WORLD TRADE
ORGANIZATIONG/SCM/N/60/THA
10 January 2001
(01-0099)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Updating Notification Pursuant to Article XVI:1
of the GATT 1994 and Article 25 of the SCM Agreement
THAILAND
The following communication has been received on 5 January 2001 from the
Permanent Mission of Thailand.
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TABLE OF CONTENTS
I. INVESTMENT  PROMOTION  INCENTIVES.......................................................................................1
II. CREDIT REFINANCING SCHEMES.................................................................................................. ....4
III. PACKING CREDI T FACI LITY .................................................................................................... .......6
IV. DIRECT PACKING CREDIT FACLITY ............................................................................................8V. EXPORT MARKET DIVERSIFICATION PROMOTION PROGRAMME........................................9
VI. MERCHANT MARI NE FIANCING...................................................................................................1 0
VII. MACHINERY UPGRADING FINANCING ......................................................................................12VIII. INDUSTRIAL ESTATE AUTHOR ITY OF THAIL AND (IEA T)....................................................14
I. INVESTMENT  PROMOTION  INCENTIVES
1. Title of the subsidy programme
Investment Promotion Incentives
2. Period covered by the notification
1 January 1999–31 December 1999G/SCM/N/60/THA
Page 2
3. Policy objective and/or purpose of the subsidy
Investment promotion incentives aim at promoting the establishment of industries in Thailand
to accelerate the country’s industrialization process and encouraging regional development.  During
recent years, investment incentives have been gear ed towards decentralization to address the on-going
development disparities between the urban and rural areas as one of the Thai Government’s policy
themes is regional development.
4. Background and authority for the subsidy
The legal basis of the investment promotion incentives is the Investment Promotion Act
(1977)  amended in 1991.  The responsible authority is the Office of the Board of Investment (BOI)
5. Form of the subsidy
Tax concessions such as exemption/reduction corporate income tax, exemption/reduction of
import duties on machinery, reduction of import duties on raw materials, and special deduction ofcertain expenditures.
The local content requirement on manufacture of milk and dairy products, assembly of
motorcycles, and manufacture of engines for automobiles shall be abolished on 4 October 1999, and
the local content requirement contained in any inve stment promotion certificates shall be nullified
from 1 January 2000.
6. To whom and how the subsidy is provided
General
A wide range of activities covering primary, secondary, and tertiary sectors are eligible for
investment promotion incentives, The scheme is not specific to any particular sectors.  Moreover,
companies in every province in Thailand can have access to investment promotion incentives.  The
Board  of Investment has established the criteria in granting tax incentives which are generally based
on the locations of investments.  The entire country is divided into the following 3 zones:
Zone 1: Bangkok and vicinities (Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi, and
Nakhon Pathom)
Zone 2: Samut Songkram, Rachaburi, Kanchanaburi, Suphanburi, Ang Thong, Ayutthaya, Saraburi,
Nakhon Nayok, Chachoengsao, and Chonburi
Zone 3: the remaining provinces11  (the least developed area of which per capita income is below 85
per cent of the national average)
Zone 1 is granted the least incentives whereas Zone 3, the most disadvantaged and least
developed area, is granted the maximum incentives.   The Board of Investment may require certain
activities to be located in zone 2 or 3 only in order to be eligible for investment promotion incentives.
                                                     
1 Plus the Laem Chabang Industrial EstateG/SCM/N/60/THA
Page 3
Factory Relocation
In order to further encourage decentralization, the Board of Investment also provides
incentives for the relocation of existing factories in zone 1 to zone 2 or 3, or from zone 2 to zone 3.
The following criteria are applied:
Factories facing environmental problems and required by the Ministry of Industry to relocate
1. The factory must be relocated to an industrial estate or promoted industrial zone.2. The former factory must be closed down and all machinery must be moved to the new
facility.  The new facility must be ready for operation within 2 years of receiving thepromotion certificate.
Other types of factories
1. The existing operation must employ not fewer than 50 people.2. Main production machinery must be moved to the new location, and the new factory must
start operating within 2 years of receiving the promotion certificate.
