THAILAND AND MALAYSIA SEEK DEEPER TRADE AND

UNCLAS SECTION 01 OF 02 BANGKOK 004796 SIPDIS SIPDIS STATE FOR EAP/MLS AND EB STATE PASS TO USTR TREASURY FOR OASIA COMMERCE FOR EAP/MAC/OKSA E.O. 12958: N/A TAGS: ECON ETRD EINV TH MY SUBJECT: THAILAND AND MALAYSIA SEEK DEEPER TRADE AND INVESTMENT TIES BANGKOK 00004796 001.2 OF 002 ¶1. Summary. In recent months Thailand and Malaysia have sought to expand trade and investment links. Thai Prime Minister Surayud Chulanont went to Malaysia last month on an official visit and traveled there again on August 31 with Crown Prince Vajiralongkorn for Malaysia's 50th anniversary of independence celebrations. Officials from both countries have expressed the desire to work jointly on the economic development of the troubled border region of five southern provinces of Thailand and four northern states of Malaysia. One Thai political leader, Dr. Kriengsak Chareonwongsak, strongly criticized Malaysia's non-tariff barriers toward Thailand during a recent forum in Bangkok. Despite efforts from both sides, direct investment between the two countries remains very low and is unlikely to increase significantly any time soon. End summary. ¶2. Following Thai PM Surayud's official visit to Malaysia, the Embassy of Malaysia in Bangkok and the Malaysian-Thai Chamber of Commerce organized the Malaysia-Thailand Business Forum to showcase and promote economic ties between the two countries. High-level participation included the Malaysian Foreign Minister Seri Syed Hamid Albar, the Malaysian Minister of Agriculture Haji Muhyiddin bin Haji Mohd Yassin, and the Thai Deputy Foreign Minister Sawanit Kongsiri. Forum attendees were mostly Thai and Malaysian business leaders. A few embassies sent representatives, including the Embassy of Iran. ¶3. Malaysian FM Hamid noted that although Thailand and Malaysia are major trade partners, the level of foreign direct investment is paltry and for the most part one-sided. Malaysian investment in Thailand during 2007 so far has totaled $324 million but Thai investment in Malaysia has totaled only $16 million. FM Hamid called for more Thai investment in Malaysia, especially in tourism, agriculture and food processing sectors. He stated Malaysia's commitment to work toward greater economic development in the five southern border provinces of Thailand and in the neighboring four northern states of Malaysia. Finally, FM Hamid reiterated Malaysia's interest in the idea of an "Indonesia-Malaysia-Thailand Growth Triangle" focusing on the areas of all three countries that were affected by the tsunami. SIPDIS ¶4. Thai Deputy FM Sawanit cited trade figures that show that Malaysia is Thailand's fourth largest trade partner and that Thailand is Malaysia's fifth largest trade partner. Sawanit stated that the RTG would like to see trade and investment between both countries increase, especially in the border areas of southern Thailand and northern Malaysia. He noted that soon a "friendship bridge" connecting Narathiwat in Thailand with Kelantan in Malaysia will open as part of joint infrastructure development efforts. Sawanit was one of several conference participants to mention halal products and services as an area of great potential for trade and investment between Thailand and Malaysia and in the ASEAN region. He called on ASEAN to promulgate ASEAN-wide halal standards to promote trade and investment and reduce non-tariff barriers. ¶5. Malaysian Agriculture Minister Haji Muhyiddin bin Haji Mohd Yassin echoed Sawanit on halal food. He said that Thailand is one of the largest exporters of halal food and that he sees the agricultural sector as an engine of growth. Yassin furthermore called for ASEAN-wide guidelines on halal food, biotechnology and GMOs. Calling on Thailand to adopt Malaysian halal standards, he said that he would like to see Malaysian halal standards become the global halal standard, akin to ISO. ¶6. Professor Kriengsak Chareonwongsak, Chairman of the Success Group of Companies and a member of the Executive Board of the Democrat Party of Thailand called on Malaysia to eliminate non-tariff barriers (NTB). According to Kriengsak, for example, Malaysia presently does not allow Thai trucks to drive directly into Malaysia unless the driver is Malaysian. Another example of Malaysian NTBs, Kriengsak said, is a rule that allows imports from Thai fisheries only when enclosed in Malaysian-made plastic bins. Kriengsak promised that if his party is elected later this year, he would work toward service sector, financial, and labor market liberalization in Thailand and called on Malaysia to do the same. ¶7. After the forum, econoff had lunch with one of the forum BANGKOK 00004796 002.2 OF 002 speakers, Kelvin Ng, a partner in a major Kuala Lumpur-based law firm with many clients who are foreign investors in Thailand, and other Thai and Malaysian business leaders who were present at the forum. They echoed the sentiment of FM Hamid that FDI is for the most part one-sided and likely to stay that way due in part to the fact that Malaysian wages are higher than Thai wages. Ng also explained that his clients are mostly in sectors not covered by the proposed changes to the Thai Foreign Business Act (FBA) and thus would not dissuade Malaysian businesses from investing in Thailand. ¶8. Comment. Despite all of the good will expressed by leaders from both countries, the sentiment on the ground was that Thai investment in Malaysia will likely remain low. Thailand is not even among the top twenty foreign investors in Malaysia. Moreover, political uncertainty in Thailand at present may well have dampened Malaysian enthusiasm for investment in their neighbor to the north. BOYCE