WORLD TRADE
ORGANIZATIONG/SCM/N/95/THA
G/SCM/N/99/THA
23 July 2003
(03-3947)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notification Pursuant to Article XVI:1
of the GATT 1994 and Article 25 of the Agreement
on Subsidies and Countervailing Measures1
Extension Under SCM Article 27.4 of the Transition Period for the
Elimination of Export Subsidies Pursuant to the Procedures
in Document G/SCM/39
THAILAND
The following communication, dated 11 July 2003, has been received from the Permanent
Mission of Thailand.
_______________
Thailand is pleased to inform the SCM Committee that two of Thailand’s subsidy
programmes, notified herein as item III: Packing Credit Facility and item IV: Direct Packing Credit
Facility, have been terminated since 31 December 2002 in accordance with Article 27.4 of theAgreement on Subsidies and Countervailing Measur es (SCM Agreement). Also pursuant to SCM
Agreement Article 27.4, Thailand has commenced the phase-out of item V:  Export Market
Diversification Promotion Programme.
Moreover, Thailand has commenced its elimination of export subsidies receiving an extension
under SCM Agreement Article 27.4 of the transition period under Article 27.2(b), in compliance with
G/SCM/101 and G/SCM/102.  As notified in G/SCM/101/Suppl.1 and G/SCM/101/Suppl.2, as of
1 January 2003 Thailand has eliminated the export requirement for the Export Processing Zone, which
is notified herein as part of item VIII:  Industrial Estate Authority of Thailand.  Regarding the current
status of the legislative amendment of the IEAT Act as per the workplan submitted to the SCMCommittee in G/SCM/101/Suppl. 1, the Cabinet is currently considering the bill and will soon
propose it to the Office of the Council of State for verification (Number 5).
In addition, as notified by Thailand via various documents such as G/SCM/N/71/THA,
G/SCM/N/71/THA/Supp l.1, G/SCM/Q3/THA/7,  G/SCM/Q3/THA/10, G/SCM/Q3/THA/17,
G/SCM/Q3/THA/20, and G/SCM/Q3/THA/23, as well as via several consultations between Thailand
and the SCM Committee and members thereof, Thailand has satisfied the standstill requirement and
has commenced the phase-out and elimination requirements contained in G/SCM/102 for the Board of
                                                     
1 This notification, in particular the relevant sections of items I and VIII, also satisfies the annual
transparency and notification provisions contained in G/SCM/101 and G/SCM/102.G/SCM/N/95/THA
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Investment Programme, details of which are notified herein as part of item I: Investment Promotion
Incentives.
TABLE OF CONTENTS
Page
I.      INVESTMENT PR OMOTION  I NCENTIV ES ..................................................................2 .
II.      CREDIT RE FINANCING SC HEMES..................................................................................5
III.  PACKING CREDIT FACILITY............................................................................................6
IV.  DIRECT PACKING CREDIT FACI LITY ...........................................................................8
V.      EXPORT M ARKET DIVERSIFICATION PROMOTION PROGRAMME ...................9
VI. MERCHANT MARI NE FINANCI NG .................................................................................11
VII. MACHINERY UPG RADING FI NANCING .......................................................................13
VIII. INDUSTRIAL ESTATE AUTHOR ITY OF THAIL AND (IEA T).....................................15
I. INVESTMENT PROMOTION INCENTIVES
1. Title of the subsidy programme
Investment Promotion Incentives
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
Investment promotion incentives aim at promoting the establishment of industries in Thailand
to accelerate the country’s industrialization process and encourage regional development.  During
recent years, investment incentives have been gear ed towards decentralization to address the on-going
development disparities between the urban and rural areas in accordance with the Thai Government’s
policy theme of regional development.
4. Background and authority for the subsidy
The legal basis of the investment promotion incentives is the Investment Promotion Act
(1977) amended in 1991 and 2001.  The responsible authority is the Office of the Board of Investment
(BOI).
