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The economic relations between Thailand and North East India (1)

I was invited to give a speech at an international conference on the topic of “The economic relations between North East India and Thailand from a Thai perspective” at Manipur Central University in Imphal, India on the 24th of March, 2014.

The organizer of the event specified the objective of the speech which was to be able to know the economic relationship between Thailand and the region of India from my perspective, including the opportunities, limitations, and suggestions on developing the relationship from a Thai scholar’s perspective.

I think that my opinions could be beneficial for the government, private sector, and layman because India is one large market with a high growth rate. Therefore, it is a good opportunity for the people of Thailand to be able to gain benefits from this new market.

This article will be divided into two sections; the first section will be talking about the conditions of relationship and Thai economic opportunities with North East India. For the next article, I will be talking about the suggestions in developing the economic relationship between the two countries.

The political wills of the two countries, both the Indian and Thai government are agreed to open more relations to each other. Thai government started the “Look West” policy in the year 1996 in order to search for newer markets, new sources of energy and investment. On the other hand, the Indian government specified the “Look East” policy by aiming for developing economic activities in the northeast region of India, a region where there is no access to seas and which is far from other parts of India. There are areas with problems such as ethnic conflicts, separatists attempt of territory, crimes against borders, migration problems, and the slow developing economic activities for example.

Thailand and India have managed to cooperate on many agreements. For example, the Thailand-India Free Trade Agreement is one where India and Thailand eliminated the tax barrier on 82 products in 2006. Also, the ASEAN-India Free Trade Agreement where India and ASEAN-5 specified to reduce the import tax down to 0 percent in the previous year, while the CLMV countries, the tariff rate will be brought down before the year 2021. Thailand and India have cooperation through others regional agreements such as, the ASEAN +6 and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation or BIMSTEC.

Thailand and India have also started a number of projects on developing the transportation infrastructures connecting between countries. For example, the India-Myanmar-Thailand trilateral highway project which begins from the Manipur state in India connected to Mae Sot in Thailand, expanding for a total of 1,360 kilometers- which is expected to be completed within 2 years. Another project is the Mekong-India Economic Corridor project, which aim to link the transportation route between Ho Chi Minh City in Vietnam through Phnom Penh in Cambodia, and Bangkok, to Dawei in Myanmar. The route will be connected with India through sea transportation route between Chennai of India and Dawei.

These economic cooperation and infrastructure development projects will provide opportunities for both countries as followings:
Opportunities for trade

Thai products have greater chances of entering the Northeast Indian market because commodities of Thailand still have great qualities and reasonable prices, and are acceptable for neighborhood countries.

The cost of export to India will decrease because the developing transportation routes will reduce the cost of transportation between the too countries. Moreover, free trade agreement will significantly help to lower down the product selling prices. The Northeast India’s economy expansion will be highly contributing to a higher purchasing power. On the other hand, Thailand still has low trade relationship with this region; as a result, a greater number of opportunities will increase in this market.

The examples of Thai products which will benefit from India’s tariff reductions consist of chemical products, plastic products, gems and jewelry, auto parts, aluminum products, furniture and parts, cosmetics, vegetables and beans, Food preparations, canned sardines, and fruit juices etc. In the same way, the Northeast Indian region will gain more opportunities to export especially main products namely ores, oil, coal, natural gas, and agricultural products such as tea leaves and bamboos.
Opportunities for investment

Nowadays investments between Thailand and India are dominated by big businesses. Investment between Northeast India and Thailand is still in low level. However, the development of infrastructure connecting both countries shall provide a great opportunity for Thai investors to invest in the petroleum and gas exploration and production and mines because the mentioned region of India is still filled with 1.3 thousand million tons of crude oil, natural gas 156 thousand million cubic meters, and various kinds of minerals. Furthermore, the Indian government has the policy of open auctions for areas of exploration and oil drilling for the private sector- both locals and outlanders.

The hydropower project is also another industry in India that is very interesting to invest in because this region has a large quantity of rainwater and the geographical potential in locating dams. In addition, the Indian government also supports investments in this sector. The same goes to processed agricultural product and food industry. This region is most suitable for planting agricultural products and Thai businesses have the technology to process food. Apart from this, there is the tourism industry, construction industry, and development of infrastructure in which lie good opportunities for Thai investors. This is because the Northeast India can be a new tourists’ destination as well as maintaining a high demand for the development of infrastructures.

However, India still has many limitations and restrictions on investment. If considering the rank of “Doing Business,” according to the World Bank, India is still in a very low position. Meaning to say, India ranked 133 in the year 2010 due to the investment processes being slow and below the minimum standard. Many states in India also have different investment laws and regulations. Hence, requesting for credits of foreign business is still difficult and highly costly, and along with the lack of interexchange information and insufficient infrastructure can be a difficult process.

The limitations on investment in Thailand through the Indian perspective are the lack of information on policies and potential economic activities. Indian investors could not find quite trustable business partners and qualified personnel staff.

Opportunities for tourism

Tourism between Thailand and Northeast India has more opportunities to expand because Thailand is main destination for Indian tourists. More than 1 million Indians have been travelling to Thailand every year. Thailand is also a popular place for filming Bollywood movies which has made Thai tourism famous for many Indians.

In the same way, the region of Northeast India has the opportunity to receive more Thai tourists even though the place is not quite well known to Thais. However, with the transportation becoming more convenient, this area could be a new tourism area for Thai tourists because the route is connected through Myanmar, where Thai people enter into already. Also, the Assam state in Northeast India is home of Tai ethnic groups such as Tai Ahom, Tai Khamti, Tai Khamyang, Tai Phake, Tai Aiton, and Tai Turung etc. Their costumes in particular and their language is very similar to the accent of Northern Thailand. This area can open doors for tourism in Nepal and Bhutan, areas which most Thai people know of.

However, the limitations for tourism in Northeast India from the Thai perspective consist of the limited information on tourism and lack of travel agent and tour operator. The area also lacks infrastructure and facilities supporting tourism.

The Northeast of India is a new opportunity that can open up for Thailand. Although there are some limitations, they can gradually decrease. In the next article, I will be talking about the suggestions on developing the relationship between Thailand and this region of India so to reduce down the limitations to the bare minimum.

Kriengsak Chareonwongsak
Senior Fellow at Harvard University’s Center of Business and Government.
kriengsak@kriengsak.comhttp://www.kriengsak.com
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