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Little gained from Thailand-Vietnam talks on rice, connectivity

Publication Date : 31-10-2012

 

Thailand and Vietnam's joint Cabinet meeting in Hanoi last Saturday lacked a policy initiative to forge cooperation for their mutual benefit as delegates kept discussions within a paradigm created by former prime minister Thaksin Shinawatra in 2004.

Two major topics highlighted by the joint meeting - of physical connectivity and cooperation on rice - were indeed an old ambition which has never been achieved.

On connectivity, both sides agreed to promote trade and investment cooperation between the two countries on the Greater Mekong Sub-region (GMS)'s East-West Economic Corridor (Ewec) framework.

They will conduct studies on ways and means to facilitate transport of passengers and goods on potential routes, including Routes No 8 and No 12, linking Thailand-Laos and Vietnam - which were not part of the GMS Cross Border Transportation Agreement (CBTA)'s designated routes - according to a joint statement issued after the meeting.

In real terms, the two governments reached common ground that land transport via Route No 9, linking Mukdahan with Savannakhet in Laos and Vietnam's port city of Danang - better known as the East West Corridor - was less utilised than expected.

They agreed to promote trade and investment along the way to connect the two countries via Laos, but no clear idea remained on how the East West Corridor project under the GMS pact had developed over the past two decades.

Physically, the road condition had improved and transportation from Thailand to Vietnam via this route was faster than before.

The problem was that the road neither served nor led to other economic activities between the two countries, and provided little more than a transport route. The corridor was designed for Thailand to ship goods via Danang port. But in recent years Thai products, even those from the Northeast, have been shipped mostly via Laem Chabang in Chon Buri.

In addition to the idea of developing the potential of nearby routes No 8 and 12 to link the two countries via Laos, the two cabinets should explore possibilities for a new generation of investment and trade in the East West Corridor to create more economic activities in the region.

There is nothing wrong with good roads throughout the Mekong region, but they need to serve something really useful to boost economic development and livelihoods along the way. Otherwise, they would be an economic waste.

On rice cooperation, both sides agreed to continue to enhance working together on producing, processing and exporting rice. The idea to cooperate with Vietnam in controlling demand, supply and the price of rice on the world market was initiated originally by Thaksin's administration - but it never eventuated into anything.

In theory, it's impossible to have a cartel controlling rice trading on the world market. Although Thailand and Vietnam are the world's two major rice exporters, they would never be able to join hands to manipulate the rice price in the market. Rice is an elastic commodity which can easily be substituted by other kinds of flour.

If Thailand and Vietnam managed to raise their prices, consumers could turn to other forms of carbohydrate. And there's no need to mention that Thailand and Vietnam are not alone in the market. Other countries are willing to dump rice if prices from the two countries were too high.

In practice, both countries have domestic pressure to release rice into the market as soon as possible after the harvest season. They don't need to consult each other on what price they should sell at. On the contrary, they have always offered cut-throat prices to retain order.

One point, which Thailand badly needs to learn from Vietnam, is how to improve productivity as the Thai yield is considerably lower than Vietnam's. Another issue is how to keep rice trading away from politics.

Before sitting together again, the two cabinets should develop concrete and new ideas on cooperation, otherwise they would just be wasting their time.

 

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