 1.073 billions US $. Myanmar applied import-substitution industrialization policy attracting Thai investors to carry out investments in hotel, garments and foods sectors. 3.8.4 Malaysia The total direct investment from Thailand to Malaysia during 2000-2007 was amounted at 2.861 billions Baht with average annual growth rate at 51.2 %. On the contrary, Malaysia was a major investor in Thailand, with an investment capital inflow of 3.6 billions Baht in 2003, and 5.9 billions Baht in 2005, (Tshuneishi, 2008). Unfortunately, there was inaccessible data on Thailands direct investment to China. 3.9 Impacts of Cross-Border Trade, Commerce and Investments Dealing With Neighbouring Countries on Thai Economy and Society Usually, cross-border trade and commerce with neighbouring countries have brought about increased extent of interdependency and economic integration over time in terms of exchanging of goods and services, sharing resources, labor and expertise as well as fostering investment flows, which may partly have certain implications to regional development throughout Greater Mekong and IMT-GT Sub-regions. All these efforts were directed toward generating mutual benefits and improved public welfare of all peoples in the mentioned areas. Nevertheless, there existed a multi-facet of impacts inherently associated with cross-border trade, commerce and investment activities on Thai economy and society, which can be summarized in Table 3.15. Table 3.15: Multi-Faceted Impacts of Cross-Border Trade, Commerce and Investments Dealing with Neighbouring Countries on Thai Economy and Society
Features 1. Political Aspect Impacts Positive Impacts Strong and continued political will to support regional economic integration has favorably created conducive business and investment environment in the Greater Mekong and IMT-GT subregions. Negative Impacts Political sensitivity within particular neighbouring country sometimes leads to onesided closure of border checkpoints for certain period. As a result, Thai commodities lose market shares to other countries/competitors. Political and border conflicts between Thailand and particular neighbouring country, for example a conflict on co-management issues of the Prasat Praviharn along Thai-Cambodian border, affect cross-border trade and business

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2. Economic Aspect

Greater increase of crossborder trade and investments signify higher degree of border openness. Pave the way toward regional economic integration. Local people from both sides gain wider access to consumer products and essentials for daily consumption from retail border trade.

3.Social Aspect

Increasing people mobility of both Thai and foreign nationals crossing border checkpoints which bring closer economic and social ties. Greater cross-border local to local people contacts deepen mutual understanding. Positive role migrant workers played in the Thai economy. All foreign workers contribute around 0.5 percent of total GDP per annum, (TDRI cited in World Bank, 2006).

environment and dilute trust and confidence among local people along border areas. Current political disruption within Thailand disturbs cross-border trade and business environment. Government partly loses revenues from ongoing importing and exporting of illegal trade along the border. The volume of illegal trade is possibly higher than official record for twice times for Myanmar, (Changhlam, 2005). For the rest, it is probably equal to formal trade, (Tsuneishi, 2008) Occasional volatility of Thai Baht currency affects purchasing power in neighbouring countries and Thai products may lose market shares. In turn, currencies of three neighbouring countries are sometimes not stabilized. Trade discrimination measures imposed by neighbouring countries caused more difficult to Thai traders for penetrating their markets. Low trade performance from one-way free trade privilege due to complex procedures either from Thailand or neighbouring countries sides resulted in continued shortage of raw agricultural materials in Thailand. Ongoing intra-regional and interregional disparities within Thailand. Concerns over how much benefits of crossborder trade openness will contribute to regional and local economic development. Some local peoples are afraid of being marginalized. Labor cost in Thailand is higher than Myanmar, Lao PDR and Cambodia at approximate 5-7 times (NESDB, 2003). Currently, Thailand alone is home to 1.5-2 millions migrants from the Greater Mekong Sub-region, of which 1.2 million were registered in the 2004 drive. Approximately three-quarters of the registered migrants are from Myanmar, with the rest split more or less equally from Lao PDR and Cambodia, (World Bank, 2006). Ministry of Labor (2007) expected that there are about 1 million of them have still not registered, but are illegally working in Thailand. This created social problems and to some extent affected national security. It is now becoming a national agenda on how to properly manage migrant labor in order to balance economic growth and societal goals. Ongoing practices of illegal activities along border areas ranging from smuggling of goods and narcotics, illegal weapon, crimes, and human trafficking. This partly affects national economic system, biodiversity and national security. Occurrence of disappeared diseases e.g. Malaria, AIDS, tuberculosis, elephantiasis, epidemics , which are associated with migrant labors as well as shortage of social services

65

delivery not only for Thai nationals but also for cross-border peoples and migrants along border areas 4.Infrastructural Aspect Greater connectivity facilitates increased volume of cross-border trade and more people mobility. Developed infrastructure drives rapid urbanization and industrialization along border areas. Convenient connectivity creates more markets for rural farmers. Under-developed infrastructure in some parts of three neighbouring countries in GMS limits cross-border trade expansion. Concerns over there will cause backwash effects by massive emigration of peoples to particular border nodes/gateways. Concerns over road safety and response to road accidents. Inadequate urban infrastructure, land use plan and urban planning in response to rapid industrialization and urbanization in some cities along border areas. Still weak collaboration among local private sectors in providing efficient cross-border logistics services. Increased forest encroachment due to rapid industrialization and urbanization along major border areas. Emerging urban environmental problems i.e. solid waste, waste water, traffic congestion and air pollution at major border areas. Ongoing illegal trade of wildlife animals.

5. Environmental and Natural Resources Aspect

Biodiversity conservation corridors serve as development strategy to reduce threats on natural resources and environment. Local capacity building in planning and managing natural resources will be enhanced particularly for the rural poor people and government staff. Regional cooperation and integration e.g. GMS and ACMECS open up opportunities to harmonize rules and regulations on trade and investments.

6. Institutional Aspect

Problems related to complex and changing financial system and relevant rules and regulations as well as money transfer procedures in neighbouring countries affect cross-border trade environment. Three neighbouring GMS countries namely Lao PDR, Cambodia and Myanmar lack of practices in international trade and limited authorized banks. Border trade mostly transacted on informal manner relying on mutual trust. This affected trust and confidence diluting business environment and trade expansion among crossborder traders. So it needs to be upgraded toward international standard.

Source: Asian Development Bank. (2005). Greater Mekong Sub-region Biodiversity Conservation Initiative: Strategic Framework and Technical Assessment 2005-2014, Manila, ADB Changhlam, A. (2005). Promoting Thailand-Myanmar border trade: paper presented at the seminar on Turning Maesod as gateway of East-West Economic Corridor at Central Maesod Hill Hotel, Maesod district, Tak province on 23 September 2005 Office of the National Economic and Social Development Board. (1998). Direction for border areas economic development, Bophit Printing, Bangkok World Bank. (2006) Labor Migration in the Greater Mekong Sub-region, Synthesis Report: Phase I

