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AEC integration to boost Thai export growth, study finds

Thailand's annual export growth should be enhanced by 1.32 percentage points after full implementation of the Asean Economic Community next year, while some products will face tougher competition under the seamless market, according to a study.

The Commerce Ministry's Trade Policy and Strategy Office conducted the study in cooperation with the economics faculty of Thammasat University.

A seminar titled "Countdown to AEC 2015" revealed figures that showed Thailand would benefit a lot from the regional integration, while it would also face some challenges due to higher competition.

Under the Global Trade Analysis Project model, annual growth in Thailand's gross domestic product will rise by 0.98 percentage point, the study found. Export growth will be 1.32 percentage point higher each year.

Major goods that will enjoy higher exports from the regional integration are agricultural products, processed foods, sugar, fuel, automobiles and parts, chemicals and petrochemicals.

Exports that might not do so well are steel and iron, fishery products, minerals, electronics and machinery. Processed meat and garments could also face slower export growth because of high competition in these industries among Asean countries.

Thailand will also import more crude oil, coal, and utility services after the free flow of human resources.

The study found that government income would increase by 0.96 per cent a year, and household incomes by an annual average of 0.98 per cent. The inflation rate will also edge up by 0.22 percentage point.

Amparwon Pichalai, director of the Trade Policy and Strategy Office, said stronger export growth would enhance demand for labour. Thus Thailand needs to develop quality labour urgently, as well as adopt more technology to support the manufacturing sector in order to support the growth in production.

She claimed that if Thailand focused more on technological development and could increase production capacity by about 1 per cent a year, it would reduce the demand for labour by 1.46 million people during the next 10 years.

She also suggested that Thai enterprises focus more on the Asean market, and consider Asean as a single country under the regional integration. This would allow them to link their supply chains and invest more in Asean countries.

Enterprises should also study other Asean countries' trade and investment rules after integration, as some law and regulations have not yet been harmonised.

Meanwhile, an Internal Trade Department seminar soliciting comments on a draft proposal on business mergers, including who will benefit or lose, showed that Asean countries would have "Trade Competition Acts" after next year's integration in order to ensure fair treatment for all member nations.

Santichai Santawanpas, deputy director-general of the department, said such legislation would be needed to ensure everyone was going in the same direction under the AEC. However, a number of countries, namely Myanmar, Laos, Cambodia, Brunei and the Philippines, do not have such a law yet. Asean, therefore, should work closely with those governments to draft the law to facilitate business growth and ensure fair benefits for all involved.

Thailand is amending its own Trade Competition Act to include state-owned enterprises so that every business will be treated under the same law. The draft amendment will also review guidelines on business mergers, according to which a merged entity should not have a market share larger than 30 per cent or total revenue of more than Bt2 billion. Otherwise, the business would need to report to the Commerce Ministry for close monitoring to prevent undue market dominance that damages competitors or consumers.


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