G/SCM/102: Decision of 19 December 2002, grants Board of Investment projects with an
export requirement an extension under SCM Agreement Article 27.4 of the transition period under
Article 27.2(b).  For details concerning the operation of these projects and other details as required in
G/SCM/102, see G/SCM/Q3 /THA/1 to G/SCM/Q3/THA /23, as well as the responses below to
question 7:  Amount of the subsidy and question 8: Duration of the subsidy and/or any time limit
attached to it.G/SCM/N/95/THA
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5. Form of the subsidy
Tax concessions such as exemption/reduction of corporate income tax, exemption/reduction
of import duties on machinery, reduction of import duties on raw materials, and special deduction ofcertain expenditures.
The new investment promotion policy, effective since 1 August 2000, has abolished the
export and local content requirements to comply with WTO obligations.
6. To whom and how the subsidy is provided
General
A wide range of activities covering primary, secondary, and tertiary sectors are eligible for
investment promotion incentives.  The scheme is not specific to any particular sector.  Moreover,
companies in every province in Thailand can have  access to the investment promotion incentives.
The Board of Investment has established the criteria in granting tax incentives, which are generally
based on the location of the investments.  The entire country is divided into 3 zones as follows:
Zone 1: Bangkok and vicinities (Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi,
and Nakhon Pathom)
Zone 2: Samut Songkram, Ratchaburi, Kanchanaburi, Suphanburi, Ang Thong, Ayutthaya,
Saraburi, Nakhon Nayok, Chachoengsao, Chonburi, Rayong and Phuket
Zone 3: The remaining 58 provinces (the least developed area of which per capita income
is below 85 per cent of the national average)
Zone 1 is granted the least incentives whereas Zone 3, the most disadvantaged and least
developed area, is granted the maximum incentives.  Since September 2002, most activities eligible
for investment promotion may be located in any zone  except certain activities that are required to be
located in industrial estates or zones for environmental safety reasons.
Factory Relocation
In order to further encourage decentralization, the Board of Investment also provides
incentives for the relocation of existing factories to other regions.  The following criteria are applied:
1. The operation must relocate from Zone 1 to Zone 2 or from Zone 1 or Zone 2 to
Zone 3.
2. The operation must relocate to an industri al estate or promoted industrial zone.
3. The existing operation must be closed down and the operation at the relocated
location must start within 2 years after receiving the promotion certificate.
The following incentives are granted:1. For relocation to Zone 2: Corporate income tax exemption for 5 years.
2
                                                     
2 Provided that such a project with capital investment of 10 million baht or more (excluding cost
of land and working capital) obtains ISO 9000 or similar international standard within 2 years from start-
up date of its new plant, otherwise the corporate income tax exemption will be reduced by 1 year.G/SCM/N/95/THA
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2. For relocation to 40 provinces in Zone 3:  Corporate income tax exemption for 8
years2; 50% reduction of corporate income tax for 5 year after the exemption period;
and double deduction from taxable income of water, electricity, and transportation
costs for 10 years3.
3. For relocation to 18 provinces which are the least developed and most disadvantaged
in Zone 3: Corporate income tax exemption for 8 years2; 50% reduction of corporate
income tax for 5 years after the exemption period; double deduction from taxable
income of water, electricity, and transportation costs for 10 years3; and deduction
from net profit of 25% of cost of installation or construction of infrastructure facilities
for 10 years starting from the date of first sales.
7. Amount of the subsidy
There is no specific budget earmarked for investment promotion incentives.  The information
on the subsidy per unit therefore cannot be provided.  No statistics on corporate income tax exemption
and reduction are available.
Pursuant to Thailand’s obligations under Article 27.4 of the SCM Agreement and the
standstill requirement in G/SCM/102, the Board of Investment has eliminated the export requirement
for projects applying for investment promotion incentives since 1 August 2000.  Therefore, no export
subsidies have been granted to new operators applying for such incentives since then.4  Furthermore,
Thailand has progressively phased-out BOI projects with an export requirement approved prior to
1 August 2000, which as notified in December 2002 totaled 532 projects, until as of 1 June 2003 only
158 projects remain.5  Details relating to these remaining 158 projects can be found in
G/SCM/Q3/THA/23, which Thailand recently submitted to the SCM Committee on 10 June 2003.
