The Nation, Bangkok

Democrats outline plans for trade and investment

Opposition party aims to convince voters it has sound economic policies

Achara Pongvutitham, Petchanet Pratruankrai

4 September 2006

Trade and investment will be an integral part of the Democrat Party’s economic policies to convince the private sector of Thailand’s sustainable development.

Kiat Sitthee-amorn, chairman of the party’s audit committee, said free-trade agreements (FTAs) would be a key strategy, while the party would promote investment mainly through creating clusters of industries for sustainable development.

According to Kiat, a key man in the Democrats’ policy planning, the party plans to revise or improve FTAs that Thailand has already signed or is negotiating.

So far, comprehensive FTAs have been implemented with Australia and New Zealand. In addition, early-harvest programmes have been launched with China and India.

However, the Japan-Thailand Economic Partnership is waiting for the official signing ceremony. Thailand is also negotiating FTAs with other major trading partners, including the US, Peru, the Bimstec countries and the European Free Trade Association.

The Democrats have closely monitored details of the FTAs and found that only some business groups benefited greatly from the pacts.

Moreover, Thailand lacks an "adjustment programme" to mitigate the impact of an FTA on the manufacturing and farm sectors. Before signing an accord, developed countries normally conduct a study of the positive and negative impacts, as well as prepare a programme to ensure the competitiveness of local businesses.

The programme allows both the government and manufacturers to know their real competitiveness in terms of production costs, weak points and strong points.

Kiat noted that FTAs concentrate on reducing tariffs on goods. The Democrats believe that restructuring tariffs on semi-finished goods and raw materials is an essential policy to strengthen Thailand’s competitiveness.

He said the government’s loss of tax income could be offset through value-added tax and corporate tax.

"Manufacturers are not reluctant to pay tax when their businesses make a lot of money," he said.

Kiat believes Thailand should focus more on region-to-region FTAs rather than bilateral deals. Bilateral pacts create more export conditions, particularly rules of origin, which are a major manufacturing and export obstacle.

"Bilateral FTAs have weakened regional free-trade integration, particularly the Asean Free Trade Area (Afta). We should focus more on regional pacts that will also strengthen our bargaining power in world trade negotiations," he said.

Kiat said Thailand should concentrate more on Asean mutual benefits. The private sector uses only 20 per cent of the privileges under the Afta agreement and Asean investors have ignored the benefits of Asean investment cooperation. To strengthen regional bargaining power, Thailand and Asean should push forward the East Asia Community (EAC) to compete with the European single market and the North Ameri-can Free Trade Agreement.

A successful EAC will control one-third of the world’s population and one-quarter of world trade, said Kiat. Thailand should not ignore bilateral free-trade negotiations but should focus on major and potential export markets such as the US and India.

Kiat emphasised that the World Trade Organisation (WTO) is the only organisation that really benefits developing countries by reducing trade and non-tariff barriers imposed by developed countries.

On investment policy, the Democrats will fully comply with WTO rules. However, the government should create more innovative investment promotion to draw more foreign and local investment. For instance, "special development zones" will be promoted by considering local industries. The strategy will lead to cluster manufacturing.

For instance, each part of the country will be set up for some kind of farming and industrial manufacturing. In particular, Thung Kula Rong Hai, the drought-prone region in the Northeast, will be helped to produce organic jasmine rice and be given research facilities.

Border trade with neighbouring countries, which generates billions of dollars of foreign-exchange earnings, will be upgraded. Investors will be attracted to set up warehouse and logistics system in border areas to facilitate trade.

To reduce oil consumption, alternative energy will be promoted. In addition, agricultural plants that use cassava (for gasohol) and palm oil (for bio-diesel) will enjoy high investment privileges.

Rubber production will be promoted in the South, East and the Northeast.

Kiat said the party would also focus on clean-technology manufacturing. Industrial estates such as Map Ta Put in Rayong would be encouraged to lead this effort.

Eco-tourism in tourist destinations such as Surat Thani, Krabi, Phang Nga, Phuket, Ranong, Trang and Chiang Rai would be developed to attract more tourists and encourage longer stays.

Finally, investment promotion in a Democrat-led government will focus on technology development. Investors and educational institutions will be encouraged to develop their own technology to strengthen the country’s manufacturing efficiency.

Investors will enjoy different privileges, depending on their investment and businesses.

Kiat pledged that the Democrats would create more rail transportation.

"Thailand’s rail transportation started in King Rama V’s reign with the construction of 3,000 kilometres of railway nationwide. 150 years have passed and the Kingdom has only an additional 1,000 kilometres of railway," he said.

Rail transportation is important to carry goods from manufacturing bases to ports at low cost, he added.