WT/TPR/S/123 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Agriculture in Thailand continues to present a contrasting policy between a "Cairns Group"
approach to agricultural trade, supporting trade liberalization for most farm products, and relatively
high levels of tariff protection in favour of selected food manufacturing enterprises.
2. The authorities consider that state-owned enterprises operating under monopoly power have
little incentive to improve productivity;  recognizing that this results in an inefficient use of resources,
Thailand has been promoting privatization of various state-owned enterprises.  While there has been
gradual private participation in the energy sectors – gas, electricity and petroleum products – through
the corporatization of state-owned companies and partial deregulation, these sectors continue to be
heavily influenced by the influential state-owned providers (including statutory monopolies).
3. In the manufacturing sector, most local-content requirements have been eliminated;  however,
tariffs on certain industrial goods, such as automobiles and motorcycles, were increased.  In 2002 and
2003, Thailand introduced provisional anti-dumping measures on certain steel products.
4. Thailand has introduced unilateral reforms, incl uding higher foreign equity limits in banking.
Majority Thai ownership is nevertheless required in many services, and at least 70% in domesticshipping and aviation.
5. While substantial restructuring has taken place in the financial sector, the slow pace of
corporate rehabilitation has constrained economic recovery.  The authorities continue to gradually
deregulate the sector while enhancing prudential controls.  The Thai Asset Management Corporation,
formed in 2001, manages restructuring of non-performing loans, which remain high.  Bank
privatization, after some initial success, has waned.
6. Basic telecommunications is to be fully liberalized in 2006.  However, other planned
deregulation in the industry has slowed, mainly due to delays in establishing an independent regulator.
State monopolies remain in basic domestic and international services.  By contrast, more competition
in mobile telephones has triggered greatly improved productivity.
7. Greater private sector involvement in transport is envisaged, including selling 23% equity in
Thai Airways International.
8. Majority foreign investment in hotels, including accommodation and restaurant activities, and
guided tour and travel services requires approval under the 1999 Foreign Business Act.
(2) A
GRICULTURE
9. The share of agriculture in Thailand's GDP declined slightly from 9.4% in 1999 to 9.1%
in 2002 (Table IV.1);  the sector accounted for about 47.9% of total employment up from about45.3% in 1999 (Table IV.2).  These data suggest a deterioration in labour productivity of the sector
relative to the national average during the period under review.
1  The share of agriculture in Thailand's
total exports has also declined, from about 20% in 1999 to 18.5% in 2001 (Chart I.1).  The share of
agriculture in overall imports remains almost unchanged at about 7.9%, reflecting the country's
                                                     
1 Nonetheless, data provided by the Thai authorities indicate that TFP in the agriculture sector
increased;  they ascribe the increase mainly to government support especially for R&D.Thailand WT/TPR/S/123
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abundant food supply, as well as a number of technical and tariff barriers to food imports.  As a
member of the Cairns Group, Thailand supports liberalization in agriculture trade.
Table IV.1
Share of GDP by sector, 1999-02
(Per cent, B million)
Share in GDP
1999 2000 2001 2002
Agriculture 9.4 8.9 9.0 9.1
Non-agriculture 90.6 91.1 91.0 90.9
Mining and quarrying 1.9 2.4 2.46 2.47
Manufacturing 32.7 33.6 33.4 33.8
Services 56.1 55.3 55.3 54.6
Construction 3.6 3.1 3.0 3.0
Electricity, gas, and water supply 2.8 3.0 3.3 3.2
Commerce 17.3 17.3 16.8 16.3
Transport, storage, and communications 8.1 8.1 8.4 8.4
Other services 24.3 23.8 23.8 23.7
Gross domestic product (GDP) 4,637,079 4,916,505 5,123,418 5,433,287
Source: Economic Data and Accounting System Office, NESDB.
Table IV.2
Share of employment by sector, 1999-02
(Per cent)
1999 2000 2001a2002a
Employment (thousand persons) 30,663.3 31,292.6 34,163.8 34,602.9
Agriculture 45.3 44.4 48.4 47.9
Non-agriculture 54.7 55.6 51.6 52.1
Mining and quarrying .. .. .. ..
Manufacturing 15.0 16.0 13.7 14.0
Services 39.5 39.4 37.7 38.0
Construction  4.6 4.8 3.6 4.0
Electricity, gas, and water supply 0.5 0.5 0.2 0.2
Commerce 15.5 15.6 13.1 13.9
Transport, storage, and communication 3.3 3.1 3.2 3.1
Other services 15.6 15.4 17.6 16.8
.. Not available .
a Data for December.
Source: National Statistical Office, Labour Force Survey.
10. At 25.7%, the average applied MFN tariff on agricultural products (WTO definition, i.e.
including processed food products) i.e. much higher than the average applied tariff for non-
agricultural imports, which is currently 13.0%.  Further, a range of agricultural products, including
fish-meal, gunny bags, jute and kenaf, remains subject to non-automatic import licensing, and23 agricultural products remain subject to tariff quota and import licensing (Chapter III(2)(iii)).  The
Public Warehouse Organization remains responsible for the importation of certain quantities under
tariff quota, including potatoes and tea (Chapter III(4)(vi)).  Exports of tobacco continue to be
channelled exclusively through the Thai Tobacco Monopoly.  At present, the only agricultural
products subject to export taxes are raw hides and skins and some forms of unprocessed wood(Chapter III(3)(ii)).WT/TPR/S/123 Trade Policy Review
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11. There have been no major changes in the overall framework of Thailand's production subsidy
and support programmes, which include a pledging scheme, soft loans, and price interventions.2
These programmes are implemented by the Bank for Agriculture and Agricultural Cooperatives, theBank of Thailand, and the Farmers Assistance Fund.  The main objective of the programmes is to
stabilize domestic prices.  Thailand also maintains a Farming Input Assistance Programme,  which is
aimed at providing short-term loans to low-income or resource-poor producers to meet seasonalfarming expense, such as the purchase of seeds, fertilizers, and facilities.
(3) P
OLICY DEVELOPMENTS IN THE ENERGY SECTOR
12. Sufficient energy supply, at reasonable prices, and meeting quality requirements of consumers
is considered as vital by the authorities.  With these objectives in mind, Thailand's policies on energy
focus on promoting efficient procurement and use of alternative energy sources.  Reform of theelectricity supply industry is considered as one of Government's policy priorities.
13. An energy industry bill is currently under review by the Office of the Council of State;  the
bill proposes the establishment of a regulatory agency under the Ministry of Energy and a transparent
regulatory framework for the energy sector.
14. Thailand has not included any energy-related sectors in its GATS Schedule of Commitments.
(i) Petroleum and petroleum products
15. Imports of petroleum products decreased from 1,849,000 tons of oil equivalent (1,849 ktoe) in
1999 to 1,167 ktoe in 2000.  Exports increased.