Details relating to projects phased-out throughout the year 2002 and the operation of these projects ingeneral can be found in G/SCM/Q3/THA/1 to G/SCM/Q3/THA/20.  In accordance with G/SCM/102,
none of these projects have been modified so as to make them more favorable regarding scope,
coverage, and intensity of benefits relative to the level of benefits that existed as indicated in
G/SCM/N/74, G/SCM/N/ 71/THA, G/SCM/Q3/THA/1 to G/SCM/Q3/THA/17 and suppl.1.
8. Duration of the subsidy and/or any time limit attached to it
The duration of the Investment Promotion Incentives programme is indeterminate.  However,
the incentives granted to each investment are subject to certain time limits.
Regarding investment projects receiving an extension under G/SCM/102, as previously
mentioned in G/SCM/Q3/THA/20 and G/SCM/Q3/THA/23, the BOI has formed a working group to
study the elimination of the export requirement for the 77 projects currently scheduled to expire
beyond the year 2005.
                                                     
3 Starting from the date of first revenue derived from promoted activity.
4 See, e.g., G/SCM/Q3/THA/17.
5 See G/SCM/Q3/THA/17, G/SCM/Q3/THA/20, and G/SCM/Q3/THA/23.G/SCM/N/95/THA
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9. Statistical data permitting an assessment of the trade effects of the subsidy
Statistics on Start-up of Investment Projects Gran ted Promotion Status by the Board of Investment
Year Number of Investment Projects Total Investment Volume
(billion baht)
1998 740 294.6
1999 526 205.3
2000 625 304.9
2001 611 267.9
2002 626 203.7
Source:   Office of the Board of Investment, Office of the Prime Minister, Thai Government
II. CREDIT REFINANCING SCHEMES
1. Title of the subsidy programme
Credit Refinancing Schemes
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
To provide financial assistance to priority sectors and projects through refinancing schemes.
4. Background and authority for the subsidy
The legal basis of this scheme is the Royal Decree Regulating the Affairs of the Bank of
Thailand B.E.2485, Section 12(4).  The responsible authority is the Bank of Thailand (BOT).
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
All of the refinancing schemes in 2002 remain unchanged from the year 2001.  However, on
11 January 2002, the temporary reduction of interest rate charged to financial institutions in
compliance with the BOT regulation arising from Small and Medium Enterprises or SMEs (B.E.
2543) and SMEs which are classified as non-performing loans (NPL) but have business potential
approved by the BOT from 3% per annum to 2% per annum since 12 January 2001 was ended.  Then,
the interest rate charged to those projects was raised to 3% per annum, which is the same rate as waspreviously applied.G/SCM/N/95/THA
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7. Amount of the subsidy
At the end of 2002, outstanding loans under the BOT financial assistance through financial
institutions were 6,715.18 million baht.  Details are as follows:
Outstanding as of Interest rate
Schemes 31 December 2002
(Million Baht)Charged by the
BOT  (% p.a.)Charged by the financial
institutions  (% p.a.)
Industry 89.04 5.0 MLR-1
Small and MediumEnterprises6,251.95 3.0 MLR-1
Livestock raising and
aqua-culture370.59 3.0 MLR-2.75
Rural development 0.00 3.0 MLR-2.75
Investment in Zone 3 3.60 3.0 MOR/MLR-2
TOTAL 6,715.18
8. Duration of the subsidy and/or  any time limit attached to it
The BOT will provide financial assistance to each enterprise for a maximum of 3 years.
9. Statistical data permitting an assessment of the trade effects of the subsidy
Not determined
III. PACKING CREDIT FACILITY   
1. Title of the subsidy programme
Packing Credit Facility
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
To encourage commercial banks to provide export financing for exporters.  The initial
purpose of the programme was to encourage the financing of commodity exports.
