Driving market forces in ASEAN region

The Chinese are also very upbeat on the coming-of-age of ASEAN, which groups the six founding members — Thailand, Malaysia, Singapore, Indonesia, Brunei and the Philippines — as well as the four new members, namely, Cambodia, Laos, Vietnam and Burma.

Also on January 1, China, the world's most populous market with 1.3 billion people, reduced most of its import tariffs to zero as part of the China-ASEAN Free Trade Area (CAFTA).

Altogether, we're talking about the world's largest free-trade zone with a combined population of nearly 1.9 billion.

If China's economic growth continues at its feverish pace, the Asian giant will soon overtake Japan as the world's second-largest economy with a gross domestic product of about US$5 trillion, compared to the U.S.'s $15 trillion.

This means China's appetite for raw materials and energy will continue to be ravenous for the foreseeable future. In the eyes of China, ASEAN is a major source of food and related products as well as a huge market of 580 million people for its manufactured goods.

In the new environment of liberalized regional trade, there will be both winners and losers. For example, Thailand's agricultural sector is more vulnerable to increased ASEAN competition than the industrial sector.

If the government and farmers do not adapt quickly enough, the dominant market position of Thai rice, tapioca or rubber will be jeopardized because their import duties are now zero.

For example, there will soon be cheaper rice from Vietnam or Burma or Cambodia or Laos entering the Thai market. To defend the home turf, it's time to focus seriously on the higher quality of Thai rice as a major selling point, and to take action to boost Thai farm yields so that we can sell more to our ASEAN neighbors.

For both industrial and farm goods, cost-cutting is another key strategy to embrace in order to survive the increased competition.

The ASEAN Free Trade Agreement (AFTA) means Thai firms can now source raw materials and semi-finished products as inputs for their production in Thailand throughout the 10-country grouping. Or they may consider relocating their factories to another ASEAN country to tap the advantageous factors of that host country, which cannot be found in Thailand. This will lower their production cost and increase competitiveness not only in ASEAN but also in the global market.

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