Indo Thai FTA

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A Feasibility Study on A Free Trade Agreement

between India and Thailand

Dr. Ram Upendra Das*Dr. Somchai Ratanakomut**Dr. Sothitorn Mallikamas**

Prepared for

Joint Working GroupOn

India-Thailand Free Trade Agreement (Ministry of Commerce, Govt. of India

and

Ministry of Commerce, Govt. of Thailand)

December 2002

______________ * Research and Information System for the Non-Aligned and Other Developing Countries(RIS), New Delhi, India.** Faculty of Economics, Chulalongkorn University, Bangkok, Thailand.



Acknowledgement

Authors are grateful for the insightful guidance that they received during the course of the study from V.R. Panchamukhi, L.K. Ponappa, Nagesh Kumar, S.S. Kapur,Kanissorn Navanugraha, A. Sajjanhar, Srirat Rastapana, Chana Kanaratanadilok, G.Ray,K.B.L. Mathur, J.C. Sharma, Vichai Maneesuwansin, A. Singh, K.C. Rout,Twaan Jaroenthai, Pithaya Boonying and R.S. Ratna. Authors would also like to thank G. Sidhu, P. Prapavong, U. Chittasevi, S. Tonggool and P. Wongmongkol, for their kindsupport.

Thanks are also due to J.P. Doonga for administrative support andBalwant Singh Bisht for secretarial assistance.

However, the usual disclaimer applies.

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Contents

Executive Summary

Chapter 1

Introduction

1.1. Background1.2. Scope and Structure of the Study1.3. Objectives of the Study1.4. Analytical and Methodological Issues

Chapter 2

India-Thailand Trade and Investment Relations

2.1. Indian Economy2.2. Thai Economy2.3. Overview of Bilateral Trade and Investment Relations2.4. India’s Exports to Thailand

2.4.1. Overview2.4.2. Merchandise Exports and Barriers : Key Sectors

2.5. Thailand’s Exports to India2.5.1. Overview2.5.2. Merchandise Exports and Barriers : Key Sectors

2.6. Investment Links Including Joint Ventures2.6.1. Indian Investment in Thailand2.6.2. Thai Investment in India2.6.3. Barriers to Bilateral Investment Flows

2.6.3.1. Indian Perspective2.6.3.2. Thai Perspective

2.7. Economic Cooperation2.7.1. Bilateral Cooperation2.7.2. Regional and Subregional Economic Cooperation

Chapter 3

Analytical and Methodological Issues

3.1. Analytical Framework 3.2 The Model and Assumptions3.3. The Macro Impact on India and Thailand3.4. Sectoral Impacts3.5. Impact not captured by the Model

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Chapter 4

Impact of Preferential Liberalisation under a Free Trade Agreement

4.1. Introduction4.2. Merchandise Trade: Impact and Potential Areas of Cooperation

4.2.1 Macroeconomic Impact under FTA: CGE Modelling Results4.2.2 Potential Areas of Trade Expansion4.2.3 Revenue Loss

4.3. Impact on Services Trade and Potential Areas of Trade Expansion4.3.14.3.2

Impact on Services TradePotential Areas of Services Trade Expansion

4.4. Investments and Private Sector Linkages

Chapter 5

Sectoral Analysis of the Impact of Preferential Liberalisation

5.1 Sectoral Impacts of FTA: Based on GTAP-CGE Analysis5.1.1 Sectoral Impacts: India5.1.2 Sectoral Impacts: Thailand

5.2. Impact on Select Sectors: Explorations at a Disaggregated Level

Chapter 6

Possible Benefits of Cooperation in Other Areas

6.1. Fisheries and Aqua culture6.2. Information, Communication and Space Technology6.3. Biotechnology6.4. Finance and Banking6.5. Tourism6.6. Infrastructure Development6.7. Healthcare Services6.8. Construction

Chapter 7

Recommended Architecture of India-Thailand Free Trade Agreement

7.1. Objectives and Principles

7.2. Scope and Coverage7.3. Rules of Origin7.4. Trade Facilitation7.5. Institutional Mechanism

Chapter 8

Conclusions

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Executive Summary

1. India and Thailand share age-old bonds of cultural affinity, commercial interests and

common perceptions on various issues. These geographically proximate neighbours need

to take advantages of the conducive setting or the context that is provided by the history

and geography between them for mutually beneficial economic cooperation.

Whether it is the economics of neighbourhood or the importance of cooperation in the

competitive global environment the economic logic suggests that both the countries must

strengthen their economic ties in the realms of trade, investment, technology and human

resources. The complementarities on different dimensions need to be exploited so as to

jointly take advantage of the globalisation process in a more effective and WTO-consistent manner.

2. In an effort to promote trade and investment cooperation between the two countries, a

Joint Working Group (JWG) was set up at the behest of the Prime Ministers of both the

countries for getting a Feasibility Study conducted on India-Thailand FTA. The First

JWG Meeting was held in New Delhi, India during April 2002. At this meeting, the JWG

adopted its Terms of Reference and finalized the broad structure of the feasibility study.

The meeting also agreed on a work programme. The present study is the outcome of this process, which has been deliberated upon extensively in subsequent three JWG meetings,

including the fourth and final one held at Bangkok on 22-24 December 2002.

3. The focus of the present study is to find out if the India-Thailand FTA is a feasible

proposition. Chapter 1 provides a brief introduction, including the background, scope and

objectives of the study. The prevailing trade and investment relations between India and

Thailand are analysed in Chapter 2. Chapter 3 dwells upon the analytical and

methodological issues underlying the study including the technical details of the

modelling exercise for assessing the impact of the FTA. Chapter 4 assesses the impact of

preferential liberalisation under the FTA at the macro level both with the help of a

computable general equilibrium (CGE) model and also through some other techniques

and its sectoral impacts are analysed in Chapter 5. The potential benefits of cooperation in

other sectors are analysed in Chapter 6. A broad architecture of the FTA is recommended

in Chapter 7. Chapter 8 provides an overview of the findings of the study.

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4. The study probes into the following central question: Is a Free Trade Agreement between

India and Thailand feasible? On the basis of a number of analytical criteria an answer to

this question has been sought. An FTA would be feasible if:

it enhances market access for both the countries in a mutually beneficial manner.

it results in cheaper import from the partner country which can help improve the

competitiveness of both domestic production and exports.

it promotes downstream production activities.

there are significant trade complementarities.

trade complementarities are not very high due to relatively less diversified export

structures and similarity in production structures, which in turn, provide the scope

for intra-industry trade. the potential for trade exists because of the possibility to trade with each other in

lower unit value items that are being exported by one country to the world but not

to the partner country and the partner country is importing those items from the

rest of the world but not from its counterpart and this results in significant costs of

non-cooperation.

due to the FTA, domestic sectors are not adversely affected in a significant

manner on account of import competition.

it does not entail significant output contraction in any of the two countries.

it does not have significant tariff revenue loss in different items.

5. India and Thailand are developing economies with both commonalties and differences in

their economic progress. The economic policy strategies adopted by them have made

them amenable to take advantage of global integration. In this context, possibilities of

bilateral economic cooperation especially in the form of an FTA are immense. It has also

been noticed that albeit the bilateral trade and investment linkages between the two

countries are quite low their dynamism in recent years is noteworthy. The relative

importance of each other in the trading space has been observed to be meagre which is

indicative of the fact that the potentials for greater trade linkages are yet to be tapped. In

terms of trade composition, significant scope for diversification in the bilateral trade

basket is noticed and it is in this context that the proposed FTA appears desirable, the

feasibility of which is assessed subsequently. In terms of the barriers to trade, it is

observed that countries face both tariffs as well as non-tariff barriers on their bilateral

trade.

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In the area of investment too, the bilateral linkages need strengthening and their sectoral

composition need to be broadened. In this regard, bridging information gap, removing

procedural bottlenecks and overcoming infrastructural constraints need to be addressed.

6. It is concluded in the Study that the FTA between India and Thailand is feasible, desirableand mutually beneficial. This understanding has been arrived at by assessing the macro

impact of the FTA with the help of a CGE modelling exercise using the GTAP

framework; identification and measurement of potentials of trade expansion on the basis

of analysing trade complementarity, production similarity, potential intra-industry trade,

costs of non-cooperation and the extent of revenue loss under the proposed free trade

regime; potentials of services trade and possibilities of investment expansion.

7. The broad highlights of the Study are as following:

First, the results of CGE modelling exercise have been supplemented with a

disaggregated level sectoral analysis in order to overcome the limitations of

different empirical approaches. It was found that the proposed FTA would result

in increased market access.

Second, FTA would improve production competitiveness in both countries.

Third, high potentials of trade cooperation were observed empirically in the

domain of intra-industry trade due to production similarities.

Fourth, there are immense potentials for maximising mutual benefits through

enhanced cooperation in trade in lower unit value items.

Fifth, implications of revenue loss were also analysed empirically and it was

found that the proposed FTA would not entail significant revenue losses. It was

also noted that the revenue losses were expected to be outweighed by significantly

larger gains in trade expansion, production, investment and overall development.

Sixth, it was also noted that there was rich potential for economic cooperation in

various identified areas like fisheries and aqua-culture, information,

communication and space technology, biotechnology, finance and banking,

tourism, healthcare, construction services and infrastructure development.

8. The Study also deals with the possible architecture of the proposed FTA and recommends

on its plausible objectives and principles; scope, rules of origin, trade facilitation and

institutional mechanism.

9. The overall conclusion of the Study is that the proposed FTA is desirable, feasible and

mutually beneficial.

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Chapter 1

Introduction

1.1 Background

India and Thailand share age-old bonds of cultural affinity, commercial interests and

common perceptions on various issues. These geographically proximate neighbours need to

take advantages of the conducive setting or the context that is provided by the history and

geography between them for mutually beneficial economic cooperation.

Whether it is the economics of neighbourhood or the importance of cooperation in the

competitive global environment the economic logic suggests that both the countries must

strengthen their economic ties in the realms of trade, investment, technology and human

resources. The complementarities on different dimensions need to be exploited so as to

jointly take advantage of the globalisation process in a more effective and WTO-consistent

manner.

India and Thailand are both considered as developing countries with significant

differences in geographical areas and population. India has the total land area more than 6

times larger than Thailand i.e. the total land area of India is 3,287,263 sq. km., whereas

Thailand has a total land area of 513,114.6 sq. km. According to the latest statistics, Indian

population is over1 billion while the population figure in Thailand is only about 60 Million.

Bilateral trade between India and Thailand is presently at a low level. Both imports

and exports between these two countries are small and mainly characterized by intermediate

products necessary for the production of final products. In the year 1990, the total bilateral

trade was about US Dollar 621 Million. By the year 2000, it increased to about US Dollar

1,169 Million.

In an effort to promote trade and investment cooperation between the two countries,

there were, recently, several state visits from Thailand. In July 2001, Thailand’s foreign

minister paid an official visit to India followed by two visits of Thailand’s Prime Minister

Mr. Thaksin Shinawatra in November 2001 and February 2002. After an initiation of the idea

to pursue the study on the feasibility of a Free Trade Agreement (FTA) by the Indian Prime

Minister Mr. Atal Bihari Vajpayee and the Thai Prime Minister the First Joint Working

Group (JWG) Meeting in New Delhi, India was held in April 2002. The Indian delegation

was led by Mr. S. S. Kapur, Joint Secretary, Department of Commerce, Government of India,

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and the Thai delegation was led by Ms. Srirat Rastapana, Deputy Director General,

Department of Business Economics, Ministry of Commerce, Government of Thailand. The

JWG Meeting agreed on getting a feasibility study conducted on the India-Thailand Free

Trade Agreement.The Second JWG Meeting was held in Petchburi, Thailand during 26-27 August,

2002. The Indian delegation was led by Mr. S. S. Kapur, Joint Secretary, Department of

Commerce, Government of India, and the Thai delegation was led by Mr. C.

Kanaratanadilok, Assistant Director General, Department of Business Economics, Ministry of

Commerce, Government of Thailand. During the Meeting the study was presented and

discussed in detail. The Indian and Thai drafts of some of the Chapters of the study were

merged. The research study teams were asked to continue their work by incorporating the

suggestions that had emerged during the Meeting.

The Third JWG Meeting was held in New Delhi, India during 13-14 November, 2002.

The Indian delegation was led by Mr. S. S. Kapur, Joint Secretary, Department of Commerce,

Government of India, and the Thai delegation was led by Mr. K. Navanugraha, Deputy

Permanent Secretary, Ministry of Commerce, Government of Thailand. In this Meeting the

complete study was presented and discussed chapter-by-chapter. The research teams were

mandated to finalise the study by taking into account the deliberations of the Meeting. The

Thai side proposed to launch negotiations on FTA Agreement and circulated a paper on

Thailand’s proposal to launch negotiations for Free Trade Agreement between Thailand and

India.

1.2 Scope and Structure of the Study

Against this background, the focus of the present study is to find out if the India-

Thailand FTA is a feasible proposition. Chapter 1 provides a brief introduction, including the

background, scope and objectives of the study. The prevailing trade and investment relations

between India and Thailand are analysed in Chapter 2. Chapter 3 dwells upon the analytical

and methodological issues underlying the study including the technical details of the

modelling exercise assessing the impact of the FTA. Chapter 4 assesses the impact of

preferential liberalisation under the FTA at the macro level both with the help of a

computable general equilibrium (CGE) model and also through some other techniques and its

sectoral impacts are analysed in Chapter 5. The potential benefits of cooperation in other

sectors are analysed in Chapter 6. The architecture of the FTA is recommended in Chapter 7.

Chapter 8 provides an overview of the broad conclusions of the study

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1.3 Objectives of the study

The study has three main objectives:

a. To analyze and assess the benefits and costs both quantitatively and qualitatively of entering into a preferential and bilateral free trade agreement consistent with, and

supportive of, the multilateral trading system.

b. To explore not only preferential trade, but also a number of other potential areas to

develop closer economic relations.

c. To render possible and suitable suggestions on the architecture of the FTA.

More specifically, the study probes into the following central question: Is a Free

Trade Agreement between India and Thailand Feasible? On the basis of a number of

analytical criteria an answer to this question has been sought. A FTA would be feasible if:

it enhances market access for both the countries in a mutually beneficial manner.

it results in cheaper import from the partner country which can help improve the

competitiveness of both domestic production and exports.

it promotes downstream production activities.

there are significant trade complementarities.

trade complementarities are not very high due to relatively less diversified export

structures and similarity in production structures, which in turn, provide the scope

for intra-industry trade.

the potential for trade exists because of the possibility to trade with each other in

lower unit value items that are being exported by one country to the world but not

to the partner country and the partner country is importing those items from the

rest of the world but not from its counterpart and this results in significant costs of

non-cooperation.

due to the FTA, domestic sectors are not adversely affected in a significant

manner on account of cheaper imports.

it does not entail significant output contraction in any of the two countries.

it does not result in significant revenue losses.

Criteria such as above need to be probed in order to conclude as to whether the FTA

between India and Thailand is feasible, desirable and mutually beneficial. The present study

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seeks to explore these dimensions both analytically and empirically in the subsequent

chapters.

1.4 Analytical and Methodological IssuesThe study on exploring the prospects of India-Thailand FTA needs to posit ‘ freeing of

trade’ in a proper analytical perspective. It also should recognise the limitations of various

techniques that are applied to assess the impact of tariff liberalisation. Therefore, an attempt

is made here to understand the implications of reduction of trade barriers in the backdrop of

certain analytical and methodological issues. This has been undertaken on the following

dimensions viz. (i) trade as an instrument of development (ii) trade facilitation in conjunction

with trade liberalisation (iii) role of rules of origin under FTA (iv) assessing the implications

of trade liberalisation with the help of Computable General Equilibrium (CGE) modelling

and (v) exploiting trade complementarities. These are discussed and analysed in Chapter 3 in

detail.

Against this background, the Study examines the feasibility of the proposed India-

Thailand Free Trade Agreement as per the chapter-scheme outlined above.

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Chapter 2

India-Thailand Trade and Investment Relations

Introduction

This Chapter presents an overview of the Indian and the Thai economy as well as of

bilateral trade and investment relations between India and Thailand. It further examines the

existing trade linkages between India and Thailand in a greater detail including an analysis of

the tariff and non-tariff barriers that the exports of each country face in the partner country.

Similarly, investment links between the countries under consideration are analysed and some

barriers to investment in the countries concerned are highlighted.

2.1 Indian Economy

A snapshot view of the macro indicators present a moderate picture of the Indian

economy. India’s GDP has been increasing over the last few decades. It has recorded an

annual average growth rate of above 5 percent approximately during the last decade (Table

1). However, its Gross National Income per capita which stood at around US Dollar 450 in

year 2000 is considerably lower than Thailand’s Gross National Income per capita which was

US Dollar 2000 in the same year (World Bank, 2002).

As for the structure of GDP, the share of agriculture, which used to be the highest in

earlier decades, has fallen tremendously and its place has been taken over by the services

sector. In recent years, services sector has occupied almost half of the GDP . Manufacturing

and agriculture sectors share the rest, almost equally, at the present juncture (Table 2). The

services sector includes trade, transport, storage and communication; financing, insurance,

real estate & business services and public administration, defence & other services.

India has been lacking in terms of achieving high savings and investment ratios as

compared to other developing countries of the South-east Asian region. India’s savings and

investment have stood at 23.4 percent (2000-01) and 24 percent (2000-01), respectively.

Inflation rate has come down in recent times and has touched a low of 1.3 percent in

2001-02. However, fiscal deficit as a percentage of GDP stood at 5.1 percent (2001-02).

More recently, exports have been growing at a faster rate than imports. Current account

balance as a percentage of GDP stood at 0.5 percent (2000-01). The debt-service ratio has

declined from 35.3 percent in 1990-91 to 17.1 in 2000-01.

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Policy Framework

In recent times, Indian economy has embarked upon trade and investment

liberalisation. Indicators of these are the falling tariff and non-tariff barriers and enhancementin the limits for the participation of the foreign direct investment in the economy. These

liberal external policy measures have been accompanied by various internal liberalisation

measures, which together have resulted in procedural simplification. Foreign exchange

regime has also undergone significant changes with more liberal norms set in place to

facilitate different economic activities and external economic linkages. However, Indian

policy-making exercise has also been characterised by a cautious approach towards issues

like capital account convertibility. A profile of the last year’s economic reforms package

provides an idea about the prevailing direction of economic policy making process in India

and it amply demonstrates that the policy regime is quite conducive for more intensive

integration with global economy. It is in this context that the FTA between India and

Thailand needs to be posited.

Economic Reforms in 2001-2002

During the last year the Indian economy continued the economic reforms process by

initiating a set of wide-ranging measures. The range and content of these measures

demonstrate the commitment of the policy makers in India to put the economy on a high

growth and development path and also to make Indian economy capable of integrating with

the global economy.

The proposed FTA between India and Thailand needs to be approached with the

understanding that due to the recent economic reforms, Indian economy has become quite

amenable to more intensive economic integration with a country like Thailand. This fact is

substantiated by highlighting the major features of economic reforms pertaining to 2001-02that are summarized below (Government of India, 2002):

I. Structural Reform Initiatives

Some of the measures that were initiated last year have addressed the imperatives of

structural reforms in the Indian economy. These include reduction in interest rates;

disinvestment of government equity in select public sector undertakings like VSNL, IBP,

CMC, HTL, PPL, BALCO and certain ITDC hotels; removal of licensing requirements and

restrictions on storage and movement of wheat, rice, sugar, edible oilseeds and edible oils;

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dereservation of fourteen items from the list of items reserved for exclusive manufacture by

the small scale sector etc.

II. Fiscal ReformsIn the area of fiscal policy, the following measures were initiated: downsizing some of

the departments; rationalisation of excise duty structure by having only a single rate of 16

percent; reduction of peak level of customs duty from 38.5 percent to 35 percent with the

abolition of surcharge on customs duty; exemption from antidumping and safeguard duties

for goods imported by 100 percent EOUs and units in FTZs and SEZs etc.

III. Infrastructure

For upgrading the infrastructural facilities the government adopted the following

measures which are important from the point of view of FDI inflows as infrastructure is a

major determinant of it: rationalisation and extension of tax-holidays for infrastructure

projects to 15 to 20 years; extension of five-year tax holiday and 30 percent deduction of

profits for the next five years to internet service providers and broadband networks;

enhancement of budgetary allocations for the Pradhan Mantri Gram Sadak Yojana (PMGSY)

for speeding up connectivity of rural roads; extension of PMGY scheme to cover rural

electrification; launching of National Highway Development Project etc.

IV. Capital and Money Markets

Capital and Money Markets were characterised by the introduction of trading in index

options, options on individual securities and stock futures. The aggregate limit for FII

portfolio investment was enhanced to 49 percent and subsequently upto sectoral ceiling.

V. External Sector

Within the ambit of external sector, trade liberalisation and promotion measures

included removal of Quantitative Restrictions (QRs) on Balance-of-Payments (BOPs)

grounds by dismantling restrictions on the remaining 715 items. Agri-economic Zones were

set up for promoting agricultural exports on the basis of specific products and geographical

areas. A Market Access Initiative (MAI) scheme was also introduced to boost exports.

Moreover, interest rates on export credit were rationalised A special financial package was

introduced for large value exports (annual exports of over Rs. 100 crore) of selected products.

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On the capital account too, steps to integrate the economy with the rest of the world

were visible. FDI up to 49 percent from all sources were permitted in the private banking

sector. In addition, 100 percent FDI was permitted for B-to-B e-commerce, courier services,

oil-refining, hotel and tourism sector, drugs and pharmaceuticals, Mass Rapid TransportSystems including associated commercial development of real estate. Foreign investors were

permitted to set up 100 percent operating subsidiaries without the condition of disinvesting a

minimum of 25 percent equity to Indian entities. Offshore Venture Capital Funds/Companies

were allowed to invest in domestic venture capital undertakings. FDI up to 100 percent was

permitted with prior approval of the Government for development of integrated townships.

It is amply clear that the policy making process in India is quite in tune with the

global realities and it has made the economy conducive for more intensive integration with

the global and regional economies. This also demonstrates that the proposed FTA with

Thailand is feasible at least on the ground that, at the first stage, the macro policy regime is

amenable for it and it would facilitate the setting up of the FTA.

Overall, the economic fundamentals of the economy are strong and it is on the

threshold of taking advantages of the global integration process. This has positive

implications for the proposed bilateral FTA between India and Thailand.

2.2 Thai Economy

Thai economy could be described as a developing country with relatively high degree

of openness. Starting in early 1960s, industrialisation in Thailand has transformed the

agriculture-dependent economy into an economy with diversified manufacturing production

bases and high degrees of linkages with the international market. The industrialisation policy

started with the strategy of import substitution or inward looking policy and later turned to

emphasise more on export market.

During the last ten years, it is observed that the share of agriculture in total GNP has

been a little lower than 10 percent (except for the year 1998 when the share jumped to about

11.16 percent). For the rest of period, the share has been stable between 8.66 percent and 9.72

percent (Table 3). In 1993, agricultural production was US Dollar 10,824 Million whereas the

total GNP for Thailand was US Dollar 123,195 Million. In 2001, the figure for agricultural

production and total GNP were US Dollar 9,806 Million and US Dollar 113,272 Million,

respectively.

Because of Thailand’s long experience in industrialisation, the main economic

activities are in the manufacturing sector. At present the share of manufacturing production is

15



more than 30 percent of the total GNP. Combination of both agriculture and manufacturing

production accounts for less than 50 percent of the GNP.

The services sector is now playing an important role in the Thai economy with the

total share higher than 50 percent of GNP. Some of the important sub-sectors in terms of GNP contribution are wholesale and retail trade, transport and communication, construction,

financial sector, public administration and education. It could be observed that after the crisis

the share of construction and finance has become significantly smaller.

Before the financial crisis, the Thai economy grew at a high rate, for example, in

1994, 1995 and 1996, the GDP rate of growth was 9.0 percent, 9.2 percent and 5.9 percent,

respectively. The growth became negative during 1997 and 1998. In 1999, the economy

started to register positive growth again, however, the positive rate dropped in 2001.

Thai economy has slowed down in 2001, due mainly to the adverse impact of global

economic slump on the external sector. GDP growth in 2001 was 1.8 percent - decreasing

from 4.4 percent and 4.6 percent in 1999 and 2000, respectively. Part of the contraction in

foreign demand was partially offset by domestic stimulus from the government sector and

measures to boost private spending. 1

During its currency and financial crisis in 1997, Thailand was regarded as the origin

of the contagious effect of the crisis to several other Asian economies. “Tom Yam Kung

disease” became well known to economists around the world. It took sometime before Thai

Government decided to change the macroeconomic policy to pull the economy out of the

recession. The government turned to expansionary fiscal and monetary policy while

maintaining the exchange rate at about 38 Baht a US Dollar which later drifted to about 44

Baht a dollar. As a result of exchange rate depreciation, international reserve soon came back

to about the same level as before the crisis. However, it cannot be concluded that the Thai

economy has fully recovered from the crisis.

Due to the crisis, the Thai Baht had significantly depreciated against the US Dollar

and the currencies of other developed trading partners. This created some disruption in

international trade. Total imports that used to be higher than total exports dropped. Since

1998, Thailand’s balance of trade account has been in surplus.

Thailand has gone through substantial reforms in many areas such as banking and

finance, debt restructuring, social safety net support, tax incentives and tax reform, legal

amendment, public enterprise privatization and foreign ownership requirement.

1 Bank of Thailand Report on Economic Condition in 2001 and Outlook for 2002.

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It seems that Thailand’s economic strategy has been to engage more intensely with

the global market. In order to perform in the world market the Thai economy has to succeed

in the process of adjustments. Another economic strategy could be to diversify in terms of

markets and suppliers across the globe as well as within the Asian region in order to competein the global market. It is in this context, that the Thailand-India economic cooperation needs

to be viewed.

2.3 Overview of Bilateral Trade and Investment Relations

The bilateral trade and investment linkages between India and Thailand have shown

dynamism in recent years. Nevertheless, the linkages are quite lesser than their potential

when analysed either in absolute terms or in relation to their relative importance for the other.

It has been observed that both the countries are not very important trade and

investment partners for each other as of today. However, our analysis, especially in Chapter

3, suggests that there does exist tremendous potential to expand the bilateral economic

linkages.

2.4 India’s Exports to Thailand

2.4.1 Overview

Export Dynamism

India’s exports to Thailand have displayed growth dynamism in recent years. It has

increased from US Dollar 201 Million (1990) to US Dollar 547 Million (2000) – registering a

172 percent increase over the decade. The average annual growth rate has been 16 percent

over the decade, 28.9 percent during 1998-99, and 16.88 percent during 1999-2000 (Table 4).

As imports have been lower than exports, India has maintained a situation of trade surplus

vis-à-vis Thailand.

Relative Importance as Export Destination

The relative importance of each other in the trading space is meagre as noticed from

Table 4. Thailand as a destination for India’s exports barely accounts for over 1 percent of

India’s total exports. Similar is the situation of India from the point of view of Thailand’s

export destination. Thailand as a source of India’s imports and India as a source of Thailand’s

imports display similar relative importance for each other. This is indicative of the fact that

the potentials for greater trade linkages are yet to be tapped.

17



Composition of Exports

India’s principal exports to Thailand are jewellery, chemicals, products extracted from

vegetable oils, iron and steel, fresh shrimps and prawns, pharmaceutical products, metals

waste and scrap, lubricating oil for hydraulic brake etc. It is evident from the export basket

that a fresh policy impetus needs to be provided for boosting India’s exports in sectors such

as textiles and clothing, engineering goods, paper products, processed food, metal

manufactures, etc. Even the export levels of major items mentioned above also need to be

enhanced (see Tables 5 and 6) by setting in place an appropriate policy regime and in this

context the proposed FTA could serve as a catalyst to the already displayed India’s export

dynamism vis-à-vis Thailand. Its feasibility is analysed in subsequent chapters. From the

observations such as above, what comes out is that it is desirable.

2.4.2 Merchandise Exports and Barriers: Key Sectors

Indian exports are facing both tariff and non-tariff barriers. As revealed by Table 7 the

import-weighted average tariff rates in Thailand for different sectors at HS 6-digit level was

on an average 9.43 percent. Commodities that face high tariff include crops n.e.c. (52.07

percent), fishing (38 percent), poultry and seafood (31.28 percent), wearing apparel (27.65

percent), oil seeds (20.50 percent) and veg., fruits and nuts (17.78 percent). This could be

one of the reasons for the low levels of exports from India to Thailand. This is supported by

the fact that there are several product groups in which Indian exports are significant and

Thailand’s tariff rates are high (Mehta, 2002). These product groups are identified as fish and

crustaceans (Chap. 3); edible fruit and nuts (Chap. 8); coffee, tea, spices etc (Chap. 9); articles

of apparel and clothing accessories (Chap. 62); etc. However, there are other reasons as well

like the non-tariff barriers and information gap as highlighted in this study that also could be

hindering India’s exports growth.

In this context, non-tariff barriers also need to be addressed. This builds a case for

closer cooperation between India and Thailand on harmonisation of health and other

standards, especially health standards as mere tariff liberalisation under the FTA might not be

sufficient to engender export growth. India and Thailand could enter into an agreement for

this as part of the FTA. Such an initiative has an added merit in the context of WTO

Agreements on Technical Barriers to Trade and the SPS Agreement. Bilateral cooperation

could help evolving joint positions at the WTO.

It has been highlighted that Indian exports, especially in food and fishery products are

facing stiff barriers in the developed countries on account of WTO agreements. The problem

18



is compounded as the export consignments are not only rejected on the grounds of non-

conformity to standards but are also being destroyed. Such a situation could also be true for

Thailand (Sareen, 2002). Therefore, one of the ways in which the issue of liberalisation of

non-tariff barriers could be tackled is through cooperation on various WTO and non –WTOagreements relating to standards. It also throws open another dimension of cooperation

whereby Indian institution like the Export Inspection Council (EIC) could enter into an

agreement with its Thai counterpart in order to harmonise the standards of the two countries

for exporting activities.

Apart from the tariff and non-tariff barriers Indian exports also face tremendous

constraints in terms of inadequate information flows, lack of adequate trade finance facilities,

procedural delays, etc. For instance, it is worth highlighting that not only that there is a lack

of information about trade partners but the quality of information available is also quite poor.

Hence, there is an urgent need to evolve a grading/rating system for exporters/importers so as

to improve the reliability of trade partners.

Thus, a comprehensive view of trade barriers needs to be taken in the proposed FTA

to augment export levels significantly vis-à-vis Thailand.

2.5 Thailand’s Exports to India

2.5.1 Overview

Export Dynamism

Thailand’s exports to India have displayed growth dynamism in recent years. In fact

they have been more dynamic than India’s exports to Thailand. It has increased from US

Dollar 63 Million (1991) to US Dollar 566 Million (2000) – registering a 798 percent

increase over the decade in contrast to India’s figure of 172 percent during 1990-2000. The

annual growth rate has been 57 percent during 1998-99, and 27 percent during 1999-2000

(Table 4). As imports have been more than exports, Thailand has maintained a situation of

trade deficit vis-à-vis India.

Relative Importance as Export Destination

The relative importance of each other in the trading space is meagre as noticed from

Table 4. India as a destination for Thailand’s exports accounts for less than 1 percent of

Thailand’s’s total exports. The situation of Thailand from the point of view of India’s export

19



destination is no different as highlighted earlier. India as a source of Thailand’s imports

displays similar relative importance for Thailand. The redeeming feature is that although the

bilateral trade between India and Thailand is rather small it has been continuously expanding

at a relatively high rate. This is somewhat indicative of the fact that the potentials for greater

trade linkages are yet to be tapped – an aspect which has been analysed in subsequent

Chapters.

Composition of Exports

Thailand’s principal exports to India are computers and components; automobiles and

auto parts; synthetic fibres; iron and steel products; textiles; chemicals; rubber and rubber

products; gems and jewellery. However, their volume is still quite low and requires policy

attention for further augmentation as well as diversification.

2.5.2 Merchandise Exports and Barriers: Key Sectors

India’s import-weighted average tariff rate imposed on the imports from Thailand is

24.63 percent. These tariff rates are high in most sectors Table 7. Thailand’s commodities

that face high import tariffs include forestry (45 percent), mineral products n.e.c. (42.03

percent), sugar (40.92 percent), oil seeds (40 percent), textiles (38.62 percent) and motor

vehicles and parts (34.94 percent). At present some other categories of Thailand’s exports are

facing high Indian trade barriers, namely, food and other agricultural products including meat

products, rice, wheat, maize, copra, coconut oil, sugar; carbon black; chemicals; rubber and

rubber products; textile; second hand capital goods; second hand vehicles, etc.

In this context, the issue of non-tariff barriers needs to be tackled.

2.6 Investment Links including Joint Ventures

Just as in the case of trade, the investment links also between India and Thailand have

remained far below their potentials and a policy regime addressing this issue could provide an

impetus to bilateral investment flows. A brief profile of the two-way investment links is

given below.

2.6.1 Indian Investment in Thailand

Thailand has remained, in a relative sense, an important investment destination for

Indian joint ventures in the ASEAN region (Table 8) but it has not been a significant

20



destination in India’s total joint ventures (JVs) abroad. In the case of Indian wholly-owned

subsidiaries (WOS) in Thailand the present scenario is disappointing (Table 9). There is

hardly any Indian presence in Thailand in terms of WOS. Therefore, steps need to be taken so

as to augment Indian joint ventures and wholly-owned subsidiaries in Thailand. One such

step could be to liberalise trade on a fast track basis in items that are produced with the help

of Indian JVs or WOS in Thailand.

Three observations could be made on the nature of Indian investments in Thailand.

First, the number of Indian investment projects has not picked up in recent times. Second,

Indian investment in absolute terms has fallen since 1998 (Table 10). Third, the shares of

Indian and Thai investments in Indian projects have also remained stagnant in recent years.