4. Background and authority for the subsidy
Packing credit facility is an export-financing scheme provided by the Bank of Thailand
(BOT) with co-financing from commercial banks.  The BOT provided funding, while the Export-
Import Bank of Thailand (EXIM Bank) allocated funds to commercial banks and supervised the
utilization of the facility.  Under this facility, commercial banks obtain funds, provided by the BOT
through EXIM Bank, at a concessionary interest rate on the condition that commercial banks co-G/SCM/N/95/THA
G/SCM/N/99/THA
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finance the other half in order to on-lend to exporters and export-oriented manufacturers.  The facility
is provided for both pre-shipment and post-shipment financing.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank financed, from the BOT’s fund, one half of the total credit granted. Commercial
banks co-financed the other half and on-lent to exporters.
50 Baht                  100         100 Baht
                                                                    no more than
                                                                     7% p.a.
The mechanism is as follows:
         1
L/C contract, P/O        
 2                 2                      3                     5
          4     6
                            7                                                                                            
                                                                           8                                             11
                                                              9                                             10
1. Exporters apply for Packing Credit line at commercial banks.
2.
Exporters receive purchasing documents from overseas or have stock in possession or have
usance export bills.
3. Exporters issue promissory notes to commercial banks.
4. Commercial banks grant the loan to exporters with interest rates of no more than 7 per cent
p.a.
5. Commercial banks issue promissory notes to EXIM Bank with the amount of up to 50 per
cent of promissory notes issued by exporters (as stated in 3).
6. EXIM Bank disburses the fund to commercial banks.
7. Exporters ship out their merchandise.8. Exporters bring export documents to commercial banks for negotiation.
9. Commercial banks negotiate export bills, disc harge the exporters’ promissory notes and give
the remaining proceeds to exporters.
10. Commercial banks pay back for settlement  of their corresponding promissory notes.
11. EXIM Bank discharges commer cial banks’ promissory notes.EXIM Bank Commercial Banks Exporters
Stock
Buyers
abroadThai
exportersCommercial
BanksEXIM
BankG/SCM/N/95/THA
G/SCM/N/99/THA
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7. Amount of the subsidy
The BOT extended the packing credit line of 10 billion baht in 2002 for which the
commercial banks co-finance the other half.  Th e BOT charged EXIM Bank at 2 per cent p.a., while
EXIM Bank channeled funds to commercial banks at  3 per cent p.a.  Commercial banks co-financed
and on-lent to exporters at an interest rate of not more than 7 per cent p.a..
8. Duration of the subsidy and/or any time limit attached to it
In accordance with Thailand’s obligations under SCM Agreement Article 27.2, the Packing
Credit Facility has been terminated since 31 December 2002.
9. Statistical data permitting an assessment of the trade effects of the subsidy
                      (Unit: Billion Baht)
1999 2000 2001 2002
Total packing credit financing disbursed 115.4 134.3 31.9
Total BOT financing* 57.7 67.2 29.6 16.0
Credit outstanding at year-end 8.8 6.8 6.7 0
Note: * These figures were roughly calculated based on the assumption that commercial banks co-
financed 50 per cent of the total credit on-lent to exporters.
IV. DIRECT PACKING CREDIT FACILITY
1. Title of the subsidy programme
Direct Packing Credit Facility
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
- To encourage fuller utilization of the packing credit fund.
- To provide liquidity to the export sector
4. Background and authority for the subsidy
In early 1998, Thailand faced a severe liquidity shortage and most commercial banks slowed
down their lending, including the co-financing under the Packing Credit Facility.  Utilization of
packing credit fund remained around 20 billion baht  in January 1998 compared to the available fund
of 33 billion baht.  The packing credit fund remained under-utilized despite badly needed export
financing because commercial banks had limited funds to co-finance.  In addition, they faced
constraints due to NPLs and inadequate capital.
