Trade deal with Thailand taps region of opportunity

By FRAN O'SULLIVAN assistant editor

Forget about Thailand as the source of exotic holidays, well-priced suits and ubiquitous sex.

The country is also a growing commercial hub.

Former Thailand ambassador Alan Williams says New Zealand needs to grasp the opportunity to clip on to the fastest-growing region within Southeast Asia - the Mekong.

The New Zealand and Thailand two-way trade market is valued at more than $1 billion.

But there is a $200 million trade deficit in Thailand's favour.

Williams - now a deputy secretary at the Ministry of Foreign Affairs & Trade (MFAT) is making it a personal mission to wake up New Zealand business to the opportunities presented by a Thailand/New Zealand closer economic partnership.

"We have a terrific opportunity to get tariffs down and ensure more is returned to New Zealanders' hip pockets."

Thailand is a great opportunity by itself - that is the message Williams is conveying to New Zealand businesses in a series of meetings, particularly in Auckland.

But New Zealand must think about it as the gateway to the Mekong region, which also includes Laos, Cambodia, Vietnam, Myanmar and the Yunnang province of China.

That is why a CEP between New Zealand and Thailand should be prized.

Williams was astounded by how quickly the Thai economy - considered a basket case when the run on the Thai baht sparked the 1997 Asian Crisis - has turned itself into the fastest-growing economy in Southeast Asia.

Under Thaksin Shinawatra, the charismatic Prime Minister, Thailand is thriving. In 12 months Thai equities have ballooned in value with the Stock Exchange index escalating by 73.5 per cent. Thailand now sports growth rates of 4.5 per cent to 5 per cent; inflation is down at 0.6 per cent; debt is now lower than 50 per cent of GDP.

Thaksin - a seasoned telecoms tycoon said to be worth US$2 billion - enjoys huge popularity. But there are concerns he has stacked the Government with family members and associates and that economic pump priming will ultimately backfire.

Williams began preparatory work on a possible free-trade deal during his ambassadorship. But it took a meeting between Prime Minister Helen Clark and Thaksin at the Asia Pacific Economic Co-operation summit in Bangkok last month to get plans for a fast-track agreement announced.

But Williams acknowledges that it will be a challenge to complete the deal by the leaders' target date - next October's Apec meeting in Chile.

Thailand and New Zealand are members of the Cairns Group of agricultural nations, which collaborate within the World Trade Organisation.

Thailand's tariffs for New Zealand's main exports are higher than the regional average and are being reduced slowly in terms of its WTO agreements.

But the Thai tariffs, which average 15 per cent across products New Zealand exports to Thailand - will drop away once a free-trade deal, or closer economic partnership, is secured.

The big opportunities for New Zealand lie with dairy products, and Thailand is already New Zealand's 17th largest export market. Dairy products top the list of New Zealand exports to Thailand - especially whole milk powder. Seafood and forest products also feature strongly.

Thailand itself sports 60,000 dairy farmers, but the industry meets only about 45 per cent of local demand for milk and milk products.

Thailand is also rated as the fifth largest source of fee-paying foreign students for New Zealand, and tourism has bounced back after substantial declines at the time of the Asian Crisis.

Foreigners also face other hurdles: It is not easy to secure working permits in Thailand and it takes time to obtain access for food and health related products for Thai markets.

Major New Zealand companies such as Fonterra and Carter Holt Harvey have significant bases within Thailand. A raft of New Zealand consulting companies are also represented.

But there are no direct air links with Thailand - business people must still fly through either Singapore or Sydney.

For Thailand's part, its electronics and motor vehicle industries have bounced back from reduced global demand.

The Green Party and some elements of the union movement have complained that a New Zealand partnership would exploit Thai sweatshops and about the country's lousy record on labour conditions.

But that is a shortsighted view.

Right now MFAT wants to hear the "good and the bad" from business people who will be affected by a Thailand deal. A group within its trade development team has been assigned to work on the proposal and can be contacted through the ministry in Wellington.