Thailand WT/TPR/S/123
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I. ECONOMIC ENVIRONMENT
(1) RECENT ECONOMIC PERFORMANCE
1. Since its last Trade Policy Review in 1999, Thailand has pursued its economic reform
programme to revive growth after the 1997 Asian financial crisis.  Nominal GDP per capita was
US$1,830 in 2001, and in 2002 real GDP was restored to its pre-crisis level (Table I.1).  With
comprehensive reforms, real GDP growth improved in 1999 and 2000, to over 4% (Table I.2).Although real GDP growth slowed in 2001 (1.9%), it  rebounded in 2002 to 5.3%, perhaps aided by a
more stable currency, low inflation, and early signs of fiscal consolidation in the Central Government.
The Government forecasts about 4.5%-5.5% growth in 2003.  Thailand’s steady progress towards
macro stabilization and key structural reforms, including financial-sector rehabilitation, and trade and
investment liberalization, have promoted growth in the face of unfavourable global factors, such asweaker exports in some key markets (except in China) and heightened recession prospects.
2. While international factors will continue to heavily influence Thailand’s growth prospects
through export performance and capital inflows, macr o stability and fiscal consolidation need to be
maintained if recovery is to continue.  Accelera ted structural reforms would help restore the still
fragile corporate and financial sectors burdened by debt and non-performing loans left after the crisis.Further opening of the economy would raise productivity, and thus competitiveness, and attract much
needed foreign direct investment, which slumped in 2002.  The Government has renewed
macroeconomic and structural reforms to meet these formidable challenges.
3. Thailand’s external economic vulnerability has declined.  The current account has recorded
sizeable surpluses since Thailand's previous Trade Policy Review;  for example, it reached 6.1% of
GDP in 2002, comprising positive trade and services balances (2.7% and 3.9% of GDP, respectively).
The current account surplus reflects excess national savings over domestic investment (29.3% and23.9% of GDP in 2001, respectively);  it also corresponds to capital outflows of 4.4% of GDP in 2001
(8.4% in 2000), and increased international reserves which reached US$33.0 billion (6.5 months
import cover).  Total external debt has declined substantially (from 93.2% of GDP in 1998 to 47.0%
in 2002);  and the debt service ratio has fallen (21.8% of GDP in 1998 to 19.5% in 2002).
4. The real effective exchange rate of the Baht has declined since 1999, which may have added a
competitive edge to Thai exporters and producers competing with imports on the domestic market.
While Thailand’s overall share in major export markets is relatively stable, competition from lower-
priced exports, particularly from China, is intensifying.
5. Manufacturing, buoyed partly by increased demand helped by the real currency depreciation,
has contributed substantially to growth.  The sector’s GDP share rose from 32.7% in 1999 to 33.8% in2002 (Table IV.1).  Nevertheless, substantial, albeit declining, excess capacity remains (65% in early
2003, up from 53.5% in 2001), reflecting past over-investment.  Higher production in 2002 was
driven mainly by domestic spending, especially private consumption on motor vehicles and other
durables, encouraged by lower bank lending rates and rising consumer credit levels.  Unemployment
has fallen continuously from 4.4% in 1998 to 2.4% in 2002, with job growth most pronounced inmanufacturing, construction, wholesale and retail trade, hotel and restaurants.WT/TPR/S/123 Trade Policy Review
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Table I.1
Main economic and social indicators
Land area (million km2) 513.1 Urban share of population, 2001 (%) 28.6
Population (2001) (million) 62.3 Nominal GDP at current market prices, 2001 US$1,15.1 billion
Population growth (1995-01)  (%) 0.7 - per capita, 2001 US$1,830
UN human development index (2000) Real GDP at constant 1988 prices, 2001 B 3,063.7 billion
(US$71.1 billion)
- overall ranking 70th- per capita, 2001 B 48,697 (US$1,132)
- human development category Medium Real GDP at constant 1988 prices, 1998 B 2,749.7 billion
(US$66.4 billion)
- ranking within category 17th- per capita (1998) B 44,929 (US$1,085)
GDP shares in current prices, 2001 (1998 in brackets):     Primary (agriculture, forestry and fishing) (%)     Secondary (manufacturing) (%)
     Services (%)12.8 (14.0)
32.0 (29.4)
55.2 (56.6)
Life expectancy at birth (2001) (years) 70.2 Enrolment ratio (net) in education (2001)
Infant mortality rate (2001) ('000) 28.6 - primary (%) 104.1
Adult literacy (2001) (%) 92.7 - secondary (%) 70.9
Source: UNDP (2002), Human Development Report ;  IMF (2002), Thailand Statistical Appendix , 19 July;  National
Economic and Social Development Board (2003), Thailand in Brief 2003 , January;  Bank of Thailand (2003),
Economic and Financial Statistics , First Quarter;  and information provided by the Thai authorities.