In order to alleviate the credit crunch in export financing and to encourage fuller utilization of
the idle packing credit fund provided by the Bank of Thailand (BOT), EXIM Bank requestedauthorization to directly lend to exporters under the packing credit scheme.  In 1998, the BOTG/SCM/N/95/THA
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approved the credit line of 5 billion baht for EXIM Bank’s Direct Packing Credit Facility to on-lend
under the same terms and conditions as commer cial banks under the P acking Credit Facility.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
With the BOT’s fund, EXIM Bank co-financed 50 per cent of the total credit granted and on-
lent to exporters.
Regarding such co-financing, EXIM Bank operated under the same regulations and work
procedure as commercial banks under the Packing Credit Facility.  Functions in the part of
commercial banks were carried out by the Banking Department of EXIM Bank, while the Packing
Credit Department of the EXIM Bank was responsible for the documentation and the settlement withthe BOT.
7. Amount of the subsidy
In 2002, the BOT allocated a line of 7 billion baht for EXIM Bank’s direct packing credit
facility, for which EXIM Bank co-financed the other half.  Of the 7-billion-baht credit line, 2 billion
baht was allocated to the Export Market Diversification Promotion Programme (see item V: Export
Market Diversification Promotion Programme).
The BOT lent to EXIM Bank at 3 per cent, while the EXIM Bank co-financed one half and
on-lent to exporters at an interest rate of not more than 7 per cent.
8. Duration of the subsidy and/or any time limit attached to it
In accordance with Thailand’s obligations under SCM Agreement Article 27.2, the Direct
Packing Credit Facility has been terminated since 31 December 2002.
9. Statistical data permitting an assessment of the trade effects of the subsidy
- Total financing disbursed in 2002           26.8 billion baht
- Total Bank of Thailand’s financing disbursed 13.4 billion baht
- Credit outstanding at the end of 2002 0 billion baht
V. EXPORT MARKET DIVERSIFICATION PROMOTION PROGRAMME
1. Title of the subsidy programme
Export Market Diversification Promotion Programme
2. Period covered by the notification
1 January–31 December 2002G/SCM/N/95/THA
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3. Policy objective and/or purpose of the subsidy
To promote exports to 141 targeted countries in 8 regions consisting of Indochina (4), Middle
East (14), Africa (53), Latin America (31), Eastern Eu rope (27), South Asia (8), East Asia (2) and the
South Pacific Islands (2).
4. Background and authority for the subsidy
In early 1999, in order to stimulate export growth in the aftermath of the Asian financial
crisis, the Ministry of Commerce launched the Expo rt Market Diversification Promotion Programme
to encourage diversification of Thai exports to new or potential markets, with EXIM Bank’sparticipation in financial measures.
Under this programme, EXIM Bank rebated inte rest to exporters who utilized the Packing
Credit Facility (at the commercial banks) or the Dire ct Packing Credit Facility (at EXIM Bank).  Such
interest rebate was capped at a maximum of 5 per cent and applicable for the incremental export valueover the previous year’s level to that particular export market.  The Ministry of Commerce allocated
the 750 million baht fund from the International Trade Promotion Fund to EXIM Bank for 5 years to
facilitate this programme.
To comply with Thailand’s obligations under Article 27.4 of the SCM Agreement, Thailand
has commenced its phase-out of the Export Market Diversification Promotion Programme by
reducing the amount of funds available thereunder since the year 2000.  Please refer to the below
response to question 7: Amount of the Subsidy, for more details.
5. Form of the subsidy
Interest rebate
6. To whom and how the subsidy is provided
6.1 Exporters who have Packing Credit lines with commercial banks, or have Direct
Packing Credit lines with EXIM Bank, complete and submit the Export Declarationfor Interest Rebate Form when applying for credits.
6.2 Exporters are required to include the clause “Export Market Diversification
Promotion Programme” in documents accompanying the promissory notes used as
collateral for credits.
6.3 Once exporters have shipped their products and have been paid by foreign buyers,
they are required to submit copies of the bill of lading, Export Entry Form, invoice,
and proof of foreign currency remittance together with an Interest Rebate Request
Form within 60 days from the due date of  the last promissory note issued under such
export.
