Fleet-footed Thailand leading ASEAN race for deals with China

Fleet-footed Thailand leading ASEAN race for deals with China
Thailand's Prime Minister Prayut Chan-O-Cha (L) prepares to shake hands with Chinese President Xi Jinping (R) before their meeting at the Great Hall of the People in Beijing on December 23, 2014.

Everybody in this region knows that Thailand - no matter which government is in power - wants to be the first among equals in engaging with China. Up to this point, every country has had to look forward to deals with China, but now Thailand is at the forefront.

The military-run government under General Prayut Chan-o-cha has done even more than the others to serve the Chinese role in Southeast Asia - since his May 22 coup steered Thailand away from the West's political and economic superpowers.

Prayut visited China on Monday only a day after Chinese Premier Li Keqiang left Bangkok at the end of the Greater Mekong Sub-region (GMS) summit on Saturday. The two governments signed six memoranda of understanding and agreements within only four days.

The first two pacts for cooperation on railway development and the purchase of Thai farm products signed were in Bangkok while Li was in town. The other four - on currency use, plus stock and water management - were signed in Beijing while Prayut was there.

Indeed, they could have signed all the documents in one visit by either party, but the two leaders wanted to show the international community the first two pacts were in the Thai interest while the latter four were for the Chinese. The overall deal is of mutual interest, which China must earn to get more.

The MoU on railway development was highlighted by both Prayut and Li during the GMS summit in Bangkok as a showcase for other Mekong countries. Thailand made the decision - the right one the Chinese would say - to choose Chinese technology and financial arrangements to complete the physical connection for transport in the region.

The Mekong countries under the Asian Development Bank-sponsored GMS have had an ambition for two decades for an entire regional rail network, ideally to link Southeast Asia - beginning from Singapore - with the southern Chinese city of Kunming.

Twenty years on, the dream has still not materialised. There are many missing rail links in the region. Laos has no rail lines while Cambodia has many rail sections that are broken or in poor order.

Laos has dealt with Beijing for a long time in the hope of a railway from its northern border with China to the capital Vientiane, eventually to connect across the Mekong River to Thailand. Given that economic activities in Laos are limited, a rail line in that portion may not be viable for investment. The Chinese demand to utilise land alongside the rails, made it hard for Laos to give a final decision.

Prime Minister Prayut told reporters after the GMS summit that the Thai-Chinese deal on rail development from Nong Khai to Bangkok and Map Ta Phut would convince Laos to decide to jump on the bandwagon of a Chinese train system.

Premier Li said Chinese standards, equipment and manufacturing capacity would be used to build the Thai railway, which would help China export its manufacturing capacity to the rest of the world.

Prayut has also helped fulfil a Chinese financial ambition to make the renminbi yuan a regional currency. During his visit to Beijing on Monday, Thai and Chinese central banks signed an extension of the Renminbi-Thai Baht Bilateral Swap Agreement (BSA) and an MoU to establish renminbi clearing arrangements in Thailand.

China has a BSA with many countries in this region, including Malaysia. The yuan clearing-house would facilitate access to and use of the Chinese currency for trade and investment in Thailand and the region. This will be more convenient as economic transactions increase, and if western currencies like the US dollar, fluctuate.

Within just one exchange visit, Prayut can fulfil Chinese roles in physical and financial connectivity. Li said he looked forward to more use of the Chinese yuan in trade and investment settlements, as well as more technology cooperation between the two countries.

During a bilateral meeting in Beijing, Li told Prayut he hoped the Thai government would support and facilitate Chinese participation in the exploitation of potassium resources in Thailand - a project which the Chinese leader is well aware is strongly opposed by local residents in Udon Thani.

Things will never come for free - so let's see who will pay more and get less.

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