Table I.2
Selected macroeconomic indicators, 1997-02
1997 1998 1999 2000 2001a2002b
National accounts (Percentage change)
Real GDP (constant 1988 prices) -1.4 -10.5 4.4 4.6 1.9 5.3
Private consumption -1.4 -11.5 4.3 4.9 3.7 4.7
Total consumption -1.6 -9.5 4.1 4.5 3.1 4.1
Gross fixed capital formation -20.5 -44.3 -3.2 5.3 0.9 6.3
Gross domestic investment -17.4 -40.6 0.5 17.6 9.6 6.2
Private consumption 4.3 -3.2 3.6 6.0 5.9 5.3
Nominal GDP (in billions of Baht) 4,732.6 4,626.4 4,637.1 4,916.5 5,123.4 5,433.3
Gross national savings (per cent of GDP) 32.9 30.7 30.7 30.3 29.3 ..
Gross domestic investment (per cent of GDP) 33.7 20.4 20.5 22.7 23.9 ..
Unemployment rate (per cent) 1.5 4.4 4.2 3.6 3.3 2.4
Prices and interest rates
Consumer price inflation (headline, period average) 5.6 8.1 0.3 1.6 1.6 0.7
Consumer price inflation (headline, end of period) 7.6 4.3 0.7 1.3 0.8 1.6
Core inflation (end of period) 6.7 4.9 0.7 0.8 1.2 0.3
Interbank rate (overnight, average end of period) 22.9 2.3 2.0 2.3 2.1 1.9
Bank repurchase rate (average, 14-day) 14.9 13.8 2.1 1.52 2.1 2.0
Commercial bank minimum lending rate (largest five, end
of period)15.3 11.8 8.4 7.9 7.2 6.75
Public finance (fiscal year October to September) (Per cent of GDP)
Budget deficit (Central Government) -0.9 -2.4 -3.5 -2.9 -2.6 -2.0
Expenditure 19.5 18.6 19.0 18.4 17.7 17.6
Revenue 18.6 16.2 15.5 15.5 15.1 16.1
Public sector overall balancec-2.6 -5.9 -6.0 -4.5 -3.3 -5.4
Table I.2 (cont'd)Thailand WT/TPR/S/123
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1997 1998 1999 2000 2001a2002b
Public sector total debt .. .. 54.2 57.3 57.6 56.6
Domestic debt .. .. 36.6 39.6 39.7 39.1
Monetary sector (end of period) (Annual percentage change)
M0 (monetary base) 4.7 0.2 30.8 -15.2 5.5 13.7
M2 (broad money) 16.4 9.5 2.1 3.7 4.2 2.6
M2ad2.0 6.1 1.3 2.2 4.6 2.4
Private sector credit growth 23.4 -9.7 -4.1 -10.0 -5.8 7.5
Adjustede23.4 -9.7 -3.2 -0.1 0.7 3.2
External sector (Per cent of GDP, unless otherwise specified)
Trade balance -3.0 10.9 7.6 4.5 2.2 2.7
Exports 37.5 47.3 46.3 55.5 54.8 52.9
Imports 40.5 36.4 38.7 51.1 52.6 50.1
Services (net) 2.9 4.7 4.7 3.8 3.9 3.9
Current account balance -2.1 12.8 10.2 7.6 5.4 6.1
Capital and financial account balance 2.8 8.7 6.5 8.4 4.4 2.5
Merchandise trade (average of imports and exports) 39.0 41.9 38.0 53.3 53.7 51.5
Merchandise export growth (% change in US$, end period) 3.8 -6.8 7.4 19.5 -6.9 5.8
Merchandise import growth (% change in US$, end period) -13.4 -33.8 16.9 31.3 -2.8 4.6
Total external debt (end-period) 72.4 93.2 77.5 64.9 58.5 47.0
Debt-service ratiof16.0 21.8 19.4 15.4 20.8 19.5
Exchange rate and reserves (Annual percentage change, unless otherwise specified)
Exchange rate (period average, Baht/US$ = reference rate) 31.4 41.4 37.8 40.2 44.5 43.0
Real effective exchange rate (CPI-based, + = appreciation) -7.9 -13.3 3.8 -4.0 -4.6 2.8
Nominal effective exchange rate (+ = appreciation) -10.6 -18.3 4.4 -4.3 -4.9 2.8
Terms of trade (- = deterioration ) 0.5 -5.9 1.3 -8.9 -9.4 0.1
Gross official reserves (US$ billion) 27.0 29.5 34.8 32.7 33.0 38.9
Reserve cover (months of GS imports)g5.3 8.7 8.8 6.3 6.5 7.4
.. Not available.
aP r e l i m i n a r y .
b Projection.
c Includes extra-budgetary funds, local government, non-fiscalized interest costs of financial sector re-structuring, losses on  non-
financial public enterprises and other off-budget activities.
d M2 plus finance companies, and finance and security companies.
e Adjusted for bad debt transfers to asset management companies and write-offs.f Percent of exports of goods and services.
g GS = goods and services.
