Thailand WT/TPR/S/63
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II. POLICY FRAMEWORK AND OBJECTIVES
(1) INTRODUCTION
1. Following the economic upheaval in the wake of the financial crisis that erupted in Thailand
in mid-1997, the Government's top priority has been to re-establish a solid basis for sustainable and
equitable economic growth.  It has sought to achieve this objective by continuing to reduce tariff and
non-tariff barriers to international trade and further liberalizing Thailand's already open foreigninvestment regime so as to attract foreign capital, which could, inter alia,  improve the balance sheet
of corporations and improve management expertise.
2. Another priority, as embodied in the 1997 constitutional amendment, is to ensure greater
transparency in the Government, thereby enhancing its accountability to the public.  Far-reaching
economic reforms are also under way to foster competition, particularly in the energy, transportation,banking, and telecommunications sectors;  these reforms include new legislation on the regulation of
financial institutions, on bankruptcy, on privatization and on competition.  While the policy thrust is
clearly towards greater openness and competition, the reforms sometimes appear to be ad hoc, partly
reflecting the difficulties faced by the Government in passing legislation through Parliament.
3. Thailand continued over the 1995-99 period to be an active proponent of regional trade and
investment liberalization as a complement to mult ilateral efforts.  Thailand was the driving force
behind the ASEAN decision to shorten the timeframe for the achievement of an intra-ASEAN
free-trade agreement, as a measure to assist regional economic recovery.  In 1999, Thailand's average
tariff on imports from ASEAN partners stood at half the corresponding MFN rate.  Thailand has also
campaigned for accelerated implementation of the Framework Agreement on the ASEAN Investment
AREA.
4. The authorities are still in the process of streamlining a number of restrictions on investment
by "aliens", which remain in Thailand's statutes.  These reforms should be particularly important for
international investment given the Government's large current privatization plans.  Once a clear legal
framework is established for the sale of state enterprises, opportunities for foreign direct investment
will in turn depend on whether and in which sectors the forthcoming Foreign Business Act specifies
maximum levels of foreign equity ownership.
(2) C
HANGES IN THE INSTITUTIONAL FRAMEWORK
Constitutional amendments
5. There have been important recent changes in Thailand's Constitution, which is the Kingdom's
highest law and provides for a parliamentary democracy under the King as constitutional monarch.
Legislative authority is exercised through the National Assembly, executive power through theCabinet (the Council of Ministers), and judicial power through the law courts.  Thailand's political
system was described in the Secretariat Report for Thailand's previous Trade Policy Review, in 1995,
and is summarized in Box II.1.  In 1997, Thailand's Constitution was amended to introduce the right
for the Prime Minister to call for a referendum on any issue considered liable to affect national or
public interest.  All people having the right to vote in an election of members of the House shall havethe right to vote in the referendum.
6. The 1997 constitutional amendment also introduced various mechanisms to prevent
fraudulent electoral conduct.  In particular, voting is now compulsory at a general election.  Further,
the amendment introduced the requirement that all new candidates for the National Assembly have
the equivalent of a Bachelor's Degree from a university, and provided for the creation of anWT/TPR/S/63 Trade Policy Review
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independent Election Commission to supervise elections.  As noted in Chapter III(4), among the other
transparency measures introduced by the constitutional amendments is the provision for a
National Counter-corruption Commission.  This Comm ission will investigates any unusual wealth,
corruption or malfeasance in office on the part of state officials.  In addition, Section 57 of the new
Constitution requires an independent advisory body to be set up to present opinions on the enactment
of laws, rules, regulations, and measures with respect to consumer protection.  This body had not yetbeen established in September 1999.
Box II.1:  Thailand's political system
The King is the Head of State of the Thai Kingdom.  Under the Constitution, on the recommendation of the
Prime Minister, the Head of State has the authority to dissolve the House of Representatives and theSenate.  The King also appoints the Prime Minister on the advice of the National Assembly, and theCabinet members on the Prime Minister's recommendation.  The King may dismiss members of the
Cabinet on the Prime Minister's advice, though he cannot dismiss the Prime Minister at will.  The Prime
Minister may be dismissed if one fourth of the members of the House or 50,000 voters lodge a complaintwith the President of the Senate requesting the Senate to pass a resolution for dismissal.  A Privy Council,appointed by the King, advises the King on all matters pertaining to his functions.
The National Legislative Assembly consists of the House of Representatives and the Senate.  Members of
the House are elected by universal adult suffrage for a term of four years;  since the constitutional
amendment in 1997, senators are no longer to be appointed, but instead elected.  The first election will bein March 2000.  Constitutionally, the number of senators should not exceed two thirds of the number of themembers of the House of Representatives;  this latter number is proportional to the population, at a ratio ofone per 150,000 citizens.  At present, there are 385 members of the House of Representatives.  The PrimeMinister must be a member of the House of Representatives, and the Speaker of the House of
Representatives is the President of the National Assembly.
Executive authority is exercised by the Cabinet, chaired by the Prime Minister.  The Cabinet considers and
approves policy action, which is normally formulated and implemented by the ministries.  These areempowered to issue regulations and notifications, in the Government Gazette , on details of policy and for
the implementation of laws.  Acting on behalf of the Cabinet, the Prime Minister is empowered tointroduce bills and budget proposals to Parliament, incl uding matters relating to foreign and trade affairs.
The normal legislative process is that ministers prepare and submit draft bills to the Cabinet, which may
then send them to the National Legislative Assembly.  Bills may also be sent to the National LegislativeAssembly by members of the House of Representatives.  If the Cabinet approves the bill, it is sent to the
Office of the Judicial Council for legal drafting, and then to the House of Representatives for passage.Thereafter, the Senate must complete its consideratio n of the bill within 60 days;  if it does not meet the
60-day limit the bill is deemed approved by the Senate.  Disagreements between the House and Senate are
settled in a Joint Committee of the two.  Once passed by the National Assembly, royal assent is required for
bills to be enacted into law;  the King may veto and return bills to the National Assembly, which can,however, override the veto with a two-thirds majority.
