Thailand WT/TPR/S/63
Page 33
III. DEVELOPMENTS IN TRADE AND INVESTMENT POLICIES AND PRACTICES
(1) INTRODUCTION
1. Despite the financial turmoil since 1997, the general thrust of Thailand's trade and investment
policy has remained liberal, and new efforts have been made to improve market access.  This has been
particularly noticeable in the area of foreign direct investment, where legislation and regulations have
been amended or streamlined to facilitate inflows of foreign capital.  In the field of trade policy,licensing has been abolished on several products, both imported and exported;  simpler and faster
customs procedures have been introduced for exporters to import their inputs;  and international
standards and testing procedures are now accepted for many industrial products without further
domestic procedures.
2. One element of uncertainty continues as a result of the considerable scope for tariff increases,
frequent changes both in border and internal taxes, made with cabinet approval, by means of
Royal decrees or ministerial regulations and notifications.  Thus, for example, the period under review
witnessed substantial fluctuation in applied tariffs, as these can be modified without parliamentary
approval.  Moreover, in early 1999, many applied tariffs were above Thailand's WTO tariff
commitments, prompting the authorities to issue a statement that WTO bound rates nevertheless apply
to WTO Members.
3. Thailand's current recovery strategy is partly based on exports.  Concerned that the financial
crisis may cut off access to export finance, the auth orities have introduced or reinforced an array of
export financing schemes, at least one of which involves preferential terms.  While these may provide
a temporary boost to the economy, they may also introduce distortions and could prove expensive in
the long run.
4. Since the 1970s, the Government has been directly involved in shaping the pattern of new
investment in Thailand through a variety of incentives and approvals granted by the Board of
Investment, under the Office of the Prime Minister.  This policy may have had a significant cost in
terms of forgone tax revenues, as most incentives consist of tax exemptions, and the
cost-effectiveness of such measures is uncertain as investment may have gone ahead without them.
Further, despite the important potential influence of the BOI on investment decisions, large amounts
of unproductive investment took place in the mid-1990s, notably in real estate, and contributed to the
recent financial crisis.
5. Improving corporate governance has become a government priority in the wake of the
massive corporate failures.  In particular, the crisis has revealed low levels of disclosure, lack of
transparency in management, inappropriate enforcement of accountancy rules, and insufficientprotection of minority shareholders.  Remedies to these problems are a precondition for the
continuation of foreign capital inflows and a more efficient allocation of resources.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Changes in border taxation
6. Thailand applies MFN treatment to WTO Members.  Applied tariffs, on nearly 550 lines
exceed WTO bound rates, therefore, the average applied tariff is higher for non-WTO members than
for Members, as the latter may claim MFN treatm ent for those applied tariff that exceed WTO
bindings (Chart III.1).  Several of Thailand's regional trading partners are not WTO Members;
however, some are members of ASEAN, (see below).WT/TPR/S/63 Trade Policy Review
Page 34
05101520
WTO members Non-WTO membersChart III.1
Average applied tariff, September 1999
Source : 17.1%18.4%Per cent
Government of Thailand.
7. During the period under review, there has been no fundamental change in Thailand's tariff
legislation, which provides for statutory, WTO bound and applied rates.  Changes to statutory ratesrequire legislative approval;  this approval has been granted in the past, for example, to implement
Uruguay Round commitments in agriculture, when statutory rates were increased under the
tariffication process.  No change in statutory rates has taken place since the last Review.  In contrast,
applied rates may be and have been modified by the Minister of Finance without Parliament's
approval, subject to Cabinet consent.  In particular, they can be increased at any time, up to thestatutory rates.  Applied rates may also be incr eased above WTO bound rates;  however, if the imports
originate in a WTO Member country, the importer may ask to be taxed at WTO bound rates.  There
have been several reductions in applied tariffs since 1995 as well as some increases.
(a) Commitments in the WTO
8. In 1996, Thailand submitted to the WTO Secretariat its new consolidated Schedule of Tariff
Concessions in the new Harmonized System (HS)  1996 nomenclature and has since remained subject
to a waiver under GATT Article XXVIII in order to conclude negotiations with Members thatexpressed reservations regarding the new Schedule.  Until the new HS 1996 Schedule is certified, the
Uruguay Round Schedule expressed in the 1992 HS nomenclature remains Thailand's legally binding
Schedule of Tariff Concessions.Thailand WT/TPR/S/63
Page 35
9. The previous Trade Policy Review of Thailand contained a detailed analysis of Thailand's
WTO binding commitments.1  For industrial products, 30.6% of tariff lines remain unbound, down
from 32% in 1995 prior to the ITA Agreement (see below);  the simple tariff average (of bound lines)
will be nearly 26% in the final year of implementation, which is 1999 for non-agricultural products
except textiles and clothing (2004).  This corresponds to a reduction of approximately 28% from the
initial bound (base) rate in 1995.  The product groupings with a relatively low proportion of tariffbindings include refined petroleum products (5%), transport equipment (25%), petroleum and coal
products (31%), rubber products (32%), fabricated metal products (38%), printing and publishing
(46%), and iron and steel (47%).
10. In agriculture, as defined for the Uruguay Round negotiations, the share of tariff bindings by
Thailand has risen to 100% from 98% in 1995 and 5% prior to the Uruguay Round negotiations.
2  The
average final bound tariff will be 32% (WTO definition) in 2004, down 20% from the initial bound
rate in 1995 (Table III.1).
Table III.1
Structure of applied tariffs in Thailand(Per cent)
Indicators 1991 1995 Jul-99 Sep-99 U.R.a
1. Bound tariff lines as a share of total lines 5.0 72.4 73.5 73.5 73.5
2. Duty-free tariff lines 1.3 2.6 3.1 3.6 3.7
3. Non- ad valorem  tariffs/all tariffs 25.0 31.1 21.3 21.3 24.8
4. Tariff quotas/all tariffs 0.0 0.9 0.9 0.9 0.9
5. Tariffs with no ad valorem  equivalent .. 2.5 0.3 0.3 0.1
6. Simple average bound tariff rate .. 37.6 33.1 33.1 27.1
Agricultural products (HS 01-24) .. 40.0 37.8 37.8 32.0
Industrial products (HS 25-97) .. 37.3 32.0 32.0 35.9
7. Simple average applied tariff rate 44.0 23.1 20.1 18.4 n.a.
8. Simple average applied MFN tariff rate 44.0 23.1 18.4 17.1 n.a.
Agricultural products (HS 01-24) 48.5 43.1 32.8 32.1 n.a.
Industrial products (HS 25-97) 43.5 20.7 16.1 14.6 n.a.
9.Domestic tariff peaksb.. 0.1 1.0 7.6 0.6
10. International tariff peaksc90.9 59.3 49.7 47.7 87.6
11. Overall standard deviation (SD) .. 16.9 17.8 17.9 13.0
12. Coefficient of variation (CV) .. 0.73 0.89 0.97 0.48
n.a. Not applicable.
.. Not available.
a Uruguay Round final rate (2004).b Share of total tariff lines that exceed three times the overall simple average tariff rate.
c Share of total tariff lines exceeding international tariff "peaks" (defined as tariff rates exceeding 15%).
Source: WTO Secretariat estimates, based on data provided by the Thai authorities.
11. At the WTO Singapore Ministerial Conference in early December 1996, Thailand was party
to the Ministerial Declaration on Trade in Information Technology Products (the Information
Technology Agreement (ITA)), which bound tariffs on specific information technology products at
                                                     
1 WTO (1995).  Thailand's schedule of tariff concessions under the Uruguay Round Agreement states
that for items subject both to an ad valorem  and an alternative specific rate, the amount of customs duty
collected shall not exceed the amount that would have been received if only the ad valorem  rate were imposed.
2 Additional bindings were made on certain live animals, animal fats, and coral, which had not been
bound as they were considered to be fish products, i.e. not covered by the Agreement.WT/TPR/S/63 Trade Policy Review
Page 36
zero.  The Agreement covers six main product categories:  computers, telecommunications products,
semiconductors, semiconductor manufacturing equipment, software, and scientific instruments.3  The
products covered accounted for 22.5% of the value of Thailand's imports and 25.3% exports in 1997.
12. In this process, Thailand committed itself to eliminate duties on an MFN basis in two equal
annual rate reductions ending in January 2000 on approximately three quarters of products covered by
the ITA;  for the remainder, tariffs are to be brought down to zero in eight equal rate reductionsending in 2005.  In early 1999, applied rates exceeded WTO bound rates on approximately one
quarter of IT items.  This share was reduced to a few IT items, however, following the  package of
autonomous tariff reductions on 10 August 1999 (Table III.2).
13. In October 1997, after the outbreak of the financial crisis, the authorities increased tariffs
substantially on some imported products (e.g. from 40% to 80% on certain passenger cars).  Tariffincreases have in some cases resulted in applied rates exceeding bound rates.  Nearly 550 lines of
Thailand's tariff bear duties in excess of WTO commitments, as illustrated in Table III.2.  Aware of
this problem, the Ministry of Finance issued  Announcement No. 4/2542 (1999) stipulating that
"import duty on the goods subject to rates higher than the bound rates will be exempt or reduced equal
to the bound rates.  The above conditions are applied only to goods originating from WTO Membersand a certificate of origin must be present at the customs."
Table III.2
Selected applied tariffs exceeding WTO bound rates, August 1999
HS Code Description Bound rate Applied rate
4202.1100 Trunks, suit cases & similar containers with
outer surface of leather30% 40%
4203.1100 Articles of apparel of leather or of
composition of leather30% 40%
4419.0000 Tableware and kitchenware of wood 20% 30%
6404.1109 Sports footwear, tennis shoes, basketball
shoes, gym shoes and the like30% 40%
6404.2000 Footwear with outer soles of leather and
uppers of textile materials30% 40%
8407.1000 Aircraft engines Free 20%
8421.1200 Clothes dryers 10% 20%
8469.11aWord processing machines 8.5% 20%
8470.21aElectronic calculators 8.5% 20%
8470.4000aAccounting machines 8.5% 20%
8470.90aOther calculating machines 8.5% 20%
8472.90aMachines for sorting mail 8.5% 20%
8520.2000aTelephone answering machines 28% 30%
8543.81aMagnetic cards 7% 20%
9009.11aElectrostatic photocopying apparatus 10% 20%
a Covered by the Information Technology Agreement.
Source: WTO tariff schedules, and applied tariffs provided by the authorities.
14. Thailand does not have specific non-preferential rules of origin;  this may complicate the
establishment of a certificate of origin.  In the course of this Review, the authorities have explained
                                                     
3 WTO Focus,  No. 15, 1997, Geneva.Thailand WT/TPR/S/63
Page 37
that importers claiming MFN conditions must:  (i) stamp or typewrite the word "WTO" in red on the
import entry originals and all copies;  (ii) submit a certificate of origin obtained from an agency
determined by the government of the exporting member country together with the import entries
requesting tariff exemption or tariff reduction.  Importers must indicate the certificate of origin
number and the name of the agency issuing the certificate on the import entries, and must sign to
certify true copies.  The certificate of origin must be signed by the authority of the authorized agencywhose signature is a priori submitted to the Customs Department;  (iii) where importers are unable to
submit a certificate of origin they must submit a request to the customs authority at the port of
importation to use alternative documentation such as a certificate of origin issued by a trade or
industrial association, chamber of commerce, or another private organization or agency in the
exporting member country, and must certify these as true copies.
15. The authorities at the Ministry of Commerce stated that numerous seminars have been held to
inform importers of their rights with respect to  WTO commitments.  However, the publication of a
consolidated customs tariff containing the tariff rates applicable to WTO Members would aid
transparency and avoid situations where foreign suppliers base their decision on shipments to
Thailand on the so-called "applied" rates, unaware that the WTO bound rate is applicable.  Inmid-1999, it was necessary to consult five separate tariff publications to ascertain the applicable
customs duty.
4
(b) Developments in applied tariffs and other border taxes
16. Tariff reforms announced in December 1994 (which were part of a large-scale reform of
Thailand's tariff structure dating back to 1990), began in January 1995 and were aimed at reducing the
average applied tariff rate from about 30% in 1994 to 17% in 1997.  Several tariff reductions were
made as part of this process in 1996, covering agricultural products as well as intermediate andmanufactured goods.  As a result, import duties fell from 19% of government revenues in fiscal year
1994 to 13% in 1997.  In the wake of the financial crisis of 1997, however, the Government
introduced various (border and internal) tax increases designed to stem the outflow of foreign
exchange, increase tax revenues, and respond to pressure from domestic industry.
17. One of the major recent tariff increases, in October 1997, covered completely built-up
passenger cars (from 42-69% to 80%);  perfumes, cosmetics, clothing, leather products, glassware and
crystal products, certain shoes, and jewellery (from 20 to 30%);  and lenses, eyeglasses, cameras,
watches, pens and lighters (from 5% to 30%).  At the same time, a surcharge of 10% was introduced
on all goods subject to tariffs of 5% or more, with the exception of the products mentioned above.
This surcharge was a temporary measure to increase tax revenue in order to achieve a budgetarysurplus of 1% of GDP agreed to with the International Monetary Fund in late 1997.  The surcharge
was abolished in August 1999, as part of the Go vernment's package of measures to encourage
investment, which also included autonomous reductions  on over 600 tariff lines, covering inputs used
by Thailand's main industries.  As can be seen from Table III.1, this latest batch of tariff reductions,
together with the elimination of the surcharge, lowered Thailand's average applied tariff to 18.4%, andto 17.1% for WTO Members.  Overall, these tariff charges have caused substantial fluctuations and
unpredictability in conditions facing importers and producers of a vast array of products (Chart III.2).
                                                     