Source: IMF (2002), Thailand Statistical Appendix , 19 July;  Bank of Thailand (2003), Economic and Financial Statistics,
First Quarter ; Bank of Thailand (2003), Thailand’s Economic and Monetary Conditions , March;  Bank of
Thailand (2003), Inflation Report [Online],  April.  Available at:  http://www.bot.or.th;  and information provided
by the Thai authorities.WT/TPR/S/123 Trade Policy Review
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(2) MAIN ECONOMIC DEVELOPMENTS
(i) Macroeconomic policies
(a) Monetary and exchange rate policies
6. The main objective of Thai monetary policy is to achieve price stability.1  The monetary
target adopted with the floating of the currency in July 1997 was replaced in May 2000 with inflation
targeting, which the authorities considered more effective than monetary targeting since the moneysupply and output relationship had become less stable.  An annualized quarterly core inflation rate of
zero to 3.5% is set as the average quarterly target
2;  the authorities consider the target range
appropriate to maintain inflation in line with Thailand’s trading partners, and thereby to preserve
export competitiveness, currency stability, and to  promote growth.  The main policy instrument to
achieve the inflation target is the central bank’s 14-day repurchase rate.  Since 2000, core inflation hasbeen kept within the target range (it was at 0.3% in 2002).
7. Monetary policy was eased in late 2001 with a view to supporting economic recovery.  The
14-day repurchase rate was reduced from 2.25% to 2% in January 2002, and again to 1.75% in
November 2002.  This followed external uncertaintie s and slower growth.  Commercial bank interest
rates also declined in 2002 as the monetary base expanded (M0 by 13.7%, and broad money, M2, by2.6%).  Private sector credit grew by 7.5% (-5.8% in 2001).  Real interest rates have fallen since early
1999.
3  Monetary policy no longer has a direct exchange rate role.  The inflation-targeting policy
framework, together with the managed floating exchange rate regime, is seen by the authorities to
provide sufficient flexibility to respond quickly to changing domestic and external developments
while ensuring long-run price stability.  Subdued wage increases have also contributed to low cost-
push inflation.
8. Lower interest rates have stimulated activity without placing downward pressure on the Baht,
largely due to Thailand’s favourable external situation and low inflation.  The Government is
committed to a flexible market-determined exchange  rate; the Bank of Thailand intervenes in the
foreign exchange market only to smooth out fluctuations.  It intervened in 2002 to contain upward
pressure on the currency to minimize competitive concerns.  The Baht's reference exchange rate
against the U.S. dollar fluctuated between B 40.38 per dollar and B 44.21 per dollar in 2002, andaveraged B 43.  The nominal effective exchange rate depreciated by 4.9% in 2001, but strengthened
slightly in 2002.  A substantial real effective currency depreciation before 1999 and during 2000 and
2001 has apparently contributed to Thailand’s favourable balance of payments.
                                                     
1 The Monetary Policy Committee (MPC), formed in July 2001, sets monetary policy (its predecessor,
the Monetary Policy Board, was established in April 2000).  The MPC is appointed by the Board of the Bank ofThailand;  it comprises senior Bank officials (chaired by the Governor) and two outside advisers, from theMinistry of Finance and the Thai Industrial Finan ce Corporation.  It approves the Bank’s quarterly Inflation
Report .  This helps the MPC to set monetary policy by providing economic and inflation forecasts for eight
quarters and enables it to explain its decisions to the public.  The MPC meets every six weeks.
2 Core inflation is defined as headline inflation less raw food and energy, because of their price
volatility.
3 The main factor in the falling real interest rates is the sharp drop in domestic investment after the
crisis, which widened the gap between national savings and domestic investment (Bank of Thailand, 2003a,p. 35).Thailand WT/TPR/S/123
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(b) Fiscal policy
9. Fiscal policy was initially the main measure used to promote growth after the 1997 Asian
financial crisis.  A series of expansionary budgets raised the overall public-sector deficit to well over
5% of GDP.  In fiscal year (FY) 20024, another fiscal stimulus package was introduced;  the package
included:  the establishment of a Reserve Fund of 1% of GDP (primarily to fund agricultural
measures);  off-budget spending on the Village Fund;  and a farm debt moratorium.  The rise in theoverall public sector budget deficit from 3.3% to 5.4% of GDP also largely reflected the issuance of
government bonds to finance losses from the financial sector bail-out.  The central government budget
deficit was much lower, falling from 2.6% to 2% of GDP;  however, extra-budgetary and off-budget
items, local government deficits, and losses by state-owned enterprizes could undermine fiscal
transparency.
