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Wednesday, Mar 10, 2004

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Getting closer to Thailand

M. Ramesh

recently in Thailand

IT IS a matter of time before the Free Trade Agreement with Thailand goes live. At present, the discussions are on about `rules of origin', to define how much value addition should be made to a product in each country so that it becomes eligible for the concessional tariff in the other country.

The FTA is expected to become operational from July 1. Thereafter, and by 2006, tariffs on the 84 identified items of trade will be progressively reduced to zero.

Will India gain or lose? Concerns are frequently raised that Thailand gets access to the big Indian market, but India gets little in return.

The answer to the question depends on how well the FTA is used rather than the agreement itself. Opportunities exist. But to identify them, one must first understand Thailand.

First, since 95 per cent of the 64 million Thais are Buddhists, they love India — the land of Buddha's birth, where there are many holy places to visit. There are many cultural affinities.

Visit any Buddhist shrine in Thailand, and this is evident. Saffron-clad, shaven-headed monks chant hymns in soft, deep voices, the effect closely resembling a vedic recital. And there is enormous goodwill for India.

Second, though Thailand is invariably bracketed among developing countries, it is — one must grudgingly admit — far more developed than India is. Bangkok may lack the lustre of Singapore or Seoul, but it has all the orderliness of a well-developed metropolis. Traffic jams happen, even despite the city's innumerable flyovers, but rarely do you hear a honk.

Take a cruise down the river, you will be amazed to see the number of five-star hotels lined up on either bank. The oversupply of five-star rooms has ensured their availability at cheap rates, so much so that it is cheaper to hold corporate conferences in Thailand than in India.

Recently, a Chennai-based corporate group held its annual conference in Bangkok, taking 419 people there. A four-night stay with five-star accommodation, a river cruise on a charter boat, a tour to the resort of Pattaya — all cost Rs 35,000 per head, including the airfare and the fee to the travel organisers. A sky-rail of recent construction is up and running in Bangkok, despite the relatively high tariffs. An underground metro is expected to begin operations from August.

What does all this mean for India? An ability to absorb goods and services, an ability to invest.

Pay a visit to Gems Gallery, a company which has four retail outlets in Thailand and claims to be `The World's Biggest Jewellery Store'. Go with local Indian friends, and they will tell you: "Buy the gem stones here, they are much cheaper than in India. But don't buy finished jewellery, it is cheaper if you have the stones set in India."

The Gems Gallery showroom in the resort-town of Pattaya alone achieves a turnover of 1 billion baht a year, or about Rs 1,200 crore. Gemstones come from all over the world — Australia, Brazil and Sri Lanka. India has a well-developed jewellery-making sector and it is cheaper to make jewels in India. There lies a business opportunity. Or, look at tourism. Thailand gets about 11 million tourists every year. The island of Phuket alone gets about 3 million. In contrast, India received 2.7 million tourists last year. Now, there is talk of twinning Phuket and Port Blair, the capital of Andaman and Nicobar islands.

Port Blair is just an hour's flight from Phuket. Co-operation between India and Thailand in tourism can help the Andamans get some of the tourists who come to Phuket. Besides, the Thais themselves want to come to India — to Bodh Gaya and other Buddhist centres — which in itself offers a considerable tourist potential.

Fisheries is yet another area of interest. Food processing is one of the key industries of Thailand and seafood exports is a major sub-segment. Look at it from India's point of view.

It is said that Thai fishermen regularly poach into India's exclusive economic zone. This is difficult to stop. However, if fishing is done by Indo-Thai joint ventures, it could lead not only to sharing of costs and profits, but also help avoid competitive over-harvesting.

And the list goes on. For example, Thailand is keen on tapping India's intellectual resources in areas such as bio-technology to upgrade its food standards. Needless to say, India's software expertise is an area of great interest too.

Therefore, the FTA need not be seen as though India is giving away its market without getting much in return. In a recent interview to this paper, Thailand's former Deputy Prime Minister, Mr Korn Dabbaransi, a very pro-India voice in Thailand, said that it did not matter in whose favour the balance of trade was, because the companies that gain in one country could actually be owned by individuals or corporates in the other.

Any interim disadvantages could be addressed through fiscal measures, as has been done in the case of auto components, where duties on imported steel have been substantially reduced.

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