4 The first, published in 1998, contains Thailand's statutory rates and is available in Thai and English.
The others, available exclusively in the Thai language contain:  AFTA rates applied to ASEAN suppliers;changes in applied rates relative to the statutory rates;  changes in AFTA rates;  and WTO tariff bindings.WT/TPR/S/63 Trade Policy Review
Page 38
020406080100
1994 1995 May 1996 Jun. 1996 Oct. 1997 1998 July 1999 Sept. 1999Chart III.2
Evolution of applied tariffs on selected products, 1994-1999
Source : Government of Thailand.Per cent
Eye glassesShoesSuitsMotor vehicles
18. Notwithstanding these fluctuations, tariffs have declined substantially on average in industry
since 1995, whereas tariffs on agricultural products have barely changed (Chart III.3).  The latest
round of tariff cuts also covers mostly industrial products, leaving agricultural tariff protectionunchanged (Table III.1).
19. Applied tariffs in September 1999 ranged from zero to 242% (out-of-quota duty on raw silk),
with a simple average of 18.4%, down from 23% in 1995.  A standard deviation of 18% reveals a
rather large dispersion little changed since 1995:  about half of the tariff lines bear duties of at most
15% Chart III.4;  however, 7.8% of lines (over 400 lin es) exceed 50%.  These tariff peaks protect the
meat and dairy sectors, fruit and vegetable processing, as well as sugar, alcoholic beverages tobacco,
clothing, and motor vehicles production (Table AIII.1).  These statistics do not take into account the
extensive use of tariff concessions in connection with investment incentive schemes (see below).
20. In 1999, specific rates were applied to 67 tariffs lines (approximately 1% of total lines),
concentrated most heavily in grains, edible oils, sugar, and petroleum products.  The authorities haveprovided ad valorem  equivalents for some 46 tariff items subject to specific rates.  These ad valorem
equivalents, defined as the ratio of collected customs duties to the value of imports, have been used in
the overall tariff calculations presented here, although they tend to underestimate ad valorem
equivalents.  A further 1,213 tariff lines, equivalent to 20% of total lines, are subject to alternative
tariffs, i.e. the higher of a given ad valorem  or specific rate.  In the calculations presented in this
report, the ad valorem  component of these duties has been used as a proxy for the duty actually
levied.  Given the recent depreciation of the Thai baht, it is likely that ad valorem  rates are the rates
actually levied, and that the ad valorem  component, therefore, provides a realistic estimate of actual
tariff levels.  Nevertheless, the relatively widespread use of non- ad valorem  tariffs reduces
transparency and predictability, and may be a source of economic distortion.Thailand WT/TPR/S/63
Page 39
0102030405060
Total Agriculture (HS 01-24) Industry (HS 25-97)Chart III.3
Applied tariff average 1991, 1995 and 1999
Per cent
Source : Government of Thailand.1991
1995
1999 
0.05.010.015.020.025.030.0
Duty
Free0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 >50Chart III.4
MFN tariff distribution, September 1999
Per cent
Source : Government of Thailand.WT/TPR/S/63 Trade Policy Review
Page 40
21. As noted in the 1995 Trade Policy Review, the tariff reform introduced that year was intended
to follow the "value-added escalation principle":  that is, zero or low tariffs for medical equipment,
fertilizer, raw materials, electronic components, and vehicles for international transportation;  5% for
primary products and capital goods;  10% for intermediate products;  and 20% or above for final
products and products requiring "special protection".  The extent of tariff escalation grew with the
tariff increases of 1997-98, including the 10% surcharge on tariffs of 5% or more.  In contrast, the1999 package of tariff reductions to encourage investment, in fact reduced tariff escalation, mainly
because the surcharge was eliminated and several of the highest rates were reduced.  The Thai tariff
even exhibits a certain degree of negative escalation, notably in the food industries (Chart III.5).  The
fact that export industries, in contrast, are less affected by higher tariffs on inputs than on output
because of the tariff concessions on inputs, is itself an incentive to export.
(c) Import surcharges and special duties
22. As noted until 10 August 1999, a 10% surcharge applied to all imports bearing duties of 5%
or more (except motor vehicles and a few other items), but was abolished by the Cabinet as part of the
package of measures to encourage investment.  Currently, certain product-specific surcharges
continue to be imposed by Thailand (Table III.3).  The stated objective of these surcharges is themaintenance of price levels for domestic producers.  Since the last Review, the surcharges on imports
of wheat and certain steel products have been abolished.
Table III.3
Products subject to import surcharges or special duties, 1999(Per cent and Baht)
Commodity Rate Rationale Measures and conditions
MFN imports
Most imports with tariffs > 5% 10% Budget revenue
generationAbolished in August 1999
Fish-meal with protein 60% and
aboveB2,400 per tonne To maintain the local
price level.Automatic licensing.  Importers must pay the special fee
and have a payment certificate for each importation.
Corn for animal feed B180 per tonne " Tariff-quota licensing.  On above-quota imports.
Non-MFN imports (imposed in addition to MFN surcharges)
Soybean cake B2,519 per tonne To maintain the local
price level.Automatic licensing.  Importers must pay the special fee
and have a payment certificate for each importation.
Corn for animal feed B1,000 per tonne " "
Source: Data provided by the Thai authorities.
23. Under Section 49 of the Investme nt Promotion Act (1977), the Bo ard of Investment (BOI) has
the power to impose import surcharges, in order to protect industries receiving investment incentives
against alleged dumping or an "inappropriate" tariff structure (e.g. when tariffs on raw materials are
higher than those on finished products).  Surcharg es cannot exceed 50% of the import price of the
goods concerned, and are initially limited to a one-year period with the possibility of renewal.  The
BOI has used this power during the period under review.  According to the authorities, such
surcharges apply to "very few" products on the grounds that "these products faced tariff structure
anomalies".  The surcharges were removed when the tariff was restructured.Thailand WT/TPR/S/63
Page 41
0102030405060Chart III.5
Tariff escalation by ISIC 2 digit, September 1999
Per cent
Source : Government of Thailand.Raw material
Semi manufactured
Fully processed
(d) Tariff quotas
24. Thailand does not impose any tariff quotas othe r than those relating to the 23 agricultural
product groups subject to tariffication under the WTO Agreement on Agriculture (Chapter IV(2)).  In
addition, a surcharge on corn for animal feed (see above) is levied on MFN out-of-quota imports.
Tariff quotas do not apply to imports from ASEAN countries, which may in principle supply
unlimited quantities at preferential AFTA rates, unless they are excluded from the AFTA scheme;
this is for example the case of palm oil.  As of 1 January 2000, all products are in principle to be
included into the AFTA scheme, with maximum duties of 20%.  ASEAN suppliers will therefore havesubstantial market access privileges relative to MFN suppliers for products subject to high
out-of-quota duties.
(e) Duty concessions and exemptions
25. Thailand continues to rely extensively on border tax exemptions to encourage investment in
remote areas and production for export.
5  The granting of these concessions is generally the
responsibility of the Board of Investment (BOI) but the concessions are also offered by export
processing or industrial zones (see below).
                                                     
5 GATT (1991).WT/TPR/S/63 Trade Policy Review
Page 42
Board of Investment provisions
26. Investment in projects that result in the exportation of at least 80% of output or that are
located in specified industrial zones are entitled to duty-free (and VAT-free) imports of machinery.  In
1998, the revenues forgone as a consequence of this concession totalled B 12 billion.  Further, all
imported raw and essential materials used in the manufacture of exports are duty free;  revenue losses
from this measure amounted to B 60 billion in 1998.  The figures for 1997 amounted to nearly half oftotal customs revenue.
27. Projects located in the most remote ("zone 3") areas, are entitled to duty-free (and VAT-free)
imports of machinery irrespective of the share of exports in output;  and to a 75% reduction (for five
years from the start of operations) in import duties on raw and essential materials used in production
for domestic sales;  however, concessions for these materials are available only if the materials cannotbe produced domestically in sufficient quantity or quality.  These exemptions resulted in revenue
losses of B 418 million in 1998.
Duty exemptions for production in export processing zones
28. The policy on Export Processing Zones, under the responsibility of the Industrial Estate
Authority of Thailand, is designed to group export-oriented manufacturing in one place for processingand merchandising.  The zones provide:  exemptions from import duty and VAT on all imports for
factory construction as well as all raw materials used in the production process and from export taxes
and VAT on exported goods;  firms located in EPZs may supply the local market, but their sales are
then subject to import duty excise tax and VAT.  Non-tax incentives include permission for foreign
investors to own land for carrying out promoted activ ities;  permission to bring in foreign technicians
and experts to work on promoted projects;  and permission to remit foreign currency.
6  Currently, the
main exports out of Thailand's five main EPZs are computers and parts, other electronic products andparts, plastic products, sports goods, and rubber products.  Exports from EPZs accounted for
approximately 7% of total merchandise exports in 1998.
Bonded warehouse and other provisions for tariff refunds
29. Goods may be imported into a bonded warehouse without payment of import tariffs when the
materials are used as an input in products destined for export or are themselves re-exported;  theobjective is to facilitate customs procedures for producers of exported goods.  Exporters can also
choose to use the duty drawback scheme administer ed by the Customs Department in order to import
inputs duty free for export production.
End-use provisions
30. Some end-use provisions remain in Thailand's tariff, whereby the tariff on an item varies
according to the use made of the product.  For example, a set of completely knocked down (CKD)
components for local assembly of motor vehicles  (HS 8703.22.9) is subject to a 20% tariff, but a
customs duty of 80% is levied on the completely built-up (CBU) unit of the same tariff item.  It has
not been possible to obtain the list of tariff items subject to end-use provisions;  these however, appear
to be relatively frequent, providing assistance to such sectors as printing ink, paint, rolling stock,
                                                     
6 These measures, while generally granted in practice, are guaranteed under the legislation covering
EPZs, but not otherwise.Thailand WT/TPR/S/63
Page 43
motor vehicles, cosmetics, perfumes, and the electronics and canning industries.7  The Governm ent
has initiated a review of the tariff with a view to eliminating such tariff provisions by the end of 1999.
(f) Regional and bilateral tariff preferences
31. Thailand grants tariff preferences to members of the Association of South-East Asian Nations,
under an agreement for the progressive establishment of an ASEAN Free-Trade Area by 2002.8  As
noted in Chapter II(3), in December 1998, the si x original signatories of the Common Effective
Preferential Tariff (CEPT) committed themselves to binding at least 85% of their tariff lines at rates
not exceeding 5% by 2000, which would account for 90% of ASEAN trade (Table III.4).  These
preferences are granted on a reciprocal basis.
Table III.4
Thailand's commitments under the AFTA, 2000
Description HS code Tariff rate (per cent)
1. 85% of tariff lines 0-5%
2. 15% of tariff lines 5-20%
of which:
Temporary Exclusion List:
Crude oils 1507.10.000, 1507.90.010, 1511.10.000, 1511.90.011,
1513.11.000,1513.19.011, 1513.19.019, 1513.19.02020
Beer 2203.00.000 20
Brandy, whisky 2208.20.010, 2208.30.000 20
Unmanufactured tobacco 2401.10.009, 2401.20.004 20
Cigars, and other
manufactured tobacco2402.90.010, 2403.91.000, 2403.99.001 20
Electric lamps 8539.39.101, 8539.39.201, 8539.39.301 20
Diesel engines 8702.10.111, 8702.10.911 10
Motor cars 8703.90.019, 8703.90.021, 8703.90.029, 8703.90.091,
8703.90.09920
except:
Sensitive List:
Cut flowers 0603.10.000 60
Potatoes 0701.10.000, 0701.90.000 60
Coffee 0901.11.000, 0901.12.000, 0901.30.000 60
Copra 1203.00.000 60
Source: Data provided by the authorities.
32. The average AFTA preferential rate extended by Thailand was about 19% in 1995, compared
with an MFN average of 23%.  In 1999, the AFTA rate was 9.8%, half the average applied MFN rateof 18.4%.  Under Thailand's commitments, the average AFTA, rate should not exceed 7.3% in 2000.
Some 37 items (down from 183 in 1994) are spec ified on the Temporary Exclusion List excluded
from the scheme until January 2000 at the latest.  By then, tariffs on these items must be reduced to at
most 20%.  This will provide substantial market access privileges to ASEAN suppliers as some of the
products are subject to tariff quotas in MFN trade (e.g. vegetable oils, potatoes).  Another seven tariff
                                                     