In terms of its sectoral composition Indian investments have been rather concentrated

mainly in manufacturing sector (Table11). In the services sector its presence has been almost

insignificant. Therefore, efforts are required to diversify the Indian investment in Thailand.

The major Indian groups who have invested in Thailand are the Aditya Birla Group,

Ballarpur Industries, Baroda Rayon Group, Usha Martin Industries, Ranbaxy Laboratories,

Lupin Laboratories and Indo Rama, although some have since withdrawn (e.g. Ballarpur). At

present, there are 26 Indian joint ventures operating in Thailand of which two Indian

companies viz. NIIT and APTECH have started their operations more recently in software

development and computer education. The potential areas for Indian investment in Thailand

are IT services and software, pharmaceuticals, herbal based medicine and cosmetics, dairy

development and products, manufacturing of machine tools, and iron and steel products,

human resource development etc. (Embassy of India, 2002).

2.6.2 Thai Investment in India

As for Thailand’s investment in India the existing scenario presents a dismal picture.

During the period 1991-2001 Thailand accounted for a mere 0.01 percent of India’s total

investment space (Table 12). The number of foreign collaboration approvals was 112 of

which 38 were technology collaborations and 74 had foreign direct investment. The total FDI

approvals from Thailand between 1991 to May 2002 were US Dollar 782.7 Million. Thailand

ranked eighteenth among the foreign countries and third among ASEAN countries in terms of

investment approvals in the period 1991 to May 2002 (Embassy of India, 2002).

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From Table 13 it is discernible that Thai investment in India has been falling steeply

in recent years. This needs to be examined as investments from other countries have been

taking place in India. Perhaps it is the effect of the Thai crisis and it is expected that it will

find its optimum level in due course. In terms of sectoral distribution of Thai investments it isobserved that it is quite concentrated (Table 14). In sectors such as minerals and ceramics and

chemicals the Thai investment presence in India is nil. The major sectors in which Thai

investment in India has been approved are telecom, tourism, food processing, chemicals and

electrical equipment as their shares in total FDI approved have been 54, 25, 15, 4, and 1

percent, respectively.

However, some policy measures in the case of Indian investment in Thailand need to

be applied in this case as well and they are expected to provide an impetus to FDI from

Thailand in India. In addition, barriers to investment flows also need to be addressed.

2.6.3 Barriers to Bilateral Investment Flows

Investment flows are often restricted due to various barriers, of which some are in the

domain of policy and others relate to the level of development itself. Some of these barriers

are mentioned below.

2.6.3.1 Indian Perspective

One major constraint coming in the way of Indian investors is in terms of information

gap regarding policy guidelines, potential sectors, prospective collaborators, etc. Indian

investors find it difficult to locate a reliable counterpart. Procedural bottlenecks also act as

barriers. Recruitment of staff in Thailand has reportedly also not been smooth. In our view

some of the trade liberalisation measures and rules of origin could provide a boost to Indian

investments in Thailand.

Similarly, despite the fact that Indian investment climate has become more liberal of

late, procedural hurdles even in the case of automatic routes have acted as major barriers.

Information gap acts as a constraint for Thailand’s investments in India too. However, it is

worth mentioning that infrastructural bottlenecks have proved to be the main constraint in

India in terms of attracting FDI from Thailand. Therefore, steps could be taken to facilitate

Thai investment in the infrastructure sector itself.

2.6.3.2 Thai Perspective

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There are some investment- barriers that need to be eliminated to facilitate foreign

investments from Thailand to India that are enlisted below:

(a) Lack of standardised procedures: Due to lack of standardised procedures, on certain

occasions, different interpretations of rules and procedures occur. This gives rise to

procedural delays.

(b) Lack of intra-and inter-state harmonisation of rules: India is divided into different States

and each state has its own authority to introduce investment promotion regimes. Such a

situation often results in possibilities of double taxation.

(c) Difficulty in loan approval for foreign projects: Procedural complexities and lack of

standardised banking norms hinder approval of loans for foreign projects.

(d) Paucity of adequate information exchange: The Office of the Board of Investment of

Thailand has launched a joint venture program, which focuses on facilitating foreign

investments seeking Thai joint venture partners. Through this programme, not even a

single joint venture between Thailand and India has been reported till now.

One important policy step to address investment barriers is reflected in the fact that

both countries have agreed to set up a Joint Venture Centre. This is supposed to facilitate

commercial and investment tie-ups between Thailand and India, especially in the areas of

road construction, tourism, food processing and other areas of interests (Embassy of India,

2002).

2.7 Economic Cooperation

Economic cooperation has emerged as an important modality in the age of heightened

competition. It can be at various levels that are not mutually exclusive. At one end of the

spectrum is multilateral economic cooperation like the WTO and at the other end is the

bilateral economic cooperation with regional and subregional cooperation mechanisms falling

in between.

India and Thailand interact with each other at all the levels of economic cooperation.

A profile of these interactions is presented below.

2.7.1 Bilateral Cooperation

Economic relations between Thailand and India expanded during the past decade. The

trend towards globalization, the liberalization of the Indian economy, and Thailand’s export-

23



oriented development strategy helped open up new economic opportunities during the first

half of the 1990s. During the latter half of the decade, convergence of the “Look East” and

“Look West” policies of India and Thailand, respectively also set the scene for the emergence

of regional cooperation.

To strengthen the cooperation process between India and Thailand several high level

mutual visits have taken place in both the countries. HRH Crown Prince Maha

Vajiralongkorn visited India in April 1992 for 15 days and again for four days in December

1998. HRH Princess Maha Chakri Sirindhorn visited India in March 1987 for 17 days

followed by a visit to the Andaman and Nicobar Islands in December, 1996, becoming the

first foreign dignitary to have been invited to visit these islands. She paid private visits to

Kushinagar on March 30, 2001 and to New Delhi/Rajasthan during April 2-13, 2001.

Former Indian Prime Minister Mr. P.V. Narasimha Rao’s visit to Thailand in April

1993 set the stage for a substantive consolidation of bilateral relations.

Dr. Thaksin Shinawatra, Prime Minister of Thailand, paid a state visit to India during 26-29

November 2001. He and the Indian Prime Minister Mr. A. B. Vajpayee mooted the idea of a

Joint Working Group (JWG) to study the feasibility of India–Thailand bilateral FTA. He

again paid a one-day working visit to New Delhi on 1st February 2002 as a follow up on

various decisions taken during his November visit to boost bilateral cooperation. Morerecently, in November 2002, Indian Prime Minister Mr. A. B. Vajpayee visited Thailand and

reinforced the bilateral ties and also emphasised the need for exploring the possibilities of the

bilateral FTA.

A joint commission for Bilateral Cooperation at the level of Foreign Ministers was

established in 1989 and since then 3 meetings have already taken place, the last one in

January 1996, for which the External Affairs Minister, Mr. Pranab Mukerjee visited

Bangkok. The Thai delegation was led by the Foreign Minister M.R. Kasem S. Kasemsri.

The next meeting is to be held in New Delhi soon (Embassy of India, 2002).

Foreign Secretary-level consultations took place in Bangkok in June 1996 when

Mr. K. Raghunath, the then Secretary (East) led the Indian delegation. The Thai delegation

was led by the Permanent Secretary Mr. M.R. Thep Devakula. Seventh round of

consultations were held in New Delhi on 23rd November 2001 in which the Thai delegation

was led by Dr. Tej Bunnag, Permanent Secretary and the Indian delegation was headed by

Mr. Shashank, Secretary (ER).

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The India-Thailand Joint Trade Committee (JTC), set up in 1986, is the official forum

for discussing trade-related problems and issues. The Joint Business Council, chaired

alternatively by the Federation of Indian Chambers of Commerce and Industry (FICCI) and

the Board of Trade of Thailand (BOT), continues to work together to promote dialogue

between the two business communities.

Bilateral Agreements

India and Thailand have been interacting intensively on various dimensions. A

modest programme of bilateral cooperation in the field of science and technology has been in

existence in the form of collaboration programme between CSIR-TISTR (Council of

Scientific and Industrial Research-Thailand Institute of Scientific and Technology Research).

A project-oriented plan is being implemented. A working programme has been signed in

February 1997 between CSIR and TISTR during a visit to India by the Governor of TISTR.

The dairy sector has also been identified as offering promising possibilities of

mutually beneficial cooperation. 35 Thai farmers, experts and officials from the dairy sector

have recently visited India with the invitation of the National Dairy Development Board

(NDDB). Collaboration also exists with the Asian Institute of Technology, Bangkok. The

Electronics Design Laboratory (EDL) was set up at Chulalongkorn University, Bangkok with

the Government of India assistance.

Some of the important bilateral agreements between the two countries are enlisted

below.

1. An Agreement regarding establishing a Joint Commission was signed in March 1989.

Three meetings, at Foreign Minister level, have since been held.

2. Bilateral Air Services Agreement was concluded in 1969, although Air India had been

operating regular flights as early as 1954.

3. A Cultural Agreement was signed in 1977.

4. An Agreement on the De-Limitation of the Sea Bed Boundary between the two

countries in the Andaman Sea was signed on June 22, 1978.

5. An Agreement on the De-Limitation of the Sea Bed Boundary between India,

Thailand, Myanmar tri-junction point 7 in the Andaman Sea was signed on October

27, 1993.

6. A Convention of Avoidance of Double Taxation was concluded in March 1985.

7. A Joint Trade Committee was established in 1985. Eight meetings have since been

held.

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8. An Agreement setting up a Joint Business Council was signed in 1989. Two meetings

have since been held.

9. A Memorandum of Understanding on Co-operation between the Indian Council for

Cultural Relations and International Studies Centre of Thailand was signed inSeptember 1994.

10. Agreement on Peaceful Uses of Nuclear Energy, signed in 2000.

11. Bilateral Investment Promotion and Protection Agreement (BIPPA) signed July 2000,

ratified (and effective) July 2001.

12. MOU on Cooperation on Information Technology and Services, signed November

2001.

13. Agreement on Cooperation in the Exploration and Use of Outer Space for Peaceful

Purposes, signed February 2002.

14. Agreement on Scientific, Technical and Environmental Cooperation, and Transfer of

Technology, signed February 2002.

15. A Memorandum of Understanding on Agricultural Cooperation is at the final stage of

negotiations (Embassy of India, 2002).

16. An Agreement on Cooperation in Tourism is under discussion (Embassy of India,

2002).

2.7.2 Regional and Subregional Economic Cooperation

Geographical proximity is an important determinant of regional and subregional

cooperation. India and Thailand are members of intra-regional groupings such as the SAARC

and ASEAN. It was not until the latter half of the 1990s that the inter-regional initiatives

were undertaken. This process began with the formation of BIMST-EC, the Mekong Ganga

Cooperation (MGC), and the Indian Ocean Rim Association for Regional Cooperation (IOR-

ARC). Meanwhile, ASEAN-India relations had already begun at a sectoral level in 1992.

These processes of economic cooperation are briefly discussed below.

BIMST-EC

The Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC)

Declaration was signed in June 1997. By December 1997, Myanmar was also included in the

grouping which became BIMST-EC. The objective of this grouping is to foster social andeconomic development for member countries by promoting cooperation and mutual

26



assistance in trade, agriculture, industry, transportation and infrastructure. The BIMST-EC

mechanism consists of senior officials’ and ministerial meetings; a separate economic senior

officials and ministers meetings overseeing economic issues; and working groups to direct

the implementation in each sector of cooperation. International organizations such as the

ESCAP and the ADB also provide financial and technical inputs.

At the First meeting of Economic/Trade Ministers of BIMST-EC held in Bangkok in

August, 1998, it was agreed that BIMST-EC should aim and strive to develop into a Free

Trade Agreement, and should focus on activities that facilitate trade, increase investment and

promote technical cooperation among member countries.

The Second Trade Ministers meeting held on 26-27 April, 2000 in New Delhi decided

to constitute an Inter-Governmental Group consisting of officials dealing with international

trade to prepare a concept paper on the possible approaches towards a Free Trade

Arrangement in BIMST-EC region. The First Meeting of this Inter-Governmental Group was

held in New Delhi on 5-6 February, 2001 wherein the Concept Paper on Possible Approaches

Towards a Preferential Trading Arrangement Leading to a Free Trade Area in BIMST-EC

Region was prepared.

At the Third BIMST-EC Trade/Economic Ministers’ Meeting held on 15th February,

2001 in Yangon, Myanmar, the Ministers stressed the importance of a time-bound work

program for establishing Free Trade Area and acknowledged the efforts of the Inter-

Government Group (IGG) for preparing the Concept Paper and had agreed the setting up of a

Group of Experts (GOE) led by the government officials which should include members of

the academia and the private sector.

The Fourth ministerial meeting held in Yangon in December 2001 had made a

number of institutional decisions to expedite the decision making process. Ministerial

meetings would henceforth be scheduled in February each year, and elevated from deputy to

foreign minister level; senior officials meetings would be held twice a year (prior to the

ministerial meeting, and in September). Membership would remain static for the time being.

The First meeting of the GOE was held during 17-18th January, 2002, in New Delhi

and the second meeting of the GOE was held during 24-25 June, 2002. At the GOE meeting,

all Member countries agreed that the “Negative List” approach is preferable while moving

towards a Free Trade Area in the BIMST-EC region. The Report of the GOE shall be

considered at the next BIMST-EC Trade and Economic Ministers meeting proposed to be

held in Colombo (Ministry of Commerce, 2002).

27



It is only to be expected that with the formal acceptance of the report of the GOE; the

Trade and Economic Ministers will take further decision in regard to the work required to be

done for having a Draft Treaty framework for a FTA in the BIMST-EC region within a fixed

timeframe, and thereafter to have negotiations for exchange of concessions and modalities for

this purpose completed speedily. Having a FTA in the BIMST-EC region is expected to give

further thrust and dynamism to the trade and economic relations among all member countries

(Ministry of Commerce, 2002).

Mekong Ganga Cooperation

The Foreign Ministers of Cambodia, India, Lao PDR, Myanmar, Thailand and

Vietnam agreed to establish Mekong Ganga Cooperation during the sidelines of the ASEAN

PMC in Bangkok in July 2000. The first Ministerial Conference was held in Vientiane in

November the same year, and it was agreed that the grouping would focus on cooperation in

four key sectors; namely, tourism, culture, human resource development, and transportation

linkages.

In subsequent meetings of MGC senior officials and ministers, working groups

chaired by a member country, were set up to coordinate and implement cooperation in each

of the identified areas: tourism (Thailand), culture (Cambodia), human resource development

(India), transportation (Lao PDR). A working group on action plan chaired by Vietnam was

assigned the task of following up on the implementation of the other four working groups.

The roadmap for the direction of cooperation under the MGC is included in the Hanoi

Plan of Acton (HPA), adopted during the 2nd MGC Ministerial Meeting in July 2001. This

document, effective for six years from 2001-2007, provides the basis for implementation of

activities during the six years under the mentioned four working groups. It also provides a

review of the plan’s implementation every two years. Another consequence of the 2nd MGC

Ministerial Meeting is the establishment of an MGC fund to provide financial support for the

planned projects and activities.

ASEAN-India Relations

India and ASEAN established a sectoral dialogue partnership in 1992, and later

elevated the relations to a full dialogue partnership in 1995. Current relations cover broad

ranges of issues of mutual interests; including politics, economics, trade, science and

technology, and development. Interaction is made through various channels such as the PMC

(Post Ministerial Conference), Senior Officials Meeting Consultation, the ASEAN-India Joint

28



Cooperation Commission (AIJCC), Working Group on Trade and Investment, Working

Group on Science and Technology. ASEAN-India Fund was set up to finance cooperation

projects. India is also a member of the ASEAN Regional Forum (ARF), which deals with

political and security issues in the East Asian region.Initiated to cover wide areas of interest, which ranged from human resource

development to various subsectors of science and technology cooperation, in May 2002

ASEAN-India joint projects concluded 3 joint collaboration projects in the areas of human

resource development, science and technology, and plant biotechnology, with 16 more

projects underway. India also generously provides over 100 scholarships a year for human

resource development, and continues to make substantive contributions towards ASEAN

development, especially among its newer members.

ASEAN-India economic relations have acquired a new dynamism in the recent past.

An ASEAN-India Economic Linkages Task Force (AIELTF) has been set up with the

mandate to prepare a draft framework agreement for setting out the road map for achieving

greater economic integration. AIELTF is to follow a building block approach with the long

term objective of setting up a Regional Trade and Investment Area (RTIA) and is required to

submit its recommendations along with a draft framework agreement through the ASEAN-

India SEOM for further consideration by the ASEAN-India Trade and Economic Ministers at

the next annual meeting in September 2003.

The First ASEAN Senior Economic Officials Meeting (SEOM) – India Consultations,

were held in Manila on 7th August, 2002 which was followed by the First ASEAN Economic

Ministers (AEM) – India consultations in Brunei Darussalam on 15th September, 2002. The

Senior Economic Officials decided that an ASEAN-India Expert Group be set up which shall

study and recommend measures to further enhance ASEAN Trade and Economic

Cooperation and Integration towards closer economic partnership. The Expert Group should

adopt a building block approach to the discussions by focussing on specific areas where clear

and concrete outcomes could be achieved. The Senior Economic Officials also prepared a

draft Terms of Reference of this Expert Group for further consideration and approval by the

Ministers at the AEM-India consultations.

At the AEM-India consultations in Brunei, all ASEAN countries agreed to India’s

proposal of having a “draft framework agreement” and the “building block approach” within

the TOR of the Expert Group. It was also decided to establish “ASEAN-India Economic

Linkages Task Force” instead of Expert Group, which should submit its recommendations

including a draft framework agreement to the next AEM-India consultations in 2003 through

29



Senior Economic Officials for further consideration and follow-up action. Another important

decision which emanated from the First AEM-India consultations is that Regional Trade and

Investment Area (RTIA) should be the long term objective with issues relating to trade and

investment promotion and facilitation being addressed in short term.At the ASEAN-India Summit held on 5 November 2002 in Phnom Penh, in addition

to deepening the existing cooperation, the future direction for expanding relations between

ASEAN and India was discussed. The Prime Minister of India stated that some progress

towards greater economic integration has been made in terms of setting up of the Task Force

to recommend measures to mutually increase market access, facilitate trade and promote

investment. He also indicated India’s keenness to have an India-ASEAN FTA within a ten-

year time frame.

IOR-ARC

The Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) was

established during the first meeting of the Indian Ocean Rim Initiative Meeting in Mauritius

1995, of which India is one of the founding member countries. The association expanded its

membership by 7 countries in 1996, and added another 5 countries including Thailand in

1999 to bring its current strength to 19 countries.

From its inception, it is viewed as a largely trade facilitating body for countries

bordering on the Indian Ocean. Current activities of the body continue to work towards

promoting trade and investments as well as related economic infrastructures such as a

payment system, exchange of trade related problems, enhancement of technology information

capabilities and so on. The association adopts a three pronged approach by including:

official, private and academic sectors.

While current cooperation and joint projects are in the initial stages, a great deal of

groundwork has been done to pave the way for cooperation in the future.

\

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Chapter 3

Analytical and Methodological Issues

Introduction

One of the ways in which the impact of FTA on different variables is assessed is

through the application of a computable general equilibrium model. It is rather well known

that such models have certain inherent limitations but as long as the results are interpreted by

keeping in view the limitations it is possible to get valuable insights for the policy making

process.

The analytical framework of the study has been laid out in section 3.1. The present

work is based on the application of the GTAP model, as it is one of the most widely used

models. A brief overview of the structure of this model is given in section 3.2 including some

of its assumptions and inherent limitations. The macro impact of the FTA on India and

Thailand are briefly analysed in section 3.3. The dimensions of sectoral impacts are dealt

with in section 3.4 and some implications of the FTA that are not captured in the model are

highlighted in section 3.5.

3.1 Analytical Framework

The study on exploring the prospects of India-Thailand FTA needs to posit ‘ freeing of

trade’ in a proper analytical perspective. It also should recognise the limitations of various

techniques that are applied to assess the impact of tariff liberalisation. Therefore, an attempt

is made here to understand the implications of reduction of trade barriers in the backdrop of

certain analytical and methodological issues. This has been undertaken on the following

dimensions viz. (i) trade as an instrument of development (ii) trade facilitation in conjunctionwith trade liberalisation (iii) role of rules of origin under FTA (iv) assessing the implications

of trade liberalisation with the help of Computable General Equilibrium (CGE) modelling

and (v) exploiting trade complementarities.

Trade as an Instrument of Development: An Integrated Approach

It is imperative to treat trade as an instrument of development. It is equally important

to recognise that the causality between trade and development runs in both the directions.

Due to lack of such an understanding often the means to achieve the ultimate aim of

31



development is treated as an end in itself. This results in overemphasis on trade liberalisation

per se.

Clarity regarding the causality between trade and development helps in taking an

integrated approach of trade whereby adequate emphasis is laid on trade-investment linkagesand setting up of trade-creating joint ventures are envisaged. In this kind of a strategy, both

trade augmentation and developmental objectives can be achieved simultaneously as joint

ventures would contribute to output generation, increase in employment and trade creation.

Trade liberalisation in such a context assumes a special meaning. One implication

could be that due to trade liberalisation bilateral investment flows between countries under

consideration could be generated to take advantage of a liberalised trade regime. The other

obvious one could be that due to setting up of trade-creating joint ventures trade flows are

generated.

Similarly, trade liberalisation could be geared in such a way that it is best suited for

taking the benefits of the technological spread-effects in the two countries. This is so because

any trade product represents a particular level of technology. Hence, with trade flows an idea

about the nature of technology embedded in the product is also exchanged. This could

generate a second round of technology flows between the countries entering into a bilateral

trade agreement. This could be an example of trade flows generating trade in technologies.

The converse of this also holds good inasmuch as technological cooperation helps improving

the competitiveness of production and leads to trade creation between the two countries.

There is another angle to this analytical understanding which also needs to be taken

note of. Once an integrated approach to trade is adopted i.e. its linkages to investment and

technology are kept in mind, the bilateral trade cooperation takes the form of a broader

development cooperation. Development cooperation helps building export and technological

capabilities, with the help of investment cooperation. Subsequently, the bilateral partners do

not restrict their cooperation for tapping each other’s trade, investment and technological

space but also jointly target the global economic space.

Thus, there is merit in considering the linkages of trade with investment and

technology, or so to say with development, as in so doing bilateral cooperation does not

remain confined to mere trade liberalisation nor it focuses only on each other’ s markets.

Trade Facilitation with Trade Liberalisation

It is our contention that reduction in trade barriers might neither be a necessary nor a

sufficient condition for propelling trade flows. It is entirely possible that even without trade

32



liberalisation trade flows could be provided an impetus. This issue is analysed a little later in

this section when the issue of the existing trade complementarities is taken up. At the moment

we argue that mere trade liberalisation is not sufficient for generating substantial trade flows

unless broad-based trade facilitation measures are set in place.Some of the trade facilitation measures that are crucial for enhancing trade flows,

inter alia, could be bridging information gap and improving quality of information, removing

procedural hurdles, customs facilitation, improving banking facilities-including trade finance,

harmonising technical standards, undertaking infrastructural improvements etc. Unless these

areas receive adequate attention long term sustained growth in trade could remain an illusive

proposition.

Role of Rules of Origin under FTA

Rules of origin have a significant role to play in a FTA. In recent times, rules of origin

have emerged as significant commercial policy tools, serving various policy objectives.

These rules are applied in both preferential and non-preferential trading regimes. The system

of rules of origin has been a very useful mechanism for the prevention of circumvention of

anti-dumping duties and in determination of countervailing duties, voluntary restraint

arrangements, etc. It has also been used in preventing trade deflection in preferential trading

arrangements and it also plays a developmental role in the partner countries. However, rules

of origin should be designed in a manner that is not trade-restricting. They should not become

trade barriers due to their complex methods of implementation.

There are different methods of determining originating status of products. Whether or

not a product has originated in a particular country is decided if the product has undergone

substantial transformation. In other words, the final product should be distinct from its

constituents. Three kinds of tests are applied to determine this. First, the change in tariff

heading test whereby the tariff heading of the final product is different from the tariff

headings of its components. Second is the percentage test according to which a minimum

percentage of total value addition should be achieved with the help of indigenous inputs. And

third, specified process tests that require a product to undergo certain stipulated processes.

What follows is a profile of some of the effects of rules of origin in a preferential

trading arrangement (Panchamukhi and Das, 2001). Out of the various positive and negative

implications of rules of origin only a few of them are analysed here.

33



A. Positive Effects

There could be three major positive effects that the rules of origin can cast in a

preferential trading arrangement in terms of: (i) preventing trade deflection, (ii) facilitating

value addition, and (iii) augmenting bilateral trade. Each of these is dealt with below.

Preventing Trade Deflection

In any preferential trading arrangement members set their own external tariffs but

give preferential tariff treatment to each other. The divergence between external tariffs of the

members and the regional preferential tariffs is a potential source of trade deflection (Shibata,

1967). In the absence of any rules of origin within the preferential agreement the country with

lowest external tariffs is likely to serve as an entry point into the partner country market for

the goods of the non-member countries. In this sense, rules of origin are important tools for

checking trade deflection from one partner country to another of third country goods. This is

an objective worth pursuing, as these types of trade flows do not forge adequate backward

and forward linkages in the member country that imports these goods first. Therefore,

compliance to rules of origin should form an integral part of any preferential trading

arrangement in order to prevent trade deflection.

Facilitating Value Addition

The three modalities of determining origin of a product aim at substantial

transformation in inputs. Thus, rules of origin together, facilitate value-addition in the

country of manufacturing. Whether it is in the form of meeting a local-content requirement as

a proportion of value-added or changes in tariff heading or a particular processing

requirement, all have a developmental role to play. Providing for value addition norms has

the potential for generating backward and forward linkages in a country adhering to the rules.

Thus, a partner country is prevented from becoming a mere trading country as these

requirements act as a deterrent to assembly kind of production activities. The rules of origin

thus, have important implications for the development of the manufacturing sector as a

whole, which in turn, contributes towards enhancing the export supply capabilities of the

member country. Hence, while devising the rules in any regional grouping the developmental

effects of them must not be overlooked.

Bilateral Trade Expansion

A regional preferential trading arrangement having the provision of cumulative rules

of origin is more liberal than the one not having it. This is because under regional cumulation

34



facility imports by a partner country of the preferential agreement from the other partner are

considered as originating in the importing country and not as imports. It has the potential to

engender intraregional trade flows of different categories of goods among the member

countries. It also has a favourable trade balance effect for the country using the cumulation provision. Moreover, there is a possibility that the first round of trade diversion effects is

converted into trade creation effects in the long run. Each of these effects of cumulation

facility is briefly discussed in Panchamukhi and Das (2001).

B. Negative Effects

Apart from the positive implications of rules of origin, as highlighted above, there are

certain adverse implications, as well that need to be kept in mind. The rules of origin might

(i) inhibit bilateral trade, and (ii) favour high cost and inefficient production.

Constraints on bilateral trade

In a member country of a preferential agreement some sectors could be lacking in the

indigenous supply of natural resources and have underdeveloped industrial base. Their

dependence on imported inputs might pose problems for their adherence to originating-status

norms. This in turn might hinder its bilateral exports within the framework of the preferential

agreement. In such a situation there appears to be a trade-off between the objectives of

preventing trade deflection on one hand and bilateral trade expansion, on the other. Hence,

rules of origin need to be evolved by taking this aspect into account.

Cost Effect

In specific production lines the local-content requirements could enforce substitution

of the imported inputs with often-costlier domestic inputs. The rise in production costs could

adversely influence the competitiveness of products. Increase in costs might well offset the

margin-of-preferences- effect of tariffs under a preferential trading arrangement. This could

ultimately obstruct bilateral trade.

Substitution in favour of high cost inputs makes it easier to meet the origin

requirements if a percentage test is applied. This kind of test would favour enterprises that are

inefficient and production bases that are marked with high wage-cost (Vermulst, 1992).

Therefore, the percentage criterion needs to be carefully devised and judiciously implemented

along with other tests of origin.

35



Summing up, it may be highlighted that the restrictive effects of rules of origin on

bilateral trade arising out of a country’s high import dependence could somewhat be reduced

if countries take greater advantage of the cumulation facility. In addition, the high-cost effect

could be tackled by using the change in tariff heading test more generally than the percentagetest. With these in place it appears that the overall positive effects of rules of origin could

outweigh the negative effects and it would be in the developmental interests of the partners to

abide by origin rules as much as possible.

Assessing the Implications of Trade Liberalisation with the help of CGE Modelling

Apart from the usual limitations of the application of the CGE modelling for

measuring gains from trade liberalisation such as the assumptions of perfect competition,

constant returns to scale, etc. in a comparative static framework, it would be pertinent to take

cognisance of the fact it also does not take into account the various trade facilitation measures

that have been highlighted above. In not doing so, it fails to adequately capture the reality and

therefore its results in terms of the impact of tariff liberalisation need to be interpreted with

caution.

Other limitations include those associated with elasticities. It has been found that the

regression techniques used for computing elasticities are not always meaningful. Elasticities

are also sensitive to time horizon in the dynamic CGE modelling. They are high over the long

run and low over the short run (McDougall, 1993). They are also sensitive to the level of

aggregation of products. Since CGE models are often based on quite aggregate sectoral

specifications the results might be influenced with unrealistic elasticities.

The results also depend to a large extent upon the closure-choice. The selection of

exogenous variables thus needs to be carefully done. By changing the exogenous variables

the results would change irrespective of the schedule of tariffs.

Exploiting Trade Complementarities

Research has shown that in many instances of a pair of countries, a particular country

A exports the same products that are being imported by its prospective partner B from the rest

of the world but not from A. What is more is the fact that the export unit values are much

lower for the products of A as compared to the import unit values of B. This has been found

to be true even when both exports of A and imports of B are valued in CIF terms. This results

in a considerable drain of scarce foreign exchange resources in the case of country B which

can be termed as costs of non-cooperation (Panchamukhi and Das, 1998).

36



Existence of such complementarities can be exploited, bilateral flows augmented and

additional foreign exchange cost could be eliminated through bilateral cooperation. The gains

could be further increased if this trade category is subjected to tariff liberalisation. Instances

such as these suggest that trade liberalisation might not be a necessary condition for increasing trade. However, this is not to deny that all trade could not be covered in this

category alone.

The question is as to why such a situation arises? There could be two prime reasons

for this phenomenon viz. (i) information gap and (ii) low quality of products of A. This is a

matter of further investigation in a specific country-pair scenario.

The preceding discussion has highlighted that the analytical and methodological

issues of India-Thailand FTA need to be clearly borne in mind while analysing the prospects

of trade and development cooperation. This is particularly relevant for evolving the free trade

agreement between the two countries.

3.2 The Model and Assumptions

GTAP is a comparative static, multi-commodity, multi-region CGE model of the

world economy. A region may be either a single country or a composite region consisting of

many countries. Each region produces each commodity, which has its own distinctive variety.

This is imperfectly substitutable with the varieties produced by other regions of the same

commodity. Within each region, each commodity is produced by a single-product industry

with the help of inputs sourced from domestic and global markets. The primary factors are

considered as skilled and unskilled labour, capital, land and natural resources. Each input to a

particular industry has an ad valorem tax associated with it. Further, industry inputs of each

composite commodity and primary factor have technical efficiency terms associated with

them. Thus, in the model one can vary intermediate input taxes, primary factor input taxes

and the efficiency with which inputs are used.

Industries source each primary factor from a fixed regional endowment of that factor.

The supplies of skilled and unskilled labour and capital are perfectly transformable between

industries. On the other hand, land is supplied with a transformation elasticity of 1 and

natural resources with a transformation elasticity so small that its supply to each industry is

essentially fixed. Hence, wages for both the categories of labour and the user price of capital

are uniform across industries However, the rental prices of land and natural resources can

vary from industry to industry. This is definitely a restrictive design.

37



Products of each region are either used as intermediate inputs in production,

consumed as inputs to final demand, or exported. It comes from the standard theory that there

are three categories of final demand: investment, government consumption and private

consumption. Each of these consumes composite commodities that are Constant Elasticity of Substitution (CES) combinations of the domestic and the imported variety, similar to

composite commodity inputs to industries. This is again a restrictive condition. Furthermore,

another restrictive feature of the model is in terms of the fact that composite commodity

inputs to investment are taken as fixed proportion to aggregate real investment. Composite

commodity inputs to government consumption are determined by the maximisation of a

Cobb-Douglas utility function of these inputs, while a constant-difference elasticities (CDE)

utility function is used for private consumption. All these add to the list of unrealistic

assumptions.

Aggregate government and private consumption are determined by the allocation of

net (of depreciation) national income between government consumption, private consumption

and net (of depreciation) saving to maximise a Cobb-Douglas utility function. Therefore,

nominal government consumption, private consumption and net (of depreciation) saving are

each a fixed share of nominal national income. Foreign income flows in GTAP are zero, so

that national income is equal to primary factor returns plus tax revenue minus subsidies.

On the other hand, aggregate investment can be determined by one of the two

mechanisms which can be configured. First, global net saving can be allocated between

regions in fixed shares. Second, elasticities of future expected rates of return with respect to

future capital stocks can be postulated, and in each region determined so as to equalise the

future expected rates of return. It is worth noting that investment does not add to the capital

stock available for productive use, but does add to the future capital stock, which may be

relevant in determining the level of investment.

Exports fall into two categories: commodities that are sold to other regions, and sales

to an international pool of freight and insurance services that is used to convey internationally

traded commodities from source to destination regions. This international pool is a Cobb-

Douglas aggregate of the contributions from all industries in all regions. So the contributions

of most industries will be zero. Only services sectors, such as trade and transport and

insurance, produce outputs that could contribute to such a pool. The quantity of freight and

insurance services used to convey a particular commodity from a source to destination region

is proportional to the quantity of commodity transported, subject to a change in the efficiency

of conveyance for that commodity and trade route.