The Constitution is the highest law of the land, followed by national law, ministerial regulations and
notifications.  Conflicts between international obligations and national laws are avoided by bringing
domestic legislation into conformity with a treaty befo re its ratification.  Such ratification requires the
approval of the National Assembly, in a joint sitting of the House and Senate.  Within this context, theWTO Agreement may be cited in Thai courts, but only in the form of domestic obligations.
The Supreme Court of Thailand is the final court of appeal in all civil (including bankruptcy), criminal, and
tax cases.  On the advice of the Minister of Justice, the King appoints, and may dismiss, members of theSupreme Court.
Source: WTO (1995);  and information provided by the Government of Thailand.Thailand WT/TPR/S/63
Page 19
New trade and investment legislation
7. Parliamentary proceedings have in some cases slowed the implementation of the
Government's ambitious legal reform programme.  The draft Foreign Business Act, for example, was
still pending approval in July 1999 after seven years before Parliament (see below).  There have also
been several changes in government during the 1995-98 period, another factor that may explain some
of the delays encountered in the implementation of the Government's programme.  For example, theauthorities have explained that a master plan fo r liberalization of the telecommunications services
industry was first formulated in 1995, but the short life of the Government prevented the plan
reaching the legislative stage;  the new Government in 1996, revised the first draft plan, but again the
stay in office of the Government was too short to take the Act to the legislative stage.  In 1997, the
plan was reviewed by a new Government, and approved by the Cabinet in November, just in timebefore the Government's departure from office.
8. Nonetheless, there have been far-reaching changes in Thailand's economic legislation, with
eight economic laws passed by Parliament in the first half of 1999, including on competition,
bankruptcy, foreclosure, and corporatization.  In  particular, Thailand's new Trade Competition Act
and Price of Goods and Services Act (as amended) both entered into force in May 1999.
1
9. Further, a new Financial Institutions Law is being drafted to modernize the existing
Commercial Banking and Finance Company laws.  According to the authorities, it will consolidate
supervision and ensure prompt corrective action;  it will not, however, introduce any amendments to
the "Bangkok International Banking Facilities" and associated tax privileges (Chapter IV(5)).  Other
laws currently being drafted include a Deposit Insurance Law, to replace the current blanket guarantee
of the financial system;  and a new Central Bank Law strengthening the powers, independence, and
accountability of the Bank of Thailand.
10. The main laws directly regulating merchandise trade are generally unchanged since Thailand's
previous Review.2  In contrast, the important legislative amendments that have taken or are taking
place in the energy, transport, and telecommunications sectors are likely to stimulate Thailand's
international trade in services;  these changes are fully described in Chapter IV, and reflect the current
process of corporatization and privatization taking place in these sectors.
Legislative and executive branches of government
11. According to the authorities, since Thailand's previous Review in 1995 there have been no
major changes in the structure and role of the Go vernment, Central Bank, Board of Investment, and
                                                     
1 Under the new Trade Competition Act, manufacturers and retailers may not hold a market share
exceeding 75%, and all mergers with foreign companies, as well as foreign joint ventures, require approval fromthe Ministry of Commerce.  The implementing regulations are expected to be published in early 2000.
Under the revised Price of Goods and Services Act, the Government is to review the list of goods and
services subject to price controls.  The law is also ex pected to bring down exporters' fees on cargo terminal
handling and bills of lading documentation.  According to Viroj Amatakulchai, Secretary-General of theThai Chamber of Commerce, exporters had been paying "exorbitant" rates for the two services as a result of"inadequate" competition and collusion between competitors.  ( International Trade Reporter,  5 May 1999.)
2 The main legislative measure pertaining to export and import transactions is the Export and Import
Act (1979), which permits the authorities to ban interna tional trade in prescribed  goods, to impose export or
import licensing and to impose import quotas or other trade-related measures.  The Customs Law (1926), and
the Customs Tariff Decree (1987), as amended in 1994, give authority to the Minister of Finance to deal withcustoms matters and to levy, reduce or exempt export and import duties, respectively.  The laws coveringconcessions for investment include the Investment Promotion Act of 1993, which replaced the 1977 InvestmentPromotion Act, and the Industrial Estate Authority of Thailand Act (1979).WT/TPR/S/63 Trade Policy Review
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other agencies involved in the formulation, coordi nation and implementation of trade, investment, and
related policies in Thailand.  The Board of Investment (see below and Chapter III(4)) appears to have
gained further influence on the pattern of investment and, hence on trade and foreign direct
investment flows.  The Committee on International Economic Relations Policy, chaired by the
Deputy Prime Minister, continues to have the main role of coordinating Thailand's international
economic policies.  Since the last Review in 1995, four new sub-committees have been set up to deal,respectively, with electronic commerce, the Generalized System of Preferences, countertrade, and the
Information Technology Agreement.  Also, the Export Development Committee, under the
chairmanship of the Prime Minister or a Deputy Prime Minister, considers the general policy
framework for export development.
12. Trade-related policy continues to rely to a large extent on regulations and notifications
formulated by the Cabinet, thus not requiring legislative approval.  For example, applied tariffs may at
any time be increased up to the statutory rates (which  are frequently considerably higher than applied
rates).  Other important issues requiring inter-ministerial coordination but not parliamentary approval
include:  export promotion and financing;  investment incentives;  VAT, excise, interior taxes and
surcharges;  controls on imports and exports;  and anti-dumping and countervailing policies.  This hasthe advantage of flexibility, but could introduce an element of unpredictability in trade policy
implementation.
Review and advisory bodies
13. Several institutions, such as the National Economic and Social Development Board in the
Office of the Prime Minister and the Thailand Development Research Institute, review and conduct
assessments of public policies.  Among the private-sector bodies, the Joint Standing Committee on
Commerce, Industry and Banking (JSCCIB) regroups trade associations such as theThai Chamber of Commerce, the Foreign Chamber of Commerce, the Federation of Thai Industries,
and the Thai Bankers' Association.  The Government is not a member of this Committee.  In 1999, the
JSCCIB created the Joint Sub-Committee on the WTO, made-up of representatives of the private and
public sector, as a forum to coordinate Thailand's participation in new trade negotiations.  The
Thai Chamber of Commerce has statutory functions in the promotion both of internal and externaltrade.  Its office is regularly consulted by the Government on matters involving international trade.
