January 30, 2024
BANGKOK – Thailand’s Finance Ministry and the National Economic and Social Development Council (NESDC) have warned that geopolitical tensions could be a major risk to the Thai economy this year.
The two agencies cited the ongoing conflict in Ukraine, the rise of protectionism and the uncertainty surrounding the US-China rivalry as potential threats to Thailand’s trade and investment.
The conflict in Ukraine has disrupted global supply chains and led to higher energy prices. This has negatively impacted Thai businesses, which are reliant on imported energy and raw materials.
The rise of protectionism could lead to higher tariffs and other barriers to trade, making it more difficult for Thai businesses to export their products and services, while the uncertainty surrounding the US-China rivalry could lead to instability in the global economy, dampening demand for Thai exports.
The Finance Ministry and the NESDC have urged the Thai government to take a series of steps to mitigate the risks. These include diversifying Thailand’s trade partners to reduce reliance on any single country, or region; strengthening Thailand’s economic resilience by increasing domestic demand and production; and promoting regional cooperation to reduce trade barriers and support economic integration.
However, the impact of geopolitical tensions on the Thai economy depends on a number of factors, including the duration and severity of the conflict in Ukraine, the pace of economic recovery in the US and China, and the actions taken by the Thai government.
Pichai Naripthaphanan, an adviser to the Prime Minister, said that Thailand needed to be vigilant as while the country might not be directly affected, there could be indirect consequences. At the same time, if Thailand is prepared, there is an opportunity for positive outcomes. Close monitoring is required not just of the ongoing conflict between Russia and Ukraine, which shows no signs of resolution, but also the situation between China and Taiwan following Taiwan’s election, the escalation of the tensions in the Korean Peninsula between South Korea and North Korea; and the ongoing conflict in Myanmar.
The situation in Myanmar needs special attention as it has strong economic and trade ties to Thailand and a significant source of natural gas for Thailand’s electricity generation.
Pichai highlighted economic opportunities for Thailand, noting that during recent discussions with foreign leaders, it was clear that they saw Thailand as a suitable investment destination due to its friendly relations with all countries and lack of conflicts.
Another positive factor is the trend amongst electronics and semiconductor industries to relocate investments away from war-prone areas. Thailand is among the targeted destinations for these investments but must enhance the readiness of its workforce if it is to support these industries. Pichai proposed upskilling and reskilling for this sector, urging the government to coordinate with the Labour Minstry on this issue.
Meanwhile, the Chiang Rai Chamber of Commerce has pointed out that China is accelerating the development of its land transport infrastructure.
The chamber’s vice-president Pakaimas Vierra noted that due to the increasing tension in the South China Sea, a crucial maritime transportation route for both China’s imports and exports, China is intensifying its investments and development of land transport routes. This is particularly evident in the border areas connecting to Laos and Myanmar, extending down to Thailand.
There are also road connections leading to the southern part of China. Currently, there are construction projects for roads, bridges, and improvements to the road network connecting to the three border checkpoints in Chiang Rai: Mae Sai, Chiang Saen, and Chiang Khong.
Furthermore, discussions are underway for collaboration with the Thai Chamber of Commerce to jointly enhance regulations and facilitate cross-border freight transport, making it more convenient. The transportation route from Chiang Rai, linking through neighbouring countries to the southern part of China, is expected to become increasingly vital, especially if there are challenges or increased transportation costs through maritime routes due to conflicts, or other issues in the future.