7 A list of end-use provisions, in Thai, is contained in the Book from Customs.  It has not been possible
to obtain a translation of the relevant pages or a complete description of all products subject to end-useprovisions.
8 ASEAN members consist of six original member s (Brunei, Indonesia, Malaysia, the Philippines,
Singapore, and Thailand) as well as Myanmar, Viet Nam, Laos and, since 1999, Cambodia.WT/TPR/S/63 Trade Policy Review
Page 44
lines are included in a Sensitive List and are to be included in the scheme by January 2001 at the latest
(Table III.4).
33. Since November 1996, tariff preferences, as well as non-tariff privileges and incentives, are
being offered under the ASEAN Industrial Coopera tion scheme (AICO) to encourage companies
located in different ASEAN countries to cooperate in resource sharing and industrial cooperation.
Participating companies may receive preferential tariff rates of 0-5%, to be determined by eachASEAN member.  AICO will be gradually repl acing the ASEAN Industrial Joint Venture and
Brand-to-Brand Complementation schemes, which were introduced in 1983 and 1988 respectively in
order to create benefits from economies of scale.  Privileges under existing projects will cease when
the final CEPT rate applies.
(g) Global System of Trade Preferences (GSTP)
34. Under the Global System of Trade Preferences (GSTP), Thailand provides preferential
margins of 10 to 20% on 11 product items to members of the GSTP Agreement.
9  The margins of
preference have not changed since 1995.  In 1997, some B 378 million, or 6.3% of imports of eligible
goods, entered Thailand from some 15 countries under GSTP preferences.
(h) Rules of origin
35. Thailand does not have specific laws, judicial decisions or administrative rulings of general
application relating to non-preferential rules of origin.10  This may constitute a problem given that
import duties differ considerably between WTO members and non-members (see above) and that a
certificate of origin is required to obtain MFN tr eatment.  Preferential rules of origin regarding the
GSTP are specified in Annex II of the GSTP Agreement.  Imports from ASEAN countries are subject
to the rules of origin for the ASEAN CEPT Scheme.
36. A certificate of origin is also required for GSTP or ASEAN preferential imports.  ASEAN
member countries agreed that "substantial transformation" should be used as the criteria in
determining product origin for ASEAN textiles and textile products.11  Previous regulations stated that
products are regarded to be of ASEAN origin if they are wholly obtained in the ASEAN region or if at
least 40% originated from one or more ASEAN member states.
(ii) Recent developments in customs procedures
37. Since 1997, the authorities have initiated a customs modernization reform programme
designed to simplify procedures and expedite customs clearance.  These procedures had been
described in the past as barriers to trade because of excessive red tape and considerable interpretation
in the calculation of import duties and customs clearance fees, particularly with respect to the
valuation of goods.12  Among recent improvements, the eight steps of the "Long Room System" have
been reduced to two, with new categories of cust oms brokers and importers introduced to "eliminate
the barriers and difficulties to importers, exporters and customs brokers".  The transparency and
simplicity of procedures is also expected to im prove considerably both with the computerization of
                                                     
9 Products are rum and rafia, radial and other tyre s, wool yarn, plain weave cotton fabrics, tubes and
pipes of cast iron, aluminium plates, pumps for liquids, and electric motors and generators
(WTO, 1995, Table IV.3).
10 WTO document G/RO/N/1/Add. 1, 22 June 1995.
11 A textile or textile product will be considered to have undergone substantial transformation if it
meets manufacturing processes identified on a specified "Single list".
12 See for example European Commission (1999);  and USTR (1999).Thailand WT/TPR/S/63
Page 45
most customs procedures during 1999, and following the entry into force of the WTO Agreement on
Customs Valuation in January 2000.
38. Thailand intends to ratify both the International Convention on the Simplification and
Harmonization of Customs Procedures (Kyoto Convention) and the International Convention on the
Harmonization of Frontier Controls on Goods.  Implementing legislation, however, has not yet been
presented to Parliament because the Kyoto Convention is still under review by the World CustomsOrganization.
(a) Registration
39. Importers do not need to be registered in order to undertake importation.  However, since
1997, the Customs Department has entered into guarantee and bond contracts with "categorized"
importers, exporters, and brokers, defined as "special-grade" or "good-grade" depending on theamounts of bank guarantees lodged with the Cust oms Department.  These registered operators are
exempt from checks on valuation, tariff classification, and tax calculation during the formality
process, and are subject to lower fees for physical inspection.  Qualifications to become a categorized
importer include being a legal person and a public company or a member of the Federation of
Thai Industries or the Thai Chamber of Commerce;  having paid-up registered capital of not less thanB 5 million;  being engaged in the import business for not less than two years;  and not having been
convicted of customs-related offences within a year prior to application.  At present, approximately
5% of import entries take place under the new system.
40. Approved ("special-grade" and "good-grade") customs brokers are allowed to take their
customers' goods out of custody without having to submit to tariff and value verification.  In addition,
special-grade customs brokers are entitled to expedited payment of drawback and other compensation,
an important advantage given the high import content of domestic manufacturing production,particularly for exports.  There are currently 65 special and 12 good-grade customs brokers.
(b) Customs inspection and valuation procedures
41. In the recently shortened Long Room System, imports pass first through the Customs
Formality Unit, where they are inspected prior to entering the Customs Valuation Unit.  Inspection
covers the nature of the goods and the HS number declared by the importer.  Imports undertaken byregistered importers or brokers are exempt from this inspection and subject instead to the post-review
system (see (a) above);  this may imply an element of discrimination, although spot-checks can take
place under the post-review system after the goods are released by Customs.  Government agencies,
state enterprises or companies granted duty exemptions by the Board of Investment (BOI) are treated
as special-grade and good-grade importers.
42. A considerable element of uncertainty persists in the fact that Customs continues to have the
authority to specify the import price on which the customs duty is levied.  Specifically, if the official
in the Customs Valuation Unit decides to reject th e market value notified by the importer, the official
may instead determine this market value as the highest price of the last 30 days at the same port of
entry.  According to the authorities, approximately 20% of all import entries are rejected for valuation
purposes, and therefore subject to "uplift".
43. Legislation to implement the WTO Agreement on Customs Valuation will bring major
changes in the operations of Customs, with a shift from pre-clearance inspection procedures to a
post-clearance verification process.  In this process, checks will be possible up to 15 days after
clearance, and customs officials will be able to inspect an importer's premises.  ImplementingWT/TPR/S/63 Trade Policy Review
Page 46
legislation has not yet been passed by Parliament, although the authorities are confident that the
Agreement will enter into force in January 2000.
44. Despite the nature of the current system, the authorities reported no more than 15 appeals
per month in 1998, of which approximately 7% were  upheld.  The Customs Department explains the
low number of claims by the "clear guidelines for calculating the price of goods which are widely
accepted by importers", and by the need for importers to submit numerous documents to substantiatetheir claims.  In late 1998, a Special Task Force on Resolving Complaints was established to
"suppress and prevent offences, create transparency and build integrity".
13
45. New customs procedures have also been introduced to facilitate imports for the production of
exports.  These procedures allow for special customs channels for duty drawback and other tax relief
claims on imports of raw materials for production, mixing, assembly or packing for re-export underSection 19 bis of the Customs Act.  Imports approved by  the Board of Investment or destined for
export processing zones may also be cleared through these accelerated procedures.
46. At the time of the last Review of Thailand, the authorities had planned the implementation of
the UNCTAD ASYCUDA system for the computerization of customs procedures. However, a
semi-public company, Tradesiam, has been entrusted to operate the national electronic datainterchange (EDI) based on the standards of the United Nations Electronic Data Interchange for
Administration, Commerce and Transport (UN/EDIFACT).
14  The system was expected to be
operational for exports in July 1999 and for imports in September 1999.  Traders would be able to
send import and export declarations, manifests, and airway bills using UN/EDIFACT Version 95B,
and Version 96B to transmit the invoice.  The auth orities expect the EDI system to reduce the volume
of paperwork, and to harmonize and simplify cust oms procedures considerably.  According to the
authorities, the EDI system will also reduce problems regarding corruption, smuggling, and customsfraud.
(iii) Import restrictions and controls
47. Since the 1995 Review, the authorities have move d further away from quantitative restrictions
as a form of protection, although a number of these import restrictions remain for economic purposes.
No new products have been made subject to import licensing since 1995.  Non-automatic importlicensing continues to protect industries manufacturing certain silk products, certain buses,
motorcycles, and building stones, as well as the 23 agricultural and agri-food products contained in
Thailand's WTO tariffication exercise.  Infant industry protection has been the main objective behind
import restrictions since the 1970s;  in the case of natural fibre (gunny) bags, protection has now been
accorded for over 30 years, and for ceramics, building items, and certain types of machinery andequipment, almost two decades.
(a) Import prohibitions
48. The legislative authority for prohibiting imports is provided by the Export and Import Act
B.E. 2522 (1979).  Under the Investment Promotion Ac t, the Board of Investment is authorized to
request the Ministry of Commerce to ban imports of  goods produced by a domestic industry, if the
Board is of the view that other forms of protection are not sufficient to assist the industry;  according
to the authorities, the BOI has never exercised this power.  Imports may also be prohibited under the
various pieces of legislation in place for health and safety reasons (see below).  Under the Export and
Import Act, the Minister of Commerce, with the approval of the Cabinet, may restrict imports for
                                                     
