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Phuket Business: Challenges ahead of ASEAN’s young union

Legacy Phuket Gazette

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PHUKET: Eliminating tariffs that financially penalize members of ASEAN, is one of the stated long-term goals of the AEC (ASEAN Economic Community).

When economic unions were proposed in the United States and Europe, tariffs became a defining factor that would later determine the outcome of those unions.

Now that ASEAN has decided to form an economic union – the AEC – in order to exert greater regional influence and become more financially prosperous, member states must decide on an effective tariff structure that won’t put any of its 10 member at a disadvantage.

Indeed, this will prove a challenge. The first question is: How will the AEC practically eliminate tariffs and promote equal business opportunities among member nations?

According to the Economic Research Institute for ASEAN (ERIA), a government-funded think tank, the AEC’s goal is to eliminate 95% of tariffs between ASEAN and other countries that it has made Free Trade Agreements (FTA) with.

ASEAN currently holds separate trade agreements with Australia, India, China, South Korea and Japan. These individual agreements between ASEAN and any one non-ASEAN country, are commonly referred to as “ASEAN +1”.

With the AEC’s economic integration deadline of 2015 fast approaching, ASEAN must now decide on how it will approach the daunting task of eliminating tariffs.

A similar case arose when the European Union decided to adopt a single external tariff applied by all of its member-states to imports from non-members.

Internal trade between the EU was aided by removal of barriers to trade, such as tariffs and border controls. The case of the Eurozone was helped further by not having currency differences to deal with.

With ASEAN, according to a recent ERIA policy brief, a “Common Concession” approach is to be applied. This means that: “A country [would] strategically focus its policy discretion [and] allow for sensitive industries on a more limited number of products.

“Assuming 95% tariff elimination is the target, for example, a country can choose up to 5% of (its) products to protect, while opening up the rest [to free trade],” suggest the report’s authors, Yoshifumi Fukunaga and Arata Kuno.

Opening up a product to trade means that no tax, subsidy or tariff will artificially alter the price of production for certain goods.

Such restriction-free trade may lead, some fear, to what is known in financial lingo as “dumping”. According to about.com, dumping is: “An informal name for the practice of selling a product in a foreign country for less than either the price in the domestic country, or the cost of making the product.”

It is illegal in many places to dump products, so that domestic manufacturers are protected from unfair competition.

For example, in Thailand, government subsidies (derived from taxes) help the country to produce rice at a lower price than its actual cost.

However, some experts, such as Jonathan Head, of the BBC’s Southeast Asia Bureau, suggest that subsidies may ultimately wind up hurting the Kingdom in the long run.

He points out that even though Thailand has been the World’s leading rice producer for over two decades, its farmers are as poor and susceptible to weather as they have ever been.

Most economists believe that subsidies are a form of “protectionism” and are inherently bad for trade because they make domestic goods and services artificially competitive against imports. But, Thailand is by no means the only ASEAN country with inward-looking economic policies.

A practical solution, in other words, detailed legislation guaranteeing “open” trade on certain products, will need to be enacted before the union takes effect.

Though few could argue that free trade will hurt ASEAN, perhaps the union should first focus inward, and decide what to do among members before making Free Trade agreements with non-members.

— Chris Hudon

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

The Thaiger

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Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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Domestic air passenger numbers double those of January

Maya Taylor

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Domestic air passenger numbers double those of January | The Thaiger
PHOTO: Vietjet

Passenger numbers on domestic flights within Thailand have doubled within a month, rising from 4,000 in January to over 10,000 this month. Having nearly recovered to pre-pandemic levels, domestic travel plummeted once more when Covid-19 resurfaced late last year.

Apirat Chaiwongnoi from the Department of Airports says 15 of Thailand’s 29 airports are now operating domestic flights, with more expected to follow. He believes the aviation sector will continue to recover further in the coming 6 months, bolstered by the national vaccine rollout.

Around 120 domestic flights a day are now operating, which is twice the number that were operating at the lowest point in the crisis. Prior to the resurgence of the virus in December, domestic passenger numbers had recovered to 30,000 – 40,000 a day, around 80% of pre-pandemic numbers.

The DoA says airports must continue to adhere to the Covid-19 hygiene measures put in place by the Health Ministry and the Civil Aviation Authority of Thailand.

SOURCE: Bangkok Post

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Coronavirus (Covid-19)

Samut Sakhon’s shrimp market to remain closed until February 15

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Samut Sakhon’s shrimp market to remain closed until February 15 | The Thaiger
PHOTO: Kom Chad Luek

Samut Sakhon’s Central Shrimp Market, the epicentre of Thailand’s recent wave of Covid-19, will remain closed until February 15. The market can reopen once the overall hygiene situation at the market and surrounding area has improved, according to the province’s disease control committee.

Local officials say the shrimp market needs to remain closed until the market structure and nearby residential facilities are inspected. People who violate the order face up to a year in prison and a fine up to 100,000 baht.

More than 12,000 people in the province have tested positive for Covid-19. The increasing number of infections is a result from the active case finding to contain the spread of the virus.

SOURCE: Thai PBS World | Thairath Online

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