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Contents How Do Ftas Affect Exporting Firms in Thailand Vol. 25 No. 1 Thailand Development Research Institute March 2010 Contents How Do FTAs Affect Exporting Firms in Thailand? by Ganeshan Wignaraja, Rosechin Olfindo, Wisarn Pupphavesa, Jirawat Panpiemras, and Sumet Ongkittikul 3 The Impact of the Global Financial Crisis and Policy Responses in Thailand by Worawan Chandoevwit 12 As one of East Asia’s most active users of free trade agreements (FTAs), Thailand has concluded 11 FTAs and engaged in another six FTA negotiations by December 2009. What is the impact of FTAs on exporters of three leading Thai exports—textiles/garments, electronics, and auto/auto parts—so far? See related article on page 3. ISSN 0857-2968 2 TDRI Quarterly Review Vol. 25 No. 1 TDRI Council of Trustees and Board of Directors * Mr. Kosit Panpiemras Mr. Kasem Narongdej Dr. Piyasvasti Amranand Chairman Chairman, KPN Group President TDRI Council of Trustees and Thai Airways International Public Board of Directors; and Mr. Teisuke Kitayama Company Limited Executive Chairman Chairman of the Board Bangkok Bank Public Company The Sumitomo Mitsui Banking * Dr. Pranee Tinakorn Limited Corporation, Japan Professor of Economics Faculty of Economics * Dr. Ammar Siamwalla H.E. Mr. Kyoji Komachi Thammasat University Vice Chairman Ambassador TDRI Council of Trustees and Embassy of Japan * Dr. Snoh Unakul Board of Directors; and Chairman Distinguished Scholar Mr. Mechai Viravaidya TDRI Foundation Chairman * Dr. Anat Arbhabhirama Population and Community Mr. Sompop Amatayakul Advisor to the Board of Directors Development Association Executive Chairman Bangkok Mass Transit System B.B. Business Management Co., Ltd. Public Company Limited * Dr. Narongchai Akrasanee Chairman Dr. Sumet Tantivejkul * Mr. Apilas Osatananda Seranee Holdings Co., Ltd. Member and Secretary-General Chairman Chaipattana Foundation Development Cooperation Foundation * Ms. Nawaaporn Ryanskul Chairperson of the Board of Directors * Dr. Twatchai Yongkittikul M.R. Chatu Mongol Sonakul Kiatnakin Bank Public Company Secretary-General Chairman, Bank of Thailand Limited Thai Bankers’ Association Dr. Chirayu Isarangkun Na Ayuthaya * Dr. Nipon Poapongsakorn * Dr. Virabongsa Ramangkura Director-General President, TDRI Chairman of the Executive Board Crown Property Bureau Advanced Agro Public Company Dr. Pasuk Phongpaichit Limited H.E. Mr. Ron Hoffman Professor Ambassador Faculty of Economics * Prof. Dr. Yongyuth Yuthavong Embassy of Canada Chulalongkorn University Senior Advisor to President National Science and Technology * Dr. Juree Vichit-Vadakan * Dr. Phaichitr Uathavikul Development Agency Associate Professor Chairman School of Public Administration Thailand Environment Foundation National Institute of Development Administration (NIDA) * Indicates membership on the TDRI Board of Directors. The Thailand Development Research Institute Foundation was established in 1984 to conduct policy research and disseminate results to the public and private sectors. TDRI was conceived, created and registered as a non-profit, non-governmental foundation, and is recognized as such by the Royal Thai Government. The Institute does technical and policy analyses to support the formulation of policies with long-term implications for sustaining social and economic development. TDRI has six research programs: Human Resources and Social Development, International Economic Relations, Macroeconomic Policy, Natural Resources and Environment, Science and Technology Development, and Sectoral Economics. Assistant: Wattana Kanchananit Caption: Kwanjai Lekagul Editor: John Loftus Production Officer: Jirakorn Yingpaiboonwong Director of Information Services: Poonsin Wongkoltoot March 2010 TDRI Quarterly Review 3 How Do FTAs Affect Exporting Firms in Thailand?* Ganeshan Wignaraja Rosechin Olfindo Wisarn Pupphavesa Jirawat Panpiemras Sumet Ongkittikul** 1. INTRODUCTION Archanun and Juthathip (2006) concluded that overall FTA utilization rates were relatively low and that FTA Since the 1970s, outward-oriented policies have trans- export creation was not significant. In contrast, TDRI formed Thailand into a regional production hub and (2006) found relatively high utilization rates for the improved economic prosperity. As of 2010, automobiles Thailand-Australia FTA and the Thailand-India FTA but and automobile parts and electronics make up a quarter relatively low rates for the ASEAN-China (PRC) FTA. of the exports from this upper-middle-income economy. TDRI (2006) also found that automobiles benefited more From the 1990s, Thailand has emphasized regional trade than textiles from implemented FTAs. Using revealed agreements as a vehicle of commercial policy. The comparative advantage analysis, Chalongphob (2003) country has participated since 1993 in the