10. The Central Government is committed to fiscal consolidation, and aims to achieve a balanced
budget by FY 2008 at the latest.  In the FY 2003 budget, the Government aims to reduce the overall
public sector deficit to 2.9% of GDP.  It is publicly committed to maintaining the public debt at less
than 60% of GDP and to ensuring that debt service payments do not exceed 16% of the budget.  The
current VAT rate, temporarily reduced from 10% to 7% in 2001, is to remain for the time being.
11. The Government introduced a short-term scheme in February 2003 to stabilize domestic retail
prices of petrol;  the scheme is to be funded by credit of up to B 8 billion mainly from the
Government Savings Bank, with government guarantees, but at no direct budgetary cost.
5
12. Despite fiscal consolidation, public sector debt remains high, mainly due to the costs of
financial restructuring by the Financial Institutions Development Fund (FIDF) and indebtedness of
state-owned enterprises including state-owned bank s.  Public-sector debt has increased, to 56.6% of
GDP in 2002;  over half is held domestically.  Contingent liabilities (estimated at some 22% of GDPat end-September 2001) due to FIDF guarantees on notes issued by asset management companies,
including the Thai Asset Management Corporati on (TAMC), in taking over non-performing loans,
also add substantially to (potential) public-sector indebtedness (Chapter IV(5)(i)).  Prudent fiscal
policy and sound debt management are therefore required, especially in the event that interest rates
rise and liquidity shortages start to constrain private-sector investment.
(ii) Structural policies
(a) Financial sector and corporate debt restructuring
13. Structural reforms have focused in part on bank rehabilitation.  Thailand recognizes the
importance of sound banking and financial systems to efficiently mobilize and channel savings into
productive investments.  This requires disclosure of accurate financial information, a sound legalsystem, and an effective prudential regulatory framework.  Pre-crisis deficiencies in the financial
system included inadequate supervision and weak regulation, poor enforcement, ineffective disclosure
requirements, and, in some cases, distorted incentives for project selection and credit allocation based
on non-market criteria.  Financial reforms have been at the heart of Thailand’s economic recovery
programme, and the sector has been cautiously deregulated alongside enhanced supervisory controls;however, slow progress, including yet-to-be-in troduced legislation on financial supervision,
strengthened central bank independence, and its supervisory role, may have hampered economic
                                                     
4 Fiscal year (FY) runs from October to September.
5 In future, subsidy payments, when the world price exceeds the capped price, are to be recouped when
the world price falls below capped levels, and used to fully repay borrowings from the financial institutions.  Asat end March 2003, B 3,775 million had been used to stabilize prices.WT/TPR/S/123 Trade Policy Review
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recovery (Chapter IV(5)(i)).6  According to the authorities, the proposed Financial Institutions
Business Act will be flexible enough to accommodate Thailand's adoption of international standards
by emphasizing corporate transparency, good governance, and consumer protection;  currently, the
Government is drafting the final legislation for parliamentary approval.
14. Despite good progress in bank rehabilitation by the FIDF and corporate debt restructuring by
the Corporate Debt Restructuring Advisory Committee (CDRAC), banks' balance sheets remain weak
due to the high incidence of non-performing lo ans (NPLs) and highly leveraged corporations.
Contingent liabilities from the banking sector and uncertainty over the future path and financing of
public debt pose fiscal risks.7  The TAMC’s deadline for restructuring NPLs appears ambitious.8
Nevertheless, the TAMC achieved its quarterly targets and restructured loans totalling B 501 billion in
2002.  Its operational plan for 2003 includes additional transfers of impaired assets and their rapid
restructuring.  The TAMC's 2003 target is to restructure B 325 billion of transferred assets, plus some
B 50 billion of assets acquired from state-owned financial institutions.  Most NPLs transferred to the
TAMC came from state-owned banks;  private banks remain exposed to NPLs.  Thus, bank
rehabilitation/re-capitalization has seemingly favoured  state-owned banks;  their further privatization
would help boost market competitiveness.
(b) Corporate governance
15. Thailand took steps to address weak corporate governance after the 1997 financial crisis
(Chapter III(4)(vii)(b)).  These include enhanced accounting, disclosure, and auditing regulations inline with international standards.  The Securities and Exchange Commission has embarked on an
Action Plan of Good Corporate Governance.  It includes legislative amendments, issuance of best
practices aimed at promoting shareholders’ rights, greater transparency, disclosure, and directors’
accountability.  The SEC is also monitoring more closely stock exchange listing requirements.  It
established a Corporate Governance Centre to advise listed companies on good corporate governancein 2000.  Commercial codes are also being revised, including amended bankruptcy provisions; a
separate Bankruptcy Court was established in mid 1999.  The Government has also taken steps to
improve public-sector governance, including comprehensive bureaucratic restructuring, designed to
reduce corruption in the public-sector and strengthen market-supporting institutions and
administrative efficiency (Chapter II(2) and (3)(ii)).  The Bank of Thailand also introduced measuresto strengthen corporate governance practices among financial institutions under its supervision
(Chapter IV(5)(i)).
