WORLD TRADE
ORGANIZATIONG/SCM/Q3/THA/17
18 December 2002
(02-6975)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4  of the Agreement on
Subsidies and Countervailing Measures
Replies by THAILAND to Questions Posed by Various Delegations
The following communication, dated 12 December 2002, has been received from the
Permanent Mission of Thailand.
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Pursuant to our letter No. 52200/902 dated 4 December 2002, I would like to enclose
herewith additional information requested by interested parties during the bilateral and plurilateral
meetings.  The information reflects the efforts of the IEAT to reduce the time-frame for its legislation
amendment from 10 to 3 years.  It also reflects the BOIs efforts to reduce the number of projects with
export subsidy requirement from 1,056 to 532 projects as well as the time-frame of its phase out
period.G/SCM/Q3/THA/17
Page 2
EXTENSION OF THE TRANSITION PERIOD
FOR THE ELIMINATION OF EXPORT SUBSIDIES
With respect to the request of Thailand for extension of the transition period for the
elimination of export subsidies as contained in G/SCM/N/74/THA, Thailand would like to take this
opportunity to respond to some concerns and questions arising in the course of informal dialogue
and/or plurilateral consultations which took  place from October 2002 to date, as follows:
1. The request by Thailand covers only programmes granted by the two government agencies,
namely the Board of Investment (BOI) and the Industrial Estate Authority of Thailand
(IEAT).
2. Under the existing export subsidy programmes, no agricultural products as defined by the
WTO receive export subsidies.  Export subsidies have been granted to producers of rubber
and wood products only.
3. No export subsidy is granted to operators of fisheries and steel products under such
programmes.
Details of the two subsidy programmes are hereby provided.
I. INDUSTRIAL ESTATE AUTHORITY OF THAILAND (IEAT)
1. Nature and operation of the programme
The objectives of this programme are to facilitate the establishment of industrial operators in
designated zones, and promote rural development.  The IEAT’s measures are considered “exportsubsidies” because they are provided to exporters located in the Export Processing Zone.  Nature and
operation of the programme are as follows:
Form of subsidy Exemptions of import duties and taxes on machinery, equipment,
tools and components essential for the production of goods, and on
materials used for construction of factories or buildings
Scope 11 Zones
Product/sector coverage Wood and furniture, paper and printing, fertilizer, dyestuffs
chemical, medicine and cosmetics, plastic and PVC products, glassand ceramics, metal products, machinery tools and equipments,
automotive and parts, electrical appliance, electronic and scientific
equipment, gem, musical and sports equipment, light industry
1,
other operations related (see Annex 1)
Intensity of benefits -
Estimated annual value of
exports24,630 million USD or 6.8% of Thai total export value in 2000
The amount of export subsidies under the IEAT's programme cannot be provided since the
Customs Department collects data on import value in aggregated amount which combines both import
value of machinery and raw materials according to each EPZ.
                                                     
1 Light industry includes suitcases, handbags, textiles, yarns and fur, footwear, toys, stationary,
kitchenware and decorative items.
2 Data is provided by the Customs Department of ThailandG/SCM/Q3/THA/17
Page 3
2. Phase-out plan
Thailand's intent to abolish its export subsidy under the IEAT programme has been
demonstrated through its effort to amend the IEAT Act during the past 7 years.  The IEAT has indeed
begun the law amendment process since 1996 by establishing the Working Group on the amendmentof the IEAT Act.  In 1997 during the Asian financial crisis, one of the proposed amendments went
through the cabinet and House of Representatives; however, failed in the Senate.  During 1997-1999,
the amendment process had been repeatedly interrupted by a number of cabinet reshuffles and
changes of political power as a result of the poor economic performance and high unemployment
during the crisis.
Pending the law amendment effort, the IEAT has exercised its administrative power to
decrease the percentage of exports requirement in order to reduce the programme’s specificity to
exporters.  This action has resulted in exporters not being required to export all of their products,
thereby domestic sales are allowed under the current regime (see Annex 2).