Association of suggested that the full impact of the ASEAN-PRC FTA Southeast Asian Nations (ASEAN) Free-Trade Area may be underestimated as China’s range of comparative (AFTA) and has pursued bilateral free trade agreements advantages over Thailand is broad. since 2001. By December 2009, Thailand was one of The few available studies of Thailand’s FTAs East Asia’s most active users of free trade agreements provide only partial insights. The CGE estimates high- (FTAs), having concluded 11 FTAs and engaged in light welfare gains from bilateral FTAs with traditional another six FTA negotiations. markets and ASEAN FTAs. Yet they are unable to In response to the trend toward FTAs, there is clarify how much such welfare gains are realized. growing academic interest in ex ante and ex post Furthermore, industry studies seem inconclusive on FTA evaluation of Thailand’s FTAs. Ex ante studies use utilization rates and effects on different sectors. In the globally computable general equilibrium (CGE) models absence of adequate industry information, enterprise to simulate the economic effects of alternative FTA surveys can help investigate the impact of FTAs on scenarios. The Thailand Development Research Institute Thailand’s exporters. (TDRI) (2006) suggested that higher welfare effects of This study is the first systematic analysis of how tariff reduction were visible from bilateral FTAs with FTAs affect exporting firms in Thailand. The research traditional markets, such as Japan and the United States explores five key issues in current academic and policy (US) than those with new markets. Kawai and Wignaraja debates: (a) awareness of FTA provisions and use of (2009a) found that ASEAN FTAs generated signifi- FTA preferences; (b) the relative importance of different cantly larger welfare gains for Thailand, especially if the FTAs and net benefits of FTAs; (c) enterprise responses CGE analysis incorporated reductions in tariffs, services to FTAs; (d) the burden imposed by multiple rules of barriers and improvements in trade facilitation. origin (ROO) and the extent of the Asian “noodle bowl” Ex post studies rely on industry analysis to assess effect; and (e) harmonization of ROO.1 These issues the effect of FTAs. In a study of the automobile sector, were investigated using a survey of 221 exporters of * This paper is a short version of “How Do FTAs Affect Exporting Firms in Thailand?” ADBI Working Paper 190. Tokyo: Asian Development Bank Institute, January 2010. ** Ganeshan Wignaraja is principal economist, Office of Regional Economic Integration, Asian Development Bank (ADB). Rosechin Olfindo is a consultant at the World Bank, Philippines. Wisarn Pupphavesa is an advisor, International Economic Relations Program, Thailand Development Research Institute (TDRI). Jirawat Panpiemras is a research specialist, International Economic Relations Program, TDRI. Sumet Ongkittikul is a research specialist, Human Resources and Social Development Program, TDRI. 4 TDRI Quarterly Review Vol. 25 No. 1 three leading Thai exports—textiles/garments, electro- only 23.6 percent of SMEs provided the same response nics, and auto/auto parts—undertaken from April 2007 (Figure 1). Expectedly, a high proportion of SMEs to May 2008. (44.3%) reported that they had no knowledge at all of FTA provisions that affect their business. Textiles/garments had the highest proportion of 2. SURVEY FINDINGS firms that claimed to be knowledgeable about FTA provisions (53.4%). However, without more detailed This section presents the main findings from the case studies of firms, it is hard to verify these claims. survey of 221 firms involved in the manufacture of The levels of awareness of FTA provisions may reflect textiles/garments, electronics, and auto/auto parts. The that the sample firms are mostly in (or near) major cities sample covers firms of different size (small and in Thailand and have access to information on FTAs, medium-sized enterprises (SMEs), large firms, and giant training, and other FTA-related services provided by firms) and ownership (domestic and foreign). The government and business associations. Awareness levels sample and sampling methodology are described in are likely to decline with increasing distance from the Appendix 1. The survey dealt with issues that can be capital city and ready access to FTA services. arranged under six headings, as follows: Negotiating multiple FTAs requires investment of scarce resources. Yet, there is speculation about the 2.1 Awareness and Use of FTA Preferences utilization of preferences in Thailand’s concluded FTAs and plans for preference utilization in FTAs under FTA texts, particularly for comprehensive agree- negotiation. The pattern of current and future preference ments, tend to be long and written in complex legal and utilization should
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