Thailand's Economic Integration with Neighboring Countries and Possible Connectivity with South Asia

Abstract

Thailand's increasing importance as a regional co-production base and as an intra-regional trade and border trade hub is due mainly to recent changes in its economic structure, namely, the lack of operational workers, rises in wages, and increases in outward foreign direct investment (FDI), together with a change of regional policies in Southeast Asia. As a result, improvements in physical connectivity, trade facilitation, energy cooperation, and financing infrastructure play an important role within an ongoing Association of Southeast Asian Nations (ASEAN) framework. Extending connectivity to South Asia could also complement the current promotion of regional trade and regional production networks. This paper reviews the current stages of Thailand's intra-regional trade, physical connectivity, trade facilitation, energy cooperation, and infrastructure funding as there are projects planned in these areas that could impact Thailand and its links to Southeast Asia and beyond to South Asia. However, Thailand's political instability impedes the progress and implementation of such projects. The paper also examines the current financing mechanism of Thailand's infrastructure projects that relies heavily on public spending. The authors propose strategies to promote Thailand's physical infrastructure, trade facilitation, and energy cooperation with the mainland countries of Southeast Asia and South Asia.

Keywords: Thailand, infrastructure, infrastructure financing, project finance, public-private partnerships

JEL Classification: F15, F36, H54