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Chapter 4 Status of Regional Development in Thailand It is worth examining the progress and trend of regional development in Thailand in order to gain insightful development patterns. This can also lead to better understanding on extent of existing interregional and intra-regional gaps as well as international development disparities especially with neighbouring countries so that the regional economic integration and appropriate regional development policies could subsequently be proposed. 4.1 Interregional Disparities Regional disparity is a matter of development concern for over a 26-year interval. There was clearly existent of core and periphery development pattern in Thailand. Bangkok and vicinities and the Eastern region represent the core regions in which dense economic activities are concentrated. Whereas other regions are regarded as periphery exemplified by lower economic development activities, which are further less developed in border regions through out the country. In terms extent of regional variation, in 1981, the Gross Regional Product (GRP) Per Capita differential of Bangkok and vicinities were higher than that of the average of the whole kingdom at 3.06 times, furthermore its growth were well advanced than the Northeastern and Northern regions for 7.93 and 4.85 times, respectively. Then the GRP Per Capita kept increasing and widening due to adoption of a combination of import-substitution industrialization and export-oriented industrialization strategies complemented with promotion of inward foreign direct investments. Until 1997, Thailand faced economic crisis that negatively affected the regional growth patterns. As a result, in 1999, it brought the regional per capita disparities of Bangkok and vicinities down to 2.83 times higher than the average of whole kingdom. This resulted from such dense concentration of economic activities including local and foreign direct investments were mainly still concentrated in Bangkok and vicinities and the Eastern Seaboard region. On the contrary, the difference of GRP Per Capita of Bangkok and Vicinities remained even higher than that of Northeastern and Northern regions as high at 8.79 and 5.7 times, respectively. Interestingly, the growth of GRP Per Capita in Eastern region was also higher than the Northeastern and Northern regions for as high at 5.77 and 4.01 times, respectively. Please see the trend of GRP Per Capita in Figure 4.1.

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(Unit: Baht)

1981 2007p1 350,000 2006p 2005

250,000 300,000

1982 1983 1984

2004 2003 2002 2001

200,000 150,000 100,000 50,000 0

1985 1986 1987 1988

2000 1999 1998 1997 1996

Whole Kingdom Southern Central

1989 1990 1991 1992 1995 1994 1993

Northern Western

Northeastern Eastern Bangkok and Vicinities

Source: Gross Regional Product for the Year 1981-2007, Office of the National Economic and Social Development Board

Figure 4.1: Gross Regional Product Per Capita in Thailand During the Years 1981 To 2007 In 2007, the disparities of GRP Per Capita between Bangkok and vicinities and the whole kingdom steadily declined, but surprisingly the differences of Bangkok and vicinities and the Northeastern and Northern regions remained almost at slightly lower points as it were in 1981. This distinctly resulted from the GRP Per Capita of the two growth magnets consisting of Bangkok and vicinities and the Eastern region have been converging since 2006, and the growths of these areas together remain increasing signifying a warning of wider regional disparities. This is probably substantiated by the increasing degree of primacy of Bangkok and vicinities since 2001. Please see details in Figure 4.2.

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1.32 1.3 1.28 1.26 1.24 1.22 1.2

Index

1.3 7 1.2 8 1.2

6 1.2 4 1.2 2 1.2

5 1.2

6 1.2

6 1.2

Y ear 1.18 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Population Registration, Department of Local Administration, Ministry of Interior

Figure 4.2: Primacy Index of Bangkok and Vicinities During 1999 To 2007 It was additionally remarkable that the growth of GRP Per Capita in Eastern region was still higher than the Northeastern and Northern regions for a peak at 7.77 and a high at 4.92 times, respectively, which were apparently higher than the points as it were in 1981. Even so, Central region performed well above national average, and its tendency has continued to expand since 1994. Northeastern was yet the most backward region, followed by Northern region. While Southern and Western regions together went along with moderate level of development. From this explanation, interregional disparities have long been alarmed, and will continue to expand. Therefore, it is internally challenging for Thailand on how to timely bring regionally balanced development of rural and urban areas toward countering the stark magnet of Bangkok and vicinities through enhancing hierarchical diffusion of economic activities as well as promoting interdependently integrated system of cities in Thailand. This should also be carried out in conjunction with actively responding to the external forces of spatially and sectorally closer economic integration frameworks with the neighboring countries under the GMS, ACMECS, IMT-GT and BIMSTEC. 4.2 Intra-Regional Disparities Although much efforts have been made by both public and private sectors to advance development in border regions over a recent decade, supplemented by continued promising cross-border trade growth, it however appears that these areas have persistently been lagging behind comparing with other regions in the country evidencing from there exists apparent intra-regional disparities measured by GRP Per Capita, Gross Provincial Product (GPP) and GPP Per Capita. This may significantly be resulted from low degree of hierarchical diffusion of economic activities from the heart of capital city of Bangkok metropolitan to the hinterland in the respective five-border regions.

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A comparison with an eight year interval between 2002 and 2007, the tendency of structure of outputs in all border regions were recently in reversing trend toward more emphasis on agriculture sector due to unexpectedly increasing global demand of many agricultural products. As a result, this has generated more job opportunities for Thai famers since 2007. Though expanding with high economic growth rate during recent an eight-year period, widening gaps of GRP Per Capita and GPP Per Capita were still present in five-border regions. In 2004, these border regions characterized by remoteness and majority of people engaged in agricultural sector and lived in rural areas, which were homes of 21.8 millions accounted for 34.6 % of the whole country population. The total numbers of people below poverty line were at 3.42 millions. The ratio of poverty incidence was at 15.70 %, or 1.40 times above national ratio of poverty, which was 11.25%. Despite the fact that border regions were habitats of one-third of national population, its share of poverty incidence was as extreme at almost half (48.4%) of aggregate numbers of those nation-wide poor people. Please see national poverty line and ratio of poverty in Appendix E. Most of daily minimum wages in border provinces were lower than Bangkok and vicinities (203 Baht/day) for 1.20-1.36 times. The socially and economically dynamic structures of individual border regions are as follows: 4.2.1 Eastern region Economic compositions in three-eastern border provinces were diverse. Comparing between 2000 and 2007, economic structure of Trat province, an agricultural base, remained unchanged with non-agriculture sector shared slightly higher proportion at 54% than agriculture reflecting a very narrow agro-processing industries in this province. Chantaburi and Sa Kaeo provinces together had a rather similar movement, in which agriculture sector turned around from the share at around 24-26 % in 2000 to 2835 % in 2007 in order to respond to an increasing demand of agricultural commodities in global market. Please see details in Table 4.1. The daily minimum wages in Eastern region ranged from 156-163 Baht/day. Please see details in Appendix F. Table 4.1: Gross Provincial Product of Eastern Border Provinces
at Current Market Prices Structure of Outputs (%) Border Provinces Agriculture
2000 2007p1

NonAgriculture
2000 2007p1

Gross Provincial Product (Million Baht)

2000 2007p1 Growth (%)

Gross Provincial Product Per Capita (Baht)

2000 2007p1 Growth (%)

Eastern Region 1.Sa Kaeo 2.Chanthaburi 3.Trat GRP of 3 Border provinces GRP Per capita of 3 Border provinces 26 24 46 28 35 46 74 76 54 72 65 54 16,496 21,174 13,508 28,593 38,126 21,473 73 80 59 33,209 43,208 60,288 53,758 72,392 89,601 62 68 49