(c) Privatization and competition policies
16. Thailand’s privatization (divestment) programme has made little progress (Chapter III(4)(vi)).
Nevertheless, efforts to "fast-track" the Master Plan for State Enterprise Reforms led to initial public
offerings in a few state entities, and corporatization of a few utilities with a view to their eventual
divestment, as in the case of the Telephone Organization of Thailand (TOT) in July 2002.  Furthercorporatizations/divestments are scheduled, for example in telecommunications.  The State Enterprise
Policy Committee (SEPC) coordinates regulatory restructuring, deregulation, and liberalization
                                                     
6 The Bankruptcy Act was also amended in 1998 and 1999 and a Bankruptcy Court was established in
1999 with a view to strengthening regulatory framework and institutional arrangements (Chapter II(5)).
7 Total FIDF losses from bank re-capitalization and restructuring are estimated at about 16% of GDP
(B 880 billion).  They are being financed by 5, 7, and 10-year government bonds, with the interest cost to be met
from the budget.
8 Remaining NPLs held by banks have fallen to 15.8% of total loans (in March 2003), compared with
more than 40% of total loans during the crisis (Chapter IV(5)(i)).  Nonetheless, total NPLs eligible for TAMCrestructuring are estimated at 20% of GDP, of which some B 500 billion (US$12 billion) were to be completed
by end 2002.Thailand WT/TPR/S/123
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policies on a case-by-case basis.  A policy for reforming state enterprises was released in March 2001.
On the other hand, in 2003 the Government established the "Vaynpak Fund", a mutual fund with
B 100 billion in capital;  the fund will invest in industries believed to show bright prospects.9  Th e
Trade Competition Act of 1999, administered by  the Office of Trade Competition Commission,
restricts monopolies and certain anti-competitive practices, especially by businesses with dominant
market power, collusion among suppliers, anti-competitive mergers, and unfair trade practices.However, certain activities, such as the activities of state-owned enterprises, are not covered by the
Act.  Competition enforcement could also be improved by addressing possible legislative weaknesses,
such as the definition of dominance, and resour ce constraints.  The Competition Commission has
announced criteria for determining dominance in two sectors, retail and motorcycles, pending Cabinet
approval.
(d) Trade and investment policies
17. Thailand has further liberalized its trade and investment regimes.  Applied tariffs have been
reduced since 1999, and measures have been taken to improve customs procedures, such as valuation,
and to attract foreign direct investment (Chapter III(2)(i)(ii) and (4)(ii)(a)).  However, average double-
digit tariffs remain, made less transparent by the high incidence of non- ad valorem  duties, and non-
tariff barriers, such as opaque licensing and other arrangements, are not just to protect infant
industries but also to meet other economic objectives .  The number of anti-dumping measures has also
increased.  Such actions may work against Thailand's efforts to establish more competitive markets.
Investment incentives have been streamlined, and tax concessions dependant on local-content and
export-performance requirements have been scrapped  for new investment.  Nonetheless, investment
incentives, such as tax holidays, continue to be used to promote regional development;  the incentives
are increasingly targeting specific industries, su ch as automobiles.  Such incentives may undermine
economic efficiency, and can be costly in forgone government revenue for questionable benefits.  The
1966 Treaty of Amity and Economic Relations Between the United States and Thailand provides
national treatment to each other's investors in the establishment, acquisition, and the right to do
business, except in some major services sectors.  To maintain such preferential treatment, Thailand
sought an MFN exemption under GATS to continue granting national treatment under the pre-existingbilateral treaty.  The authorities state that non- U.S. foreign investors can also enjoy fewer FDI
restrictions on establishment in Thailand by applying to the BOI for investment promotion measures.
(3) D
EVELOPMENTS IN TRADE AND FOREIGN INVESTMENT
(i) Trade in goods
18. Thailand's merchandise exports and imports have grown substantially since 1999, except in
2001, when exports and imports declined by 6.9% and 2.8%, respectively (Table I.2).  Trade
rebounded in 2002 with corresponding growth of 5.8% and 4.6%.  While merchandise trade (average
of exports and imports) declined as a share of GDP from 53.7% in 2001 to 51.5% in 2002, it remained
well above the 1999 level of 38.0%.