13 Customs Department of Thailand (1998).
14 Information from Thai on Tradesiam [Online].  Available at:  http:/www.tradesiam.com.Thailand WT/TPR/S/63
Page 47
reasons such as economic stability, public interest, public health, national security, peace and order,
morals, or for any other national interest.  Imports may be "absolutely" or "conditionally" prohibited;
in the latter case, they are allowed if certain specified conditions are satisfied.
49. Imports of diamonds from Angola are currently absolutely prohibited in conformity with the
resolution of the United Nations Security Council.  Imports of counterfeit products and the equipment
for their manufacture are also banned to protect trade marks, patents, and copyright, and to preventdeceptive practices.
50. Household refrigerators using CFC in the production process, are under an absolute import
prohibition for public health reasons.  Domestic production of household refrigerators using CFC is
also banned.  Import of electrical or mechanically operated gaming machines are under absolute
prohibition for reasons of public morals.  Since October 1997, however, imports of parts used asinputs for these machines may take place with the a pproval of the Cabinet or the Board of Investment,
but only for export production.
(b) Import licensing
51. Thailand's Export and Import Act provides for automatic and non-automatic licensing, under
the authority of the Department of Foreign Trade at the Ministry of Commerce (Box III.1).  Licences
are generally allocated on a first-come-first-served basis, with exceptions for certain agri-food
products.  A licensee is free to import from any country of origin even in the case of agri-food
products subject to tariff quota;  Thailand has not specified "country reserves" in the WTO Agreement
on Agriculture.
Box III.1:  Licensing
Import licences must be requested from and approved by the Department of Foreign Trade prior to the
arrival of the shipment.  Any change in the product coverage or conditions for granting import licences isnotified in the Government Gazette , and is reported in the Quarterly Bulletin  of the Bank of Thailand.
Changes in licensing regulations are made available to interested parties through announcements of theDepartment.  These announcements are published in the Government Gazette  and/or in the national
newspaper, and are broadcast on national radio.
Licences must be obtained before the arrival of shipment and are generally valid for 90 days, unless
otherwise specified on the licence.  A 15% tolerance in value over that stated on the licence is usuallypermitted for bulk goods.  The licence can be extended twice, each time for a period of 90 days.
Under normal circumstances, an import licence may be granted within one to three days.  For imports of
restricted products, approval of another Ministry may be required, and licences may take between one week
and one month to obtain.  Documentation requiremen ts vary according to the product involved.  These
include the name and address of the importer, business of importer, name and address of exporter orshipper, country of origin form, means of transport, description and amount of goods to be imported,pro forma invoice, sales contract, certificate of import permit, and document approved from industry.  Insome cases, the Government may stipulate some additional conditions for those importing under licence.
Source:   Government of Thailand.
52. Non-automatic licensing is used to prevent importation of a number of products in order to
protect farmers' income or the domestic industry (Table III.5).  State enterprises or government
institutions may apply for import licences for these products, however.WT/TPR/S/63 Trade Policy Review
Page 48
Table III.5
Selected products subject to import licensing in Thailand, 1999
Commodity Rationale Measures and conditions
Agricultural products
Fish meal with protein content less than
60%To help local fishermen sell their
products at a reasonable priceNAL, importation is not generally allowed.
Gunny bag (all types) woven of jute or
kenafTo protect local industry NAL, importation is not generally allowed.
Jute and kenaf To secure farmers' income NAL, imports permitted for use as raw material in
manufacturing.
Non-agricultural products
Marble, travertine, ecaussine and othercalcarious monumental, building stone
and alabasterIndustry protection NAL, import allowed only to use as raw material by the
sole factory.
Worked monumental or building stone,
and articles thereofIndustry protection NAL, except by the factory or by government agencies.
Six-wheeled buses, seating over 30 Industry protection NAL, except for government use and other defined
conditions.
Silk yarn Industry protection Imports are allowed when local content conditions are met.
Used motor vehicles Public health Imports by public sector only, or for temporary entry for
re-export.
Used six-wheeled buses, over 30 seats " "
Used motorcycles " "
Used diesel engines with displacement
of 331-1,100 cc" NAL, except in case of domestic shortage.
Electrical and mechanical operated
gamesPublic morals Prohibited, except with the approval of the Board of
Investment.
Note: NAL = Non-automatic licensing.
Source: Information provided by the Thai authorities.
53. Non-automatic licensing also applies for public health or environmental reasons to imports of
ceramic food containers coated with lead, to clenbuterol compounds, and to plastic waste, parings,
and scrap used motor vehicles, used motorcycles, and used diesel engines.  In addition, non-automaticlicensing applies for other reasons (financial security, protection against counterfeiting, protection of
art) to imports of gold, coins, and antiques;  imports of silk garments are also under non-automatic
licensing to protect the domestic industry and to ensure that local-content requirements are met.  The
automatic licensing system currently applies only  to intaglio printing machines, and machinery to
produce tapes, videos, and compact discs (to prevent bank note and other counterfeiting).
(c) Actions in the WTO Committee on Import Licensing
54. Pursuant to footnote 5 to Article 2.2 of  the WTO Agreement on Import Licensing, the
authorities notified the Committee that Thailand, as a developing country Member, would delay the
application of these provisions by two years from the date of entry into force of the Agreement
(January 1995).  Thailand has not notified its relevant licensing legislation or provided replies to the
Import Licensing Questionnaire under Articles 1.4(a), 8.2(b) and 7.3 of the Agreement.Thailand WT/TPR/S/63
Page 49
(iv) Trade defence measures
(a) Safeguards
55. On 10 June 1999, the Ministry of Commerce issued the Notification on Safeguard Measures
B.E. 2542, under the provision of Article 5 of the Export and Import Act.  The Notification is the legal
basis for safeguard measures;  according to th e authorities, it is in compliance with the
WTO Agreement on Safeguards.  As of September 1999, there were no safeguard measures in placeor investigations in process.
56. No voluntary export restraints have been taken vis-à-vis WTO Members since the last known
measure, on manioc (cassava) to the EU, expired in 1995.  The export tax on ball bearings to prevent
CVD action in the EU expired in 1998.  Thailand has agreed to an export quota on exports of
passenger cars to Chinese Taipei (section (3)(ii)).
(b) Anti-dumping duty actions
57. In July 1999, Thailand maintained anti-dumping duties on three products from four
WTO Members (Table III.6);  another two were levied on products imported from non-members.  The
anti-dumping duties range from 14% to 46% of the value of imports.  No countervailing measures are
in place.
Table III.6
Anti-dumping measures, as at 31 December 1998
Country/customs territory Product Date of imposition Definitive duty rate in force
India Hydrogen peroxide 08/11/1994 30% (f.o.b.)
Russia Hot-rolled steel sheets in coils 26/05/1997 25-33%
Ukraine Hot-rolled steel sheets in coils 26/05/1997 46%
Poland H-section 27/05/1997 28% (c.i.f.)
Indonesia Float glass 24/04/1998 14-19% (c.i.f.)
Republic of Korea H-section 24/04/1998 32-45% (c.i.f.)
Source: WTO document G/ADP/N/47/THA, 14 April 1999;  and Government of Thailand.
(c) Anti-dumping and countervailing duty regulations
58. In 1995, the Minister of Commerce, by virtue of the Export and Import Act, and with the
approval of the Cabinet, enacted the Notification of the Ministry of Commerce on the Imposition of
Anti-Dumping and Countervailing Duties.  This notification attracted numerous questions and
comments from WTO Members.  Subsequently, a new Notification of the Ministry of Commerce on
the Imposition of Anti-Dumping and Countervailing Duties B.E. 2539 ("the new Notification") cameinto force on 14 September 1996.
15  The legal status of the new Notification was a major issue of
concern for WTO Members.  Moreover, several WTO Members have pointed out that the new
Notification was silent on many of the specific requirements contained in the Agreements (Box III.2).
A new Anti-Dumping and Countervailing Act became effective in July 1999, providing the legal basis
for anti-dumping and countervailing measures.  Acco rding to the authorities, the new Act is in full
compliance with the WTO Agreement on the Implementation of Article VI of the General Agreement
on Tariffs and Trade 1994 (the Anti-Dumping Agreement).  The new Act was not available in English
at the time of writing this report.
                                                     
15 G/ADP/N/1/THA/3, G/SCM/N/1/THA/3, 13 January 1997.WT/TPR/S/63 Trade Policy Review
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Box III.2:  The 1996 Notification on the imposition of anti-dumping and countervailing duties
Several provisions of the Agreement were not featured in the 1996 Notification;  similarly, several
provisions of the Notification contained rules and pr ocedures to be prescribed by the Department of
Foreign Trade, which had not been issued when the new Anti-Dumping and Countervailing Act came intoforce in July 1999.  These gaps had been described by WTO Members as potentially leaving ample roomfor arbitrary interpretation.  Issues raised related in particular to start-up  costs (Article 2.2.1);
administrative, selling and general costs (Article 2.2.2) ;  exchange rates used (Article 2.4.1);  confidential
information (Article 6.5);  procedures for on-site verification (Article 6.7 and Annex I);  refund procedures(Article 9.3.2);  procedures regarding use of best information available (Annex II);  sampling;  andde minimis  margins and negligible volume.  For example, Article 9.3 of the Notification indicated that the
terms de minimis  in respect of the margin of dumping and "negligible" in respect of the volume of dumped
goods were prescribed by the Department of Foreign Trade, but no indication was given as to how the
prescribed values were to be calculated.
The independence of the body assessing injury was another cause for concern.  In anti-dumping
proceedings, the Department of Foreign Trade at the Ministry of Commerce was responsible for conducting
dumping investigations, while the Department of Internal Trade in the same Ministry conducted injuryinvestigations.
WTO Members have stated that Thailand's 1996 Notification did not provide for domestic judicial review
of anti-dumping decisions (Article 13 of the Anti-Dumping Agreement) or of countervailing duty decisions(Article 23 of the WTO Agreement on Subsidies and Countervailing Measures) or for the incorporation ofsuch reviews into individual anti-dumping investigations.  In response, the authorities have indicated thatthe International Trade Court has jurisdiction over civil cases regarding dumping and subsidization.Finally, the Notification was silent on the procedures to follow in order to implement the decision of a
WTO Dispute Settlement Body should such circumstances arise.
In July 1999, the Notification was replaced by the Anti-Dumping and Countervailing Duty Act of 1999.
The text of this Act was not available in English at the time of completion of this Review.
Source:   WTO Secretariat.
(3) DEVELOPMENTS IN EXPORT POLICY
59. Over the past two years the policy of promoting exports has been given more emphasis in the
hope of achieving an export-led recovery.  Nonetheless, the authorities have continued to adapt
existing export measures to the requirements of the WTO Agreements.  In particular, specialprivileges for export-oriented investment projects have been reduced;  and certain export quotas have
been terminated.  Meanwhile, in the wake of the financial crisis, several other assistance mechanisms
have been reinforced, with particular emphasis on export finance.
(i) Registration and documentation procedures
60. As noted in the previous Review of Thailand, a number of exports require registration with
the Department of Foreign Trade of the Ministry of Commerce.  Registration is in place for quality,
price monitoring, and food security purposes, as well as to meet quantitative restrictions in the case of
textiles and clothing.  According to the authorities, one additional purpose of registration is to avoid
price undercutting among exporters.  Recently, the recovery in export prices has reportedly made it
possible to terminate export registration requirements for frozen foods and canned products.  Coffee isalso subject to registration requirements under the International Coffee Agreement.  Such
requirements remain in place on exports of textiles and clothing, tapioca, rice, and longans.Thailand WT/TPR/S/63
Page 51
61. Since 1997 Customs has made special efforts to expedite the customs clearance process, with
particular emphasis on exports (section (2)(ii) above).16  In particular, documentation requirements
have been reduced:  since 1996 exporters are no longer required to obtain a Certificate of Exportation
from an authorized bank;  this certificate was required by the Customs Department to clear the goods
for export.  An exporter identification card, issued by the Customs Department, is still required as part
of customs procedures.
(ii) Export prohibitions, quotas and charges
(a) Export licensing
62. As is the case for imports, licensing is used to administer quotas, conditional prohibitions, and
absolute prohibitions.17  These measures are in place for economic, quality, health and safety
purposes, as well as to implement arrangements with trading partners, concerning notably textiles andclothing, motor vehicles, and certain agricultural products (Table III.7).  The 1992 bilateral voluntary
export restraint with the European Union on tapioca products was incorporated into the framework of
the WTO Agreement on Agriculture:  exports of tapioca products may enter the EU at a tariff quota
rate of 6% provided that annual exports do not exceed 5.5 million tonnes and that total exports during
the four years from 1995 to 1999 do not exceed 21 million tonnes.
Table III.7
Products subject to export licensing, 1999
Product Measure Purpose
1. Exports licensed for economic reasons
Live bovine animals Non-automatic licensing Prevention of domestic shortages
Longans, fresh, durians Automatic licensing by Customs SPS, export regulation
Canned tuna, canned pineapple and
concentrated pineapple juiceAutomatic licensing Exporters must be members of the Thai
Food Processors Association
Pearls Non-automatic licensing Prevention of domestic shortages
Shrimps and other seafood, fresh or
frozenAutomatic licensing Exported products must have health
certificates according to requirements of
the importing nation
Coffee and products Automatic licensing Compliance with International Coffee
Agreement
Tapioca Export quota (EU) Bilateral agreement provisions
Tapioca pellets and chips Automatic licensing (non-EU countries) Product quality assurance
Sugar Automatic licensing Compliance with International Sugar
Organization Agreement
Jute and kenaf seeds Non-automatic licensing Prevent domestic shortages
Soybean cake Non-automatic licensing Prevent domestic shortages
Fertilizers (excluding chemical fertilizers) Prohibition unless approved by the
National Energy AdministrationPrevent domestic shortages
Textiles and clothing Export quota (EU, US, Canada, Norway) Bilateral agreement provisions
Gold Non-automatic licensing under conditions
approved by the Ministry of FinanceNational financial security
Table III.7 (cont'd)
                                                     