The following incentives are granted:For relocation to zone 2: corporate income tax exemption
2  for 3 years, extendible to 7 years if
projects are relocated to industrial estates or promoted industrial zones.
Relocation to zone 3: 8-year corporate income tax exemption, 50 per cent reduction of
corporate income tax for 5 years; double deduction, from taxable income, of water, electricity, and
transportation costs for a period of 10 years; and deduction of up to 25 per cent of costs of installation
or construction of infrastructure facilities.
Research and Development
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.
Additional 3 years of corporate income tax exemption will be granted to promoted projects which
invest in research and development activities.  However, when combined with the existing corporate
income tax exemption, the total period cannot exce ed 8 years.  This programme is not targeted to
research and development in any particular sectors.
7. Amount of the subsidy
There is no specific budget earmarked for investment promotion incentives.  The information
on the subsidy per unit therefore cannot be provided.  No statistics on corporate income tax exemptionand reduction are available  However, figures on import duty concessions  (exemption and reduction
of import duties on machinery and reduction of import duties on raw materials)  are provided.  These
figures also include assistance given to disadvantaged region.
                                                     
2 starting from the date when income is first derived from the promoted activityG/SCM/N/60/THA
Page 4
Import Duty Exemption and Reduction
Granted to BOI-Promoted Projects
(1 January–31 December 1999)
   Unit : million baht
Machinery
Exemption 6,308.10
Reduction 37.83
Raw Materials
Reduction 754.15
Total 7,100.08
Source: Customs Department, Ministry of Finance, Thai Government
8. Duration of the subsidy and/or any time limit attached to it
The duration of the programme is indeterminate.  However, the incentives granted to each
investment are subject to certain time limits.
9. Statistical data permitting an assessment of the trade effects of the subsidy
Statistics on Start-up of Investment Projects Granted Promotion by the Board of Investment
Year Number of Investment Projects Total Investment Volume
(billion baht)
1996 611 230.3
1997 479 273.5
1998 740 294.6
1999 526 205.3
Source:  Office of the Board of Investment, Office of the Prime Minister, Thai Government
II. CREDIT REFINANCING SCHEMES
1. Title of the subsidy programme
Credit Refinancing Schemes
2. Period covered by the notification
1 January 1999–31 December 1999
3. Policy objective and/or purpose of the subsidy
To provide financial assistance to priority sectors3 and projects through refinancing schemes
                                                     
3 Economic sectors deemed important to the development of the national economy and its sustainable
growth.G/SCM/N/60/THA
Page 5
4. Background and authority for the subsidy
The legal basis of this scheme is  the Royal Decree Regulating the Affairs of the Bank of
Thailand B.E.2485, Section 12(4). The responsible authority is  the Bank of Thailand (BOT).
5. Form of  the subsidy
Loan
6. To whom and how the subsidy is provided
In January 1999, the BOT revised the interest rate in any Bank of Thailand Regulations
Governing the Purchase of Promissory Notes aris ing from the Small Scale Industrial Undertaking
B.E. 2531 that the medium industrial enterprises with net fixed assets between  50 million Baht –
200 million Baht would be  allowed to receive the BOT’s financial assistance.  Furthermore, in
March 1999, the BOT  increased credit line provided to the small and medium industries (SMIs) from
4,121.42 million Baht to 42,142.42 Million Baht.
7. Amount of the subsidy
At the end of 1999, the outstanding loans under the BOT financial assistance granted to
producers through the financial institutions total 4,575.05 million Baht as shown below.
