HA HUY THANH
A senior researcher, deputy director of the Institute of Economics, Hanoi.

In last 20 years, there have been 3 important historical events which-significantly influenced on Vietnam-Thailand economic relations. First, on August 6th, 1976 the diplomatic relationship between Thailand and Vietnam was established. Since then the cooperation between the two countries has gradually improved in many different areas. Second, with the visit of Thailand's Premier Chatichai Choonhavan to Vietnam in 199O, the policy on returning the battleground back into a market place has been gradually implemented by the efforts of both sides and for the regions interests. It could be asserted that the opening of these diplomatic relations is the first in the development of other activities, including economic cooperation. And third, Vietnam's joining ASEAN in July 1995 opened new perspectives for economic cooperation between Vietnam and other ASEAN countries, including Thailand. This article presents trade relationship between Thailand and Vietnam in last 20 years, and Thailand's direct investment in Vietnam in order to show future trade and investment prospects between two countries . .

I. TRADE BETWEEN THAILAND AND VIETNAM.

During the 1970s, Thailand was one of Vietnam's trading partners. The trade between Vietnam and Thailand during this time, however, was limited by the small volume along with an unstable political situation within the region. Thailand's export to Vietnam accounted for I . 1-1 .7% of the total volume of its annual export, while import from Vietnam represented only 0.07% of Thailand's total import.

Chart 1. Import and export values between Vietnam and Thailand for period 1972-l979 (Million US$)

Just after establishment of diplomatic relations between two countries, trading relations significantly improved. During 3 years 1977-1979, export and import value increased more than 3 times. During the first half of 1980s, the export-import relationship between Vietnam and Thailand suffered due to complicated political problems within the region. In the context of USA's embargo against Vietnam and regional conflicts, trading activities between Vietnam and Thailand almost stopped. In 1986, trade value was only 4.7 million USD. The Sixth National Congress of the Communist Party of Vietnam, held in December, 1986, decided to take renovation into all activities of the country, including economic, and social activities. Since then, expanding Vietnam's external economic relations has been a primary objective and

an important prerequisite for the implementation of the country's political tasks and socio-economic targets. For Thailand, the span of 1987-1988 was the time in which Thai's economy began rapidly to develop. The GDP growth rate was about 10% . It appeared that there was a need to import more raw materials for increased domestic production. The changes in foreign economic relations of Vietnam along with import requirements of Thailand have helped to promote a trade relationship between both countries. The level of export-import between Vietnam and Thailand in the period 1985-1993 has developed much more than for previous periods.

Chart 2. Export-import values between Vietnam and Thailand, 1985-1993 (In US$ million)

During 1990s, trading activities between both countries significantly expanded. The growth rate of trade turnover increased and reached 45.0% in 1994 and 72.7% in 1995.(Table 1)

Table 1: Vietnam's trade with Thailand (1991-1995)

	1991	1992	1993	1994	1995
Total turnover(mill.bath)	3538.3	3985.5	5076.4	7365.4	12721.1
+Exports	2970.1	2038.0	2145.7	985.2	1073.8
+Imports	568.5	1947.5	2930.7	6380.1	11647.3
+Vietnam's deficit	+2401.6	+90.5	-785.0	-5394.9	-10573.5
Growth rate (%)	22.9	12.6	27.3	45.0	72.7
+Exports	-	-31.3	5.2	45.0	72.7
+Imports	-	242.5	50.4	117.7	82.5

Source.' Vietnam Economic Time, June 1996.

- Although the export-import ･value between the two countries has developed at a fast pace, it accounted for only 0.2% of total annual export-import value of Thailand. Looking at the goods that have been exported and imported between the two countries we can see that there has not been high value goods. Thai goods exported to Vietnam included : . Polyester fabric . Chemical substances . Fishing nets . Pharmaceutical materials . Lacquer . Iron tubes . Some types of machinery. According to statistics given by the Ministry of Trade of Vietnam, there wasn't any consumer goods imported from Thailand, nevertheless, there are various kinds of Thai consumption goods available in Vietnam. It could be that these goods have been imported into Vietnam illegally or re-imported from Cambodia and Laos. Vietnam's goods exported to Thailand included:

. Wood: In some years wood has made up 60% of the total export-import values between Thailand and Vietnam, even though the export of wood has been prohibited . . Cattle hides: The amount of cattle hide exported has greatly decreased as the Government of Vietnam now has a policy to decrease the export of raw materials. . Metals: This good has increased in recent years. . Sea products.

