Thai-Malaysian border trade ready to move to the next level

Thai-Malaysian border trade ready to move to the next level

The border crossing at Sadao in Songkhla is one area where facilities and services need to be expanded to reduce customs bottlenecks. (Photo by Patipat Janthong)
The border crossing at Sadao in Songkhla is one area where facilities and services need to be expanded to reduce customs bottlenecks. (Photo by Patipat Janthong)

Border trade between Thailand and Malaysia remains robust but more work needs to be done to reduce non-tariff barriers and improve infrastructure links to make the process smoother, experts from both sides agree.

Thailand and Malaysia share a border that stretches for 647 kilometres, and their bilateral trade is already the largest in Asean in terms of value. In 2013 and 2015, Thai-Malaysian border trade averaged 500 billion baht or US$14.4 billion per year, accounting for more than half of all Thailand's border trade that also includes Cambodia, Laos and Myanmar. Border trade accounts for 65% of the total trade value between Thailand and Malaysia of $22 billion a year.

Nevertheless, there is still a lot of work to be done to improve the free flow of trade and tear down non-tariff barriers via regional agreements as well as bilateral talks. The two governments have also agreed to build at least two more bridges to improve logistics and transport capacity.

Non-tariff barriers are currently the biggest obstacle to the mobility of trade in goods and services and movement of people within the region, said Chua Tee Yong, deputy minister of Malaysia's Ministry of International Trade and Industry (MITI).

Removing these barriers requires continuous engagement with all 10 Asean countries but it takes time since it involves many parties.

"We look at [lowering of the non-tariff barriers] as something that we need to do on a gradual basis since we are different from the European Union," said Mr Chua. "The EU is governed by one central agency, but for us it is more a matter of consensus building, and that is the reason why Asean has been able to grow progressively with the cooperation of every member state.

"This consensus building is something that is important and it should be maintained for us to have strong growth prospects both for our economy individually and also for the region."

Winichai Chaemchang, Thailand's deputy commerce minister, said Asean as a whole has been trying to reduce non-tariff barriers as much as possible. A special committee regularly reviews the particular problems that each country may have and there is a contact point to facilitate improvements in each country. However, he believes that bilateral talks on trade facilitation are even more essential.

"I think sometimes that trade facilitation is worth more than reductions of tariffs or non-tariff barriers and it is up to the governments of Asean to engage in solving this problem," he said.

Mr Chua said Asean must acknowledge that countries are at different stages of economic development and growth, with wide variations in income per capita and population. Thus there is a need to find a common platform to resolve the problem of trade barriers.

"We hope Asean countries can increase their efforts to establish common standards, namely in halal, ICT, building materials, services, banking, customs and logistics among many others to facilitate greater expansion of regional trade under the AEC (Asean Economic Community)," he said.

"This continuous engagement, such as the Asean FTA (free trade agreement) with China and separate engagement between Asean member states, is a process that we need to continue in order to find a solution as time goes by."

Mr Winichai offered the specific example of the Sadao border crossing in Songkhla province as a place where customs bottlenecks exist, so there is an ongoing agreement to expand facilities in order to alleviate congestion.

"World trade is slowing down, particularly in the developed markets, and that is why we concentrate first on Asean as the region is Thailand's biggest trading partner and it is even more than China right now," he said.

Mustapa Mohamed, the MITI minister, said the two governments had agreed to improve or, if possible, build new bridges at the checkpoints between Rantau Panjang (Kelantan, Malaysia) and Sungai Kolok (Narathiwat, Thailand) and between Tak Bai (Narathiwat) and Pengkalan Kubor (Kelantan).

"In the annual discussion between the two prime ministers in Bangkok last month it was decided that the two bridges should be given priority since there is congestion where the current bridge between Rantau Panjang and Sungai Kolok is already 50 years old," he said. "There has been a decision to either expand or build a new bridge there and this is most welcomed by the people of Kelantan since it would improve the flow of people and trade between the two countries."

The minister said the countries would share the bridge construction costs equally, with work expected to start in the third quarter of 2017. The Rantau Panjang-Sungai Kolok bridge is expected to cost about 60 million ringgit (510 million baht), and the one linking Tak Bai and Pengkalan Kubor between 140 million and 160 million ringgit.

Mr Mustapa made the comments at the first Asean Border Trade (ABT) meeting held in late September in Kota Bharu, Kelantan, where two memoranda of understanding were signed. One was between Malaysia External Trade Development Corporation (Matrade) and Bangkok Bank (BBL) on trade promotion cooperation. BBL, Thailand's largest bank by assets, now has five branches in Malaysia, will agree to bring interested clients to join future Matrade events. The second agreement was between Gabungan Usahawan Parlimen Jeli (Malaysia Confederation of Entrepreneurs) and the Chamber of Commerce in Narathiwat for cooperation in trade events.

"The MoU will give more opportunities to our clients and to buyers from the Matrade side to do more trading," said BBL vice-president Ratana Yaowaratana, adding that financial cooperation between the bank and Matrade might be possible in the future.

"There has been a lot of talk about Thailand's trade with the CLMV countries (Cambodia, Laos, Myanmar and Vietnam) and it has been a hot issue in the past few years, but trade between Thailand and Malaysia is still one of the most important as it is the largest market of all neighbouring countries even though it currently does not make it a lot of noise in the news," she added.

The ABT was built on a pilot programme, Border Trade Fair 2015, which was arranged in Songkhla by the Thai government in June 2015, by Matrade, which also spearheaded the exhibition in Kelantan alongside the MITI. The event comprised an exhibition, business matching sessions, seminars and forums, and a business clinic joined by about 100 Malaysian companies from the agricultural produce, apparel, food and beverage, electrical and electronic goods, furniture, gifts and souvenirs, and beauty sectors.

The exhibition involved 150 exhibitors and 100 buyers from Malaysia, Thailand, Myanmar and Singapore where most of the buyers (43) are Thais. It has attracted 3,700 visitors and was estimated to have generated around 72.1 million ringgit worth of transactions at the event alone

"The reason for the exhibition is to promote trading activity within the Asean region … and we feel positive that with all these future developments, we hope to continue to enhance trade within the Asean region," Mr Chua said.

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