PROSPECTIVE FTA WITH INDIA: Firms mull Thai bases

The Nation, Bangkok

PROSPECTIVE FTA WITH INDIA: Firms mull Thai bases

By Benjaprut Akkarasriprapai

15 September 2004

India’s private sector is welcoming the Thai-Indian free-trade agreement (FTA), with an increasing number of Indian companies planning to set up their manufacturing bases in Thailand prior to the deal being signed.

Manab Majumdar, joint director and team leader of the World Trade Organisation division of the Federation of Indian Chamber of Commerce and Industry, said that Indian firms supported the FTA. It will provide opportunities for greater market access, foreign direct-investment inflow and cost reductions through obtaining raw materials at lower prices in Thailand.

“Leading Indian automotive companies are asking for price quotes from Thailand even though the completed FTA has not yet been signed,” he said.

Thailand and India have agreed to tariff reductions on 82 items under the Early Harvest Scheme (EHS), which came into effect on September 1. Products in the EHS include rambutan, longan, mangosteen, grapes, barley, canned seafood, jewellery, plastics, air-conditioners and parts, electronics, cars and automotive parts.

The India-Thailand Trade Negotiating Committee hosted the third round of negotiations last month in India, and Thailand will be the site of the fourth round, in Khon Kaen from September 20-23.

Majumdar said that Indian companies are eager to invest in Thailand. Rico Auto and Ashok Leyland plan to move their manufacturing bases to Thailand, Jay Bharat Maruti Co is looking for a technical joint venture with a Thai partner and Sona Steering will open a branch office here.

Although opportunities lie ahead, he mentioned that some companies would lose out, due to aggressive trade competition. However, he suggested internal organisational reforms could help them readjust and restructure.

He said that with more open trade resulting from increased market access, strict monitoring and enforcement of rules of origin for products entering India must be adhered to. Furthermore, he added that with more open trade, transfers of technology could be expected, and mergers and acquisitions among private companies in both countries could occur shortly.

Meanwhile, Anen Aung-Aphinant, vice chairman of the Federation of Thai Industries, said that an open-trade policy with India is an opportunity for Thai exports, in the sense that it could reduce Thailand’s dependence on certain markets, such as the European Union and the United States.

“It’s a long-term gain for Thai industries, because India has abundant resources and a different market level. Thai products tend to be marketed toward middle- and high-income populations, while Indian products cater to those in the lower income brackets,” said Anen.

India is the second-largest market in the world, with a population of 1.04 billion.

Last year, India achieved economic growth of 8.1 per cent.

Trade between the two countries has been relatively light in the past, with Thailand exporting only $639.1 million worth of products to India last year and importing $869.9 million from them last year.

In the first six months of this year, Thailand exported $411.9 million worth of goods to India and imported $598.7 million.

Exported products included computers and parts, cars and automotive parts, plastics, metal and jewellery, while imported products included jewellery, steel, gold, silver, chemicals, cotton, machinery and computers and parts.

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