Interest rate
SchemesOutstanding as
of 31 December 1999
(million Baht)Charged by the
BOT
(%)Charged by the
Financial Institutions
(%)
Industrial Credit 277.75 5.0 MLR-1
Small-scale industry 3,712.56 3.0 MLR-1
Livestock raising 287.17 5.0 MLR-2.75
   And aqua-culture
Rural development 0.18 3.0 MLR-2.75
Zone 3 investment 297.39 3.0 MOR/MLR-2
TOTAL 4,575.05
8. Duration of the subsidy and/or any time limit attached to it
Indefinite
9. Statistical data permitting an assessment of the trade effects of the subsidy
Not determinedG/SCM/N/60/THA
Page 6
III. PACKING CREDIT FACILITY
1. Title of the subsidy programme
“Packing Credit Facility”
Packing credit facility is an export financing scheme provided by the Bank of Thailand with
co-financing from commercial banks.  Under this  facility, commercial banks obtain fund, provided by
the Bank of Thailand through the Export-Import Bank of Thailand (EXIM Bank), at the concessionary
interest rate on condition that commercial banks co-finance the other half in order to on-lend to
exporters and export-oriented manufacturers.  The facility is provided for both pre-shipment and post-
shipment financing.
2. Period covered by the notification
1 January 1999–31 December 1999
3. Policy objective and/or purpose of the subsidy
To encourage commercial banks to provide export financing for exporters.  The initial
purpose of the programme was to encourage the financing of commodity exports.
4. Background and authority for the subsidy
The Bank of Thailand provided the funding.  EXIM Bank allocated fund to commercial banks
and supervised the utilization of the facility.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank financed, from the Bank of Thailand’s fund, one half of the total credit granted.
Commercial banks co-financed the other half and on-lent to exporters.
50 Baht      100 Baht
3% p.a. no more than
     8% p.a.*
Note: * In 1999, EXIM Bank reduced interest rate charged to exporters 4 times from 13 per cent
p.a., 10 per cent p.a., 9 per cent p.a. and 8 per cent p.a. respectively, due to high liquidity in
domestic money market.EXIM Bank Commercial Bank ExportersG/SCM/N/60/THA
Page 8
9. Statistical data of permitting an assessment of the trade effects of the subsidy
(billion baht)
1995 1996 1997 1998 1999
Total packing credit financing
disbursed182.0 178.0 170.4 179.9 115.4
Total BOT’s financing 91.0 89.0 85.2     108.0 57.7*
Credit outstanding at year-end 41.9 44.6 42.1   12.3 8.8
Note: * The figure was roughly calculated, based on the assumption that commercial banks co-
financed 50 per cent of total credit on-lent to exporters.
IV. DIRECT PACKING CREDIT FACLITY
1. Title of the subsidy programme
“Direct Packing Credit Facility”
2. Period covered by the notification
1 January 1999–31 December  1999
3. Policy objective and/or purpose of the subsidy
To encourage fuller utilization of the packing credit fund.
To provide liquidity to the exporter sector
4. Background and authority for the subsidy
In early 1998, Thailand faced a severe liquidity shortage and most commercial banks slowed
down their lending, including the co-financing under the packing credit facility.  Utilization of
packing credit fund stayed around 20 billion baht in January 1998 compared to the available fund of33 billion baht,.  The packing credit fund remained under-utilized despite the badly needed export
financing because commercial banks had limited fund to co-finance, as well as faced constraints on
the NPLs and the capital adequacy basis.
In order to alleviate the credit crunch in export financing and to encourage fuller utilization of
the idle packing credit fund provided by the Bank of Thailand, EXIM Bank asked for EXIM’s direct
lending to exporters under the packing credit scheme.  In 1998, the Bank of Thailand approved the
credit line of 5 billion baht for EXIM’s direct packing credit facility to on-lend under the same terms
and conditions as commercial banks under the packing credit facility.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
With the Bank of Thailand’s fund, EXIM Bank co-financed 50 per cent of the total credit
granted and on-lent to exporters.G/SCM/N/60/THA
Page 9
In such co-financing, EXIM Bank was obliged to the same regulations and work procedure as
commercial banks under the packing credit facility.  Functions in the part of commercial banks were
carried out by Banking Department of EXIM Ba nk, while the Packing Credit Department of EXIM
Bank was responsible for the documentation and the settlement with the Bank of Thailand.