51,178

88,192

72

45,568

71,917

58

Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board

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Nevertheless, non-agriculture sector comprising industry and services including crossborder trade with Cambodia still played major role in this regional border economy. Especially, cross-border trade, retail and wholesale trading as well as industrial development contributed significantly to the GPP of Sa Kaeo province; the growth of GPP and GPP Per Capita rose at acceptable rate. Nonetheless, intra-regional disparities in these three provinces appeared to increase from 3.5 times below GRP Per Capita of Eastern region in 2000 to 4.55 times in 2007. Sakaeo and Trat provinces had ratio of poverty above national rate at 1.22 and 1.10 times, respectively. So, Sa Kaeo province faced the problem of most widening gaps, which was below the GRP Per Capita of Eastern region at 5.8 times in 2007; special attention and much development efforts should consequently be placed to this province. 4.2.2 Northeastern region Economic structures in nine-border provinces also known as populous yet resource scarce region were also different features. Comparing between 2000 and 2007, economic structure of Ubon Ratchathani province, a regional growth center, remained unchanged with non-agriculture sector shared as high proportion at 84 %, while agriculture shared a much smaller proportion at 16%. Border provinces of Si Sa Ket, Nakhon Phanom, Loei and Nong Khai had experienced expanding share of agriculture sector between 2000 and 2007 ranging from 11-14 %. Whereas the share of agriculture sector in Surin, Buriram, Amnat Charoen and Mukdahan provinces slightly grew at approximate 2-7 % between above period. Please see details in Table 4.2. The daily minimum wages in Northeastern region ranged from 150-162 Baht/day. Table 4.2: Gross Provincial Product of Northeastern Border Provinces
at Current Market Prices Structure of Outputs (%) Border Provinces Agriculture
2000 2007p1

NonAgriculture
2000 2007p1

Gross Provincial Product (Million Baht)

2000 2007p1 Growth (%)

Gross Provincial Product Per Capita (Baht)

2000 2007p1 Growth (%)

Northeastern Region 1.Nakhon Phanom 2.Nong Khai 3.Si Sa Ket 4.Buri Ram 5.Surin 6.Ubon Ratchathani 7.Amnat Charoen 8.Loei 9.Mukdahan GRP of 9 Border Provinces GRP Per Capita of 9 Border Provinces 22 19 20 21 20 16 25 25 17 34 30 34 25 22 16 30 37 24 78 81 80 79 80 84 75 75 83 66 70 66 75 78 84 70 63 76 14,808 17,858 25,661 30,260 26,700 41,162 6,853 16,739 7,968 188,009 23,229 34,285 49,254 51,094 43,601 66,720 11,567 33,942 12,639 326,331 57 92 92 69 63 62 69 103 59 74 21,386 35,237 65 21,147 19,796 17,872 19,830 19,696 23,837 18,549 26,915 24,827 31,468 35,800 32,517 31,497 30,645 29,474 36,317 51,992 37,426 49 81 82 59 56 24 96 93 51

Source:

Gross Provincial Products of border provinces for the Office of the National Economic and Social Development Board

year

2000

and

2007,

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Comparing within non-agriculture sector, limited share of manufacturing development was noticeable. Nakhonpanom was the least industrial activity province at 3 %, while Buriram, Nong Khai and Mukdahan provinces had more industrial development at 16.22, 13.51 % and 13.39 %, respectively. The shares of retail and wholesale trading as well as cross-border trade were vital proportion in all border provinces ranging from 20 % to 34.32 %. Though presently located in the most backward region, intra-regional disparities in these nine border provinces yet appeared to steadily increase from 1.2 times below GRP Per Capita of Northeastern region in 2000 to 1.38 times in 2007. Ubon Rachathani, Surin, Buriram and Nakhon Phanom provinces faced the problem of exacerbating gaps. The ratios of poverty in seven border provinces excluded Ubon Ratchatani and Nong Khai were higher than that national ratio ranging from 1.06 times (Amnat Charoen) to 3.01 times (Surin). As a result, the northeastern border provinces were most long exposed to widespread incidence of poverty in Thailand. To cope with these phenomena, some rural people decided to seasonally and circularly migrate for seeking jobs either in Bangkok Metropolitan, the Eastern Seaboard region, other regional growth centers or abroad. Thus such development initiatives and policy interventions should be suitably targeted toward poverty eradication as well as bringing intra-regional income equality in particular and equitable interregional development in general. 4.2.3 Northern region Economic structures of eight-northern border provinces were not much diversified. Similar to other border regions, agriculture sector drove backward between 2002 and 2007 at around 12-20 % in Uttaradit, Nan, Phayao, Chiang Rai, Maehongson and Tak provinces and at 6-10% in Chiangmai and Phitsanulok provinces, which both are regional growth centers. Please see details in Table 4.3.The daily minimum wages in Northern border provinces ranged from 149-168 Baht/day.

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Table 4.3: Gross Provincial Product of Northern Border Provinces

at Current Market Prices Structure of Outputs (%) Border Provinces Agriculture
2000 2007p1

NonAgriculture
2000 2007p1

Gross Provincial Product (Million Baht)

2000 2007p1 Growth (%)

Gross Provincial Product Per Capita (Baht)

2000 2007p1 Growth (%)

Northern Region 1.Phitsanulok 2.Uttaradit 3.Nan 4.Phayao 5.Chiang Rai 6.Chiang Mai 7.Mae Hong Son 8.Tak GRP of 8 Border provinces GRP Per capita of 8 Border provinces 20 20 20 22 21 11 17 15 26 31 34 32 32 17 38 33 80 80 80 78 79 89 83 85 74 69 66 68 68 83 62 67 35,175 15,545 12,214 13,206 31,531 72,483 5,871 17,230 203,255 54,304 27,253 21,259 23,279 53,157 120,972 10,142 36,190 346,556 54 75 74 76 69 67 73 110 71 33,038 55,459 68 43,445 32,736 26,092 25,664 27,364 47,365 27,045 34,589 64,793 56,052 43,861 43,960 44,505 76,388 44,511 69,601 49 71 68 71 63 61 65 101

Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board

Comparing within non-agriculture sector, in 2007, limited share of manufacturing development was obvious. Chiang Rai province was the least industrial activity at 5.85 %, while Uttaradit, Tak and Phitsanulok provinces had higher level of industrial development at 18.25, 18.16 % and 11.52 %, respectively. The shares of retail and wholesale trading as well as cross-border trade were at meaningful proportion in all border provinces ranging from 16.47 % to 25.68 %. Still, intra-regional disparities in these eight border provinces slightly increased from 1.36 times below GRP Per Capita of Northern region in 2000 to 1.37 times in 2007. Chiangrai province most encountered continuing intra-regional gaps. The ratios of poverty in eight border provinces widely varied, which were higher than national ratio ranging from 1.06 times (Phitsanulok) to 3.01 times (Mae Hong Son). As a result, the Northern border provinces ranked second on widespread incidence of poverty in Thailand. Therefore, priority development polices and programs should be consistently addressed this divergence. 4.2.4 Western region Unlike other regions, economic structures of four- western border provinces rather well developed. Even so, a small reversal of agriculture sector between 2000 and 2007 at around 3-16% was perceived reviving the significant contribution of this sector to the regional economy of respective border provinces. Comparing within non-agriculture sector, in 2007, significant share of manufacturing development progress in these border provinces were rather equally evident. Prachuapkhirikhan province was the least industrial activity at 23.34 %, while Ratchaburi, Kanchanaburi and Phetchaburi provinces maintained higher level of industrial development at 33.6, 27.46 % and 25.95 73

%, respectively. Ratchaburi alone also generated a great amount of electricity at a large share of 26.69 % of GPP. The shares of retail and wholesale trading as well as crossborder trade accounted for quite high particularly in Kanchanaburi province; it ranged from 11.74-24.23 % in these four-border provinces. Please see details in Table 4.4. The daily minimum wages in Western border provinces ranged from 160-165 Baht/day. Table 4.4: Gross Provincial Product of Western Border Provinces
at Current Market Prices Structure of Outputs (%) Border Provinces Agriculture
2000 2007p1

NonAgriculture
2000 2007p1

Gross Provincial Product (Million Baht)

