European firms push Thai-EU FTA talks

Economy May 16, 2013 00:00

By PRANEE MUENHANGWAREE
THE NATI

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Representatives of the European business community in Thailand yesterday said the country's service sector was in a dangerous situation due to strict local regulations that obstruct foreign investment, especially from Europe.



The government should speed up FTA (free-trade agreement) negotiations with the European Union to reduce such barriers, said Rolf-Dieter Daniel, president of the European-Asean Business Centre in Thailand (EABC).

Thailand’s strict commercial regulation of its service industries has placed the sector in a perilous position by obstructing investment and limiting business expansion, he said.

“In my view, an FTA between Thailand and the EU would help resolve such a problem. Thailand has opened the way for its service sector to expand under the [upcoming] Asean Economic Community, and via strong trade agreements with the US and Japan.

“The country should provide the privilege to other countries, as well. The primary issue that needs resolving is the right for foreign investors to own shares of more than 50 per cent, and [even] up to 100 per cent, depending on the circumstances,” he said.

The proposed FTA would reduce barriers to increased EU investment in Thailand’s service sector, which was a critical requirement for the country to advance to the next level of economic development, he said.

Unfortunately, Thailand’s service sector has been underperforming due to low labour productivity and a lack of investment, he added.

For example, manufacturing accounts for just 21 per cent of the labour force, but generates 41 per cent of gross domestic product, while services account for 41 per cent of the labour force and generate 50 per cent of GDP.

By encouraging greater EU engagement with service industries in Thailand, with concurrent knowledge transfers, an FTA can help address the labour productivity issue and expand the sector. This would have a positive impact on the wider economy because the service sector is also critical for the efficient production and distribution of goods, Daniel said.

“If the investment obstacle is solved, it will attract more European investors in the local service sector and they will transfer know-how to local entrepreneurs, which will be useful for them in developing their business competitiveness in Asean,” he said.

STRONG SUPPORT

Daniel was speaking as the European business community in Thailand, through the EABC, which is a quasi-European chamber of commerce, announced its strong support for the Thailand-EU FTA process.

It said the benefits of the FTA for Thailand included both direct economic gains and a range of significant social and developmental benefits that would help create “a virtuous cycle of growth that in turn will advance Thailand to a higher level of national prosperity”.

The EABC encouraged both parties in the negotiations to move forward without delay in order to maximise Thailand’s potential benefits from a finalised agreement.

The economic benefits for |the Kingdom from a Thailand-EU FTA have been clearly articulated by the Thailand Development Research Institute, which published the results of models that showed Thailand would always achieved significantly higher GDP growth with an FTA than if it opted out of such an agreement.

Further, a recent study found that in the short term, EU imports from Thailand would grow 6.7 per cent in a year following implementation of an FTA.

According to another study prepared for the Board of Trade, additional annual Thai GDP growth could reach 0.56 per cent following an FTA with the EU.