7. Amount of the subsidy
In 1999, the Bank of Thailand allocated a line of 6 billion baht for EXIM Bank’s direct
packing credit facility, to which EXIM Bank co-financed another half. Out of 6 billion baht credit
line, 2 billion baht was for Export Market Diversification Promotion Programme (Details are provided
on page 12).
The Bank of Thailand lent to EXIM Bank at 3 per cent, while EXIM Bank co-financed one
half and on-lent to exporters at the interest rate not more than 8 per cent as of end 1999.
8. Duration of the subsidy
Date of Commencement : 27 April 1998.
9. Statistical data permitting an assessment of the trade effects of the subsidy
- Total financing disbursed in 1999* 15.2 billion baht
- Total Bank of Thailand’s financing disbursed  7.6 billion baht
- Credit outstanding at end 1999  5.2 Billion baht
Note: *  From the BOT’s line of 6 billion baht, EXIM bank provided the credit line to exporters
totally 14.5 billion baht due to the fact that total utilization would scarcely be over 80 per cent
at one moment.  Of the approved credit line, total business turnover was 15.2  billion baht in
1999.
V. EXPORT MARKET DIVERSIFICATION PROMOTION PROGRAMME
1. Title of the subsidy programme
Export Market Diversification Promotion Programme
2. Period covered by the notification
1 January–31 December 1999
3. Policy objective and/or purpose of the subsidy
To promote export to the 141 targeted countries in 8 regions consisting of Indochina (4),
Middle East (14), Africa (53), Latin America (31), Ea stern Europe (27), South Asia (8), East Asia (2)
and the South Pacific Islands (2)
4. Background and authority for the subsidy
In early 1999, in order to stimulate export growth in the aftermath of the Asia Crisis, the
Ministry of Commerce launched the “export Ma rket Diversification Promotion Programme” toG/SCM/N/60/THA
Page 10
encourage diversification of Thai export to new or potential markets. EXIM Bank participated in the
financial measures.
Under this programme, the EXIM Bank would reba te interest to exporters who utilized the
Packing Credit Facility (at the commercial banks) or Direct Packing Credit Facility (at EXIM Bank).Such interest rebate was capped at a maximum 5 per cent and applicable for the incremental export
value over the previous year’s level to that particular export market. The Ministry of Commerce
allocated the 750 million baht fund from the Intern ational Trade Promotion Fund to EXIM Bank for 5
years to facilitate this programme.
5. Form of the subsidy
Interest rebate
6. To whom and how the subsidy is provided
1. Exporters  having Packing Credit lines with commercial banks or Direct Packing Credit lines
with EXIM Bank complete and submit the Export Declaration for Interest Rebate Form when
applying for credits.
2. Exporters are required to include a clause “Export Market Diversification Promotion
Programme” in documents accompanying the promissory notes used as collateral for credits.
3. Having shipped out their products and paid by foreign buyers, exporters are required to
submit copies of the bill of lading, Export Entry Form, invoice, proof of foreign currency
remittance together with Interest Rebate Requ est Form within 60 days from the due date of
the last promissory note issued under  such export.
4. EXIM Bank checks all relevant details and cross-checks with the Ministry of Commerce, in
particular the incremental export value to such market over the previous year’s level. If all
details are valid, EXIM Bank pays the rebate to the exporters.
7. Amount of the subsidy
The Ministry of Commerce has provided EXIM Bank an annual fund of 150 million baht for
5 consecutive years, totaling 750 million baht for interest rebate under this programme.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement :  14 June 1999
Date of Termination : December 2003
9. Statistical data permitting an assessment of the trade effects of the subsidy
Interest rebates paid to exporters in 1999 totaled 2.93 million baht.
VI. MERCHANT MARINE FIANCING
1. Title of the subsidy programme
Merchant Marine FinancingG/SCM/N/60/THA
Page 11
2. Period covered by the notification
1 January–31 December  1999
3. Policy objective and/or purpose of the subsidy
To alleviate the country’s deficit on balance of trade & services
To strengthen the merchant marine business of Thailand
To accommodate the export sector with good shipping facility.