14. In July 1999, the Foreign Chamber of Commerce presented its report "Toward Enhancing
Thailand's Investment Climate" to the Thai Govern ment, demanding a "strategic investment incentive
programme that would match incentives offered by competitor countries".  The report recommended
extending investment incentives to smaller busin esses, including suppliers and those providing
business support and quality control services.  The report also suggested an overhaul of import and
export procedures to increase efficiency and transparency.
3
15. The absence in Thailand of a specific law recognizing the status of non-governmental
organizations (NGOs) does not, in the view of the authorities, prevent an NGO from presenting views
concerning the determination and implementation of trade policies.  The Office of theConsumer Protection Board, a government agency attached to the Secretariat of the Prime Minister,
reportedly plays a large part in this respect.  The Office of the Council of State, during the process of
scrutinizing draft legislation, will normally invite representatives of non-governmental agencies or
bodies to present their views or give explanations on particular matters relevant to the draft.
                                                     
3 Wall Street Journal , 7 July 1999.Thailand WT/TPR/S/63
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16. Previously, the Thai judiciary played only a small role in reviewing Thai international trade
law;  in May 1997, however, the Intellectual Propert y and International Trade Court (Chapter III(4))
became operational, thereby expanding the judiciary's role.  The Court's main function is the trial and
adjudication of commercial disputes in the areas of trade and intellectual property, but it also
participates in the preparation and review of international trade legislation.
(3) DEVELOPMENTS UNDER INTERNATIONAL AGREEMENTS
(i) Thailand and the WTO
17. Thailand became the 59th founding Member of the WTO in December 1994.  Thailand
accords at least most-favoured nation (MFN) treatment to all WTO Members (discussed further in
Chapter III(2)).  The WTO Agreement necessitated certain changes in Thai legislation, which have
mostly been implemented.  The remaining law to be modified as a result of the WTO Agreement isthe Customs Evaluation Act (by January 2000 – see Chapter III(2));  in addition, the authorities are
still debating whether changes are required to the Industrial Estate Authority of Thailand Act.  In
addition, a number of intellectual property laws remain to be adopted or amended to conform with
WTO provisions (Chapter III(4)).  The authorities are confident that the required changes will be
introduced within the timeframe provided by the WTO Agreement.  A summary of Thailand'snotifications to the WTO is presented in Table II.1.
Table II.1
Status of Thailand's notifications to the WTO, as at September 1999
ProvisionDescription of
requirementPeriodicityDocument No. of most recent
notification or number of
notificationComments
Agreement on Agriculture
Art. 18.2 Information on tariff quotas
administrationOnce, then changes G/AG/N/THA/30, 9 June 1999 -
Art. 18.2 Volume of imports under
tariff quotasAnnual G/AG/N/THA/27, 15 June 1998 -
Art. 5.7 and 18.2 Summary of special
safeguards takenAnnual n.a. No safeguards taken
Art. 18.2 Domestic support Annual G/AG/N/THA/29, 28 October
1998-
Art. 10 and 18.2 Export subsidies (outlays
and quantities)Annual G/AG/N/THA/32, 9 June 1999 -
Notification of total exports Annual G/AG/N/THA/33, 9 June 1999 -
Agreement on Textiles and Clothing
Articles 2.6 & 2.7 First phase of the integration Once G/TMB/N/41, 28 April 1995
and corrigendum
Art. 2.8 (a) and
2.11Second phase of the
integrationOnce G/TMB/N/213, 11 February
1997, addenda and corrigendum-
Agreement on Subsidies and Countervailing Measures
Art. 32 Laws and regulations Once, by March 1995,
then changesG/SCM/N/1/THA/3, 13 January
1997, and addendum,
corrigendum and revisions.-
Art. 25 Specific subsidies granted Annual G/SCM/N/25/THA, 19 March
1998-
Art. 25.11 Countervailing duty actions
takenEvery six months when
measure is takenn.a. No countervailing duty
actions taken
Table II.1 (cont'd)WT/TPR/S/63 Trade Policy Review
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ProvisionDescription of
requirementPeriodicityDocument No. of most recent
notification or number of
notificationComments
Anti-dumping (Agreement on Implementation of GATT Article VI)
Art. 18 Laws and regulations Once, by March 1995,
then changesG/ADP/N/1/THA/3, 13 January
1997-
Art. 16.4 Anti-dumping actions taken Every six months
preliminary or final
anti-dumping actionsG/ADP/N/41/THA,
22 October 1999Covered the period 1 January
1998 - 31 June 1998
Agreement on Safeguards
Art. 12 Laws and regulations Once by March 1995,
then changesG/SG/N/1/THA/1, 27 March
1995 and revision-
Art. 12 Investigations and actions
takenAd hoc n.a. No actions taken
Agreement on Technical Barriers to Trade
Art. 2.9 & 2.10 Technical regulations Ad hoc 81 notifications (1996- July
1999)-
Sanitary and Phytosanitary Measures (Agreement on the Application of)
Art. 7, Annex B Measures taken Ad hoc 14 notifications (1995- July
1999)-
Agreement on Preshipment Inspection
Art. 5 Laws and regulations which
put the Agreement into forceOnce, then changes only n.a. Thailand does not have any
laws or regulations
governing PSI
Agreement on Import Licensing Procedures
Art. 7.3 Questionnaire;  rules and
information concerning
procedures for the
submission of applicationsAnnual for questionnaire;
rules and information
once, then changes.. No responses provided to
questionnaire
Art.1.4(a) and8.2(b)Laws and regulations
relevant to import licensingNo laws communicated
Agreement on Rules of Origin
Art. 5.1  Preferential rules of origin Upon entry into force .. No preferential rules notified
Annex II (4)  Non-preferential rules of
originApril 1995 G/RO/N/1/Add.1,
22 June 1995Absence of non-preferential
rules
Agreement on Trade-Related Investment Measures
Art. 5.1 TRIMS inconsistent with the
AgreementG/TRIMS/N/1/THA/1, 28 April
1995-
Quantitative Restrictions (Decision on Notification Procedures for QRs)
WTO document
G/L/59Complete notifications on
non-tariff measuresEvery two years,
beginning January 1996.. No NTMs communicated
General Agreement on Tariffs and Trade (GATT)
Art. XXVIII Schedule of concessions G/MA/44, 15 January 1997 Thailand reserved its right
under the provisions of
Art XXVIII:5 of the GATTto modify its
Schedule LXXIX during the
three-year period
commencing 1 January 1997
Table II.1 (cont'd)Thailand WT/TPR/S/63
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ProvisionDescription of
requirementPeriodicityDocument No. of most recent
notification or number of
notificationComments
General Agreement on Trade in Services
Art. III.3 Changes in legislation S/C/N/72, 29 Sept. 1998 -
S/C/N/73, 29 Sept. 1998 -
S/C/N/91, 18 Dec. 1998 -
Agreement on Trade-Related Intellectual Property Rights
Art. 63.2 Laws and regulations Once, then changes .. -
.. Not available.
n.a. Not applicable.