16. In accordance with the provisions of the Foreign Business Act B.E. 2542 (1999), a foreign
business licence, issued by the Ministry of commerce, is required for foreign participation in
petroleum exploration, or production/distribution of petroleum products, or any company with foreign
shareholding 50% or more.  In addition, petroleum exploration and production rights in Thailand aregranted by the Department of Mineral Fuels, under the Ministry of Energy.
3  An optional commercial
covenant specified by the National Energy Policy C ouncil (NEPC) for the establishment or expansion
of oil refineries requires the payment of 2% royalty on the value of production.
17. Thailand has not bound tariffs on most petroleum products.  Imports of gasoline, kerosene,
high speed diesel oil, naphtha, and liquified petroleum gas are also subject to import licensing(Chapter III(2)(iii)).  Only wholesale prices of liqui fied petroleum gas continue to be regulated by the
Government.
                                                     
2 For example, rice producers continue to be eligible for a paddy pledging programme run by the Bank
of Agriculture and Agricultural Cooperatives, a state-owned bank.  Under this scheme, farmers can pledge up to90% of their crop to the Bank in exchange for low interest loans.  In the case of sugar, the establishment and
expansion of sugar mills continue to be controlled by the Government;  it sets the domestic price of sugar and, in
doing so, determines the price received by sugar planters and millers.  Under this arrangement, 70% of the net
revenue from sugar and molasses is paid to farmers and 30% to the mills.  In March 2001, the Governmentintroduced a Farmer's Debt Moratorium Scheme effective for 2001-04.  The objective of the scheme is to helpsmall and resource-poor farm households to recover from the economic crisis of 1997.  To be eligible for thescheme, farmers must have debts of less than B 100,000 with the Bank of Agriculture and Agricultural
Cooperatives.
3 The rate of royalty ranges from 5% to 15%, and the compulsory exploration period is six years.  The
duration of the concession is 20 years, and the total exploration area of any single concessionaire may not
exceed five blocks of 4,000 square kilometres.  Concessionaires are allowed to sell or otherwise dispose of thepetroleum produced in so far as they meet their royalty and tax obligations.Thailand WT/TPR/S/123
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Pipeline transport system
18. Currently, two multi-product pipelines are in operation for the transport of petroleum
products;  a third pipeline is being planned.  Concessions, granted by the Department of Energy
Business in the Ministry of Energy, are required for investments in petroleum transmission and
downstream distribution pipelines.  The PTT Public Company Limited is responsible for the operation
and maintenance of the existing onshore and two offshore natural gas transmission pipelines.
(ii) Other energy
(a) Natural gas
19. Three major producers dominate natural gas production and supply in Thailand, and, as the
sole distributor, the PTT continues to be a de  facto monopoly over transmission and processing of
natural gas.  Prices are regulated by the National Energy Policy Council and the Energy Policy andPlanning Office of the Ministry of Energy.  Curren tly, some 80% of total gas consumption is used in
power generation, and the remainder is used to produce LPG and petrochemical feedstock, as well as
industrial and transport fuel.  In addition to domestic production, natural gas is also supplied by
imports from Myanmar.
(b) Electricity
Generation
20. Since March 1996, the Government has promoted participation of the private sector in
electricity generation.  By June 2003, 66 power purchase agreements had been signed with small
power producers (SPPs) for a total capacity of 2,269.3 MW;  agreements have also been signed with
seven independent power producers (IPPs) for a capacity of nearly 6,000 MW.  The total generation
capacity in April 2003 stood at 25,377.8 MW.  Thailand has also started to buy power from
neighbouring countries such as the Lao People's Democratic Republic, Myanmar, China, andCambodia.
4
Distribution
21. Distribution and sales of electricity remain a state monopoly;  there is no third-party access
for the time being in the transmission and distribution system, and no retail competition.
(4) POLICY DEVELOPMENTS IN SELECTED MANUFACTURING SECTORS
22. The share of manufacturing in GDP expanded from 32.7% in 1999 to 33.8% in 2002.  The
share of manufacturing in employment, however, decreased from 15.0% in 1999 to 14.0% in 2002.
This indicates a slight improvement of labour productivity in manufacturing in relation to the national
average.
23. Since the previous Trade Policy Review of Thailand, the Government has refrained from
introducing new instruments of import protection, and most local-content requirements tied with BOI
incentives have been eliminated;  however, tariffs on certain industrial goods, such as automobiles
and motorcycles, have been increased.  Nonetheless, the average industrial tariff (HS 25-97) declined
                                                     
4 Two hydropower projects of the Lao Peoples' Democratic Republic, i.e. Theun Hinboun (187 MW)
and Houay Ho (126 MW) started supplying electricity to Thailand in March 1998 and September 1999 under25-year and 30-year contracts, respectively.WT/TPR/S/123 Trade Policy Review
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from 14.6% in 1999 to 12.9% in 2003 (Table III.1).  In 2002 and 2003, Thailand introduced
provisional anti-dumping measures on certain steel products.
24. Thailand places emphasis on structural reforms aimed at enhancing the country’s
competitiveness, and advancing to a high-performance economy by making its production base more
skill and knowledge intensive;  it has proposed sectoral strategic plans classified into three groups:
(1) globally competitive industries (e.g. food and fashion); (2) regionally competitive (e.g. chemicaland ceramics);  and (3) basic industries that need support from the Government (e.g. iron and steel,
and petrochemicals).  The plans are to be implemented through public bodies, such as an SMEs
Promotion Office and specialized institutions.  The authorities state that the strategic plans mainly
concentrate on human resource development and training.
(i) Textiles and clothing
25. Clothing is Thailand's third main source of i ndustrial export revenue after electronics and
electrical appliances.  In 2001, clothing and textile exports constituted 5.5% and 2.9%, respectively,
of total merchandise exports;  clothing and textile imports constituted 0.2% and 2.5%, respectively, of
Thailand's total merchandise imports.
26. Between 1999 and 2003, average tariffs on clothing were reduced from 46.5% to 33.6%
(Table AIII.1).  Import licences are required for silk yarn;  according to the authorities, this licensing
requirement is for statistical purposes.  Import licences are also required for imports of gunny bags
woven of jute and kenaf (Chapter III(2)(iii)).
27. Under the WTO Agreement on Textiles and Clothing (ATC), exports of textiles and clothing
are restricted by quotas imposed by four major trading partners:  the European Union, the United
States, Canada, and Norway.  Thailand’s exports to these countries amounted to US$3,105.4 million
in 2001, and US$3,007.5 million in 2002.