2000 2007p1 Growth (%)

Gross Provincial Product Per Capita (Baht)

2000 2007p1 Growth (%)

Western Region 1.Kanchanaburi 2.Ratchaburi 3.Phetchaburi 4.Prachuapkhirikhan GRP of 4 Border Provinces GRP Per Capita of 4 Border Provinces 15 14 10 22 22 17 25 28 85 86 90 78 78 83 75 72 43,531 55,100 31,673 30,084 160,388 69,025 105,955 53,241 55,215 283,436 59 92 68 84 77 65,938 112,766 71 58,841 68,193 71,175 65,543 89,178 128,358 117,131 116,395 52 88 65 78

Source:

Gross Provincial Products of border provinces for the Office of the National Economic and Social Development Board

year

2000

and

2007,

It is notable that a minor intra-regional income disparities among these four-border provinces was only seen in Kanchaburi province at 1.10 times below GRP Per Capita of Western region in 2007. Three other western border provinces performed well in alleviating poverty down to about half of national ratio, except Kanchanaburi province which had ratio of poverty at 1.50 above national ratio. Therefore, priority development polices and programs should be directed toward Kanchanaburi province in particular and the Western region in general. 4.2.5 Southern region Economic structures of six- southern border provinces known as resource rich region somewhat developed but slightly behind Western border region. Despite that, significant reversal of agriculture sector between 2000 and 2007 at around 3-16% in Ranong, Satun, Songkhla and Chumphon provinces and approximately as high at 21 % in Yala province and 25% in Narathiwat province were observed. These turnarounds pushed the share of agriculture sector back as tall at 49-59 % in respective fiveprovinces, excluding Songkhla province at 29 %. Please see details in Table 4.5. The daily minimum wage in Southern region ranged from 153-169 Baht/day.

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Table 4.5: Gross Provincial Product of Southern Border Provinces

at Current Market Prices Structure of Outputs (%) Border Provinces Agriculture
2000 2007p1

NonAgriculture
2000 2007p1

Gross Provincial Product (Million Baht)

2000 2007p1 Growth (%)

Gross Provincial Product Per Capita (Baht)

2000 2007p1 Growth (%)

Southern Region 1.Chumphon 2.Ranong 3 Satun 4.Songkhla 5.Yala 6.Narathiwat GRP of 6 Border Provinces GRP Per Capita of 6 Border provinces 38 46 50 24 28 34 49 49 53 29 49 59 62 54 50 76 72 66 51 51 47 71 51 41 22,692 11,504 17,973 101,780 17,631 20,187 45,580 17,309 27,217 168,611 39,198 46,468 101 50 51 66 122 130 49,763 69,304 70,482 79,461 41,485 29,774 92,192 94,640 97,164 119,620 84,164 62,625 85 37 38 51 103 110

191,767

344,383

80 56,712 91,734 62

Source: Gross Provincial Products of border provinces for the year 2000 and 2007, Office of the National Economic and Social Development Board

Comparing within non-agriculture sector, between 2000 and 2007, dissimilar changes in particular provinces noticed. Ranong province clearly increased share of manufacturing and retail and wholesale trade as well as cross-border trade. Chumphon and Songkhla provinces faced a slight decrease of manufacturing and trade activities. Satun province demonstrated slight decrease share of manufacturing activities, but received slight increase of trading movements. The two Southern most border provinces of Yala and Narathiwat, which were under unrest situation for almost four years apparently encountered economic downturn. The shares of retail and wholesale trading as well as cross-border trade were negatively affected ranging from -6.48 % in Yala and -11.55 % in Narathiwat provinces. The share of manufacturing development decreased at -3.1 % in Yala province, but it increased 1% in Narathiwat province. Only Narathiwat province did find having ratio of poverty above national ratio at 1.61 times, whereas incidence of poverty dropped significantly approximate half of national ratio in the rest of Southern border provinces. It is clearly shown that the ongoing unrest circumstances has pessimistically distressed the economic growth and the state of human well-being of the people in three border provinces including Pattani in particular and the other two neighboring provinces of Songkhla and Satun. For that reason, while restoring peace and public order in the affected areas, aggressive and broad-based local economic development as well as strongly linking with regional and national economy should be proactively undertaken in response to specific economic and social needs of the local border people.

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4.3 Existing Industrial Development Along Thai Border Area Rapid industrialization has also associated with city primacy particularly in Bangkok and its vicinities. Bangkok metropolitan plays important roles as both commercial and administrative centers of Thailand. The growth of Bangkok and its vicinities have become abnormal central place causing highly imbalanced spatial and economic development. In addressing this challenge, Royal Thai Government has implemented policies on investment promotion since 1993. The specific objectives were to equitably disperse economic activities to regional provinces. The Board of Investment (BOI, 2008) has spatially divided into three Investment Zones based on economic factors. These are: Zone 1 consists of central provinces with high income and good infrastructure. They are Bangkok, Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi and Nakhon Pathom. Zone 2 comprises of 12 provinces. They are Samut Songkhram, Ratchaburi, Kanchaburi, Suphanburi, Ang Thong, Ayutthaya, Saraburi, Nakhon Nayok, Chachoengsao, Chonburi, Rayong and Phuket Zone 3 includes the remaining 58 provinces with low income and less developed infrastructure. All border provinces are located in this zone.

Priority activities were designated by BOI placing emphasis on agriculture and agricultural products, technological and human resource development, infrastructure, public utilities and basic services, environmental protection and conservation, as well as targeted industries. A wide range of privileges on reduction of import duty on machinery, corporate income tax exemption for a certain period was granted to investors. Despite much policy attempts have been in place, approximate 80 % of capital investment was even now converged in Bangkok and vicinities, the Eastern Seaboard region and other 10 provinces surrounding Bangkok in the first nine months of 2003 owing to investors enjoy positive advantages of agglomeration economies in these regions, (NESDB and ADB, 2005). Consequently, actual investment in the border provinces has been far behind causing out migration of Thai labor to these strong growth areas as well as worsening interregional disparities in Thailand. Nevertheless, there is a prominent investment platform along Thailand-Myanmar border area. It is located in Maesod district, Tak province, which plays a significant role as major industrial development location in Northern part of Thailand. Maesod district is home to labor-intensive industry particularly for garment productions. In 2003, Tak province had 464 factories. Maesod alone hosted 235 factories, which accounted for 51% of the whole province with total investment capital at 1,500 millions Baht, and it generated export values at 3,100 millions Baht per year, (NESDB). The key laborintensive industries were textile and garment, canned food, wood furnitures, jewelry and accessories. In addition, there was increasing emergence of service industries e.g. garage and car maintenance shops, etc. The principal reason for investors in locating these industrial plants in Maesod was to take advantage of cheap labor from Myanmar. In 2003, approximate 10,000 Myanmarnese workers were employed in Maesod district.