(a) Composition of trade
19. Thailand’s composition of trade has changed little since 1999.  The share of manufactured
exports remained at 74% in 2001 (Chart I.1).  The largest items in this category include office
machines and telecommunications (24.9% in 2001), other consumer goods (9.7%), textiles and
                                                     
9 Department of Industrial Promotion online information.  Available at:  http://www.smethai.net/en/
download/download/article-13.doc.WT/TPR/S/123 Trade Policy Review
Page 8
clothing (8.4%), and other semi-manufactures (8 .3%).  Agricultural products, especially food,
continue to rank second, accounting for 18.5% of Thai exports in 2001 (20.1% in 1999).
20. Some three quarters of imports are manufactured products (75.1% in 2001 and 77.3% in
1999).  The two largest categories, in 2001, were office machines and telecommunications (21.6% of
total imports) and non-electrical machinery (10.2%), both shares were higher than in 1999.  Shares ofother main manufactured imports, such as chemicals, other semi-manufactures, and transport
equipment declined.  Mining accounted for 15.2% of imports in 2002 (12.5% in 1999).  The import
share of agriculture products remained at just under 8%.
(b) Direction of trade
21. The geographical structure of Thailand's trade has not changed substantially since 1999.  East
Asian countries are Thailand's major trading partners, accounting for 49.1% of exports and 53.5% of
imports in 2001 (Chart I.2).  Japan is by far its largest East Asian trading partner, accounting for
15.3% of exports and 22.4% of imports in 2001.  Ot her important East Asian trading partners are
Singapore;  Malaysia;  China;  and Hong Kong, Chin a.  However, Thailand’s principal export markets
are outside Asia;  these are the United States (20.3% of exports in 2001) and the European Union(16.2%), especially the United Kingdom (3.6%).  After Japan, Thailand’s main import sources in
2001 were the European Union (12.2%), especially Germany (4.1%), the United States (11.6%), and
China (6%).  Middle East markets, especially the United Arab Emirates and Saudi Arabia, are also
important import sources (9.6%).
22. Thailand’s main ASEAN trading partners are Singapore and Malaysia.  ASEAN partners
accounted for 17.4% of Thailand’s exports in 2001 (up from 16.6% in 1999) and 14.9% of imports
(unchanged from 1999);  ASEAN members might be diverting trade between themselves at the
expense of non-members by providing each other tariff preferences on most imports under the
ASEAN Free-Trade Area (AFTA) (Chapters II and III).
(ii) Trade in services
23. Thailand enjoys a substantial surplus on services trade;  its share in GDP was 3.9% in 2002, a
slight decline from 1999 (4.7%).  These surpluses relate mainly to tourism and transportation services(especially for passengers).  Gross tourism receipts amounted to US$7.7 billion in 2002, well below
the peak of US$9 billion in 1996, due largely to lower spending per tourist following the Baht’s
depreciation.  Tourism receipts were adversely affected in 2003 by the SARS (Severe Acute
Respiratory Syndrome) outbreak.Thailand WT/TPR/S/123
Page 9
Chart I.1
Product composition of merchandise trade, 1999 and 2001
1999 2001
(a)    Exports (f.o.b.)
Other  
3.2
Manufactures
73.9
Total:   US$58.4 billion Total:  US$65.1 billion
(b)    Imports (c.i.f.)
Other  
2.3
Other semi-manuf.
9.1Iron &
steel
5.4Agriculture
7.9
Transport equip.
7.8Mining
12.5
Non-electrical
machinery
8.5Manufactures
77.3
Chemicals
11.3
Office machines
& telecom.
19.4Other electrical
machines 
 7.5Textiles & clothing  2.7
Other electrical 
machines   
6.8Mining
15.2
Other semi-manuf.
7.2Transport equip.
6.7
Iron & steel
4.2
Manufactures
75.1Chemicals
10.7
Total:   US$50.3 billion Total:   US$62.1 billionPer cent
Manufactures
74.1Other 
3.5
Other consumer 
goods  9.7
Mining
3.8
Office machines & 
telecommunication
24.9
Other 
2.0Other consumer 
goods  9.7
Non-electrical
machinery
10.2Other consumer goods 
                      5.1
Textiles & clothing  2.9Office machines & 
telecommunication 
26.1Mining
2.8
Non-electrical 
machinery
5.1Agriculture
20.1Agriculture
18.5
Other 
semi-manuf.
8.3
Office machines
& telecom.
21.6Non-electrical 
machinery
5.6Chemicals
5.8Chemicals
5.1
Other
 semi-manuf.
8.0
Source :  UNSD, Comtrade database (SITC Rev.3).Other consumer goods  
                  5.5Agriculture
7.8Textiles & 
clothing   8.4
Transport 
equip.  4.9
Other electric.
machines  6.6Textiles & 
clothing  9.0
Transport
equip.  4.0
Other electric. 
machines  6.8 WT/TPR/S/123 Trade Policy Review
Page 10
Chart I.2
Direction of merchandise trade, 1999 and 2001
1999 2001
(a)    Exports (f.o.b.)