5  Thailand administers these quotas under two  different
methods.  The first is the "basic quota" allocated to exporters based on the shipment in the preceding
years;  The second is the "supplementary quota" derived mainly from:  (i) the balance of quota
remaining after the basic quota has been  allocated, (ii) the surrendered quota, and (iii) the quota from
those who fail to fully utilize their allocated quotas.  This supplementary quota is available to all
exporters and is allocated, in principle, according to their demand.  If the available quota isinsufficient, an allocation of supplementary quota is made pro rata  or by other methods.
28. The authorities consider that once the current quotas are eliminated, Thailand will face fiercer
competition from countries with lower labour costs, such as China, Indonesia, and Viet Nam, in its
major markets, such as the United States, the EU, and Canada.  In their view, the products mainly
affected would be those for which Thailand's competitors have high potential and those previouslysubject to quotas, particularly garments;  small businesses with low production and export potential
would be particularly affected unless they improv e efficiency.  Many of Thailand's quotas in the
United States, EU, and Canada under the ATC are under-utilized (Table AIV.1), suggesting that the
international competitiveness of certain products in this sector may be weak.  Such under-utilization
may also be partly due to these countries' preferential agreements with some of Thailand's maincompetitors.
                                                     
5 Major markets for Thai exports not covered by ATC-based bilateral quota agreements are Japan;
Hong Kong, China;  United Arab Emirates;  and Saudi Arabia.Thailand WT/TPR/S/123
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(ii) Steel products
29. By 2000, steel production in Thailand had recovered to the level prior to the onset of the 1997
Asian financial crisis, due mainly to a recovery in demand for steel by its main users, e.g.
automobiles, electrical appliances, and construction.
30. Tariffs in 2003 declined for semi-processed iron and steel products, to 7.5% on average, down
from 10.3% in 1999;  tariffs on fully processed iron and steel products remained on average at 20%during the same period (Table AIII.1).  However, Thailand applied surcharges to some steel products
(i.e. hot-rolled non-alloy steel plate and coil, cold-rolled non-alloy steel plate and coil, cold-rolled
stainless steel sheet and coil, and coated steel sheet and coil) as from 29 January 2002.  The
surcharges were imposed for six months, and ranged from 5% to 25% on the c.i.f. prices of imports.
After expiry of the term of imposition, the Governme nt decided to apply anti-dumping duties to these
products (Table III.4).
31. Since 1999, imports of six steel products are required to meet mandatory technical regulations
(Table AIII.2).
(iii) Motor vehicles
32. Tariffs on completely-knocked-down (CKD) au tomobiles increased from 20% to 33% in
January 2000. Excise duties on motor vehicles ranged from 0% to 48% in May 2003.  Quantitative
import restrictions in the form of non-automatic licensing remain in place on certain used diesel
engines (Table III.3).  Importation of used motorcycle engines is absolutely prohibited.  Importation
of used motorcycles or passenger cars is generally prohibited except when imported temporarily by
the public sector for re-export.  During the period under review, Thailand abolished local-content
requirements on automobiles.
6 
33. Technical regulations are set by the Ministries of Transport and Industry.  Some
217 companies in the sector have received ISO 9000 certification:  six were certified by the Thailand
Industrial Standard Institute, the others were certified by various agencies.  In 1998, the Management
System Certification Institute (Thailand) was established to undertake certification work under the
framework of ISO 9000, ISO 14001, and ISO 18001, among others.
(5) SERVICES
34. In 2002, services, including construction, accounted for about 55% of GDP and about 40% of
employment;  commerce (wholesale and retail tr ade) dominates (16.3% of GDP), followed by
transport, storage, and communications (8.4%).  A large share of FDI goes into services, especially
finance and retail trade.
35. Thailand's GATS Schedule covers all mayor service sectors except health.  Foreign equity
limitations of 49% on commercial presence are scheduled for a range of professional services, such as
legal, accounting, and architecture, as well as for certain construction, education, environmental,
tourism, recreational, cultural and sporting, and maritime, rail and road transport services.  In other
sectors, foreign equity limitations range from 20% to 49% for telecommunication services, and 25%
to 49% for most banking and non-banking financial services (including insurance).  In financial
                                                     
6 Local-content requirements comprised:  not less than 54% of local parts for passenger cars;  a
compulsory parts list amounting to 60-70% for small trucks;  incorporation of seven specified locally producedparts and at least 40% domestic content for trucks and buses;  and motorcycles were required to incorporate alocal engine.WT/TPR/S/123 Trade Policy Review
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services, although new branches are subject to discretionary licensing, "grandfathering" provisions
allow foreign bank branches operating in Thailand before July 1995 to open up to two more
branches.7  Access through locally incorporated banks is limited to the acquisition of shares of
existing banks and foreign equity participation is limited to 25%.  Thailand has also listed MFN
exemptions on telecommunications, transport, and professional services.
(i) Financial services
36. Financial sector reform following the 1997 Asian financial crisis has been central to
Thailand’s recovery programme.  While some reforms have been slower than expected, significant
progress in  consolidation and restructuring has taken place.  Developments in this regard include:  a
fall in the number of commercial banks, including foreign branches, from 36 in 1997 to 31;  a drop in
stand-alone international banking facilities (IBFs) from 15 to six (all foreign owned);  forced mergers;
and closure of 56 finance companies.8  Many banks and other financial institutions were re-
capitalized, with government help, to meet end-2000 capitalization targets.9
37. The stability and performance of the financial system has improved since the 1997 Asian
financial crisis.  Institutions have been reorganized and more efficient risk management techniques
have been introduced;  profitability has begun to recover since 2002.  Nevertheless, banks' balancesheets remain weak, with bank rehabilitation inco mplete.  Many banks remain reluctant to extend
business credit, faced with a substantial corporate debt overhang following the crisis.  Concerns still
exist that bad loans may again creep up.
10
38. The Thai authorities have gradually deregulated the financial sector while enhancing
supervisory controls, especially in banking, insurance, and fund management.  However, the lines of
authority between the Ministry of Finance and the Bank of Thailand, which have joint responsibilities
in prudential regulation of the financial sector, are somewhat unclear, and may have hinderedimproved  financial supervision.
11  According to the authorities, su ch joint responsibility between the
supervisory authorities in key financial legislation provides important checks and balances.  For
example, the Bank of Thailand jointly deliberates with the Ministry of Finance on significant policy
initiatives.  The authorities also believe that the key financial laws clearly separate prudential
responsibility:  the Bank of Thailand supervises commercial banks, finance companies, and creditfonciers, while the Ministry of Finance is empowered to supervise specialized financial institutions.
The draft Financial Institutions Businesses Act, currently being considered by the Government, would
give the Bank of Thailand sole responsibility for supervising financial institutions.