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4.4 International Development Disparities Between Thailand and Neighbouring Countries In addition, significant different stages of economic and social development between Thailand and neighbouring countries have been observed, which can be measured by Gross National Income and Gross National Income Per Capita. These international disparities open a wide range of possibilities to foster sectoral and spatial development cooperation among bordering countries within the GMS in order to mutually share the benefits/growths of regionalization and globalization. 4.4.1 Gross National Income Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries Almost a recent decade, the tendency of differences on relative size of economy between Thailand and particular neighbouring countries as represented by Gross National Income Purchasing Power Parity have steadily been declining, yet there are wide gaps. Lao PDR faced the widest development divergences. The size of Thais economy had larger than Lao PDRs economy for 46.98 times in 2006, and the trend of disparity was fluctuating. Then, it followed by Cambodia. The differences between the Cambodian to Thais economy gradually diminished, but there existed that the Thais economy had bigger than Cambodians economy for 21.4 times in 2006. Myanmar ranked third, in which the Thais economy had greater than 13.05 times in 2000.
Unit: Number of Time

50 45 40 GNI PPP Gaps (Times) 35 30 25 20 15 10 5 0 2000 Lao PDR Malaysia 2005 Myanmar 2006 Cambodia

Source: World Development Indicators database, April 2008, World Bank Note: Data for Myanmar was not available for the year 2005 and 2006.

Figure 4.3: Gross National Income Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries at Current International Price

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For the subsequent years, data were not available, but the trend of divergence was probably varied similar to that of Lao PDR. Malaysia, which was more advanced than Thailand in terms of technology and capital accumulation came fourth with the Thais economy had large than Malaysians economy at 1.48 times in 2006. Please see details on the trend of dwindling development gaps between Thailand and neighbouring countries in Figure 4.3. However, it is clearly shown that there remain such large development gaps between Thailand and Lao PDR, Cambodia and Myanmar in particular and with Malaysia in general. It is therefore necessary to find means for intervening/narrowing these international development disparities. In this regard, creating special border economic zones of Thailand with potential linkages with neighbouring countries could be one of the key solutions. 4.4.2 Gross National Income Per Capita Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries The international differences of Gross National Income Per Capita between Thailand and neighbouring countries have shown at distinct gaps, in which the patterns of disparities in some countries were somewhat reverse from the above Gross National Income. It is likely that the tendency of these income disparities will be slowly weakened in all neighbouring countries. Thailands income had higher than Myanmar at 9.8 times in 2000, while data on the subsequent years were not available. And the trend might be little by little shrinking. In 2006, Cambodia came second, in which Thailand had higher income at 4.8 times. Lao PDR ranked third, in which Thailand had higher income at 4.27 times. On the other hand, Malaysia had higher income than Thailand at 1.63 times. Please see details in Figure 4.4.
Unit: Number of Time
12

GNI Per Capita PPP Gaps (Times)

10

0 2000 Lao PDR Malaysia 2005 Myanmar 2006 Cambodia

Source: World Development Indicators Database, April 2008, World Bank Note: Data for Myanmar was not available for the year 2005 and 2006.

Figure 4.4: Gross National Income Per Capita Purchasing Power Parity Gaps Between Thailand and Neighbouring Countries

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As a result, this becomes a major influencing factor for a large number of people from neighbouring countries particularly from Myanmar, Cambodia and Lao PDR both illegally and legally immigrates in order to seek for jobs in Thailand. In contrast, a significant number of southernmost provinces people also searches for works in Malaysia. For that reason, closer cross-border cooperation and development in the form of special border economic zones in Thailand could partly help bridge international income disparities in particular and international development disparities in general between Thailand and these neighbouring countries.

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Chapter 5 Prospects for Developing Special Border Economic Zones in Thailand Thailand is strategically placed at the intersection of mainland South East Asian region. Thailands participation in regional cooperation and integration programs i.e., the GMS, ACMECS, IMT-GT and BIMSTEC have driven meaningful spatial implications in pursuit of fostering equitable regional and rural development. It is widely recognized that major transnational economic corridors are important means to potentially spur growth to the hinterland areas. In this regard, it also placed particular opportunity to exploit economic complementarities of sister cities or city pairs toward developing special border economic zones at the key cross-border areas as well as other potential gateways linking with neighboring countries. Therefore, it is necessary to take stock and assess the feasibility and pro and cons of establishing special border economic zones in Thailand. 5.1 SWOT Analysis on Prospect for Promoting Special Border Economic Zones 5.1.1 Strengths Existing macroeconomic policies supports on regional economic and social integration frameworks i.e. GMS, AECMECS, IMT-GT, and BIMSTEC help streamline the direction of cross-border development cooperation. Royal Thai Government has strongly determined to promote sister cities program, and in which there is greater potential, it will play larger role as special border economic zones linking with neighboring countries. Thailand has already organized important arrangements for administering special border economic zones by simplifying rules/regulations/procedures and tax and non-tax investment privileges, one stop service center, labor management and foreign currency services to attract investments to selected border regions. Thailand has now extended MFN and AISP trade privileges to four-neighboring countries namely Lao PDR, Cambodia, Myanmar and Vietnam. This can facilitate greater flow-in of agricultural and intermediate goods from these neighbouring countries to Thailand for either further processing, consumption or export.

5.1.2 Weaknesses Thailand encountered some trade discriminations measures introduced by neighboring countries, which affected market penetration of Thai products. It takes sometimes to harmonize or simplify different rules/regulations on trade and investments in respective neighboring countries. Many efforts are needed to ensure that special border economic zones will have lesser degree of enclave development along border areas. Otherwise, greater physical connectivity along economic corridors may induce back wash effects in the border regions. The three Southern most provinces of Thailand have been facing turmoil hindering socio-economic development as well as affecting the state of wellbeing and human security.

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5.1.3 Opportunities Flourishing growth rate of cross-border trade with neighboring countries rationalize to establish industrial and investment platforms along potential border areas in order to take advantage of close proximity to potential markets and regional supply networks in respective neighboring countries. Hierarchically distribute growth and prosperity to the border regions toward reducing interregional and intra-regional disparities within Thailand. Sharing of resources i.e. labor, raw materials, infrastructure, capitals and technology for co-production arrangements. This is directed toward fostering closer economic, social and cultural relations as well as reducing stage of development gaps between Thailand and neighboring countries. Boosting people and tourist flows between Thailand and neighboring countries. Efficiently managing problems on illegal immigration into Thailand, control communicable diseases and epidemics, smuggling, illegal cross-border trade of goods and animals. Greater penetration of Thais products to neighboring countries and nearby countries markets i.e. China, Vietnam, Singapore, India, Bangladesh, Nepal and Bhutan through transit trade. Engaging cross-border regional production networks, outsourcing as well as integrating special border economic zones into global supply chain networks.

5.1.4 Threats Political sensitivity within particular neighboring country or occasional border conflicts between Thailand and particular neighboring country likely affected business and investment environment along border areas in particular and the whole conflicting countries in general. Spread of narcotics and human trafficking could be increased.

5.2 Potential Geographical Border Areas and Economic Sectors for Cross-Border Development and Cooperation Toward Development of Special Border Economic Zones Linking With Neighboring Countries By combining relevant Royal Thai Government policies and priorities development areas with analytical judgments from this study, which are substantiated by economic rationales e.g. connectivity, accessibility, level of economic development of border regions preferably the backward regions/provinces, there are eight provinces that have preliminarily high potentials to develop toward special border economic zones in Thailand for economically, socially and culturally linking with neighbouring countries. The details of geographical areas and prospective economic sectors appear in Table 5.1.

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Table 5.1: Potential Geographical Border Areas and Economic Sectors for Developing Special Border Economic Zones in Thailand Preliminary potentials for cross-border development toward creating special border economic zones in Thailand Industry Agriculture Tourism

Border Provinces Cross-border trade

1.Chiang Rai province 1.1 Maesai district

Logistics services

1.2 Chiangsaen district 1.3 Chiangkhong district

Contract farming to supply Golden triangle, historical Distribution center for food and agro-processed tourism, agro and ecoindustries for domestic and tourism international markets. Historical and cultural Distribution center tourism Logistics services and distribution center

Agro-processed industries, canned fruits, jewelry and precious stones, garments, assembly electronic parts and electric appliances, machines, agricultural machines, medical equipments, human drugs, printing and file producing. -Resource-based industries e.g. garments, textiles, agroprocessed industries, jewelry and precious stones, processed woods and furnitures

Contract farming to supply for food and agro-processed industries for domestic and international markets.

