Government sees bright side of break-up

Government sees bright side of break-up

One question looming over the post-Brexit referendum era is how fast stock and currency markets will recover. The Stock Exchange of Thailand index lost 1.62% on Friday as investors were shaken by the Leave vote. (Photo by Pattarapong Chatpattarasill)
One question looming over the post-Brexit referendum era is how fast stock and currency markets will recover. The Stock Exchange of Thailand index lost 1.62% on Friday as investors were shaken by the Leave vote. (Photo by Pattarapong Chatpattarasill)

The government insists that Britain's exit from the European Union is unlikely to affect any trade talks with the EU.

According to Sirinart Chaimun, director-general of the Trade Negotiations Department, Thai-EU FTA (free trade agreement) negotiations were only being conducted at a junior official level, as the EU commissioners were reluctant to hold any talks with Thailand until the country's new constitution is in place.

Negotiations for a Thai-EU FTA were formally launched on March 6, 2013.

The aim of the talks is a comprehensive FTA covering tariffs, non-tariff barriers and other trade-related issues such as services, investment, procurement, intellectual property, regulatory issues, competition and sustainable development.

The talks, however, were suspended following the May 22, 2014 military coup.

Last June, the EU said it would delay signing an agreement on closer economic and political ties and demanded a swift return to democracy.

Last year, Thailand's exports to the 28 EU countries totalled just under US$22 billion, down 6% from 2014. Shipments to Britain were worth $4 billion. Shipments to the EU contributed 9% of the country's total export value, which amounted to $214 billion last year.

According to Mrs Sirinart, after departing from the EU, Britain will become more free in deciding its own policies.

For instance, she said if Britain wanted to initiate a free bilateral trade pact with Thailand, the talks could commence at once without waiting for a green light from EU commissioners.

She added that the Asia-Europe Meeting was unlikely to suffer any negative effects, as the cooperation framework is mostly related to political and foreign affairs.

Nopporn Thepsithar, president of the Thai National Shippers' Council, said in the long-term Thailand's international trade talks with Britain or the EU were likely to become easier, as Britain's exit is expected to lead the EU to ease its rigid requirements in the talks.

Meanwhile, Chris Ireland, chief executive of JLL in the UK, said the Brexit had ushered in a new dawn for Britain, with considerable uncertainty and no real precedent.

"Even if it is effectively 'business as usual' for the UK in terms of trade and legislation until 2018, such a major change will inevitably create uncertainty in the economy and real estate markets. In the event of a well-managed exit, these effects will be largely confined to the UK," he said.

"In the short term we may see a weakening in occupier demand. The impact on rents may be limited by tight supply, but activity will be adversely hit while initial uncertainty about direction and timing continues. Investor sentiment may also remain subdued in the short to medium-term. For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key," said Mr Ireland.

"Much will depend on the speed of negotiation, the wider political picture and whether a clear direction of travel and timetable for an EU exit is established early on," he added.

Adam Challis, head of residential research at JLL, said investors may well identify opportunities in the London housing market over the short term, particularly international purchasers that can benefit from the currency arbitrage that has been opened up by a weaker pound sterling.

Prof Christian Stadler, Warwick Business School, said it was not clear what would happen next, making businesses reluctant to invest. He does not expect a massive exodus, but believes companies will opt to expand in Europe rather than the UK, especially those that export to the EU.

"The devaluation of the pound should help exports slightly, but it will be an issue for all those who have EU suppliers. There is an expected contraction of the UK market, which will hit sales in the UK.

"In the long term if the UK follows the Swiss model, which is essentially adopting EU regulations minus having a say in the decisions, this would be the better option for businesses as it puts dealing with the EU more or less back to where it is at the moment. This will be an issue for some industries, like banking, as they won't have much of an influence on regulation anymore...Politically this would be a difficult one to pull off as people have to put up with the things they did not want -- most prominently immigration," he said.

Prof Stadler added that it would be "a disaster" if the UK took a tougher stance on immigration, as the EU would be bound to retaliate.

"Access to the EU will become difficult. For some companies this means doing business in Europe won't be attractive any more. Others will have to deal with complicated bureaucracy. In short: a nightmare," he said.


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