Cablegate: Thailand and Malaysia Seek Deeper Trade And

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DE RUEHBK #4796/01 2490208
ZNR UUUUU ZZH
R 060208Z SEP 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 9449
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHCHI/AMCONSUL CHIANG MAI 4065

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E.O. 12958: N/A
TAGS: ECON ETRD EINV TH MY
SUBJECT: THAILAND AND MALAYSIA SEEK DEEPER TRADE AND
INVESTMENT TIES

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1. Summary. In recent months Thailand and Malaysia have
sought to expand trade and investment links. Thai Prime
Minister Surayud Chulanont went to Malaysia last month on an
official visit and traveled there again on August 31 with
Crown Prince Vajiralongkorn for Malaysia's 50th anniversary
of independence celebrations. Officials from both countries
have expressed the desire to work jointly on the economic
development of the troubled border region of five southern
provinces of Thailand and four northern states of Malaysia.
One Thai political leader, Dr. Kriengsak Chareonwongsak,
strongly criticized Malaysia's non-tariff barriers toward
Thailand during a recent forum in Bangkok. Despite efforts
from both sides, direct investment between the two countries
remains very low and is unlikely to increase significantly
any time soon. End summary.

2. Following Thai PM Surayud's official visit to Malaysia,
the Embassy of Malaysia in Bangkok and the Malaysian-Thai
Chamber of Commerce organized the Malaysia-Thailand Business
Forum to showcase and promote economic ties between the two
countries. High-level participation included the Malaysian
Foreign Minister Seri Syed Hamid Albar, the Malaysian
Minister of Agriculture Haji Muhyiddin bin Haji Mohd Yassin,
and the Thai Deputy Foreign Minister Sawanit Kongsiri. Forum
attendees were mostly Thai and Malaysian business leaders. A
few embassies sent representatives, including the Embassy of
Iran.

3. Malaysian FM Hamid noted that although Thailand and
Malaysia are major trade partners, the level of foreign
direct investment is paltry and for the most part one-sided.
Malaysian investment in Thailand during 2007 so far has
totaled $324 million but Thai investment in Malaysia has
totaled only $16 million. FM Hamid called for more Thai
investment in Malaysia, especially in tourism, agriculture
and food processing sectors. He stated Malaysia's commitment
to work toward greater economic development in the five
southern border provinces of Thailand and in the neighboring
four northern states of Malaysia. Finally, FM Hamid
reiterated Malaysia's interest in the idea of an
"Indonesia-Malaysia-Thailand Growth Triangle" focusing on the
areas of all three countries that were affected by the
tsunami.

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4. Thai Deputy FM Sawanit cited trade figures that show that
Malaysia is Thailand's fourth largest trade partner and that
Thailand is Malaysia's fifth largest trade partner. Sawanit
stated that the RTG would like to see trade and investment
between both countries increase, especially in the border
areas of southern Thailand and northern Malaysia. He noted
that soon a "friendship bridge" connecting Narathiwat in
Thailand with Kelantan in Malaysia will open as part of joint
infrastructure development efforts. Sawanit was one of
several conference participants to mention halal products and
services as an area of great potential for trade and
investment between Thailand and Malaysia and in the ASEAN
region. He called on ASEAN to promulgate ASEAN-wide halal
standards to promote trade and investment and reduce
non-tariff barriers.

5. Malaysian Agriculture Minister Haji Muhyiddin bin Haji
Mohd Yassin echoed Sawanit on halal food. He said that
Thailand is one of the largest exporters of halal food and
that he sees the agricultural sector as an engine of growth.
Yassin furthermore called for ASEAN-wide guidelines on halal
food, biotechnology and GMOs. Calling on Thailand to adopt
Malaysian halal standards, he said that he would like to see
Malaysian halal standards become the global halal standard,
akin to ISO.

6. Professor Kriengsak Chareonwongsak, Chairman of the
Success Group of Companies and a member of the Executive
Board of the Democrat Party of Thailand called on Malaysia to
eliminate non-tariff barriers (NTB). According to Kriengsak,
for example, Malaysia presently does not allow Thai trucks to
drive directly into Malaysia unless the driver is Malaysian.
Another example of Malaysian NTBs, Kriengsak said, is a rule
that allows imports from Thai fisheries only when enclosed in
Malaysian-made plastic bins. Kriengsak promised that if his
party is elected later this year, he would work toward
service sector, financial, and labor market liberalization in
Thailand and called on Malaysia to do the same.

7. After the forum, econoff had lunch with one of the forum

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speakers, Kelvin Ng, a partner in a major Kuala Lumpur-based
law firm with many clients who are foreign investors in
Thailand, and other Thai and Malaysian business leaders who
were present at the forum. They echoed the sentiment of FM
Hamid that FDI is for the most part one-sided and likely to
stay that way due in part to the fact that Malaysian wages
are higher than Thai wages. Ng also explained that his
clients are mostly in sectors not covered by the proposed
changes to the Thai Foreign Business Act (FBA) and thus would
not dissuade Malaysian businesses from investing in Thailand.

8. Comment. Despite all of the good will expressed by
leaders from both countries, the sentiment on the ground was
that Thai investment in Malaysia will likely remain low.
Thailand is not even among the top twenty foreign investors
in Malaysia. Moreover, political uncertainty in Thailand at
present may well have dampened Malaysian enthusiasm for
investment in their neighbor to the north.
BOYCE

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