2. Tak province Maesod, Maeramad and Pobpra Districts

Contract farming to supply Nature-based or for food and agro-processed adventure link industries for domestic and Myanmar international markets.

soft Logistics services with e.g. warehouses, distribution center and packing services

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Border regions Cross-border trade

Preliminary potentials for cross-border development toward creating special border economic zones in Thailand Industry Agriculture Tourism
-New industries e.g. electronic parts and electric appliances, as well as marketled industries to penetrate South-Asian countries e.g. consumer goods, agricultural machines, construction materials, ceramics, plastic, auto parts, toys, shoes, and handicrafts.

Logistics services

3.Kanchanaburi province 4. Ranong province 5.Mukdahan province 6.Aranyaprathet district, Sakaeo province 7. Trat province 8.Songkhla province, Sadao, Hat Yai and Muang districts

Fishery and rubber industries

Natural plantation Light industries and packing Contract farming services

Three pagodas pass and historical tourism rubber Agro and eco-tourism

Sea port and multimodal transportation logistics center

Rubber industries, auto parts, Rubber plantation processed sea food, frozen food

Cultural tourism, border shopping at Sadao and Hat Yai cities

Cross-border logistics services, distribution center

Source: International Economic Strategy Unit, Office of the National Economic and Social Development Board. (2005). Progress Report on Establishment of Special Border Economic Zone in Chiang Rai province Office of the National Economic and Social Development Board. No year of publication. Development of Special Border Economic Zone in Tak Province Office of the National Economic and Social Development Board. (2006). Final Report on Feasibility Study on the Establishment of Special Border Economic Zone in Sadao District, Song Khla Province linking with Bukit Kayu Hitam, Kedah State of Malaysia prepared by Chula Unisearch, Chulalongkorn University Tsuneishi, T. (2008). IDE discussion paper no.153, Development of border economic zones in Thailand: Expansion of border trade and formation of border economic zones, Chiba, Institute of Developing Economies (IDE), JETRO Remarks: Refers to there exists of prospective economic activities.

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Chapter 6 Conclusions and Recommendations 6.1 Conclusions The Greater Mekong Sub-region regarded as a geo-spatial unit is very important economic bloc due to it shares common culture, religion and linguistic base with a big threshold of population and resources. This region also has great potential for development underpinning by the GMS and ACMECS Development Cooperation Programs. Thailand located at the strategic location of South East Asian region has been intensifying economic interdependence with neighbouring countries through increasing cross-border trade and peoples mobility, which made possible by means of greater degree of physical connectivity in the form of economic corridors and continuous trade and investment facilitation. As a result, it opens up new opportunity for Thailand to engage cross-border production and supply chain linkages with neighbouring countries by establishing special border economic zones in prospective locations in order to take advantage of cheap labor from Cambodia, Lao PDR and Myanmar and wider access to their primary markets, regional supply networks as well as penetrating to regional and global markets. Robust cross-border trade relations between Thailand and neighbouring countries have been observing since the last decade, which trading patterns are becoming quite diverse depending on their comparative advantage, division of labor and specialization of production. In general, Thailand mainly exports consumer, intermediate and some capital goods to neighbouring countries, and imports primary goods such as agricultural and fishery products and ranges of resources from neighbouring countries. Cross-border trade gaps between Thailand and individual neighbouring countries greatly varied from one country to another. In addition, cross-border retail trades particularly carried out by rural poor are always conducted at the specific allowed border crossings. It is notable that three neighbouring countries-Cambodia, Lao PDR and Myanmar- are rapidly urbanizing. The trend of capital investment out-flows from Thailand to these neighbouring countries appears to be intensifying as a result of greater trade and investment openness in the Greater Mekong Sub-region. Cross-border trade, commerce, investments as well peoples mobility triggered a multi-facet of impacts on Thai economy and society comprising six aspects: political, economic, social, infrastructural, environmental and institutional characteristics. These need to be addressed with awareness. Though the growth of cross-border trade and commerce is flourishing, it is probable that this progress might to some extent lead to variation on regional development impacts. However, Thailand is facing significantly chronic interregional and intra-regional disparities, in which the Northeastern has long been a backward region followed by Northern region. In addition, the degree of primacy of Bangkok and vicinities continue to steadily expand substantiating the existence of regional variations. There exist obvious intra-regional disparities. Out of 30 provinces, 19 backward border provinces identified were Sa Kaeo and Chantaburi (Eastern region); Ubon Ratchathani, Surin, Buriram and Nakhon Phanom (Northeastern region); Chiangrai, Uttaradit, Nan, Phayao, Chiang Mai, Mae Hong Son and Tak (Northern region); Kanchanaburi (Western region); Narathiwat, Yala, Chumphon and Ranong (Southern region).

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Taking these cross-border trade interactions and peoples mobility as major factors, it can preliminarily be identified possible special border economic zones to be created between Thailand and individual neighbouring countries in order to bridge not only intra-regional and interregional disparities within Thailand but also to narrow international development gaps with respective neighbouring countries as follows: Cambodia The priority locations to develop special border economic zones could be: Aranyaprathet district, Sakaeo province, (Thailand) linking with Poipet city, Banteay Meanchey province, (Cambodia) Trat province, (Thailand) linking with Koh Kong, (Cambodia) The priority commodities to be produced at the proposed SBEZ are motorcycles and its parts, cement, engines, livestock feed, gas for household cooking, woven fabrics, printed textiles, gourmet powder, and chemical fertilizers, etc. Lao PDR The priority location to develop a special border economic zone could be at Mukdahan province, (Thailand) linking with Savannakhet province, (Lao PDR). The priority commodities to be manufactured at the proposed SBEZ are oil products, cars, pellet cement woven fabrics, knitted fabrics, medical equipments, digger, polymers of ethylene, tiles, tyres, etc. Malaysia The priority location to develop a special border economic zone could be at Sadao, Hat Yai and Muang districts, Songkhla province, (Thailand) linking with Bukit Kayu Hitam, Kedah state (Malaysia). The priority commodities to be manufactured at the proposed SBEZ are parts and accessories of machinery, mixed rubber, electromagnetic, other products made from steels, processed parawoods, particle board, magnetic tapes, rubber hand glove, print circuit board, etc. Myanmar The priority locations to develop as special border economic zones could be at: Chiang Rai province consists of Maesai, Chiangsaen and Chiangkhong districts, (Thailand) linking with Tachilek province (Myanmar). Tak province comprises of Maesod, Maeramad and Pobpra districts, (Thailand) linking with Myawaddy province, (Myanmar) Ranong province, (Thailand) linking with Koh Song province, (Myanmar) Kanchanaburi province, (Thailand) linking with Dawei province, (Myanmar) The priority commodities to be produced at the proposed SBEZs are gourment powder, diesel oil, vegetable oil, motorcycles, woven cloth with various colors, lead acid, Benzene oil, fishing net, human drugs, non-sweetened milk, etc.

