China the big export winner, Thailand ’not fully benefiting’: TDRI

The Nation | August 5, 2011

China the big export winner Thailand ’not fully benefiting’: TDRI

By Nalin Viboonchart

China seems to be the manufacturing base that is benefiting the most from the free-trade agreement with Asean countries, as the value of exports from China to Asean in three major industries have increased significantly over the past decade, according to the Thailand Development Research Institute (TDRI).

So far, Thailand has not fully benefited from free-trade agreements because of a number of obstacles, including the rules of origin — the principle that duty-free status can only be conferred on a product if a pre-specified proportion of its value added comes from the country of its origin.

Hence the Office of Industrial Economics, which is the TDRI’s partner in researching the benefits for Thailand and Asean countries from FTAs, will propose solutions to relevant state agencies when each agreement is due for review, TDRI vice chairman Somkiat Tangkitvanich said yesterday.

Somkiat said the TDRI had conducted a deep study of the benefits from FTAs on four major industries, and whether manufacturers in Asean were utilising these benefits within the Asean grouping. The study focused on the automobile, plastics and chemical products, textiles and garments, and electrical appliances and electronic components industries.

The study found that Asean manufacturers in three of the industries, with the exception of automobiles, were increasing their reliance on goods imported from China. The proportion of goods they imported from that country had increased significantly over the past decade.

In the textile industry, China has overtaken South Korea as the biggest exporter to Asean. In 2010, about 58 per cent of textiles imported by Asean countries were from China, sharply up from 18 per cent in 2000. The proportion from South Korea has fallen to 18 per cent from 31 per cent in 2000.

Proportions from other countries have also dropped over the past 10 years, although the proportion imported by other Asean countries from Thailand has remained steady at 5 per cent.

In the plastics and chemical-products industries, the proportion of imports by Asean countries from China has increased from 6 per cent in 2000 to 16 per cent, overtaking Japan, which was the biggest exporter to these industries in Asean in 2000, with a proportion of 23 per cent.

The current proportion of imports from China is similar to that from Singapore, while that of Japan has tumbled to 14 per cent. The contribution from Thailand has increased by only 1 per cent over the past decade, to 6 per cent, whereas Singapore’s exports to other Asean countries grew from 13 per cent to 16 per cent.

In the electrical-appliance parts and electronics industries, Asean imports from China have climbed from 4 per cent to 14 per cent over the past 10 years. Contributions from all other major exporters - except Singapore and the United States - have dropped, and their shares have been lost to China.

Singapore is now the biggest exporter to other Asean countries in these industries, with a proportion of 21 per cent. Thailand’s export proportion for these industries has declined from 6 per cent in 2000 to 4 per cent.

The automobile industry is the only one in the TDRI study in which Thailand is becoming a key exporter, along with Japan.

The proportion of Asean automobile-industry imports coming from Thailand has risen from 4 per cent to 12 per cent in the past decade. Japan remains the biggest export source for auto parts, with a proportion of 49 per cent, although this share has fallen from 60 per cent since 2000. Thailand’s safety-belt production has now replaced that from Japan, for example.

Focusing on Thailand, Somkiat said Thai exporters had made total tax savings of Bt101.78 billion because of FTAs in the 10 years since 2000. Most of this saving was achieved on exports to Asean countries, with tax relief amounting to Bt68.29 billion. This was followed by a tax saving of Bt15.22 billion on Thai exports to China.

Automotive and auto-parts manufacturers have benefited the most from FTAs, with combined tax savings of roughly Bt40 billion, followed by the food industry with tax savings of about Bt11.36 billion.

Meanwhile, Thai importers have enjoyed a combined tax saving of nearly Bt60 billion from FTAs over the past 10 years. Once again, automotive industries benefited the most with around Bt18 billion in tax saved on imports, followed by food industry with tax savings of Bt7.83 billion.

Somkiat said a number of goods from Thailand were unable to enjoy benefits from the FTAs because they could not meet the rules of origin (ROO) requirements, or were on the sensitive-products list.

Thai exports are affected by the complexity of procedures to qualify products under the rules of origin, as well as consideration of officials in partners’ markets concerning the ROO. Therefore, the government should propose a relaxation of the ROO to its FTA partners, because the study found that such a revision could benefit Thai exporters more than the abolition of import tariffs, he said.

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source: The Nation