Source : WTO documents.
18. There have not been any issues raised against Thailand under the WTO Dispute Settlement
Mechanism (Table II.2), but Thailand has been involved in a number of cases, including two panels as
an affected party;  most of the matters relate to trade in agricultural products, textiles or clothing.
Table II.2
Dispute-related WTO matters involving Thailand, September 1999
Subject Against/raised by: Actions taken (date) WTO document
Thailand as an affected party:  panels
Restrictions on imports of textile and
clothing productsTurkey/Hong Kong
joined by Malaysia, the
Philippines and ThailandConsultations requested (February 1996);
panel report circulated requesting Turkey to
bring measures into conformity with GATT
1994 (May 1999).  Panel report appealed
(July 1999).WT/DS29/3; WT/DS34/R
Import prohibition of certain shrimp
and shrimp productsUnited States/India,
Malaysia, Pakistan and
ThailandConsultations requested (October 1996);
Panel established February 1997;  adoption
of Appellate Body Report (November 1998);agreement by the United States to bring its
measures into conformity within 13 months.WT/DS58/1-15;
WT/DS58/R;
WT/DS58/AB/R
Consultations requested by Thailand
Duties on imports of rice European
Communities/ThailandConsultations requested October 1995. WT/DS17/1
Restrictions on imports of textile and
clothing productsTurkey/Thailand Consultations requested June 1996. WT/DS47/1
Consultations joined by Thailand
Imposition of anti-dumping duties
on imports of colour television
receiversUnited States/Korea
joined by ThailandRequest to join consultations (July 1997);
Panel later established but Thailand not
involved.WT/DS89/3
Cases in which Thailand has reserved third-party rights to participate in panels
Export subsidies in respect of
agricultural productsHungary/Argentina,
Australia, Canada, New
Zealand, Thailand and
the United States, joined
by JapanConsultations requested (March 1996);  Panel
requested by New Zealand;  Panel established
(February 1997);  agreement for Hungary to
seek a waiver for the subsidies (July 1997).WT/DS35/1, 4-7;
WT/DSB/10;
WT/DSB/M/29
The Cuban Liberty and Democratic
Solidarity ActUnited States/EU and
its member StatesPanel established (November 1996);
suspension of panel proceedings (April 1997);
Panel lapsed (April 1998).WT/DS38/2-6
Source : WTO Secretariat.WT/TPR/S/63 Trade Policy Review
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19. Since 1995 the Thai Government has participated in numerous initiatives in the WTO to
improve market access, as a party to the Information Technology Agreement and as one of the
countries to submit a market access schedule under the 1996 Harmonized System classification.Thailand has actively participated in the work of the WTO Committee on Agriculture, urging
improved implementation of commitments by Members, including strict compliance with tariff
reductions and elimination of market access restrictions.  These external objectives must however be
reconciled domestically with the food processing industry's continued demand for tariff protection.
Following pressure by the Federation of Thai Industries', domestically produced or manufactured farmand food products will be left untouched by the package of autonomous Thai tariff reductions
announced in August 1999.
4
20. In textiles and clothing, the authorities have expressed their regret that only a few quantitative
restrictions have been eliminated by Members in the first years of the WTO Agreement on
Textiles and Clothing, while "new barriers to trade including repeated anti-dumping actions as well as
other customs and administrative formalities imposed by developed countries have unnecessarily
added to unfair restrictions against imports from developing countries".5  Among the other areas of
concern, the Government sees the need to intensify efforts to integrate developing countries into the
multilateral trading system, and has expressed worries about the increased use of so-called
anti-circumvention measures.
21. The Government's stated trade and investment  policy objectives are to promote economic
cooperation and to avoid frictions with foreign trade partners.  Since the previous Review in 1995,successive Governments have pursued these objectives particularly in five areas:  negotiation to
eliminate tariff and non-tariff barriers to trade;  regional liberalization;  privatization in the
communications and energy sectors;  mutual reco gnition arrangements and harmonization efforts in
the areas of standards and regulations;  and the more effective enforcement of intellectual property
rights.
22. With regard to merchandise trade, following the crisis, the authorities have prioritized
domestic recovery relative to trade liberalization.  For example, imports of competing finished goods
have been somewhat curtailed through increased tariffs (Chapter III(2)).  At the same time, tariff cuts
announced in the August 1999 tax package, mainly cover capital goods, raw materials and products
that are not being produced domestically, inputs used by the domestic electronics, car and parts, andpackaging industries.  In addition, export financing mechanisms have been reinforced to ensure access
to funding by companies in the wake of the multiple collapse of banks and other financing
institutions.
23. With regard to investment, the authorities are more selectively supportive in allowing foreign
participation.  In services, the authorities have agreed to majority foreign equity participation,allowing for foreign capital injections in certain troubled domestic companies, notably failed banks
and financial companies.  In manufacturing, 100% foreign-owned ventures have recently received
investment approval, provided that they are established under the sponsorship of the
Board of Investment.  As a result of these new regulatory changes, actual market access conditions are
considerably more liberal than the provisions of the underlying legislation, which contains statutory
rules requiring a majority equity participation of Th ai capital in a wide range of activities (see below).
