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Border Trade: A Future Direction or the Thai Economy in ASEAN

The near future, it seems certain that Thailand will 11 become a hub for land-based trade in Southeast Asia and a gateway for the movement of goods through the region, because of its strategic location at the heart of the ASEAN Economic Community. As a result, the country will enjoy an increase in the value of cross-border trade transactions as well as more tourist arrivals, consequently boosting the Thai economy.

Exchanges in ASEAN

This optimistic forecast is based on my belief that land transport through Customs checkpoints along Thailand’s borders will overtake marine transport as the main channel for regional trade because trucks and trains take less time.

These are not new claims and I do believe that business operators and the private sectors generally may be skeptical about the preparedness of Thailand’s government agencies to cope with this major and complex trend in order to take full advantage of it.

In making the forecasts, I am taking into account the context and environment of regional collaboration; the direction in which our neighboring countries and other ASEAN nations are developing; investment flows from the world’s biggest economies to Thailand and other ASEAN Member States; and the preparation of Thailand’s public sectors in terms of infrastructure, amendments of laws and regulations to facilitate the business, and simplification of working procedures for the ease of doing business.

Significantly, the value of Thailand’s border trade has continued to increase (see the Tables below), despite of a slowdown in the global economy brought about by the economic downturn in China and a consequent weakening of the Japanese economy. Trade and investment in Thailand and other ASEAN Member States continue to expand. Before elaborating on the preparations already made by the public sectors for this transformation in regional trade, I will lay out some background.

In 2003, ASEAN Concord II named the ‘three pillars’ that, when created, would cement the association of the 10 nations: the ASEAN Security Community (ASC); the ASEAN Economic Community (AEC); and the ASEAN Socio-Cultural Community (ASCC). In 2006, the ASEAN Economic Ministers agreed to speed up establishment of the AEC to implementation by the end of 2015.

The Physical AEC and Future Economic Trends

At the end of 2014, the population of the 10 ASEAN Member States that were a year away from becoming the AEC was about 637 million. In descending order of numbers, this comprised Indonesia, about 254 million; the Philippines, 108 million; Vietnam, 93million; Thailand, 68million; Myanmar, 56million; Malaysia, 30 million; Cambodia, 15 million; Laos, 7 million; Singapore, 6 million; and Brunei, 400,000. It seems likely that in the future the economic integration of the 10 ASEAN Member States will be extended to include China, South Korea and Japan, a grouping that is currently known as ASEAN+3. This will entail a quantum leap in market size.

This would create a trading bloc with a population well in excess of three billion. Bilateral and multilateral free-trade pacts have been a major feature of increasing levels of economic integration within the geographic region encompassing the ASEAN+6 grouping.

These trends have stolen the limelight from the development of regional transport networks and economic-development zones along three major ‘economic corridors’, which include:

• The East-West Economic Corridor, which stretches 1,500 km from Myanmar through Thailand and Laos to Vietnam (Mawlamyine to Myawaddy in Myanmar; Mae Sot to Phitsanulok, Khon Kaen, Kalasin and Mukdahan in Thailand; Savannakhet in Laos to long Ha and Danang in Vietnam).
• The North-South Economic Corridor, which spans 1,280 km from China to Myanmar, Thailand, Laos and Vietnam over several routes (from Kunming to Jinghong and Daluo, in China; Kengtung to Tachileik in Myanmar; and from Mae Sai to Bangkok in Thailand. Alternatively, from Kunming to Jinghong in China; Boten to Louang Namtha and Houayxay in Laos; and from Chiang Khong to Bangkok in Thailand. The third route extends from Kunming in China to Hanoi and the port city of Haiphong in northern Vietnam.
• The Southern Economic Corridor, which connects Thailand, Cambodia and Vietnam by three routes: Bangkok to Aranyaprathet

Poipet and Phnom Penh in Cambodia and Ho Chi Minh City to Vung Tauin Vietnam – a distance of 1,005 km: Bangkok to Trat in Thailand, Koh Kong to Ste Ambel and Karnpot in Cambodia, Thence to Ha Tien, Ca Mau and Nam Can in Vietnam – a distance of 907 km; and from Bangkok in Thailand through Siem Reap, Stung Treng and Oyadav, in Carnbodia’s Ratanakiri province to Pleiku and Guy Nhon in Vietnam – a distance of 1,150 km. Many related transport and other agreements have been signed and sealed in preparation for exponential growth in land-based trade.