12
                                                     
7 WTO document GATS/SC/85/Suppl.3, 26 February 1998.
8 IBF’s are offshore units of banks that provide credit to both overseas and local businesses.  They must
use foreign funds.  IBFs may be located in Bangkok (BIBFs) or in the provinces (PIBFs).
9 The Government’s re-capitalization scheme finished at the end of 2001;  support totalled
B 73.7 billion.
10 Chudasri (2003).
11 EIU (200b), p. 8.  Relevant laws are the Commercial Banking Act, 1962, and the Act on the
Undertaking of Finance Business, Securities Business and Credit Foncier Business, 1979.  The Ministry ofFinance delegated supervision of "specialized government financial institutions", such as the Bank forAgriculture and Agricultural Cooperatives, to the central bank in 1999.
12 Relevant authorities are still discussing the legislation.Thailand WT/TPR/S/123
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(a) Banking and other financial services
Background and recent developments
39. Foreign equity limits were relaxed in 1997 for ten years to allow foreign ownership of up to
100% (previously 25%) in commercial banks, finance companies and credit fonciers.13  A f t e r  t e n
years, foreign investors will not be allowed to purchase additional equity or participate in equity
recapitalization of financial institutions unless their equity holding is less than 49%.  Foreign investorswho increased their equity to over 49% during this ten-year period will not have to sell their shares,
but will not be able to purchase additional shares.  While the number of foreign commercial bank
branches fell from 22 to 18 between 1999 and 2002 (three branches closed in 2001), relaxation of
foreign equity limits led to substantial majority ownership of four Thai commercial banks.
14  At the
end of 2002, foreign banks (hybrid banks plus branches) held 16% of total commercial bank assets ofB 6.5 trillion.  This share has been on a rising trend.
15
40. Two of the ten fully Thai-owned commercial banks are state-owned.  The Government,
having increased bank ownership following re-capitalization, sold two banks in 2000.  Two state-
owned banks were merged during April 2002 and became one of the largest banks in Thailand.  In
September 2002, the Government partially privatized Bank Thai (state share of 49%),  TheGovernment plans to divest its equity in Krung Th ai Bank by the end of 2003, if market conditions
allow.
41. Several government institutions were formed to  help rehabilitate the financial sector.  The
Financial Sector Restructuring Agency (FRA), under the Ministry of Finance, was established in 1997
to determine the viability of 56 suspended debt-laden finance companies and to review their
rehabilitation plans.  These firms (with total assets of B 860 billion or 11% of the financial sector)
were liquidated, and asset auctions completed in late 1999.  The state-owned Asset ManagementCorporation, established in 1997, purchased some of these assets as "bidder of last resort";  its assets
totalled B 25.8 billion at end of 2000. The Financial Institutions Development Fund (FIDF),
established in 1985 to rehabilitate distressed institutions, was instrumental in taking over and re-
capitalizing/restructuring troubled banks.  It has also provided a blanket guarantee for depositors and
non-subordinated creditors of every financial institution incorporated in Thailand since 1997.  Theauthorities plan to establish the Deposit Insurance Agency (DIA) to operate a limited deposit
insurance scheme when the economy and financial sector achieves sustainable growth and stability.
Draft legislation establishing the DIA is being considered by the Ministry of Finance.
42. A key factor in bank rehabilitation was the tr eatment of non-performing loans (NPLs), which
reached more than 40% of total loans during the crisis.
16  Banks were initially allowed to set up asset
management companies, regulated by the Bank of Thailand, to transfer NPLs for restructuring by
debt-equity swaps, foreclosures, asset sales or le gal action (AMC Act, 1998).  Remaining NPLs held
by banks were to be provisioned and written off.  However, while these have fallen substantially, they
remain relatively high at B 753.6 billion, or 15.8% of total loans (March 2003).17  State commercial
banks have a higher overall share of NPLs than private, including hybrid, banks (43% and 24%,
                                                     
13 Individual equity limits of 5% were also lifted.
14 Such foreign banks are called "hybrid" banks.  The total market shares of hybrid banks and foreign
branches were about 5.8% and 10.6% in 2002, respectively.
15 Commercial banks hold about 80% of the banking system’s total assets, of which about half are held
by the four largest commercial banks, one of which is state-owned (Krung Thai Bank).
16 Banks hold over 95% of NPLs.  Finance companies, credit foncier companies and IBFs hold the rest.
17 Bank of Thailand (2003b).WT/TPR/S/123 Trade Policy Review
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respectively).18  To accelerate their restructuring, the Thai Asset Management Corporation (TAMC)
was established in 2001 to manage NPLs and to centralize debt restructuring (Box IV.1).  Any new
NPLs emerging after end 2000 are not covered by the TAMC.19  The TAMC’s target was to
restructure B 500 billion in debt by end 2002, and to cut the level of NPLs in the banking system to
below 10% of total loans by end 2003.20 The TAMC achieved its 2002 targets of restructuring
B 500 billion.  Progress has been slow, however, partly due to creditor disagreements and concernsover the restructuring framework, including the TAMC’s operations, transparency, and management,
as well as inadequate implementation of bankruptcy laws.
Box IV.1:  Thai Asset Management Corporation (TAMC)
After overcoming a constitutional challenge, the TAMC commenced operations in October 2001 as a
government agency owned by the Financial Institutions Development Fund (FIDF).  Its role is to managenon-performing loans (NPLs) transferred from banks and other financial institutions.  A Board of Directorsconsisting of 11 members appointed by the Minister of Finance and approved by the Council of Ministersmanages the TAMC.
All state-owned financial institutions and asset management companies had to transfer to the TAMC all
NPLs as at end December 2000 classified as:  "loss", "doubtful of loss", "doubtful" and "sub-standard".
Private institutions and asset management companies could choose to transfer NPLs, but only if:  they weresecured by property;  the debtor company was indebted to at least two Thai financial institutions;  the NPLvalue exceeded B 5 million;  and the NPL was not subject to any bankruptcy settlements.  Trade creditors,non-Thai banks, and foreign branches were ineligible.
The TAMC paid state banks the value of the NPL colla teral, excluding personal guarantees, or at prices
determined by the TAMC Board where there was no colla teral.   The price paid to private banks that opted
to transfer loans was the lower of the loan’s collateral value (excluding private guarantees) or its bookvalue less reserves.  Payment was by ten-year notes guaranteed by the FIDF.  The TAMC was scheduled toissue B 170 billion (US$3.7 billion) notes.  Profits and losses are shared between the financial institution
and the TAMC.