4. Background and authority for the subsidy
Since 1995, the government took a serious look into the country’s problem of current account
deficit and, in the meantime, found out that the neglected merchant marine business not only incurred
revenue foregone but also brought about substantial outflow of freight and shipping expenses, not to
mention the insufficiency of Thailand’s shipping business.
As a result, EXIM Bank launched a financial service for the merchant marine business from
its own fund in early 1996.  Later, in September 1996, the government provided, through the Bank of
Thailand, a credit line of 2 billion baht for merchant marine financing at EXIM Bank.  Then, in
February 1998, a portion of 1 billion baht from the Structural Adjustment Loan (SAL) from the ADB
World Bank Co-financing to the Thai government was provided to EXIM Bank to on-lend undermerchant marine financing together with the machinery upgrading financing.
In the meantime, EXIM Bank still provided financing from its own source of fund
simultaneously, especially to customers who were not qualified by the BOT’s conditions, for
example, when the financed ship aged over 20 years.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank extended credit to entrepreneurs of merchant marine business to buy/renovate
their ships, new or used ones.
Customers who were qualified by the BOT’s cond itions could utilize the BOT’s fund in baht
denomination which offered a low interest rate of up to 7 per cent p.a.  EXIM Bank had to co-financeanother half with the BOT’s fund in baht or US dollar denomination at the market interest rate.
From EXIM’s own fund, the financing was provided in baht or US dollar, both at the market
interest rate, with more relaxed conditions.
As for the SAL fund, since the cost of fund was relatively high, above 11 per cent in baht
lending, the fund was not commercially acceptable for customers.
Criteria for Bank of Thailand’s fund for merchant marine financing :
The company is registered in Thailand and has Thai ownership more than 50 per cent of total
registered capital.
The main business involves international shipping.G/SCM/N/60/THA
Page 12
The financing is for the investment in new ship or the used one with up to 20 years of age.
This investment shall include the rehabilitation cost of the used ship.
The financed ship must be registered in Thailand and flies Thai flag.The term of lending from BOT’s fund was up to 5 years, while that from EXIM’s fund was up
to 7 years, depending on business conditions.
7. Amount of the subsidy
BOT’s fund totalled    2   billion baht
SAL fund totalled       1   billion baht (together with machinery upgrading)
EXIM Bank’s own source of fund was up to customers’ demand for financing and funding
availability.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement :
EXIM Bank’s facility : early 1996.
BOT’s fund : September 1996.
SAL fund : February 1998.
9. Statistical data of permitting an assessment of the trade effects of the subsidy
(billion baht)
1996 1997 1998 1999
Total credit granted 0.98 2.42* 3.89 3.82
Total BOT’s financing 0.07 0.76 1.43 1.79
Credit outstanding at year-end 0.64 2.77* 3.43 3.61
Note: *  Credit outstanding exceeded credit line because of the exchange rate effect.  Credit line was
quoted at the proxy exchange rate of 30 baht to a US dollar in 1997, while credit outstanding
was quoted at the market exchange rate as of December 30, 1997.
VII. MACHINERY UPGRADING FINANCING
1. Title of the subsidy programme
Machinery Upgrading Financing
2. Period covered by the notification
1 January–31 December 1999
3. Policy objective and/or purpose of the subsidy
To strengthen the competitive edge of Thai exporters.G/SCM/N/60/THA
Page 13
To encourage the renovation/upgrading of the technology of production/quality of products of
Thai exports.
4. Background and authority for the subsidy
Thailand’s export performance unexpectedly recorded the zero growth in 1996 after a decade
of high growth.  The government deemed it necessary to improve the competitive edge of Thai major
export products, and an awareness arose that some export industries did face a serious problem of out-
of-dated technology of producti on which brought about low quality of products and incompetitive
prices.