38



The total regional imports of each commodity is a CES composite of imports of the

commodity from each exporting region. The prices determining the allocation of total imports

among exporters is the domestic market price in the exporting region, plus (minus) export

taxes (subsidies), plus the price of international freight and insurance costs per unit of thecommodity, plus import tariffs. Thus, the choice among sources of imports occurs at the

economy-wide level, while the choice between the domestic and the imported (aggregated

across sources) varieties of each commodity occurs at the level of agents within the economy,

that is, industries and final demands.

A detailed discussion of GTAP Model and further improvements in it in terms of

treating the FDI flows in a more comprehensive manner can be found in Hanslow, Phamduc

and Verikios (2000).

The following sections dwell upon the possible impact on India and Thailand at the

conceptual level.

3.3 The Macro Impact on India and Thailand

On account of tariff liberalisation under the proposed FTA both countries are

expected to benefit primarily on account of price reduction in their imports. On the other

hand, there could be demand-pull effects on their exports due to reduction in the partner

country’s import tariffs. The latter effect would be reinforced by the former in terms of

improved price competitiveness of exports. This is expected to improve the export

competitiveness of the products in the global market as well.

It is obvious that due to higher export demand, domestic activities on the supply side

would get an impetus and resultantly there would be a greater demand for factors of

production in each economy. This may lead to an increase in the factor prices.

Exports of both the countries may increase in each other’s markets, displaying both

trade creation and trade diversion. On the other hand, the impact of FTA may not be

restricted to external demand only. It could have important implications for the internal

demand as well. Higher export income and lower import prices could influence private

consumption in each country, subject to the composition of products that experiences the

price decline. The effect could also be observed in terms of better savings profile.

Investment is also expected to increase due to greater export opportunities. All these, inter

alia, would contribute to the overall welfare gains in the countries.

39



3.4 Sectoral Impacts

Analytically, there is a possibility of both positive and negative effects of FTA at the

sectoral level. The major positive impact that can be experienced by various sectors is in

terms of improved market access and exports in each other’s markets. The other positive

implication could be in terms of lower imported input prices and improved competitiveness

of products.

However, FTA may also entail higher import competition and lead to output

contraction in some sectors. These could be tackled through setting up of trade-creating joint

ventures so as to mitigate the negative effects and strengthen the trade-investment linkages

for tapping the global market as well.

3.5 Impact not captured by the Model

Apart from the macro level and sectoral impacts of the FTA that are highlighted

above it would be pertinent to mention some of the other possible dimensions of analysis

which are usually not captured by a CGE model. Since an analysis of these dimensions is also

important to probe into the question as to whether the FTA is a feasible proposition or not, a

snapshot view of them is provided below.

The FTA might influence the trade and production sectors further if the potentials of

trade expansion are taken into consideration while implementing the FTA. Such impacts

remain un-captured by the model and they are briefly explained now. First, the potential of

trade expansion could be immense in terms of possibilities of tapping the potential intra-

industry trade, i.e. trade between the two countries in the same sector. Second, potentials of

trade expansion in terms of exploiting trade complementarities in products where a country

has a price advantage over its competitors and by not exploiting these the countries incur

substantial costs of non-cooperation. Third, the model also does not capture the impact of

FTA under different tariff liberalisation scenarios at a disaggregated level of product/tariff

lines. Finally, the model also does not capture the possible tariff revenue loss at the

disaggregated level.

Summing Up

It is thus expected that there would be an extensive impact of the proposed FTA on

Indian and Thai economies as a result of increase in economic activities and trade integration.

These would have implications for investment linkages as well. Some domestic adjustmentswould also be required to safeguard the revenue loss effects of the FTA.

40



Chapter 4

Impact of Preferential Liberalisation under a Free Trade Agreement

4.1 Introduction

Recent years have witnessed an increasing trend of globalisation. The technological

revolution especially in the realm of information technology and pursuance of liberal

economic policies by countries the world over have been the two prominent forces that have

intensified the globalisation process. With the advent of the WTO this process has got an

added impetus at the multilateral level. Alongside the phenomenon of globalisation, the world

economy has also witnessed spurts of regional and bilateral economic integration efforts in

the developed and developing regions alike. There is a growing understanding that such

developments in fact prove to be as building blocks to the globalisation and multilateral

liberalisation process.

Both India and Thailand are part of the WTO and at the same time members of

various regional economic cooperation initiatives such as BIMSTEC, Ganga-Mekong

Cooperation, IOR-ARC etc. They also interact on various economic cooperation dimensions

under the Indo-ASEAN cooperation framework. Thus, any intensification of trade and

economic cooperation between India and Thailand at the bilateral level would act as a

catalyst to all the other economic processes to which both are a part.

The main focus of the present chapter is to assess the impact of preferential

liberalisation under a Free Trade Agreement between India and Thailand. This has been

accomplished at two levels. First, by assessing the macro impact with the help of a CGE

modelling exercise using the GTAP framework. Second, potentials of trade expansion are

identified by making explorations into the aspects of trade complementarity, production

similarity, potential intra-industry trade, costs of non-cooperation and the extent of revenue

loss under the proposed free trade regime. The technical details of the CGE model is

presented in Chapter 3 and the sectoral impacts are summarized in Chapter 5. Towards the

end, impact on services sector is analysed and some potentials for trade expansion in this

context are identified.

Some of the conceptual issues that have been in the background of the empirical

exercise of this Chapter are highlighted below.

41



Conceptual Background

Any trade liberalisation efforts entail both some adjustment costs and benefits. In

principle, trade liberalisation might create competitive environment in which domestic

producers would have to adjust themselves. Resource reallocation is a necessary phenomenonthat would provide trading partners with opportunities to gain from changing direction of

trade.

With tariffs getting reduced in the raw materials and intermediate goods segment,

lower cost of production could enhance the competitiveness of the final products. Moreover,

tariff liberalisation provides additional avenues for market access. They also can bring in

dynamism to the downstream activities and at the same time provide an impetus to high value

added production and exports. These effects come about due to different production and

exporting structures of two countries. However, even when production structures are similar

there is ample scope for trade augmentation of the intra-industry variety – a phenomenon

which characterises the major chunk of present-day global trade, contrary to the outcomes of

the Hecksher-Ohlin trade theories.

Furthermore, in order to quantify the benefits from bilateral FTA adequate attention

needs to be paid on the phenomenon of costs of non-cooperation which essentially means

estimating the additional costs incurred by one country by not importing lower unit value

items from the partner country which is on the other hand being exported to the rest of the

world by the latter. Cooperation at the bilateral level thus could result in significant foreign

exchange savings in both the countries. Increased trade in goods also throws open

possibilities of investment and technological cooperation. These are some of the positive

connotations of trade liberalisation.

This is not to deny that trade liberalisation can have certain negative implications as

well. They have fiscal implications in terms of revenue losses. Import competition could also

result in output contraction in some sectors and also at the aggregate macro levels (Sen and

Das, 1992). Subsequently, pressures on foreign exchange reserves increase and they

necessitate cooperation in the realm of banking and financial sector.

Bilateral FTA could be considered as a step forward towards freer trade at the global

level. Therefore, bilateral Free Trade Agreement between India and Thailand could be

considered as WTO-consistent if the conditions laid down in the WTO provisions are adhered

to. In fact, an early learning from the experience of a bilateral FTA in terms of domestic

adjustments could be beneficial for more wide-ranging adjustments that the WTO

Agreements might entail in future.

42



Two most analysed aspects of a FTA are trade creation and trade diversion. By

definition, trade creation is referred to as an efficiency gain that results from the operation of

a free trade area because more efficient firms from a member country displace less efficient

local producers in the domestic market. In this case the increase in efficiency of resource

allocation is transformed into a lower product price and trade, in turn, expands because of this

change in price. The consumers gain from such a situation while the domestic firms have to

face higher levels of competition from partner-country suppliers.

Trade diversion, on the other hand, is referred to as an efficiency loss that results from

the operations of a free trade area because less efficient firms from a member country

displace more efficient producers from a non-member country (Ingram, James C., and Robert

M. Dunn, Jr., (1993).

A bilateral FTA could also help bridge the information gap and higher quality of

information exchange could also significantly enhance the bilateral trade volumes as quite

often countries do not trade with each other due to sheer lack of adequate information

regarding their partner’s trading profiles. This results in considerable costs, which has come

to be known as Costs of Non-cooperation.

It is with this background we move on to assessing the impact of India Thailand FTA,

at the macro level, and identifying the potential areas of trade expansion.

4.2 Merchandise Trade: Impact and Potential Areas of Cooperation

As mentioned above we first present the assessment with the help of CGE model and

subsequently focus on the potentials for trade augmentation.

4.2.1 Macroeconomic Impact under FTA: CGE Modelling Results

This section is to evaluate the economic impact of India-Thailand FTA. An attempt

has been made to quantitatively analyse the impacts of import tariff elimination between

India and Thailand on macroeconomic variables and trade flows. A free trade area will

theoretically improve the welfare of the countries through the benefits of better market access

and cost reduction derived from tariff cuts. However, there might be instances of output

compression in some sectors due to increased import competition. Results of sectoral impact

are presented in Chapter 5.

43



Model & Data

The Global Trade Project (GTAP), a static computable general equilibrium model,

has been used to approximate this potential gain from FTA. This model has been widely used

to analyse a number of international trade policies under different research programmes. Thismodel is constructed by economists at the Purdue University, USA in collaboration with

economists at Monash University, Australia.

It is assumed that the FTA will reduce the tariff rates to zero from the level prevailing

in 1999. Tariff rate data for both countries has been obtained from UNCTAD TRAINS

database.

The Macroeconomic Impact of FTA on India

The results from GTAP simulation show (Tables 15 and 16) that India-Thailand FTA

will lead to a decline in price level due to the reduction of India’s import tariff rates. In

addition, FTA will result in higher demands for India exports due to the reduction of

Thailand’s tariff rates and greater competitiveness of Indian products in the world market.

Higher export demand leads to greater demand for primary inputs such as labor and land. As

the result, average wage rate will increase by 0.07 percent while land rent will increase by

0.15 percent. In addition, the import tariff cut will result in a decline of rental price for

capital and average intermediate input prices. The GDP deflator, the average price level, will

decline by 0.02 percent in India.

Tariff elimination between Thailand and India will boost the India’s total exports by

1.02 percent. The trade creation effect will lead to a rise in India’s exports to Thailand by

42.78 percent. In addition, the exports to other countries will slightly expand due to cost

reduction from import tariff cuts and the resultant strengthening of competitiveness of India’s

products in the world market.

The India-Thailand FTA may also cause trade diversion. India will increase its

import value from Thailand by 113.8 percent while decrease its import value from Japan by

0.94 percent, Indonesia by 1.99 percent and China by 2.11 percent.

The FTA has impacts not only on external demand but also on internal demand.

Higher export income and lower commodity prices will increase private consumption in India

by 0.03 percent. Aggregate savings will rise by 0.04 percent. Private investment is expected

to increase by 0.16 percent, caused mainly by greater export opportunities. Overall, the

welfare of India will improve by US Dollar 74.89 Million.

44



The Macroeconomic Impact of FTA on Thailand

India-Thailand FTA will benefit Thailand mainly through increasing market access in

India’s huge market. A rise in Thailand’s exports increases the demand for primary factors of

production. Wage and rental price of land will rise by 0.39 percent and 0.52 percentrespectively, while the rental price of capital will increase by 0.03 percent. This leads to a

0.09 percent increase in the GDP deflator. The higher demand for Thailand’s export will

raise the export price index by 0.12 percent. (Table 15).

The India-Thailand FTA could result in significant trade creation. It is expected that

there will be 113.87 percent surge in Thailand’s exports to India while Thailand’s imports

from India will rise by 42.78 percent. There will also be an increase in the total exports of

Thailand by 0.52 percent. Due to cheaper products from India and expansion of overall

economy, Thailand’s total imports will increase by 0.66 percent.

On the other hand, the FTA will cause some trade diversion effects. The exports of

Thailand to ASEAN members will decline in the range of 0.29 percent - 0.43 percent. The

exports to China and Japan are expected to drop by 0.53 percent and 0.41 percent,

respectively (Table 16).

The FTA would expand not only Thailand’s external sector but also the internal

sector. Gross domestic investment in Thailand will rise by 0.47 percent while the private

consumption and savings will increase by 0.41 percent and 0.39 percent, respectively. As a

result, the real GDP will increase by 0.34 percent. This would lead to a US dollar 545.2

millions increase in the welfare of the country.

It may be mentioned while summing up that the international trade between India and

Thailand has been limited, regardless of positive factors such as size of economies and

location. The high import tariff is one of important trade barriers between these two

countries. The results of the GTAP simulation show that India-Thailand FTA will increase

both countries’ welfare. The main benefits of FTA are through substantial trade creation

between the two economies. Even though the impact of India-Thailand FTA is positive, the

size of impact is relatively small for both countries. One factor behind limited benefit is the

current small trading activities between India and Thailand. Our study, which is a market

analysis of substantial tariff cut, could underestimate the true impacts of FTA. Therefore,

this analysis has been supplemented with other techniques of impact assessment and that

brings out that there is very high potential for economic gains and trade expansion between

India and Thailand if the FTA is set into place. Moreover, it should be noted that current high

45



tariffs mean high adjustment cost of economies. This analysis does not take this high

adjustment cost into account.

4.2.2 Potential Areas of Trade ExpansionAn attempt has been made here not only to identify the potential areas of cooperation

in the realm of merchandise trade but also to make an assessment of the extent of potential

trade expansion. Our empirical analysis is focussed towards highlighting that even without

tariff liberalisation, tremendous potential exists for trade expansion between India and

Thailand.

On top of it if tariff liberalisation under the proposed FTA is undertaken, obviously

enough the advantages would be much more as the CGE results mentioned above also

suggest. However, tariff liberalisation would entail revenue loss to the respective

governments, therefore, estimates of product-by-product tariff revenue loss has also been

estimated.

The potentials of trade expansion are brought out with the help of computing a Trade

Complementarity Index and a Production Similarity Index. This analysis has been further

extended by computing the intra-industry Trade Index and Costs of Non-cooperation between

the countries under consideration.

Trade Complementarity and Production Similarity

One of the ways of ascertaining potentials of trade cooperation between a pair

countries is by comparing their exports and imports vectors at a point of time and bring out

the matching between the two. A matching such as this between the export supply of one

country and import demand of the partner country can be captured by constructing a Trade

Complementarity Index. One way of undertaking this is by calculating what is known in the

literature is the Cosine Measure (Linnemann, 1992) as given below:

Cos(IxTm) = I EIi . MTi

TiI E2Ii . I M2

Where trade complementarity between India’s exports with Thailand’s imports is given by

Cos(IxTm) , E=Exports to world, M= Imports from world, I=India, T=Thailand, i=product at HS

46



6 digit level. Similarly, trade complementarity index between Thailand’s exports and India’s

imports can also be calculated. The value of the index varies between 0 and 1 with the former

implying no complementarity and the latter perfect complementarity. The index is denoted by

cos(

), when the two axes x (exports) and y (imports) match perfectly, the angle between thetwo is zero degrees but the value of cos(0) is 1. This situation implies perfect

complementarity. When the vectors do not match completely, it could be the other extreme

situation of 90 degrees between the export (x) and import (y) and the value of index would be

zero as cos (90) is 0.

Table 4A.1

Trade Complementarity and Production Similarity (1999)

Trade Complementarity

between India’s Exports

and Thailand’s Imports

(Cos(IxTm))

Trade Complementarity

between Thailand’s Exports

and India’s Imports

(Cos(TxIm))

Production Similarity

between India and

Thailand (Cos(TpIp))

0.13 0.20 0.84

The computed trade complementarity indices of the two types are given in Table 4A.1

above. These were calculated by matching the export and import vectors of the two countries

that were arrived at by taking the average over the period 1995-1999. It is evident that the

trade potential exists between the countries, however, the trade complementarity is not very

high. This phenomenon needs a little explanation. Low trade complementarity could be

explained in terms of moderate diversification of export supply and import demand in the

countries under consideration.

Table 4A.2

Export Concentration Indices

Countries 1980 1990 1999

Japan 0.118 0.139 0.137

US 0.064 0.078 0.089

UK 0.083 0.061 0.085

India 0.112 0.142 0.161

Thailand 0.201 0.098 0.108

Source: UNCTAD (2001).

47



In the event of high trade diversification or high trade concentration in similar

products the complementarity may turn out to be high. Assuming that the export and import

structures of both India and Thailand are moderately diversified at the present juncture, not

very high trade complementarity index is a plausible proposition. This assumption is also notunrealistic as it is corroborated by our observation on export concentration Hirschmann index

of the two countries presented in the above Table 4A.2.

Thus far we know that trade complementarities exist between India and Thailand,

however, it is not very high. We have provided an explanation for this phenomenon. We

probe into the issue further by examining whether the production structures of the two

countries are similar. It may be argued that even if the production structures are similar, the

potentials for trade expansion would be very high. In fact the higher the production similarity

the higher would be the potential for intra-industry trade. One may hasten to add that a

majority of global trade are presently of the intrra-industry variety and not of the inter-

industry type as envisaged in the traditional Hecksher-Ohlin framework of trade theories.

Hence, it is worthwhile to explore the issue of production similarity between the two

countries so as to pin down the argument that potentials for trade expansion of the intra-

industry variety exists. The index of production similarity is calculated by applying the cosine

measure to the production data of the two countries. The table above reveals that our

calculations do suggest that there is immense possibility of intra-industry trade expansion

between the two countries. This is further corroborated by our calculations as analysed

below.

Potential Intra-industry Trade (IIT)

The phenomenon of two countries trading with each other in a particular industry or

sector is known as intra-industry trade as opposed to inter-industry trade. The index of IIT

(Grubel-Llyod Index) is commonly calculated as the following:

IIT Index = 1 – [ | XiA – MiB | ] / [XiA + MiB ]

where X is exports, i is a product and A is exporting country, B is importing country, and M

is imports. The index varies from 0 to 1 with the former implying no IIT and the latter as

maximum IIT. The index is sensitive to the definition of industry. The higher is the level of

aggregation while defining industry the higher would be IIT and vice versa. Therefore, as the

48



literature suggests 4-digit level of SITC classification is close to optimum level on which the

industry bias of the index is minimum.

Thus, we have calculated the IIT at SITC 4 digit level but with a novel application.

Usually, the IIT is calculated for the existing trade flows between partners. We havecalculated the index for India and Thailand for products that are being exported by one

country to the rest of the world but not being imported by another country, instead it is being

imported from the rest of the world. The index in such a situation captures the potentials for

intra-industry trade between the two countries. Thus, low trade complementarities as captured

by the cosine measure and production similarity do not act as a constraint on future trade

flows. Our calculations suggest that there is ample scope for intensifying intra-industry trade

linkages between India and Thailand (Table 17) and this aspect needs to be taken into

account while evaluating the feasibility of an FTA between the two. The tables reveal that

there are several product categories that are displaying high or medium levels of IIT index

implying the rich potential for such trade flows.

There is an added advantage of focussing on potential IIT products as they can

facilitate tremendous amount of foreign exchange savings for the two countries. Having

observed that there is rich potential for trade expansion we extend the analysis further by

calculating the Costs of Non-cooperation by comparing the prices of exports of one country

to the prices of imports of another country – an aspect which has not been captured so far in

our analysis. Such an exercise would also throw light on the extent of trade complementarity

between India and Thailand through a different analytical and methodological route.

Costs of Non-cooperation

A comparison is made of items that India presently exports to the world but not to

Thailand with the same items that are presently being imported by Thailand from world but

not from India at SITC 4-digit level. The results are further reported by identifying the items

that fall in these SITC categories at HS 6-digit level in the case of India and HS 10-digit level

in the case of Thailand along with their respective tariff levels. This has been accomplished

so as to facilitate the policy-making process in terms of identifying items for the annexures of

tariff liberalisation schedules of the proposed FTA. The results suggest that there is immense

potential to augment India’s export of these items to Thailand because these items are being

exported by India to the rest of the world at unit values lower than the unit values of

Thailand’s imports when sourced from the rest of the world. If Thailand sources these items

from India it could amount to a saving of US Dollar 7.9 Billion for Thailand. It may be

49



mentioned that this is without taking into account the proposed tariff liberalisation under the

FTA. If tariff liberalisation is also taken under consideration the competitiveness of India’s

export products would increase further in the Thai market.

On the other hand, India would gain in terms of foreign exchange earning throughincreased exports. Thailand would gain in terms of foreign exchange saving as mentioned

above which would in turn improve Thailand’s competitiveness in its manufacturing process

as several such products under consideration fall in the category of raw materials and semi-

finished goods.

Similarly, it has been worked out as to what kind of gains would be possible by

comparing India’s imports and Thailand’s exports that are taking place vis-à-vis rest of the

world but not bilaterally. It is estimated that India could save US Dollar 4.6 Billion of foreign

exchange if it sources those items from Thailand that are presently not being imported from

Thailand but they are being exported by Thailand to the rest of the World. In this case, there

would be potential increase in Thailand’s exports to India as well. If these products are

subjected to tariff liberalisation there would be improvements in the competitiveness of

Indian products.

4.2.3 Revenue loss

Any analysis of tariff liberalisation under an FTA would be incomplete if an

assessment of its fiscal implications in terms of tariff revenue loss is not made. An attempt

has been made in this section to quantify the expected revenue loss both for India and

Thailand in different sectors at the present level of imports from each other and given the

prevailing tariff structure. The estimation has been carried out at the HS 6- digit level of

disaggregation but the results in the Table 4A.3 below are presented at the sectoral level.

Sectors have been categorised in the following broad categories: Natural Resources,

Agriculture, Agro-industry and Manufacturing. Manufacturing is further sub-divided into

labour-intensive, capital-intensive, technology-intensive and miscellaneous categories. A

classification like this would help formulate the tariff liberalisation schedule in such a manner

which does not imply incurring more costs in terms of revenue losses as compared to the

benefits reaped. It also facilitates preparation of tariff schedules for liberalisation by keeping

in mind the possible developmental imperatives of a particular country. For instance, the

tariff schedule could be evolved by having a balanced mix of products which neither affects

adversely the labour-intensive sectors nor compromises in getting efficiency-enhancing

capital-intensive and technology-intensive imports on liberal terms.

50



Table 4A.3

Expected Revenue Loss under Free Trade Regime (US $ Million)

Sectors Scenario I:25percent

Reduction in

Existing

Tariff Level

Scenario II:50percent

Reduction in

Existing

Tariff Level

Scenario III:75percent

Reduction in

Existing Tariff

Level

Scenario IV:100percent

Reduction in

Existing

Tariff Level

India

Natural Resources 0.118 0.236 0.354 0.473

Agriculture 1.360 2.721 4.081 5.442

Agro-Industry 2.446 4.893 7.339 9.786

Manufacturing

Labour-intensive 3.762 7.524 11.286 15.049

Capital-intensive 6.236 12.473 18.710 24.947

Technology-intensive 7.915 15.831 23.746 31.662

Misc. Manufacturing 0.886 1.772 2.658 3.544

Thailand

Natural Resources 2.282 4.564 6.846 9.128

Agriculture 0.103 0.207 0.310 0.414

Agro-Industry 1.216 2.433 3.649 4.866

Manufacturing

Labour-intensive 15.509 31.019 46.528 62.038

Capital-intensive 3.638 7.276 10.914 14.553

Technology-intensive 20.047 40.095 60.142 80.190

Misc. Manufacturing 1.845 3.691 5.537 7.382

Source: Calculated from UNCTAD, TRAINS , CD-ROM, 2001 and CMIE, India Trade’s,CD-ROM, 2001.

The upshot of the above is that the potentials for trade expansion would have to be

judged against the possible costs in terms of revenue losses.

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4.3 Impact on Services Trade and Potential Areas of Trade Expansion

We first present a profile of the likely impact of FTA on services sector and

subsequently identify the potential areas of trade expansion in this sector. A relatively

detailed discussion of some potentials of trade expansion in select sectors is presented inChapter 6.

4.3.1 Impact on Services Trade

Trade liberalisation in the realm of goods has important implications for trade in

services. It is possible to pin down expansion in two types of service trade: (a) expansion in

trade facilitation services and (b) services trade independent of trade in goods. Each type is

discussed briefly below.

Expansion in Trade Facilitation Services

Such services have a two- way linkage with trade in goods. On one hand, if not set in

place they can hinder trade flows and on the other, trade in goods give rise to exchange of

various services of this type. “Trade facilitation is defined as the simplification and

harmonization of international trade procedures, with trade procedures being the activities,

practices and formalities involved in collecting, presenting, communicating and processing

data required for the movement of goods in international trade. This definition relates to a

wide range of activities, such as import and export procedures (customs or licensing

procedures); transport formalities; and payments, insurance and other financial requirements”

(www.unescap.org/itid/publication/chap7_2107.pdf). It is evident that trade in goods under

an FTA would impact the services sector by providing a spurt to several service activities. On

the other hand, these services impact on trade flows inasmuch as they promote the latter.

A category of trade facilitation services is the one that includes supportive export

financing services both at the pre-shipment stage and post-shipment stage. It also includes

services relating to export credit insurance and bank guarantees. Another set includes a set of

services such as packaging, costing, pricing, legal services, market survey and an entire

gamut of consultancy services. An entirely new domain of services that needs to be

mentioned in this context is that related to e-commerce. Furthermore, trade under FTA can

impact favorably on the infrastructural services sector such as those related with aviation,

shipping etc transport services.

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Services Trade unrelated to Trade in Goods

Under an FTA, certain service sectors’ trade could also be focused upon – especially

that need not necessarily be linked to trade in goods. For instance, software services, R&D

services, medical services, accountancy services, engineering services, legal and other professional services.

Thus it is clear that the impact of FTA in goods would be felt on a wide range of

services both that relate to trade in goods and those that are unrelated to trade in goods.

Overall, they also build a case for setting in place an FTA. In fact it needs to be highlighted

that such services are crucial for making the FTA itself feasible and mutually beneficial for

the partner countries.

One of the areas i.e. educational and cultural services, in which cooperation between

India and Thailand has progressed is described below.

Present Status of Cooperation in the Areas of Educational and Cultural Services

In September 1994, an MOU was signed between the Indian Council for Cultural

Relations (ICCR) and the International Study Centre of Thailand (ISCT), which functions

under the aegis of the Thai Foreign Ministry. The first India-Thai Colloquium under the aegis

of the MOU was held in New Delhi in March 1996, which witnessed a scholarly exchange of

ideas for promoting closer cooperation between the two countries presented by intellectuals

drawn from a range of disciplines. This is expected to be a regular feature hosted alternately

in Thailand and in India. Thailand agreed, during Prime Minister Thaksin’s visit to India in

November 2001, to convene the 2nd India – Thai Colloquium at the earliest.

Cultural exchanges have been taking place supported by the Indian and Thai

governments, India-Thai community and lovers of Indian arts. Since November 1999 seven

dance troupes from India have visited Thailand and one Ramakien troupe from Thailand hasvisited India. In addition, International Conferences on Ramayana and Sanskrit have been

held in Thailand in 2001-2002. The Festival of India in Thailand and a Festival of Thailand in

India was held in 1996 and 1997.

Between mid-nineties till September 2002, around 248 Thai nationals have availed of

various scholarships offered by Government of India. India offers 46 scholarships every year

to Thai students and professionals including 10 under General Scholarship Scheme, 4 under

Cultural Exchange programme, 10 under ITEC, 10 under ASEAN/HRD Project, 10 under Colombo Plan and 2 for Hindi Language. In 2000, approximately 730 student visas to Thai

53



nationals were issued and in the current year until October over 590 student visas had been

issued. Academic exchanges between Thai and Indian Universities have also taken place.

However, since the economic crisis in Thailand there has been a slow down in these

exchanges. A number of MoUs on academic exchanges including exchanges of

lecturers/scholars exist between Thai and Indian Universities. An India Studies Centre was

established at the prestigious Thammasat University of Bangkok in April 1993, with support

of the Thai-Indian community. The Centre is active in holding seminars and discussions on

topics relating to India. Thammasat and Silpakorn University are also holding Hindi classes.

Indian Council for Culture Relations (ICCR) has deputed an Associate Professor for Sanskrit

to the Silpakorn University. India has also been assisting the Asian Institute of Technology

(AIT) by providing an annual grant of Rs. 3 Lakhs and seconding Professors for short-term

courses (Embassy of India, 2002).

4.3.2 Potential Areas of Services Trade Expansion

Addressing this issue in the context of India-Thailand FTA it is possible to pin down a

variety of services sectors where potentials for cooperation exist. Our observations are based

on the discussions and meetings with experts and businessmen and are more qualitative in

nature than quantitative.

The following select services sectors are considered as having rich potentials for trade

between India and Thailand:

1) Tourism

2) Information Technology Services

3) Educational Services

4) Audio-visual Services

5) Banking Services

6) Export Finance and Guarantee Services

7) Aviation and Shipping Services

8) Consultancy Services and International Marketing

9) Health Care Services

10) Construction Services

Potentials of cooperation in some of the services sectors are discussed in a rather

detailed manner in Chapter 6.

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4.4 Investments and Private Sector Linkages

In terms of the impact of a bilateral FTA on investment flows between the two

countries one may highlight that trade and investment linkages run in both the directions.

While trade flows require an initial investment impetus, investments could also take place totake advantage of a liberal trade regime – an additional dimension to the phenomenon of

tariff-jumping investments. This means that investments from one country could flow to the

partner country to take advantage of certain specific conditions like low labour costs, assured

supplies of inputs or other locational advantages like improved infrastructure and

subsequently export back to home country by taking advantage of tariff liberalisation under

the FTA.

Thus, India-Thailand FTA could generate investments in various areas. It needs to be

highlighted that sectors where the possibilities of import competition is relatively greater and

the likelihood of revenue loss is also more could be targeted for investment cooperation

between the countries. The emphasis is to convert the challenges of competition into

opportunities for cooperation.

Cross-investments (FDI) in the capital account of the balance of payments would also

correct for imbalances on the current account, if any. In addition, investments would

strengthen the private sector interactions between the two countries. It can also provide an

opportunity for public-private sector interface.

Summing up

It may be concluded that the FTA between India and Thailand is feasible, desirable

and mutually beneficial. This understanding has been arrived at by assessing the macro

impact of the FTA with the help of a CGE modelling exercise using the GTAP framework;

identification and measurement of potentials of trade expansion on the basis of analysing

trade complementarity, production similarity, potential intra-industry trade, costs of non-

cooperation and the extent of revenue loss under the proposed free trade regime; potentials of

services trade and possibilities of investment expansion.

55



Chapter 5

Sectoral Analysis of the Impact of Preferential Liberalisation

Introduction

The preceding Chapter dwelled upon the impact of tariff liberalisation on various

macro variables. This was accomplished with the application of the GTAP-CGE model. The

potentials of cooperation in trade, services and investments were also analysed. The overall

scenario emerging out of this empirical exercise has positive connotations for the intensive

bilateral economic cooperation process between India and Thailand.

In this Chapter the sectoral impact of the proposed FTA on different sectors is brought

out. This has been undertaken by adopting two approaches. First, documenting the impact on

sectors which was possible to do with the help of the GTAP data. Since the GTAP database

consists of sectors at a fairly aggregate level – which is also one of its limitations as

highlighted in chapter 3 – we have undertaken a detailed analysis of the FTA impact at HS 6-

digit level for select sectors. The latter approach took into consideration product by product

tariff changes in alternative tariff liberalisation scenarios and estimated the possible increase

in imports in each of the countries under consideration. The results of these two approaches

are presented below and suggest that the FTA between India and Thailand would not cast any

substantial adverse impact on select important sectors in both India and Thailand in terms of

any drastic surge in imports under the liberalised bilateral trade regime.

5.1 Sectoral Impacts of FTA: Based on GTAP-CGE Analysis

Using the GTAP modelling we have arrived at the results of the impact of FTA on

different sectors but they are not classified according to the tariff lines. Results suggest that

there would be both positive and negative impact of FTA but the overall impact would be

positive and the negative impact would not be substantial. In any case, sensitive sectors could

always be subjected to a calibrated tariff liberalisation schedule.

Analytically, the positive impact could be in terms of improved market access, hence

higher exports and lower input costs due to cheaper imports. The negative impact could be in

terms of output-contraction on account of import competition. These FTA-influences are

discussed below for India and Thailand.

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5.1.1 Sectoral Impacts: India

It is discernible from Table 18 that the GTAP results show both positive and negative

FTA impacts for different sectors. On the positive side, some Indian sectors such as minerals,

poultry and seafood, other food products and metal products are expected to gain fromimproved market access in Thailand due to lower tariff barriers. Sectors such as wearing

apparels and leather products gain from lower input costs of imports due to lower Indian

tariffs. On the negative side, some sectors may experience output-contraction resulting from

import competition such as other crops, textiles, chemicals, rubber and plastic products and

motor vehicles and parts. However, in most cases output-contraction is minimal.

Positive Impacts from Market Access

The sectors that display positive impacts in terms of improved market access for

Indian products in the Thai market include minerals, metal products, poultry and seafood and

other food products.

Minerals gain benefits from Thailand’s tariff reduction. This sector’s exports to

Thailand will increase by 2.10 percent. In addition to a rise in export demand, the output of

mineral sector will expand because of the rise in domestic demand. Expansion in its

downstream industries such as metal products, ferrous metals and other metals increases the

demand for mineral products. Mineral output will expand at the rate of 1.80 percent. Higher

demand leads to a 0.12 percent increase in domestic mineral price. The trade balance for the

products will rise by US Dollar 129.13 Million.

Metal products gain benefits as its exports to Thailand will increase by 1.6 percent.

The output of metal products will expand at the rate of 1.04 percent. The trade balance for the

products will rise by US Dollar 8.47 Million.

Other food products’ exports to Thailand will increase by 3.55 percent. Moreover,

this sector will benefit from reduction of India’s tariff barriers, resulting in the cost reduction

of 0.01 percent and the improvement in sectoral competitiveness. The production of other

food products will expand at the rate of 1.79 percent. The trade balance for the products will

rise by US Dollar 69.68 Million.