The TAMC has substantial powers, including establishing limited liability companies, guaranteeing credit
for debtors and lending debtors money.  It can restructure debt by unilaterally amending loan terms, forcing
a debt-equity conversion and take assignments of debts or assets from debtors to settle debts.  Certainprocedures under relevant laws are generally waiv ed.  The TAMC rules and procedures of business
reorganization are separate from those under the Bankruptcy Act.  The TAMC files a petition with theBankruptcy Court when the business plan is approved.
Source: Pornavalai, Cynthia M. (2002), Thai Asset Management Corporation (TAMC) , Tilleke & Gibbins International
Ltd, March.
43. All creditors are involved in very step of the TAMC's restructuring process, and have the right
to provide comments and recommendations on restructuring plans, even though they are not asset
managers for the TAMC.  Both the Board of Directors and the Executive Committee comprise
representatives from state agencies and private organizations, acting on behalf of creditors and
debtors.  According to the authorities, this help s ensure that the TAMC adheres strongly to the
principles of transparency and good governance, and provides equal and fair treatment of all parties.
                                                     
18 However, state-owned banks have retained a much lower share of NPLs (8.3%) compared with
private banks (21.3%), and a much higher share in AMCs (34.3% and 2.4% of total loans, respectively).  This
may give state commercial banks a competitive edge over private banks.  NPLs (as a share of total loans) are
highest in construction, mining and quarrying, and real estate.
19 New NPLs may emerge as the cash-flow projections used in cases restructured under the Corporate
Debt Restructuring Advisory Committee (CDRAC) may have been overly optimistic.
20 Chudasri (2003).Thailand WT/TPR/S/123
Page 81
Regulatory framework
44. Strengthened prudential regulation and supervision to improve the sector’s resilience and to
restore public confidence largely reflects the re cognition that inadequate and especially lax
application of regulatory, supervisory and prudential requirements had contributed to the financial
crisis.21  The Bank of Thailand has aligned its bank supervisory standards on asset valuation, loan
review, loan classifications, provisioning against ba d loans, and capital requirements, with BIS (Bank
of International Settlements) standards.  A minimum capital adequacy ratio of 8.5% was set for
commercial banks in 1997 (7.5% for foreign branches).  This ratio averaged 12.5% for locally
incorporated banks as of March 2003.   Measures have also been taken to enhance oversight and
regulation of loan portfolios, including on large exposures, cross-holdings, and related-party lending.
Risk-based bank monitoring, covering strategic, credit, liquidity, and operational risk assessments, isalso applied, and on-site examinations are conducted using a rating system whereby institutions rated
"one to three" are examined annually; those rate d "four" are also closely monitored and subject to
corrective action; and those rated "five" are subject to "intervention and permanent examination."
The Bank of Thailand has also taken various initiatives to strengthen corporate governance in addition
to those required by the banking legislation.  These include:  a Financial Institution Directors'handbook issued in March 2002;  a policy statement in December 2002 on the structure of
commercial banks' board of directors;  implementation of "fit and proper" tests and qualification
requirements for directors and managers of financial institutions;  and minimum disclosure
requirements.
22
45. Locally incorporated commercial banks must be licensed by the Minister of Finance.  They
may be established only by Thai interests or as joint ventures with foreign partners.  Foreign banks
also operate as licensed branches, and are required to maintain certain domestic reserves.  Licensingprovisions are generally applied uniformly to domestic and foreign banks.  Automatic teller machines
of foreign banks must be operated at their branch, but foreign banks can join the ATM network
operated jointly by Thai banks. Foreign branches can offer the same normal commercial bank services
as Thai banks, including connected or incidental business, such as non-equity related investment
banking, brokering and underwriting of fixed income securities, and many types of securitiesbusiness, such as securities lending, funds management, and investment advisory services, provided
they have a securities licence.
46. No commercial bank licences have been issued since Thailand’s last Trade Policy Review in
1999.  However, according to the authorities, amendments to the licensing regime are being
considered in the context of the Bank of Thailand's Financial Sector Master Plan.
(b) Insurance
47. The insurance industry in Thailand has shown renewed growth recently.  Life insurance
premiums rose substantially by the end of September 2002, to B 80.6 billion, an increase of 24.2%
over the same period in 2001 (B 64.9 billion). Apart from the generally low rates of return in the
financial market, the growth was perhaps aided by  the Government decision to raise the annual tax-
deductible limit on premiums paid to life insurance policies issued by locally incorporated insurers
from B 10,000 to B 50,000 on new policies from 1 January 2002.  Non-life insurance premiums also
increased by 13.8%, to B 30.4 billion by the end of June 2002, up from B 26.7 billion in the same
period in 2001.  There are in total 104 insurance firms (26 life insurers including one foreign branch
                                                     
21 WTO document TN/S/W/4, 22 July 2002.
22 Others include: limitations on cross-directorships of directors and management executives of
commercial banks;  requirements of internal and external auditors;  and certain anti-money-laundering and anti-terrorism requirements.WT/TPR/S/123 Trade Policy Review
Page 82
and one life insurer), and 78 non-life insurers (including five foreign branches, six specialized health
insurers, and one re-insurer).
48. The Government’s three-stage liberalization plan for insurance, which began in 1997, to
allow greater foreign participation has remained at the second stage.  At the first stage, 25% foreign
equity participation in a joint venture with a local firm was allowed (in 1997).23  Certain insurance
companies exceed the 25% limit because they started operations in Thailand before the legislationbecame effective in 1992 and were allowed to keep their higher foreign equity participation under
"grandfathering" provisions.  The largest life insurer, with over half of the market, has a majority
foreign ownership;  this firm entered the Thai life  insurance market before enforcement of the current
Life Insurance Act, and its acquired rights have therefore been protected under grandfathering
provisions.  Proposed legislative amendments, if approved by the Parliament, would raise the limit offoreign equity participation to 49% (completion of the second stage);  majority foreign equity
participation would be allowed within ten years after the completion of the second stage liberalization
(third stage).  The bill is being considered at mini sterial level.  A foreign insurance branch is not
allowed to open sub-branches in Thailand.
49. The Department of Insurance (DOI) of the Ministry of Commerce supervises insurers.
Improved supervisory measures have been adopted on solvency margins, technical reserves,
investments, and disclosure requirements.  Minimum capital requirements are set at B 50 million (or
not less than 2% of policy reserves) for life insurers and B 30 million (or not less than 10% of net
premiums in the preceding year, whichever is higher) for non-life insurers.  The DOI has proposed
amending these to B 500 million and B 300 million for life and non-life insurers respectively.  For
supervisory purposes, insurers' financial performance is subject to inspection and examination;  the
frequency of inspection depends on their performance and operational risks.  All premiums areapproved by the Insurance Commissioner.  According to  the authorities, such approval is required to
help protect the insurer and the insured by ensuring that premiums are fair and adequately reflect the
degree of risk.
