RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/THA/10
5 April 2002
(02-1803)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Additional Replies to Questions Posed by the EUROPEAN COMMUNITIES1,
MEXICO2, the UNITED STATES3, AUSTRALIA4, SWITZERLAND5 and JAPAN6
The following communication, dated 3 April 2002, has been received from the Permanent
Mission of Thailand.
_______________
Revised replies to questions from the European Communities, Mexico and the United States
are indicated in bold type face .  The original replies to these questions were circulated in document
G/SCM/Q3/THA/7.
QUESTIONS FROM THE EUROPEAN COMMUNITIES
Q.1 Please elaborate on when and how Thailand intends to phase out these programmes for
which an extension is requested.
Reply
1. Investment Promotion Incentives [BoI]
There are 1,392 projects with export requirements under the Board of Investment's
subsidy programme, which were approved before August 2000.7  The longest grace period
approved before August 2000 is 13 years.  Therefore, considering the number of projects under
the programme and the original grace periods endo rsed, the BoI expects to completely eliminate
this subsidy programme within 13 years (2013).
                                                     
1 G/SCM/Q3/THA/3
2 G/SCM/Q3/THA/5
3 G/SCM/Q3/THA/6
4 G/SCM/Q3/THA/1
5 G/SCM/Q3/THA/2
6 G/SCM/Q3/THA/4
7 The Board of Investment has actually abolished its export requirement scheme, as specific under
Section 36(4) of the Investment Promotion Act of 1977, amended in 1991, since August 2000, not August 2001
as stated in the Requests Pursuant to Article 27.4 of the Agreement on Subsidies and Countervailing Measures
(G/SCM/N/74/THA).G/SCM/Q3/THA/10
Page 2
2. Export Market Diversification Promotion Programme [EXIM]
The Export and Import Bank of Thailand (EXIM) expects the phase-out process to be
completed by 31 December 2003.  The Ministry of Commerce who finance this subsidy programme
through the EXIM Bank has decreased the annual fund from B 150 million to B 50 million in 2000and 2001 as a step towards the termination of the programme.
3. Industrial Estate Authority of Thailand [IEAT]
The Industrial Estate Authority of Thailand (IEAT) expects to finish the amendment of the
IEAT Act within approximately ten years, taking into account the lengthy and time-consuming law
amendment process.
Q.2 In footnote 1 of document G/SCM/N/74/THA it is stated that the "Machinery Upgrading
Financing" programme is not to be considered to be a prohibited subsidy and therefore not
relevant to the request.  However, information on this scheme as contained in document
G/SCM/N/71/THA would indicate that this scheme  constitutes an export subsidy. (e.g. "Policy
objective:  To strengthen the competitive edge of  Thai exporters").  Please elaborate on why this
programme would not constitute a prohibited export subsidy.
Reply
[EXIM]
Since the focus of the Export and Import Bank of Thailand (EXIM) is principally to facilitate
export and import activities, the distribution of this fund, 50 per cent financed by the Bank of
Thailand (BoT), thus aims at Thai exporters.  Other Thai producers who share the same
characteristics as those eligible exporters but do not export can obtain similar preferential
treatment from the BoT through the Industrial Finance Corporation of Thailand (IFCT).
Given this evidence, most Thai operators who meet the same set of requirements will obtain a similar
kind of loan.
QUESTIONS FROM MEXICO
Q1. What is the corporate income tax in Thaila nd, and what is the amount of the reduction
in corporate income tax currently applied to th ose firms located in each of the three zones
covered by the programme?
Reply
[BoI]
Incorporated firms operating in Thailand pay income tax at a rate of 30 per cent of net profits.
The 50 per cent reduction of corporate income tax for a period of five years is given only for the
companies, which have operated in zone 3 (least-developed provinces) for at least eight consecutive
years.  There is no reduction in corporate income tax given to companies operating in zones 1
and 2.  The exact amount of the corporate income tax exemption for the firms is not available.G/SCM/Q3/THA/10
Page 3
Q2. Under what circumstances is there an  exemption from corporate income tax?