East Asia
46.1
Middle East
3.3Malaysia  3.6Other 
East Asia
11.1
United States
21.7
Japan
14.1
Total:   US$58.4 billion Total:   US$65.1 b illion
(b)    Imports (c.i.f.)
Other Americ
2.4United States
12.8
EU15
11.7East Asia
54.8Other  5.0
China
6.0
Japan
22.4Singapore
4.6
EU15
12.2East Asia
53.5United States
11.6
Total:   US$50.3 billion Total:   US$62.1 b illion
Source :   UNSD, Comtrade database (SITC Rev.3).Per cent
Malaysia  4.2Other 
East Asia
  12.0
East Asia
49.1China  4.4
Hong Kong, China
5.1
Other America
2.2EU15
16.2United States
20.3
Other 
East Asia  
9.8
Japan
24.4Other 
East Asia
11.6
Singapore
5.9Oceania  2.5
EU15
16.8Middle East
3.1Other America
 2.9 Other America
2.5Oceania  2.6
Other
 Europe
  1.9
China
5.0
Middle East
8.5Other  4.7
Middle East
9.6Japan
15.3
Malaysia
5.0Oceania  2.5Chinese Taipei  3.5
Hong Kong, 
China  5.1
Singapore
8.7Other  1.5
Singapore
8.1Africa  2.3
Other 
Europe
1.9South Asia 1.5
Africa  2.0South Asia 1.7
Other Europe
2.9Other Europe
2.7Malaysia
5.0Chinese
 Taipei
4.2Chinese 
Taipei
4.7
Oceania  2.9Thailand WT/TPR/S/123
Page 11
(4) FOREIGN INVESTMENT PATTERNS
24. Net foreign direct investment (FDI) in Thailand rose from US$2.8 billion in 2000 to
US$3.8 billion in 2001, although this was well below its peak of US$5.1 billion in 1998.10  F D I
slumped in 2002 to US$0.9 billion;  this partly reflected substantial net outflows in mining and
quarrying, food and sugar, electrical machinery and appliances, financial institutions, and real estate
(Table I.3).  In 2002, net FDI outflows in these activities amounted to some US$565 million, almostthree fifths of the value of net FDI inflows.  Mo st FDI inflows are in manufacturing and services;
FDI in agriculture is negligible.  In 2002, the larges t recipients of FDI were wholesale/retail trade,
machinery and transport equipment, metallic and non-metallic products, and chemicals.
Table I.3
Net inflows of foreign direct investment by sector, 1998-02
(US$ million and share in per cent)
Sector/Activitya1998 1999 2000 2001 2002b
Total 5,143.0 3,562.0 2,813.0 3,759.0 899.0
(Per cent)
Agriculture 0.0 0 0 0.1 0
Mining and quarrying 0.4 -1.2 9.8 13.8 -11.1
Manufacturing 43.0 35.6 64.5 57.3 55.7
Food and sugar 1.4 2.6 3.3 2.9 -8.0
Textiles 2.4 0.6 1.0 1.5 2.8
Metal and non-metallic 6.6 7.4 3.3 9.4 10.0
Electrical machinery and appliances 5.1 11.9 10.6 17.6 -9.1
Machinery and transport equipment 12.9 11.1 23.7 11.4 24.4
Chemicals 4.4 0.2 13.6 1.3 9.0
Petroleum products 6.4 0.2 1.1 7.4 3.6
Construction materials 0.5 1.1 2.1 -0.1 2.3
Other 3.2 0.5 5.7 5.9 20.7
Services 56.6 65.6 25.7 28.8 55.4
Financial institutions 16.4 6.9 4.8 -5.0 -31.4
Wholesale/retail trade 20.4 29.3 2.4 23.7 49.3
Construction 3.7 -4.2 -0.1 -0.1 0
Real estate 0.5 4.2 2.5 3.0 -3.0
Other 15.6 29.4 16.1 7.2 40.5
a Covers investment in non-bank sector only.
bP r e l i m i n a r y .
Source: Bank of Thailand (2003), Economic and Financial Statistics, First Quarter , Table 63 [Online].  Available at:
http://www.bot.or.th.
25. In 2002, net FDI inflows were predominantly from East Asian economies, especially
Singapore and Japan.  Large net FDI outflows occu rred elsewhere, most notably to the European
Union, mainly the Netherlands, and the United States (Table I.4).  The relative importance of East
Asian economies, especially Singapore and Japan, as sources of FDI inflows increased substantiallyin 2002.
