Road expansion makes Thailand a ‘China plus one’ option

The China-Laos Railway which opened its doors at the end of last year, is being extended to Thailand. The Laos section proved so popular that the frequency of train service had to be increased several times due to demand.

Six months after its opening, the Chinese railway group said the route had delivered more than 4 million tonnes of freight by the end of May. The route also handled over 3.2 million passenger trips. As of December 2021, 21 regions in China have designated cross-border trains for transporting goods along the railway line, with goods such as fertilizers, daily necessities, electronics and fruits. The 1,035 km China-Laos Railway connects Kunming in China to the Laotian capital Vientiane.

This has raised expectations for Thailand, with former Thai Deputy Prime Minister Pinit Jarusombat saying the China-Laos railway offers a new logistics option for Thailand’s trade with China. “It totally exceeded expectations. The Sino-Thai railway is currently under construction and Thailand expects it to be operational very soon.

Once completed, a transport corridor crossing the three countries will greatly increase the speed of movement of people and goods between Southeast Asia and China, he added.

The China-Laos-Thailand (CLT) route runs south from Vientiane, crosses the border with Thailand at Nong Thai and its free trade zone, and continues to Bangkok. The route passes through some of Thailand’s main agricultural regions, although free trade zones are also dotted along the route – prime areas of interest for foreign investors wishing to diversify away from China, while maintaining access to the consumer market. Thailand is a member of ASEAN, which has a free trade agreement with China, which means goods can be shipped both ways duty-free.

In addition to this, Thailand also has 62 industrial zones, which offer VAT refunds and exemption from import duties, allowing local Thai components to be matched with components imported from China, as well as Cambodia, neighboring Laos and Vietnam. The final products can then be exported to non-Asian markets such as the United States or Europe, sold in the Thai domestic market, or re-exported to ASEAN member states. ASEAN also has a free trade agreement with India.

Pinit is also optimistic about the development of cross-border rail logistics and the prospect of Thailand as a regional hub. Citing the example of Thai agricultural products exported to China, he pointed out that the China-Laos railway accelerates the transportation speed of chilled and frozen fruits and vegetables. In addition to infrastructure construction, Pinit said the road also provides investment and business opportunities, with an increasing number of Chinese companies entering Thailand in various fields, such as durian plantation, rubber companies, as well as automotive, energy and high-tech industries. .

He said the Thai government attaches great importance to developing relations with China and the two countries should further enhance their cooperation in business, investment and tourism.

Current bilateral trade between China and Thailand reached around $131 billion in 2021 and grew by 33% that year. Thai Deputy Prime Minister and Commerce Minister Jurin Laksanavisit said Thailand hopes to further expand its exports to China, and the CLT railway will certainly help. This makes Thailand an ideal candidate as a “China plus one” supply chain hub where it can compete with Vietnam.

Laksanavisit said Thailand and China enjoy strong trade relations and various types of cooperation, including bilateral trade agreements, the ASEAN-China Free Trade Agreement (FTA) and the Regional Comprehensive Economic Partnership (RCEP).

“We hope to see a big win from RCEP,” he said, which as the world’s largest FTA will benefit Thailand in terms of broader market access as well as tariff reductions. RCEP entered into force on January 1st this year, allowing “Thailand and other member countries, including China, to share in the prosperity”. he said.

As for fruits and agricultural products, Thailand is ready to use the CLT road to transport fruits to China after the completion of sanitary and phytosanitary facilities at Mohan port in southwestern Yunnan province. of China), by the third quarter of 2022.

The entire Vientiane-Bangkok road is expected to be fully operational by 2026, although some sections connecting the Laos-China railway will be completed before that. Interested foreign investors should contact our Thai offices at thailand@dezshira.com for feasibility studies.

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