1 Trade & Transport facilitation issues with Thailand Asst. Prof. Ruth Banomyong (PhD) Thammasat Business School

2 AGENDA Definition & scope of Trade & Transport Facilitation Benefits of Trade & Transport Facilitation Facilitation related agreements Trade with Thailand

3 What is Trade & Transport Facilitation? No standard definition The objective of TTF is to reduce transaction costs of international trade while maintaining efficient and effective control. Finding the right balance between control and facilitation.

4 Scope of Trade & Transport Facilitation Customs Rules & regulations Trade procedures & documentation Transit issues Logistics Security ICT Finance

5 Benefits of Trade & Transport facilitation To Government –More effective control methods –Better data accuracy & possibly more revenue To Traders –Lower administrative & compliance cost –Reduced processing/clearance time To Society at large… –Lower cost of imported goods –Increase export competitiveness –Indirect poverty reduction

6 A National Trade Facilitation Body The Ministry of Transport has a Transport facilitation committee. UNCTAD has implemented a “cluster” development to facilitate trade and transport in Lao PDR since March 2005.

7 A World Bank Audit Methodology for Trade & Transport Facilitation To alleviate poverty and gain access to trade Borders impose complex barriers WB invests a lot in ports, airports & roads Investments will not yield full returns unless there is associated trade facilitation publicat/twu-46.pdf

8 Lao transit related agreements Bilateral Asian Development Bank (ADB) Association of South East Asian Nations (ASEAN) United Nation Multilateral Treaties

9 Bilateral With Thailand –1978 Agreement on transit trade –1999 Agreement but still difficulties in protocol implementation With Vietnam –1991 Agreement on transit trade –1999 Agreement on road transport –2000 Agreement on transit trade With Cambodia –1999 Agreement on road transport

10 ADB agreement G.M.S Trilateral Agreement for the transportation of goods & people –Thailand, Lao PDR, Vietnam Cambodia acceded in 2001 China acceded in 2002 Myanmar expression of interest The GMS agreement has been designed to harmonise individual bilateral agreements among the members’ countries, in particular, the harmonisation of customs and immigration procedures.

11 ADB Led-agreements Even though ADB led agreements have been signed for transit facilitation but their implementation is still lacking. The issue of ‘single window’ customs inspection is currently being finalised with a pilot between Dan Sawanh & Lao Bao starting at the end of 2005.

12 ASEAN Framework Agreements Facilitation of Goods in Transit –Hanoi 1998 Inter-state traffic –Unsigned Multimodal transport –Unsigned but is expected for, 2005?

13 International Trade Multilateral treaties None related to Customs or Multimodal Transport matters Convention on Transit Trade of Land- locked States, New York, 8 July –8 July 1965 (Signed) –29 December 1967 (Ratified)

14 Trade with Thailand Nongkhai is the most important province for Thai-Lao PDR: –border-trade –transit trade More than 90% of Lao transit trade goes through Nongkhai.

15 Thai-Lao Transit trade value (million US$) Official transit Lao transit exportLao transit import border post Nongkhai Mukdahan Piboon Nakorn Phanom Bungkarn Chiengkhane Thalee TOTAL

16 Trade with Thailand Carriage of transit goods can only be done through designated and licensed hauliers. Formerly only 5 licensed operators for transit cargo: –Express Transport Organisation (ETO) –Ubonsahatham –Regional Container Line (RCL) –TL Enterprises –State Railway of Thailand (SRT).

17 Trade with Thailand As of April 2005, there are 172 Thai trucking companies with a total fleet of 5,139 vehicles with international transport permit Only 11 operators have specifically applied for the international transit permit. The traditional operators are still dominant but freight rates have gone down by 20 to 30%. Fuel cost increase may not lead to a sustained reduction in freight rates.

18 Trade with Thailand Export from Lao PDR into Thailand can move: –in any Thai registered vehicle –in Lao registered vehicle for delivery only within Nongkhai province. –transload of export or transit cargo in Nongkhai.

19 Example of difficulties with Thailand Transit shipment ex-Pakse via Piboon via Bangkok to Le Havre in France. Export of ‘Palm Beer’ Must export via Vientiane (~750 km north) as it is the only officially recognised transit point for tobacco & alcohol.

20 Reasons behind difficulties –The Excise Department: special permit for cigarettes and alcohol. –The Royal Forestry Department: Timber and other wood products permit. –Department of Livestock: authorisation permit for leather or other animal part and body. –Ministry of Interior: Weapons and explosives permit.

21 Thai transit related agencies and fees State Agency Cost (with receipt) Cost (without receipt) DelayService Provided Royal Forestry Department Baht 200 per 1 set of transit documents Baht per cubic meter depending on type of timber 1 day Issuance of permit document Livestock Department Baht 200 per 1 set of transit documents None1 day Issuing of permit document Excise Department Baht 200 per 1 set of transit documents None1 day Issuing of permit document Customs Department (Nongkhai*) Bath 270 per 1 set of transit documents NoneN/A

22 Export via Bangkok (Thailand) Cost per TEU to Bangkok quoted at ~ USD 800/TEU (FAK) –Vientiane-Nongkhai quoted at ~USD 116/TEU –Nongkhai-Bangkok quoted at ~ USD 500/TEU Distance just under 700 km. Non-transport related cost estimated at around 40% of total cost for FOB Bangkok.

23 Thai-Lao Border crossing charges Total : 131 $

24 Comparison of transit cost

25 Comparison of average transit time

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27 Questions? Comments? Thank You For Your Attention!