Poultry and Seafood products are expected to gain benefits from Thailand’s tariff

reduction. Their exports to Thailand could increase by 3.81 percent. Poultry and seafood

productions will expand at the rate of 3.30 percent. The trade balance for the products will

rise by US Dollar 0.44 Million.

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Positive Impacts from Lower Cost

Wearing apparel will benefit mainly from lower cost of productions due to India’s

tariff rate cuts. When tariff rates of textiles, chemicals, rubber and plastic products are

reduced, the intermediate input cost for the wearing apparel sector could decline by 0.05 percent. This greater competitiveness will rise the export demand for Indian products by 0.52

percent. Lower product price, improvement in domestic income profiles and higher export

demand are expected to raise the output of wearing apparel by 0.13 percent.

Leather products will also benefit mainly from lower cost of production due to

India’s tariff rate cuts. When tariff rates of its intermediate input sector such as leather-based

products, wearing apparel, chemicals, rubber and plastic products are reduced, the

intermediate input cost for the leather sector would decrease by 0.1 percent. This greater

competitiveness will raise the export demand for the Indian leather products by 1.01 percent.

Such factors would help raise the output of wearing apparel by 0.03 percent.

Negative Impacts due to Import Competition

There are certain sectors that could face output contraction due to increased imports

on account of tariff liberalisation. However, it may be mentioned that the results do not point

towards any significant impact in this regard.

Other crops sector could experience a decline in output due to import competition

from Thai products. India’s tariff reduction could raise imports from Thailand by 16.46

percent. As a result, the output of this sector could drop by 0.38 percent.

In the case of Textiles sector, India’s tariff reduction is expected to increase imports

from Thailand by 8.79 percent. As a result, the output of textiles could drop by 0.21 percent.

Chemicals, rubber, and plastic products are likely to have a slightly lower output

contraction. A cut in India’s tariff will lead to increase in imports from Thailand by only 0.03 percent.

Motor vehicles and parts sector is expected to face a higher competition from

Thailand. A tariff cut in imports of motor vehicles and parts will increase imports from

Thailand by 153.8 percent. However, ironically the output in this sector will decrease by

0.01 percent only.

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5.1.2 Sectoral Impacts: Thailand

According to the GTAP results of sectoral impacts of FTA for Thailand summarised

in Table 19 just like the Indian case, the FTA could have both positive and negative

implications for different sectors. On the positive side, some sectors such as sugar; textile;leather; chemical, rubber and plastic products; vehicles and parts and electronic equipment

may benefit from more exports to India due to improved market access. Sectors such as

plant based fiber, steel and machinery may expand due to the increased production activities

in their downstream sectors. On the negative side, import competition may cause a decline in

output in sectors such as other minerals, food products and wearing apparel. However, the

negative effects appear to be inconsequential

Positive Impacts from Market Access

It is expected that the Sugar sector could benefit from reduction in India’s import

tariff. As a result, exports to India and production in Thailand of sugar could increase by

3.24 percent and 1.87 percent, respectively.

Other Crops’ exports to India may grow by 0.48 percent and output in this sector

could expand by 0.32 percent.

Textiles will benefit from reduction in India’s tariff rate and an expansion in India’s

wearing apparel sector. Thailand’s export of textiles to India is likely to grow by 175.82

percent, leading to 8.0 percent surge in total textiles export. The production is expected to

expand by 2.36 percent.

Chemicals, Rubber and Plastic products are likely to gain from cut in tariff barriers

due to which Thailand’s export to India could rise by 104 percent. Output expansion of 3.07

percent and a price rise of 0.14 percent are also expected.

Products belonging to the Vehicles and parts sector may benefit from tariff cut and

the exports of Thai automobile industry to India may grow by 153 percent while its total

exports can increase by 8.45 percent. Expectation for production expansion is by 0.56

percent.

Electronic equipments sector is expected to benefit from tariff reduction. Due to

which exports to India may increase by 269.46 percent while the total exports could grow

only by 0.5 percent. In addition, total output of this sector may increase by 0.46 percent.

59



Gains from Expansion of its Downstream & Overall Economy

Plant based fiber sector may grow by 1.25 percent due to an increasing demand from

the textiles sector. Since the textiles sector is likely to gain from higher exports to India,

plant based fiber which is an important intermediate input for textiles, will obtain some benefits from FTA.

Steel sector could grow by 0.68 percent as a result of the production and exports

expansion in vehicles and parts, and metals products.

Negative Impacts due to Import Competition

Minerals sector could experience a decline in output due to import competition.

Tariff reduction may increase import into Thailand by 49.79 percent while the sectoral total

import will rise by 2.74 percent. As a result, the output of minerals may drop by 0.52

percent.

Other food products are likely to have a slightly lower output-contraction caused by

import competition. A cut in Thailand ’s tariff will lead to increase in import of Thailand in

the sector by 1.66 percent while the domestic output may decline by 0.36 percent.

On the other hand, the Wearing and apparel sector is likely to face a higher

competition from Indian products in Thai market. Thailand’s tariff cut in imports, together

with lower cost of production of India’s products will make imports increase from India by

2.74 percent. As a result, the output in this sector could decrease by 0.05 percent.

Summing up it may be reiterated that the positive impact of the FTA in the case of

both India and Thailand appear to be more relevant. The evidence of some output-contraction

effects in both the countries arising due to import competition from the partner country has

come out to be miniscule in most sectors. Nevertheless, in the case of sectors where domestic

production needs to be safeguarded a gradual approach to tariff liberalisation could be

adopted.

5.2 Impact on Select Sectors: Explorations at a Disaggregated Level

As highlighted above, one of the limitations of the GTAP modelling is that the data is

at an aggregated level. In the second approach an attempt has been made to assess the impact

of tariff liberalisation under the India-Thailand FTA on some select sectors at a disaggregated

level. One of the highlights of an empirical exercise as this is in terms of its ability to make

the assessments in different tariff liberalisation scenarios.

60



Sectors included in the analysis for Thailand and India are Agri-Business and

Processed Food, Rubber and Rubber Products, Textiles and Clothing, Gems and Jewellery

and Automobiles and Auto Parts, Organic, Inorganic and Agro Chemicals, Drugs and

Pharmaceuticals, Leather and Leather Products and Iron and Steel.The results of such an exercise suggest that under different tariff liberalisation

scenarios the impact in terms of an increase in imports into the countries under consideration

in the specific sectors would cause any significant concern domestically, by way of upstaging

stiff import competition. The methodology, information about data and the results are

analysed below. The results are analysed in the backdrop of a brief profile of each of these

sectors and some possible areas of cooperation are also identified.

Methodology

The import profiles of select sectors of each country were analysed at HS 6-digit

disaggregated level. The quantity and values of imports by each country from the world at

this level were used to compute unit values of products and subsequently their elasticities.

On the basis of these elasticities, expected increase in bilateral imports in value terms in these

sectors under four scenarios of tariff liberalisation viz. tariff reduction from the existing level

to 50 percent (Scenario I), 25 percent (Scenario II), 10 percent (Scenario III) and 0 percent

(Scenario IV) levels were obtained. The determination of the levels of tariffs under different

scenarios was guided by the fact that the present range of tariff levels pertaining to the sectors

under question was observed to be 60percent - 1percent.

Data

The data was obtained from UNCTAD, Trains, CD-ROM, 2001 in the case of

Thailand and CMIE/DGCIS, India Trades, CD-ROM, 2001. While both the import and tariff

data were available from Trains for Thailand, imports for India were obtained from the

above-mentioned database and the Indian tariff data was taken from the website of the

Central Board of Excise and Customs, Government of India. The data for Thailand’s imports

are of 1999 and tariff pertain to 2000. In the case of India both imports and tariff data are of

2001. It is worth mentioning that while the tariff data for India are at HS 6-digit level, the

tariff data for Thailand are available at HS 10-digit level. Hence, Thailand’s tariff was

converted into 6-digit level for the sake of comparability with the Indian data.

Since the bilateral imports of the two countries are at a nascent stage about 250 tariff

lines could be considered ultimately for the analysis. Out of which those tariff lines were

61



excluded for which either the quantity or the value data was not available. Furthermore,

products with wrong elasticity signs were also excluded. It is a matter of further research to

find explanation for the unexpected elasticity signs.

Results

The results are presented first for Thailand and subsequently for India vis-à-vis

sectors such as agri-business and processed food, automobiles and auto parts, textiles and

clothing, gems and jewellery, drugs and pharmaceuticals, organic, inorganic and agro

chemicals, iron and steel and leather and leather products and rubber and rubber products. It

is worth-mentioning that in the Tables 20 and 21 summarising results have some blank cells

which means that the tariff levels were already lower than the tariff level of the scenario to

which the cell belongs. For instance, empty cells under the Scenario I against the rubber and

rubber products implies that the tariff levels of the products for which this computation was

possible in this sector were already lower than 50 percent level.

Sectoral Impact in India and Thailand

We present below a sector-by-sector analysis of the possible impact in the chosen

sectors of the tariff liberalisation under different scenarios both at the aggregate sector level

and at the level of HS 6-digit disaggregation.

In the case of Thailand, the maximum impact is visible in textiles and clothing sector

followed by leather and leather products, agri-business and processed food, organic,

inorganic and agro-chemicals, rubber and rubber products, iron and steel, automobiles and

auto parts and gems and jewellery (Table 20).

In the case of India, the maximum impact is visible in organic, inorganic and agro

chemicals sector followed by leather and leather products, agri-business and processed food,

iron and steel, textiles and clothing, rubber and rubber products, drugs and pharmaceuticals,

gems and jewellery and automobiles and auto parts in terms of the absolute volume of

imports (Table 21). However, in terms of share of the expected increase in the total imports

from Thailand in a particular sector the impact varies.

Agri-business and Processed Food

Both India and Thailand are well endowed with natural and raw material resources

required for the Agri-Business and Processed Food Sector. The climate is also quite suitable

for the production of agricultural products, fisheries, aqua-culture products and diary

62



products. Both the countries have developed in the areas of foodgrain production, commercial

crop production, plantation crops, horticultural crops, etc. The countries have also succeeded

in terms of flows of agricultural credit as well as in terms of agricultural mechanisation.

A large part of the population is dependent on Agriculture and it has offered immenseemployment opportunities to their peoples. Both India and Thailand are leading producers of

Rice, Maize, Sorghum, Soyabean, Groundnuts, Pineapple, etc. For instance, total world

production of Rice was 598,852 thousand tonnes in 2000 of which production in India was to

the tune of 134,150 thousand tonnes and in Thailand it was 25,608 thousand tonnes. In the

case of Pineapple total world production was 13,504 thousand tonnes in 2000 of which

production in Thailand was to the extent of 2,287 thousand tonnes and in India it was 1,440

thousand tonnes. Both the countries are leading exporters in various spheres of Agri-Business

and Processed Food.

Impact

The potential increase in imports of Thailand in this sector could be US Dollar 13.94

Million if the tariff level in year 2000 is brought down to 50 percent level (Scenario I). It is

evident from Table 20 that this could increase to US Dollar 16.45 Million, 19.33 Million, and

22.77 Million under Scenarios II (25 percent), III (10 percent) and IV (0 percent). The impact

seems to low or moderate as these volumes of import surge account for 7 percent, 9 percent,

19 percent and 23 percent shares in total imports of this sector from India the four scenarios,

respectively.

The products that might experience relatively higher surge in imports from India have

been identified at HS 6-digit level as 030349, 151530, 220830, 230310, 160420, 120740,

030342, 030741 etc. Overall, this sector does not appear to be experiencing very high import

surge on account of tariff liberalisation under the India-Thailand FTA. However, for some of

these products a gradual approach in tariff reduction could be adopted given the impact on

them.

This sector is expected to face import competition in India from the Thai products as

the likely increase in the imports could be in the range of US Dollar 6.56 Million (Scenario

II) to US Dollar 37.84 Million (Scenario IV). In terms of the share of increase in total imports

of this sector from Thailand it is somewhat unusual, ranging between 61percent to 350percent

between Scenarios II and IV. This could be explained by the unusual price and quantity

relationships in this sector’s imports from Thailand which is reflected in large elasticities and

in turn in such shares. Therefore, estimates could only be considered as specific to a

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particular phase and not as a general phenomenon as also due to lack of adequate data to

calculate alternative elasticities.

Some of the prominent sectors having relatively larger impact are HS 200799,

170490, 180690, 200980. Possible Cooperation

The bilateral trade between India and Thailand pertaining to this sector has been quite

low since the overall bilateral trade between them has not been substantial. The need for

cooperation between India and Thailand in this sector is evident from the fact that both the

countries face somewhat similar challenges in the context of WTO Agreements. The

importance of the sector is such that the proposed FTA between India and Thailand would

have to be oriented in such a way that both the countries experience mutually beneficial gains

for this sector without having any adverse implications in terms of sudden import surge and

output contraction. The proposed FTA could perhaps ensure regular supplies of raw materials

in both the countries, help in jointly withstanding the global competition and assist in jointly

evolving various sanitary and phyto-sanitary measures that have emerged as major non-tariff

barriers in the developed world. Another area for cooperation could be development of

technology on testing and quality control.

Automobiles and Auto Parts

This sector has been a prominent one in both India and Thailand. The Thai

automotive industry has been growing over the past decade. In early 1990s, the government

liberalised the import regime and restructured the tax system that resulted in market

expansion. Many countries focused on investing in Thailand and it is considered the “Detroit

of Asia” (ARGC, 2002). Despite the recent recession after the crisis there are still continuous

flows of foreign investments from the major manufacturers viz. Toyota, Mitsubishi, BMW,

Benz-Chrysler, GM and Ford-Mazda. The total investment is about 100 Billion Baht. The

strengths in auto parts industry are the qualified and skilled labours, large market size and its

strategic location in Asia. After the drop in vehicle market in 1998, growth was recovered by

51 percent (1999), 20.1 percent (2000) and 13.3 percent (2001) with total sales reaching

297,052 units (Bangkok Post, 2002).

The Indian automotive industry is characterised by strong competition among quality-

conscious manufacturers. A large, highly skilled and low cost manufacturing base makes it

amenable to overseas business linkages. Since early 1990s, companies such as Suzuki,

Daewoo, Hyundai, Ford, GM, Honda, Volvo and Toyota have set up manufacturing bases in

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the market. After the growth of 20 percent between 1993-97 the industry experienced a

slowdown due to global trends. In 2000-2001, production of passenger vehicles was 630,592

units, commercial vehicles 152,079 units, two wheelers 3,929,321 units and three wheelers

around 192,111 units (http://www.tradepartners.gov.uk). The growth in vehicle sector hascaused growth in the auto-component industry.

Impact

The level of potential increase in imports of Thailand form India in this sector is

extremely miniscule. It may rise in the range of US Dollar 0.01 Million to 0.48 Million

between Scenario II and IV. The anaysis was not posssible under Scenario I as the traiff

levels in Thailand were already lesser than 50 percent in this sector. The share of the

expected import surge in total imports of Thailand from India in this sector is almost

insignificant, even in the Scenario of free trade.

At the disaggregated level, the products that can experience the impact relatively

more are HS Codes : 871494, 871493 and 871496. Thus, in this sector, possibilities of import

competition from Indian products appears to be very low.

This sector appears to remain isolated from the FTA impact in India as the expected

increase in import volume falls within the range of US Dollar 0.005 Million (Scenario II) and

0.03 Million (Scenario IV). However, in terms of share the impact is very much visible as the

share ranges between 6.45 percent and 38.70 percent for the II and IV Scenarios.

Only one HS code viz. 871499 is expected to experience the impact. This is so due to

data limitations.

Possible Cooperation

Between India and Thailand there is ample scope for intra-industry trade in both

motor vehicles and auto components segments, as the present level of trade is very small.

Joint ventures, joint efforts for improvement in efficiency, training manpower, etc. could be

possible areas of cooperation.

Textiles and Clothing

Textiles and Clothing sector has been a source of foreign exchange earnings, domestic

income generation, employment generation in both India and Thailand. Both are important

players in the global textiles and clothing market.

This sector is deemed as the largest one in Thailand which has developed through the

import substitution regime and has become an export oriented industry. In Thailand, this

industry contributed on an average more than 10 percent of the total exports and 15 percent of

65



the GDP during the last 5 years. In terms of employment, there are 1.14 Million workers in

this industry which accounted for 26-29 percent of total employment in the manufacturing

sector since 1993 (ARGC, 2002).

In the case of India, this sector adds about 14 percent to industrial production, 45

percent to total national export earnings and 4 percent to GDP. It provides direct employment

to about 35 Million people and is the second largest job provider after agriculture in India

(http://www.tradepartners.gov.uk).

Both India and Thailand have been competing with each other in the global market

and the kind of industrial cooperation that could have taken place between them has not been

undertaken at an intensive level. Even the existing trade linkages are not significant.

Impact

This sector in Thailand is likely to face a stiff competition from Indian products as

revealed by the estimates. Under Scenario II, imports could increase to the extent of US

Dollar 0.04 Million but it could be to the tune of US Dollar 61.07 Million and 363.29 Million

under Scenarios III and IV, respectively. This could be deemed as a significant impact in

terms of the increase in the level of imports. It is significant also in terms of the share of the

increase in imports in total imports from India of textiles and clothing items. The shares

peratining to the four scenarios are 0.047 percent (Scenario II), 61.07 percent (Scenario III)

and 92.57 percent (Scenario IV).

At the disaggreagate level it may be observed that the overall effect in this sector is

generated by only a handful of products. Intense competition may occur in HS products such

as 500310, 520911, 611090, 6110990, 520512 etc. This suggests that although the textiles

and clothing sector would be subject to maximum competition in relation to other sectors that

are under consideration, at the disaggregate level the effect would be concentrated only in a

few product/tariff lines.

This sector is expected to face stiff competition in the Indian market from Thai

products in the domestic maarket as the possible increase in imports could be US Dollar

10.52 Million, 15.24 Million and 24.29 Million under the Scenarios II, III and IV. On the

other hand, due to large values of elasticities, the impact in terms of share in existing level of

imports from Thailand also turns out to be unexpectedly large: 160 percent (Scenario II), 232

percent (Scenario III) and 370.25 percent (Scenario IV).

Some of the products experiencing relatively larger impact are HS 630790, 590320,

540241, 580429, 590700, 600243 etc.

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Both the countries need to (i) facilitate Indo-Thai joint ventures, (ii) establish fashion

design center targeting higher-end markets which requires joint collaboration in computer-

aided-designing (CAD) and computer-aided-manufacturing (CAM), (iii) establish local brand

names for the international market, (iv) provide local small and medium enterprises adequate

support in management and marketing, (v) cooperate to improve the dying technique for yarn

and fabric production, etc.

Gems and Jewellery

The gems and jewellery industry is another very prominent one in the industrial and

trade space of both India and Thailand. In the case of India it is one of the foremost foreign

exchange earner for the country and accounts for 17 percent of country’s total exports during

2001-2002. In 2000-2001 India exported jems and jewellery items worth US Dollar 7.7

Billion. India’s international market share of diamonds in 55 percent by value; 80 percent by

caratage and 95 percent by pieces (http://www.indiaonestop.com). The range of products

include cut and polished diamnonds, coloured gemstones, gold jewellery, pearls, non-gold

jewellery, synthetic stones, fashion jewellery, etc. Since this sector is highly labour intensive

it has been a major employment generating sector in India.

In the case of Thailand this sector features in the list of top 10 export products with a

proportion of 2.6 percent in total exports and with the production level of 2 Million pieces a

year. This sector employs 1.2 Million workers in Thailand. It needs to be highlighted that 80

percent of the production in value terms are exported, of which, 70 percent is exported in the

form of processed ornaments and the rest in the form of gemstones. Thailand is an important

lapidary centre which allows Thai manufacturers to have a competitive advantage in the

world market (ARGC, 2002). Some of the major items of exports from Thailand are pearl,

non-lapidary jewellery, lapidaries jewellery, ornaments, emulated ornaments, synthetic

jewellery, etc.

Gems and jewellery items are one of the most prominent ones within the ambit of

India-Thailand trade relations. However, the present level of trade is far from its potential.

Some of the items that are traded bilaterally are non-industrial diamonds, precious and semi-

precious stones, articles of jewellery and parts thereof, rubies, sapphires and emeralds

worked, etc.

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Impact

At the aggregate level, this sector in Thailand is expected to experience an increase of

imports from India to the tune of US Dollar 0.024 Million and 0.047 Million under Scenarios

III and IV. This miniscule absolute sum is also reflected in the value of its meagre share in

total imports from India to Thailand of gems and jewellery items – in the range of 2 – 4

percent.

The meagre impact could be misleading. Due to data related problems such results

have come about. Several Gems and Jewellery products could not be included into

calculations because of lack of quantity data. Moreover, in several cases the impact

assessment could not be made as the elasticity estimates were far from satisfactory. Hence,

only two products viz. HS 710310 and 711311 could be included in the analysis due to data

limitations. It is worth emphasising at this stage itself, even at the cost of digression, that

unless information gap between the countries is bridged both empirical analysis and the

policy making process would be based only on an incomplete understanding of the benefits

and costs of cooperation.

In the case of India, Gems and Jewellery products do not seem to be facing very

significant import competition from Thailand as the likely increase in the import volume

could only be US Dollar 0.30 Million, 1.21 Million and 1.81 Million under II, III and IV

Scenarios. However, with respect to its share in total imports from Thaialnd of gems and

jewellery products the impact does appear to be of some concern as it ranges between 1.85

percent (Scenario II) and 11.13 percent (Scenario IV).


711790 etc.


The potential areas of cooperation in this sector could include: (i) exchange of skilled

manpower in diamond and stone-cutting, (ii) cooperation to ensure stable supply of raw

materials, (iii) joint development of advance technology, (iv) collaboration in upgradation of

certifying and testing facilities, (v) establishing joint product design centres.

Drugs and Pharmaceuticals

Drugs and pharmaceuticals sector has also developed in both India and Thailand. In

Thailand, there is competition between local manufactures and foreign subsidiaries of

medicines and pharmaceutical products. There are approximately 200 local manufacturers

and about 400 foreign subsidiaries/representatives. This sector has suffered due to the Thai

68



economic crisis. According to one estimate the total size for the pharmaceutical market was

worth 28 Billion Baht in 1999 (ARGC, 2002). It is important to highlight that the local

pharmaceutical industry in Thailand is mainly a formulating industry and does not involve

much R&D. Most of the pharmaceutical ingredients of locally manufactured drugs areimportant. To elaborate, the Thai pharmaceutical market is made up of locally produced

domestic drugs (generic products, which account for an estimated 46 percent of the drugs on

the market), locally produced international brands (about 32 percent of the market), and

imports (22 percent of the market) (www.pacificbridgemedical.com).

The Indian pharmaceutical sector is highly fragmented with over 20,000 registered

units. The leading 250 pharmaceutical companies control 70 percent of the market, with the

market leader Glaxo SKB having only a 5.7 percent market share in 2000. The top 10

companies cover around 31 percent of the pharma market. Because of Government price

controls and the fragmented nature of the market, it is an extremely competitive industry

which has evolved around the opportunities presented in the regulated environment

(www.tradepartners.gov.uk). The industry currently demonstrates wide ranging capability in

the field of drugs and medicines’ manufacture and in terms of technology. In addition to

pharmaceutical formulations the country produces over 350 Active Pharmaceutical

Ingredients which are manufactured from the basic stage. The ancillary industry is also well

developed and an extensive range of pharmaceutical manufacturing equipments is locally

produced. The size of the market in India was estimated at US Dollar 3.8 Billion in 2000.

Indian pharmaceutical sector accounts for 1percent of the global sales in value terms and

8percent in terms of volume.

Drugs and pharmaceuticals are being traded between India and Thailand but not in big

volumes.

Impact

Data limitations prevented an analysis of this sector in the case of Thailand.

However, in the case of India this sector can experience a surge in imports from

Thailand to the extent of US Dollar 0.46 Million, 1.83 Million and 2.74 Million under

Scenarios II, III and IV, respectively. However, the share of expected increase in these

Scenarios could be 0.43 percent, 1.71 percent and 2.57 percent in total imports of these

products from Thailand.

The effect is mainly concentrated in products such as 300290, 300510, 300390 and

300490. Thus, it appears that this sector would remain relatively insulated from the adverse

effect of FTA from the point of view of India.

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The possible areas of cooperation could include: (i) setting up joint-ventures, (ii)

scientific research, (iii) marketing tie-up with overseas pharmaceutical companies jointly, (iv)

development of products that have gone off-patent, (v) joint studies on WTO TRIPs

Agreement.

Organic, Inorganic and Agro Chemicals

India has a sizeable domestic chemicals market. It is not only large but quite

diversified and mature as well. Almost all segments, such as organic chemicals, inorganic

chemicals, agro chemicals, coatings, dyes and pigments, soaps and cosmetics,

pharmaceuticals, fertilisers and speciality chemicals, have a sizeable presence. The size of thechemical industry is estimated at US Dollar 28 Billion. The share of inorganic chemicals is

8percent, organic chemicals 15 percent, drugs and pharmaceuticals 15 percent, soap and

toiletries 11 percent, fertilisers 18 percent, other chemicals 3 percent, etc. The Indian

chemical industry has shown impressive growth over the years and has been among the

fastest growing sectors of the Indian economy. It accounts for about 12.5 percent of the

country’s industrial production, 12 percent of the exports of manufactured goods. The

industry contributes 19 percent of the excise and customs revenue

(www.tradepartners.gov.uk).

Besides the presence of world majors such as Unilever, ICI, Hoechst, Dupont, BASF,

Bayer and Glaxo, there are thousands of large, medium and small scale companies in this

sector. For examples, in dyes and dye intermediates alone there are over 100 small-scale

companies compared to 50 large companies in the organised sector. Most of the small and

medium size plants operate on batch processes, whereas some of large producers have highly

automated continuous process plants.

India is currently the largest manufacturer of pesticides and the second largest

producer of agrochemicals in Asia. India exported chemicals worth Rs. 193,687 Million and

plastics and rubber products worth Rs. 48,607 Million in 2000-2001 which is a reflection the

growing acceptance of Indian chemical products worldwide. The easy availability of raw

materials, a trained and skilled workforce, a technically qualified managerial cadre base and

low production costs have made India an attractive sourcing destination for multinationals.

Many overseas companies are also undertaking collaborative research with local companies

and institutions.

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The chemicals industry in Thailand has improved the quality of Thai manufactured

goods in many industries ranging from agriculture to textiles and from metal working and

electronics to petrochemicals and ceramics. In so doing, the chemical industry has enabled

the Thai industry to compete in international markets not only in terms of price but alsoquality. Thailand has been exporting chemical products such as cosmetics, albuminoidal

substances, fertilisers, carbon black, solvents, etc. Thailand also has a large petrochemicals

industry producing 1.7 Million tonnes per year of ethylene and 4.15 Million tonnes per year

of plastic resins. Thailand is also an exporter of polyolefins and exports more than 2 Million

tonnes per year of speciality plastic resins. Thailand’s chemical industry continues to attract

significant levels of foreign investment. During the first half of 2000 six projects were

approved in basic chemicals, five projects in other chemicals with total investment in the

chemical sector amounting to US Dollar 500 Million (http://www.boi.go.th).

The trade figures pertaining to this sector are relatively higher than other products as

far as the bilateral trade between India and Thailand is concerned. However, in terms of

absolute levels of trade it is quite low.

Impact

The impact in this sector in Thailand would be miniscule, primarily because already

the prevailing tariff levels are equal to or less than 10 percent category for the products data

was available. The increase in imports could be around US Dollar 7 Million under the

Scenario of free trade: Scenario IV. In terms of the share also the impact appears to be

minimal.


294150, 281511, 381710, etc.

This sector would be the quite affected in the case of India as it may be subjected to

an upsurge in imports from Thailand to the tune of US Dollar 1.66 Million, 47.24 Million and

131.69 Million under the Scenarios II, III and IV. Nevertheless, the impact is low in terms of

the share of expected increase in India’s total imports in this sector from Thailand as it turns

out to be less than 1percent in Scenario II and III but it is 2.70percent under Scenario IV.

At the HS 6 digit level, some of the products displaying relatively higher impact

include HS codes: 290123, 283650, 283210, 292219, 292221, 293100 etc.

Thus, even this sector does not raise any serious concern in the event of an FTA

coming into being.

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In this sector the following areas could be studied for possible cooperation: (i)

collaboration in scientific research, (ii) technological and human resource development, (iii)

creation of an industry database and (iv) developing niche markets.

Iron and Steel

There are 150 steel product manufacturers in Thailand with a combined annual

production capacity of 20 Million tonnes and a combined workforce of 20,000. The majority

of industry is made up of downstream manufacturers producing mainly reinforcing bar, wire

rod and section for the construction industry. Many of them import scrap iron for forging into

billets that are re-rolled into steel bars (http://www.tradeport.org). Development of further

upstream production for basic products such as pig iron and sponge iron and intermediate

products such as billets, glooms, and slabs are the areas that need more policy and business

attention. Some of the constraints coming in the way of this sector are unavailability of large

capital fund, inadequate supplies of iron ore, high cost of fuel for smelting, etc. The total

exports from this sector amounted to US Dollar 969.2 Million in 2000

(http://www.thailand.com/exports).

The last decade in India has seen inefficient steel mills with outdated technology

declining while new capacities have come up that possess latest technology and expertise.

The potential demand for steel in India is vast with the per capita steel consumption being

26.7 Kg compared to the global average of 121 Kg in 2000-2001. This offers a huge potential

to steel manufacturers. Finished steel production recorded a growth rate of 7.7percent in

2000-2001 and reached the level of 29.27 Million tonnes (Government of India, 2002). The

production of pig iron at 3.4 Million tonnes recorded a growth rate of 6.8 percent in the same

year. However, the growth of the industry has been slower than expected due to sluggish

demand in the steel consuming sectors, overall economic slowdown in the country,

competition from cheap imports and anti-dumping restrictions raised by developed countries

on India’s exports.

The bilateral relations in this sector are low and the potential has not been tapped as

yet.

Impact

This sector appears to be insulated from the proposed tariff liberalisation under FTA

as far as Thailand is concerned. Imports could increase in this sector in the range of US

72



Dollar 0.51 – 3.36 Million and the shares may be in the range of 0.001 percent - 0.008

percent.


721129, 722790, etc.

The Indian iron and steel sector could experience an increase in imports on account of

tariff liberalisation under FTA to the extent of US Dollar 9.58 Million, 25.21 Million and

35.63 Million under the three Scenarios depicting reduction in tariff levels to 25 percent, 10

percent and 0 percent (i.e free trade), respectively. Once again it is noticeable that the impact

is marginal as the increased imports would account for equal to or less than 1 percent of the

prevailing level of imports from Thailand to India.

The products of this sector that would be experiencing relatively higher impact

include 721934, 732399, 732690, 721090, 731590, 731815 etc. This sector, in the ultimate

analysis, may not be adversely affected by the FTA.

Overall, the analysis at the disaggregated level for both Thailand and India in the case

of specific sectors suggest that the domestic market in both the countries would not

experience any significant import competition due to any massive upsurge in imports from

the partner country, excepting a few sectors. However, at the individual product level at the

HS 6 digit classification some efforts would be required to calibrate the tariff liberalisation

proposals and setting up of joint ventures in those products could be promoted after

examining all its dimensions. The above exercise has at least identified the products that can

be taken note of within the ambit of trade and investment policy and accordingly the FTA

may be evolved.


Cooperative endeavours may include trade augmentation in raw material and

intermediate goods, reduction of cost in various operations like smelting, joint marketing, etc.

Leather and Leather Products

Due to its labour intensive nature this industry provides employment opportunities to

over 0.2 Million in Thailand. The industry makes value added products out of heights of

cattle through leather tanning industries and thus produces goods like leather shoes, bags,

gloves, etc. There are 20 large leather tanning producers that represent 60 percent of the total

market share. Large tanneries allot about 50 percent of their leather for local consumption

and the remaining is exported worldwide. The Thai tanning industry has a combined annual

production capacity of 150,000 tonnes. More than 90 percent of leather product

73



manufacturers are in the middle and small business. Majority of Thai leather products are

exported. The export value of leather products in 1999 was at 16.95 Billion Baht (ARGC,

2002).

In India, the small scale, cottage and artisan sector account for over 75 percent of the

total production in leather industry. Exports from leather sector account for 4.3 percent of

India’s exports (Government of India, Department of Industrial Development, Annual Report ,

2002).

Impact

In terms of absolute volume of imports this sector in Thailand is likely to experience

moderate impact but in terms of shares the impact would be insignificant. The increase in

imports could be around US Dollar 17 Million, 35 Million and 46 Million under the

Scenarios II, III and IV, however, the respective shares are less than 1percent.


640620, etc.

As for India, impact in this sector is relatively more as the likely increase in imports

from Thailand comes out to be US Dollar 12.32 Million, 49.29 Million and 73.94 Million

under Scenarios II, III and IV, respectively. In terms of the share of the expected import

increase in India’s total imports in this sector from Thailand the impact is noteworthy as it

turns out to be 2.50 percent, 10.00 percent and 15 percent.

Some of the relatively more prominent products in terms of the impact are 640419,

640199, 640320, 640699 and 640620.


Possible areas for cooperation may include: (i) developing technology for cost

reduction, (ii) improving quality of tanned leather, (iii) training of artisans with exposure to

information technology tools, etc.

Rubber and Rubber Products

While Thailand is the world’s largest producer of Rubber, India too is one of the

largest Rubber producing countries. In both the countries different Rubber products like tyres,

tubes, washers, sheets, gloves, conveyor belts, aprons, rubber moulded goods, automotive

components, etc. are produced on a large scale. Apart from having economies of scale both

the countries are producers of rubber products of international standards.

In Thailand around 800,000 household are engaged in rubber plantation of 12.29

Million rai (i.e. 76.81 Million hectares). There are about 1,745 rubber processing firms.

