Cross-border trade between Thailand and Vietnam tends to grow by approximately 30%CAGR over the next 3 years.
Key drivers of this growing trend are an expansion of manufacturing sector and a growth of domestic consumption in Vietnam, which will generate positive impacts of Thai cross-border logistics business.
However, problems concerning road conditions, differences between transportation laws in each country, and complexities in customs procedures remain important obstacles to cross-border trade to Vietnam.
Cross-Border Logistics to Vietnam…A Golden Opportunity should not be missed!!
In June 2018, member countries of the Greater Mekong Subregion (GMS) has implemented cross-border transport operations according to the GMS-CBTA (Cross- Border Transport Facilitation Agreement), with the aim of reducing obstacles from customs procedures and traffic systems.
EIC estimates that the agreement will help to reduce transport leadtime by 45% and save logistics costs over 20% compared to traditional cross-border logistics model.
Based on a past performance analysis of the cross-border logistics business landscape, EIC found that the number of registered vehicles do not reflect the competitiveness of this business.
This is shown in the operating results of logistics service providers with over 100 registered vehicles, which performed below the average market – an average revenue growth of around 10% and an average gross profit margins of around 20%.
Nevertheless, cross-border logistics business must confront with numerous challenges, including infrastructure limitations, intense competition from both Thai and international competitors under the GMS-CBTA agreement, and the expansion of the railway network as an alternative mode of transportation to Vietnam.
Cross-border trade has become increasingly important for Thai economy, especially given that Vietnam, as a main cross-border trade partner, contributes over 60% of Thailand’s total cross-border trade.
It is well-known that Thailand has long-standing trade relations with neighboring countries and the government has worked continuously to promote trade in the regional area.
Over the past 5 years (2014-2018), border trade to Myanmar, Laos, Cambodia, and Malaysia expanded by 3%CAGR, while cross-border trade with southern China, Singapore, and Vietnam grew by more than 12%CAGR. In 2018, Thailand’s cross-border trade was valued at over 300 billion baht, or over 2 million tons in trade volume.
Despite the fact that cross-border trade with southern China fetched the highest value amounting to 100 billion baht, there was a relatively low share of trade volume because the majority of cross-border exports consisted of high-value products such as computer components and electronic equipment. Meanwhile, the volume of Thailand’s cross-border trade with Vietnam amounted to 1.3 million tons, contributing over 60% of Thailand’s total cross-border trade volume and 95% being exports.
Given this, the Vietnam market could present an opportunity for logistics service business.Key Thai export products to Vietnam include fresh, chilled or frozen fruits, non-alcoholic beverage, and electronic equipment.
For the medium term (2019-2021), Thailand’s cross-border trade with Vietnam is expected to improve by around 30%CAGR relied on Vietnam’s economic growth, from an expansion of manufacturing sector and domestic consumption.
Vietnam is one of the world’s fastest-growing economies, attracting foreign investors who are interested in establishing production base in the country for exports. Chinese investors, in particular, are also increasingly relocating their manufacturing base to Vietnam to avoid trade wars. However, Vietnam’s manufacturing sector relies much on imports of raw materials and intermediate goods which is positively impacting Thailand’s export supplying to these factories.
In terms of domestic consumption, over 90 million of Vietnam’s population with middle class accounting for over 15% has boosted demand for high-quality and luxury goods. Coupled with a…
Author: Kamonmarn Janglom
Thai Exports fell for fifth straight month, down 2.65% in 2019
Thia Exports fell for the fifth straight month in December, resulting in a full-year contraction of 2.65% in 2019
Trade in Asia-Pacific declines for the first time since 2009
For the first time since the 2009 global economic crisis, the value and volume of trade in the region is declining. But the region is expected to bounce back in 2020 with positive trade growth.
Bangkok (ESCAP news) – Asia-Pacific economies may see positive trade growth in 2020 but are still facing downside risks from the adverse impacts of the United States – China trade tensions, two new trade briefs by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) released today have revealed.
Trade in the Asia-Pacific region contracted during 2019
For the first time since the 2009 global economic crisis, the value and volume of trade in the region is declining. Total export volume fell by 2.5 per cent, while import volume decreased by 3.5 per cent.
Oil exporting economies such as Islamic Republic of Iran and Indonesia, as well as Japan, Singapore and Hong Kong, China registered some of the largest declines in export volume.
Merchandise trade in the region also faced strong headwinds in 2018-2019 caused by the worldwide economic growth slowdown and heightened trade tensions.
These have had an adverse effect on trade, particularly in the case of economies closely integrated with China through Global Value Chains (GVCs). Integration of smaller traders into the global and regional economy through GVCs is becoming more difficult. New import barriers increase the cost of production and reduce the competitiveness of companies participating in regional production networks.
Tariff war-related toll could reach $117 billion in the Asia-Pacific region
ESCAP earlier estimated the tariff war-related toll on gross domestic product (GDP) could reach as much as $400 billion worldwide and $117 billion in the Asia-Pacific region. These projections are materializing and could increase unless current efforts to reduce trade tensions are successful.
“For the Asia-Pacific region, the challenge is to increase trade and deepen economic integration to support sustainable development. Looking ahead to 2020, the agreement reached between China and the United States is welcome and should reduce policy uncertainty,”United Nations Under-Secretary-General and Executive Secretary of ESCAP Armida Salsiah Alisjahbana.
She further underscored the importance of the multilateral trading system to underpin future trade growth.
The new guarantees provided by the implementation of the Phase-I deal reached between China and the United States might boost investor and consumer confidence enough for trade in the region to grow by about 1.5 per cent in 2020.
This growth would be felt more in developing economies, which could see a 1.9 per cent and 2.7 per cent growth in exports and imports respectively in 2020. However, country-level forecasts vary widely and uncertainties are high.
In trade in commercial services, the region again outperformed the rest of the world in 2019.
Relatively slower growth is expected in 2020, with transport services, other business services and goods-related services expected to be the most affected sectors.
The mid to long-term prospects for trade in services – in particular ICT and business services – remain bright, supported by technological advances.
Commercial services trade in Asia and the Pacific continue to be dominated by a relatively small number of economies, namely China, Japan, India, Singapore, Republic of Korea and Hong Kong, China – accounting for over 70 per cent of total commercial services trade in the region.
Increasing business opportunities associated with digital technologies may lead to a further concentration of trade opportunities in those economies.
The ESCAP trade briefs serve as a complement to the Asia-Pacific Trade and Investment Report 2019. They provide in-depth analysis of performance and trends in 2018-2019, and the outlook for 2020 at regional and country levels, with a special emphasis on the impact of escalating trade tensions within and outside the region.
Read the Asia-Pacific Trade in Goods Trends and Outlooks: https://www.unescap.org/resources/trade-goods-outlook-asia-and-pacific-20192020
Read the Asia-Pacific Trade in Services Trends and Outlooks: https://www.unescap.org/resources/trade-commercial-services-outlook-asia-and-pacific-20192020
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