6.4 EXIM Bank checks all relevant details and cross-checks with the Ministry of
Commerce, in particular the incremental export value to such market over the
previous year’s level.  If all details are valid, EXIM Bank pays the rebate to theexporters.G/SCM/N/95/THA
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7. Amount of the subsidy
To comply with Article 27.4 of the SCM Agreement, Thailand has already commenced its
phase-out of the Export Market Diversification Promotion Programme by decreasing the amount offunds available thereunder.  Initially, when this programme commenced in 1999, the Ministry of
Commerce provided to EXIM Bank an annual fund of 150 million baht for 5 consecutive years,
totaling 750 million baht for interest rebate under this programme.  However, in the year 2000, the
Ministry of Commerce reduced the initial allocation of 150 million baht per year by 100 million baht.
Therefore, for each year since then, including for the year 2002, no more than 50 million baht has
been allocated by the Ministry of Commerce to EXIM Bank for the disbursement of the rebate.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement: 14 June 1999
Date of Termination: 31 December 2003, pursuant to Article 27.4 of the SCM 
Agreement
9. Statistical data permitted an assessment of the trade effects of the subsidy
Interest rebates paid to exporters since June 1999 until December 2002 total 70.5 million baht
or 9.4 per cent of the total funds initially provided by the Ministry of Commerce for this programme.
VI. MERCHANT MARINE FINANCING
1. Title of the subsidy programme
Merchant Marine Financing
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
- To alleviate the country’s deficit on balance of trade & services
- To strengthen Thailand’s merchant marine business
4. Background and authority for the programme
In 1995, the Thai Government took a serious look into the country’s problem of current
account deficit, and discovered that the neglected merchant marine business not only incurred revenue
foregone but also brought about substantial outflow of freight and shipping expenses, not to mentionthe insufficiency of Thailand’s shipping business.
As a result, EXIM Bank launched a financial service for the merchant marine business from
its own funds in early 1996.  Later, in September 1996, the government provided, through the Bank of
Thailand (BOT), a credit line of 2 billion baht for merchant marine financing at the EXIM Bank.
Then, in February 1998, a portion of 1 billion baht from the Structural Adjustment Loan (SAL) from
the ADB World Bank Co-financing to the Thai Government was provided to EXIM Bank to on-lend
under merchant marine financing together with Machinery Upgrading Financing (see item VII:
Machinery Upgrading Financing).G/SCM/N/95/THA
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In the meantime, EXIM Bank still provided financing from its own source of funds,
especially to customers who did not qualify unde r the BOT’s conditions, for example, ships aged
over 20 years.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank extended credit to entrepreneurs of merchant marine business to buy/renovate
their ships, new or used ones.
Customers qualifying under the BOT’s conditi ons could utilise the BOT’s funds in baht
denomination which offered interest rates of up to 5 per cent p.a. while the BOT charged EXIM Bankat 3 per cent p.a.  EXIM Bank co-financed the other half with the BOT’s funds in baht or US dollar
denominations at the market interest rate.
From EXIM Bank’s own funds, financing was provided in baht or US dollar denominations,
both at the market interest rate, with more relaxed conditions.
As for the SAL fund, since the cost of fund was relatively high, i.e., above 6.38 per cent in
US dollar lending, the fund was not commercially acceptable for customers.
Criteria for the BOT’s fund for merchant marine financing:
- The company is registered in Thailand and has Thai ownership of more than 50 per cent of
total registered capital.
- The main business involves international shipping.
- The financing is for the investment in new ships or the used ones with up to 20 years of age.
- This investment shall include the rehabilitation cost of the used ship.
- The financed ship must be registered in Thailand and fly the Thai flag.
The term of lending from the BOT’s fund was up to 5 years, while that from EXIM Bank’s
funds was up to 7 years, depending on business conditions.
