A recent study has found that the implementation of a free-trade agreement (FTA) between Thailand and the European Union (EU) would boost both economies by 2.32 to 3.7 per cent, depending on the scope of trade liberalisation.

A scenario in which Thailand does not have an FTA with the EU but Malaysia and Vietnam do, however, would cost both economies 4.1 per cent, the study found.

The Thailand Development Research Institute (TDRI) study showed that a bilateral FTA with the EU would create tremendous benefits for Thailand within eight years. Not implementing such a pact would see Thailand lose competitiveness to Vietnam and Malaysia, TDRI said, as they have made more progress in negotiating agreements with the bloc.

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(FTA) Free-Trade Agreement between Thailand & EU

The feasibility study by the TDRI was funded by the Trade Negotiations Department to assess the possible impacts, positive and negative, of such a pact on Thai businesses.

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FTA will boost both economies,TDRI study finds

Although private investment has joined the rebound in Thai economy, the outlook remains weak relative to other demand

Key risks to the outlook are (i) political uncertainty and (ii) the timing of the withdrawal of fiscal and monetary stimulus. Increased political tensions may have a long-lasting impact on investment, and withdrawal of stimulus (in Thailand and the advanced economies) must be precisely timed to avoid macroeconomic imbalances (including new asset bubbles) while also ensuring that the recovery is on a sufficiently solid footing.

Thailand performs well compared to other countries in the region on many aspects of government regulations and regulatory procedures that facilitate business. According to the latest annual World Bank’s Doing Business report, in 2008 Thailand ranks 13th among over 180 countries and 4th in East Asia in the ease of doing business. The ease of doing business is measured by quantitative indicators of regulatory requirements and procedures in ten areas in the life cycle of typical small and medium enterprises (SMEs) in the largest city in a country. They include, for example, the number days, steps, and cost needed to obtain business licenses, registering property, clear customs, pay taxes, and close a business. It only takes 2 steps and 2 days to register property in Thailand, on of the fastest in the world. Progress over the recent years has been particularly on the improvements in the customs process after the introduction of the internet-based customs clearance system, which has reduced the number of required documents and time taken to clear customs for exports.

The market’s views on export performance in 2010 of Thailand have improved

FTA will boost both economies,TDRI study finds

Most of the infrastructure development in Thailand has been responsive to demand rather than forward-looking. Availability and accessibility appear to no longer be a challenge. The next step for Thailand is to put more emphasis on quality of service delivery, management, and sound regulation.

About the author

The Office of the Board of Investment is a government agency under the Office of the Prime Minister. Its core roles and responsibilities are to promote valuable investment, both investment into Thailand and Thai overseas investment.

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