RESTRICTED
WORLD TRADE G/SCM/Q2/THA/4
3October 1996
ORGANIZATION(96-3990)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Questions from theEUROPEAN COMMUNITY Regarding theNew
andFullNotification ofTHAILAND1
Thefollowing communication, dated 19September 1996, hasbeenreceived fromthePermanent
Delegation oftheEuropean Community.
_______________
Thailandsubmittedon30June1995itsnotificationofsubsidyprogrammestotheWTOpursuant
toArticle XVI:1 GATT 1994 andArticle 25oftheWTO Subsidies Agreement. Inthisrespect, the
European Communities would liketoobtain clarification onanumber ofissues onthenotified schemes
asdescribed below.
Moreover, theCommunity hasobtained information ondifferent subsidy schemes which were
notnotified totheWTO although theirnotification appears toberequired pursuant toArticle 25.2
oftheSubsidies Agreement.
Furthermore, theCommunity would likeThailand tocomment foreachspecific programme
onhowitwillimplement oriscurrently implementing itsobligations under theSubsidies Agreement.
I. NOTIFIED SUBSIDY PROGRAMMES
(a) Industrial credit refinancing scheme
Under theRoyal Decree regulating theAffairs oftheBank ofThailand, theBank ofThailand
isauthorized toprovide financial assistance topriority projects. Each company, withatotal
fixedassetnotexceeding Baht200million willbeallocated credit linesforissuing promissory
notes. Theamount ofrefinancing is50percentofthePN'sfacevalue. Theprogramme is
administered bytheNational Council forInvestment andExport Promotion. Thescheme is
toprovide financial support toindustries forrural development. TheCommunity further
examined thisscheme andfound thatextensive loans aregiven to"export oriented projects"
(maximum loans sizeBaht30million average fivetoeightyears atpreferential interest rates).
With respect tothisprogramme, theCommunity would likethefollowing clarifications:
- Could Thailand provide more detailed information onthecriteria foreligibility and
thetrade effects?
1G/SCM/N/3/THA.G/SCM/Q2/THA/4
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- Isthisprogrammecontingentuponexportperformance?(theprogrammeisadministered
bytheDepartment ofExport Promotion)
- Could Thailand comment onthecompatibility ofthescheme withitsobligations under
theSubsidies Agreement?
- CanThailand provide thetableindicating howthissubsidy willbephased out?
(b) Income taxreduction orexemption
Thisscheme provides forincentives under theinvestment promotion laws. Thailand developed
aprogramme where extensive benefits areconferred tonewinvestments. Article 31ofthe
Investment Promotion Actgrants exemptions fromcorporate taxincome foraperiod ofthree
toeight years. TheBoard ofInvestment istheauthority responsible forgranting theincome
taxexemption orreduction onadiscretionary basis (asdescribed insection 32).
With respect tothisprogramme, theCommunity would likethefollowing clarifications:
- CanThailand provide thecriteria foreligibility forthese benefits?
- CanThailand explain under whatconditions theBoard ofInvestment willgrant atax
reduction rather thananexemption from thetax? HastheBoard ofInvestment full
discretion inreducing grants?
- Isthereanyrequirement oflocalcontent ortheuseofdomestic goods inorder tobenefit
from thisscheme?
(c) Export Promotion Programme
Article 36oftheInvestment Promotion ActB.E. 2520 (asamended byActB.E. 2534)
establishes ascheme where special rights andbenefits aregranted inorder topromote exports.
Pursuant totheInvestment Promotion Act,these special rights aredivided infourmain
categories:
(a) anexemption ofimport duties ontherawandessential materials imported foruse
specifically inproducing exports; or
(b) exemption ofimport duties onimports forre-export;
(c) exemption ofexport duties onproducts orcommodities which thepromoted persons
produces orassembles; or
(d) adeduction from theassessable income forpayment ofjuristic person income taxof
anamount equal to5percentoftheincreased income overtheprevious year, derived
from theexport ofproducts.
With respect tothisprogramme, theCommunity would likefollowing theclarifications:
- CanThailand provide thecriteria foreligibility forthese benefits?
- Towhatextent isexport performance acriterion?G/SCM/Q2/THA/4
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- Canthesebenefits beconferred cumulatively? (Canacompany benefit simultaneously
from thefourcategories?)
- Could Thailand comment onthecompatibility ofthescheme withitsobligations under
theSubsidies Agreement?
- CanThailand provide thetableindicating howthissubsidy willbephased out?
- CouldThailandprovidethetotalamountofbenefitsprovidedsofartoeligiblecompanies
under thisscheme?
- Could Thailand provide thetotalamount already budgeted orforeseen tobespent under
thisscheme?
(d) Import dutyexemption
Section 28oftheInvestment Promotion Actestablishes ascheme where companies canapply
forimport dutyexemption where machinery isimported which isnotbeing produced or
assembled inThailand. Section 29allows theadministering authority toreduce thegrant by
50percentifitconsidered thatthegrant forthefullamount tobeinappropriate.