Reply
[BoI]
Should a company meet all the requirements set by the Board of Investment (BoI), it will be
granted a tax exemption of three to eight years, depending on the zone in which it is located.  Indeed,
the firm, which meets all requirements, will obtain a three-year, five-year and 8-year tax exemption if
it is located in zone 1, zone 2 and zone 3 respectively.  The granting scheme is not specific to any
particular sector, thus a wide range of activities, including primary, secondary and tertiary
sectors ar eligible for investment promotion incentives.
Q3. Do agro-industrial activities (e.g. pineapple canneries) also benefit from this
programme?
Reply
[BoI]
Some agro-industrial activities have benefited from the subsidy programme, provided that
they meet the BoI's requirements such as location, size of investment and standard requirements.  The
BoI grants the subsidy to agro-industrial and non agro-industrial businesses alike by employing
the same requirements and selection procedures.
Q4. Could Thailand provide data on what perc entages of beneficiary firms operate in the
textile and apparel sector, the footwear sector, and the toy sector?
Reply
[BoI]
There are 1,392 projects with export requirements under the Board of Investment's subsidy
programme, which were approved for the benefits prior to August 2000.  The breakdown of these
projects is as follows:
Industry Number of projects Percentage in total
Textiles and apparel sector 137 9.84%
Footwear sector 17 1.22%
Toy sector 10 0.72%
Others 1,228 88.22%
Total 1,392 100%
Q5. What is the amount exported by firms benefiting from this programme? Is an itemized
breakdown in accordance with the Harmonized System available?G/SCM/Q3/THA/10
Page 4
Reply
[BoI]
The amount exported by all firms under the subsidy programme is not available.  However,
the BoI can provide an estimation of the amount of  exports as follows.  An itemized breakdown in
accordance with the Harmonized System is not available.
Year Amount of Exports
1999 US$28,202.13 million
2000 US$32,246.66 million
2001 US$29,244.61 million
QUESTIONS FROM THE UNITED STATES
Investment Promotion Incentives
Q1. How many projects were approved prior to August 2001 for which benefits will continue
beyond 2002?  What is the nature of these projects?  What is the expiry dates of these projects?
Reply
[BoI]
There are 1,392 projects with export requirements under the Board of Investment's
subsidy programme approved prior to August 20008 for which benefits will continue beyond
2002.  The expiry dates of these projects are various depending on their specific characteristics
and the government's policy at the time the p references were given.  The longest grace period
approved before August 2000 is 13 years.  The BoI expects to completely eliminate this subsidy
programme by 2013.  The benefits were given on a non-discriminatory basis to any Thai
operator who meets the programme requirements.
Industrial Estate Authority of Thailand
Q2. How long of an extension of the transition  period is needed for this programme?  Is
there a plan for the phase-out of benefits?
Reply
[IEAT]
The Industrial Estate Authority of Thailand [IEAT] expects the phase-out process to take
approximately ten years, taking into consideration the lengthy and time-consuming process of the law
amendment.  At present, companies operating in designat ed industrial estates are still eligible to
receive tax preferences under the IEAT Act of 1979.  However, these benefits will be completely
eliminated as soon as the new IEAT Act comes into effect.
                                                     
8 See footnote 7.G/SCM/Q3/THA/10
Page 5
QUESTIONS FROM AUSTRALIA
Q1. Regarding the investment promotion incentives, could Thailand provide details on those
projects granted benefits under the programme prior to August 2001 in terms of how many
projects, which sectors they cover and when they will sunset?
Reply
[BoI]
A number of projects were granted benefits under this programme prior to August 20009,
1,392 projects of which have grace periods extending beyond 31 December 2002.  The longest grace
period approved before August 200010 is 13 years.  Therefore considering the number of projects
under the programme and the original grace periods endorsed, the BoI expects to completely eliminate
this subsidy programme within 13 years (2013).
The breakdown of those projects approved for the subsidy is as follows:
Industry Number of projects
Agriculture and agricultural products 99
Mining, ceramics and basic metals 17
Light industry 298
Metal products, machinery and transport equipment 156
Electronic industry and electrical appliances 650
Chemical, paper and plastic 169
Service and public utilities 3
Total 1,392
The numbers of projects graduating from the subsidy programme each year in and after 2002
are as follows:
Year Number of projects expired
2002 19
2003 46
2004 120
2005 96
2006 185
2007 149
2008 152
2009 176
2010 163
2011 97
2012 108
2013 70
Note:  Eleven projects that were approved prior to August 2000 have already expired.