Thailand has a firm intention to complete the law amendment process within 2005, provided
that there is no major political interference and changes in the executive branch during the process.
Detailed phase-out plan is provided in Annex 3.
3. Necessity of maintaining the subsidies
Notwithstanding that the programme has greatly helped to correct the persisting problem of
income inequality in the country, where 28.2 per cent of the total population still live on less than $2 a
day, created 370,000 jobs for local people around the country, and provided a place for skill
enhancement and development, necessary to sustain employment, promote better career opportunities,
and raise the standards of living, the only reason Thailand has requested for the extension of transition
period is to complete the amendment of the IEAT Act.  We had faced severe economic hardshipduring the financial crisis that prevented us from successfully amending the law to meet the deadline
in 2002.  Yet, when the economy started to recover and the political environment become stable, we
have immediately started the process again.  It is also important to note that the extended transition
period is crucial to the Thai economic recovery.  Disruptions caused by the termination of this
programme before the law is completely amended would only hamper our effort to amend the law and
sustain our economy through this time of difficulties.
4. Standstill
The IEAT has no intention to make any modification during the period of extension so as to
make them more favourable than they are at present.  In fact, the IEAT has not made any modification
since 1992 in relation to benefit or sector/product coverage.  Indeed, the IEAT has been reducing the
percentage of export requirement from 100 per cent in 1979 to 40 per cent in 2002.  Furthermore, itwill continue to reduce the percentage of export requirement to 20 per cent, starting from
January 2003 (see Annex 2).
5. Annual review
In order to verify that the transparency and standstill requirements are being fulfilled, the
IEAT will provide annual notifications indicating the progress and status of the law amendment,
modifications made to the programme, and work plan for the next year, starting in 2003 until its law
amendment process has been completed.  The IEAT will also provide all available additional details
and clarification in the annual notifications upon member’s request.G/SCM/Q3/THA/17
Page 4
II. THAILAND’S BOARD OF INVESTMENT (BOI)
1. Nature and operation of the programme
The objectives of the programme are to attract investment and to solve the problem of
development disparities between the urban and rural areas, which constitutes serious social anddevelopment problems in Thailand.  Some of the BOI’s measures are considered “export subsidies”
because they are tied with a condition that operators must export.  Nature and operation of the
programme are as follows:
Form of subsidy Exemption of corporate income tax
Scope 532 projects3 (expire during 2003-2011)
Product/sector coverage Rubber and wood products, mining, ceramics and basic metals,
light industry4, metal products, machinery and automotive and
parts, electronic and electrical appliances, chemical, paper andplastic products, service and public utilities (see Annex 4)
Intensity of benefits - Based on location of the investment (eg. highly developed regions
are granted least benefits).  Benefits will be phased out within
certain time limits (maximum 8 years)
- Benefits and the number of the projects will decrease over the
period of 2003-2011 (Approximately 64 per cent of the projects
will graduate within 3 years)
Estimated annual value ofexports
51,200 million USD or 1.77% of Thai total export value in 2000
Estimated amount ofsubsidies
6US$10.8 million or 0.9% of the annual export value in 2000(US$1,200 million)
In respect of estimated amount of subsidies, the actual amount of subsidies cannot be
provided since there is no data collection on exemption of corporate income tax.  In addition, there is
no budget earmarked for the export subsidies.
2. Phase-out plan
The BOI has started phasing out its export subsidies by introducing a series of removals of
export requirements linked to granted investment incentives since 1992.  The process was then
discontinued during 1997-2000 when the incentives and requirements were introduced again to off-setthe severe capital out-flows and prevent the collapse of the entire economy as the country faced its
worst economic crisis in history.  In 2000, after the Thai economy started to recover from the deep
recession the BOI continued its effort by introducing a complete abolishment of its export
requirement scheme, leaving no export subsidies being granted to new operators applying for the
BOI’s investment incentives after August 2000.