EXIM Bank, therefore, introduced a financial service to facilitate the machinery upgrading of the
export production.  The government later supported by the provision of fund from the Bank of
Thailand to co-finance with EXIM Bank in this facility.  Then came the SAL fund to be mutually used
in machinery upgrading and merchant marine financing.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank extended credit to exporters whose plans to renovate/upgrade their machinery
were approved by bodies authorized by the Ministry of Industry.
Exporters eligible for Bank of Thailand’s fund must be qualified by the following criteria:
The renovation plan had been approved by bodies authorized by MOI.
The financing shall be used for new machinery investment in replacement of the old one.Exporters qualified by the BOT’s criteria could utilize BOT’s fund in baht denomination by
25 per cent of total lending at an interest rate of not more than 4.5 per cent p.a.  EXIM Bank co-
financed another 75 per cent, in baht or US dollar, at the rate of EXIM’s prime rate plus up to 1.5 percent p.a. for baht lending or  LIBOR plus up to 3.5 per cent p.a. for US dollar lending.
Apart from co-financing with BOT’s fund, EXIM Bank also provided machinery upgrading
financing on its own, with a more relaxed condition, for instance, to finance the investment in some
particular kinds of machinery that were not included in MOI’s conditions.
Lending interest rate of EXIM Bank stayed at EXIM Prime plus 1.5 per cent p.a. in baht
lending, while US dollar lending at the rate up to LIBOR plus 3.5 per cent p.a. (EXIM Prime stayed at
8 per cent p.a. as of end 1999.)
The term of lending for machinery upgrading was up to 5 years for  BOT’s and up to 7 years
for EXIM Bank’s fund due to repayment capability of exporters.
7. Amount of the subsidy
BOT’s fund 1 billion baht
SAL fund 1 billion baht (together with merchant marine)
EXIM Bank’s own source of fund was subject to fund availability.G/SCM/N/60/THA
Page 14
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement :
EXIM Bank’s facility : Early  1997.
BOT’s fund : May  1997.SAL fund : February  1998.
9. Statistical data permitting an assessment of the trade effects of the subsidy
(billion baht)
1997 1998 1999
Total credit granted 0.33 0.67 0.81
Total BOT’s financing 0.01 0.09 0.55
Credit outstanding at year-end 0.26 0.37 0.62
VIII.  INDUSTRIAL ESTATE AUTHORITY OF THAILAND (IEAT)
1. Title of the subsidy programme
Industrial Estate Authority of Thailand (IEAT)
2. Period covered by the notification
1 January–31 December 1999
3. Policy objective and/or purpose of the subsidy
To procure a suitable land for the establishment or expansion of industrial estate which
includes the general industrial zone and export processing zone.
To provide facilities for industrial operators in the industrial estate.
To promote and control the industrial estate owned by private sector or other government
agencies.
4. Authority for the subsidy
Industrial Estate Authority of Thailand (IEAT)
5. Form of the subsidy
Incentive cover the exemptions of payment of surcharge under the law on promotion of
investment, import duty, value added tax and excise tax on machinery, equipment, tools and supplies
including the component thereof which are essential for the production of goods or trading for export,
as the case may be, and on materials to be used for the construction, assembly or installation of
factory or building and goods imported and taken into an export processing zone by industrial
operator and trader for export for use in the production of good or trading for export.G/SCM/N/60/THA
Page 15
6. To whom and how subsidy is provided
Incentive is provided to the industrial operato r who is permitted to engage in industrial
activity in an industrial estate.
7. Amount of the subsidy
No specific budget provided
8. Duration of the subsidy and/or any time limit attached to it
Upon operation period.
9. Statistical data of permitting an assessment of the trade effects of the subsidy
YEAR IMPORT VALUE (BAHT) EXPORT VALUE (BAHT)
2538 (1995) 73,139,944,267 73,462,181,499
2539 (1996) 99,350,433,973 96,475,416,167
2540 (1997) 115,506,326,620 139,367,488,253
2541 (1998) 128,270,754,625 200,181,565,655
2542 (1999) 126,015,534,291 205,549,433,221
 (TOTAL) 542,282,993,776 714,946,084,795
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