74



Around 25,00 employees are in primary processing i.e. production of smoked sheets and

rubber liquid and approximately 44,000 employees are in secondary processing such as

rubber wrap, glove, etc. In India the industry has 32 producing units just in the field of tyre

production spread out in 13 states. There are around 220 medium scale units and over 5,500

units in the small scale sector as well as an equal number in the tiny sector with an annual

turnover of over Rs. 12,000 crore. This sector directly employees about 3.5 lakh people

(Government of India, 2001).

One important trend witnessed in this sector is that global manufacturing of rubber

products is shifting its base from the US and the EU markets towards the Asian region due to

cheaper labour costs. One of the modalities through which it is being accomplished is through

Business Process Outsourcing (BPO). The BPO opportunity in this sector is pegged at US

Dollar 100 Billion (Business Line, 2002).

Impact

This sector, in the case of Thailand, does display the possibility of some impact at the

aggregate level though the extent is small. While the expected increase in imports from India

to Thailand could be a mere US Dollar 0.001 Million under Scenario II, it could rise to US

Dollar 4.43 Million and 4.91 Million under Scenario III and IV, respectively. The share of

increased volume of imports in total imports from India of rubber and rubber products could

be in the range of 15 – 17 percent.

In this sector too, the aggregate impact arises due to high concentration of the effect

of tariff liberalisation in just a few tariff lines at HS 6 digit-level. Just one product viz.

401220 exhibits almost all the impact pertaining to this sector. Other products showing little

impact are 400821, 401120 and 401699.

The import increase in India could be in the range of US Dollar 3.04 Million to 18.25

Million between the Scenarios II and IV. In terms of share the impact is very large in

Scenario III and Scenario IV mainly due to rare values of elasticities that came about due to

lack of data availability.

Some of the products experiencing relatively larger impact are 400219, 400299,

400950, 401699 etc.


India and Thailand could establish more intensive trade linkages under the proposed

FTA, set up trade-creating joint ventures to target the global market, undertake joint R&D,

collaborate in the domain of BPOs vis-à-vis developed countries, etc.

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Summing up

This chapter has demonstrated both with the help of the results obtained from the

CGE modelling and disaggregated sectoral analysis that overall India and Thailand might not

experience any significant upsurge in imports or output contraction due to the proposed FTA between the countries. If at all, there are notable positive implications in terms of improved

market access, enhanced product competitiveness due to lower costs and an impetus to

downstream production and exporting activities in various sectors in both the countries. It is

worth mentioning that some of the results obtained on the basis of the CGE Approach and the

disaggregated sectoral analysis are bound to be somewhat different because of the difference

in methodologies.

However, specific products and sectors do require addressing the concerns that get

raised on account of likely imports-surge and for such specific products a gradual approach

towards tariff liberalisation is warranted. Alongside, sectors in which both countries are likely

to compete with each other could be considered for joint venture and investment cooperation

and trade of the intra-industry variety may be focused upon.

On the basis of the analysis presented in this Chapter one can reiterate that the

proposed FTA between India and Thailand is not only feasible but also mutually beneficial to

a large extent provided certain adjustment costs are taken into account while setting it in

place.

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Chapter 6

Possible Benefits of Cooperation in Other Areas

Introduction

As it has been observed in the previous chapters although the present level of

economic linkages between India and Thailand are limited the potentials of trade expansion

are immense. There could also be cases wherein more intensive investment cooperation could

be possible however, a more detailed study of it could be taken up. Viewing trade in the

wider framework of development the study also attempts to identify other dimensions of

cooperation, including investment and technology, in select sectors so as to take advantage of

the trade-development linkages. The sectors chosen for exploring the potentials of

cooperation between India and Thailand in this context include fisheries and aquaculture;

information, communication and space technology; biotechnology; finance and banking;

tourism; and infrastructure development. This chapter investigates into these areas and tries

to identify the dimensions on which bilateral cooperation could bring in mutual benefits.

6.1 Fisheries and Aquaculture

Both India and Thailand have had a prominent fisheries and aquaculture sector. They

have great potentials in developing this sector through bilateral cooperation. Both countries

have long coastal areas that can be jointly promoted so as to make this sector more dynamic

in terms of production and exports.

Total output from this sector is higher in India than Thailand. It can be observed from

Tables 22 and 23 that the distribution of total output from this sector has been almost equal

between marine and inland sources however, in the case of Thailand the marine sector outputis higher than India and in the case of inland source the situation is reverse. This is due to

relatively large land area in India. Nevertheless, it appears that in the Indian case marine

sources could be exploited more with the help of Thai cooperation, considering that the

fisheries sector on the whole has been one of the major sources of foreign exchange earnings

for Thailand.

For marine fisheries, the Indian Government policy has been to subsidise the poor

fishermen for motorising their traditional crafts. This helped increase the fishing areas andfrequency of operation. The result has been an increase in total catch and earnings of

77



fishermen. The Government has also been operating a scheme of reimbursing the central

excise duty on oil used by fishing vessels below 20 meters length to offset the operational

costs. These measures among others have helped the fish production in India.

In the case of Thailand, shrimp production has received policy attention. Even withsome environmental implications, shrimp farms in Thailand have created significant amount

of production both for domestic consumption and for exports. In Thailand, shrimp farm areas

spread over several provinces (Table 24) and tend to produce some negative impact on rice

farming. Recently, the Government has expressed some concern over the land use issue and

came up with some measures to deal with the shrimp farm’s environmental impacts.

The Indian Government’s scheme in aquaculture has been to utilize the brackishwater

area for shrimp culture. At present, approximately 22,857 hectares have been developed for

shrimp culture. Presently, 39 Brackishwater Fish Farmers Developed Agencies (BFDAs)

functioning in the coastal areas of the country provide a package of technical, financial and

extension support to shrimp farmers. Guidelines prepared for sustainable development and

management of brackishwater aquaculture have been circulated to all concerned States and

other agencies. The guidelines incorporate measures for mitigating the adverse impact of

shrimp farming on the coastal eco-system. An aquaculture authority has been established

under the Environment Protection Act to control the coastal aquaculture and to ensure that the

aquaculture activities are carried out in an environment- friendly and sustainable manner.

Thus, cooperation in the environmental implications of shrimp farming could be another area

of bilateral cooperation. This could also promote bilateral intra-industry trade between the

coulntries.

Potential Bilateral Cooperation

Cooperation in scientific research and development in the area of aquaculture and

fisheries, both inland and marine, could enhance the capability of production and trade for

both countries. This could provide avenues for bilateral trade, investment and technology

flows between the countries.

6.2 Information, Communication and Space Technology

Recent information technology revolution has brought to the fore various aspects of

developmental challenges that need to be taken cognizance of. First, information has become

a crucial input into most of the economic activities. Second, asymmetry between haves and

have-nots of the information has also increased and it is considered that such an asymmetry

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could result into the continuation of the gap between the developed and developing countries.

Thirdly, this gap is due to the nature, quality and the ability to process information. The

technologies that are required for information processing are also mainly in the hands of the

developed countries and this has manifested itself in what has come to be known as ‘digital

divide’. Therefore, digital divide is in terms of access to information per se as well as control

over information and communication technologies (ICT). Since a major part of the ICT is

used via the space, capability to acquire and use space technologies also become crucial for

bridging the present phenomenon of digital divide.

In a scenario wherein India and Thailand have acquired considerable capability in the

software and hardware sectors, respectively various dimensions of cooperation could be

contemplated which could help both the countries facing the challenges of digital divide at

the global level. In this regard, the potentials, a priori, are immense. The following areas in

the information and communications technologies could be considered both for trade and

investment (joint ventures): consumer electronic goods, electronic instruments, office

equipments, medical equipments, telecom equipments, computer hardware, software services

and telecom services and projects. Cooperation in these areas would also facilitate trade in

goods as envisaged in the India-Thailand FTA through improved competitiveness of products

and checking delays both at the firm level and the policy level.

Out of the whole gamut of electronic and software products Thailand has not emerged

as a major destination for India’s exports (Table 25). It features prominently in the case of

India’s exports of transformers in the electronic components, head stack, switching mode

power supply in the computer hardware sector (Table 26). Thailand does not feature

significantly as a destination in the area of consumer electronic, telecommunications

equipments and even computer software exports from India. These trends are contrary to

popular perceptions that India has comparative advantage only in the software sector and not

in the hardware sector. Perhaps, in the latter there is scope for promoting intra-industry trade

with Thailand. A fresh impetus in the realm of the FTA is needed for not only boosting trade

in this sector but also investment promotion.

In terms of space technology a lot more can be done to strengthen the partnership

between India and Thailand. For instance, one of the international cooperation programmes

of the Indian Space Research Organisation (ISRO) is conducted through the Centre for Space

Science and Technology Education in Asia and the Pacific (CSSTEAP) which is sponsored

by the United Nations. The centre is established with a view to promote space technology

cooperation in the Asia-Pacific region with a view to space technology capability building.

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Present Status of Cooperation

A Memorandum of Understanding (MoU) on Cooperation in Information Technology

& Science was signed on 28-11-2001 in New Delhi. As a follow-up to the MoU, the Indo-

Thai Information Technology Joint Task Force was set up and is scheduled to meet soon.

The Agreement on Cooperation in the Exploration & Use of Outer Space for Peaceful

Purposes envisages cooperation in the fields of Space Science, Exploration of Outer Space,

Monitoring of the Earth’s Environment for Outer Space and Remote Sensing of the Earth,

Plan and conduct Joint Space Projects of Mutual Benefit and interest, Training Personnel,

Exchange of Scientists and facilitate their participation in Joint Research Activities and

Projects, Exchange of Documentation, Equipment, Experimental Data, Scientific Information

and Literature etc. Joint Symposia and Conference, Joint use of Launch Vehicles and any

other area of cooperation to be determined by both sides. Executing Organisation are the

Indian Space Research Organisation (ISRO) and the Geo-Informatics and Space Technology

Development Agency (GSTDA). The executing Organisation may set up Joint Working

Groups, if deemed necessary for more detailed management of individual aspects of joint

activities etc. (Embassy of India, 2002).


The following policy steps could be initiated for strengthening cooperation between

India and Thailand in Information, Communication and Space Technology to meet the

challenges of digital divide:

1. Create an online database on trade, investment and technology partners in

India and Thailand.

2. Trade, investment and technological cooperation could be explored in sectors

such as consumer electronic goods, electronic instruments, office equipments,

medical equipments, telecom equipments, computer hardware, software

services and telecom services and projects.

3. Joint ventures in the software sector to tap the global market and intra-industry

trade and investment in the hardware sector need to be accorded strategic

focus.

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6.3 Biotechnology

The biotechnology revolution has opened up new vistas of opportunities, especially in

the agriculture sector, in developed and developing countries alike. In the case of developing

countries, often with limited scope for extending land area for agri-production, biotechresearch and applications have promised enhanced production levels, productivity growth,

employment opportunities, lower food prices etc. However, developments such as these have

also been associated with the concerns relating to bio-safety and more recently, with the

WTO Agreements coming in force, they have heightened a quest for preserving the

traditional knowledge-systems in the developing countries.

As for the status of biotechnology in India and Thailand it is not possible to do justice

to this subject at this stage. However, a brief profile is presented here, that too only on some

dimensions. In the case of India, the major institutions that are engaged in promotion of

biotechnology research are Department of Science and Technology (DST), Council of

Scientific and Industrial Research (CSIR), Department of Biotechnology (DBT), Indian

Council of Medical Research (ICMR), Indian Council of Agriculture Research (ICAR),

University Grants Commission (UGC), Department of Scientific and Industrial Research

(DSIR) etc. Just to provide the rigour of their activities on an illustrative basis the proposed

role of DBT in promoting industrial application of biotech is given in the box below.

Changing Role of DBT

In recent times, DBT has taken up a proactive role in promotion of industry. DBT

proposed a single window application-processing cell as part of a new regulatory system for

the domestic biotechnology sector. The move formed part of the recent recommendations on

biotechnology sector made by the Confederation of Indian Industry (CII). Besides

recommending setting up of a single window application-processing cell at DBT, CII had

also suggested a fixed time frame of 150 days for clearing new biotech proposals

In this regard, CII had recommended a process whereby a new application would be

sent by the single window agency to the Review Committee on Genetic Manipulation

(RCGM), which in turn would be required to submit a scientific evaluation report within 60

days of receiving the applications. This report will be submitted to the relevant approval

committee, identified by the end product category. For example, in case of agricultural

products, it would go to the Genetic Engineering Approval Committee (GEAC), in case of

pharmaceutical products to the Drugs & Pharma Approval Committee (DPAC), and in case

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of food products to the Biotech Foods Approval Committee (BFAC). The

GEAC/DPAC/BFAC would be required to accord approval or rejection within 90 days of

receiving the evaluation report from RCGM. In case of rejection of the application, the

applicants will also have the right to appeal to the concerned approval committee. CII had

also suggested that any additional information required by RCGM for completeness of the

application form would have to be called for within 30 days of receipt of the application.

Besides DBT, the recommendations were submitted by CII to 14 other agencies, including

seven ministries. Most of the recommendations submitted by CII have been accepted by

DBT.

Source: Chaturvedi (2002).

In terms of the sectoral diffusion of biotech companies in India it is discernible from

Table 27 that their activities are quite concentrated in agriculture followed by health

biotechnology.

While India has been actively engaged in biotech research it has also kept the bio-

safety concerns at the forefront, especially in the wake of WTO Agreements on TRIPs and

the Biosafety Protocol. The concerns have taken into account the interests of the farming

community and the protection of the environment.

One major issue that has been widely debated is the perceived threat from

biotechnology “from the larger involvement of the private sector as a provider of seeds and

other planting material in Indian agriculture, where achieving food security was set as the

basic objective. The direction of public sector research was in keeping with this objective:

both food crops and commercial crops formed a part of the research agenda. But while public

sector research took a balanced view, private sector showed keen interest in the commercial

crops, giving very little attention to the corps linked with the food security of a developing

country. These seeds, better known now as ‘terminator seeds’, were aimed at preventing

farmers from re-using the seeds obtained from a year’s harvest” Dhar (2001).

The issue of safe handling of GMOs in research, application and technology transfer

has been yet another vast area of debate and intensive policy making process in India

(Chaturvedi, 2002). Moreover, extensive efforts are on for the preservation of traditional

knowledge.

Biotechnology has grown over the years in Thailand too. This sector has grown

steadily since 1983 (see Table 28 for an illustration). Thailand has a good research

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infrastructure for the biotech explorations (Damrongchai, 2002). The conventional research in

plant and animal breeding, agronomy, animal husbandry, soil science etc. has culminated into

sophisticated research in biotech, cellular and molecular biology and biosafety.

A comparison of the crop biotechnology R&D in India and Thailand is made in Table29 (Hautea, 2002). It shows that there exists both complementarity and similarity in efforts.

Both complementarities and similarities provide for different avenues for bilateral

cooperation by way of R&D collaborations, exchange of research scientists, etc. However,

these aspects require more in-depth investigations.


A modest programme of bilateral cooperation in the field of science and technology

has been in existence in the form of collaboration programme between CSIR-TISTR (Council

of Scientific and Industrial Research – Thailand Institute of Scientific and Technological

Research). A project-oriented plan is being implemented. A new working programme for two

years was signed in December 1999 between CSIR and TISTR during a visit to India by a

six-member TISTR delegation. The areas identified for cooperation were Biotechnology,

Herbal Drug & medicinal plants, food technology, fire research, eco-toxicity assessment,

glass blowing, metrology and standards and building materials. High-level exchanges have

taken place between CSIR & TISTR. The head of the Institute of Science, Technology and

Development Studies (ISTAD) visited TISTR in April 2000 for discussions regarding joint

projects and again in November 2000 for discussions with the TISTR delegation to India to

review the existing CSIR-TISTR S&T Programme and identified areas for cooperation. The

areas are Ethics in Biotechnology, exchange of Science books and journals. The Thai side

showed interest in CD-ROMs on Medicinal & Aromatic Plants. Training and research at

National Physical Laboratory and Centre for Biotechnology were also discussed. Setting up

of a Fire Research Facility at TISTR with CSIR assistance is under consideration (Embassy

of India, 2002).


The following areas could be studied in greater detail for possible bilateral

cooperation: (i) R&D collaboration (ii) Bio-safety (iii) Preservation of traditional knowledge

(iv) Common positions in multilateral fora.

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6.4 Finance and Banking

Trade integration between India and Thailand under the proposed FTA would

necessitate concomitant efforts on the front of finance and banking cooperation. This would

be so because trade flows can be given a stimulus by setting in place an appropriate trade-facilitating financial and banking framework.

Various trade-related financial and banking services need to support the trade

liberalisation efforts between the countries. The starting point could be to forge strong

institutional linkages in the area of export finance. As the table below shows the EXIM Banks

of both India and Thailand are quite equipped to initiate such linkages, given their diverse

and comprehensive dimensions of export financing and promotional activities. What is

perhaps missing at present is more strengthened institutional linkages between the two EXIM

Banks despite that fact that they do interact in forums like the Meetings of the Asian Export

Credit Agencies (ECAs). Some time back EXIM Bank of India extended US Dollar 10

Million line of credit to the Exim Bank of Thailand. However, there is scope for creating

intensified bilateral institutional mechanisms, especially to build export competitiveness of

products of the two countries. In this regard, efforts could be made to launch a joint

technology upgradation scheme; R&D activities in different sectors such as biotech,

information technology etc.; business cells in both the banks and so on. For this purpose, the

existing MoU between the two exim banks needs to be further strengthened.

A Comparison between the Major Activities of the Exim Banks of India and Thailand

Exim Bank of India Exim Bank of Thailand

Pre-Shipment Credit Pre-Shipment Financing (Baht)

Post-Shipment Credit Pre-Shipment Financing (US Dollar and Yen)

Investment Abroad Packing Credit

Import of Technology Direct Packing Credit

Export Product Development Term Loan for Business Expansion

Lending Programme for Export Oriented Units Merchant Marine Financing

Production Equipment Finance Programme Long Term Credit for Export of Thai Capital Goods

Overseas Investment Finance Programme Financing Facility for Overseas ContractEquity Investment in Indian Ventures Abroad Negotiation of Export Bills

Asian Countries Investment Partners Programme Export Credit Insurance

Export Marketing Finance Programme Financial Facilities for Overseas Investment

Export Product Development Programme Foreign Investment Advisory Services

Export Vendor Development Programme Credit Facility for Export of Agricultural Produce

Foreign Currency Pre-Shipment Credit Financing Facilities for Re-Export

Bulk Import Finance Export Advisory Service

Finance for Research and Development for ExportOriented Units

Long Term Working Capital

Source:Export-Import Bank of India (www.eximbankindia.com) and Export-Import Bank of Thailand

(www.exim.go.th).

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In terms of the present status of the banking relations between the countries it is found

that is at a very preliminary stage and there is ample scope for bilateral cooperation. As

revealed by Tables 30 and 31 the presence of Indian banks in Thailand and Thai banks in

India is almost negligible. However, this is not to suggest that potentials for cooperation donot exist in this sector. The Indian policy regime has of late become quite conducive for

promoting FDI in the banking sector (see box below) and the Thai banks could take

advantage of that so as to facilitate the trade integration process as envisaged in the proposed

FTA.

Foreign Direct Investment in the Banking Sector in India

The norms relating to foreign direct investment (FDI) in the Indian banking sector are

governed by the overall foreign investment policy as well as guidelines laid down by the

Reserve Bank under various statutory provisions.

Limit for FDI under Automatic Route in Private Sector Banks

a) FDI up to 49 percent from all sources is permitted in private sector banks under the

automatic route, subject to conformity with the guidelines issued by the Reserve Bank

from time to time.

b) Initial Public Offerings (IPOs), private placements, ADRs/GDRs and acquisition of

shares from existing shareholders are included for the purpose of determining the above

mentioned FDI ceiling under the automatic route.

c) Issue of fresh shares under the automatic route is not available to those foreign investors

who have a financial or technical collaboration in the same or allied field. This category

of investors requires FIPB approval.

d) The automatic route is not applicable to transfer of existing shares in a banking company

from residents to non-residents. This category of investors requires approval of FIPB,

followed by "in principle" approval of the Reserve Bank. The "fair price" for transfer of

existing shares is determined by the Reserve Bank, broadly on the basis of SEBI

guidelines for listed shares and the erstwhile Controller of Capital Issues (CCI) guidelines

for unlisted shares. After receipt of "in principle" approval, the resident seller can receive

funds and apply to the Reserve Bank for obtaining final permission for transfer of shares.

e) Under the Insurance Act, the maximum foreign investment in an insurance company has

been fixed at 26 percent. Application for foreign investment in banks which have joint

venture/subsidiary in insurance sector should be made to the Reserve Bank. Such

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applications will be considered by the Reserve Bank in consultation with Insurance

Regulatory and Development Authority (IRDA).

f) Foreign banks having branch presence in India are eligible for FDI in the private sector

banks subject to the overall cap of 49 percent with the approval of the Reserve Bank.

Limit for FDI in Public Sector Banks

FDI and portfolio investment in nationalised banks is subject to overall statutory limits of 20

percent. The same ceiling would also apply in respect of investments in the State Bank of

India and its associate banks. The norms also include provisions relating to (i) voting rights of

foreign investors, (ii) approval of the Reserve Bank and reporting requirements, (iii)

conformity with SEBI Regulations and Companies Act Provisions and (iv) disinvestment by

foreign investors.

Source: Reserve Bank of India (2002).

In India, foreign banks were so far allowed to set up branches but not subsidiaries.

The Union Budget 2002-03 announced the elimination of this restriction to allow foreign

banks to set up subsidiaries in India. A foreign bank could choose either to set up a subsidiary

or have branch presence. Such subsidiaries will have to adhere to all banking regulations,

including priority sector lending norms, applicable to other domestic banks. Necessary

amendments to the Banking Regulation Act, 1949 to relax the maximum ceiling of voting

rights of 10 percent for such subsidiaries would be brought about. Guidelines in this regard

are being worked out by the Reserve Bank of India (RBI, 2002).

With the policy reforms several financial services can also be rendered. As on

30.06.2002, 41 foreign banks are operating 203 branches in India. Foreign banks are also

permitted to set up Representative offices in India. At present 25 foreign banks are having

representative offices in India. They are required to give their applications to Reserve Bank

of India which are considered in consultation with Government of India, representative

Offices cannot undertake any commercial activities or earn profit, all their expenses are to be

met out of inward remittances received from abroad.

Representative offices are permitted to undertake the specific type of work which

includes liaison work, correspondent banking, loan syndication, risk management for

companies engaged in raising money overseas, International trade finance such as

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buyer's/suppliers credit to the Indian importers, Off-shore foreign currency loans and

Information outpost for the group etc.


The present status of cooperation is less than satisfactory. The issue of Bilateral

Account Trade is presently under discussion.


Thus, the following areas could be considered for bilateral cooperation between India

and Thailand: (i) Institutionalising bilateral export finance and promotion activities of the

EXIM Banks of India and Thailand in a more strengthened manner (ii) launch a joint

technology upgradation scheme (iii) R&D activities in different sectors such as biotech,

information technology etc. (iv) establishing business cells in both the EXIM Banks (v)

increasing the presence of commercial banks on a mutual basis (iv) encouraging FDI from

Thailand to India in banking operations (v) financial services collaboration.

6.5 Tourism

Tourism sector in both India and Thailand has played a very important role in

economic development. Being relatively labour intensive industry, tourism sector has created

significantly high employment. Also earnings of foreign exchange for both countries have

been quite substantial however, Thailand has fared better than India in terms of both attracting

tourists and foreign earnings (see Table below).

Comparison of Tourism Income between Thailand and India in 2000

Item India Thailand

Inflow of International tourists

(Million)

2.641 9.508

Outflow of Domestic tourists

(Million)

3.960 1.946

Income from Tourism (Million US

Dollar)

3,296 7,112

Total population (Million) 1,014 63

Source: Tourism Authority of Thailand (2001).

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For India, tourism has emerged as in instrument for employment generation and

poverty alleviation. During 1999-2000, direct employment in the tourism sector was

estimated to be 15.50 Million. Tourism also promotes national integration and international

understanding and gives support to local handicrafts and cultural activities. Tourism in India

has grown substantially over the last three decades. Foreign tourist arrivals during 2000 were

2,641,157. However, India’s share in the world tourist market during 2000 was a mere 0.38

percent. Foreign exchange earnings from tourism during 2000 were estimated at 140,475

Million Rupees.

In order to further accelerate the development of tourism in India, the policy thrusts

given for tourism promotion are on development of infrastructure; product development and

diversification; development of eco-adventure sports and wildlife tourism; exploring new

source markets; environmental protection and cultural preservation of national heritage;

launching of national image building and marketing plans in key markets; providing

inexpensive accommodation in different tourist centres; streamlining of facilitation

procedures at airports; human resource development; creating awareness and public

participation; and facilitating private sector participation in development of infrastructure,

etc.

The hotel sector is one of the most important segments of the tourism industry with

high potential for employment generation and foreign exchange earnings. To give impetus to

this sector, the government provides tax benefits and other incentives. The industrial policy

has now placed hotels and tourism related activities as a priority industry. Foreign

investment and collaborations are now facilitated under the new economic policy. Automatic

approval is available for foreign equity investment up to 100 percent in hotel and tourism

sector.

India has bilateral air services agreements with 96 countries as on 31 May 2001.

India and Thailand also have tourists exchanges but the level of tourists flow from Thailand

to India has been relatively low as compared to western tourists (Table 32).

The Bilateral Agreement on Aviation between India and Thailand comprises 3

national airlines, namely, Air India, Indian Airlines and Thai Airlines. The Agreement has

fixed the maximum capacity at 4,1 00 seats per week from each side. Including the operation

of other airlines, there are 44 direct flights operating between Bangkok and destinations in

India. This includes, 22 flights per week for Calcutta, 30 flights per week for New Delhi, 15

88



flights per week for Madras, 31 flights per week for Mumbai, 2 flights per week for

Bangalore, and 2 flights per week for Guwahati.

Visa on arrival for maximum stay of 15 days is allowed for Indian nationals at Thai

International port of entry including Bangkok, Chiangmai, Phuket, Had Yai, Utaphao, MaeSai and Chiang Saen.


A draft Agreement on Tourism Cooperation between India and Thailand is under

negotiation. Apart from the draft agreement, the Indian Mission in Thailand has been making

efforts to promote tourism especially in the Northeastern states of India after the

commencement of direct Air India biweekly flight between Guwahati and Bangkok in April2002. In addition, efforts are also being made to promote tourism to Buddhist circuits in

India. Both Thailand and India have also decided to open tourist offices in New Delhi and

Bangkok, respectively to strengthen cooperation in tourism. Thai Tourist Office has already

started functioning from the Thai Embassy in New Delhi.

It is important to note that Indian Airlines flights between Bangkok and Gaya have

commenced as recently as on December 18, 2002 in an effort to link the Indian and Thai

Centres on the Map of Buddhism.


India has great potential in historical, cultural and eco-tourism. This also includes

Buddhist Circuit Tourism, Asian Highways and Capital Cities Tour. Thailand would also

benefit from greater aviation link with India and could promote Thailand as a gateway for

India into ASEAN countries. Increase in the travel service and air transport between

Thailand and India would help promoting tourism for both countries. Joint tourism

promotion, charter flight agreement, eco-and cultural tourism, development of tourism

infrastructure such as hotel, restaurant and travel services, air tourism safety, avoidance of

double taxation, tourism facilitation, business traveller privilege and development of national

tourism standards could be some of the potential areas of cooperation.

6.6 Infrastructure Development

Infrastructure development is considered as a key to enhance the economicdevelopment in general and economic cooperation in particular. Without adequate

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infrastructural facilities trade augmentation between two countries is not possible even if

tariffs are liberalised. Similarly, developed infrastructural services have emerged as an

important determinant of FDI inflows. There could be several subsectors of the infrastructure

sector that need to be focused upon for achieving developmental objectives. But in thecontext of India-Thailand FTA, highway and seaport facilities are considered relatively more

important.

Highways

In India, the development of National Highways is done through. budgetary support.

The supporting funds are also available from funding agencies such as the World Bank, the

Asian development Bank etc. As far as the Indian transport system is concerned, recently

there has been a major shift in the pattern of demand for transport service as the

transportation mode is changing from railways to the road sector. However, according to the

National Highways Authority of India, about 40 percent of habitations are not connected by

good roads. Therefore, there seems to be existing some potential demand for roads in India.

On the other hand, Thailand has made substantial progress in terms of creating highway

infrastructure. The complementarity may be tapped by inviting Thai FDI into the road sector

in India for which the FDI regime in India is quite conducive. A detailed study on this aspect

is warranted. This would contribute to facilitating trade flows not only between India and

Thailand but also to other countries from India.

Seaport

India has about 5,600 kilometers of main coastline serviced by 12 major ports and

181 other ports. The major ports are under the purview of the Central Government, while

other ports come under the jurisdictions of the respective State governments.

It is reported that about 90percent of Indian international trade operates through

seaports. The major seaports in India are as follows: Mumbai, Calcutta, Haldia, Cochin,

Kochi, Kandla, Chennai, Mormugao, Jawahar Lal Nehru (Nhava Sheva), Paradip, Tuticorin,

Visakhapatnam, Ennore and New Mangalore. Of these ports, Mumbai Jawahar Lal Nehru,

Kandla, Mormugao, New Mangalore and Cochin port are on West coast, while Calcutta,

Haldia, Paradip, Visakhapatnam, Chennai, Ennore and Tuticorin, are on east coast. With

growing, international trade, there seems to be future potential demand for development of

these seaports together with industrial estates and in-land container depots.

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It was decided to establish trilateral transport and other linkages between India-

Thailand and Myanmar. Pursuant to this the India-Myanmar-Thailand Foreign Ministers met

during 5th

-6th

April 2002 in Yangon. It was agreed to construct a highway to connect India-

Myanmar-Thailand to promote cooperation between Southeast Asia and South Asia. The road

from Moreh in India to Mae Sot in Thailand through Bagan in Myanmar is to be completed

within two years. Two Task Forces have been set up: one on financing to be chaired by

Thailand and the other on technical matters to be chaired by India (Embassy of India, 2002).


Since Thailand is relatively well endowed with highways the potential cooperation between Thailand and India might be in terms of private sector joint ventures in road

construction projects. Other possible areas could be reconstruction of weak bridges;

modernisation of road construction technology for speedy execution; road quality assurance;

engineering measures to improve road safety, etc.

Potential cooperation in seaport related development might be in the areas of

containerisation of sea transport and seaport management as well as management of industrial

estate and free trade zones. Other areas could include coastal shipping development, ship

building technology, ship repair, in-land water transport and public enterprise privatisation.

6.7 Healthcare

Healthy citizens and healthy communities have emerged as important determinants of

economic development. Health care sector displays advancement on some dimensions and

underdevelopment on other dimensions in both India and Thailand. Some of these

dimensions are analysed below, in the context of which, potentials for cooperation between

India and Thailand are highlighted.

The broad health indicators suggest that Thailand has made tremendous progress in

this sector. It has been able to reduce infant mortality, improve immunisation rates and

increase life expectancy. Health care in Thailand is financed primarily through the

programmes such as (i) voluntary health insurance, (ii) mandatory programmes, (iii) social

welfare programmes, and (iv) fringe benefits. Considerable progress has been made in terms

of checking the growing incidence of HIV spread.

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However, there are several dimensions on which this sector has not been able to

succeed as it should have. First, gains in terms of improved health indicators have not been

equitably distributed around 40percent of Thai population does not have access to adequate

healthcare, primarily in rural areas (World Bank, 1999). Second, it has been observed that

various financing schemes are not rationalised. Consequently, some people are covered by

several different programmes while others received no coverage at all. According to an

estimate around 23 Million people are not covered by any financing schemes. Third, children

in Thailand have been found vulnerable to poor nutrition.

There has been a significant progress in various aspects of health care in India. Some

of the states like Kerala, Maharasthra, Punjab, etc. have made considerable progress in terms

of the health indicators like the infant mortality rate, life expectancy, crude death rate, etc.

Impressive strides have been made in recent years in the realm of state-of-the-art hospitals in

the country. These hospitals use the latest technical equipments and provide services of

highly skilled medical personnel. Since these services are often available at competitive

prices patients from all over the world come to India for specialised treatment. All India

Institute of Medical Sciences (AIIMS, New Delhi) is considered as a leading medical

university in Asia (www.healthlibrary.com).

However, health care sector deserves priority attention due to a plethora of unattained

objectives. First, the advancements made in this sector in India has been uneven and

restricted to a few states. Second, during the last few years there has been rising incidence of

communicable diseases. Third, the country also lacks in terms of addressing adequately the

health problems that arise due to the modernisation process like heart diseases, accidents,

traumas, etc. Fourth, optimising the existing rural health infrastructure throughout the country

is yet another major challenge in the Indian context. The country also lacks in terms of a

health management information system. Fifth, the country also lacks in terms of handling the

health related impact of developmental projects that include incidence of pesticide poisoning,

pollution, gradual degradation of ground water and emergence of Malaria. And finally,

village schools do not have adequate sanitation and safe drinking water facilities.


Against this background of progress and underdevelopment in India and Thailand

with respect to the health care sector some potential areas for cooperation between the two

countries can be identified: (a) launching a Joint Health Programme to increase coverage of

population, (b) initiating a Joint Health Investment Programme for extending health care

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provisions to village schools with special focus on nutrition, sanitation and safe drinking

water facilities, (c) increasing trade in health services, (d) setting in place low-cost health

management information system, (e) starting a scheme for handling health related impact of

developmental projects.

6.8 Construction

It is an obvious fact that availability of infrastructure services serves as an important

determinant of economic development. In the various infrastructure sectors such as

telecommunications, power, railways, roads, ports, airports etc., construction industry plays

a crucial role. Construction industry, among other activities, meets the needs of

housing/dwelling units, railway lines, roads, bridges etc. Being a labour intensive industry itis one of the biggest employers in developing countries demanding for unskilled labours on

one hand and qualified architects, on the other. The construction industry is an important

indicator of economic buoyancy in any country. A boom in construction industry would not

only mean many more jobs but growth in other important sectors of economy, like steel and

cement as well.