                                                     
4 Bangkok Post,  9 June 1999, "Farm Products Safe from Lower Tariffs".
5 WTO document WT/MIN(98)/ST/71/Rev.2, 10 June 1998:  Statement by H.E. Dr. Supachai
Panitchapakdi, Deputy Prime Minister and Minister of Commerce.Thailand WT/TPR/S/63
Page 25
24. In contrast, government objectives have been more clearly defined in the plans announced for
the privatization of several specific energy sectors as well as for telecommunications services.
Although these reforms have yet to be passed into law, the authorities favour eventual competition,
including by majority foreign companies, in the supply of these services.
(ii) Other multilateral agreements
25. Thailand is a member of the Cairns Group of pr oducers and exporters of agricultural products,
along with Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia,
New Zealand, the Philippines, and Uruguay.  In preparation for the next multilateral negotiations on
agriculture, the Group is currently focusing on export subsidies, domestic support, and market access.
Thailand is also a member of such multilateral trade-related organizations as UNCTAD, the
Common Fund for Commodities, the Food and Agriculture Organization of the United Nations, theWorld Bank, the International Monetary Fund, the International Finance Corporation, and the
Asian Development Bank.  Since its previous Re view, Thailand has withdrawn its membership of
several international commodity agreements, incl uding the International Agreement on Jute and
Jute Products, the International Natural Rubber Organization (effective in March 2000), and the
Association of Tin Producing Countries.
26. Thailand receives trade preferences under the Generalized System of Preferences (GSP) from
28 trading partners.  In 1998, Thailand exported goods worth about US$9 billion under GSP schemes
(about one sixth of total exports), unchanged since 1994 but more than double the level of 1989.  The
authorities have stated that they favour MFN tariff reductions over the granting of GSP treatment,
because GSP schemes typically incorporate graduation mechanisms under which tariffs have been
raised on several categories of Thai exports.
6  For example, Thai GSP treatment from the
European Union ended on 1 January 1999 for three pr oduct categories, namely fishery products, fresh
fruit and vegetables, and cut flowers;  thus, Thai  exporters were faced with MFN customs duties
ranging from 11% to 30%.  Thailand is also a member of the Global System of Trade Preferences
(GSTP) and offers preferential tariffs for 11 tariff lines, including iron products, motors, and
generators (Chapter III(2)).
(iii) Regional trade agreements
27. Thailand also participates actively in APEC and other regional groups.  The authorities have
noted in the context of this review that Thaila nd's willingness to move forward towards regional
liberalization is sometimes hampered by weaker commitments by partner countries.
(a) ASEAN
28. Thailand was one of the founding members of the 1967 Association of South-East Asian
Nations (ASEAN).  The other founding members were Indonesia, Malaysia, the Philippines, and
Singapore.  Brunei Darussalam joined as the sixt h member in 1984, Viet Nam as the seventh in 1995,
Laos and Myanmar in 1997 and Cambodia in April 1999.  ASEAN has a total population of
500 million, an aggregate annual GDP of US$6 85 billion and total trade of US$720 billion.7  ASEAN
holds regular (mostly annual) meetings with eleven ASEAN dialogue partners:  Australia, Canada,China, EU, India, Japan, New Zealand, the Republic of Korea, the Russian Federation, the United
States, as well as the United Nations Development Programme.  In the wake of the 1997 crisis,
                                                     
6 Comments by Deputy Prime Minister Supachai Panitchpakdi.  Available at:  http://bangkokpost.net,
26 November 1998.
7 Information available at:  http://www.ASEANSEC.ORG.WT/TPR/S/63 Trade Policy Review
Page 26
ASEAN members have generally resisted protectionism and opted instead for an acceleration of trade
and investment liberalization.
Tariff elimination
29. Since 1995, Thailand has actively encouraged all efforts to accelerate tariff elimination under
the ASEAN Free Trade Area (AFTA – Box II.2).  In 1999, Thailand's AFTA tariff averaged 9.7% and
will decrease to 7.3% by 2000.  In comparison, the MFN average tariff is over 18%:  the margin ofpreference for regional supplies is therefore quite substantial, in contrast with some other
ASEAN member countries.
8
Box II.2:  Tariff elimination under the ASEAN
The Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade
Area forms the core mechanism for the implementation of intra–ASEAN tariff reductions on productsoriginating from ASEAN member states.  A product is regarded as originating from ASEAN, if at least
40% of its contents originate from any member st ate;  the 40% may originate from a single ASEAN
country or may be a cumulation of materials, parts or components from member countries.
On 1 January 1993, ASEAN members started to implement tariff reductions agreed under the CEPT with a
view to reducing all tariffs on ASEAN trade to between 0 and 5% over a maximum of 15 years and to
eliminating non–tariff barriers.  The CEPT tariff reduction programme consists of a Normal Track and aFast Track.  In the initial plan, tariffs on all products in the Normal Track were to be lowered to amaximum of 20% by 2001, and to the 0–5% range by 2008.  Tariffs under the Fast Track (concerning 15product groups accounting for about half of total intr a-ASEAN trade) had to be reduced to a maximum of
20% by 1998 and to the 0–5% range in 2003.  (The Fast track Programme covers:  oils, chemicals,
fertilizers, rubber products, pulp and paper, wooden and rattan furniture, gems and jewellery products,
mineral products, cement, pharmaceuticals, plastics, leather products, textiles and apparel, ceramics and
glass products, machinery and electrical appliances.)  In addition, each member submitted a list of productstemporarily excluded from the application of the CEPT (Temporary Exclusion List).  The lists, which
contained mostly chemical, plastic, and motor vehicl e products, had to be reviewed after eight years.
Products that would definitely not be part of the CEPT scheme were integrated in a "General Exclusion
List".