                                                     
3 Previously, Thailand indicated that there are 1,056 projects benefiting from the programme.  The
most recent study by the BOI found that out of 1,056 projects, 524 projects have  already expired during 1988-
2002.  Beginning 1 January 2003, there will be 532 projects with export subsidies left.   
4 Light industry includes upholstery, gems and jewellery, medical equipment, sports equipment,
footwear, luggage, handbags, toys, textiles and garments, furniture, souvenirs, and decorative items.
5 Calculation is based on projected income notified by the applicants to the Board of Investment.
6 Assuming that all operators gained profits which in fact they might not, the calculation is based on an
average profit margin of 3 per cent (actual profit margins are varied in the range of 2-3 per cent as nearly alloperators are sub-contractors or operating on fee or on a contractual basis) and the rate of 30 per cent corporate
income tax.G/SCM/Q3/THA/17
Page 5
Thailand expects that all remaining export subsidies under this programme will be completely
eliminated by the end of 2011.  To expedite the phase-out process, the BOI has a plan to eliminate the
export requirement linked to the joint venture criteria7 that will gradually decrease the number by
approximately 40 per cent of the remaining 532 projec ts (see Annex 5).  The phase-out plan of the
projects left after the removal of the joint-venture criteria requirement will have a similar phase-out
pattern as of those 532 projects.  Obviously, these remaining projects will have insignificant adverse
effect on international trade.
3. Necessity of maintaining the subsidies
Thailand has requested for an extension of transition period for elimination of those export
subsidies granted to operators who submitted their applications before August 2000 only.  Theextension is deemed crucial for Thailand to prevent the divestment of confidence in government
development plans as a result of benefits being terminated prior to the agreed timeframe and to
provide investors the needed time for adjustments, especially in the current unstable economic
environment.  Failure to obtain an extended transition period would bring about economic difficulties
as a result of investors’ loss of confidence and higher unemployment.
4. Standstill
The BOI has no intention to make any modificati on during the period of extension so as to
make them more favourable than they are at present in terms of benefits and sector/product coverage.
In addition, it guarantees that no extension of grace period will be given to any operator during theextension period.  Therefore, current beneficiaries will gradually graduate from the programme during
2003-2011.
5. Annual review
In order to verify that the transparency and standstill requirements are being fulfilled, the BOI
will provide annual notifications indicating the progress of phasing-out the remaining export
subsidies, modifications made to the programme, current status and work plan for the next year,
starting in 2003 until its export subsidies have been completely eliminated.  The BOI will also provide
all available additional details and clarification in the annual notifications upon member’s request.
III. CONCLUSION
It is very important to note that the Thai Government is under the process of tariff-
restructuring.  Indeed, most, if not all, import duties on machinery will be reduced to zero per cent in
2003 (Detailed information will be submitted at the later stage).  Consequently, benefits currently
granted by the BOI and IEAT in forms of exemption or reduction of import duties on machinery to
operators under the programmes do not make a significant difference from other operators not in the
programmes.
Thailand would like to emphasize again that the request for extension of the transition period
for elimination of export subsidies provided by the BOI and IEAT is purely of technical, financial,
economic and development purposes, without any intent to create trade distortion.  The
implementation of our commitments in the past via the subsidy notifications Thailand has regularly
                                                     
7 Under the joint venture criteria, a foreign investor must export at least 80 per cent of the total sales in
order to hold all shares of the corporate.  Other project s not classified under the joint venture criteria will receive
tax benefits only when the export requirement is met.G/SCM/Q3/THA/17
Page 6
submitted to the SCM Committee and the progressive elimination of some major subsidy measures
through successive effort in amending relevant laws can illustrate our strong intention to carry out our
commitments.