A close look at this industry suggests that there is scope for cooperation in this

industry between India and Thailand. While in recent years India has witnessed growth in this

sector, Thailand has confronted with a slowdown – especially, after the economic crisis of the

late nineties. There are complementarities that provide avenues for cooperation. The

infrastructural weaknesses in India and relatively developed infrastructure in Thailand present

a situation of complementarity at one dimension. The recent trends of growth and slowdown

in India and Thailand, respectively in this industry also display complementarities at another

dimension.

Construction stocks have been growing since the last year or so in India (Business

Line, 2002). This is attributed to, among other things, the Government's renewed thrust on

infrastructure spend and the Golden Quadrilateral road project. Most companies recorded a

higher growth in turnover. For instance, Hindustan Construction posted a 27 percent rise in

turnover. For L&T, the total value of projects on hand as of March 2002 was 26 percent

higher than in the previous year, and for Hindustan Construction, it jumped by 38 percent.

‘These statistics clearly indicate a demand pick up in the industry. The industry contributes a

little over 5 percent of the country's GDP and 37 percent of all investments. But if one takes

into account the multiplier effect it has on other core sectors such as cement, steel, housing

93



finance and also on employment generation, the contribution might go up to 10 percent. At

present, the demand is primarily from the road development housing sectors’ (Business Line,

2002).

The Government's mega Golden Quadrilateral and other highway projects havethrown up fresh opportunities for construction companies. Also, in the past few years, the

housing sector has attracted chunk of the investments. According to the CMIE estimates,

construction in the household sector rose significantly, from 44 percent to 53 percent of the

total construction activity in the country during 1995-2000. The annual average growth rate

of the construction sector for the next three-four years is projected at about 7.4 percent.

Though the potential for growth appears significant, certain constraints need to be

taken note of. Road projects, which constitute a significant portion of the orders, are a low-

value-added activity. On the other hand, due to intense competition both domestic and

international players are compelled to bid low prices. Another problem is the financing of

such huge projects. The projections are based on the assumption of increased participation by

the private sector through the `public-private partnership' and foreign investments. However,

it is in this context that there appears to be scope for cooperation between India and Thailand.

In the case of Thailand, although this industry has witnessed growth, the aftermath of

the recent crisis is far from over. This is reflected in the trends perceived in the demand for

construction materials like glass, cement, ceramic tiles etc. For instance, during 1999-2000,

all Thai glass companies have decreased their production by 40-50 percent (ARGC, 2002).

One reason has been the sluggish domestic market and another reason has been increased

competition both by domestic and foreign companies.

The cement industry in Thailand has made critical adjustments since the crisis. Faced

with foreign debts and decreasing domestic demand the industry has encountered huge losses.

Investments plans to raise productivity have retarded. Competition has increased

tremendously. Domestic demand for cement in 1998 and 1999 was only 20.65 and 19.0

Million tons respectively compared to 36.0 Million tons in 1997 (ARGC, 2002).

Consequently, domestic manufacturers are targetting the export market.

In the case of ceramic tiles, the total production capacity was 1.89 Million metric tons

in 1999 whereas the actual production was only 1.42 Million metric tons – which is about 75

percent of the overall capacity. The production of mosaic tiles has been decreasing due to

high production costs (ARGC, 2002).

The facts mentioned above are pointers to the fact that producers in the construction

industry in Thailand have been facing problems of overproduction. They are trying to

94



diversify to the export markets. On the other hand, India needs more investments in its

infrastructure sector as a whole and construction industry in particular. The growth climate in

this industry in India is also promising.

Potential Bilateral CooperationAgainst this backdrop, the following areas for cooperation in this industry could be

contemplated: (a) Increasing trade in construction materials between India and Thailand, (b)

Setting up joint ventures to enhance competitive capabilities and meet financial requirements,

(c) Exchanging construction technologies suited for the local needs and (d) Cooperating in

terms of skilled human resources in the areas of managerial, scientific and architectural

expertise.

Summing Up

This chapter has highlighted although briefly the possible benefits of cooperation

between India and Thailand in select areas. Most of the cooperation initiatives have the

potential to contribute to the efficacy of the prospective bilateral FTA. However, cooperation

in these areas can also be viewed separately from the FTA process – although these areas

have potential for generating trade flows between the countries of a variety of products.

95



Chapter 7

Recommended Architecture of the

India –Thailand Free Trade Agreement (ITFTA)

Introduction

The preceding chapters have demonstrated both analytically and empirically that the

India-Thailand FTA is a feasible proposition, as it would entail mutually beneficial trade

linkages between them. However, the architecture of the FTA could be such that it posits the

trade integration process in a wider developmental framework so that the trade-initiatedimpulses are brought in synergy with investment and technology flows. The FTA also needs

to take into account the conceptual basis and empirical results of the present study at the

stage of its implementation. One prime objective of the FTA should be to maintain its WTO-

consistency.

The present chapter, in this context, pins down the objectives and principles of the

FTA. It also lays down recommendations for its scope and coverage. Under any FTA, rules

of origin play an important role in the event of tariff liberalisation, hence, the basis for

evolving the ITFTA rules of origin have also been laid down. Towards the end, this chapter

suggests some strategies for addressing some of the adjustment issues. This chapter draws

upon an earlier work on similar subject (Panchamukhi and Das, 1999) and other prevailing

trade agreements in both the developing and developed regions.

WTO-Consistency

It is rather well-known that if a WTO member enters into a regional integration

arrangement with another member or a group of members in a manner which grants more

favourable conditions to its partners it departs from the principle of non-discrimination as

defined in Article I of GATT, Article II of GATS etc. (www.wto.org). However, a departure is

permitted and it is WTO-consistent under the following three sets of rules:

1. Paragraphs 4 to 10 of Article XXIV of GATT (as clarified in the Understanding on the

Interpretation of Article XXIV of the GATT 1994) provide for formation of customs

unions and free-trade areas covering trade in goods.

96



2. Enabling clause which refers to preferential trade arrangements in trade in goods between

developing country members.

3. Article V of GATS which governs the trade in services under regional trading

arrangements for both developed and developing countries.

Two points are discernible from the above-mentioned rules. First, developing

countries can take recourse to all of the above three sets of rules but developed countries can

receive advantage under the 1st and 3rd sets of rules. Second, the underlying rules in 1st and

2nd sets pertain to trade in goods and the 3rd set relates to trade in services. Thus, the policy

makers dealing with the subject of ITFTA would have to make two decisions: First, whether

the ITFTA needs to cover trade in both goods and services and second, whether the ITFTA

needs to be notified to the WTO under the Article XXIV or the enabling clause if the scope of

the agreement covers only trade in goods. These decisions have important implications for

the scope of the proposed ITFTA as well as its modalities of negotiations.

The Article XXIV of GATT requires that a free trade agreement like the one

envisaged here, among other things, needs to cover substantially all the trade, obviously in

goods (paragraph 8 (b) of Art. XXIV). Similarly, if services were included in the scope of

agreement it would require substantial sectoral coverage and elimination of substantially all

discrimination (paras 1(a) and (b), respectively of Art. V of GATS). However, some

flexibility in the application of these paras of the GATS is granted to developing countries in

accordance to their level of development (para 3(a) and (b) of Art. V of GATS).

However, under the enabling clause reduction or elimination of tariffs and non-tariffs

are provided among developing countries as far as goods are concerned (paras 1 and 2 (c) of

the enabling clause).

7.1 Objectives and Principles

It may be proposed that in laying down the objectives and principles of the ITFTA,

two criteria need to be taken into consideration. First, the national level developmental

imperatives and second, its WTO-consistency could be the two prime dimensions on which

the FTA could be raised. The objectives and principles need also to reflect the predicaments

of the scope and coverage of the ITFTA which could be envisaged in as comprehensive a

manner as possible, so as to avoid amendments at later stages of its implementation.

97



Objectives

The objectives of the proposed Agreement could be to achieve sustained development

and welfare of the people of the Contracting States through:

(1) expanding bilateral trade between the countries in accordance with and building onother multilateral, regional and bilateral rights and obligations of the Contracting

States;

(2) utilising trade integration for strengthening integration in other spheres such as

investment, technology, labour market, manufacturing etc. for raising export supply

capabilities and achieving global competitive standards;

(3) aiming at all-encompassing economic integration measures that could provide greater

opportunities for employment, better working conditions and help securing higher

living standards for their peoples;

(4) augmenting freer trade, especially in goods that embody different technology levels so

as to achieve trade creation, particularly through its technological spread effects;

(5) encouraging complementarity between different sectors of the Contracting States

through a harmonious blend of competition and cooperation; and

(6) establishing common standards for exports originating in the Contracting States in

line with international standards.

Principles

The Agreement could be governed in accordance with the following principles:

(1) The Contracting States shall grant to the goods and services of other Contracting

Parties treatment no less favourable than that accorded to products of any other

country in accordance with the relevant articles of the WTO/GATT.

(2) The Contracting States shall adhere to the national treatment principle of the

WTO/GATT.

(3) Bilateral integration through this Agreement shall be accomplished through principles

of non-discrimination, overall reciprocity and mutuality of advantages ensuring

equitable distribution of benefits among the Contracting States keeping in mind their

different stages of economic development;

(4) Trade Liberalisation would be achieved through the principles of transparency,

gradualism, flexibility and balance.

98



7.2 Scope and Coverage

(1) The Agreement could cover all trade in goods among the Contracting States except

for a negative list;

(2) The Agreement could consist of arrangements relating to tariffs, non-tariffs, para-

tariffs, and direct trade measures;

(3) It could also include measures relating to state trading and government procurement.

7.3 Rules of Origin

The rules of origin need to be evolved by taking into account their various economic

effects as analysed in Chapter 3, especially by keeping their developmental role in a regime

of trade liberalisation. Originating products need to be defined in terms of substantial

transformation that they undergo in the partner country. This could be achieved by adhering

to the three tests as analysed in Chapter 3 viz. change in tariff heading; percentage test and

specific process test.

The first test could be applied at HS 4-digit which is neither too aggregated nor

disaggregated level. The second test could be at 50 percent domestic value addition since

logically, any final product with less that half of contribution from indigenous sources

perhaps cannot be considered as originating in the country of manufacture. For the

calculation of the domestic content appropriate method needs to be evolved. The ITFTA

could also consider incorporating a provision of bilateral cumulation mechanism as well on

the lines of regional cumulation provisions under a regional arrangement. The third test could

be applied on a case-by-case basis.

7.4 Trade Facilitation Measures

Adjustments would be required in this area as mere tariff liberalisation would not be

sufficient to augment bilateral trade. Countries may evolve and set in place trade facilitation

measures in the following areas:

(a) Bridging information gap and improving the quality of information.

(b) Vertical integration of exporting activities.

(c) Customs cooperation for harmonisation of rules, procedure, classification and

documentation.

(d) Banking facilitation, specially, trade finance including credit, guarantee and

insurance.

99



(e) Taxation.

(f) Harmonisation of standards and technical barriers to trade.

7.5 Institutional Mechanism

The administration and implementation of the proposed Agreement could be

undertaken by setting in place a well-defined institutional framework.

Summing Up

This chapter has dealt with the possible architecture of the proposed ITFTA and

recommended on its plausible objectives and principles, scope, rules of origin, trade

facilitation and institutional mechanism by emphasising on the WTO-consistency of the FTA.

100



Chapter 8

Conclusion

Recognising that the age-old bonds of cultural and historical affinity and the

advantages of geographical proximity provide the adequate base for stregthening economic

cooperation process between India and Thailand, the present study posed before it the

question whether a Free Trade Agreement between them is a feasible proposition. It was

hypothesised that the present low levels of trade and investment linkages between the two

countries perhaps could be due to hitherto untapped possibilities of economic cooperation. It

was also observed that the present policy regimes in both the countries are quite conducive to

more intensive bilateral economic integration and a process as this could prove to be a

building block for other subregional, regional and global economic integration processes of

which both are a part. The study thus, focused on finding the potentials of trade expansion

between India and Thailand.

The study estimated the potentials of trade augmentation by analysing the trade

complementarity and production similarity profiles, possibilities of intra-industry trade and

costs of non-cooperation. Having observed rich potentials of trade expansion and significant

costs of non-cooperation both analytically and empirically, the study moved on to assessing

the impact of a Free Trade Agreement between India and Thaialnd on their respective major

macroeconomic variables with the help of a CGE modelling exercise using the GTAP. The

results suggest that both the countries are expected to gain in terms of macroeconmic

performance, including export growth. As it was not possible to accomplish it with the help

of the model, estimates were also made with respect to the possible revenue loss under

different tariff liberalisation scenarios for different categories of products so as to facilitate

the policy-making process at the time of the implementation of the prospective FTA.

The impact analysis with the help of the CGE model was further extended to different

sectors. Since a very disaggregated level empiricism was not possible in this regard, efforts

were made to do so without using the model. Both the modelling exercise and the

disaggregated analysis show that the impact of the proposed FTA would not be adverse for

the domestic production activities. However, at the HS 6-digit level there would be items that

101



could be affected relatively more than others and in case as these a calibrated tariff

liberalisation schedule and setting up of joint venture are recommended.

The study also explored the possibilities of cooperation in several other important

areas that included sectors such as fisheries and aquaculture; information, communication and

space technology; biotechnology, finance and banking; tourism; and infrastructure

development. It was concluded that these areas offer mutually beneficial avenues for

cooperation between the two countries.

Finally, the study dwells upon a possible architecture of India-Thailand FTA and

makes recommendations with regard to its objectives and principles; scope and coverage;

rules of origin; and strategies for addressing adjustment issues. In so doing, the study took

into account the national developmental imperatives of the two countries and WTO-

consistencey of the proposed FTA.

Overall, the findings of the study help concluding that the proposed Free Trade

Agreement between India and Thailand is feasible, desirable and mutually beneficial . If

not implemented timely both the countries would continue to incur significant costs of

non-cooperation.

102



Table 1

Major Economic Indicators: India

Variables 1990-91 1998-99 1999-2000 2000-01 2001-02

GDP Growth (percent) 5.6 6.5 6.1 4.0 5.4

Gross domestic

investment/GDP(percent)

26.3 22.7 24.3 24.0 --

Gross domestic savings/GDP(percent) 23.1 21.7 23.2 23.4 --

Inflation rate WPI (percent) -- 5.3 6.5 4.9 1.3

Fiscal deficit/GDP (percent) 6.6 5.1 5.4 5.5 5.1

Export growth (percent) 9.0 -3.9 9.5 19.6 0.6

Import growth (percent) 14.4 -7.1 16.5 7.0 0.3

Current account balance/GDP (percent) -3.1 -1 -1.1 -0.5 --

Debt service ratio (percent) 35.3 18.0 16.2 17.1 --

Source: Government of India, Economic Survey 2001-2002.

Table 2

Structure of GDP in India(percent)

Year Agriculture,

forestry and

logging, fishing,mining &

quarrying

Manufacturing,

construction,

electricity, gasand water supply

Trade,

transport,

storage, &communication

Financing,

insurance, real

estate & businessservices

Public

administration,

defence & otherservices

1990-91 34.93 24.49 18.73 9.67 12.18

1991-92 34.09 23.93 18.96 10.69 12.33

1992-93 34.18 23.74 19.04 10.77 12.27

1993-94 33.54 23.69 19.26 11.53 11.98

1994-95 32.94 24.35 19.82 11.35 11.54

1995-96 30.59 25.47 20.92 11.43 11.59

1996-97 30.87 25.45 20.92 11.34 11.431997-98 29.03 25.20 21.51 12.08 12.18

1998-99 28.87 24.57 21.75 12.18 12.62

1999-00 27.58 24.37 22.07 12.70 13.28

2000-01 26.55 25.00 22.35 12.57 13.54

Source: Government of India, Economic Survey 2001-2002 .

103



T a b l e 3

P e r c e n t a g e o f G r o s s N a t i o n a l P r

o d u c t a t C u r r e n t M a r k e t P r i c e s b y

S e c t o r

( p e r c e n t )

Y e a r

A g r i c u l t u r e

M i n i n g

A n d

Q u a r r y i n g

M a n u -

f a c t u r i n g

E l e c t r i c i t y

G a s a n d W a t e r

S u p p l y

C

o n s t r u c t i o n

W h o l e s a l e &

R e t a i l T r a d e ,

R e p a i r o f V e h i c l e s

a n d P e r s o n a l a n d

H o u s e h o l d G o o d s

H o t e l s a n d

R e s t a u r a n t s

T r a n s p o r t , s t o r

a g e

a n d

C o m m u n i c a t i o n

1 9 9 3

8 . 7 9

1 . 4 2

3 0 . 0 8

2 . 4 8

7 . 0 8

1 8 . 0 2

5 . 4 7

7 . 6 2

1 9 9 4

9 . 2 3

1 . 3 6

3 0 . 0 1

2 . 3 7

7 . 4 9

1 7 . 8 0

5 . 3 8

7 . 5 5

1 9 9 5

9 . 6 6

1 . 2 2

3 0 . 3 9

2 . 4 6

7 . 3 5

1 7 . 2 3

5 . 3 4

7 . 3 6

1 9 9 6

9 . 7 2

1 . 4 1

3 0 . 3 9

2 . 3 7

7 . 5 7

1 6 . 9 2

5 . 5 2

7 . 5 6

1 9 9 7

9 . 7 0

1 . 7 9

3 0 . 9 7

2 . 5 8

5 . 9 0

1 7 . 6 2

5 . 3 3

8 . 0 3

1 9 9 8

1 1 . 1 6

1 . 8 9

3 1 . 9 8

3 . 1 9

4 . 0 0

1 7 . 6 0

5 . 1 7

8 . 0 8

1 9 9 9

9 . 5 4

1 . 9 4

3 3 . 6 0

2 . 8 9

3 . 6 9

1 7 . 7 9

5 . 6 7

8 . 3 6

2 0 0 0 p

8 . 8 9

2 . 4 2

3 4 . 1 0

3 . 0 3

3 . 1 1

1 7 . 5 4

5 . 7 0

8 . 2 2

2 0 0 1 p 1

8 . 6 6

2 . 5 0

3 3 . 8 7

3 . 3 3

2 . 9 6

1 7 . 3 8

5 . 7 2

8 . 1 5

Y e a r

F i n a n c i a l

I n t e r m e d i a r y

R e a l E s t a t e ,

R e n t i n g

a n d

B u s i n e s s

A c t i v i t i e s

P u b l i c

A

d m i n i s t r a t i o n

a n d D e f e n s e ;

C o m p u l s o r y

S o c i a l S e c u r i t y

E d u c a t i o n

H e a l t h

a n

d

S o c i a l

W o r k

O t h e r

C o m m u n i t y ,

S o c i a l a n d

p e r s o n a l

S e r v i c e

A c t i v i t i e s

P r i v a t e

H o u s e h o l d

w i t h

E m p l o y e d

p e r s o n

G r o s s

D o m e s t i c

P r o d u c t

G r o s s N a t i o n a l

P r o d u c t

1 9 9 3

6 . 9 1

3 . 7 7

3 . 7 7

3 . 2 6

1 . 3 8

1 . 2 6

0 . 1 6

1 0 1 . 4 7

1 0 0 . 0 0

1 9 9 4

7 . 3 1

3 . 6 5

3 . 5 7

3 . 0 9

1 . 3 8

1 . 2 2

0 . 1 5

1 0 1 . 5 6

1 0 0 . 0 0

1 9 9 5

7 . 2 0

3 . 4 7

3 . 8 3

3 . 3 3

1 . 4 8

1 . 1 9

0 . 1 4

1 0 1 . 6 6

1 0 0 . 0 0

1 9 9 6

7 . 2 8

3 . 4 4

3 . 8 0

3 . 3 1

1 . 5 3

1 . 3 1

0 . 1 4

1 0 2 . 2 6

1 0 0 . 0 0

1 9 9 7

6 . 7 1

3 . 4 1

3 . 9 3

3 . 5 5

1 . 6 6

1 . 3 6

0 . 1 4

1 0 2 . 6 7

1 0 0 . 0 0

1 9 9 8

5 . 2 7

3 . 4 3

3 . 4 7

4 . 0 7

1 . 8 6

1 . 3 6

0 . 1 6

1 0 3 . 5 8

1 0 0 . 0 0

1 9 9 9

3 . 4 7

3 . 4 9

3 . 5 3

4 . 1 4

2 . 0 2

1 . 5 1

0 . 1 5

1 0 2 . 8 1

1 0 0 . 0 0

2 0 0 0 p

3 . 0 9

3 . 3 4

4 . 4 0

4 . 0 7

2 . 0 1

1 . 5 3

0 . 1 5

1 0 1 . 5 9

1 0 0 . 0 0

2 0 0 1 p 1

3 . 0 5

3 . 2 9

4 . 5 5

3 . 9 8

2 . 1 0

1 . 5 3

0 . 1 4

1 0 1 . 2 2

1 0 0 . 0 0

S o u r c e : N

a t i o n a l E c o n o m i c a n d S o c i a l D e v e l o p m e n t B o a r d . ( N E S D B )

1 0 4



T a b l e 4

I n d i a - T h a i l a n d B i l a t e r a l T r a d e

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

E x p o r t s

I n d i a t o T h a i l a n d ( U S $ M n . )

2 0

1

1 9 9

2 4 2

3 1 8

3 7 4

4 6 1

4 3 4

4 6 0

3 6 3

4 6 8

5 4 7

I n d i a t o W o r l d ( U S $ M n . )

1 7 8 1

4

1 7 8 7 3

1 8 5 0 0

2 0 2 5 9

2 4 1 9 6

3 0 5 3 7

3 2 3 2 5

3 3 2 4 8

3 6 4 2 2

3 8 5 7 7

4 4 2 9 8

S h a r e ( p e r c e n t )

1 . 1

3

1 . 1 1

1 . 3 1

1 . 5 7

1 . 5 5

1 . 5 1

1 . 3 4

1 . 3 8

1 . 0 0

1 . 2 1

1 . 2 3

I m p o r t s

I n d i a f r o m T h a i l a n d ( U S $ M n . )

6

2

4 9

6 7

5 4

1 4 6

1 4 6

1 7 6

2 0 8

3 0 9

4 9 2

6 2 2

I n d i a f r o m W o r l d ( U S $ M n . )

2 3 5 2

9

1 9 5 0 9

2 3 2 2 7

2 1 2 2 5

2 5 4 8 6

3 4 4 8 4

3 6 0 5 5

3 9 0 1 7

4 2 1 4 0

4 5 0 3 8

4 9 7 2 4


0 . 2

6

0 . 2 5

0 . 2 9

0 . 2 5

0 . 5 7

0 . 4 2

0 . 4 9

0 . 5 3

0 . 7 3

1 . 0 9

1 . 2 5

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

E x p o r t

s

T h a i l a n d t o I n d i a ( U S $ M n . )

6 3

6 5

7 4

1 9 3

2 9 0

2 4 2

2 9 4

2 8 4

4 4 7

5 6 6

T h a i l a n d t o W o r l d ( U S $ M n . )

2 8 8 1 1

3 2 4 7 2

3 7 1 5 8

4 5 5 8 3

5 7 2 0 1

5 5 7 4 3

5 7 5 6 0

5 4 4 8 9

6 1 7 9 7

6 5 1 6 0


0 . 2 2

0 . 2 0

0 . 2 0

0 . 4 2

0 . 5 1

0 . 4 3

0 . 5 1

0 . 5 2

0 . 7 2

0 . 8 7

I m p o r t s

T h a i l a n d f r o m I n d i a ( U S $ M n . )

9 3 7

3 3 5

5 2 2

5 2 8

6 2 9

6 4 0

5 9 4

4 3 0

5 1 5

6 0 2

T h a i l a n d

f r o m

W o r l d

( U S $

M n . )

3 7 9 2 5

4 0 6 8 6

4 6 0 6 5

5 4 3 9 4

7 3 6 9 2

7 3 3 3 6

6 2 8 0 4

4 3 1 0 8

5 3 2 0 7 5 6 9 1 5


2 . 4 7

0 . 8 2

1 . 1 3

0 . 9 7

0 . 8 5

0 . 8 7

0 . 9 5

1 . 0 0

0 . 9 7

1 . 0 6

S o u r c e : I M F , D

i r e c t i o n o f T r a d e S t a t i s t i c s Y e a r b o o k , v a r i o u s i s s u e s .

1 0 5



T a b l e 5

I n d i a ’ s E

x p o r t s t o T h a i l a n d

( I n M i l l i o n U S D o l l a r s )

S l . N o .

C o m m o d i t y

1 9 9 9

2 0

0 0

2 0 0 1

2 0 0 2

( J a n -

M a y )

1 .

J e w e l l e r y i n c l u d i n g s i l v e r b a r s a n d g o l d

1 6 3 . 9

1 9 4 . 0

1 8 5 . 9

9 8 . 3

2 .

C h e m i c a l s

6 0 . 8

8 7 . 7

1 0 5 . 3

4 6 . 7

3 .

R e s u l t i n g f r o m e x t r a c t i o n f r o m v e g e t a b l e

o i l s

2 6 . 6

5 9 . 9

6 0 . 6

4 2 . 8

4 .

I r o n a n d S t e e l

1 2 . 4

2 7 . 5

5 9 . 3

1 7 . 4

5 .

F r e s h s h r i m p s a n d p r a w n s

2 1 . 3

2 8 . 7

2 9 . 7

7 . 4

6 .

M e d i c a l a n d P h a r m a c e u t i c a l

p r o d u c t s

2 1 . 8

2 4 . 9

2 7 . 8

1 2 . 2

7 .

M e t a l s w a s t e a n d s c r a p

9 . 6

1 0 . 1

2 2 . 9

1 5 . 9

8 .

L u b r i c a t i n g o i l f o r h y d r a u l i c

b r a k e

-

4 2 . 8

2 1 . 4

N A

9 .

F o r I n d u s t r i a l u s e m a c h i n e s

7 . 8

1 0 . 7

1 4 . 4

8 . 2

1 0

.

R a w h i d e a n d L e a t h e r s

1 . 8

4 . 0

1 3 . 3

7 . 4

1 1

.

E l e c t r i c a l m a c h i n e r y a n d p a r t s

7 . 1

1 0 . 5

1 2 . 2

3 . 2

1 2

.

T e x t i l e Y a r n & T h r e a d

1 2 . 1

1 8 . 3

1 1 . 5

3 . 1

1 3

.

V e g e t a b l e f a t s a n d o i l s

1 3 . 3

1 4 . 4

9 . 7

4 . 5

1 4

.

F a b r i c s

1 5 . 5

1 5 . 7

8 . 8

2 . 1

1 5

.

M e t a l m a n u f a c t u r e s

1 3 . 9

9 . 0

8 . 2

3 . 0

1 6

.

T e x t i l e f i b r e s

7 . 1

6 . 0

N A

2 . 3

1 7

.

F r e s h c u t t l e f i s h a n d s q u i d

7 . 6

N A

N A

1 . 7

1 8

.

P e s t i c i d e s

4 . 2

4 . 5

N A

3 . 3

1 9

.

P a p e r , p a p e r b o a r d a n d p r o d u

c t s

0 . 5

1 . 6

N A

0 . 4

2 0

.

C e r e a l a n d c e r e a l p r e p a r a t i o n

0 . 1

0 . 4

N A

1 . 1

O t h e r s

4 2 . 9

5 2 . 2

8 0 . 0

3 4 . 1

T o t a l

4 5 0 . 3

6 2 2 . 9

3 0 6 . 1

6 7 1 . 0

S o u

r c e : E m b a s s y o f I n d i a , B a n g k o k , T h a i l a n d .

1 1 3



T a b l e 6

V a l u e o f P r i n c i p a l E x p o r t s

f r o m I n d i a t o T h a i l a n d a n d R e l a t i v e

I m p o r t a n c e o f T h a i l a n d a s E x p o r t D e s t i n a t i o n

( I n M i l l i o n U S D o l l a r s )

S I T C C o d e

D e s c r i p t i o n

D e s t i n a t i o n

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

W O R L D ( a )

5 5 8 7 . 0 0

5 4 4 0 . 0 0

5 1 9 8 . 0 0

4 6 1 8 . 0 0

T H A I L A N D ( b )

7 0 . 0 0

7 5 . 0 0

5 6 . 0 0

5 3 . 0 0

0

F O O D A N D L I V E

A N I M A L S

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

1 . 2 5

1 . 3 8

1 . 0 8

1 . 1 6

W O R L D ( a )

2 2 6 . 0 0

2 9 8 . 0 0

1 9 4 . 0 0

2 4 6 . 0 0


0 . 0 0

0 . 0 0

1 . 0 0

0 . 0 0

1

B E V E R A G E S A N D

T O B A C C O

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

0 . 0 0

0 . 0 3

0 . 3 4

0 . 1 9

W O R L D ( a )

2 0 0 6 . 0 0

1 7 7 9 . 0 0

1 3 5 3 . 0 0

1 3 8 0 . 0 0


5 0 . 0 0

2 2 . 0 0

1 2 . 0 0

1 3 . 0 0

2

C R U D E

M A T E R I A L S , I N E D I B L

E

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

2 . 5 2

1 . 2 2

0 . 8 8

0 . 9 2

W O R L D ( a )

5 1 6 . 0 0

3 9 5 . 0 0

1 4 1 . 0 0

9 1 . 0 0


1 . 0 0

0 . 0 0

0 . 0 0

8 . 0 0

3

F U E L S , L U B R I C A N T S ,

E T C .

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

0 . 1 4

0 . 0 8

0 . 0 3

9 . 0 5

W O R L D ( a )

1 9 3 . 0 0

1 7 7 . 0 0

1 7 3 . 0 0

2 6 2 . 0 0


6 . 0 0

9 . 0 0

7 . 0 0

1 5 . 0 0

4

A N I M A L , V E G .

O I L S , F A T S , W A X

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

3 . 3 5

5 . 0 1

3 . 8 0

5 . 6 0

W O R L D ( a )

3 0 0 9 . 0 0

3 4 1 8 . 0 0

3 1 0 9 . 0 0

3 6 8 1 . 0 0


5 5 . 0 0

5 0 . 0 0

4 8 . 0 0

8 1 . 0 0

5

C H E M I C A L S , R E L T D . P

R O D . N E S

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

1 . 8 1

1 . 4 6

1 . 5 6

2 . 2 1

1 1 4



W O R L D ( a )

1 2 2 3 6 . 0 0

1 3 1 3 0 . 0 0

1 2 3 7 8 . 0 0

1 5 2 1 5 . 0 0


2 3 2 . 0 0

1 5 2 . 0 0

1 6 3 . 0 0

2 5 1 . 0 0

6

M A N U F A C T U R E D

G O O D S

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

1 . 8 9

1 . 1 6

1 . 3 1

1 . 6 5

W O R L D ( a )

2 7 3 6 . 0 0

2 7 8 3 . 0 0

2 3 3 8 . 0 0

2 5 4 5 . 0 0


2 8 . 0 0

2 7 . 0 0

2 3 . 0 0

2 0 . 0 0

7

M A C H I N E S , T R A N S P O

R T E Q U I P

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

1 . 0 3

0 . 9 6

0 . 9 7

0 . 8 0

W O R L D ( a )

6 3 3 7 . 0 0

6 6 3 6 . 0 0

7 4 5 6 . 0 0

7 8 3 4 . 0 0


4 . 0 0

6 . 0 0

1 0 . 0 0

7 . 0 0

8

M I S C

M A N U F A C T U R E D

A R T C L S

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

0 . 0 6

0 . 0 9

0 . 1 4

0 . 0 8

W O R L D ( a )

5 5 9 . 0 0

6 6 7 . 0 0

7 7 1 . 0 0

8 0 1 . 0 0


1 . 0 0

2 . 0 0

1 . 0 0

0 . 0 0

9

G O O D S N O T C L A S S D

B Y K I N D

S H A R

E O F ( b ) i n ( a )

( p e r c e n t )

0 . 1 2

0 . 2 4

0 . 1 0

0 . 0 6

S o u r c e : I T C , P e r s o n a l C o m p u t e r T r a d e A n a l y s i s S y s t e m ( P C - T A S ) , 1 9 9 6 - 2 0 0 0 , U

N C T A D / W T O .

1 1 5



T a b l e 7

W e i g h t e d A v e r a g e o

f B i l a t e r a l T a r i f f R a t e i n 1 9 9 9

( p e r c e n t )

S . N o .

