IMT-GT Studies Center : Database of Research

Abstract  1999/2542

             The  Indonesia-Malaysia-Thailand  Growth  Triangle  or  IMT-GT  was  established  in  1993,  following  the  feasibility  study  and  the  cooperation  framework  of  the  Asian  Development  Bank.   It  primarily  focuses  on  cooperation  from  the  private  sector  with  support  from  the  private  sector.   Its  main  goal  is  to  promote  the  common  use  of  economic  resources  to  achieve  the  highest  potential  in  production,  investment,  technology  transfer  and  infrastructure  links  to  reduce  transportation  costs,  enabling  the  IMT-GT   products  to  be  competitive  in  the  global  market.   This  project  covers  some  parts  of  the  3 countries:  5 southern  border  provinces  of  Thailand  (Songkhla,  Pattani,  Narathiwat,  Yala  and  Satun),  4 Malaysian  states  (Kedah,Perlis,  Perak,  and  Penang)  and   the  North  of  Indonesia  (Medan,  Banda  Aceh,  Aceh  and  Riau).   One  factor  contributing  to  the  economic  cooperation  of  the  IMT-GT   is  that  each  area  has  different  products.   For  example,  the  South  of  Thailand  produces  vegetables,  fruits  and  rubber  trees,  while  the  North  of  Sumatra  is  abundant   in  oil,  natural  gas  and  sea  products,  and  the  North  of  Malaysia  gains  advantage  from  its  electronic  industry,  palm  oil  and  rubber  products.   However,  the  restraints  of  the  IMT-GT  project  are  the  poor  quality  of  labor  and  human  resources,  lack  of  public  utilities  -communications  and  land,  sea  and  air  transportation  – and  uncoordination  in  the  investment-trade-customs  policy  and  transport  procedures  among  the  threesub-regions.
           The  trade  strategy  under  the  Indonesia-Malaysia-Thailand  Growth  Triangle  is  to  find  some  means  to  increase  the  trade  potential  between  Thailand  and  Malaysia,  and  Thailand  and  Indonesia  under  the  IMT-GT  .  This  research  study  covered  3 areas,  i.e.,  trade  liberalizations,  trade  facilitations  and  overall  trade  forecasts  between  Thailand  and  Malaysia   and  Thailand  andIndonesia
           The  study  of  Thailand’s  trade  situation  in  the  IMT-GT   zone  has  revealed  that  since  its  border  connects  with  Malaysia,  Thailand  is  engaged  in  trade  with  Malaysia  by  land,  (cars,  trains)  by  sea  and  by  air.   There  are  11  border  checkpoints  in  5 provinces.   The  Thailand-Malaysia  border  trade  accounts  for  about  35  percent  of  the  total  Thailand-Malaysia  trade  value.   Particularly,  transport  links,  along  with  customs  and  border  trade  facilitations,  now  help  to  promote  more  border  trade.   The  trade  problems  with  Malaysia  under  IMT-GT   are  Malaysia’s  trade  protectionism  in  importation  and  packaging,  transportation  of  goods  in  transit,  high  tariffs,  port  inconvenience,  and  smuggling  is  prevailing.   Trade  with  Indonesia  under  IMT-GT   still  has  some  limitations.   First,  both  countries  have  a similar  production  structure.  Most  trade  is  done  through  Malaysia  .  There  is  little  border  trade  between  Thailand  and  Indonesia.   Because  of  no  common  border,  trade  has  to  be  done  bysea.
           AFTA,  APEC  and  WTO  and  the  potentiality  of  doing  so  depends  upon  trade  facilitations  in  Thailand’s  IMT-GT  zone.   Its  facilitating  agencies  include  the  public  and  state  enterprise  sector  and  the  private  sector.   The  facilitation  problems  with  Malaysia  are  availability  of  information  for  decision-making  on  trade  and  investment,  readiness  of  export  processing  zones,   transportation  system  and  custom  formalities.   On  the  contrary,  there  are  few  facilitation  problems  with  Indonesia,  as  both  countries  have  no  commonborder.
           In  order  to  increase  Thailand’s  trade  potential  under  IMT-GT  , this  study  employed  the  trade  data  of  the  years  1993-1998  to  forecast  the  trade  value  for  the  years  1999-2001   between  Thailand  and  Malaysia  and  between  Thailand  and  Indonesia  by  the  Box-Jenkins  technique  and  by  Multiple  Regression  Analysis  (MRA).   The  results  indicated  similar  trends  because  the  figures  derived  from  the  two  techniques  were  closed,  resulting  in  entrepreneurs’  more  confidence  in  theforecasts.
