Recent high-level meetings between the ministers of Thailand and India showed a major step towards future economic development as the two countries have a lot in common in the fields of trade and commerce. As India warmly greeted Thailand to cooperate in trade partnership, the two countries are close to concluding a Free Trade Agreement (FTA) covering trade in goods by 2010.

If we look close geo-strategically as well as economically to the future prospects, the two South-East Asian countries have immense scopes of future economic ties. During his recent three-day visit to New Delhi the Thailand Prime Minister General Surayud Chulanont signalled long-term mutual benefits in investment and partnership that would be expanded further to cover technological know-how and expertise. At a meeting organised by industry chambers CII, ASSOCHAM, and FICCI, Mr Chulanont expressed that the two countries must look forward to concluding regional FTAs in the frameworks of ASEAN and BIMSTEC, which will benefit the regional economy as a whole.

General Surayud was accompanied by his Foreign Minister Mr Nitya Pibulsonggram, Commerce Minister Mr Krirk-Krai Jirapaet and Energy Minister Mr Piyasvasti Amranand. The general held talks with his Indian counterpart Prime Minister Dr Manmohan Singh on a broad array of bilateral, regional and global issues, including intensification of trade and investment between the two countries. General Surayud met President A P J Abdul Kalam, External Affairs Minister Mr Pranab Mukherjee and Commerce Minister Mr Kamal Nath.

Way back in 2003 at Bangkok, the two countries signed a framework agreement to establish a FTA. Focusing on different views of trade, the agreement provided for an early harvest scheme (EHS) under which common items of export interest to both sides have been negotiated for elimination of tariffs on a fast track. The EHS spans 82 items including auto parts, electronic goods, and fruits for which tariffs were cut since September 2004. Indian Commerce and Industry Minister Mr Kamal Nath said that India and Thailand agreed to start parallel negotiations on the services and investment parts of the FTA.

Great Expectation

Voila! India’s exports to Thailand could rise to US$2.6 billion by 2010-11 from the current level of US$1 billion. Thailand is the third largest importers of Indian products in Asia, first and second being Singapore and Malaysia. According to a study by FICCI, if the Indo-Thai FTA is timely implemented in year, total trade of India with Thailand would increase to US$7 billion. Over the past five years, the total exports to Thailand has been growing at an annual average of 15 percent and exports of 82 items under the EHS witnessed 82 percent growth in 2005-06.

Major advantage for Indian in the bilateral trade between the two countries would be in the area of service sector. Areas like medical professionals, engineering, finance, IT sector, and construction-related services could be of interest to Indian service providers. The trade of 82 items in the EHS of India-Thailand FTA has increased by over 140 percent from approximately US$358.63 million in 2005-06. A FICCI report said share of these 82 items has increased from 10.34 percent in 2003-04 to 15.68 percent in 2005-06.

Despite high growth rate of exports in 2005-06, the share of 82 EHS items in India’s total export to Thailand has remained the same at around 7 percent over the last few years. Meanwhile, share of imports in India’s total imports from Thailand has increased to 23 percent from 14 percent during 2003-04 and 2005-06. As trade between India and Thailand has touched US$2 billion in the first eight months of the financial year 2006-07, it indicates strong growth in bilateral trade relations between the two countries.

Focusing Northeast

Geographically, Thailand is nearer than Delhi from the northeast. Taking into account this geo-strategic advantage, right after the FTA between the two countries, Thai investors are keen to invest in the northeast region. Visiting Thailand Commerce Minister Krirk-krai Jirapaet expressed his country has a lot to offer to India’s northeast region in the fields of energy, gas, petrochemical, and agro-based industries. The minister felt that various activities that would attract foreign investments and tourists could be done in the tourism sector of the northeast region.

At a joint press conference with Indian Minister for Development of North East Region (DONER) Mr Mani Shankar Aiyar and Indian Minister of State for Commerce Mr Jairam Ramesh, the Thai minister said that despite a close cultural affinity, there was still a room for improvement in bilateral ties between India and Thailand. During the conference, ministers of both sides discussed various aspects of expertise Thailand could share with the northeast region. It’s quite obvious that Thailand could invest in the region for developing infrastructure and value addition to the available raw materials like natural gas, rubber, and bamboo industry.

Of course, the ‘Look East Policy’ of India would not make any proper sense without improving the business relation between Northeast and Southeast Asian countries. Jirapaet also said, “For the proper use of synergy during the next meet of BIMSTEC (Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooperation), Thailand would suggest for a triangular sub-regional economy among Northeast India, Bangladesh and southern part of Myanmar.” The Thai minister further stated that his country is keen to increase its bilateral trade volume with India from US$3.5 billion to at least US$4billion a year as the current Indo-Thailand trade volume is seven times lower than that of Thai-China. Mr Jirapaet informed that a renowned Thai food-processing house C P Group had expressed their interest in setting up a food-processing project in the Northeast state of Tripura.

“In addition to having the FTA, India and Thailand should look much closely what we have done in the past as joint investment partners in the Northeast which embraces not just the Northeastern part of the India but also Bangladesh and Myanmar as well because of greater communality of interest”, said Mr Ramesh. In his further statement the minister advocated for opening the previous roads and ports of the region, which were closed during the British period. During the discussion between the ministers from both sides Mr Aiyar announced that Indian government would sanction US$15 billion on road construction in the eight northeastern states in the next five years.

Well, in an overall view, India is engaged at the moment with a massive infrastructure development programme within the northeast region and Thailand has huge investment potential in different aspects in the region. Really a perfect future vision of successful economy!