The 1995 ASEAN Summit formalized a proposal to advance the completion of AFTA by five years, from
2008 to 2003, and to expand the coverage of the scheme to unprocessed agricultural products.  In addition,ASEAN members decided to incorporate in the CEPT sche me most tariff lines that where initially left out
of tariff schedules under Temporary Exclusion Lists.  This incorporation is taking place in five equal
instalments of 20%, with the first instalment in January 1996 and the last in 2000.  In December 1998, the
Heads of State or Government of ASEAN agreed on th e principle of again bringing forward the completion
of the free-trade area (possibly by year 2002 instead  of 2003).  To accelerate the ASEAN Free Trade Area,
the leaders agreed that the six original signator ies to the agreement on CEPT would advance the
implementation by one year.  They also agreed to achieve a minimum of 90% of their total tariff lines at0-5% by the year 2000, which would account for 90% of intra-ASEAN trade.  By 2002, 100% of items on
the Inclusion List would have tariffs of 0-5%.  The new members of ASEAN shall maximize their tariff
lines between 0-5% by 2003 for Viet Nam and 2005 for Laos and Myanmar;  and expand the number oftariffs lines in the 0% category by 2006 for Viet Nam and by 2008 for Laos and Myanmar.
Source : Information provided by the Thai Government;  and WTO (1998).
                                                     
8 For example, Indonesia's simple average CEPT tariff is currently about 7% (against 9.5% for applied
MFN tariffs), and is scheduled to fall to 3.7% by 2003 (WTO, 1998).Thailand WT/TPR/S/63
Page 27
30. ASEAN member states decided, in December 1998, to expand access to the 1996
Basic Agreement on the ASEAN Industrial Cooper ation (AICO) Scheme, which promotes joint
manufacturing industrial activities between ASEAN-based companies.  AICO provides tariff
preferences on inputs sourced in the region.  In December 1998, the 30% ASEAN equity requirement
under the AICO Scheme was waived for the period 1999-2000 so that foreign companies could also
enjoy the preferential intra-ASEAN trading conditions.  As of September 1999, there have been a totalof 49 AICO applications to five ASEAN countries , of which 36 concerned investments in Thailand
highlighting the country's attractiveness as an investment location;  31 of these applications were
approved.
Technical barriers to trade
31. For intra-AFTA trade, member states had agreed in 1992 to eliminate within five years all
quantitative restrictions and other non-tariff barriers (NTBs), with respect to products covered by the
CEPT scheme.  Among recent developments, members have agreed to a process of cross-notification
of remaining NTBs.  More recently, the 1998 ASEAN Framework Agreement on Mutual Recognition
Agreements (MRAs), which was signed in Hanoi, stipulates the general principles for developing
sectoral MRAs amongst member states, and for eliminating technical barriers to trade within ASEAN.It also stipulates the general conditions under which each signatory to the sectoral MRA shall accept
or recognize results of assessment procedures for conformity with requirements produced by the
conformity assessment bodies of the other signatories.
Services
32. The ASEAN Economic Ministers also agreed in December 1995 to expand the scope of
cooperation to services, and signed the ASEAN Framework Agreement on Services.  Seven priority
areas to be liberalized are specified in the 1995 Bangkok Declaration, namely telecommunications,tourism, financial, construction, business, maritime, and air transport services.  Thailand's schedule of
specific commitments, issued in December 1998, covers all of these areas.  It offers market access for
certain subsectors that are not covered by Thailand's GATS Schedule (e.g. VSAT operations
Chapter IV(6)).
Investment33. Investment incentives offered by China's special economic zones and technology
development zones are perceived as a major challenge for ASEAN policy-making.  In order to attract
investment to ASEAN through a more liberal and tr ansparent environment, therefore, members signed
the Framework Agreement on an ASEAN Investment  Area (AIA) in the Philippines in October 1998.
The Agreement covers all direct investment in manufactures and manufacturing services.
9  A l l
industries are to be opened to national treatment to ASEAN investors by 2010 and to all investors by
2020, with certain exceptions, to be submitted within six months after signing.  Thailand has
subsequently campaigned for accelerated implementation of the AIA from 2010 to 2003;  Thai
regulations currently contain no major market access or national treatment limitations to foreign
investment, reflecting the Government's investment-based recovery strategy.10
                                                     
9 ASEAN Secretariat [Online].  Available at:  http://www.aseansec.org.
10 For manufacturing projects, if production is mainly for the domestic market, Thai nationals are
normally required to hold at least 51% of total register ed capital, except in the case of projects located in remote
areas (zone 3), where maximum foreign shareholding is considered on a case-by-case basis (Chapter III(4)).But these provisions are currently suspended in order to encourage foreign investment (section (4) below).WT/TPR/S/63 Trade Policy Review
Page 28
New areas of cooperation
34. The Framework Agreement on Intellectual Property aims at improving the legislation on and
enforcement of intellectual property rights in the ASEAN region and envisages the possibility of
integrating patent and trade mark protection into a single ASEAN legal framework.  According to the
authorities, members are currently considering th e establishment of an ASEAN Regional Trademark
and Patent Filing System.
Bilateral Payment Arrangements (BPA)
35. Following the financial crisis that began in mid-1997, ASEAN leaders agreed in
December 1997 to promote greater use of ASEAN currencies to settle intra-ASEAN trade.  Such
bilateral payment arrangements (BPAs) have been established to settle trade transactions on a netting
basis between two countries' clearing agents.  To date, one BPA has been successfully concluded
(between Malaysia and the Philippines) while three more are at various stages of negotiations
(including between Malaysia and Thailand).
ASEAN surveillance process
36. ASEAN member countries established the ASEAN Surveillance Process in October 1998 in
order to provide an early warning system and a peer review process of macroeconomic and financialdevelopments in the region.  The ASEAN Surveillance Technical Support Unit will initially provide
technical support to the surveillance process, with the assistance of staff from the Asian Development
Bank.  An ASEAN Surveillance Coordinating Unit, based at the ASEAN Secretariat in Jakarta, will
monitor macroeconomic and financial developments in the region, and any structural or sectoral
issues deemed important by the ASEAN Select Committee, which is composed of members of the
ASEAN Senior Finance Officials Meetin g and the ASEAN Central Bank Forum.
Recent developments37. In order to expand intra-regional trade liberalization and preferential treatment for foreign
investors, leaders at the 6th ASEAN Summit in Hanoi on 16 December 1998 issued a Statement on
Bold Measures announcing and acceleration of AFTA tariff elimination;  short-term measures to
attract investment in ASEAN countries;  greate r scope for ASEAN industrial cooperation (AICO);
and the launching of a Second Round of Negotiations on Services.  In the area of tariffs, the leadersagreed to reduce tariff rates to 5% or less on 90% of goods traded by six members
(including Thailand) by 2000.  They also agreed to a three-year reduction of corporate taxes and
permission for foreign corporations to set up wholly  owned subsidiaries in the manufacturing sectors
(but not manufacturing services) during 1999 and 2000 on an MFN basis.