           Meanwhile,  the  research  team  constructed  a questionnaire  for  entrepreneurs  in  the  5 southern  border  provinces  to  seek  their  opinions  about  the  IMT-GT  project,  trade  problems  and  obstacles,  suggestions   about   trade  cooperation  in  such  areas  as  trade  liberalizations,  trade  facilitations  and  others.   The  results  showed  that  about  85  percent  of  the  respondents  agreed  to  the  notion  of  cooperation  under  the  IMT-GT  project  and  92  percent  agreed  to  trade  cooperation  in  transportation  and  communication.   The  respondents  found  trade  cooperation  the  most  fruitful.   Several  trade  problems  and  obstacles  under  the  IMT-GT  zone  are  complicated  customs  regulations  (55%),  a too  short  period  of  the  opening  and  closing  of  checkpoints  (51%),  complexity  of  the  regulations  of  goods  in  transit  (49%),  high  tariffs  (47%),  and  import  prohibition   and  restrictions.   The  respondents  suggested  that  to  materialize  free  trade,   Thailand  should  talk  with  Malaysia  or  abolishing  or  reducing  tariffs  or  special  fees.   As  for  non-tariff  measures,  restrictions  of  packaging  and  import  quotas  should  be  abolished.   In  trade  facilitations  to  support  free  trade,  the  entrepreneurs  suggested  having  customs  checkpoints’  time  extended  to  24  hours  and  going  through  only  single  inspection  point.   In  addition,  they  wanted  common  insurance  companies  and  freedom  for  their  cargo  trucks  to  pass  the  border,  and  soon.
           Moreover,  the  research  team  constructed  a questionnaire  for  entrepreneurs  and  government  agencies  in  the  5 southern  border  provinces  to  collect  the  data  about  trade  facilitations  and  services  from  different  agencies.   About  70  percent  and  87.5  percent  of  the  questionnaires  were  returned  from  the  former  group  and  the  latter  group,  respectively.   It  was  found  that  they  wanted  the  Customs  Department  to  improve  the  computer  systems  and  to  have  single  tariff  forms  for  use  in  all  the  sub-regions   under  the  IMT-GT  (73.5%  and  91.4%).   They  also  preferred  only  single   Thailand-Malaysia  inspection  (63.7%  and  71.4%).   In  transportation,  they  wanted  freedom  to  transport  goods  across  the  border  (75.5%  and  82.9%).   Besides,  they  wanted  the  Songkhla  port  developed  (72.5%  and  88.6%)  and  to  have  only  one  country  to  inspect  goods  in  transit.   In  the  agricultural  sector,  they  wanted  a common  agricultural  market  set  up  for  the  IMT-GT  (67.6%  and  91.4%)  and  to  have  slaughterhouses  of  Halal  standards  (54.9%  and  91.4%)  .  In  the  industrial  sector,  they  wanted  a special  economic  zone,  a free  trade  zone  or  a duty  free  zone  in  the  IMT-GT  (74.5%  and  88.6%).   Also,  they  wanted  the  Board  of  Investment  to  grant  more  privilege  to  investors  in  the  5 southern  border  provinces  than  those  in  Zone  3.   As  for  information  and  trade,  the  entrepreneurs  still  needed  information  about   non-tariff  barriers  (67.6%  and  82.9%)  .  They  would  like  to  import  more  goods  from  the  IMT-GT  to  Thailand  (65.7%  and  77.1)  and  to  urge  the  Thai  Chamber  of  Commerce  to  coordinate  more  with  the  Joint  BusinessCouncil.
           The  study  on  trade  strategy  under  Indonesia-Malaysia-Thailand  Growth  Triangle  covered  3 areas  altogether,  i.e.,  trade  liberalizations,  trade  facilitations  and  trade  forecast.   In  determining  a trade  strategy,  it  was  recommended  that  these  three  areas  be  integrated  and  promoted  and  that  an  aggressive  trade  strategy  be  used  when  Thailand  has  a high  trade  potential  and  a defensive  trade  strategy  when  it  shows  a low  trade  potential.   Such  trade  strategies  will  prevent  Thailand  from  too  muchdisadvantage.

IMT-GT Studies Center(Thailand), Prince of Songkla University
P.O.Box 102 Hatyai, Songkhla,THAILAND 90110
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