                                                     
10 The figures contained in this section cover investment in the non-bank sector only.WT/TPR/S/123 Trade Policy Review
Page 12
Table I.4
Net inflows of foreign direct investment by country, 1998-02
(US$ million and share in per cent)
Sector/Activitya1998 1999 2000 2001 2002b
Total 5,143.0 3,562.0 2,813.0 3,759.0 899.0
(Per cent)
United States 25.0 18.0 21.9 1.5 -33.1
EU 17.7 38.4 18.0 4.7 -50.2
Belgium 0.6 -1.1 -0.6 0.1 -2.2
Germany 2.0 5.6 3.7 0.9 0.9
Finland 0.8 - 0.1 -0.1 3.8
France 5.4 6.8 1.0 2.7 -1.2
UK 2.0 5.1 14.3 8.8 24.7
Ireland 0 - - 1.3 5.7
Netherlands 6.5 18.1 -2.6 -10.2 -83.1
ASEAN 11.2 16.1 13.8 42.8 130.7
Malaysia 0.3 0.8 0.7 1.1 -1.7
Singapore 10.5 15.1 12.7 41.6 131.9
Japan 28.9 13.7 30.1 36.6 69.0
Hong Kong, China 2.4 6.5 11.8 4.3 3.7
Chinese Taipei 2.1 3.4 5.7 1.5 8.7
Other 12.7 3.9 -1.3 8.6 -28.8
- Negligible.
a Covers investment in non-bank sector only.
bP r e l i m i n a r y .
Source: Bank of Thailand (2003), Economic and Financial Statistics, First Quarter , Table 62 [Online].  Available at:
http://www.bot.or.th.
26. The stock of FDI in Thailand is estimated at US$33.8 billion in 2001 (US$25.8 billion in
2000); about three quarters is equity capital and reinvested earnings.11  Portfolio investment in
Thailand is also important, with an estimated at US$17.1 billion in 2001.  Net inflows of portfolio
equity investment (excluding banking) fell sharply in 2001 to only US$17 million (from
US$897 million), but increased in 2002 to US$222 million.
(5) OUTLOOK
27. Thailand’s economic outlook appears to be favourable.  Growth accelerated in 2002
exceeding expectations.  It was propelled by domestic demand, especially private consumption and
investment, and by exports (mainly in the second half  of the year).  Growth in early 2003 also appears
strong, despite the uncertain international climate and the adverse effects on tourism of the SARS
outbreak.
28. Official forecasts by the Office of National Economic and Social Development Board
(NESDB) are for 4.5-5.5% growth in 2003, with he adline inflation of 1.6% and a current account
surplus of about 3.9% of GDP.12  The Ministry of Finance also projects 2003 growth of around 5%;
two thirds is expected to come from domestic demand, especially consumption, and the rest from
exports.  The Bank of Thailand recently revised its growth projections upwards to between 3.5%-
                                                     
11 Bank of Thailand (2003c).
12 NESDB online information.  Available at:  http://www.thailandoutlook.com/main_sector/
economic_forecast/forecast_inside.asp#nesdb.Thailand WT/TPR/S/123
Page 13
4.5% in 2003, and of 4.5%-6% in 2004.13  It forecast lower than expected core inflation, of below 1%
in 2003, but slightly higher headline inflation, of 1% to 2%, caused by the rise in world oil and
agricultural prices.  Both core and headline inflation were expected to average around 1%-2% in
2004.  Aggregate demand, buoyed by exports and low real interest rates, is expected to remain strong
and a major source of non-inflationary growth, given substantial excess capacity in production and
low cost-push pressures.  Private researchers have also projected average real growth of 4.2% in 2003and 4.9% in 2004.
14
29. Robust growth will depend upon continued structural reforms and macroeconomic
stabilization, especially fiscal consolidation a nd sound public debt management.  The high public-
sector debt and substantial contingent liabilities associated with financial sector rehabilitation remain
a significant downside risk, as does the large overhang of corporate debt and non-performing loansafter the crisis.  Maintaining fiscal discipline, notably ensuring that the balanced budget objective is
met, would assist future growth prospects.  Furt her improvement in market access as well as progress
in privatization and regulatory reform, with a view  to assuring competitive domestic markets, would
also contribute to a steady recovery.  These prospects also hinge on international economic
developments and their impact on Thai exports and inward foreign investment, both of which are vitalfor Thai growth.  Expanding export shares in major markets, especially as competition from Chinese
products intensifies, and rekindling foreign direct investment, especially after the sharp fall in 2002,
will be key factors in Thailand’s economic performance.
                                                     
13 The Bank concluded that the probability of 3.5%-4.5% growth in 2003 was 75%, but that the
probability of it exceeding this range had increased slightly.  The 2004 growth range forecast of 4.5%-6% wasalso estimated to have an 86% probability (Bank of Thailand, 2003).
14 Bank of Thailand (2003a), p. 70.