(b) Asia-Pacific Economic Cooperation (APEC)
38. Launched in 1989, APEC was created to promote cooperation among countries in the
Asia-Pacific Rim.
11  Almost three quarters of Thailand's external trade is with fellow APEC members.
                                                     
11 The members, besides Thailand, are Australia;  Brunei Darussalam;  Canada;  Chile;  China;
Chinese Taipei;  Hong Kong, China;  Indonesia;  Japan; the Republic of Korea;  Malaysia;  Mexico;
New Zealand;  Papua New Guinea;  the Philippines;  Si ngapore;  and the United States.  The Bogor Declaration
in November 1994 committed APEC to achieve free and open trade and investment in the region by no laterthan 2020.  In the Declaration it was agreed that the p ace of implementation will take into account the differing
level of economic development among APEC economies, wi th the industrialized economies achieving the goal
of free and open trade and investment no later than 2010, and developing economies no later than 2020.Thailand WT/TPR/S/63
Page 29
As a small economy with both an open investment regime and fairly high tariffs relative to APEC
partners, Thailand could be one of the largest potential beneficiaries of full liberalization under
APEC.12
39. APEC activities related to the reduction of trade and investment barriers have primarily been
undertaken through initiatives in the areas covered under the Individual Action Plans (IAPs).13  This
process, which began in January 1997, allows member economies to gradually reduce such barriers ona voluntary basis without imposing binding comm itments on individual members.  Thailand has
progressively improved commitments under its IAP.
40. In an attempt to accelerate the reduction of impediments to trade and investment in line with
APEC goals, member economies launched, in 1997, an Early Voluntary Sectoral Liberalization
(EVSL) initiative aimed at liberalizing trade in 15 key sectors by 2005.
14  So far, this initiative has not
achieved the success initially expected, particularly with regard to the tariff reduction component of
the initiative.
41. The Thai authorities consider that Econom ic and Technical Cooperation (ECOTECH), the
other branch of APEC, is just as important as trade and investment liberalization activities and should
be treated accordingly.  Thailand plays a major role in supporting and developing ECOTECH projectsin the region, playing host to numerous meetings and training programmes organized through APEC.
It is also an active participant in all ECOTECH activities undertaken elsewhere in the region.
(c) Asia-Europe Meetings (ASEM)
42. Leaders of 25 Asian and European countries held the first Asia-Europe Meeting (ASEM) in
Bangkok, in March 1996, to enhance the process of mutual understanding between the
two continents on political, social, and economic matters.  The Thai authorities have since noted
substantial progress in ASEM economic cooperation, including the implementation of theInvestment Promotion Action Plan (IPAP), which was initially drafted by Thailand and subsequently
endorsed by the Second Meeting of ASEM Leaders in London in 1998.  The Trade Facilitation Action
Plan (TFAP), which was also endorsed at the second ASEM is another tangible achievement aimed at
reducing non-tariff barriers and promoting trade opportu nities between the two regions.  It consists of
trade facilitation goals in several priority sectors, such as customs procedures, standards, quarantineand SPS procedures.  TFAP goals are expected to be achieved by the year 2000 at the third ASEM.
Despite its informal nature, which in the view of the Thai authorities has caused some difficulties in
coordination, ASEM is seen among partners as very  beneficial both to Asian and European countries
as an opportunity not only to enhance mutual understanding but also to deepen cooperation in various
fields, particularly trade and investment.
(d) Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Cooperation (BIMST-EC)
43. The BIMST-EC aims to strengthen both social policy and economic growth in the region.
Eight areas of cooperation are covered under BIMST-EC:  trade and investment, transport and
                                                     
12 Adams (1998).
13 These areas are:  tariffs;  non-tariff measures;  services;  investment;  standards and conformance;
customs procedures;  intellectual property rights;  competition policy;  government procurement;  deregulation;
rules of origin;  dispute mediation;  mobility of business people;  and implementation of the Uruguay Round
outcomes.
14 These key sectors are composed of nine priority sectors:  gems and jewellery, energy, chemicals,
fish, environmental products, medical equipment and apparatus, telecommunications, forestry products, andtoys;  and six remaining sectors:  rubber, fertilizer s, food, oilseeds, civil aviation, and automotive.WT/TPR/S/63 Trade Policy Review
Page 30
communications, tourism, technology, energy, and fisheries;  technical assistance is provided by
ESCAP and UNDP.  BIMST-EC holds Ministerial and Senior Officials meetings once a year with
member countries taking turns as host.  Due to the economic crisis and the shortage of operating
capital, cooperative efforts amongst member countries have been slow.
(e) Greater Mekong Subregional Economic Cooperation (GMS-EC)
44. The GMS-EC, which comprises Cambodia, China (Yunnan Province), Myanmar, Laos,
Thailand, and Viet Nam, is supported by the Asia n Development Bank (ADB) by way of technical
cooperation in the key areas of transportation, energy, communications, human resource development,
tourism, environment and natural resource management, and trade and investment.  The results so far
include linkages of land and water transportation across neighbouring member countries.  A working
committee is to be set up to facilitate trade, w ith assistance from ESCAP and the ADB.  Objectives
include better exchange of trade-related information, elimination of non-tariff trade barriers,
facilitation of investment to attract foreign investors, and the establishment of bilateral trade
agreements.
(iv) Bilateral trade agreements
45. Thailand maintains a total of 34 bilateral tr ade agreements.  The Treaty of Amity and
Economic Relations with the United States, which is considerably wider in scope than the other 33,
contains the following main elements:
- MFN, non-discriminatory treatment with respect to customs duties, as well as any
other charges, regulations, and formalities levied upon or in connection with
importation and exportation;  internal taxes, sale, distribution, storage and use;
international transfer of payments for imports and exports;  import restrictions or
prohibitions;  all matters relating to importation and exportation;
- national treatment with respect to establishing enterprises of all types engaging in
commercial, industrial, financial, and other business activities, with exceptions in
communications, transportation, fiduciary functions, banking involving depository
functions, exploitation of land or other natural resources, or domestic trade in
indigenous agricultural products;
- national treatment with respect to the pa yment made by nationals or companies of
either party of taxes, fees or charges, or to the requirements with respect to the levy
and collection thereof;
- national treatment with respect to patents, trade marks, trade names, designs and
copyrights;  and
- dispute settlement to be carried out by means of arbitration.