                                                     
9 See footnote 7.
10 See footnote 7.G/SCM/Q3/THA/10
Page 6
QUESTIONS FROM SWITZERLAND
Q1. Regarding the Investment Promotion Incentives, Switzerland understands that Thailand
wishes to request an extension of the transiti on period for beneficiaries who were approved
before August 2001.  Could Thailand specify how many beneficiaries would therefore beaffected and what amounts of subsidies would be involved?
Reply
[BoI]
There are 1,392 projects with export requirements, which were approved before
August 200011, under the Board of Investment's subsidy programme with a grace period extending
beyond 31 December 2002.  Thus, these 1,392 projects will be affected should the request fail to
obtain the extension permission.  The exact amount of the corporate income tax exemption for these
firms is not available.
Q2. Could Thailand specify the time needed for completing the amendment of the IEAT so
as to fully bring the measure into conformity with the SCM Agreement?
Reply
[IEAT]
The Industrial Estate Authority of Thailand (IEAT) expects the phase-out process to take
approximately ten years, taking into consideration the lengthy and time-consuming process of law
amendment.
QUESTIONS FROM JAPAN
Investment Promotion Programme [BoI]
Q1. Could Thailand please provide concrete examples of "Research and Development"
referred to in its notification?12
Reply
With a view to upgrading the country's technological capabilities, the Board of Investment
grants additional incentives to promoted projects, which invest in research and development activities.
Examples of such projects are R&D in surface science tribology, R&D in natural products/cosmetics/
healthy food, R&D in test and conservation of silk , R&D in silt protector, and R&D in polymer and
plastic.
Q2. Could Thailand please clarify the meaning of "additional incentives" in R&D
corporations?
                                                     
11 See footnote 7.
12 G/SCM/N/71/THAG/SCM/Q3/THA/10
Page 7
Reply
Eligible R&D projects are entitled to the ex emption of import duty on machinery, corporate
income tax exemption for eight years and other privileges entitled for each zone.
Q3. Could Thailand please provide the latest data regarding the amount of tax exemption?
Reply
The exact amount of the corporate income tax exemption for the firms is not available.
Export Market Diversification Promotion Programme [EXIM]
Q4. It seems that this programme is institut ed on the assumption  that Packing Credit
Facility and direct Packing Credit Facility exist.  Could Thailand please explain the correlation
between these three programmes?
Reply
The Export Market Diversification Promotion Programme was initially designed under the
condition that Packing and Direct Packing Credit facilities exist.  However, since the Packing and
Direct Packing Credit facilities will be terminated by the end of this year while the plannedtermination of the subsidy programme is on 31 December 2003, the Ministry of Commerce, the fund
provider of this programme, and the Export and Import Bank of Thailand (EXIM), the fund
administrator, then allow customers who meet the criteria set forth (e.g. export to the 141 targeted
countries) to submit their requests for interest rebates.
Industrial Estate Authority of Thailand (IEAT)
Q5. Could Thailand please explain in detail th e difference between General Industrial Zone
and Export Processing Zone?
Reply
The main difference lies in privileges investors will receive when they operate in each zone.
All investors whose operations are in both Gene ral Industrial (GIZ) and Export Processing Zones
(EPZ) are eligible for the general privileges, which are:
1. Permission to own land for carrying out industrial activities (Sec. 44).2. Permission to bring foreign technicians and experts to work under industrial activities
(Sec. 45).
3. Permission for foreign technicians, experts and spouses or dependents to stay in the
country (Sec. 46).
4. Permission to take or remit abroad foreign currency (Sec. 47).Operators in EPZ will obtain these additional duty and tax privileges:1. Exemption from payment of surcharge under the law on promotion of investment,
import duty, VAT and excise tax on imported machinery, components and material
imported for factory construction (Sec. 48).G/SCM/Q3/THA/10
Page 8
2. Exemption from payment of surcharge under the law on promotion of investment
import duty, VAT and excise tax on raw materials (Sec. 49).
3. Exemption from payment of export duty, VAT and excise tax for exported goods
(Sec. 50).
4. Exemption from payment or refund of taxes and duties for local goods utilized for
production (Sec. 52).
Q6. Could Thailand please provide the amount of tax exemption of the programme?
Reply
The amount of tax exemption of the programme is not available.
__________