50. Life insurance premiums of up to B 50,000 annually are tax deductible only for holders of
policies issued by locally licensed companies, but not for holders of policies issued by branches ofcompanies incorporated abroad.  The measure was introduced on 1 January 2002.  According to the
authorities, insurance companies do not benefit from any other preferential tax schemes.
51. The DOI supervises re-insurance because the authorities believe that without it insurers may
over-expose themselves to risk.  Non-life insurers must not assume "risks of more than 10% of their
capital funds" (Non-Life Insurance Act).  While no specific requirements cover the choice ofre-insurers, insurers must submit their reinsurance treaties to DOI within 30 days of signing.  The DOI
encourages domestic retention in the market segments where local companies have capacity and
potential to assume the risks.  Minimum domestic retention levels apply, for example 30% for all-risk
property policies exceeding insured sums of B 300 million, where an insurance firm wishes to apply
"special premium rates".  Although not a legal requirement, according to the authorities, at least 10%of premiums on fire policies exceeding sums insured of B 30 million must be re-insured with the
Thailand Fire Pool (set up by DOI and the General Insurance Association, and managed by Thai
Reinsurance).
52. Premium rates must be approved or fixed by the Insurance Commissioner.  Currently, the
compulsory motor premiums are fixed to the rates effective 1 April 2002.
                                                     
23 Most insurance companies have major foreign shareholdings.  For example, New York Life
International (U.S.) owns 25% of Siam Commercial Life Assurance; Allianz (Germany), 25% of CharoenPokphand Life Assurance; and Zurich Insurance (Switzerland), 25% of   National Life Assurance.Thailand WT/TPR/S/123
Page 83
(c) Capital markets
53. The Securities and Exchange Commission (SEC) is responsible for the prudential regulation
of securities and investment management businesses;  the SEC also supervises the capital market, in
accordance with the Securities and Exchange Act (1992).  The SEC has enhanced its supervisory and
regulatory measures, including disclosure requirements, to further deepen and broaden the capital
market.  The SEC declared in 2002 that it had made considerable progress in promoting marketconfidence through good corporate governance, and that this must continue.  It believes that a well
regulated capital market, with good governance am ong listed companies, that enforces investors'
rights will facilitate private fund raising.  The SEC's 2003 plan focuses on increasing institutional
investors and continued efforts to promote good governance.
24
54. The Capital Market Master Plan issued in 2002 emphasized corporatization of the Stock
Exchange of Thailand (SET), better corporate governance in securities businesses, and the
restructuring of the SEC with a view to improving efficiency and accountability of capital markets.
New regulations and guidelines have applied to equity and debt instruments of securities companies
since 2001.  The SEC must approve major shareholders (i.e. those with more than 10% of the total
shares) of securities and funds management companies to ensure they are "fit and proper" and havesound financial status.
55. The Foreign Business Act (1999) covers foreign equity in securities companies.  Foreign-
owned (up to 100%) securities firms may engage in brokerage business.  However, non-brokerage
securities activities, such as underwriting, dealing, investment advisory, and fund management, are
List 3 businesses, i.e. closed to firms with majority foreign equity unless permitted by the Director-
General of the Department of Business Development under the Ministry of Commerce.  Since the
Ministry of Finance does not  issue new broker or dealer licences, new entry is only possible bybuying equity in existing securities firms.  The SEC applies its licensing rules uniformly irrespective
of foreign equity holdings.
56. Investment management businesses under th e SEC Act (e.g. mutual fund management,
private fund management, and venture capital manage ment) are categorized as List 3 businesses under
the Foreign Business Act (1999).  There are currently two investment management companiesexempted from the majority shareholding clause.
57. The SET’s capitalized value in 2002 was B 1,986 billion (B 1,607 billion in 2001).  There are
36 brokerage companies operating as members of the SET.  Brokerage fees were deregulated in
October 2000, but the SEC re-introduced a commission fee floor of 0.25% for at least three years in
January 2002.  The Market for Alternative Investment (MAI) was established in 2001 for small andmedium-sized enterprises.  Its market capitalization was B 3.8 billion in 2002 (B 0.4 billion in 2001).
The Government introduced  income tax incentives, valid for five years, to encourage stock exchange
listings in 2001.  These reduced the tax rate (on profits below B 300 million) for existing and new
stock exchange listings (before 5 September 2004) from 30% to 25%, and to 20% for new MAI
listings. All companies listed on the MAI and incor porated in Thailand are entitled to this tax
privilege.  No direct restrictions apply to foreign investment in Thai securities
25;  such foreign
investment is subject to the Foreign Business Act (1999) and other related laws.
                                                     
24 SEC online information.  Available at:  http://www.sec.or.th/secen1/news/secnews/35-2002.shtml
25 EIU (2002b), p. 33.WT/TPR/S/123 Trade Policy Review
Page 84
(ii) Telecommunications
58. Thailand’s telecommunications market has expanded during the period under review,
especially for mobile services.  The number of fixed lines rose from about 5 million in 1998 to about
8 million in 2002, raising teledensity from 8.2% to 10.2%.  The teledensity for mobile services is
much higher, at 27.3%, or over 18.0 million subscr ibers (1.0 million in 1998).  The number of Internet
service providers has also grown, from 15 in 1998 to over 20 in 2002.  However, Internet penetration,at about 3%, remains low, partly due to regulatory constraints and high costs.
26
59. Thailand embarked on a Master Plan for Telecommunications Development in 1997 to fully
liberalize basic telecommunications by 2006.27  The Plan stipulated the removal of state monopolies,
and their corporatization (and subsequent privatization);  it also started gradual liberalization of the
telecom market, targeting full competition in 2006.  Existing concessions to foreign participants are tobe converted to licences to encourage what the authorities see as "free and fair" competition in
telecommunications.  In addition, an independent regulator, the National Telecommunications
Commission (NTC), is to be established in accordance with the 1997 Constitution, which calls for the
separation of regulatory, policy-making, and operational functions currently undertaken partly by the
two state enterprises and by the Posts and Telegraph Department (PTD) of the Ministry of Transportand Communications.
60. The NTC's creation was provided for in the  Act on the Organization to Assign Radio-
frequency Spectrum and to Regulate the Sound Broadcasting, Television Broadcasting and
Telecommunication Services, which entered into force on 8 March 2000.  The Telecommunications
Business Act 2001, which entered into force on 17 November 2001 empowered the NTC to regulate
and supervise the telecommunications industry.  It is to establish a regulatory framework for
promoting "free and fair" competition, including rules and regulations on competitive practices,licensing, operating conditions, fees, tariff structures and consumer rights.
61. Nonetheless, state monopolies in the basic tel ecommunications markets are maintained by the
Telephone Organization of Thailand (TOT) and the Communications Authority of Thailand (CAT).