S e c t o r

T h a i l a n d - I n d i a *

I n d i a - T h a i l a n d *

1

P a d d y

0 . 0 0

0 . 0 0

2

W

h e a t

0 . 0 0

0 . 0 0

3

C

e r i a l g r a i n n e c

0 . 0 0

0 . 0 0

4

1 0 . 0 0

1 7 . 7 8

5

V

e g , f r u i t , n u t

O

i l s e e d s

2 0 . 5 0

4 0 . 0 0

6

S u g a r c a n e , s u g a r b e e t

0 . 0 0

0 . 0 0

7

P l a n t - b a s e d f i b e r s

0 . 5 0

0 . 0 0

8

C

r o p s n e c

5 2 . 0 7

2 4 . 9 3

9

L i v e s t o c k s

0 . 0 0

1 7 . 4 8

1 0 A

n i m a l p r o d u c t s n e c

0 . 0 0

0 . 0 0

1 1 R

a w m i l k

0 . 0 0

0 . 0 0

1 2 W

o o l , s i l k - w o r m c o c o o n

0 . 0 0

0 . 0 0

1 3 F o r e s t r y

5 . 8 3

4 5 . 0 0

1 4 F i s h i n g

3 8 . 0 0

1 5 . 0 0

1 5 C

o a l

0 . 0 0

0 . 0 0

1 6 O

i l

1 3 . 7 5

0 . 0 0

1 7 G

a s

0 . 0 0

0 . 0 0

1 8 M

i n e r a l s n e c

1 2 . 7 8

0 . 0 0

1 9 M

e a t p r o d u c t s

0 . 0 0

0 . 0 0

2 0 P o u l t r y , s e a f o o d s

3 1 . 2 8

0 . 0 0

2 1 V

e g o i l a n d f a t s

6 . 0 2

0 . 0 0

2 2 D

a i r y p r o d u c t s

1 7 . 8 0

0 . 0 0

2 3 P r o c e s s e d r i c e

0 . 0 0

0 . 0 0

2 4 S u g a r

0 . 0 0

4 0 . 9 2

2 5 F o o d p r o d u c t s n e c

1 1 . 5 0

4 . 3 2

2 6 B

e v e r a g e s , t o b a c c o p r o d s

1 9 . 7 5

0 . 0 0

2 7 T e x t i l e s

1 8 . 9 4

3 8 . 6 2

2 8 W

e a r i n g a p p a r e l

2 7 . 6 5

3 0 . 0 0

2 9 L e a t h e r p r o d u c t s

5 . 9 7

2 8 . 2 1

3 0 W

o o d p r o d u c t s

9 . 7 6

3 5 . 0 0

3 1 P a p e r p r o d s , p u b l i s h i n g

1 3 . 7 7

2 . 5 7

3 2 P e t r o l i u m , c o a l p r o d u c t s

1 3 . 7 5

0 . 0 0

3 3 C

h e m , r u b b e r , p l a s t i c p r o d s

9 . 6 7

2 9 . 8 9

1 1 6



3 4 M

i n e r a l p r o d u c t s n e c

1 9 . 4 1

4 2 . 0 3

3 5 F e r r o u s m e t a l s

7 . 0 9

3 2 . 8 0

3 6 M

e t a l s n e c

8 . 7 0

2 8 . 3 3

3 7 M

e t a l p r o d u c t s

1 0 . 5 2

2 7 . 9 6

3 8 M

o t o r v e h i c l e s a n d p a r t s

1 7 . 4 9

3 4 . 9 4

3 9 T r a n s p o r t e q u i p m e n t s n e c

0 . 0 0

3 . 0 0

4 0 E l e c t r o n i c e q u i p m e n t s

1 5 . 4 2

3 3 . 9 1

4 1 M

a c h i n e r y , e q u i p m e n t s n e c

5 . 4 3

2 6 . 7 5

4 2 M

a n u f a c t u r e s n e c

0 . 9 8

7 . 6 3

4 3 E l e c t r i c i t y

0 . 0 0

0 . 0 0

4 4 G

a s m a n u f a c t u r e , d i s t r i b u t i o n

0 . 0 0

1 2 . 0 0

4 5 W

a t e r

0 . 0 0

0 . 0 0

4 6 C

o n s t r u c t i o n

0 . 0 0

0 . 0 0

4 7 T r a d e , t r a n s p o r t

0 . 0 0

0 . 0 0

4 8 F i n a n c e , b u s i n e s s , r e c r e a t i o n

0 . 0 0

0 . 0 0

4 9 P u b A d , d e f e n c e , e d u c , h e a l t h

0 . 0 0

0 . 0 0

5 0 D

w e l l i n g s

0 . 0 0

0 . 0 0

A

v e r a g e T a r i f f R a t e

9 . 4 3

2 4 . 6 3

n o t e :

0 . 0 0 i m p l i e s z e r o i m p o r t v a l u e

* X - Y : i m p l i e s X ' s t a r i f f r a t e f o

r i m p o r t f r o m Y

1 1 7



T a b l e 8

S h a r e o f T h a i l a n d i n t o t a

l I n d i a n J o i n t V e n t u r e s i n A S E A N

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9

8

1 9 9 9

N u m b e r

E q u i t y

( p e r c e n t )

N

u m b e r

E q u i t y

( p e r c e n t )

N u m b e r

E q u i t y

( p e r c e n t )

N u m b e r

E q u i t y

( p e r c e n t )

N u m b e r

E q u i t y

( p e r c e n t )

I n d o n e s i a

1 8

2 6 . 7 9

1

3 . 1 3

2

3 . 1 1

- -

- -

2

5 . 0 4

M a l a y s i a

3 9

3 4 . 4 7

4

5 . 5 7

9

3 . 5 5

2

0 . 5 3

5

1 3 . 3 3

P h i l i p p i n e s

1

0 . 5 3

- -

- -

- -

- -

- -

- -

- -

- -

S i n g a p o r e

3 7

7 . 5 7

3

2 6 . 9 7

7

6 4 . 9 5

6

4 7 . 9 4

2

4 . 1 3

V i e t n a m

1

2 . 2 0

- -

- -

- -

- -

2

5 . 4 9

- -

- -

T h a i l a n

d

2 4

1 6 . 4 5

3

3 7 . 3 1

2

6 . 5 7

- -

- -

5

7 4 . 9 5

T o t a l

1 4 1

1 0 0 . 0 0

1 6

1 0 0 . 0 0

2 3

1 0 0 . 0 0

1 5

1 0 0 . 0 0

1 6

1 0 0 . 0 0

S o u r c e :

G o v t . o f I n d i a , I n d i a n J o i n t V e n t u r e s

a n d W h o l l y O w n e d S u b s i d i a r i e s A b r

o a d A p p r o v e d u p t o D e c e m b e r 1 9 9 5 , 1 9 9 6 , 1 9 9 7 , 1 9 9 8 a n d 1 9 9 9 .

T a b l e 9

S h a r e o f I n d i a n W h o l l y O w n e d S u b s i d i a

r i e s i n T o t a l A S E A N W h o l l y O w n e d S u b s i d i a r i e s

S o u r c e : G o v t . o f I n d i a , I n d i a n J o i n t V e n t u r e s a n d W h o l l y O w n e d S u b s i d i a r i e s A b r o a d A p p r o v e d u p t o D e c e m b e r 1 9 9 5 ,

1 9 9 6 , 1 9 9 7 , 1 9 9 8 a n d 1 9 9 9 .

C o u n t r y

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

N u m b e r

E q u i t y

( p e r c e n t )

N u m b e r

E q u i t y

( p e r c e n t )

N u m b

e r

E q u i t y

( p e r c e n t )

N u m b e r

E q u i t y

( p e r c e n t )

N u m b e r

E q u i t y

( p e r c e n t )

I n d o n e s

i a

2

0 . 0 0

- -

- -

- -

- -

- -

- -

2

1 0 . 6 5

M a l a y s i a

6

1 . 9 7

2

2 1 . 3 1

1

0 . 6 4

2

0 . 2 7

1

0 . 5 5

P h i l i p p i n e s

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

S i n g a p o

r e

5 6

6 0 . 5 7

1 9

7 1 . 0 2

1 5

5 4 . 3 7

1

0

9 . 7 9

1 1

4 9 . 5 3

V i e t n a m

- -

- -

- -

- -

- -

- -

1

5 . 7 4

- -

- -

T h a i l a n d

2

0 . 1 2

- -

- -

- -

- -

- -

- -

- -

- -

T o t a l

9 1

1 0 0 . 0 0

2 4

1 0 0 . 0 0

2 0

1 0 0 . 0 0

1

9

1 0 0 . 0 0

2 0

1 0 0 . 0 0

1 1 8



Table 10

Indian Investment Projects Submitted to BOI, Thailand

Million Baht

1998 1999 2000 2001 2001

(Jan-

June)

2002 (Jan-

June)

Net Application No. of projectsTotal InvestmentTotal Registered

Capital-Indian-Thai

Application Approved No. of projectTotal InvestmentTotal Registered

Capital-Indian-Thai

87,245.0

788.5263.1

19.9

1010,157.5

1,355.0489.3107.1

7334.7

118.589.011.3

61,373.7

94.068.3

7.5

111,786.3

276.5106.1

41.4

1110,166.3

3,195.61,250.8

742.5

81,679.5

558.0540.9

12.9

121,954.4

431.7379.1

33.1

5352.0

298.0260.836.8

5107.6

19.717.4

2.3

211.1

8.06.21.8

315.3

8.55.42.4

Source: Thai Board of Investment, Thailand.

Note: 1) Indian Investment projects refer to projects with Indian capital of at least 10percent. InternationalAffairs Division, BOI

114



T a b l e 1 1

I n d i a n I n v e s t m e n t P r o j e c t s A p p l y i n g f o r P r o m o t i o n C l a s s i f i e d b y S e c t o r

M i l l i o n B a h t

Y e a r

1 9 9 8

1 9 9 9

2 0 0 0

S e c t o r

N o . o f

P r o j e c t s

S h a r e i n

T o t a l

( p e r c e n t )

I n v e s t m e n t

S h a r e i n T o t a l

( p e r c e n t )

N

o . o f

P

r o j e c t s


( p e r c e n t )

I n v e s t m e n t

S h a r e i n

T o t a l

( p e r c e n t )

N o . o f

P r o j e c t s

S h a r e i n

T o t a l

( p e r c e n

t )

I n v e s t m e n t

S h a r e

i n T o t a l

( p e r c e n t

)

A g r i c u l t u r a l P r o d u c t s

1

1 2 . 5 p e r c e n t

1 0 9 . 0

1 . 5 p e r c e n t

1

1 4 . 3 p e r c e n t

2 5 0 . 0

7 4 . 7 p e r c e n t

1

9 . 1 p e r c e n t

9 9 . 8

5 . 6 p e r c

e n t

M i n e r a l s a n d C e r a m i c s

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

1

1 4 . 3 p e r c e n t

5 . 0

1 . 5 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

L i g h t – I n d u s t r i e s / T

e x t i l e s

4

5 0 . 0 p e r c e n t

3 , 5 3 4 . 0

4 8 . 8 p e r c e n t

5

7 1 . 4 p e r c e n t

7 9 . 7

2 3 . 8 p e r c e n t

5

4 5 . 5 p e r c e n t

1 , 3 7 7 . 8

7 7 . 1 p e r

c e n t

M e t a l P r o d u c t s a n d

M a c h i n e r y

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

E l e c t r i c a n d E l e c t r o

n i c P r o d u c t s

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

3

2 7 . 3 p e r c e n t

1 3 . 0

0 . 7 p e r c

e n t

C h e m i c a l s a n d P a p e r

2

2 5 . 0 p e r c e n t

3 , 6 0 0 . 0

4 9 . 7 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

2

1 8 . 2 p e r c e n t

2 9 5 . 6

1 6 . 5 p e r

c e n t

S e r v i c e s

1

1 2 . 5 p e r c e n t

2 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

T o t a l

8

1 0 0 . 0 p e

r c e n t

7 , 2 4 5 . 0

1 0 0 . 0 p e r c e n t

7

1 0 0 . 0 p e r c e n t

3 3 4 . 7

1 0 0 . 0 p e r

c e n t

1 1

1 0 0 . 0 p

e r c e n t

1 , 7 8 6 . 2

1 0 0 . 0 p e

r c e n t

Y e a r

2 0 0 1

2 0 0 1 ( J a n - J u n e )

2 0 0 2 ( J a n - J u n e )

S e c t o r

N o . o f

P r o j e c t s

S h a r e i n

T o t a l

( p e r c e n t )

I n v e s t m e n t

S h a r e i n

T o t a l

( p e r c e n t )

N

o . o f

P

r o j e c t s


( p e r c e n t )

I n v e s t m e n t

S h a r e i n

T o t a l

( p e r c e n t )

N o . o f

P r o j e c t s

S h a r e i n

T o t a l

( p e r c e n

t )

I n v e s t m e n t

S h a r e

i n T o t a l

( p e r c e n t

)

A g r i c u l t u r a l P r o d u c t s

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

M i n e r a l s a n d C e r a m i c s

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

L i g h t – I n d u s t r i e s / T

e x t i l e s

4

5 0 . 0 p e r c e n t

8 1 . 5

4 . 9 p e r c e n t

2

4 0 . 0 p e r c e n t

6 4 . 0

1 8 . 2 p e r c e n t

2

4 0 . 0 p e r c e n t

6 4 . 0

1 8 . 2 p e r

c e n t

M e t a l P r o d u c t s a n d

M a c h i n e r y

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

E l e c t r i c a n d E l e c t r o

n i c P r o d u c t s

2

2 5 . 0 p e r c e n t

2 0 8 . 0

1 2 . 4 p e r c e n t

3

6 0 . 0 p e r c e n t

2 8 8 . 0

8 1 . 8 p e r c

e n t

3

6 0 . 0 p e r c e n t

2 8 8 . 0

8 1 . 8 p e r

c e n t

C h e m i c a l s a n d P a p e r

2

2 5 . 0 p e r c e n t

1 , 3 9 0 . 0

8 2 . 8 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

e n t

S e r v i c e s

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e n t

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c e

0

0 . 0 p e r c e n t

0 . 0

0 . 0 p e r c

1 1 5



n t

e n t

T o t a l

8

1 0 0 . 0 p e

r c e n t

1 , 6 7 9 . 5

1 0 0 . 0 p e r c e n t

5

1 0 0 . 0 p e r c e n t

3 5 2 . 0

1 0 0 . 0 p e r

c e n t

1 0 0 . 0 p e r

c e n t

1 0 0 . 0 p

e r c e n t

3 5 2 . 0

1 0 0 . 0 p e

r c e n t

S o u r c e :

T h a i B o a r d o f I n v e s t m e n t , T h a i l a n d .

N o t e : 1 )

I n d i a i n v e s t m e n t p r o j e c t s r e f e r t o p r o j e c t s w i t h I n d i a n c a p i t a l o f a t l e a s t 1 0 p e r c e n t .

2 )

N e w p o l i c y l a u n c h e d i n A u g u s t 2 0 0 0 e f f e c t s p r e v i o u s f i g u r e s r e l a t e d t o s e c t o r .

1 1 6



T a b l e 1 2

S t a t e m e n t o n C

o u n t r y - W i s e / Y e a r - W i s e B r e a k - U p o f F o r e i g n D i r e c t I n v e s t m e n t A p p r o v e d I n d i a

D u r i n g 1 9 9 1 T o

2 0 0 1 ( U p t o 3 1 / 1 2 / 2 0 0 1 )

( R s . M i l l i o n )

S l . N o .

C o u n t r y

1 9 9 1 - 9 5

1 9 9 6 - 2

0 0

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1 *

T o t a l

( 1 9 9 1 - 2 0 0 1 )

1 T

h a i l a n d

2 3 4 9 0 . 1 0

1 1 0 1 . 8 6

7 6 5 . 2 2

2 5 9 . 4 4

3 . 4 5

7 0 . 0 0

3 . 7 5

1 2 . 0 8

2 4 6 0 4 . 0 5

S

h a r e

(

p e r c e n t )

0 . 0 4

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 1

2 M

a l a y s i a

1 4 9 4 4 . 0 0

4 0 8 2 1 . 0 3

4 2 3 . 3 1 2 1 0 4 6 . 4 1 1 8 0 3 1 . 0 2

1 1 6 1 . 4 6

1 5 8 . 8 3

1 0 5 7 . 9 6

5 6 8 2 2 . 9 9

S

h a r e

(

p e r c e n t )

0 . 0 3

0 . 0 2

0 . 0 0

0 . 0 4

0 . 0 6

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 2

3 I

n d o n e s i a

3 1 5 5 . 8 0

7 7 5 . 0 2

3 7 5 . 0 0

1 0 5 . 0 0

2 9 4 . 0 0

- -

1 . 0 2

0 . 7 0

3 9 3 1 . 5 2

S

h a r e

(

p e r c e n t )

0 . 0 1

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

4 S

i n g a p o r e

1 3 8 4 8 . 6 0

3 0 9 8 1 . 5 0

3 1 9 7 . 7 2

8 6 1 9 . 0 1

7 6 7 3 . 3 9

8 2 5 8 . 9 4

3 2 3 2 . 4 4

3 7 9 8 . 7 0

4 8 6 2 8 . 8 0

S

h a r e

(

p e r c e n t )

0 . 0 2

0 . 0 2

0 . 0 1

0 . 0 2

0 . 0 2

0 . 0 3

0 . 0 1

0 . 0 1

0 . 0 2

5 P

h i l i p p i n e s

9 5 2 . 9 2

2 8 9 2 . 4 2

2 8 3 6 . 8 4

4 9 . 0 0

- -

- -

6 . 5 8

1 9 . 2 5

3 8 6 4 . 5 9

S

h a r e

(

p e r c e n t )

0 . 0 0

0 . 0 0

0 . 0 1

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

T

o t a l

5 9 5 3 9 8 . 9 0 1 8 7 2 5 7 6 . 3 8 3 6 1 4 6 8 . 0 5 5 4 8 9 1 3 . 4 7 3 0 8 1 3 5 . 0 3 2 8 3 6 6 5 . 3 4 3 7 0 3 9 4 . 4 9

2 6 8 7 4 6 . 6 9 2 7 3 6 7 2 1 . 9 7

S o u r c e : G o v t . o f I n d i a , S I A N e w s l e t t e r , J a n u a r y 2 0 0 2 .

* F i g u r e s f o r 2 0 0 1 u p d a t e d u p t o 3 1 / 1 2

/ 2 0 0 1

1 1 7



T a b

l e 1 3

T h a i l a n d ’ s I n v e s t m e n t i n I n d i a

V a r i a b l e

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2 *

N o . o f P r o j e c t s

1

7

8

2 0

1 5

2 3

9

6

8

7

7

2

T o t a l I n

v e s t m e n t ( R s .

m n . )

n . a .

2 5

3 6 8 4

1 0 0

1 9 6 8 1

7 7 0

2 5 9

4

7 0

4

1 2

n . a .

F i n a n c i a l ( F ) /

T e c h n i c

a l ( T )

1 ( F )

4 ( F )

3 ( T )

4 ( F )

4 ( T )

1 0 ( F )

1 0 ( T )

1 3 ( F )

2 ( T )

1 9 ( F )

4 ( T )

8 ( F )

1 ( T )

4 ( F )

2 ( T )

6 ( F )

2 ( T )

2 ( F )

5 ( T )

4 ( F )

3 ( T )

2 ( T )

T h a i C a

p i t a l ( p e r c e n t )

0 . 0 0

2 0 . 1 4

2 2 . 5 0

1 6 . 8 5

4 4 . 6 5

4 0 . 1 9

6 0 . 6 7

3 5 . 6 7

1 8 . 7 5

1 0 . 7 1

2 3 . 5 7

n . a .

I n d i a n C a p i t a l

( p e r c e n t )

n . a .

7 9 . 8 6

7 7 . 5 0

8 3 . 1 5

5 5 . 3 5

5 9 . 8 1

3 9 . 3 3

6 4 . 3 3

8 1 . 2 5

8 9 . 2 9

7 6 . 4 3

n . a .

S o u r c e : C a l c u l a t i o n s b a s e d o n D a t a

r e c e i v e d f r o m I n d i a n I n v e s t m e n t C e n

t r e , N e w D e l h i .

N o t e s : ( i ) * D a t a a v a i l a b l e t i l l F e b r u

a r y 2 0 0 2 .

1 1 8



T a b l e 1 4

T h a i l a n d ’ s I n v e s t m e n t i n I n d i a

A g r i c u l t u r a l

P r o d u c t s

M i n e r a l a n d

C e r a m i c s

L

i g h t

I n d u s t r i e s /

T e

x t i l e s

M e t a l P r o d u c t s

a n d M a c h i n e r y

E l e c t r i c a n d

E l e c t r o n i c

P r o d u c t s

C h e m i c a l s

O t h e r s

V a l u e

N o . o f

P r o j .

V a l u e

N o . o f

P r o j .

V a l u e

N o . o f

P r o j .

V a l u e

N o . o f

P r o j .

V a l u e

N o . o f

P r o j .

V a l u e

N o . o f

P r o j .

V a l u e

N o . o f

P r o j .

1 9 9 1

0 . 0 0

1

1 9 9 2

3 . 5 9

4

2 1 . 6 0

1

0 . 0 0

2

1 9 9 3

3 6 6 4 . 2

5

0 . 0 0

2

2 0 . 0 0

1

1 9 9 4

8

5 3 . 8 0

2 6 . 9 3

2

0 . 0 0

1

1 0 . 9 9

1

8 . 1 0

8

1 9 9 5

2 0

1

7 6 1 . 7

1

4 1 7 5

4

1 4 7 2 4

9

1 9 9 6

3 6 . 7 7

6

1 2 9 . 1

1

2 4 . 5 0

1

4 8 9 . 8

6

9 0 . 0 8

7

1 9 9 7

9

1

0 . 0 0

1

2 5 0 . 4

7

1 9 9 8

0 . 4 5

1

0 . 0 0

1

3 . 0 0

4

1 9 9 9

6 8

2

0 . 0 0

1

0 . 0 0

1

2 0 0 0

3 . 7 5

7

2 0 0 1

0 . 0 0

1

0 . 0 0

1

1 1 . 6 5

5

2 0 0 2 *

0 . 0 0

2

S o u r c e : C

a l c u l a t i o n s b a s e d o n D a t a r e c e i v e d f r o m I n d i a

n I n v e s t m e n t C e n t r e , N e w D e l h i .

N o t e s : ( i )

D a t a a v a i l a b l e t i l l F e b r u a r y 2 0 0 2 .

1 1 9



1 2 0

J

a p a n

K o r e a

T a b l e 1 5

M a c r o e c o n o m i c I m p a c t s o f T

a r i f f R e d u c t i o n

T h a i l a n d

I n d

i a

M a l a y s i a

S i n g a p o r e

I n d o n e s i a

P h i l i p p i n e s C h i n a

O t h e r s

R e n t a l p

r i c e o f c a p i t a l

( p e r c e n t )

0 . 0 3

- 0

3

0 . 0 1

0 0

0 0

0 1

0 0

0 0

0 0

0 0

. 0

0 .

0 .

0 .

0 .

0 .

0 .

0 .

R e n t a l p

r i c e o f

l a n d ( p e r c e n t )

0 . 5 2

0 . 1

5

1

6

1

0 0

2

0 0

2

1

- 0 . 0

- 0 . 4

- 0 . 0

0 .

- 0 . 0

0 .

- 0 . 0

- 0 . 0

L a b o u r w a g e

r a t e ( p e r c e n t )

0 . 3 9

0 . 0

7

0 0

1

1

0 0

1

0 0

1

0 0

0 .

- 0 . 0

- 0 . 0

0 .

- 0 . 0

0 .

- 0 . 0

0 .

A v e r a g e p r i c e o f

p r i m a r y

f a c t o r ( p e r c e n t )

0 . 1 6

0 . 0

5

0 0

1

0 0

0 0

0 0

0 0

1

0 0

0 .

- 0 . 0

0 .

0 .

0 .

0 .

- 0 . 0

0 .

P r i c e o f

G D P ( m a r k e t

p r i c e ) ( p e r c e n t )

0 . 0 9

- 0

2

0 . 0 0

1

0 0

0 0

0 0

0 0

1

0 0

. 0

- 0 . 0

0 .

0 .

0 .

0 .

- 0 . 0

0 .

I m p o r t P r i c e ( p e r c e n t )

0 . 0 0

0 . 0

0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

E x p o r t P r i c e ( p e r c e n t )

0 . 1 2

0 . 0

0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

T e r m s o

f t r a d e ( p e r c e n t )

0 . 1 2

0 . 0

0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

0 . 0 0

A g g r e g a t e c a p i t a l s t o c k

( p e r c e n t )

0 . 4 7

0 . 1

6

1

2

2

1

1

1

1

- 0 . 0

- 0 . 0

- 0 . 0

- 0 . 0

- 0 . 0 1

- 0 . 0

- 0 . 0

- 0 . 0

R e a l G D

P ( f a c t o r c o s t )

( p e r c e n t )

0 . 3 3

0 . 0

3

1

1

1

0 0

1

0 0

1

0 0

- 0 . 0

- 0 . 0

- 0 . 0

0 .

- 0 . 0

0 .

- 0 . 0

0 .

R e a l G D

P ( m a r k e t

p r i c e s ) ( p e r c e n t )

0 . 3 4

0 . 0

4

1

1

1

0 0

1

0 0

1

0 0

- 0 . 0

- 0 . 0

- 0 . 0

0 .

- 0 . 0

0 .

- 0 . 0

0 .

R e a l p r i v a t e

c o n s u m p t i o n ( p e r c e n t )

0 . 4 1

0 . 0

3

1

2

1

0 0

1

0 0

1

0 0

- 0 . 0

- 0 . 0

- 0 . 0

0 .

- 0 . 0

0 .

- 0 . 0

0 .

R e a l g o v e r n m e n t

c o n s u m p t i o n ( p e r c e n t )

0 . 2 2

0 . 0

0

0 0

1

1

0 0

1

0 0

0 0

0 0

0 .

- 0 . 0

- 0 . 0

0 .

- 0 . 0

0 .

0 .

0 .

R e a l i n v

e s t m e n t

( p e r c e n t )

0 . 4 7

0 . 1

6

1

2

2

1

1

1

1

- 0 . 0

- 0 . 0

- 0 . 0

- 0 . 0

- 0 . 0 1

- 0 . 0

- 0 . 0

- 0 . 0

R e a l S a v i n g ( p e r c e n t )

0 . 3 9

0 . 0

4

- 0 . 0 1

- 0 . 0 1

- 0 . 0 1

0 . 0 0

- 0 . 0 1

0 . 0 0

- 0 . 0 1

0 . 0 0

E x p o r t v o l u m e s

( p e r c e n t )

0 . 5 2

1 . 0

2

1

2

1

0 0

1

0 0

0 0

0 0

- 0 . 0

- 0 . 0

- 0 . 0

0 .

- 0 . 0

0 .

0 .

0 .

I m p o r t v o l u m e s

( p e r c e n t )

0 . 6 6

1 . 1

2

1

2

2

0 0

1

1

1

- 0 . 0

- 0 . 0

- 0 . 0

0 .

- 0 . 0 1

- 0 . 0

- 0 . 0

- 0 . 0

T r a d e B

a l a n c e ( M i l l i o n

$ )

- 9 4 . 0 2

- 5

4 7

5 1

6 0

5 7

7 1

5

9 2

9

1 . 5 1

0 .

0 .

2 .

0 .

3 .

3 6 . 8

7 .

9 2 . 8

W e l f a r e

( M i l l i o n $ )

5 4 5 . 2 1

7 4 . 8 9

- 5 . 3 4

- 8 . 4 3

-

- 1 3 . 9 2

- 2 . 2 2

- 4 0 . 8 5

-

1

3 5 . 4 6

- 2 9 . 3 6

5 2 0 . 3 6



T a b l e 1 6

I m p a c t s

o f T a r i f f R e d u c t i o n o n t h e V a l u e o f I n t e r n a t i o n a l T r a d e F l o w s

( p e r c e n t )

T h a i l a n d

M a l a y s i a S i n g a p o r e I n d o n e s i a P h i l i p p i n e s

I n d i a

C h i n a

J a p a n

K o r e a

O t h e r s

T o t a l

T h a i l a n d

0 . 0 0

- 0 . 4 0

- 0 . 2 9

- 0 . 4 3

- 0 . 3 8

1 1 3 . 8 7

- 0 . 5 3

- 0 . 4 1

- 0 . 5 8

- 0 . 4 3

0 . 4 7

M a l a y s i a

0 . 3 3

0 . 0 0

- 0 . 0 1

- 0 . 0 2

- 0 . 0 1

- 0 . 6 8

0 . 0 0

- 0 . 0 1

0 . 0 0

- 0 . 0 1

- 0 . 0 1

S i n g a p o r e

0 . 3 0

0 . 0 0

0 . 0 0

- 0 . 0 2

0 . 0 0

- 1 . 3 1

0 . 0 0

0 . 0 0

- 0 . 0 1

- 0 . 0 1

- 0 . 0 2

I n d o n e s i

a

- 0 . 1 1

0 . 0 3

0 . 0 2

0 . 0 0

0 . 0 0

- 1 . 9 9

0 . 0 1

0 . 0 2

0 . 0 1

0 . 0 0

- 0 . 0 2

P h i l i p p i n

e s

0 . 3 7

0 . 0 1

- 0 . 0 1

- 0 . 0 2

0 . 0 0

- 1 . 8 6

- 0 . 0 1

0 . 0 0

- 0 . 0 2

- 0 . 0 1

0 . 0 0

I n d i a

4 2 . 7 8

0 . 0 2

0 . 0 6

0 . 0 6

0 . 0 2

0 . 0 0

0 . 0 2

- 0 . 1 5

0 . 0 0

0 . 0 8

0 . 7 9

C h i n a

- 0 . 0 3

0 . 0 1

0 . 0 1

0 . 0 0

0 . 0 1

- 2 . 1 1

0 . 0 0

0 . 0 1

0 . 0 0

0 . 0 0

- 0 . 0 1

J a p a n

0 . 3 5

0 . 0 0

- 0 . 0 1

- 0 . 0 1

0 . 0 0

- 0 . 9 4

- 0 . 0 1

0 . 0 0

- 0 . 0 1

- 0 . 0 1

0 . 0 0

K o r e a

0 . 1 9

0 . 0 1

0 . 0 1

- 0 . 0 1

0 . 0 1

- 1 . 7 3

0 . 0 0

0 . 0 1

0 . 0 0

0 . 0 1

- 0 . 0 1

O t h e r s

0 . 0 9

0 . 0 0

0 . 0 0

- 0 . 0 1

0 . 0 0

- 0 . 7 4

0 . 0 0

0 . 0 1

- 0 . 0 1

0 . 0 0

- 0 . 0 1

T o t a l

0 . 5 3

- 0 . 0 1

- 0 . 0 2

- 0 . 0 2

0 . 0 0

0 . 3 8

- 0 . 0 1

- 0 . 0 1

- 0 . 0 1

- 0 . 0 1

0 . 0 0

1 2 1









P o

r t l a n d c e m e n t , e t c . , P r i n t i n g i n k ,

I n

s u l t d w i r e , e t c . c o n d c t r , P a r t s , t e l e c o m m

u n . e q u i p t ,

A c r y l i c p o l y m e r s , S t a r c h e s , i n u l i n , g l u t e n ,

M

i l k c o n c e n t d . , s w e e t e n e d , C o p p e r

p l a t e , e t c . 1 5 m m + t h , S p i c e s , e x . p e p p e r , p i m e n t o ,

B o v i n e m e a t , f r o z e n , P o l y a m i d e s ,

O t h . n o n - f e r r . o r e , c o n c n t r , A r t c l s . c e r a m i c m a t r l , n e s ,

E l e c t r i c a l c a p a c i t o r s , O t h e r s t y r e n e p o l y

m e r s ,

P l

s t c s h e e t e t c . s e l f - a d h , E l e c . c o n t r o l p a n e l s e t c . ,

O t h . f o o t w e a r , l t h r . u p p e r s , C o t t o n l i n t e r s ,

R i c e , m i l l e d , s e m i - m i l l e d ,

S h i p s , b o a t s , o t h r . v e s s e l s , T r u n k s , s u i t - c a s e s , e t c . ,

P o r t l a n d c e m e n t , e t c . , V e g . p r o d u c t s , r o o t s , t u b r s ,

S i l v e r , M i l k e x . c o n c e n t d . s w e e t n d , B i r d s ' e g g s , i n s h e l l ,

F i s h , f r o z e n e x . f i l l e t s , C r u s t a c e a n s , f r o z e n ,

M o l l u s c s , B u c k w

h e a t e t c . u n m i l l e d , C e r e a l

g r o a t , m e a l , p e l l t s , M i x e s , d o u g h s f o r 0 4 8 . 4 ,

V e g e t a b l e s f r o z e

n , O r a n g e s , e t c . , A p p l e s , f r e s h , G r a p e s , f r e s h o r

d r i e d , N a t u r a l h o n e y , C o f f e e , n o t r o a s t e d , C o c o a b e a n s ,

C o c o a p o w d e r , s w e e t e n e d , O t h . c o c o a p r e p . l e s s 2 k g . ,

B r a n , s h a r p s , o t h . r e s i d u e s , V e g e t a b l e r e s i d u e s , w a s t e ,

Y e a s t s , F e r m e n t e

d b e v e r a g e s , n e s ,

T o b a c c o r e f u s e , O

t h . m a n u f a c t u r e d t o b a c c o , W h o l e b o v

i n . h i d e < 8 k g

d r y , S h e e p s k i n , e x c p t . f u r s k i n , G r o u n d n u t s ( p e a n u t s ) , S e

s a m e

( s e s a m u m ) s e e d s

, O i l s e e d s , e t c . n e s ,

R e c l m d . u n h d . r u b b e r ; w a s t e , F u e l w o o d , w o o d c h a r c o a l ,

W o o d , c o n i f , w o r k e d , s h a p e d , W o o d , n o n - c o n i f . w r k d , s h p d ,

R a w s i l k ( n o t t h r

o w n ) , C o t t o n , n o t c a r d e d , c o m b e d , C o t t o n , c a r d e d o r

c o m b e d , F l a x , w a

s t e f l a x , W o o l , g r e a s y , O t h e r w o o l ,

u n p r o c e s s e d , N a t u r a l c a l c . p h o s p h a t e s , S a n d s , n a t r l . n o t

m t l . b r n g , I n d u s t r i a l d i a m o n d s , N a t u r a l a b r a s i v e s , n e s ,

S o d i u m c h l o r i d e , e t c . , W a s t e , s c r a p o f c a s t i r o n ,

A l u m i n a ( a l u m i n i u m o x i d e ) , O t h . n o n - f e r r . o r e , c o n c n t r ,

P r e c . m e t a l w a s t e

, s c r a p , V e g . m a t e r i a l , f o r p l a i t n g , P r o p a

n e ,

l i q u e f i e d , A n i m a l o i l , f a t , g r e a s . n e s , C o t t o n s e e d o i l , f r a c t i o n ,

S u n f l o w e r s e e d o i l , e t c . , S e s a m e o i l , f r a c t i o n s ,

