WORLD TRADE
ORGANIZATIONG/SCM/N/74/THA
4 January 2002
(02-0033)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
THAILAND
The following communication, dated 26 December 2001, has been received from the
Permanent Mission of Thailand.
_______________
In accordance with Article 27.4 of the Agreement on Subsidies and Countervailing Measures,
the Government of Thailand is hereby requesting an extension of the period of exemption in relation
to certain prohibited subsidies notified. The detailed Thailand’s request is enclosed herewith.
In pursuit of the above request, Thailand seeks to enter into consultation with the Committee
on Subsidies and Countervailing Measures (SCM Committee) and therefore takes this initiative to
indicate its interest more than one year before the expiry period of the present exemption. This
extension is considered to be necessary, taking into account the country’s economic, financial anddevelopment needs.
Thailand looks forward to consultations with  the SCM Committee in this regard, and will
provide any additional information to facilitate a favorable outcome.
* * *G/SCM/N/74/THA
Page 2
I. NOTIFIED SUBSIDY PROGRAMMES
In pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the SCM Agreement,
Thailand has notified the following subsidy programmes to the SCM Committee
(G/SCM/N/71/THA):
1. Investment Promotion Incentives
2. Credit Refinancing Schemes
3. Packing Credit Facility
4. Direct Packing Credit Facility
5. Export Market Diversification Promotion Programme
6. Merchant Marine Financing
7. Machinery Upgrading Financing
8. Industrial Estate Authority of Thailand (IEAT)
II. REQUEST FOR EXTENSION
A. COVERAGE
This request for extension covers three subsidy programmes previously notified to the SCM
Committee, namely, (1) Investment Promotion Incentives, (2) Export Market Diversification
Promotion Programme and (3) Industrial Estate Authority of Thailand.
B. RATIONALE FOR EXTENSION
Under the first Royal Decree Regulating the Affair of the Bank of Thailand, the Thai
government has been using subsidy programmes as a means to achieve specific social and economic
objectives since 1942. Currently, there are eight subsidy programmes in existence as cited above.
These subsidies come in different forms and are provided by four main governmental authorities: the
Bank of Thailand (BoT), the Export and Import Bank of Thailand (EXIM Bank), the Board of
Investment (BoI) and the Industrial Estate Authority of Thailand (IEAT).
Accordingly, having realized that some of these subsidy programmes are prohibited subsidies
under Article 3.1 of the Agreement  on Subsidies and Countervailing Measures (SCM Agreement), the
Thai government has taken necessary steps in ensuring progressive transition towards bringing these
measures into conformity with the Agreement. As  a result, some major subsidy programmes, such as
Packing Credit Facility and Direct Packing Credit Facility, will be terminated by the end of 2002,  as
agreed to under Article 27.4 of the SCM Agreement1.
                                                     
1 Since the Credit Refinancing Schemes, Merchant Marine Financing and Machinery Upgrading
Financing programmes are not considered to be prohibited subsidies under Article 3.1 of the SCM Agreement,
as they are not contingent upon export performance or the use of domestic over imported goods, they are thus
not relevant to the matter at hand.G/SCM/N/74/THA
Page 3
Nevertheless, Thailand is experiencing particular difficulties in eliminating three of the eight
aforementioned subsidy programmes which are, (1) Investment Promotion Incentives, (2) Export
Market Diversification Promotion Programme, and (3) Industrial Estate Authority of Thailand, for
reasons provided as follows:
1. Investment Promotion Incentives
Although the Board of Investment, the principle administrator of the Investment Promotion
Incentives programme, has already abolished its export requirement scheme, as specified under
Section 36(4) of Investment Promotion Act of  1977, amended in 1991, since August 2001, and has
not granted special rights or benefits to new applicants since then, the original grace period of some
projects approved before August 2001 nonetheless extends beyond the last authorized period as set
forth under Article 27.2(b) of the SCM Agreement.
This being the case, in order to maintain policy coherence and prevent the divestment of
confidence in government developmental plans and endeavours, as well as offer the beneficiaries the
needed time for appropriate adjustments, especia lly in this turbulent time in country’s economic
history, Thailand is thus requesting an extension of the subsidy programme only for the beneficiarieswho were approved before August 2001.