16 Customs Department of Thailand (1998).
17 Exports of all types of arms to the Federal Republic of Yugoslavia are banned, in accordance with
the UN Security Council Resolution.WT/TPR/S/63 Trade Policy Review
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Product Measure Purpose
2. Exports licensed for environmental and other reasons
Wood and articles of wood, rattan Non-automatic licensing Forest conservation
Wood charcoal Non-automatic licensing Forest conservation
Coal, all types except briquette from
Hongai anthracite coalProhibition unless approved by the
National Energy AdministrationConservation of natural resources
Elephants Non-automatic licensing Animal conservation
Black tiger shrimp, live Export permission To preserve the original species
Ornamental fish Export permission Animal conservation
Rare sea animals Export permission Animal conservation
Horses, mules and donkeys Non-automatic licensing Animal conservation
Tree shrews " Conservation of rare animal species
Wild animals (277 kinds) " Animal conservation
Wild animal carcasses (292 kinds) " Animal conservation
Coral " Conservation of seacoast and deep-sea
Geomyda spinosa " Animal conservation
Sacred and buddha images Prohibition except for new replicas To protect national treasures
Goods by deceptive practice Ban on exports Intellectual property rights
Copyright-infringing cassette tapes, CDs,
videos, software and booksBan on exports To protect patents and copyrights
Natural sand Ban on exports Conservation of exhaustible resources
Minerals composed with natural sand Prohibition unless approved by the
Department of Mineral ResourcesConservation of exhaustible resources
Fuel oil and products thereof exported
through customs border of the eastern
provincesExport restrictions Conformity with UN resolution
Products under certification, with the
originating countries, not to re-export to
third countriesNon-automatic licensing Conformity with bilateral agreements
All products to Yugoslavia (Serbia and
Montenegro)Prohibition Conformity with UN resolution
Source: Government of Thailand.
63. In conformity with a bilateral agreement between the two countries, a quota of 4,000 cars is in
place for exports to Chinese Taipei since 1998;  the agreement provides for a 10% annual increase in
the quota.  The authorities are of the view that this measure would have to be made GATT-consistent
in the event of Chinese Taipei's accession to the WTO.  Three kinds of textile and clothing export
quotas are in place (Chapter IV(4)).
(b) Export charges
64. As is the case for import duties, export taxes in Thailand consist of statutory rates, stipulated
in Part III of the Customs Tariff, and applied rates (Table III.8).  The level of applied export taxes
continued to be very low over the period under review, and their contribution to government revenue
almost negligible.  Developments since the last Review include the termination of the export
surcharge on ball bearings to the EU, which had been applied for the purpose of preventingcountervailing duties in the EU.  The persistence of relatively high statutory export taxes,
nevertheless, leaves an element of uncertainty in Thailand's trade regime, as statutory export taxes onThailand WT/TPR/S/63
Page 53
important products such as rice or rubber could in principle be reintroduced without the need for
legislative approval.18
Table III.8
Applied export duties and surcharges in Thailand, 1999
Commodity Rate
Hides of bovine animals
Raw hides B 5 per kg.
Other B 4 per kg.
Parings, waste and dust for use in the production of leather B 4 per kg.
Wood, sawn wood and articles made of wood B 4 per kg.
Wood and sawn wood, of genus Hevea 3%
Bamboo-stalk and wood of coconut trees 5%
Veneers 10%
Memo item
Ball bearing exports to the European Union B 0.31 per unit (terminated 7 July 1998)
Source: Government of Thailand.
(iii) Export assistance
65. The 1997 financial crisis resulted in the closure of a large number of banks and finance
companies.  The remaining commercial banks adopted more cautious lending policies at a time whenforeign banks were reportedly also reducing their cr edit lines to Thai companies.  In a survey by the
World Bank and the Thai authorities in the last quarter of 1997 and the first quarter of 1998, access to
finance was noted as a bottleneck more often in 1998 than in 1997.  While all firms reported the cost
of finance as a worry, however, access to capital was mentioned more often by non-exporters than by
exporters.  The survey also found that access to finance was less of a long-term problem for small andmedium enterprises, which have traditionally received less external financing, than for larger
corporations.
19  Concern that companies' access to funds may have been reduced, with detrimental
effects on export performance, has led the authorities to vastly expand the number and scope of export
assistance mechanisms.
66. In particular, important changes have been made since 1997 to the activities of the
EXIM Bank in order to provide extra trade finance to the export sector.20  By the end of 1998, its
                                                     
18 Products listed in Part III of the Customs Tariff ar e:  rice and glutinous rice (10%);  metal scraps of
any kind (50%);  hides of bovine animals;  rubber of genus Hevea in various forms such as sheets or slabs(40%);  wood, sawn wood and articles made of wood;  raw silk (not thrown), silk yarn and yarn spun from wastesilk and noil silk (B 100 per kg.);  fish (pulverized or only baked) unfit for human consumption (75%);  andgoods not elsewhere specified or included in the export tariff listing.  The last category has no statutory export
duty.
19 Dollar and Hallward-Driemeier (1998).
20 The Export-Import Bank of Thailand (EXIM Bank) is a financial institution wholly owned by the
Royal Thai Government, under the supervision of the Ministry of Finance.  EXIM Bank was established underthe Export-Import Bank of Thailand Act B.E. 2536, which became effective on 7 September 1993.  The EXIMBank is Thailand's main provider of export finance, insurance and guarantees, with the objective of promoting
export business.  EXIM Bank provides long-term credit for exports of capital goods;  financial facilities for
overseas contracts;  export credit insurance;  export financing to small and new exporters;  merchant marine
financing;  and term loans for machinery upgrading.  In addition, EXIM Bank sometimes takes a leading role inencouraging interest rate cuts in export financing among commercial banks.  In promoting exports, EXIM Bankavoids overlapping any business already well served by commercial banks.WT/TPR/S/63 Trade Policy Review
Page 54
paid-up capital had been increased to B 6.5 billion, up from B 2.5 billion.  The Bank of Thailand also
increased EXIM Bank's credit line for export refi nancing for the Packing Credit Facility (see below)
from B 26 billion to B 33 billion (nearly US$1 billion).  In addition, new assistance schemes have
been added to the existing panoply of existing export financing instruments;  however, the authorities
have stated that loans provided under the new schemes are at market conditions.
67. The main subsidized financing scheme for exporters is the Packing Credit Facility , provided
through commercial banks for preshipment financing and in some cases also post-shipment financing.
Under this facility, commercial banks that lend to exporters at capped interest rates (currently 13% in
local currency) may borrow one half of that amount from the EXIM Bank at a rate of 5% per annum.
EXIM Bank leaves it to commercial banks to allocate and approve credit lines to each exporter.  The
Direct Packing Credit  Facility  was launched in April 1998, to address the credit crunch after the
flotation of the baht, as commercial banks were reportedly reluctant to co-finance under the
Packing Credit Facility.  The Bank of Thailand, therefore, allocated a part of the Packing Credit
Facility, some B 5 billion, to EXIM Bank to extend directly to exporters.  In this regard, EXIM Bank
has to finance the entire amount and comply with the same regulations as commercial banks under the
Packing Credit Facility.  Together, the two P acking credits amounted to a business turnover of
B 186 billion at end 1998 (over US$5 billion), up from B 182 billion at the end of 1995.  The subsidy
amounts to the volume of loans times the difference  between the market rate and the concessionary
rate provided by the EXIM Bank.
68. The Preshipment Financing Facility  (PSF) is an additional export credit service to serve
those exporters who have no access to the Packing Credit Facility or who have inadequate credit lines
at commercial banks.  EXIM Bank extends the PSF facility directly to exporters.  Attached to the PSF
facility is the post-shipment service, under which exporters can negotiate their export bills with theEXIM Bank and settle their outstanding debt under the PSF facility with proceeds from such export
bills, thus enabling further use of the credit line.  The PSF facility is provided to exporters in three
currencies – Thai baht, U.S. dollars and Japanese yen.  The total turnover under this facility increased
from B 5 billion to nearly B 36 billion (nearly US$1 billion) between end 1995 and end 1998.
69. The Term Loan for Business Expansion  is a medium-term loan, usually for two to
five years, to support the expansion of exporter's production capabilities, as well as investment in new
machinery, or other fixed assets for export production.  Included in this facility are loans for the
purchase of machinery introduced in 1996 to facilitate the upgrading or replacement of obsolete
machinery, and hence to enhance the competitive edge of Thai exports.  Loans for machinery
upgrading are provided in Thai baht and U.S. dollars.  Credit commitments under this schemeincreased from B 632 million at end 1995 to B 3.5 billion at end 1998.
70. Important increases have taken place in credit commitments under the
Merchant Marine Financing , which is a credit of up to seven years extended to domestic merchant
marine businesses to finance the purchase of new or used ships.  The objective is to help develop the
Thai shipping sector in order to lessen dependence on foreign vessels and alleviate Thailand's currentaccount deficit.  Nearly B 4 billion of credit commitments had been made under this programme at the
end of 1998, up from B 13 million in 1995.  The scheme is believed to have increased the share of
merchant ships that fly the Thai flag from 0.44% in 1995 to 9.43% in 1998.
71. The Long-term Credit for Export of Capital Goods  is designed to enhance the competitive
edge of Thai exporters in selling their capital goods abroad.  Under this scheme, EXIM Bank provides
term loans, usually three to seven years, up to 85% of  the export value, in baht or U.S. dollars.  The
loan can consist of re-lending through the importer's bank, direct buyer's credit or direct supplier'scredit.Thailand WT/TPR/S/63
Page 55
72. The Financial Facility for Overseas Contract  includes three categories of assistance:
long-term loans to contracting parties in foreign countries who engage Thai contractors;  short to
medium-term credits as a working capital of the contract;  and issuance of guarantees for the contract.
73. EXIM Bank also provides exporters with Export Credit Insurance  covering commercial or
political risk, for the export of any kind of product to markets worldwide.  Exporters are compensated
for losses associated with a purchaser's refusal or  inability to pay for contracts fulfilled.  Business
turnover under export credit insurance rose from  B 1.4 billion in 1995 to B 10 billion in 1998.
74. The Export Liquidity Enhancement Facility  was launched in April 1998 to alleviate the
effect of a domestic credit crunch on export financing.  Under this facility, EXIM Bank channels
funds from the Asian Development Bank's co-financing facility (see below) through commercial
banks, to service exporters' working capital requirements, finance imports of raw materials forexport-oriented manufacturing, and to facilitate commercial banks' export bill financing.  The facility
is provided in U.S. dollars, and commercial banks are not required to co-finance the loans.
75. Foreign trade partners have also provided financial assistance to Thailand's export sector.  In
October 1997, EXIM Bank received a US$500 million loan from the Industrial Bank of Japan in order
to lend to exporters via commercial banks, at interest rates not to exceed LIBOR plus 3%.  In addition,since 1997 the Ministry of International Trade and Industry of Japan has provided trade and
investment guarantees as well as advanced payments for Japanese importers purchasing Thai exports,
for an amount totalling US$1 billion.  Other trade finance facilities include a US$600 million loan
from the Export-Import Bank of Japan to EXIM Bank and the Industrial Finance Corporation of
Thailand, and a syndicated loan of US$1 billion from the Asian Development Bank and other leading
foreign commercial banks to EXIM Bank.
(4) I
NTERNAL MEASURES
(i) Taxation
(a) Indirect taxes
Excise taxes
76. Three indirect taxes are levied on the c.i.f. value of imports in addition to the customs tariff:
the excise tax, the interior tax, and VAT.  All three are levied on imports at the same rates andconditions as on domestic production, with the exception of certain motor vehicles
21, which are
exempt from excise tax;  the authorities intend to abolish this exemption at the end of 1999.  These
indirect taxes represent approximately 57.8% of tax revenue, compared to 12.5% for customs duties
(Chart III.6).
                                                     