C o c o n u t o i l , f r a c

t i o n s , C a s t o r o i l , f r a c t i o n s , W a x e s , a n i m a l , v e g .

o r i g i n , H a l o g e n . d

e r v . h y d r o c a r b o n , S u l p h . e t c . d e r v . h y d r o c a r b ,

C y c l i c a l c o h o l s , d e r i v a t s , O t h r . o r g a n o - i n o r g a n . c o m p ,

A l d e h y d e , e t c . f n c

t . c m p n d s , E s t r s , i n o r g a n i c a c i d , e t c ,

O t h e r c h e m i c a l e

l e m e n t s , F l u o r i d e s e t c . ,

C h l o r i d e , b r o m i d e , i o d i d e s , H y p o c h l o r i t e s , e t c . , N i t r i t e s ; n i t r a t e s ,

M e t a l l i c a c i d s a l t s , e t c , D y e s , t a n n i n g e x t r a c t e t c ,

V e g . a l k a l o i d s , e x

c . g r p 5 4 2 , H o r m o n e s , e t c . e x c p . g r p 5 4 2 ,

P o t a s s i c c h e m . f e

r t i l i z e r , W a s t e , e t h y l e n e p o l y m e r s ,

T u b e , n o t r e i n f . n o f t t n g s , M o n o f i l a m e n t , o t h . p l a s t i c ,

D e t o n a t o r s , f u s e s

e t c . , F i r e w o r k s , f l a r e s , e t c . ,

W o o d - , r e s i n - b a s e c h e m . p r , L e a t h e r b e l t i n g e t c . , S a d d l e

r y a n d

h a r n e s s , O t h . f o r m

s u n v u l c d . r u b b e r , P a c k i n g s , p a l l e t s e t c . ,

W o o d , d o m e s t . u s

e e x . f u r n t , C o n v r t d . p a p e r , p p r b r d , n e s ,

1 2 5



S t a t i o n e r y , e t c . , F a b r i c , < 8 5 p e r c e n t a r t . s t p l . f i b r , P i l e , c h n l

l e . f a b r c , m -

m a d e , F a b r i c , w o o l , f n e . h a i r , n e s , F a b r i c , w v n . j u t e , o t h . t x t l ,

F a b r i c , w o v e n g l a s s f i b r e , G i m p e d y a r n , e t c . ,

T a r p a u l i n s , s a i l s , a w n i n g s , B l a n k e t s , t r a v e l l i n g r u g s ,

C a s t , r o l l e d g l a s s , s h e e t s , O r n a m e n t a l c e r a m i c a r t c l ,

P i g i r o n , e t c . p r i m

r y . f o r m , F e r r o - m a n g a n e s e , O t h e r f e r r o

- a l l o y s ,

I n g o t s o f i r o n o r

s t e e l , S e m i - f i n i s h . i r o n , s t e e l ,

S e m i - f i n . a l l o y s t l . 2 5 p e r c e n t + c , F l a t - r o l l e d . h i - s p e e d s t l , F l a t , h o t -

r o l l d . a l l o y s t l , F l t

, c o l d - r o l l d . a l l o y s t l , N i c k e l , n c k l . a l l o y , u n w r g t ,

N i c k e l , n i c k e l a l l o y , w r k d , L e a d , l e a d a l l o y s , w o r k e d ,

C o b a l t , c a d m i u m , e t c . u n w r t , N a i l s , t a c k s , e t c . c o p p e r ,

H . h o l d a p p l i a n c s

, e t c . n e s , C h a i n , i r o n , s t e e l , A r t i c l e s

c o b a l t , e t c . , n e s , A r t i c l s . t u n g s t e n , e t c . n e s , S t e a m , s u p e r - h e a t

b o i l e r s , A u x . b o i l r p l a n t , c o n d e n s r , S t e a m , v a p o u r t u r b i n e s ,

P a r t s f o r s t e a m t u r b i n e s , R e a c t i o n

e n g i n e s , H y d r l c . t u r b i n e , w t r . w h e e l , N u c l e a r r e a c t o r s , p t s

n e s ,

D a i r y m a c h i n e r y

e t c . p r t s , P a p e r , p u l p , m a k i n g m a c h r y ,

O t h . p r i n t n g , a n c i l l . m a c h s , B o o k b i n d i n g m a c h n e r y , p r t ,

M c h - t l , w r k n g m t l , n o l a t h s , U n i t h e a d , d r i l l , e t c . m a c h ,

R o t a r y p u m p s , n

e s , T a p e r d r o l l e r b e a r n g e t c , S p h e r i c a l r o l l e r

b e a r n g s , O t h e r c y

l . r o l l e r b e a r i n g , T y p e w r i t r s , w d - p r o c m

a c h s ,

M o t o r v e h . r a d i o

r e c e i v e r , P u b - t r a n s p o r t p a s s v e h c l ,

R o a d t r a c t o r , s e m

i t r a i l e r , M o t o r v e h i c l e c h a s s i s ,

M o t o r v e h i c l e b o

d i e s , M o t o r c y c l e s e t c . , T r a i l e r s , t r a n s p o r t

g o o d s , T r a n s p o r t

c o n t a i n e r s , O t h r . l o c o m o t i v e s , t e n d e r s ,

A i r c r f t e t c . U L W < = 2 0 0 0 k g , T u g s a n d p u s h e r c r a f t ,

I l l u m i n a t e d s i g n s e t c . , H a n d b a g s , n e s , T r a v e l g o o d s n e s ,

O v e r c o a t s , o u t e r w

e a r , e t c . , J a c k e t s a n d b l a z e r s ,

U n d e r w e a r , n i g h t w e a r e t c . , O v e r c o a t s , o t h . c o a t s e t c . ,

S u i t s a n d e n s e m b l e s , J a c k e t s , S k i r t s & d i v i d e d s k i r t s ,

T r o u s e r s , b r e e c h e s e t c . , U n d e r w e a r , n i g h t w e a r e t c . ,

O v e r c o a t s , o u t e r w

e a r e t c . , U n d e r w e a r , n i g h t w e a r e t c . ,

J e r s y s , p u l l o v r s , e t c . k n i t , S w i m w e a r , O t h . g a r m e n t s , n o t k

n i t t e d ,

O t h e r g a r m e n t s k n i t t e d , H o s i e r y , e t c . k n i t t e d , L e a t h e r

a p p a r e l , a c c e s s r s , A r t i c l e s , a c c e s s o r i e s . f u r ,

H e a d g e a r , f i t t i n g s , n e s , F o o t w e a r , w . m e t a l t o e - c a p ,

F o o t w e a r , n e s , N o

n - o p t i c . m i c r o s c o p e e t c , L i q . c r y s t a l

d e v c s ; l a s e r s , M e d

i c a l , b a r b e r ' s f u r n t r e ,

P h o t o f i l m f l a t u n e x p o s d , P h o t o f i l m r o l l u n e x p o s d ,

1 2 6



P h o t o p a p e r e t c . u n e x p o s d , A r m d . f i g h t . v e h c l , w e a p o n s ,

B o m b , m i n e s , m i s

s l . a m m . e t c , N o n - m i l i t a r y a r m s , F a i r g r o u n d

a m u s e m n t s e t c , H

a n d p a i n t n g s , d r a w n g e t c ,

O t h r . a r t i c l e s , p r e c . m e t a l , C a r v e d , m o u l d e d g o o d s n e s ,

M a n u f a c t u r e d g o

o d s , n e s . ,

1 2 7



Table 18Sectoral Impacts of Tariff Reduction on India

Sectors MFN Output price export

(percent change)

Import

TH IN

perce

nt

perce

nt

percent percen

t

percent percent

Agriculture 1 Paddy 0.00 0.00 0.01 0.05 -0.13 0.12

2 Wheat 0.00 0.00 0.01 0.04 -0.20 0.18

3 Cerial grain nec 0.00 0.00 0.01 0.06 -0.26 0.25

4 Veg,fruit,nut 17.78 10.00 -0.03 0.05 -0.21 0.23

5 Oil seeds 20.50 40.00 0.05 0.06 1.78 0.21

6 Sugar cane,sugar beet 0.00 0.00 0.03 0.05 -0.20 0.12

7 Plant-based fibers 0.50 0.00 0.03 0.05 0.19 0.14

8 Crops nec 52.07 24.93 -0.38 -0.06 0.72 16.46

9 Livestocks 0.00 17.48 0.02 0.04 -0.25 0.1510 Animal products nec 0.00 0.00 0.02 0.04 -0.23 0.15

11 Raw milk 0.00 0.00 0.02 0.04 0.02 0.02

12 Wool,silk-worm cocoon 0.00 0.00 -0.03 0.03 -0.14 0.04 Natural Resources 13 Forestry 5.83 45.00 0.06 0.00 4.34 0.1614 Fishing 38.00 15.00 0.03 0.03 0.15 0.28

15 Coal 0.00 0.00 0.05 0.02 -0.12 0.13

16 Oil 13.75 0.00 0.03 0.03 -0.18 0.1317 Gas 0.00 0.00 0.07 0.04 0.33 0.18

18 Minerals nec 12.78 0.00 1.80 0.12 2.10 0.18

Agro-industry 19 Meat products 0.00 0.00 -0.01 0.02 -0.05 0.5820 Poultry,seafoods 31.28 0.00 3.30 0.00 3.81 0.36

21 Veg oil and fats 6.02 0.00 0.09 -0.01 0.99 0.02

22 Dairy products 17.80 0.00 0.07 -0.01 6.57 0.02

23 Processed rice 0.00 0.00 0.18 -0.02 0.18 -0.08

24 Sugar 0.00 40.92 -0.29 -0.01 0.07 10.71

25 Food products nec 11.50 4.32 1.79 -0.01 3.55 0.18Manufacturing 26 Beverages,tobacco prods 19.75 0.00 0.05 -0.01 0.14 0.01

27 Textiles 18.94 38.62 -0.21 -0.04 0.73 8.79

28 Wearing apparel 27.65 30.00 0.13 -0.05 0.52 43.82

29 Leather products 5.97 28.21 0.03 -0.10 1.01 11.15

labor intensive

30 Wood products 9.76 35.00 0.10 0.01 0.35 0.55

Paper prods,publishing 13.77 2.57 0.05 -0.01 0.98 0.10

32 Petrolium,coal products 13.75 0.00 0.08 0.02 -0.05 0.11

33 Chem,rubber,plastic prods 9.67 29.89 -0.03 -0.06 1.47 0.7134 Mineral products nec 19.41 42.03 0.15 0.01 1.05 0.59

35 Ferrous metals 7.09 32.80 0.21 0.00 1.65 0.35

36 Metals nec 8.70 28.33 0.05 -0.01 1.11 0.29

Capital intensive

37 Metal products 10.52 27.96 1.04 0.00 1.60 0.32

38 Motor vehicles and parts 17.49 34.94 -0.01 -0.01 0.67 1.34

39 Transport equipments nec 0.00 3.00 0.07 0.01 -0.10 0.15

40 Electronic equipments 15.42 33.91 -0.37 -0.05 0.71 0.5241 Machinery,equipments nec 5.43 26.75 0.05 -0.02 1.02 0.36

Technology intensive

42 Manufactures nec 0.98 7.63 0.08 -0.01 0.05 0.17

Services 43 Electricity 0.00 0.00 0.07 0.02 0.05 0.02

44 Gas manufacture,distribution 0.00 12.00 0.07 0.02 0.02 0.0245 Water 0.00 0.00 0.07 0.02 0.02 0.02

46 Construction 0.00 0.00 0.12 0.01 -0.03 0.01

47 Trade,transport 0.00 0.00 0.04 0.03 -0.08 0.10

48 Finance,business,recreation 0.00 0.00 0.02 0.01 -0.03 0.05

49 PubAd,defence,educ,health 0.00 0.00 0.02 0.01 -0.05 0.05

50 Dwellings 0.00 0.00 0.02 0.01 0.03 0.03

31

128



Table 19

Sectoral Impacts of Tariff Reduction on Thailand(percent change)

MFN output price export importSectors

TH IN

perc

ent

perc

ent

percent percent percent percent

Agriculture 1 Paddy 0.00 0.00 -0.39 0.23 -0.84 0.24

2 Wheat 0.00 0.00 -0.22 0.04 -0.21 -0.22

3 Cerial grain nec 0.00 0.00 -0.50 0.24 -0.95 0.094 Veg,fruit,nut 17.78 10.00 -0.09 0.34 -0.77 0.91

5 Oil seeds 20.50 40.00 -0.23 0.29 -1.09 1.30

6 Sugar cane,sugar beet 0.00 0.00 0.35 0.49 -1.65 1.68

7 Plant-based fibers 0.50 0.00 1.25 0.88 -3.34 2.52

8 Crops nec 52.07 24.93 0.32 0.46 0.48 0.55

9 Livestocks 0.00 17.48 -0.01 0.32 -1.61 0.9810 Animal products nec 0.00 0.00 -0.08 0.20 -1.06 0.50

11 Raw milk 0.00 0.00 0.00 0.37 0.38 0.38

12 Wool,silk-worm cocoon 0.00 0.00 0.96 0.77 -3.22 2.76

Natural Resources 13 Forestry 5.83 45.00 0.36 0.16 1.91 0.54

14 Fishing 38.00 15.00 -0.16 0.16 -0.63 0.53

15 Coal 0.00 0.00 0.46 0.32 -1.45 0.53

16 Oil 13.75 0.00 0.01 0.22 -1.16 0.37

17 Gas 0.00 0.00 0.32 0.29 -1.31 0.66

18 Minerals nec 12.78 0.00 -0.52 0.11 -0.54 2.74

Agro-industry 19 Meat products 0.00 0.00 0.00 0.24 -1.01 0.68

20 Poultry,seafoods 31.28 0.00 -0.66 0.18 -0.73 0.8821 Veg oil and fats 6.02 0.00 -0.03 0.14 -0.58 1.87

22 Dairy products 17.80 0.00 -0.07 0.13 -0.52 0.2523 Processed rice 0.00 0.00 -0.40 0.21 -0.59 0.49

24 Sugar 0.00 40.92 1.87 0.30 3.24 0.81

25 Food products nec 11.50 4.32 -0.36 0.08 -0.32 1.66

26 Beverages,tobacco prods 19.75 0.00 0.16 0.15 -0.87 0.6727 Textiles 18.94 38.62 2.36 0.08 8.00 0.66

28 Wearing apparel 27.65 30.00 -0.05 0.09 -0.46 2.74

29 Leather products 5.97 28.21 0.52 0.09 0.68 1.11

Manufacturinglabor intensive

30 Wood products 9.76 35.00 0.14 0.10 -0.48 0.67

31 Paper prods,publishing 13.77 2.57 0.26 0.06 0.13 0.46

32 Petrolium,coal products 13.75 0.00 0.27 0.06 -0.23 0.4133 Chem,rubber,plastic prods 9.67 29.89 1.61 0.14 3.85 0.80

34 Mineral products nec 19.41 42.03 0.37 0.05 0.14 0.68

35 Ferrous metals 7.09 32.80 0.68 0.05 1.91 0.5136 Metals nec 8.70 28.33 3.07 0.04 8.81 0.48

Capital intensive

37 Metal products 10.52 27.96 0.43 0.03 1.18 0.69

38 Motor vehicles and parts 17.49 34.94 0.56 0.04 8.45 0.5539 Transport equipments nec 0.00 3.00 -0.40 0.12 -1.21 0.61

40 Electronic equipments 15.42 33.91 0.46 0.05 0.50 0.51

41 Machinery,equipments nec 5.43 26.75 0.59 0.05 0.76 0.53

Technology intensive

42 Manufactures nec 0.98 7.63 -0.25 0.10 -0.49 0.44

43 Electricity 0.00 0.00 0.53 0.16 -0.75 0.78

44 Gas manufacture,distribution 0.00 12.00 0.61 0.26 1.40 1.40

45 Water 0.00 0.00 0.29 0.12 0.35 0.35

Services

46 Construction 0.00 0.00 0.46 0.07 -0.26 0.48

129



47 Trade,transport 0.00 0.00 0.14 0.11 -0.33 0.57

48 Finance,business,recreation 0.00 0.00 0.18 0.11 -0.44 0.53

49 PubAd,defence,educ,health 0.00 0.00 0.14 0.29 -1.11 0.76

50 Dwellings 0.00 0.00 0.36 0.07 0.36 0.36

130



Table 20

Impact of India-Thailand Free Trade Agreement on Select Sectors in Thailand

Potential Increase in Imports of Thailand from India under different Tariff Liberalisation Scenarios

(Value in Million US $)

Sectors Expected Increase in Value of Imports of Thailand from India

Scenario I:

Reduction to

50percent Tariff

Level

Scenario II:

Reduction to

25percent Tariff

Level

Scenario III:

Reduction to

10percent Tariff

Level

Scenario IV:

Reduction to

0percent Tariff

Level

Agri-Business and

Processed Food

13.94 (7.22) 16.45 (8.52) 19.33 (10.00) 22.77 (11.79)

Rubber and

Rubber Products

- 0.001 (0.004) 4.43 (15.02) 4.91 (16.66)

Textiles andClothing

- 0.04 (0.047) 61.07 (73.08) 77.36 (92.57)

Gems and

Jewellery

- - 0.024 (2.00) 0.047 (4.00)

Automobiles and

Auto Parts

- 0.01 (0.00) 0.01 (0.00) 0.48 (0.16)

Organic, Inorganic

and Agro

Chemicals

- - - 7.13 (0.002)

Drugs and

Pharmaceuticals

- - - -

Leather and

Leather Products

- 17.33 (0.02) 34.67 (0.04) 46.23 (0.05)

Iron and Steel - - 0.51 (0.001) 3.36 (0.008)

Source: Calculated from UNCTAD, Trains, Spring-2001.

Note: (i) Figure in parenthesis is percent of total imports in that particular sector (ii)Base Year for theImport Data: 1999, and (iii) Reference Year for Tariff: 2000.

131



Table 21

Impact of India-Thailand Free Trade Agreement on Select Sectors in India

Potential Increase in Imports of India from Thailand under different Tariff Liberalisation Scenarios

(Value in Million US $)Sectors Expected Increase in Value of Imports of India from Thailand

Scenario I:

Reduction to

50percent Tariff

Level

Scenario II:

Reduction to

25percent Tariff

Level

Scenario III:

Reduction to

10percent Tariff

Level

Scenario IV:

Reduction to

0percent

Tariff Level

Organic, Inorganic

and Agro

Chemicals

- 1.66 (0.03) 47.24 (0.97) 131.69 (2.70)

Drugs and

Pharmaceuticals

- 0.46 (0.43) 1.83 (1.71) 2.74 (2.57)

- 12.32 (2.50) 49.30 (10.00) 73.94 (15.00)

Iron and Steel - 9.58 (0.14) 25.21 (0.38) 35.63 (0.53)

Agri-Business and

Processed Food

- 6.56 (60.71) 25.33 (234.5) 37.84 (350.36)

Rubber and

Rubber Products

- 3.04 (35.41) 12.17 (141.66) 18.25 (212.48)

Textiles and

Clothing

- 10.52 (160.32) 15.24 (232.30) 24.29 (370.25)

Gems and

Jewellery

- 0.30 (1.85) 1.21 (7.42) 1.81 (11.13)

Automobiles and

Auto Parts

- 0.005 (6.45) 0.02 (25.80) 0.03 (38.70)

Source: Calculated from UNCTAD, Trains, Spring-2001.

Note: (i) Figure in parenthesis is percent of total imports in that particular sector (ii)Base Year for the Import Data: 1999, and (iii) Reference Year for Tariff: 2000.

Leather and

Leather Products

132



Table 22

Fish Production in India

(Million tons)

Year Marine Inland Total

1993-94 2.649 1.995 4.644

1994-95 2.692 2.097 4.789

1995-96 2.707 2.242 4.949

1996-97 2.967 2.381 5.348

1997-98 2.950 2.438 5.388

1998-99 2.696 2.566 5.262

1999-2000 2.834 2.823 5.657

Source: India 2002 p.394

Table 23

Fish Production in Thailand

(Million tons)

Year Marine Inland Total

1989 2.539 0.201 2.740

1990 2.555 0.231 2.7861991 2.709 0.259 2.968

1992 2.966 0.274 3.240

1993 3.048 0.337 3.385

1994 3.150 0.373 3.523

1995 3.185 0.388 3.573

1996 3.112 0.437 3.549

1997 2.979 0.405 3.3831998 3.077 0.429 3.077

Source: Department of Fisheries and the Center for Agricultural Information Office of Agricultural Economics, Ministry of Agriculture and Co-operatives, Thailand.

133



Table 24

Production of Shrimp from Shrimp Farm in Thailand

Year Number of Farms Areas (rai) Total ShrimpProduction

(thousand tons)

1989 14,235 474,551 93.494

1990 16,299 411,555 118.227

1991 18,998 470,826 162.070

1992 19,403 454,975 184.884

1993 20,027 449,292 225.5141994 22,198 457,793 263.446

1995 26,145 468,385 259.540

1996 23,413 454,148 239.500

23,723 457,000 227.560

1998 25,977 475,116 252.731

1997

Note: 1 rai =0.16 Hectare or 0.395 AcreSource: Thailand’s Department of Fisheries.

134



Table 25Top 10 Destinations of India’s Software Services Exports During 2000-01

S.No. Country Total Export During

2000-01

Total Export During

1999-2000

percentAge Growth

Rs. Cr. US $ Mln. Rs. Cr. US $ Mln. Rs. Cr. US $ Mln.

1. USA 16686.61 3627.52 11258.11 2618.17 48.22 38.552. UK 3744.24 813.96 2350.95 546.73 59.26 48.88

3. Germany 1080.86 234.97 687.66 159.92 57.18 46.93

4. Singapore 1004.70 218.41 235.68 54.81 326.30 298.50

5. Australia 750.30 163.11 185.68 43.18 304.08 277.73

6. Japan 747.94 162.60 402.17 93.53 85.98 73.85

7. Netherlands 422.85 91.92 161.15 37.48 162.40 145.29

8. Switzerland 304.05 66.10 323.89 75.32 -6.13 -12.25

9. Belgium 332.25 72.23 139.14 32.36 138.79 123.21

10. Canada 330.26 71.80 134.66 31.32 145.26 129.26

Source: ESC, Statistical Year Book of Indian IT and Electronics Industry 2000-2001, Electronics and

Computer Software Export Promotion Council, New Delhi.

Table 26

Major Items of Export of Computer Hardware from India and their Major

Destinations

(US $ Million)

S. No. Items 2000-2001 1999-2000 Top Destinations During

2000-2001

1. Head Stack 176.38 Malaysia, USA, Singapore,Hong Kong, Thailand,

China, Germany

80.23

2. Computer parts 7.75 0.01 Singapore, USA, UK, Nepal

3. Scanner 3.87 5.41 USA, UK, Germany, Nepal, UAE

Switching mode power supply

3.37 5.05 Singapore, Thailand, USA,Burma, Bangladesh, SriLanka, Germany, Canada

5. Data entry terminal 3.14 0.45 UK, USA, Singapore,Australia, Sri Lanka, NewZealand, Indonesia, Oman

6. Personal Computer (Laptop, Palmtop etc.) or

Micro computer/processor

2.87 0.00 Sri Lanka, Malaysia,Singapore, USA, Egypt

7. Dot Matrix Printer 2.53 0.94 Sri Lanka

8. Lan Cards 0.48 0.20 Sri Lanka, Bangladesh,Taiwan, Nepal, Bhutan,UAE, UK

Add on cards 0.27 0.26 Belgium, Yemen, Kenya,USA, France, Bangladesh

10. Part and accessories of themachines

USA, UK, Indonesia,Singapore, Sri Lanka,Australia, Hong Kong

0.16 0.00

4.

9.

Source: ESC, Statistical Year Book of Indian IT and Electronics Industry 2000-2001, Electronics and Computer Software Export Promotion Council, New Delhi

135



Table 27

Secotoral Breakup of Biotechnology Firms in India

Agriculture 49percent

Health 25percent

2percent

Others 24percent

Environment

Source: Chaturvedi, Sachin, (2002), “Status and Development of Biotechnology in India: An AnalyticalOverview”, RIS Discussion Paper No. 28, New Delhi.

Table 28

Chronology of GMOs in Thailand

Date Events

1983 Inauguration of Thailand’s National Center for Genetic Engineering andBiotechnology(NCGEB, now BIOTEC)

1985 Establishment of BIOTEC’s Plant Genetic Engineering Unit (PGEU) Nakhornpathom, Thailand

1986 BIOTEC commissioned a status report on the prospects of biotechnology inagriculture stated the need for the country’s biosafety regulatory system

1990 A feasibility study on biosafety by BIOTEC

1990 Biosafety Subcommittee was established under BIOTEC

April 1992 BIOTEC appointed an ad hoc subcommittee to draft Thailand’s first biosafety guidelines

January 1993 National Biosafety Committee (NBC) established with BIOTEC as secretariat,followed by established of Institutional Biosafety Committees (IBCs) at variousinstitutes

1993 First application for importing transgenic plant for field test on seed production(Calgene’s Flavr Savr tomato)

1994 A list of 40 prohibited transgenic plant added to the 1964 Plant Quarantine Act

1994 Flavr Savr tomato granted permission for field test

1995 Application of Monsanto’s Bt cotton.

1995 Establishment of DNA Fingerprinting Unit, BIOTEC in NakhornPathom,Thailand

March 1996 Bt Cotton field test experiment started in northeastern Thailand.

1998 Establishment of Food Biosafety Subcommittee under NBC

June1992 Complete draft of biosafety guidelines (for laboratory and for field test)

1997 Establishment of Plant Biosafety Subcommittee under NBC

136



1998 Establishment of Microbial Biosafety Subcommittee under NBC

1999 Trade dispute between Thailand and some EU countries over detention of tuna inoil from Thailand. Other trade dispute cases follow suit.

1999 Subcommittee for Policy on Trade of Biotechnology Products set up under theCommittee for International Economic Policy

1999 Amendment of the 1964 Plant Quarantine Act to strengthen Regulation of transgenic plants

A report “Status of GMOs in Thailand” published by BIOTEC

September 1999

First public hearing on GMOs organized by Department of Agriculture (DOA)held in Bangkok

First survey in Bangkok by BIOTEC on public awareness and attitude towardsGMOs

December 1999

Inauguration of Thailand Biodiversity Center (TBC) as the potential national focal point for the Cartagena Protocol on Biosafety (Thailand has not yet signed the protocol). NBC’s secretariat (including subcommittees) moved to TBC.

2000 Establishment of DNA Technology Laboratory (former part of DNAFingerprinting Unit), with a mandate to detect GMOs on service basis, amongother tasks.

2000 Establishment of two separate GMOs detection laboratories in Department of Agriculture and Department of Medical Science

2000 Thailand Food and Drug Administration (FDA) commissioned a work group toconsider labeling method for GM foods

March 2000 Ministry of Agriculture and Cooperatives’ and declaration on import prohibitionof 40 transgenic plants (revised) with exceptions for grains of GM corn and soy

bean

April 2000 Trade dispute between Thailand and Kuwait / Saudi Arabia over tuna in oil(suspected to be made from GM soya bean)

September 1999

October 1999

October 2000 A National Subcommittee on Biosafety Policy proposed to the NationalCommittee on Conservation and Utilization of Biodiversity (NCCUB), with TBCas secretariat office.

January 2001 Trade dispute between Thailand and Egypt over tuna in oil reached its peak. Both party agreed to sign MOU.

February 2001 A draft of GMOs policy approved by the Subcommittee for Policy on Trade of Biotechnology Products

March 2001 BIOTEC starts a series of consultation meeting with stakeholders on GMOs issue

137



April 2001 A controversial resolution by the cabinet to hault Ministry of Agriculture’s largescale field trials according to a request from a pressure group, until a biosafetylaw is finished.

August 2001 BIOTEC conclude consultation series

Source: Damrongchai, Nares, (2002), “Agricultural Biotechnology in Thailand”, paper presented at Biotechnology and Development: Challenges and Opportunities for Asian Region, RIS, NewDelhi.

Table 29

Crop biotechnology research and development in India and Thailand

Country Key Institution Crops

India Department of Biotechnology, Ministryof Science and Technology

GM rice, cotton, mungbean, pigeonpea, potato, brassica, maize, wheat, and vegetables; tissuecultured citrus, mango, mangrove, vanilla, andcardamom

Thailand National Center for Genetic Engineeringand Biotechnology

Rice, maize, cotton, cassava, durian, rubber,tomato, and orchid

Source: Hautea, Randy A., (2002), “Crop Biotechnology Initiatives in Asia: Progress, Opportunities andChallenges”, paper presented at Biotechnology and Development: Challenges and Opportunities for Asian Region, RIS, New Delhi.

Table 30

Foreign banks operating in India with No. of branches as on 30-06-2002

No. of Br. In

India

Name of Bank Country of

incorporation

1. ABN Amro Bank Netherland 122. Abu dhabi Commercial Bank UAE 2

3. American Express Bank USA 4

4. Arab Bangladesh Bank Bangladesh 1

5. Bank International Indonesia Indonesia 1

6. Bank Muscat SAOG Sultanate of Oman 1

7. Bank of America USA 5

8. Bank of Bahrain & Kuwait Bahrain 2

9. Bank of Ceylon Sri Lanka 1

10. Bank of Nova Scotia Canada 5

11. Bank of Tokyo Mitsubishi Japan 4

12. Barclays Bank UK 2

13. BNP Paribas France 9

14. JP Morgan Chase Bank USA 1

15. China Trust Commercial Bank Taiwan 1

16. Cho Hung Bank South Korea 1

17. Citibank USA 19

18. Commerzbank Germany 1

138



19. Credit Agricole Indosuez France 2

20. Credit Lyonnais France 4

21. Deutsche Bank Germany 5

22. Development Bank of Singapore Singapore 1

23. Dresdner Bank Germany 1

24. Hongkong & shanghai Banking Corpn. Hongkong 31

25. ING Bank Netherland 2

26. KBC Bank Belgium 1

27. Krung Thai Bank Thailand 1

28. Mashreq Bank UAE 2

29. Mizuho Corporate Bank Japan 1

30. Oman International Bank Sultanate of Oman 2

31. Oversea-Chinese Banking Corpn. Singapore 132. Siam Commercial Bank Thailand 1

33. Societe Generale France 4

34. Sonali Bank Bangladesh 2

35. Standard Chartered Bank UK 22

36. Standard Chartered Grindlays Bank Australia 40

37. State Bank of Mauritius Mauritius 3

38. Sumitomo Mitsui Banking Corporation Japan 2

39. Toronto Dominion Bank Canada 1

40. UFJ Bank Ltd. Japan 1

41. Antwerp Diamond Bank N.V. Belgium 1

Total 203

Source: Reserve Bank of India: 2002

139



Table 31

Country-wise branches of Indian Banks at Overseas Centres

Nationalised Banks Private Banks

Name of the

country

SBI BOI BOB IND

BANK

IOB UCO Canara

Bank

Syndicate

Bank

Bharat

Overseas

Bank

Total

Sri Lanka 2 - - 2 2 - - - - 6

United

Kingdom

3 6 7 - - - 1 1 - 18

United States

of America

4 2 1 - - - - - - 7

Japan 2 2 - - - - - - - 4

Maldives

Islands

1 - - - - - - - - 1

West Germany 1 - - - - - - - - 1

Bangladesh 1 - - - - - - - - 1

Bahamas 1 - 1 - - - - - - 2

Bahrain 1 - - - - - - - - 1

Belgium 1 - 1 - - - - - - 2

Singapore 1 1 - 1 1 2 - - - 6

Hong Kong 1 2 - - 2 2 - - - 7

Cayman

Islands

- 1 - - - - - - - 1

France 1 1 - - - - - - - 2

Channel

Islands

- 1 - - - - - - - 1

Fiji Islands

- - 9 - - - - - - 9

Kenya - 2 - - - - - - - 2

Mauritius - - 8 - - - - - - 8

UAE - - 6 - - - - - - 6

Seychelles - - 1 - - - - - - 1

South Africa 1 - 1 - - - - - - 2

South Korea - - - - 1 - - - - 1

Sultanate of

Oman

- - 3 - - - - - 3

Thailand - - - - - - - 1 1

Total 21 18 38 3 6 4 1 1 1 93

Source: Reserve Bank of India: 2002

140



Table 32Foreign Tourists Visiting India

(Number of visitors in thousands)

Country of Nationality 1990 1995 1996 1997 1998

Afghanistan 20.5 10.9 8.6 3.3 3.5

Australia 30.1 49.4 52.6 60.5

Canada 41.0 63.8 75.8 81.8 73.5

France 79.5 82.3 89.5 93.7 96.6

Germany 71.4 89.0 102.9 101.9 90.7

Iran 22.7 12.3 12.9 10.5 10.3

Italy 49.2 53.0 50.7 55.3 54.0

Japan 59.1 76.0 99.7 93.3 90.7

Kenya 13.8 17.4 19.8 19.6 22.0

Malaysia 34.3 50.0 56.3 56.8 48.3

Netherlands 24.4 40.1 40.8 48.9 54.7

Pakistan 41.5 46.6 44.8

Russia 37.7 40.7 37.8 32.2 31.8

Saudi Arabia 17.3 16.3 17.8 14.9 13.1

Singapore 32.6 48.6 48.4 52.1 55.1

South Africa 21.2 21.9 20.9

Spain 18.6 24.4 24.1 23.5 26.9Sri Lanka 68.4 114.2 112.3 121.4 119.1

Switzerland 32.4 29.4 34.6 31.3 33.7

Thailand 11.9 14.5 16.9 15.6 15.4

U.K. 235.2 334.8 367.5 380.0 372.5

U.S.A. 125.3 203.3 232.4 247.4 244.8

Total (incl.Others) 1,707.2 2,123.7 1,923.7 1,973.6 1,975.1

Foreign exchange

earnings in Million

Rupees

24,440.0 86,400.0 100,500.0 110,514.0 117,484.0

141



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Documents

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