. Rice: In Thailand's official statistics there are no figures on rice importation from Vietnam, there is, however, data in Vietnam's official statistics that support the view that rice is being exported to Thailand. It could be explained by the way that Vietnamese rice are exported to Thailand and again Thailand continues to export to other market or it is only transferred through out the Thai's border-gate. Other small value goods such as: granite, silk, jute. There could be made some concluding remarks on trade relations between Vietnam and Thailand as follows: 1 . Export-import values between Vietnam and Thailand are still small although gradually increasing. At the present time Thailand's trade with Vietnam ranks 8th in the list of large trading partners of Vietnam (after Singapore, Japan, Hong Kong, Russia, France, Republic of Korea, and Taiwan). 2. The goods structure imported-exported between Thailand and Vietnam appears not to have changed over the past several years. Many of the exported goods of Thailand and Vietnam are similar such as rice, textile, clothes. For that reason in many cases Vietnam and Thailand are competitors in trade. 3. Vietnam now is in the beginning stage of industrialization. The needs for modern technologies are very high. Looking at the structure of Thailand's economy, Thailand would be unable to meet the presents technological demands of Vietnam.. Also Vietnam can not be the only supplier to Thailand for raw materials. That is one of the reasons why the increase in value of export-import between Vietnam and Thailand will be limited.

II . THAILAND'S DIRECT INVESTMENT TO VIETNAM.

In 1991, four years after the Vietnamese Government establish the Law on Foreign Direct Investment, Thai companies began to establish joint ventures with Vietnamese companies in Vietnam. Total number of registered projects is 96, however, 24 projects were dissolved before expiration date.

As of March 1997, 72 projects are in operation with approx. I billion dollars of registered capital . Those projects turn out 93 million dollars annually and provide jobs for 2,550 people. Thailand ranks 9th among 56 countries having investment projects in Vietnam.

In accordance to the number of projects and total invested capital , direct investment from Thailand into Vietnam is as following (Table 2).

Table 2: Number of Thai's FDI projects and registered capital in Vietnam

	1991	1992	1993	1994	1995	July 1996
Projects	5	6	11	19	13	6
Total capital(US$ mil.)	20.5	23.0	79.9	198.2	135	190

Among 57 projects existing as of July 1996 with a total investment capital of US$480,680,000 there are 38 joint ventures with a totalinvestment capital US$343,342,000, a further 18 projects have 100% investment capital from Thai companies and I project !s based on an business cooperation contract.

Thailand's investment projects are concentrated in the following areas : agriculture and sea processing products, livestock food production, hotel and tourist services, production and business of construction materials. The distribution of projects by business area is as following (Table 3).

Table 3: Thai FDI projects by sector (AS of December 1996)

Sector	Number of projects	%	Registered capital (Mill. USD)	%
Industry	39	63.9	275.0	46.8
Tourism and hotel	12	19.6	192.2	32.7
Finance and banking	3	4.9	45.0	7.6
Other	7	11.6	55.1	12.9
TOTAL	61	100	587.3	100

Thai's direct investment in industry was mainly for processing natural resources , namely:
- Agricultural and sea product processing: 14 projects with total US$ 44.3 million.
- Stone processing: 4 projects with total US$ 17.6 million.
- Production and business of construction materials: 7 projects with total US$ 33.2 million.

Among countries having biggest number of license withdrawals, Thailand ranks second, after Hong Kong. The reason behind is financial inability of small companies. or bad market research performance leading to difficulties in products realization. or variances between partners.

Based on the implementation of Thailand's direct investment in Vietnam over the past several years the following conclusions can be drawn:

1. Thailand's direct investment into Vietnam is characterized by small size projects . These projects are mainly concentrated in agricultural and sea processing. hotel and tourist services. There are no projects that focus on industry production or infrastructure development.

2. Most companies investing capital in Vietnam are small scale companies with limited capital.

3. There are no projects using high/modern technology.

Under the present conditions of Vietnam's development, appropriate technology transfer is used to increase employment and income of the labor force, this is one aim of socio-economic development. For that reason. transfer of appropriate technology from Thailand and other ASEAN countries to Vietnam will be encouraged by the Vietnamese Government.