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6.2 Policy Implications for Establishing Special Border Economic Zones in Thailand 6.2.1 Political Aspect Strengthen strong political ties between Thailand and neighbouring countries nationally and regionally. It acts as a central basis for stabilizing political relations and mutual trust with neighbouring countries, which will subsequently affect other development cooperation aspects. This also helps keep peace and national security along border areas conducive to a range of development collaborations.

6.2.2 Economic Aspect Properly manage the stability of Thai Baht currency. This will keep sustaining pace of cross-border trade flows between Thailand and neighbouring countries as well as enhancing their purchasing power. Rationally relocate specific type of industries, which Thailand is held least comparative and competitive advantages due to increasing labor cost to potential border areas in order to take advantage of cheap labor in neighbouring countries. At the same time, it provides opportunity to cooperate and coordinate cross-border spatial development and production as well as managing problems of illegal immigration of labor. Employ special border economic zone as a means to bridge both internal interregional and intra-regional gaps in Thailand and to narrow international development disparities with neighbouring countries. This can be done through two-ways linkages of growth from border nodes to the hinterland and vice versa in order to bring regionally balanced development by actively promoting regional and rural development placing particular emphasis on poverty alleviation along major economic corridors. Then establish crossborder co-production, outsourcing and cross-border supply chain networks in order to promote cross-border spill over effects, which can help reduce the development gaps between Thailand and respective neighbouring countries.

6.2.3 Social Aspect Proactively negotiate and manage problems of illegal immigration of labor and associated social consequences of cross-border migration. This will appropriately deal with the sharing of regional human capital together with enhancing cross-border human development priorities through provisions of social infrastructure and jointly utilized with neighbouring countries, where it is necessary. Strengthen cross-border social and cultural engagements in order to foster closer ties, mutual trust and confidence between Thailand and neighbouring countries. This will be a solid basis for increasing social and cultural interactions between Thailand and neighbouring countries, which can help bring sustainable peace and harmony to the GMS at large. 86

6.2.4 Infrastructural Aspect Provide adequate economic and urban infrastructure including land use planning in response to rapid industrialization and urbanization along potential border areas. This will facilitate the implementation of special border economic zones as well as upholding the joint utilization of key facilities e.g. air port and river port, etc. as well as promoting cross-border trade of energy services.

6.2.5 Environmental Aspect Comprehensively develop cross-border integrated environmental and natural resources management and protection plans for potential border areas by actively promoting public participation. Provide local capacity building for managing and protecting natural resources to local officials and local people as well as maintaining livelihood opportunities e.g. community forestry from available natural resources to local people particularly for the rural poor.

6.2.6 Institutional Aspect Strengthen institutional capacity building for advancing cross-border development via special border economic zones. This will cover various aspects needed to support flows of goods, people, capital and technology ranging from standard financial system and its rules and regulation harmonization, a range of cross-border initiatives and coordination including investment and trade polices, public-private partnerships, logistics provisions and management and spatial planning.

6.3 Recommendations 6.3.1 Explore more geographical border areas, which have high potential to develop as special border economic zones in Thailand. The objective is to investigate geographical border areas in different regions of Thailand on possibility to undertake cross-border development and cooperation with respective neighbouring countries. Active public participation in this preparatory process should be encouraged. 6.3.2 Set up a system for managing and administering special border economic zones. It can promote potential border areas as special industrial development regions in stead of full fledged special border economic zone if it is constrained by national legal procedure. 6.3.3 Establish local supply chains networks to link with the proposed special border economic zones. It is necessary to ensure that local communities and enterprises have equal opportunity to gain benefits from these industrial development regions by fostering local supply chains in providing raw material, labor, and equitable employment opportunities as well as networking with rural industries enterprises and particular rural industrial clusters in order to expand market access to neighbouring

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countries, regional and global markets. As well, active rural and community development planning should be aggressively taken into account so that local sustainable livelihoods enhancement and necessary capacity building required can appropriately be supported. 6.3.4 Cross-border logistics services provisions should be established. It is important to promote local direct investments in providing cross-border logistics services at competitive price and efficient operation. This can strengthen local business environment in competing with multinational logistics providers. In addition, collective efforts in nurturing local entrepreneurship should be initiated. 6.3.5 Close cooperation and coordination on managing social problems associated with cross-border illegal immigration should be put in place. This is to proactively respond to the increasing problems resulted from cross-border peoples mobility e.g. the need to address communicable diseases i.e., tuberculosis, elephantiasis, AIDS, human trafficking, smuggling of goods and wildlife animals and illegal immigration of labor into Thailand. A broad-based public involvement in countering these problems should be fostered. 6.3.6 Institutional capacity building for regional and local public administration system should be promoted. As special border economic zone concept is newly adopted in Thailand, a wide range of capacity building schemes for regional and local public administration system in order to efficiently deal with a multi-facet issues on cross-border cooperation and coordination ranging from harmonization of rules and regulations on cross-border trade, cross-border logistics provisions and management and cross-border spatial planning, environmental and natural resources management, traffic management and road safety, etc.

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Appendixes

93

Appendix B: Statistics of Foreign Direct Investments From Thailand To Cambodia During 1 August 1994 To 30 September 2004
Unit: Millions of $ US

No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

Category Hotel Processed woods Telecommunications Textiles Processed foods Construction Agro-industries Plastics Medias Mining Air traffic control Assembly plant Chemicals Petroleum Packaging Entertainment Total

Number of project 7 3 2 7 9 5 5 3 4 3 1 1 2 3 1 1 57

Total registered capital 123.4 38 16 8.05 7.66 7.33 11.29 4.3 2.76 3.04 2.5 2.0 1.4 1.55 0.65 5.0 234.93

Total Thai investment capital 48.38 33.92 14.8 7.72 5.76 4.53 4.39 3.26 2.69 2.52 2.25 2.0 0.89 0.82 0.65 0.50 135.15

Source: Cambodia Investment Board (CIB) retrieved from http://www.thaiset.com/thaiset/news/270147/new01.htm, on 10 June 2008

94

Appendix C: Statistics of foreign direct investments From Thailand To Lao PDR During 1988-2005
Unit: Millions of $ US

No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Category Hydro-power plant Telecommunications and transport Hotel and tourism Industry and handicraft Agri-business Banking and insurance Trading Textiles and garments Services Construction Mining Wood industries and wood furnitures Consultancy services Total

Number of project 6 9 13 90 44 6 46 38 34 17 8 17 2 330

Total Thai investment capital 1,127.5 637.3 287.9 101.4 61.7 50.8 33.8 29.8 25.3 23.1 15.7 10.5 2.4 2,407.2

Share (%) 46.83 26.47 11.95 4.21 2.56 2.11 1.41 1.24 1.06 0.96 0.66 0.44 0.10 100

Source: Department for the promotion and management of Domestic and Foreign Investment, retrieved from http://www.thaiset.com/thaiset/news/270147/new01.htm, on 10 June 2008

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Appendix D: Statistics of Foreign Direct Investments From Thailand To Myanmar During 1988 To 2006 (January)
Unit: Millions of $ US

No. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Category Industrial production Hotel Fisheries Mining Transport Oil and gas exploration Construction Real estate Agriculture Total

Number of project 16 12 7 8 4 5 2 1 1 56

Total Thai investment capital 614.6 228.6 171 121.2 107.3 48.4 37.8 14 2.7 1,345.6

Share (%) 45.7 17 12.7 9.0 8.0 3.6 2.8 1.0 0.2 100

Source: Myanmar Investment Commission (MIC), retrieved from http://www.thaiset.com/thaiset/news/270147/new01.htm, on 10 June 2008