21 These vehicles consist of modified passenger cars and pick-up trucks with a chassis and a windshield
that comply with local content requirements.WT/TPR/S/63 Trade Policy Review
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Per cent
Corporate
income tax
11.3Chart III.6
Composition of tax revenue, 1997/98 (first quarter)
Source :  Data provided b y the Government of Thailand.Personal 
income tax 
15.3
Excise taxes
22.9
Value-added 
tax 
34.9Customs duties
12.5Other 
3.1
77. Excise taxes are levied on 15 product groups  (Table III.9), although 98% of revenue is
derived from four product groups:  petroleum products , beverages, tobacco and motor vehicles.  Since
the previous Trade Policy Review in 1995, excise taxes have been increased on most products, and
duties were newly imposed on wool carpets, motorcycles, batteries, trucks, and the use of golf
courses.  In 1996/97, excise taxes amounted to approximately 3.8% of GDP.  In March 1999, excise
taxes on fuel oil were reduced from 17.5% to 5% as part of the Government's economic stimulus
package.
Interior tax
78. The municipality tax (or interior tax) is approximately 10% of the value of the excise tax.
The value of excise tax plus the interior tax is calculated using the following formula:
Value of excise tax = (c.i.f. value + import duty)     x excise tax rate
   1 – (1.1 x excise tax rate)
Value-Added Tax
79. The VAT rate of 7% on goods and services, introduced in 1992, was increased to 10% in
August 1997 but reduced again to 7% in April 1999 as  part of the Government's stimulus package,
until 31 March 2001 when it will revert back to 10%.  The VAT structure is broad based, with
exemptions only for books, education, hospitals, unprocessed agricultural products, fertilizers, animal
feeds, pesticides, and certain other social goods and services.  For products where excise tax and
interior tax are applied, VAT is levied on the value inclusive of excise and interior tax.Thailand WT/TPR/S/63
Page 57
Table III.9
Excise taxes imposed in Thailand, September 1999
(Per cent and baht per designated unit)
Item RateaItem Ratea
Ad valorem Specific Ad valorem Specific
Distilled spirits Petroleum and its products
Whiskey 35 B 150/litrebGasoline except unleaded 40 B 4.6/litre
Brandy 25 B 150/litrebUnleaded gasoline 31 B 3.6/litre
Absolute alcohol 10 B 6/litrebKerosene 23 B 3.1/litre
Other spirits 35 B 150/litrebFuel used directly in jet aircraft 1 B 0.2/litre
Fermented spiritsFuel not used directly for jet aircrafts 23 B 3/litre
Beer 53 B 100/litrebDiesel with sulphuric acid
Wine & champagne 55 B 100/litrebover 0.25% 28 B 2.3/litre
Other fermented liquors 25 B 100/litrebnot over 0.25% 26 B 2.2/litre
Non-alcoholic beveragesLiquefied petroleum gas 23 B 2.17/litre
Soda water 25 B 0.77/440cc Natural gas liquid 36 B 3.15/litre
Soft drinks 20 B 0.37/440cc Fuel oil 5 -
Juices 20 B 0.37/440cc Petroleum products with bitumin 12 -
Hydrocarbon solvent 30
Juices meeting certain fruit Exempt
content requirementsMotor vehicles
Tobacco Passenger cars, with engine
Shredded tobacco 0.1 B 0.01/10gr. not over 2,400cc 37.5 -
Cigarettes 70 - 2,401-3,000cc, <220 HP 43 -
Cigars 0.1 B 0.12/gr. over 3,000cc, >220 HP 50 -
Other rolled tobacco 0.1 B 0.02/5gr. Off-road passenger vehicles 32 -
Blended shredded tobacco 0.1 B 0.09/gr. Public transport cars, with engine
Chewing tobacco 0.1 B 0.09/gr. not over 2,400cc 37.5 -
Perfume 15 - over 2,400cc 43 -
Services Trucks (with G.V.W. <4000kg, pick up) 5 -
Horse racing 20 - Yachts 0 -
Golf course 10 - Motorcycles 3 -
Batteries and cells 10 -
Playing cards Batteries with excise taxed materials
(recycled lead)5-
Licence fee for selling cardsWool carpets 20-
Wholesale - B 100 per year Transformed marble and granite Exempt
Retail - B 20 per yearElectrical appliances
Fee for a licence substitute Air conditioning systems 15 -
Wholesale - B 50 per copyChandeliersExempt
Retail - B 10 per copy Chandeliers with lead crystal 15 -
Stamp fee for cards of all
sizes- B 30 per
100 cardsLead crystal products 15 -
a In cases where both an ad valorem  and a specific rate are given, the higher of the two is applied.
b Per litre of pure alcohol.
Source: Data provided by the Thai authorities.
80. VAT exemptions may be given for imported goods or raw materials as part of BOI incentives,
as well as under the laws governing industrial estates (section (2)(i) above).  However, it is not clearWT/TPR/S/63 Trade Policy Review
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whether domestic sales from companies located in EPZs are always subject to VAT.  In accordance
with the destination principle of taxation, exports are exempt from VAT.
(b) Direct taxes
81. Taxes on income and profits account for roughly 35% of total tax revenues;  corporate and
personal income taxes, respectively, account for 21 and 14 percentage points.  Property taxes yielded
little more than 1% of total tax revenues.
82. The corporate tax is levied at a flat rate of 30% on the profits of domestic and foreign
companies alike.  Profits are defined for tax purposes as income minus business expenses, including
depreciation allowances (ranging from 5% to 20% per annum depending on the type of asset), wages
and salaries.  In August 1999, as part of the package of government measures to stimulate private
investment, businesses were authorized to choose the "double declining balance" method ofaccelerated depreciation, by which assets can be depreciated at twice the rate of the straight line
method.  This measure is expected to increase after-tax cash flow of businesses and encourage them to
invest in new assets.
22
83. As in many other countries, the corporate tax is used by the Thai Government not just to
generate revenue, but also as an instrument of economic policy by means of tax incentives.  Amongthe main types of incentive are corporate tax holidays (that is, total exemption from tax) for specified
periods;  as described in more detail in the next section, these incentives are, in most cases, granted by
the Board of Investment (BOI).  One noteworthy tax incentive outside the purview of the BOI
involves the reduced tax rate of 10% granted to Inte rnational Banking Facilities (IBFs) in an attempt
to develop Thailand's financial sector;  the cost of this incentive in terms of tax revenue forgone was
just over B 1 billion in 1996/97.  As discussed in Chapters I and IV, this particular tax incentive, by
implicitly subsidizing foreign exchange borrowing by Thai enterprises, probably contributed to the
financial crisis and caused significant distortions in the development of the Thai banking system.
84. The personal income tax (PIT) embodies schedular and global elements in its basic design.  A
graduated rate schedule involving five brackets ranging from 5% to 37% applies to net income of
individuals, including those who are self-employed.  Interest income is either exempt, as in the case of
demand deposits with the Government Savings Bank and (within limits) certain savings deposits, orsubject to a final withholding tax of 15%.  In order to reduce double taxation of corporate profits
distributed as dividends, taxpayers can choose be tween a final withholding tax of 10% on gross
dividends and an imputation credit (refundable if necessary) where underlying profits have been fully
taxed at the corporate level.  Although capital gains are generally included in taxable income, gains
from the sale of shares listed on the Stock Exchange (and of property not acquired with a view totrading or making profit) are exempt from tax.
85. In order to mitigate, if not remove, international double taxation and to combat tax evasion,
Thailand has concluded tax treaties with the following countries:  Australia, Austria, Bangladesh,
Belgium, Canada, China, Czech Republic, Denmar k, Finland, France, Germany, Hungary, India,
Indonesia, Israel, Italy, Japan, Republic of Kor ea, Laos, Luxembourg, Malaysia, Mauritius, Nepal,
the Netherlands, New Zealand, Norway, Pakistan, the Philippines, Poland, Romania, Singapore,
South Africa, Spain, Sri Lanka, Sweden, Switzerland, the United Kingdom, the United States, and
Viet Nam.
                                                     
22 Ministry of Finance [Online.]  Available at:  http://www.mof.go.th/August10/mepi_el.htm.Thailand WT/TPR/S/63
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(ii) Investment incentives
86. Investment promotion, embodied in the Investme nt Promotion Act, has been a cornerstone of
the Government's economic strategy since 1993.  In particular, as noted in Chapter II(4), the
Government actively encourages foreign direct investment, and measures affecting investment
generally do not differ according to the origin of capital.
(a) Incentives provided by the Board of Investment (BOI)
87. Under the Investment Promotion Act, the Board of Investment continues to have
wide-ranging influence on the formulation and implementation of trade and investment policies.  The
BOI, inter alia,  authorizes the granting of tax as well as non-tax incentives.23  Changes in the nature
of incentives may be introduced by ministerial notification and do not need to be approved by
Parliament provided they fall within the purview of the Investment Promotion Act.  In 1997, totalinvestment approved by the BOI amounted to B 483 billion;  36% of investments was in chemicals,
plastic and paper production and another 37% in services and infrastructure.  The approved total
amounted to 40% of gross private investment in Thailand.
24  The BOI appears to have a strong
influence on the level and sectoral allocation of investment in Thailand and hence on the country's
overall industrial structure.
88. Industrial decentralization and, to a lesser extent, export promotion have been the main
objectives in the granting of tax holidays and other incentives since 1993.  Available statistics indicate
that the share of investment projects in the most remote "zone 3" rose from less than one third of
approved projects in 1990 to over two thirds in 1997.  In 1997, export industries accounted for 68% of
total investment promoted by the BOI;  electrical appliances, agricultural processing, and clothing led
the way.25  According to the authorities, the importance of export promotion has been reduced and
most export requirements have been abolished, except in "zone 1" where they may still be applied.The main incentives are described below.
Reduction of import duty and VAT
89. As noted, exemptions or reductions of import duties and VAT on machinery and on materials
used for production for the local market are granted to investment projects that either locate their
factories in industrial estates or promoted industrial zones or export at least 80% of total sales.Concessions are more generous in the most remote parts of the country.
Corporate income tax relief
90. A three-year corporate tax holiday is granted for projects in industrial estates or promoted
industrial zones in zone 1 that export at least 80% of total sales.  In zone 2, projects do not need to be
located in industrial estates or promoted industrial zones;  if they are, the exemption is forseven years.  In zone 3, an eight-year corporate income tax holiday is granted regardless of the
location, plus a 50% reduction of corporate income tax for five years after the exemption period.
Further, water, electricity, and transportation costs are deductible from taxable income for ten years
from the date of first sales, meaning that thes e costs can be deducted twice;  and 25% of the
installation and construction costs of infrastructure facilities can be deducted in the calculation of net
                                                     
23 As discussed in Chapter II(4), these non-tax incentives include the permission to be majority
foreign-owned and the permission to own land.
24 According to the authorities, BOI approval data cannot be compared with gross domestic investment
because BOI data refer to investment planned for the entir e life of the project, not investment on a yearly basis.
25 Bangkok Post,  16 April 1999.WT/TPR/S/63 Trade Policy Review
Page 60
profit.  Existing projects that relocate from zone 1 to 2 or 3, or from zone 2 to 3 become eligible for
all incentives granted to new projects in that zone.
91. Under a new measure, export ventures employing more than 500 workers or increasing
employment by 50% can receive a three-year corporate tax holiday;  if the investment is in
zone 2 or 3, the tax holiday increases to five years provided that applications are received before the
end of 1999.26
Subsidized credit
92. The Bank of Thailand provides financial assistance to new investment projects or for the
relocation into zone 3 of existing projects with capital funds not exceeding B 200 million (excluding
land cost).  Under this scheme, the Bank of Thailand will purchase promissory notes drawn by
entrepreneurs through commercial banks and other financial institutions to fund the acquisition offixed assets.  The term of the notes must not exceed 120 days for working capital and five years for
investment in fixed assets.  The Bank of Thailand charges financial institutions 3% per annum;  and
the latter charge enterprises the Minimum Lending Rate minus 2%.  The amount of refinancing is
60% of the note's face value;  the commercial bank must carry the credit risk on the remaining 40%.
Incentives for investment in research and development activities93. Incentives for research and development have not changed since the last Review.  An
additional three year corporate income tax holiday will be granted to projects that invest in research
and development activities.  These projects may also import machinery and equipment for research
and development activities with tax reduction or exemption for eight years from the arrival date of the
first shipment.
94. Another regulatory discretion is the capacity of the BOI to relax provisions of the foreign
investment regime to attract foreign participation in specific projects.  For example joint-venturecriteria, specified in BOI Announcement No. 1/ 2536 of 1993, provide for higher foreign equity
participation than that specified under the Alien Business Law, provided the projects are approved by
the BOI (Chapter II(4)).  Recently, a large number of foreign-owned projects have been put up for
BOI promotion in order to bypass the remaining restrictions under the Alien Business Law and thus
gain market access.  These investments may not be granted any tax incentives, but mainly constitutean avenue for 100% foreign ownership, including of land, which is not possible except under BOI
promotion.
95. The criteria used by the BOI for granting project approvals are as follows:  for a project with
investment capital (excluding the cost of land and working capital) not exceeding B 200 million, the
value added must account for not less than 20% of sales revenue, except for certain types of projectssuch as those involving the conservation, restoration or development of natural resources and the
environment;  and registered capital of a newly established project must amount to at least 20% of
total investment.  For expansion projects, the proportion of registered capital to total investment is
considered on a case-by-case basis;  modern machinery and production processes and new equipment
must be used.  In cases where an older process is to be used, its efficiency must be certified by areliable institution, and adequate environmental protection systems must be installed.
96. For a project with investment capital (excluding the cost of land and working capital)
exceeding B 200 million, the criteria mentioned above are applied together with the following
additional considerations:  impact of the project on its own industry and related industries;  impact on
                                                     