The TOT supplies domestic phone services, including calls to neighbouring land-joined countries,
while the CAT provides all international telephone, Internet, and postal services.  The TOT wascorporatized on 31 July 2002, becoming the TOT Corporation Public Company Limited
28;  the CAT is
yet to be corporatized.  The planned privatization of the TOT and the CAT by 1999, as stipulated in
the Master Plan, has been delayed29;  in the case of the TOT, it would appear that divestment was
slowed by the need to convert concession contracts into licences.30  Deregulation is regarded as
difficult until the NTC is created and the regulatory framework developed;  moreover, the precise pathto achieving full liberalization in 2006 is yet to be specified.
                                                     
26 For example, the costs of leasing Internet lines from the CAT are more than double those in Malaysia
and the Philippines and six times those in Hong Kong, China (EIU (2003), p. 23).
27 See WTO (2000), for details of the Master Plan.
28 The TOT's initial public offering on the stock exchange has been postponed;  however, and is due in
late 2003.  The CAT is now to be corporatized in 2003 (initially planned for November 2002) and split into two:the CAT Telecom, for privatization soon afterwards;  and the Thai Post, to be privatized at a later date.
29 In the original Master Plan, the TOT and the CA T were to be divested after corporatization by
allowing a strategic partner to hold 25% equity, private investors 22% (not more than 5% per investor), andemployees at least 3%.  Foreign ownership was to be ca pped at 25%, with state equity in the TOT and the CAT
to fall to 30% by 2006.
30 There are 33 such concessions, with assets tota lling B 100 billion (about one third of the TOT's total
assets), Prateepchaikul (2003).  Concession holders must pay an excise tax and compensate the TOT or the CAT(Royal Ordinance, 28 January 2003).  Excise tax has been set at 2% and 10% of revenue for basic telephone andmobile calls, respectively.Thailand WT/TPR/S/123
Page 85
62. The Telecommunications Business Act 2001 reduced the foreign equity cap from 49% to
25%.  However, the Government announced in May 2002 that it would raise the ceiling back to 49%;
this is due to be implemented in 2003.
63. The PTD has set up a study group on interconnection, which is drafting rules and procedures
for ministerial approval. Other study groups were also set up on licensing, competition policy,
universal services, pricing, and consumer protection.
64. Private operators have been allowed to provide services in joint ventures or under build-
transfer-operate (BTO) contracts with TOT or CAT.31  Both state monopolies compete with private
operators in providing mobile and a few other services, such as data communication and paging.  The
CAT and the TOT both have a small share of the mobile phone market; private consortiums with
concessions are the main suppliers.  Two new mobile operators also commenced provision of servicesin 2002.  Call-back international services are currently prohibited.  Foreign operators provide calling
card services under CAT concessions.  In regard to Internet-related services, the CAT has 32% equity
stakes in most service providers.
65. Currently, activities related to standards are conducted mainly by TOT Corporation, the CAT,
and the PTD.  However, the NTC is to become responsible for setting standards and technicalspecifications for telecommunications services and e quipment, as well as for supervising the testing
and certification of equipment used in telecommunications services.  The PTD is solely responsible
for conducting conformity tests on radio-communication equipment with a view to ensuring
conformity with the relevant technical specifications  or international standards.  TOT Corporation and
the CAT mainly develop telecommunication standards on transmission, switching, outside plant and
terminal equipment, and also perform technical testing of such equipment.  The PTD may accept
conformity test results from overseas regulators or recognized accredited bodies;  it does not acceptmanufacturers’ self-certification.
66. Using, importing, possessing, making or trading in non-conforming or non-certified
equipment is illegal (1955 Radio Communications Act).  Such imported equipment is confiscated and
the import licence terminated.  The average time required to perform type approval is ten working
days.  According to authorities, technical standards have been reviewed regularly to ensureconsistency with international specifications, in a transparent manner.
67. Thailand participates in ASEAN telecommunication initiatives, such as ASEAN
Telecommunications Senior Officials Meeting, ASEAN Telecommunications Ministers Meeting, and
ASEAN Telecommunications Regulators’ Council.  While Thailand has no bilateral mutual
recognition agreements, it has agreed to join Phase I (mutual acceptance of test reports) in 2004 andPhase II (mutual acceptance of equipment certification) in 2006 of the Mutual Recognition
Arrangements under the APEC Telecommunications Working Group.
68. In March 2002, a Thailand ten-year IT policy framework (IT 2010) was adopted, and later in
the same year a National Information and Comm unications Technology Master Plan for 2002-06 was
approved by the Cabinet. The Electronic Transaction Act, 2001, deals with legal framework of"electronic transactions’ and "electronic signatures".  It applies to all kinds of e-commerce.  The
Government sold 51% equity in Internet Thailand on the stock exchange in November 2001
(Chapter III(4)(vi)).
                                                     
31 Concessions are usually for up to 25 years, and revenue sharing arrangements with the relevant state
enterprise varies substantially.  Some agreements also contains excess profit clauses.  Network ownership istransferred to the state on completion as Thai legislation prevents private ownership of such infrastructure.WT/TPR/S/123 Trade Policy Review
Page 86
(iii) Transportation
69. There have been no major change in Thailand's policies concerning transportation in the
period under review.
70. Foreign investment in domestic land, waterway, or air transportation, including domestic
airlines, is restricted under the Foreign Business Act (1999) as List 2 business, i.e. closed to non-Thai
nationals or companies with majority foreign equity, unless approved by the Cabinet.  While the Actpermits foreign equity participation up to 60% (or 75% on a case-by-case basis), if two thirds of the
firm’s board of directors are Thai nationals, specific transport legislation seemingly prohibits majority
foreign equity.  In the case of domestic shipping and aviation, sectoral legislation also stipulates
minimum Thai equity levels of 70%, which are higher than the 51% allowed under the Foreign
Business Act.
(a) Maritime transport
71. Thailand’s international seaborne trade increased from 114.3 million tonnes in 1998 to
152.8 million tonnes in 2001.  Since 1999, the share carried by Thai-flagged vessels has remained at
around 10%.  The number of merchant vessels rose from 297 in 1998 to 365 in 2001.  Thailand’s
Ninth Development Plan aims to raise maritime transport and port services to international standards.The Harbour Department and part of the Office of the Maritime Promotion Commission was merged
to form the Marine Department in October 2002.
72. International shipping is open to both Thai and foreign operators.  Operators of Thai-flagged
vessels providing international services must:  be majority Thai owned;  meet the national safety and
marine environmental requirements;  operate vessels registered with the Marine Department to fly the
national flag;  and be a registered maritime transport operator with the Marine Department.  Goods
imported directly or indirectly by government agencies or public enterprises are reserved for Thai-flagged vessels.  Foreign ships receive MFN treatment, and obtain port access on a first-come-first-
served basis.