(4) FOREIGN INVESTMENT REGIME
46. Thailand, like other countries in the region, has attracted more foreign direct investment (FDI)
in the period under review than ever before.  Between 1994 and 1997 foreign direct investment
inflows into Thailand increased from US$1.4 billion to US$3.8 billion, and nearly doubled toUS$6.8 billion in 1998 (Chapter I(3)).  A liberal approach to foreign investment has been a major
factor in this expansion.  For example, the recent surge of FDI reflects in part the opening in 1998 of
several previously restricted services sectors, in particular in banking and finance, but also the energyThailand WT/TPR/S/63
Page 31
sectors and telecommunications.  Although the investment regime is in a state of flux, with conditions
attached to foreign investment having changed frequently, in practice, foreign participation is allowed
in a large majority of economic sectors.
47. A new Foreign Business Act, due to replace the current legislative framework, was expected
to obtain parliamentary approval at the end of 1999 after seven years of deliberations.  Meanwhile, the
conditions for foreign investment are determined on the basis of two acts and several announcements
including the Alien Business Law of 1972;  the Roya l Decree of 1973;  the Investment Promotion Act
of 1977;  the Board of Investment (BOI) No. 1/2536 of April 1993 specifying the criteria for joint
ventures;  a March 1998 announcement allowing additional foreign equity participation under BOI
sponsorship;  a November 1998 announcement allowing new projects in manufacturing to be 100%
foreign-owned;  an announcement waiving locationa l requirements for foreign investment projects;
and sector-specific legislation and announcements relating thereto.  Also, the criteria for approval
seem to differ depending on which legislation is invoked.15  According to the authorities, however,
since 1998 approval for foreign investment is no l onger negotiated on a case-by-case basis with the
Board of Investment.
48. Thailand provides various incentives to investors.  National treatment prevails, however, so
that these incentives are provided to domestic and foreign investors alike (Chapter III(4)).  Below is a
summary of the basic legislative framework as it stood in mid-1999, and a description of external
agreements regarding investment.
(i) Basic framework
49. As noted, the main laws governing foreign direct investment in Thailand are the
Announcement of the National Executive Council No. 281 (also known as Alien Business Law of
1972) and the Investment Promotion Act of 1977.  In addition, certain sectors such as electricity,
petroleum, gas, and other natural resources, international transport, financial services and certain
business services are covered by specific legislation with specific criteria for foreign participation.
For example, for projects of over B 1 billion in natural-resource-based activities, a recent
announcement authorizes foreigners to hold the majority of all shares initially, but Thai nationals must
acquire at least 51% of the shares within five years of operation, a condition which may constitute adisincentive to long-term investment.
The Alien Business Law
50. The Alien Business Law specifies the main areas where Thailand imposes restrictions on
foreign majority ownership.  The Alien Business Law defines foreign juridical persons as (i) those
juridical persons with 50% or more of their capital owned by non-Thais;  or (ii) those where at leastone half of the number of shareholders, partners or members are foreign, notwithstanding the amount
of capital invested by aliens.  This definition, which would appear to be subject to a number of legal
loopholes, was reportedly to be amended in the forthcoming Foreign Business Act, so that the
restrictions would apply to equity ownership rath er than to the number of foreign shareholders.
51. Aliens, as defined by one of the two conditions above, are prohibited from engaging in
activities listed in Annex A, which include rice and salt farming, internal trade of local agricultural
products, as well as most professional services such as real estate, accounting services, legal services,
architectural services, advertising, auctioning, brokerage and construction (see also Chapter IV(7)).
                                                     
15 Some provisions of the April 1993 Announcement appear to allow foreign direct investment that
would normally be prohibited under the Alien Business Law, provided that projects are carried out under theGovernment's Board of Investment incentive programme.WT/TPR/S/63 Trade Policy Review
Page 32
52. For any business under Annex B, Thailand allows foreign participation up to 49% unless
otherwise permitted by a Royal Decree.  Annex B is a list of 37 agricultural, industrial, and services
activities including several food processing subsectors (e.g. sugar, flour, beverages),
pharmaceutical drugs production, and most retail sales services.  However, the Government issued a
Royal Decree in 1973 permitting up to 100% foreig n ownership for such business as agriculture,
industry and handicrafts, commerce, and services, provided that they are granted permission by theBoard of Investment (BOI).
53. Most other economic activities are included in a third group (Annex C), where
foreign nationals may invest only after receipt of a permit from the
Department of Commercial Registration at the Ministry of Commerce, which is granted on a
case-by-case basis.  New investment in all services sectors (except those in Annex A or B) is subjectto the granting of a permit by the Department.
54. In practice, the Board of Investment allows most new manufacturing projects to be
foreign-owned.  Foreign take-over of existing manufact uring plants is approved if the consent of the
Thai partners is obtained, in order to avoid hostile take-overs.
Restrictions on land ownership55. Under Thai law, foreigners may not normally ow n land or property, with the exception of a
limited number of housing apartment units.  However, in order to encourage foreign investment, the
acquisition of land may take place as part of a Bo ard of Investment project.  Moreover, during 1998,
the Securities and Exchange Commission created "p roperty funds";  these are wholly foreign-owned
Thai trusts that may own property (with the exception of vacant land).  Leasehold terms for foreigners
were also due to be extended from 30 to 50 years.
(ii) International initiatives and agreements
56. To date, Thailand has signed bilateral investment guarantee and protection agreements with
20 countries.  These agreements generally provide for national treatment and MFN treatment, and
ensure repatriation of profits by investors.  In addition, Thailand supported the creation of the
WTO Agreement on Trade-Related Investment Measures (TRIMs), and made the appropriate
notification (Table II.1 and Chapter III(4)).