26 Bangkok Post,  16 April 1999.Thailand WT/TPR/S/63
Page 61
government revenue and any additional burden on the Government;  effect on consumers;  and
contribution to technological development.  For a project with investment capital (excluding the cost
of land and working capital) exceeding B 500 million, a feasibility study must be submitted.
Notifications to the WTO
97. Since 1995, Thailand has made three subsidy notifications pursuant to Article XVI:1 of
GATT 1994 and Article 25 of the WTO Agreement on Subsidies and Countervailing Measures.  Thenotifications cover certain of the investment promotion incentives described above, the benefits
provided by the Industrial Estate Authority of Thailand, and the refinancing schemes operated by the
Bank of Thailand at subsidized interest rates.  Six WTO Members have put questions regarding these
notifications.
Effectiveness of investment incentives98. Aside from the issue of WTO-consistency, the effectiveness of tax incentives for investment
is uncertain.  Proximity to markets, availability of skilled manpower at relatively low cost, adequacy
of essential infrastructure, and a stable economic, political, and regulatory environment may be more
influential than tax breaks on the investment decision process.  Further, these incentives come at a
high cost in terms of forgone budgetary revenue and they may cause serious distortions in terms ofresource allocation (e.g. oversupply, bottlenecks) between activities that receive concessions and
those that do not (Box III.3).
(b) Trade-related investment measures
99. In 1995 Thailand notified the WTO Committee on Trade-Related Investment Measures
(TRIMs) of certain investment laws and regulations that were related to trade, as well as the products
concerned.  Since then, certain measures have reportedly been abolished;  local-content requirements
are currently in place for dairy products, motorcycle assembly, and engines for pick-up trucks(Table III.10).  As a result of these measures, the corresponding firms pay no corporate tax.
According to the authorities, the corporate tax ex emption is mainly determined by the location of
investment, and only in these cases conditional on a local content requirement.
100. In particular, Section 32 of the Factory Act (B .E. 2535) empowers the Minister of Industry to
determine, upon the approval of the Cabinet of Ministers, product items, quality, ratio of the rawmaterials, sources of raw materials, factors and/or the kinds of energy to be used in the production of
certain finished goods.  Announcements issued under  this authority have been confined to the
local-content requirement for domestically assembled motor vehicles.
101. Moreover, Section 20 of the Investment Promotion Act (B.E. 2520) authorizes the
Board of Investment to grant special investment incentives to industries and firms that agree tocomply with certain production conditions.  One of  those conditions is that the firms use the
predetermined proportions of locally produced raw materials in the production of certain product
items.  The type of raw materials or inputs and the percentage of local-content requirement can be
changed to encourage the establishment of different industries for economic development purposes.
BOI incentives include three to eight-year corporate tax holidays and import duty exemptions, but notexcise tax exemptions, which may be provided by the Excise Department (see Table III.10).WT/TPR/S/63 Trade Policy Review
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Box III.3:  Investment incentives
Incentives for investment, notably tax holidays, are common in many developing and developed economies.
The main aim of these incentives is to encourage domestic investment and attract foreign direct investment
(FDI), and thereby develop a local industry, in many cases oriented towards exports.  While it is difficult to
judge the extent to which incentives have actually in creased investment in Thailand, there are grounds for
doubting their effectiveness, based on evidence from other economies.  Indeed, in some instances the use of
incentives may be counterproductive or have unexpected adverse repercussions, as in the case of the tax
incentive granted to the International Banking Facilities (IBFs).
In the first place, access to incentives is seldom among the main determinants of business decisions.  This has
been confirmed repeatedly by business surveys.  Proximity to markets, the availability of sufficiently skilled
labour at relatively low cost, adequacy of essential infrastructure and a stable economic and legal
environment are usually much more important.  Other countries' experience with evaluation of tax and
non-tax incentives suggests that the cost of such measures to the Government (in terms of expenditure or tax
revenue forgone) may exceed the investment generated.  Their high cost is related to the difficulty in
identifying incremental investment (i.e. investment that would not be undertaken without the incentive).
Tax cuts for foreign multinational enterprises (MNEs) that in many cases receive a full credit for taxes paid
abroad may have little or no effect on the incentive for those firms to invest in the country offering such relief.
Use of investment incentives may also provoke countermeasures by trading partners.  Even where they do not
contravene the WTO Agreement on Subsidies and Countervailing Measures, they may be used by other
countries as a justification for countermeasures.  In particular, countries may react by adopting incentives of
their own, thus resulting in a beggar-thy-neighbour situation.  Such an "incentives race" tends to be harmful to
all countries concerned, developing countries especially.
As countries often have a mix of policies that simultaneously impede and encourage foreign investment,
rather than offering incentives to attract foreign inve stment, governments might instead focus on the removal
of existing impediments to investment.
Source: WTO Secretariat;  WTO (1998a) Trade Policy Review - Hungary, and WTO (1998b) Trade 
Policy Review - Indonesia.
Table III.10
Trade-related investment measures in place in September 1999
Product and criteria for granting incentives Incentive
Dairy products Domestic raw milk must be purchased in proportion to any
imported skimmed milk powder used to manufacture milk or
milk products.
Passenger cars Exempt from corporate income tax and import duty
(machinery).  Also, see below.
Not less than 54% of domestic auto-parts must be used Corporate income tax and import duty (machinery)
exemption.
Vans and other types of passenger cars "
Domestic parts must be used
Small vans and trucks "
Local engines and parts must be used
Motorcycles "
Not less than 70% of domestically produced parts must be used
Table III.10 (cont'd)Thailand WT/TPR/S/63
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Product and criteria for granting incentives Incentive
Engines for automobiles "
Locally manufactured parts and components shall account for the
following shares of the total parts and components used:Year 1:  20%;  Year 2:  30%;  Year 3:  40%;  Year 4:  50%;
Year 5:  50%;  Year 6:  60% and Year 7:  70%
Engines for motorcycles "
Locally manufactured parts and components shall account for the
following shares of the total parts and components used:
Year 1:  30%;  Year 2:  40%;  Year 3:  60%;  Year 4:  70%;
Year 5:  80%
Multi-purpose benzene engines "
Locally manufactured parts and components shall account for rising
shares of the total parts and components used
Modified passenger cars and pick-up trucks with chassis and
windshieldExcise tax exemption
At least 60% domestic parts and components must be used in any
modification
Source: WTO document G/TRIMs/N/1/THA/1, 28 April 1995;  and information provided by the Thai authorities.
(iii) Protection of intellectual property rights
102. Since its last Trade Policy Review in 1995, Thailand has amended its legislation in order to
implement the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
within the transition period permitted for developing countries27, while taking further steps to improve
enforcement.  A new Patent Act, as amended came into force in March 1999.  In April 1999 a draft
amendment of the 1991 Trademark Act was awaiting consideration by the House of Representatives.In addition three other draft laws were under consideration by the Council of State:  the law on the
protection of geographical indications;  the law on the protection of layout-design (topographies) of
integrated circuits;  and the law on protection of trade secrets.  The Protection of Plants Variety Act,
to be adopted by Thailand by 2005 as a consequence of the TRIPS Agreement, is currently under
study by the House of Representatives.
103. The law establishing the Intellectual Property and International Trade Court became effective
on 26 October 1996.  The court has jurisdiction for all civil and criminal cases involving patents, trade
marks and copyrights;  civil and criminal cases involving domestic trade under the Criminal Code;
civil cases dealing with technology transfer;  and cases involving international trade.
104. As noted in the previous TPR, Thailand is a party to the Berlin Act (1908) of the
Berne Convention for the Protection of Literary and Artistic Works, and to Articles 22 to 38 of the
Paris Act (1971) of the Berne Convention.  In 1989 Thailand joined the World Intellectual PropertyOrganization (WIPO), as well as the Berne Union.  Since 1995, Thailand has adopted the
Paris Convention for the Protection of Industrial Property and the Patent Cooperation Treaty.
Thailand has not acceded to the Rome Convention (International Convention for the Protection of
Performers, Producers of Phonograms and Broadcasti ng Organizations) as it considers performer's
rights, as well as rights for producers of sound recordings and broadcasting organizations, to beprotected under the domestic Copyright Act of 1994.
105. Since 1995, Thailand has entered into a number of regional agreements on
intellectual property cooperation, including Memoranda of Understanding with Australia, Cambodia,
                                                     
27 Thai laws do not specify any "grandfather" rights to be applied by Thailand under the
TRIPS Agreement.  The laws clearly state that measures ar e not to be retroactive, particularly in criminal cases.WT/TPR/S/63 Trade Policy Review
Page 64
China, Viet Nam and Slovenia.  Thailand also si gned MOUs on industrial property cooperation, with
France, Japan, and Laos.  The ASEAN Working Group on Intellectual Property Cooperation has
convened nine meetings since 1995, the last one in August 1998 in the Philippines.  Its activities
include the ASEAN-EC IPR Cooperation Programme;  ASEAN Patent Information on CD-Rom;  the
setting-up of regional patent and trade mark filing systems and the proposed publication on the status
of ASEAN IP Cooperation.
(a) Legislative developments
Copyright and related rights
106. No major change has taken place in Thailand's copyright legislation since the last Review in
1995.  As noted therein, Thailand's Copyright Act (1994) entered into force in March 1995.
Protection is given during the life of the creator, plus 50 years;  under Thai law, a copyright isconsidered to exist upon creation of a work and registration is not required.  According to the
authorities, protection extends to literary works (including computer programs), dramatic, artistic,
musical, audio-visual, cinematographic works, sound recordings, broadcasting works and all other
materials in the literary, scientific, and artistic domains.  The Act is considered by the authorities to
comply with Thailand's TRIPS requirements and the Paris Act of the Berne Convention.  The Thaiauthorities stated in the previous Review that certain provisions of the new Copyright Act extend
beyond the TRIPS requirements, for example, additional protection of an author's moral rights and
performers' rights.
107. In case of infringement, copyright holders have the right, under the Act, to seek injunctions,
compensation for damages, and to recover investigation costs and legal expenses.  Officials of the
Department of Intellectual Property are given the right to seize pirated goods upon request of the
copyright holder and to enter any premises where such goods are suspected to be held.  Penalties fordirect infringement for commercial purposes ra nge from B 100,000 to B 800,000, with prison terms of
six months to four years.  Exception clauses in the case of computer software include the research and
study of the computer and personal use by the owne r of a copy of the software provided that the
purpose is not for profit.
108. The authorities have indicated that they are seriously considering the implication of accession
to the two treaties on copyrights and neighbouring rights adopted by WIPO in December 1996, with
respect to Thailand's obligations under the TRIPS Agreement.
28
Trade marks
109. Trade marks in Thailand are recognized under the Trademarks Act (1991).  The authorities
have indicated that Thailand is amending several provisions of the Trademark Act including in thefollowing areas:  (i) revision of the definition of trade marks to comply with the TRIPS requirement;
(ii) inclusion of the provisions on acceptance of application filed, in accordance with any international
agreement or cooperation of which Thailand becomes a member;  (iii) inclusion of the national
treatment principle for the purpose of claiming priority rights;  (iv) inclusion of the provisions on
temporary protection for trade marks in respect of goods exhibited at official or officially recognizedinternational exhibitions held in Thailand or in any country that is a member of an international treaty
or agreement on the protection of trade marks of which Thailand becomes its member.  In addition,
the national treatment principle covers the applicant having domicile and effective commercial
establishment in Thailand or in countries of an international convention or agreement concerning the
                                                     