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Appendix E: Poverty line, Ratio of Poverty, Poverty Headcount (Income side) Divided by Regions and Provinces for the Year 2004 Poverty line Baht/person/ month 1,853 1,853 1,321 1,368 1,308 1,464 1,374 1,321 1,362 1,278 1,321 1,344 1,313 1,347 1,304 1,422 1,315 1,277 1,272 1,364 1,297 1,334 1,276 1,278 1324 1,342 1,343 1,339 Ratio of Poverty (%) 1.64 1.64 2.36 0.57 0.31 1.68 10.74 3.50 8.60 4.32 10.49 3.28 4.14 3.18 1.30 12.45 10.67 7.61 5.60 13.75 5.55 16.94 5.79 4.86 5.17 7.17 5.09 Number of Poverty Headcount (x1,000) 108.4 108.4 20.2 5.6 3.4 8.5 38.5 25.0 61.8 26.8 24.3 8.9 21.2 20.4 14.0 29.2 26.2 31.4 29.4 68.8 44.0 134.8 50.1 10.3 22.5 32.2 757.4 Number of Population (x1,000) 6,608.2 6,608.2 857.7 982.1 835.8 1,088.2 508.8 357.0 713.8 718.2 620.0 231.6 271.9 513.6 642.9 1,080.0 234.1 245.4 412.5 525.9 500.1 792.2 795.4 866.3 211.4 435.5 448.7 14,889.4

Regions 1.Bangkok metropolitan 2.Central region

Provinces Bangkok metropolitan Total Nakhon Pathom Nonthaburi Pathum Thani Samut Prakan Samut Sakhon Chai Nat Phra Nakhon Si Ayutthaya Lop Buri Saraburi Sing Buri Ang Thong Chantaburi* Chachoengsao Cholburi Trat* Nakhon Nayok Prachin Buri Rayong Sa Kaeo* Ratchaburi* Kanchanaburi* Suphan Buri Samut Songkhram Phetchaburi* Prachuap Khiri Khan* Total

97

Regions 3.Northern region

Provinces

Chiang Mai* Lamphun Lampang Uttaradit* Phrae Nan* Phayao* Chiang Rai* Mae Hong Son* Nakhon Sawan Uthai Thani Kamphaengphet Tak* Sukhothai Phitsanulok* Phichit Phetchabun Total 4.Northeastern Nakhon Ratchasima region Buri Ram* Surin* Si Sa Ket* Ubon Ratchathani* Yasothon Chaiyaphum Amnat Charoen* Nong Bua Lam Phu Khon Kaen Udon Thani Loei* Nong Khai* Maha Sarakham Roi Et Kalasin Sakon Nakhon Nakhon Phanom* Mukdahan* Total

Ratio Number of Number of Poverty line of Poverty Baht/person/ Population Poverty Headcount (Thousand) month (%) 1,156 18.59 286.2 1,539.7 1,170 5.75 24.1 419.4 1,152 16.54 129.8 784.7 1,124 14.16 66.7 470.8 1,142 5.01 24.8 494.2 1,133 19.33 91.8 474.9 1,159 19.52 99.6 510.1 1,135 15.18 179.6 1,183.4 1,090 33.95 84.9 250.1 1,151 1,099 1,075 1,113 1,140 1,134 1,121 1,084 1,131 1,708 1,065 1,057 1,081 1,061 1,069 1,077 1,079 1,074 1,108 1,085 1,088 1,089 1,062 1,077 1,102 1,064 1,069 1,085 1,078 17.06 21.62 6.81 29.60 14.53 11.96 11.07 20.39 16.24 15.63 21.69 33.97 19.29 7.03 10.67 22.57 12.01 29.46 9.03 15.14 17.27 10.78 9.51 8.21 15.36 30.16 32.27 22.26 17.16 183.2 66.4 46.9 175.8 87.0 94.9 63.2 202.3 1,907.4 402.7 327.7 458.6 276.6 121.4 60.4 251.7 43.7 145.2 159.5 226.1 110.0 98.4 91.7 107.0 147.9 322.6 224.5 75.0 3,650.8 1,073.8 307.0 689.0 594.0 599.0 793.7 570.5 992.1 11,746.5 2,576.2 1,510.7 1,349.8 1,433.0 1,726.0 565.9 1,115.5 364.4 492.8 1,765.9 1,493.9 637.2 912.4 964.4 1,304.2 962.9 1,069.5 695.5 337.0 21,279.3

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Regions 4.Southern region

Provinces Nakhon Si Thammarat Krabi Phang Nga Phuket Surat Thani Ranong* Chumphon* Songkhla* Satun* Trang Phatthalung Pattani Yala* Narathiwat* Total

Ratio Number of Poverty line Poverty of Baht/person/ Poverty Headcount month (%) (x1,000) 1,147 13.04 201.8 1,166 1,160 1,176 1,186 1,173 1,201 1,239 1,129 1,151 1,190 1,106 1,104 1,100 1,164 1,242 6.76 .55 0.21 5.42 5.60 2.61 6.63 2.16 3.34 22.96 10.00 18.15 7.82 11.25 23.8 1.3 0.6 9.4 25.6 33.7 17.2 13.2 16.9 143.3 43.4 124.8 655.0 7,079.0

Number of Population (x1,000) 1,547.6 351.5 328.3 307.7 889.4 173.0 457.6 1,290.9 259.2 610.5 504.4 624.0 434.4 687.9 8.3764 62.8998

Nation-wide

Source: Table of data on poverty and income distribution, 2007, Office of Community Enterprise Development and Income Distribution, Office of the National Economic and Social Development Board Remark: The bold provinces with an asterisk (*) are those which share common land border with neighboring countries.

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Appendix F: Table of Daily Minimum Wage Rate Nation-Wide Announced by Ministry of Labor Effective on 1 June 2008 Minimum wage rate (Baht) 203 197 180 179 173 170 169 168 165 164 163 162 161 160 158 157 156 155

Provinces Bangkok metropolitan, Nakhon Pathom, Nonthaburi, Pathum Thani, Samut Prakan and Samut Sakhon Phuket Cholburi Saraburi Chachoengsao, Phra Nakhon Si Ayutthaya and Rayong Nakhon Ratchasima Ranong Phangnga and Chiang Mai Krabi and Kanchanaburi Phetchaburi and Ratchaburi Chantaburi, Prachin Buri, and Lop Buri Loei Singburi and Ang Thong Prachuap Khiri Khan, Samut Songkhram and Sa Kaeo Chumphon and Uthai Thani Chiang Rai, Trang, Songkhla, Nong Khai and Udon Thani Kamphaengphet, Trat, Nakhon Nayok, and Lamphun Kalasin, Nakhon Si Thammarat, Nakhon Sawan, Buri Ram, Pattani, Phattalung, Phetchabun, Yasothon, Yala, Sakon Nakhon, Satun, and Surat Thani Khon Kaen, Chai Nat, Roi Et, Lampang, Suphan Buri, Nong Bua Lam Phu and Ubon Ratchathani Nakhon Phanom, Narathiwat, Mukdahan and Amnat Charoen Phitsanulok Tak, Nan, Maha Sarakham, Sukhothai and Surin Phayao, Phichit, Phrae and Si Sa Ket Uttaradit Chaiyaphum

154 153 152 151 150 149 148

Source: Ministry of Labor, retrieved from http://www.mol.go.th/statistic_01.html, on 25 May 2008

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