7. Total amount of the subsidy
- The BOT’s fund totalled 1.0 billion baht
- SAL fund totalled 19.3 million US dollars (together with funds for Machinery 
Upgrading Facility)
- EXIM Bank’s own source of funds was up to customers’ demand for financing and funding 
availability.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement:
EXIM Bank’s facility : Early 1996.
BOT’s fund : September 1996.
SAL fund : February 1998.G/SCM/N/95/THA
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9. Statistical data permitting an assessment of the trade effects of the subsidy
                                                                                                                                     (Unit: Billion baht)
1998 1999 2000 2001 2002
Total credit granted 3.89 3.82 3.37 2.58 3.10
Total BOT financing 1.43 1.19 1.17 0.92 0.36
Credit outstanding at year-end 3.43 3.61 3.48 2.67 2.87
VII. MACHINERY UPGRADING FINANCING
1. Title of the subsidy programme
Machinery Upgrading Financing
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
- To improve the productivity of Thai industrial operators
- To encourage the renovation/upgrading of the technology of production/quality of
Thai products
4. Background and authority for the subsidy
The government deemed it necessary to improve the productivity of Thai industrial operators.
Moreover, some industries faced the serious pr oblem of outdated technology of production which
brought about low quality of products.
EXIM Bank therefore introduced a financial service to facilitate the machinery upgrading of
the operators.  The Thai government later supported this policy through the provision of funds from
the Bank of Thailand (BOT) to co-finance this facility with EXIM Bank.  Then came the SAL fund to
be mutually used in Machinery Upgrading Financing and Merchant Marine Financing (see above
responses for item VI: Merchant Marine Financing).
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
The EXIM Bank extended credit to operators whose plans to renovate/upgrade their
machinery were approved by agencies authorized by the Ministry of Industry (MOI).
Operators eligible for the BOT’s fund must meet the following criteria:
- Operators’ renovation plans must have been approved by agencies authorized by
MOI.G/SCM/N/95/THA
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- The financing may be used to replace old machinery with new machinery, or to
modify or further enhance the performance of existing machines or equipment in
order to increase efficiency.
- Investments may also be related to energy conservation, or related to environment
conservation, including the relocation of factories into industrial estates, etc.
In addition, targeted industries eligible for this f acility were also clearly identified to cover the
13 industries6 under the Industrial Restructuring Plan, with small-and-medium-scaled enterprises
(SMEs) as the priority.
Operators meeting the BOT’s criteria could utilize the BOT’s fund in baht denomination by
50 per cent of total lending at an interest rate of not more than MLR-1 (MLR quoted by the 4 largest
commercial banks).  EXIM Bank co-financed the other half, in baht or US dollars, at EXIM Bank’s
prime rate plus up to 1.5 per cent p.a. for baht le nding; or LIBOR plus up to 3.5 per cent p.a. for US
dollar lending.
Apart from co-financing with the BOT’s fu nd, EXIM Bank also provided machinery
upgrading financing on its own, with more relaxed conditions, for instance, to finance investment in
some kinds of machinery not included in the MOI’s conditions.  The lending interest rate of EXIM
Bank stayed at EXIM Prime plus 1.5 per cent p.a. in baht lending, while US dollar lending is at the
rate of up to LIBOR plus 3.5 per cent p.a. (EXIM Prime stayed at 6.75 per cent p.a. as of the end of2002).
The term of lending for machinery upgrading was up to 5 years for the BOT’s fund and up to
7 years for EXIM Bank’s fund due to the repayment capability of operators.
7. Amount of the subsidy
BOT’s fund 0.44 billion baht
SAL fund 19.3 million US dollars (together with funds for Merchant Marine
Financing)
EXIM Bank’s own source of fund was subject to fund availability.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement:
EXIM Bank’s facility : Early 1997.
BOT’s fund : May 1997.SAL fund : February 1998.
