Malaysia and Thailand sought today to cast aside economic rivalries and work towards closer integration to boost their industries and tap growth potential in Asean's markets.

Malaysian Prime Minister Dr Mahathir Mohamad said there could be a "degree of integration of the five southern provinces of Thailand and the northern Malaysian states of Kedah, Perlis and Kelantan."

Despite the formation of the Association of Southeast Asian Nations Free Trade Area (AFTA) to integrate the economies of the 10 member states, Mahathir said they should also work towards greater bilateral cooperation.

But in a keynote address at a two-day Malaysia-Thai technology and business forum here he cautioned such integration must be gradual and carefully executed as it involved national interests and may disrupt local businesses and workers.

EU experience

Mahathir cited the European Union experience as an example, noting that the introduction of the euro had raised the cost of living among poorer members, leading to higher wages and turning Europe into a high-cost area that led to an influx of cheap labour from Asia and Africa.

Similarly, an influx of cheap Thai products could push Malaysian products off the shelf and make industries here non-viable, while low wages for Thai labourers may cause unemployment for Malaysians.

On the other hand, Malaysians' higher purchasing power could push up prices and cause inflation in Thailand, undermining its cost advantage, he said.

But both nations must "put aside our suspicions of each other, seek areas of agreement" and implement measures to enhance cooperation, beginning with designated border areas, he added.

Thailand Prime Minister Thaksin Shinawatra said industrial clusters could be formed in designated border areas to build the competency of their entrepreneurs.

Opportunities not shut

Despite recent economic uncertainties, he said opportunities in Asean's market of 500 million people were "far from being shut off."

"Considering the total GDP of Asean, it could be sustained well over US$730 billion. I believe that in terms of long-term growth, Asean will be the most dynamic economy of Asia after China," he said.

Asean is Malaysia's top trading partner while Thailand's exports to the region have grown an average 20 percent a year in the last decade.

But Thaksin said recent crises to hit the region, from the 1997 Asian economic turmoil to terrorism and the SARS outbreak, had taught Asean nations that they must accelerate integration among themselves.

He called for deeper Malaysia-Thai collaboration in areas such as tourism, the automotive sector, food production, information technology and high-tech industries as they move towards knowledge-based economies.

Stay together

Malaysia is currently Thailand's fifth largest trading partner, with total trade surpassing US$6 billion last year, he said.

"No man is an island. We cannot struggle alone and we cannot survive if we are left behind. So we have to stay together, pool our strength towards building a strategic alliance," he said.

Businesses could pool resources to cut costs, conduct product testing and standardization, seek co-funding and venture capital and build a joint supply, chain among others initiatives, he added.

Both Mahathir and Thaksin witnessed the signing of a joint declaration by their science ministers to deepen technology and business cooperation.

It aims to "improve the technology-driven competitiveness of both nations" and promote public-private sector cooperation, according to a statement at the two-day forum attended by some 300 government officers and businessmen.

Mahathir and Thaksin were scheduled to hold bilateral talks later today. - AFP