Thailand plans significant infrastructure development to boost cross-border trade with Myanmar. Both countries stand to benefit – if the plans come to fruition.
By John Pennington
Thailand revealed plans to invest in its infrastructure to boost trade with Myanmar. By committing to the initial investment, Thailand has started the process. Both parties must then work together to reap the benefits of the new infrastructure.
Border trade makes up a reported 80% of trade between Myanmar and Thailand. It is essential for both countries’ economies.
Thailand is planning significant investment
Construction of a deep-sea port in Leam Chabang is underway. Railway lines will connect it with Ma Ta Phut Port and Sattahip Port. Improving transport links will speed up the transfer of goods. It will make the process more efficient and cost-effective. Companies could use move products to the Indian Ocean and bypass the Malacca Straits.
Thailand’s DFT planned a project to promote cross-border trade and investment. The DFT was due to sign an agreement, match companies from the two countries and hold a seminar. Thailand also plans to build dry ports, container depots, yards, and truck terminals.
“Since Thailand is strategically located in mainland Southeast Asia, we recognised the vital role of transport and logistics in such a globalised and dynamic world today,” explained Thailand’s Minister for Transport Arkhom Termpittayapaisith. “More importantly, logistics is one of [the] competitive tools in the global market, where currently, Thailand’s logistics cost is approximately 14% of GDP out of which 7.5% being transport costs,” he added.
Myanmar and Thailand began talking earlier this year about bolstering cross-border trade. They focused on developing new routes, improving trade channels and sharing data. They also discussed creating a new special economic zone (SEZ). Both countries need to work on developing infrastructure to build it. Thailand launched its own SEZ policy in 2015, identifying 10 locations. Its plans for improving infrastructure imply a firm commitment to its policy.
The volume of cross-border trade between the two countries is growing
While 87% of Myanmar’s border trade is with China, trade with Thailand accounts for 12%. The rest of Myanmar’s border trade is with India (0.8%) and Bangladesh (0.2%).
Source: Myanmar Times
Border trade in the fiscal year ending in March 2017 amounted to US$1.3 billion. This figure was an increase of US$200 million from the previous period. Between April and December 2016, trade volume amounted to US$870.9 million. Trade volume in the same period in 2017 was US$895.7 million.
Source: Myanmar Ministry of Commerce
Both countries set targets to increase trade on a year-on-year basis. Investment – from both sides – should help them hit those targets.
Both Thailand and Myanmar should benefit from the investment
Thailand’s proposed investment in infrastructure has a definite end goal. “We want to, and we have planned to support the export of products made in Myanmar, to Thailand or to the global market,” said Panitarn Pavarolavidya, Deputy Secretary General of the Federation of Thai Industries (FTI).
The government aims to make cross-border trade more accessible to Thai businesses. Expanding ports, better infrastructure and improved connectivity are moves towards that goal. More construction projects will result in job opportunities for locals.
Thailand’s commitment includes collaborating with Myanmar to upgrade the Thailand-Myanmar road. It also includes developing rural areas. Myanmese residents could gain employment at new SEZs on the border.
Goods and services will always be in demand, and the exchange of information is now critical. Thailand and Myanmar must develop both their physical and digital infrastructure.
Both countries must also consider and address trade challenges
There are still significant challenges to overcome. The Thai government has not revealed how much the new infrastructure will cost. As trade grows, the Thai government will be confident about recouping its outlay.
An even more significant challenge is the fight against illicit activity. Myanmar officials estimated that smuggling costs up to US$500 billion per year. The officials claimed Myanmese government operatives are unable to monitor border trade. They added that border personnel are open to bribes and corruption.
Building infrastructure will boost trade. Will Thailand help Myanmar combat the corruption that costs vast amounts of money?
The government hoped establishing SEZs would lead to a reduction in illicit activity. These zones depend on developed infrastructure to succeed. Thailand does not yet have this infrastructure in place. It is a vicious circle. Infrastructure development is expensive. Without it, the SEZs will not work. Without SEZs, smuggling will continue to cost them money.
In March, Myanmar and Thailand launched a “Stronger Together” promotion. Thailand’s Commerce Minister Apiradri Tantraporn claimed Thai businesses support the drive. “Enterprises are showing high interest in trading and investing by way of the Mae Sot/Myawaddy crossing, and the Thai government has made this a pilot project for expanding border trade with neighbouring countries,” she said.
Thailand’s push comes at a time when China is moving closer to Myanmar
Trade links between Myanmar and Thailand are well-established and productive. Myanmar views Thai products as well known and of high quality. That degree of trust and familiarity has built up over many years.
Thailand may view the proposed China-Myanmar Economic Corridor as a threat. The volume of Myanmar’s trade with China is enormous. It also has opportunities to trade with Bangladesh and India. In economic terms, Thailand is more dependent on the cross-border trade than Myanmar.
China will not be able to quickly increase their share of Myanmar’s trade at Thailand’s expense. Thailand and Myanmar have long-standing commitments to one another. “There is an age-old saying: Myanmar is the farmland, Thailand is the kitchen,” Pavarolavidya added. “We want Myanmar to be the farmland, and also the kitchen, so we will help until Myanmar and Thailand are able to stand equally in the supply change.”
Thailand’s proposed infrastructure developments could boost trade and reduce smuggling. Regardless of China’s intentions, both countries should benefit in the long run.