Theprogramme isadministered bytheBoard ofInvestment, which isresponsible forgranting
thebenefit totheapplicant.
With respect tothisprogramme, theCommunity would likethefollowing clarifications:
- CanThailand provide thespecific criteria foreligibility forthese benefits?
- CanThailand explain under what conditions theBoard ofInvestment willreduce a
grant by50percent? HastheBoard ofInvestment fulldiscretion inreducing grants?
(e) Benefits forfactory relocation
TheBoard ofInvestment developed ascheme where existing activities willbepromoted ifthey
relocate from central toregional areas. Theprimary purpose istoencourage industrial
development inregional areas. Inorder toevaluate theregional promotion, Thailand hasbeen
divided inthree zones according tothelevel ofindustrial development. Inorder toobtain
abenefit from theGovernment, acompany needs torelocate from zone1or2tozone3and
conduct acertain typeofactivity. These criteria areapplied onapolicy basis without strict
legaldefinition.
Acompany which fulfils theconditions willobtain income taxexemption forathree- toeight-
yearperiod (three years forrelocation tozone2,seven years forrelocation toapromoted
industrial zoneandeightyears forrelocation tozone3).Relocation tozone3involves additional
benefits: reduction ofcorporate income taxforfiveyears aftertheinitial period, double
deduction from taxable income ofwater, electricity andtransport costs fortenyears.
With respect tothisprogramme, theCommunity would likethefollowing clarifications:
- CanThailand givethedetailed criteria forthezoneclassification, inparticular theGDP
percapita ofeachzonecompared tothenational average?G/SCM/Q2/THA/4
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- Areallindustrial activities promoted onanequal basis?
- Inwhatrespect andtowhatextent canthesebenefits becumulated withbenefits under
Section 36oftheInvestment Promotion Act?
- Isexport activity arequirement forbenefits inthespecific zones? Islocalcontent a
requirement?
(f) Livestock raising andaqua-culture credit
Under thisscheme, theRoyal Bank ofThailand isauthorized toprovide financial assistance
topriority sectors andprojects through refinancing schemes.
With respect tothisprogramme, theCommunity would likethefollowing clarifications:
- CanThailand provide thecriteria foreligibility forthese benefits?
- Towhatextent isthisprogramme conditional upon export performance?
- CanThailand explain what"priority projects" are?Isexport requirement afactor in
granting priority status toaproject?
II. SUBSIDY PROGRAMMES NOT NOTIFIED TOWTO
TheCommunity examined thedifferent policies oftheThaiauthorities withrespect toincentives
tothelocalindustry. Inthisrespect, thefollowing programmes areavailable inThailand andwere
notnotified totheWTO.
(a) Export Packing Credit (EPCP)
Under thisscheme loans aregiven atalower interest ratethanthemarket ratebythe
Bank ofThailand andcommercial banks thathavejoined thispolicy.
TheCommunity would likeclarification onwhythisprogramme wasnotnotified toWTO
andrequests that,ifappropriate, Thailand supplies anotification under Article 25,using the
standard format. Inaddition, theCommunity would likeThailand tocomment onthe
compatibility ofthescheme withitsobligations under theSubsidies Agreement, andtoindicate
whether there areanyplans tophase outthissubsidy.
(b) Taxanddutycompensation ofexported goods produced intheKingdom Act
Lawof9August B.E.2524 (1981)
TheCommunity would likeclarification onwhythisprogramme wasnotnotified toWTO
andrequests that,ifappropriate, Thailand supplies anotification under Article 25,using the
standard format. Inaddition, theCommunity would likeThailand tocomment onthe
compatibility ofthescheme withitsobligations under theSubsidies Agreement, andtoindicate
whether there areanyplans tophase outthissubsidy.G/SCM/Q2/THA/4
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(c) Duty drawback scheme under Section 19oftheCustoms Act
Customs Act(No.9)B.E.2482
TheCommunity would likeclarification onwhythisprogramme wasnotnotified toWTO
andrequests that,ifappropriate, Thailand supplies anotification under Article 25,using the
standard format. Inaddition, theCommunity would likeThailand tocomment onthe
compatibility ofthescheme withitsobligations under theSubsidies Agreement, andtoindicate
whether there areanyplans tophase outthissubsidy.
(d) Industrial Estate Authority ofThailand Act
LawB.E.2522 (1979)
TheCommunity would likeclarification onwhythisprogramme wasnotnotified toWTO
andrequests that,ifappropriate, Thailand supplies anotification under Article 25,using the
standard format.
(e) Electricity rebates forexporters
Does thestate-owned electricity company stillprovide rebates perunitofexported product?
Ifso,Thailand isrequested tonotify thissubsidy under Article 25,using thestandard format.