Lastly, we hope that our true intention and Thailand’s good-faith compliance shall draw
sympathetic and positive consideration from all Members concerned so as to grant Thailand the
extension under Article 27.4 of the SCM Agreement.G/SCM/Q3/THA/17
Page 7
ANNEX 1
BREAKDOWN BY PRODUCT SECTOR
IN THE EXPORT PROCESSING ZONE
Industrial Product Sector Number of Projects
Wood and Furniture 4
Paper and Printing 2
Fertilizer, Dyestuffs Chemical 1
Medicine and Cosmetics 32
Plastic Products, PVC Products 4
Glass and Ceramics 3
Metal Products, Machinery Tools and Equipment, and Automotive
Parts55
Electrical Appliances, Electronic and Science Equipment 79
Gems 9
Musical and Sports Equipment 17
Light Industry 45
Other Operations Related 18
TOTAL 269
Source:  Industrial Estate Authority of ThailandG/SCM/Q3/THA/17
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ANNEX 2
COMMITMENT TO STANDSTILL OF INDUSTRIAL
ESTATE AUTHORITY OF THAILAND (IEAT)
In principle, the programme for which an extension is granted shall not be modified during
the period of extension referred to standstill requir ements so as to make them more favourable than
that specified in IEAT's first notification.  The continuation of an expiring programme without
modification shall not be deemed to violate standstill.
In order to guarantee its commitment to the afore-mentioned principle, IEAT will not
diversify any schemes of tax preferences under IEAT's Act of 1979 and these benefits will be
eliminated immediately after the law amendment proces s is complete which is expected to be within a
3 year period.  Meanwhile, IEAT has decreased the proportion of export requirement as of the
following:
During 1979-1992: 100% export requirement
During 1992-1995: 80% (at least) export requirement
20% Local market allowed
During 1995-2002: 40% (at least) export requirement
60% Local market allowed
During 2003-2005: 20% (at least) export requirement
80% Local market allowed
After the amendment: No export requirementG/SCM/Q3/THA/17
Page 9ANNEX 3
WORK PLAN OF THE IEAT ACT AMENDMENT
2002 2003 2004 2005No. Action Processes1/4 2/4 3/4 4/4 ¼ 2/4 3/4 4/4 1/4 2/4 3/4 4/4 1/4 2/4 3/4 4/4
PHASE 1
1 Working Group (WG) studies the overall context for amendment ▬
2 WG proposes conclusive bill to IEAT governor for a review ▬
3 IEAT proposes the revised bill to the Board's Sub-Committee and then the Board of
IEAT▬
4 The approved bill proposed to Ministry of Industry (MOI) for final review ▬
5 Ministry of Industry WG reviews the bill ▬
6 MOI proposes the approved bill to the Cabinet for a review ▬
7 The Cabinet considers and proposes the bill to the Office of the Council of State
(OCS) for verification▬▬
8 OCS verifies the bill and returns it to the Cabinet ▬▬
9 The Cabinet reviews the bill and sends it to the House of Representatives (HoR) ▬
10 HoR considers the bill and sends the approved bill to the senate for consideration
and approval▬▬
11 Issue new rules, regulations, procedures and enforce new IEAT Act ▬G/SCM/Q3/THA/17
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ANNEX 4
BREAKDOWN BY PRODUCT SECTOR
UNDER THE BOI'S SCHEME
Product Sector No. of Projects
Rubber and Wood Products 37
Mining, Ceramics and Basic Metals 7
Light Industry 95
-  -Textiles 23
-  Garments 13
-  Footwear 2
-  Toys 4
-  Others 53
Metal Products, Machinery and Automobiles and Parts 78
Electronic and Electrical Appliances 252
Chemical, Paper and Plastic 62
Service and Public Utilities 1
Total 532
Source:  Board of Investment of Thailand
ANNEX 5
BOI PHASE OUT PLAN
Expiry year Number of projects to
expirePercentage of projects to
expire
(Total:  532 projects)Accumulative
percentage
(Total:  532 projects)
2003 127 23.87% 23.87%
2004 120 22.56% 46.43%
2005 94 17.67% 64.10%
2006 70 13.16% 77.26%
2007 55 10.34% 87.60%
2008 34 6.39% 93.99%
2009 14 2.63% 96.62%
2010 15 2.82% 99.44%
2011 3 0.56% 100.00%
Total 532 100.00% -
Important note:  Only 532 projects will expire after 31 December 2002.  Of these 532 projects, more
than 60 per cent will expire in the next 3 years (by the end of 2005).  No export subsidies will be
granted after 2011.
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