Ship more semi-finished goods to CLMV: economist

Aat Pisanwahich, dean of the University of the Thai Chamber of Commerce School of Economics and director of the Centre for International Trade Studies (CITS), yesterday unveiled a study on the export and market share of the Thai manufacturing and agriculture sectors in the Asean countries versus the performance of other Asean countries in the 10 Asean markets from 2010 to 2015.

The research shows that Malaysia, Singapore and Indonesia continued to be the top three Asean markets for Thai products, together accepting more than half of this country’s exports to Asean during the past five years.

Nevertheless, Vietnam has emerged as the third-biggest Asean market for Thai goods this year.

Whereas CLMV still accounts for a smaller share than the traditional Asean markets, Thai products have continued to gain a share of these "new Asean markets". According to the study, Thai products increased their share in the CLMV markets by 3.3 percentage points last year, with an increase in export value of Bt51.08 billion. This year the share went up by a further 0.6 percentage point, thank to a Bt9.73-billion rise in exports.

On the other hand, Singapore, Malaysia, Indonesia and the Philippines have all seen their share of the CLMV markets decline.

However, Aat said "there is no rosy path ahead" as competition in the CLMV markets is intensifying with companies from "old Asean" members developing their products to gain a stronger foothold in CLMV as well as establishing production bases in those markets.

To sustain its leading position in the CLMV markets, Aat suggested Thailand increase its sales of intermediate goods or semi-finished products, which currently account for just 5.7 per cent of all Thai shipments to CLMV.

"These countries have attracted a lot of FDI [foreign direct investment], and thus we should not only sell our finished products to them. Their purchasing power is still not large, but their industries have grown a lot," he said.

Aat also suggested that Thailand reduce the bureaucratic red tape at the borders, and to use CLMV more as transit points for shipping its goods to third countries such as China, to exploit CLMV’s geographical and Generalised System of Preferences (GSP) advantages.

The research divides Thai products into four categories – star, unclear, cash cow, and sunset – taking into account their potential in the old and the new Asean markets.

For the old Asean markets, automobiles and natural rubber are identified as the "star" Thai products that possess good potential, whereas nine products are identified as "sunset", namely steel, wood products, non-metal products, textiles, apparel, plastics, tapioca, palm oil, and fruits.

For the CLMV markets, nine products are identified as the "stars": rice, foods, textiles, apparel, wood products, petroleum, non-metal products, steel, and paper. Three are considered "sunset": natural rubber, tapioca, and palm oil.

Aat said there were only two choices for these "sunset" products: either urgently improve their competitiveness, or withdraw them from the markets.

According to the study, Thailand lost its share in the old Asean markets to the tune of Bt19.98 billion in the 2010-2015 period, while it gained a share worth Bt62.7 billion in the CLMV markets during the same period.

Its CLMV gain is more than offsetting its loss in traditional Asean markets, resulting in a net gain in the total Asean market of Bt42.7 billion during the period.

CITS expects overall Thai exports to drop for the third consecutive year with shipment values decreasing 5.4 per cent in 2015 to total Bt7.2 trillion. For the Asean markets alone, Thai exports are forecast to drop by 6.5 per cent to total Bt1.87 trillion.