                                                     
6 The thirteen industries eligible under this program are as follows: (1) Food and animal food; (2)
Textiles and articles of apparel and clothing accessories; (3) Footwear and parts and leather and bovine leatherproducts; (4) Wood and wood sheets and housewear; (5) Pharmaceutical and chemical products; (6) Rubber andrubber products; (7) Plastic products; (8) Ceramic products and tableware and kitchenware of glass; (9)Electrical equipment and electronic appliances; (10) Moto r cars, parts and accessories; (11) Precious stones and
jewellery; (12) Iron or steel products; and (13) Petrochemical industry and its relatedG/SCM/N/95/THA
G/SCM/N/99/THA
Page 15
9. Statistical data permitting an assessment of the trade effects of the subsidy
                     (Unit: Billion baht)
1998 1999 2000 2001 2002
Total credit granted 0.67 0.81 0.74 0.56 0.50
Total BOT financing 0.09 0.55 0.15 0.12 0.27
Credit outstanding at year-end 0.37 0.62 0.63 0.40 0.49
VIII. INDUSTRIAL ESTATE AUTHORITY OF THAILAND (IEAT)
1. Title of the subsidy programme
Industrial Estate Authority of Thailand (IEAT)
2. Period covered by the notification
1 January–31 December 2002
3. Policy objective and/or purpose of the subsidy
- To procure suitable land for the establishment or expansion of industrial estates
which include the General Industrial Zone and Export Processing Zone.
- To provide facilities for industrial operators in the industrial estates- To promote and control industrial estates owned by the private sector or other
government agencies
4. Authority for the subsidy
Industrial Estate Authority of Thailand (IEAT)
5. Form of the subsidy
Incentives cover the exemptions of payment of surcharge under the law on promotion of
investment, import duties, value added tax and excise tax on machinery, equipment, tools and supplies
including the components thereof which are essential for the production of goods or trading forexport, as the case may be, and on materials to be used for construction, assembly or installation of
factories or buildings and goods imported and take n into export processing zones by industrial
operators and traders for export for use in the production of goods or trading for export.
6. To whom and how the subsidy is provided
Incentives are provided to the industrial opera tor who is permitted to engage in industrial
activities in an industrial estate.
As of 1 January 2003, Thailand has eliminated the export requirement for the Export
Processing Zone (EPZ), in accordance with G/SCM/101.
7  However, with regard to the operation of
the EPZ throughout the year 2002, products, by products, and other items resulting from the
production in the export processing zone for use or distribution in the Kingdom were subject to tariffs
                                                     
7 See G/SCM/101/Suppl.1 and G/SCM/101/Suppl.2.G/SCM/N/95/THA
G/SCM/N/99/THA
Page 16
and duties according to their condition, price, and customs tariffs on the date of their removal from the
EPZ.  They were considered as imported into the Kingdom on the date of their removal from the EPZ
according to Section 51, IEAT ACT B.E. 2522, which has been amended by Section 3, IEAT Act
(second) B.E. 2534.
The criteria that an entity or enterprise had to m eet in order to qualify to take part or locate in
an industrial estate are stated in IEAT announcements No. 1/2531, No. 4/2535, No. 6/2535 and
No. 2/2538 regarding standard, procedures, and conditions in the application for permission and the
granting of permission to operate in industrial es tates.  As indicated in G/SCM/101/Suppl. 1 and
G/SCM/101/Suppl. 2, IEAT  announcements No. 1/2531 and No. 2/2538 have been amended by
announcement No. 1/2546, thereby effectively elim inating the export requirement for the EPZ.
Regarding the current status of the legislative amendment of the IEAT Act as per the workplan
submitted to the SCM Committee in G/SCM/101/Suppl. 1, the Cabinet is currently considering the
bill and will soon propose it to the Office of the Council of State for verification (No. 5 in the
submitted workplan).
7. Amount of the subsidy
No specific budget provided
8. Duration of the subsidy and/or any time limit attached to it
Upon operation period.
9. Statistical data permitting an assessment of the trade effects of the subsidy
(Unit:  Billion baht)
YEAR IMPORT VALUE EXPORT VALUE
1999 126.01 205.45
2000 115.51 208.43
2001 152.67 259.47
2002 171.00 296.01
TOTAL 565.19 969.36
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