Thailand seeks to boost clout with regional pact

Thailand seeks to boost clout with regional pact

Reuters Bagan, Myanmar

Thailand, seeking to boost its regional influence and improve prickly relations with its neighbors, pledged on Wednesday to offer soft loans to Laos, Cambodia and Myanmar and waive import duties on their goods.

"The summit is an auspicious start for four countries which used to be suspicious of one another," Thai Prime Minister Thaksin Shinawatra told reporters after signing an economic agreement with his three counterparts at a summit in Myanmar.

"Soon we will have four nations, one economy in which our neighbors will supply us farm land and raw materials and we will be their producer and seller of their goods."

In their final communique, the leaders pledged to work together to accelerate economic growth and resolve differences through "mutual understanding, confidence and good neighborliness".

Wealthier Thailand's big-brother-on-the-block image has often led to strained relations in the region.

Thaksin sparked a war of words with Myanmar in August when he ordered Thai troops to kill Myanmar drug smugglers and hinted Thailand may go after drug factories across the border.

Thailand's relations with Cambodia were damaged severely in January when mobs torched the Thai embassy and several Thai businesses in Phnom Penh.

Diplomatic ties, downgraded in the aftermath of the riots, have been restored, but damaged Thai businesses are still arguing about compensation from Cambodia.

Thailand, with an economy eight times the combined size of its three neighbors, is pushing for a new trade zone it says would uplift their economies and strengthen regional stability.

Bangkok sees economic development as the best way to deal with the flow of migrant labor, refugees and drugs from its impoverished neighbors.

Military-ruled Myanmar, Communist-led Laos and newly democratic Cambodia, still recovering from the "Killing Fields" of the 1970s, will be offered about 11 billion baht ($275 million) in grants and soft loans for development projects.

Analysts say the so-called Economic Cooperation Strategy will pry open doors for Thai companies, particularly in Myanmar where vast energy reserves are coveted by Thailand to power its auto, electronics and textiles factories.

Myanmar awarded two offshore blocks to Thailand's PTT Exploration and Production PCL on Wednesday. Thailand also agreed to help Myanmar develop its downstream gas sector, everything from pipelines to petrochemical plants.

"The zone reportedly will foster a high degree of economic dependence on Thailand for the three countries, solidifying Bangkok as the preeminent political power in peninsular Southeast Asia," Strategic Forecasting said in a report.

Thaksin has been touted as Southeast Asia's next leader following the retirement of Malaysian Prime Minister Mahathir Mohamad last month.

While Thailand stands to gain the most, closer ties will relieve pressure on neighbors shunned by the West.

"Myanmar and Laos will benefit greatly from being able to circumvent current or future trade sanctions imposed by the United States and Europe by running its commodities and finished goods through Thailand," said Strategic Forecasting.

The promise of loans to Myanmar is a practical example of Thaksin's "constructive engagement" policy he says will draw the once wealthy, now poor country towards democracy.

Thaksin scorns U.S. and European sanctions on Myanmar as an non-Asian way of dealing with an Asian problem.

The United States and the EU have tightened sanctions since Myanmar's generals detained democracy icon Aung San Suu Kyi after a violent clash between her supports and government backers on May 30.