Interview : Sontirat Sontijirawong

What sectors will benefit from the leveraging of free trade agreements (FTAs) and bilateral agreements?

SONTIRAT SONTIJIRAWONG: Our ministry has always been active in negotiating FTAs as a way to liberalise enterprise and open up investment opportunities. All in all, Thailand has concluded 12 FTAs with 17 countries. This has led to a large increase in trade between Thailand and its FTA partners. Since each FTA entered into force, the kingdom’s trade with ASEAN grew by 707%, 406% with the Thailand-India FTA and 262% with the ASEAN-China FTA. In the last 10 years trade with non-FTA partners like the US and the EU grew by 61.2% and 31.6%, respectively.

Furthermore, Thailand’s export basket has become less dependent on its three traditional partners – the US, the EU and Japan – while the ASEAN market has increasingly emerged as the key export destination. Undeniably, FTAs enable Thailand to leverage the global and regional supply chain, linking us closer to our trade and investment partners around the world and within the region. In the automobile industry, for instance, the benefits of FTAs and close trade relations with Japan have enabled Thailand to become an important hub in the global supply chain for automobile production.

The automotive industry has thus become a major driver of the economy and a top export earner for Thailand, accounting for approximately 12% of GDP and employing more than 550,000 people. Through the extensive network of the car-production supply chain, it generated considerable employment for local suppliers, especially those in Tier 2 and 3.

To gain access to raw materials and markets overseas, Thailand is pushing investment in various sectors. Currently, the kingdom’s outward foreign direct investment (FDI) is high in mining, at 23%; manufacturing, especially in food and chemical products, 23%; banking and insurance, 12%; and wholesale and retail, 10%. Yet Thailand’s investment also targets sustaining long-term partnerships with FDI-recipient countries through mutual benefits for shared economic development.

How can Thailand’s trade with Cambodia, Laos, Myanmar and Vietnam (CLMV) boost development?

SONTIRAT: The role of Thailand’s policies and the Ministry of Commerce is to ensure that our economy can fully participate, link and quickly respond to changes in the global landscape, as today more products are “Made in the World” rather than in a specific country. Production and operations are divided globally, from design and manufacturing, to assembly and marketing, creating complex international production chains. The future of economic growth should thus be viewed within the prism of regional, not national, value chains.

With a population of 237m and a GDP of $680bn, the CLMV cluster is a big market for manufacturing and agriculture. There are tremendous opportunities in high-value services. The region is also rich in natural resources, land under cultivation, low-cost labour, a rising middle class, open trade policy and improving infrastructure. While Thailand has capital, technology and capabilities to invest, we are confident that strategic partnership among the CLMV players will leverage our strengths, which will result in shared prosperity and win-win relations in the region.

In terms of trade, CLMV has become one of Thailand’s most dynamic markets, with an export value totalling $25.2bn in 2017, accounting for 10.6% of Thailand’s total exports. This is comparable to Thailand’s export value in our traditional markets, namely Japan, the US and the EU-15. As a result, the kingdom’s trade with CLMV thus helps reduce the extent of Thailand’s dependence on traditional export markets.

With regard to investment, CLMV’s purchasing power is on the rise, and various Thai companies engaged in food processing or textiles have now moved their production to the CLMV region to take advantage of its plentiful labour, low production costs and lower Generalised System of Preferences tariffs. Through this strategic partnership, Thailand can distribute its products both throughout the region and around the world.