2. Export Market Diversification Promotion Programme
The Export Market Diversification Promotion Programme has undoubtedly been a vital
instrument contributing to Thailand’s success as an export-oriented economy. On the one hand, theProgramme has helped to encourage the diversification of exports so as to ensure continuous outlets
for Thai exports in the global marketplace. On the other hand, and more importantly, it has
contributed to a more stable income flows from expor ts returns and to greater predictability in trade
and market patterns, which are necessary for economic forecasts and effective developmental plans
and policies. Indeed, without the Programme, Thailand is likely to encounter greater uncertainty andinstability in trade and income flows, which will inevitably cause severe disruptive to the country’s
growth and development.
In this connection, it needs not be mentioned that the dramatic decline of Thai exports to the
world major markets due to recent global economic slowdown makes it even more difficult for
Thailand to abolish the Programme at present. Perceivably, the termination of the Programme at this
time would not only impede the attempt to find new potential exports markets as substitutes for theailing ones but also to hinder Thailand export  promotion programmes, and thus hamper economic
recovery efforts.
Consequently, given the importance of the Programme to Thailand’s economy and
development goals and its planned termination in 2003, Thailand therefore requests for an extensionof the Programme until the end of 2003, which is one year after the last authorized period as set forth
under Article 27.2(b) of the SCM Agreement.
3. Industrial Estate Authority of Thailand (IEAT)
The Industrial Estate Authority of Thailand’s subsidy programme was originally projected to
facilitate the establishment of industrial operators in designated industrial zones which are made up of
general industrial zones and Export Processing Z ones (EPZs). Specifically, the aim of the Programme
is to promote rural development by giving more favorable rights and privileges to operators investing
in industrial zones located in the rural area through the granting of incentives, such as tax exemptions
and waivers of duties on raw material and machinery imports to industrial operators in EPZs. Thehighest incentives are granted to operators investing in the 58 least developed provinces (Zone 3),G/SCM/N/74/THA
Page 4
while moderate and fewer incentives are granted to operators investing in more developed regions
(Zone 1 and 2).
To date, the Programme has greatly helped to correct the persisting problem of income
inequality in the country, where 28.2 percent of the total population still live on less than $2 a day.Evidently, the industrial zones have not only created 370,000 jobs for local people around the country
but also have become a place for skill enhancement and development, necessary to sustain
employment, promote better career opportunities, and raise the standards of living.
Notwithstanding the merits of the Programme, Thailand has attempted to bring this measure
in line with the commitments under the SCM Agreem ent.  For instance, the legislature amendment
process has been underway for some time to amend Section 48, 49, 50, 51 and 52 of the IndustrialEstate Authority of Thailand Act of 1979. Yet, given the fact that the economic crisis which broke out
in 1997 did not only deviated a great deal of gove rnmental resources, time, and energy in tackling the
numerous and incessant repercussions but also hampered Thailand’s initial industrial reforms and
restructuring efforts, the delay in the amendment process was inevitable. Furthermore, given the
resulted economic hardship, it is envisaged that putting an end to the subsidy programme at the end ofnext year could add additional burden to the economy, such as massive unemployment, further
income inequality and gaps in urban-rural development, as well as political, economic and social
disruptions.
Thailand is thus requests for an extended transition period to complete the amendment of this
legislature so as to fully bring the measure into  conformity with the SCM Agreement and for the
industrial operators in EPZs to effectively adjust and prepare themselves to future changes.
III. CONCLUSION
Thailand would like to emphasize again that the request for extension of the three subsidy
programmes is purely of technical, economic and development purposes, without any intent to create
unnecessary trade distortion. The implementation of our commitments in the past via the subsidy
notifications Thailand has regularly submitted to the SCM Committee and the progressive elimination
of some major subsidy measures through successive amendment of national legislation can illustrate
our strong intention to carry out our commitments.
Lastly, Thailand hopes that our true intention and positive actions shall draw sympathetic and
positive consideration from all members concerned to this request.
__________