These include the following bilateral pacts:

• Thai-Laos Road Transport Agreement:
• Memorandum of Understanding between Thailand and Malaysia Regarding the Movement in Transit of Perishable Goods by Road from Thailand through Malaysia to Singapore:
• Agreements on the Facilitation of Goods and Passenger Transport at the Lao Bao-Dansavan h Border Checkpoint between Vietnam and Laos, and that between Savannakhet in Laos and Mukdahan in Thailand;
• Initial Implementation of a Cross-Border Transport Agreement for the Aranyaprathet-Poipet Checkpoint between Thailand and Cambodia; and
• Initial Implementation of a Cross-border Agreement between Thailand and Myanrnar for the Mae Sot-Myawaddy and Mae Sai-Tachileik Checkpoints. Multilateral agreements have already been signed regarding recognition of domestic driving licences issued by ASEAN Member States and recognition of commercial vehicle inspection certificates. Further transport agreements that will be enforced in the future include the ASEAN Framework on the Facilitation of Cross-Border Goods Transport, the Greater Mekong Subregion Cross-Border Transport Agreement and the Protocol on Inspection and Quarantine Requirements for Imports and Exports of Fruits between Thailand and China through Third Countries.

All of these developments are creating a momentum that is reflected in recent figures for the value of Thailand’s border trade:

Value of Cross-Border Goods Imports Border

Value of Cross-Border Goods Exports

The Customs Department, the main tasks of which are to facilitate and control cross-border trade, protect society and environment, collect tax revenues as well as investigate and suppress illegal Customs-related activities, has issued numerous measures to support border, cross-border and transit trades. These measures also implement under the ASEAN Economic Cornmunity, e.g. the elimination of tariff and non-tariff barriers, amendments of rules of origin, revision/update of regulations/working procedures, etc.

The Department’s trade facilitation measures that will help to out transaction costs of doing business include:

• Provide advance rulings on Customs valuation, classification and rules of origin;
• Introduce the Customs Automation System, including the National Single Window, ASEAN Single Window and Tracking Systems;
• Introduce CCTV system and other technologies for Customs control purposes
• Introduce X-ray Inspection System for cargo inspection;
• Establish Customs checkpoints and prototype checkpoints to promote border trade by separating areas for cargo and people inspection; and
• Introduce information and communication technologies to the Department’s general administrative work and Customs services, Other measures to facilitate trade and promote international trade include the provision of post clearance audit. In addition the Customs Act was also amended, in line with the Cross-Border Transport Facilitation Act B.E.2556, to allow Customs to work in Common Control Areas, or those areas where joint Customs operations involve officials from bordering countries.

As a result, Thai Customs officials will be able to work with Customs officials from neighboring countries in Common Control Areas, enabling “single stop inspections” and cargo clearances. The Mukdahan-Savannakhet checkpoint, the border of Thailand and Laos, will be the first area to implement the Common Control Area concept, following the creation of the Common Control Area at the Lao Bao-Dansavanh checkpoint, the border of Vietnam and Laos.

In this connection, eight Customs Houses under the said pilot projects are located in Aranyaprathet, Klong Yai, Mukdahan, Mae Sot, Sadao, Padang Besar, Chiang Khong and Nong Khai, with four key elements:

1. Provide designated areas for cargo clearance, which are separated from immigration procedures and equipped with Information and Communication Technology.
2. Provide “One-Stop Services”(OSS), following the international standard; automation systems , for example, the National Single Window which allows the interface with relevant agencies to exchange information e.g. licenses, certificates, etc. and public service manuals with diagrams detailing working processes, types of documents, and expected service times.
3. Apply cross-border trade-facilitation and promotion measures e.g. incentives under Customs and other related laws, advisory and consultancy services on the Customs related activities.
4. Conduct, and coordinate-Corporate Social Responsibility (CSR) activities within their communities.

The Customs Department is also planned to renovate Customs Houses and border checkpoints, construct new office buildings, including working facilities for Customs officials to enhance the efficiency of existing services for business operators and people in general.

In addition, new Customs/Immigration Quarantine facilities are planned to be established at the Klong Luk border checkpoint, an office building will be constructed at the Klong Yai border checkpoint, and extra facilities at the Mukdahan Customs House. The infrastructure and Customs-facilities projects under 2stphase of the Special Economic Zones include the construction of a Customs House and cargo inspection yard in Nong Khai, along with the development of the Nong Khai border checkpoint.

New Customs Houses, in some cases with associated facilities, will be built in Chiang Khong, Nakhon Phanom, Chiang San, the Ban Pu Nam Ron permanent checkpoint in Kanchanaburi province, and the Chiang Khong Customs House. Furthermore, opening and closing times of border crossings have been extended to match those of permanent border checkpoints to facilitate the movement of both cargo and travel.

The international commitment to this massive integration is attracting increasing flows of investment from the world’s biggest economies into Thailand and other ASEAN Member States. It is difficult, in the light of all these factors, to be anything but optimistic for the future.