US-China trade tensions could affect ASEAN economic integration: expert

US-China trade tensions could pit Thailand and other ASEAN nations against each other, says Dr Pavida Pananond.

What impact do US-China trade tensions have on Thailand?

Pavida Pananond: “The positive aspect is people might expect some diversion of trade that used to take place between the US and China. For example, Vietnam is filling in that way in sectors such as furniture. If China is not able to buy soy beans from the US, maybe Thailand can supply agri-business like sugar or soy beans. That’s the direct impact from trade diversion.

“The negative aspect is that Thailand’s supplies are affected because final products have to face tariff barriers. We know world trade these days is not driven by final products, so you’re not just buying a computer or TV or phone from one country. The computer was made by many smaller companies who produce different parts, so that is the supply chain for that phone. We should also pay attention to the indirect impact as result of how supply chain activities would be shifted.”

What impact do US-China trade tensions have on ASEAN?

“As companies locate away from China, ASEAN states could be looking at increased potential investment coming in. So now this puts ASEAN states against each other as countries try to grab the same things – which could undermine the regional integration that goes ahead. Adding to value to each other is important [to prevent any overlap]. Rather than a general policy ... come invest in ASEAN, where countries might be strong in different areas of the value chain.”

How do you view economic and business ties between NZ and ASEAN?

“New Zealand should not view ASEAN in a one-dimensional manner – it’s not just about trade. Opportunities for investment is an area to look at – Southeast Asia as a regional network to export to other countries.

“It’s not just New Zealand going to those countries, but also what can be offered in New Zealand. There are lots of higher-end technology in New Zealand that could be needed in ASEAN countries.

“On the other side, Asian companies coming here shouldn’t view New Zealand just as a market. If they do, they’ll overlook New Zealand because it’s too small. Instead they should think: ‘This is a country with strong agricultural knowledge and technology – what can we learn to improve our product?’”

What are Thailand’s key areas of economic potential and growth?

“It’s about quality. It is a challenge for Thailand – one we should try to reach.

“Thailand needs to ... develop an ecosystem of more international business that allows higher-end and higher value-added activities. That means better educational institutions, better rules and regulations, clearer policy direction, as well as a pool of skilled labour – no matter how cheap you go, people will want to invest in this area – this is what they look for.

Singapore already knows that – they make themselves very clear and transparent, and they are known as one of the easiest places to do business. They do attract investment and are the regional headquarters for multinationals, so it’s difficult for Thailand to compete. So Thailand has to think about what it can do to not compete with Vietnam and Cambodia.

“Thailand can also benefit from being centrally-located in mainland Southeast Asia. Our geographical location is a great advantage for companies looking to get into the markets of the increased middle class in Southeast Asia. Thailand can be a gateway, but a gateway needs good infrastructure – road, rail system, transport, and distribution centres located in Thailand.”

Dr Pavida Pananond is Associate Professor of International Business at Thammat Business School in Bangkok, Thailand. She has an interest in the internationalisation of firms and economic upgrading with reference to the emerging markets of the Southeast Asia region. She was in New Zealand as one of five [email protected] Fellows.

– Asia Media Centre