Asean states shunning peers

With the Asean Economic Community (AEC) entering its third year, the latest study has found that members are trading more with outsiders, notably China and South Korea, than with their peers.

The study also predicts that over the next five years, Thailand and Asean members will lose both trade and investment opportunities in Cambodia, Laos, Myanmar and Vietnam (CLMV) to China, South Korea and others.

Aat Pisanwanich, director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce, said that between 2016 and 2017, the proportion of intra-Asean trade dropped to 24.8% of Asean’s total trade from 24.9% in 2015, the year that the AEC took effect.

He forecast the proportion of intraAsean trade to drop to 24.7% over the next five years.

External trade, meanwhile, represented 75.1% in 2015 and rose to 75.2% in 201617. Such trade is expected to make up 75.3% of Asean’s total trade over the next five years.

Trade among Asean members totals US$2.068 trillion (66.2 trillion baht). Over the next five years, that value is expected to reach $2.576 trillion.

“It’s quite interesting that the six old Asean members (Thailand, Singapore, Indonesia, Malaysia, the Philippines, Brunei) and the CLMV love to trade with partners outside of Asean rather than their Asean fellows, now that the purchasing power of countries outside of Asean such as Japan, China and South Korea is much higher than that of Asean,” Mr Aat said.

“More importantly, the export product structure in Asean and CLMV is mostly identical and engaged mainly in agriculture and processed agricultural products, leading Asean members to compete with one another and resulting in the introduction of non-tariff measures to protect their domestic industries.”

He said Asean has also implemented free-trade agreements with several countries outside of the bloc, including China, South Korea, India and Japan, allowing foreign investors to enjoy customs and investment privileges and produce products for re-export.

Mr Aat said that over the next five years, the CLMV will trade more with China and South Korea in lieu of Japan, as the two countries have heavily invested there. The trend will eventually lead Asean to lose a greater market share in the CLMV to China and South Korea.

Thailand is yet to optimise Asean investment, unlike Singapore, Malaysia and those outside of the bloc, because of inferior human resource capabilities, capital and investment promotion policies, Mr Aat said.