73. Thailand’s bilateral maritime agreements with several countries, including Viet Nam, China,
Peru, Morocco, and the Republic of Korea, generally provide for:  reciprocal recognition of crew's
identity documents;  facilitation of ship and crew ar rivals and departures;  assistance in search and
rescue of ships in distress; technical cooperation;  and the establishment of a joint committee (in some
agreements).  Thailand is reviewing its bilateral agreements to facilitate removal of its GATS MFN
exemptions;  the cargo-sharing clauses in the China and Viet Nam agreements were abolished in 1995
and 1999, respectively.
74. Cabotage restrictions reserve domestic shipping for national security reasons to Thai-flagged
vessels that are owned by Thai nationals or companies with at least 70% Thai equity.  Under the
Foreign Business Act, a company registered under Thai law with foreign equity not exceeding 49%
may operate domestic transport including domestic shipping.  However, under the Thai Vessels Act
B.E. 2481, "trade in Thai waters" is reserved for Th ai flag vessel owned by either natural persons of
Thai nationality or juridical persons registered under Thai law with at least 70% Thai equity.  Thus, acompany with less than 70% Thai equity may hire a "Thai flagged" vessel to provide domestic
shipping services.  Under certain conditions, such as where domestic shipping capacity is inadequate,Thailand WT/TPR/S/123
Page 87
foreign vessels may be allowed to operate domestically, subject to ministerial approval on a case-by-
case basis.  Thai domestic vessels must be crewed by Thai nationals (Thai Vessels Act).32
75. The Port Authority of Thailand (PAT) manages the major public ports of Bangkok and
Laem Chabang, and associated services, including stevedoring, cargo handling, storage, and delivery
(Port Authority of Thailand Act, 1951).33  There are plans to restructure the PAT, which is currently
reviewing a privatization plan proposed by consultants.  Other public ports are open to privateoperators with majority Thai equity (Foreign Business Act).  They must hold permits issued by the
Marine Department to construct (Navigation in Th ai Waters Act) and operate (the Law on Business
Affecting Public Security and Well-being) a port.
(b) Air transport
76. The number of international and domestic scheduled Thai airlines has increased from four to
six since 1999.  Domestic air services were liberalized in 2001 to allow private operators to compete
on all routes serviced by the national carrier, Thai Airways International (93% state owned).  The
major private domestic operator is Bangkok Airways.  Foreign carriers had 52% share of Thailand’s
international passenger traffic in 2001;  Thai Airways International had 43%.
77. The Department of Civil Aviation is the designated regulator and secretariat to the Civil
Aviation Board.  The Airports of Thailand Public  Co., Ltd. (AOT) manages Bangkok International
Airport (Don Muang) and the regional international airports at Phuket, Chiang Mai, Chiang Rai, and
Hat Yai.  The privatization of the AOT is being planned;  the Government has approved the sale of
30% equity of the AOT, including to foreign investors.  Suvarnabhumi Airport, due to open in 2005
as the main airport in Thailand, is being constructed by the state-owned New Bangkok International
Airport.  The planned partial sale (dating back to the late-1990s) of 23% of Thai Airways
International to reduce state ownership to 70%, is continuing.
34
78. Licensed air carriers must meet the rules set by the Civil Aviation Board (Air Navigation Act
and Announcement of the Thai National Executive Council No.85).  Applicants must have minimum
capital of B 25 million (non-scheduled fixed-wing services) or B 50 million (scheduled fixed-wing
services);  have no transferable shares and maximum foreign equity of 30%;  have majority of board
members of Thai nationality;  meet minimum insurance requirements;  and submit a feasibility studyof the proposed services showing that they will benefit the public and respond to market demand.
Foreign international carriers operate under bilateral air services agreements, which cover mainly
flight capacity and frequency, route schedule, airline designation, and traffic rights.  Foreign carriers
are not allowed to operate domestic routes.  It has 93 bilateral agreements allowing some 1,300 flights
per week.
79. Aircraft repair and maintenance operators must be licensed and have at least 70% Thai equity;
the majority of board members must be Thai nationals.
35  Foreign airlines are allowed to operate
computer reservation systems (CRS) services for their internal use (Telephone and Telegraph Act).
Thailand intends to deregulate the CRS as part of its telecommunications liberalization under the
NTC’s responsibility.  A draft CRS Code of Conduct is being finalized.
                                                     
32 At least half of the crew of Thai-flagged vessels operating international services must be Thai
nationals (relaxed from three quarters).
33 A private operator is engaged at Laem Chabang Port under a concession contract with the PAT.
34 Thai Airways International benefits from government guarantees, war risk insurance, and regulations
that require civil servants and officers of government-related agencies to use its services.
35 An aircraft repair, maintenance, and ground-h andling service operator must maintain minimum
capital of B 3 million, unless it is a foreign designated airline under a bilateral agreement.WT/TPR/S/123 Trade Policy Review
Page 88
(iv) Tourism
80. Tourism is estimated to account for about 5% of GDP.  The Tourism Authority of Thailand
(TAT), a state agency, handles tourism promotion.  The Tourism Master Plan (2001-2110) aims to
increase overseas tourists to 22.46 million by 2010 (16.02 million in 2005), and total tourism receipts
to B 859.1 billion (B 538.6 billion in 2005).  Arrivals rose by about 8% in 2002 to 10.9 million.  Most
tourists are from East Asia.  The average hotel room occupancy rate was 59.6% in 2001.
81. Urgent tourism development measures, aime d at raising annual tourism earnings by
B 50 million, were introduced in April 2001 to stimulate the economy.  The package included
preventing attractions from deteriorating, improved immigration procedures, and market promotion.
The Committee for National Tourism Development, chaired by the Prime Minister, was formed in
2001 to prepare tourism plans and policies.  Government promotion is directed at attracting long-staytourists.  The average length of stay of international visitors is eight days.  The Government is
revising the Hotel Act of 1935 and introducing a hotel grading system.  The Board of Investment
offers tax and other investment incentives for hotels with more than 100 rooms, and is considering
granting special privileges to foreign investors in certain types of accommodation, such as retirement
homes.
82. Majority foreign ownership in hotels, including accommodation and restaurant activities, and
guided tour and travel services (Travel Business and Guide Act of 1992), requires approval under the
Foreign Business Act (1999).  Tourist guides must be Thai nationals and meet TAT’s qualification
standards.  The new Ministry of Tourism and Sports is considering whether to allow majority foreign
ownership in travel and guided tour agencies, as well as access for foreign-language tour guides in
collaboration with Thai guides.Thailand WT/TPR/S/123
Page 89
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