28 The two treaties are the WIPO Copyright Treaty and the WIPO Performance and
Phonograms Treaty.Thailand WT/TPR/S/63
Page 65
protection of trade marks to which Thailand is a member.  Owners of registered trade marks are given
protection for ten years;  registration is renewable for unlimited ten-year terms.  Trade marks that are
identical or similar to well-known trade marks may not be registered and those already registered can
be revoked.  Also protected are services marks, certification marks, collective marks and well-known
marks.  According to the authorities, all amendmen ts required in Thailand's trade mark legislation in
order to conform to the TRIPS Agreement have been incorporated in the amended Trademark Act.
110. As noted in the Review of Thailand, applications for trade mark registration must be filed
with the Department of Intellectual Property at the Ministry of Commerce.  To qualify, a trade mark
must meet the requirements of distinctiveness, differentiation from other registered trade marks and
not be in violation of public order or morality.  Thailand's Trademark Act adopts the International
Classification of Goods and Services, in accordance with the Nice Agreement (1977).  Statistics ontrade mark registration in Thailand indicate a fall in 1996 and in 1997, followed by a recovery in 1998
(Table III.11).
Table III.11
Trade mark and patent statistics for Thailand, 1990-98
Year Trade marks Patents
Applications Registrations Applications RegistrationsAbandoned
applicationsa
1990 12,863 10,173 2,555 474 546
1991 12,338 10,048 2,586 626 454
1992 13,378 8,156 2,633 386 306
1993 15,463 8,147 3,345 451 94
1994 15,869 13,003 3,928 674 ..
1995 17,459 12,293 4,436 782 ..
1996 19,076 9,928 5,518 1,355 ..
1997 19,909 8,157 6,623 1,149 ..
1998 .. 12,231 6,409 1,175 ..
.. Not available.
a Patent application deemed abandoned due to the applicants' failure to request substantive examination within five years.
Source: Data provided by the authorities.
Geographical indications
111. According to the authorities, the draft law on geographical indications before the
Council of State.  Its scope will extend not only to wine and spirits, but to other products specific tothe country (e.g. durians, Thai silk).  Protection will not extend to services.  Regarding registration,
the authorities envisage the establishment of special committees to study the product and consider
requests for registration.
Patents
112. A detailed presentation of Thailand's Patent Act (1979) is given in the 1995 Secretariat
Report.  Since then, an amendment of the Act has been promulgated and published in the
Royal Gazette  on 31 March 1999.  The Act, as amended, will enter into force on 27 September 1999.
The amendment introduces the principle of national treatment:  the Patent Act as amended will grant
protection to nationals of other countries, that are party to any international convention to which
Thailand is also a party, in the same manner as that given to Thai nationals.  Another requirement ofthe TRIPS Agreement that is met by the amendment is the elimination of the working requirement of
the patent;  accordingly, the importation of patented products by the patentee will be considered as
working the patent.  Another substantial amendment of the Patent Act is the elimination of theWT/TPR/S/63 Trade Policy Review
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Pharmaceutical Patent Board, which had the power to require patent holders to reveal cost and pricing
information, and to impose penalties for excessive prices.
113. As noted in the previous Review, the Patents Act includes both invention and design patents;
an invention may be in the form of a product or process.  The term of protection, applied from the
date of filing, is 20 years for inventions and ten years for designs.  Under the Patents Act, an invention
is defined as any innovation or invention which crea tes a new product or process, or any improvement
on a known product or process.  A product design is  defined as any form or composition of lines or
colours that gives a special appearance to a product and can serve as a pattern for an industrial or
handicraft product.
114. Applications for patents must be submitted to the Department of Intellectual Property at the
Ministry of Commerce.  Statistics on patent applications and registrations (Table III.11) show a verysmall number of registrations (less than 20%) compared to applications.  According to the authorities,
the deferred examination system is a major factor in the small number of patent registrations:  after
the filing of the application and publication, the applicant must request a substantive examination, at
any time within five years from the publication of the application.  Thus, applicants may delay the
request while exploiting the invention or process.  When the invention or process does not justifyregistration or when the applicant has exhaustively exploited it, the applications are abandoned.  In
addition, the Department of Intellectual Property requires the applicant to submit a final search report
from the first filing country at the time of the request;  most applicants wait for such report before
making the substantive application.
(b) Parallel imports
115. The authorities have stressed that parallel imports for legitimate goods are necessary in order
to maintain competitive prices of products protected by intellectual property rights.  Parallel importsare allowed for goods protected by copyrights or by registered or unregistered trade marks.  Under the
Patent Act, the patentee has an exclusive right to import patented products made by patented process
and products made by patented industrial designs.  However, according to the authorities, the
Patent Act does, in fact, allow parallel imports because of an exception clause for imports at lower
prices than those charged by the patentee.  Under the draft law on the protection of layout designs ofintegrated circuits, the right holder will have an exclusive right in importing the protected layout
design into the country.
(c) Regulatory controls on anti-competitive practices
116. Section 39 of the Patent Act prohibits the patentee from stipulating any condition, restriction
or compensation that would unfairly limit competition.  Sections 5 and 15 (2) of the Copyright Actalso prohibits the granting of licences that unfairly restrict competition.
(d) Compulsory licensing
117. Regarding copyrights, any interested person may apply for compulsory licensing to translate
the work into Thai or to reproduce the copies of the translation published in Thai, under special
circumstances, for the benefit of study, teaching or research without a profit-seeking purpose (Section
54 of the 1994 Copyright Act in Annex II).  Regarding patents, any person may apply for a licence
under circumstances specified under (Annex III) Section 46 of the Patent Act after the expiration of
three years from the grant of a patent or four years from the date of application, whichever is earlier.Thailand WT/TPR/S/63
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(e) Enforcement
118. The authorities are concerned that difficulties of enforcement of intellectual property rights
may discourage investment in Thailand.  The Government has thus taken several actions to promote
and protect IP rights, including the establishment in 1993 of the Coordinating Centre for Suppression
of Intellectual Property Rights Violation, under the Department of Intellectual Property.  The Centre
coordinates its activities with relevant government and private sector agencies.  A Tripartite WorkingGroup has also been established, comprising representatives from the International Federation of
Phonographic Industries (IFPI), the European Commission (EC) and Thai agencies (consisting of the
Department of Intellectual Property (DIP), the Office of Attorney General, and the Royal Thai Police
(RTP)).  Its main objective is to monitor enforc ement of the protection of the European Communities'
copyrighted works.  The Tripartite Working Group meets twice a year.
119. In April 1997, a specialized division within the police force was established to deal
specifically with intellectual property.  The Joint Committee for the Suppression of Intellectual
Property Infringement is chaired by the RTP and consists of representatives from the RTP, the DIP
and the Department of Economic Affairs of the Ministry of Foreign Affairs.  In December 1997, the
Office of Attorney General set up a special section, the Department of Intellectual Property andInternational Trade Litigation, to deal specifically with IP.  Also in December 1997, the Intellectual
Property and International Trade Court was inaugurated.  Over 100 civil cases have been presented to
the court since December 1997;  the total value of material subject to dispute exceeds B 7 billion.  The
Court has sentenced two defendants in two separate cas es to jail terms of nine months;  the defendants
in the two cases were repeat offenders.
120. In July 1998, The Working Group on the Cooperation and Monitoring of the Suppression of
IPR Violation was established.  The Group is chaired by the Deputy Commerce Minister and consistsof representatives from law enforcement agencies and private sectors.  Its duties include cooperating
with concerned public and private agencies to enhance enforcement efforts, to monitor the
suppression of IPR violation, and review the difficulties of enforcement.  Further, mass-media
campaigns have been conducted in educational institutions throughout the country and direct training
provided to enhance IP understanding.  Courses on IP are being introduced at every educational levelwith a view to minimizing IPR infringement.  Mo reover, the Department of Intellectual Property has
established the Industrial Property Information Centre (IPIC) and a comprehensive IP library to
provide IP information to the public.
121. At the border, customs jurisdiction allows for the seizure, solely upon request of the
right holder, of trade mark infringing goods that are being imported or exported.  With respect tocopyright, the right holder must file a request with Customs to suspend and inspect goods.  Upon
inspection, the copyright holder must file a compla int with the police and inform the Customs within
24 hours.  Customs jurisdiction is confined to border points.
122. In general, the authorities consider that the institutional mechanisms are in place to protect
IPRs, but that it is extremely difficult to enforce these rights in practice.  Problems includecooperation from right holders, which is essential ac cording to the law, in conducting raids or filing
the case to the courts.  In the meantime, closer cooperation is needed with the police and the public
prosecutor to effectively deter infringing activitiesWT/TPR/S/63 Trade Policy Review
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(iv) Standards and other technical requirements
(a) Products regulated by the Thai Industrial Standard Institute
123. The Thai Industrial Standards Institute (TISI) has participated actively in the work of the
WTO Committee on Technical Barriers to Trade (the TBT Committee).  It considers "that the
disciplines of the (TBT) Code, e.g. harmonization of international standards, transparency, avoidance
of unnecessary obstacles to trade and non-discrimination would be beneficial to Thailand as well as toother developing countries in the sense that they can contribute to an efficient and effective standards
preparation process as well as facilitate the conduct of international trade".  TISI has, in particular,
made several written contributions with a view to sharing with other Members its experiences
regarding the implementation of the provisions of  the Code of Good Practice (Annex 3) of the
Agreement.
124. In a major development since 1997, Thai industrial standards (TIS) are now systematically
based on international standards with a view to achieving mutual recognition with major trading
partners (Table III.12).  In 1998, a total of 412 standards were based on international standards, out of
a total of 1,700 standards.  Firms meeting TIS continue to enjoy a 5% price preference in government
procurement (see below).
Table III.12
Thai industrial standards (TIS), 1995-98
Cumulative total of published TISs adopted from international standards
ISO standards IEC/CISPR standards Codex standards YearCumulative
total of
published
TISsIdentical Modified Identical Modified Identical Modified
1995 1,389 26 160 13 41 - 9
1996 1,410 37 171 13 42 - 9
1997 1,464 69 185 31 42 22 20
1998 1,700 73 218 34 42 25 20
Source: Government of Thailand.
125. The authorities have also revised the criteria for conformity assessment procedures for
product certification, for both local and imported products.  The new system covers compulsory and
voluntary standards and is based on accreditation as a condition for accepting test results orcertification of other countries.  Thus, foreign factories that have received ISO 9000 certification and
whose product testing has been carried out by laboratories accredited by bodies having a mutual
recognition agreement (MRA) with Thailand will be exempt from the quality control system and their
products exempt from sampling and testing for each import.  In all other cases, quality assessment
testing and sampling takes place systematically for products subject to mandatory standards, at the
expense of the importer.
29
126. Since 1996, Thailand has made 81 notifications under the WTO Agreement on Technical
Barriers to Trade, the second largest number from a developing country.  Some 59 notifications were
made under Article 2.9, ten under Article 2.10 (urgency procedure) and eight under Article 5.7
(conformity assessment procedures, urgency procedure).  Nearly half of the notifications were made
in 1998.  In addition, 12 quarantine and health regulations have been notified under the
                                                     
29 Products subject to mandatory standards require a licence from the Thai Industrial Standards Institute
(TISI) for domestic manufacture or for import into Thailand (Thai Industrial Standards Institute [Online].Available at:  http://www.tisi.go.th).Thailand WT/TPR/S/63
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WTO Agreement on Sanitary and Phytosanitary Measures (the SPS Agreement).  Further, in
June 1999, Thailand prohibited imports of animal products from several EU countries following the
discovery of dioxin contamination.
127. In 1998, ASEAN countries signed a collective Memorandum of Understanding (MOU) on a
regional economic cooperation programme on standards, quality, and conformity assessment with the
European Union.  Under the MOU, the EU would provide a contribution of US$6.12 million toco-finance the programme over a period of five years.  The programme is expected to strengthen
economic and business cooperation with the EU a nd assist in ASEAN's efforts to liberalize its
economy.  It will promote and facilitate international trade by adopting compatible quality structures,
standards, and conformity assessment procedures.  The authorities actively support the conclusion of
MRAs, such as the one currently envisaged with the European Union.
(b) Products regulated by the Food and Drug Administration
128. Thailand's Food and Drug Administration (TF DA), under the Ministry of Public Health,
monitors and regulates production, sales, and imports of food and tobacco products, cosmetics, drugs
and narcotics, feedstuffs, fertilizers, hazardous substances, live animals, plants, seeds, medical
devices, and psychotropic and volatile substances.  The procedures have been described by sometrading partners as relatively long, complex, and expensive (see below).
30  According to the
authorities, these procedures are shorter and less costly following recent improvements.
Import permits
129. Importers of regulated products must apply for an import licence, and manufacturers for a
manufacturing licence.  Licences are for three years.  Import licences for pharmaceuticals and food
cost B 15,000.  The import permit, issued by the FDA,  is required by customs authorities in order to
clear the imported food items.  The FDA may take up to six months to issue the permit.  For importersto be licensed, their application must include a detailed list of ingredients and a description of the
manufacturing process for the item concerned.  This requirement for disclosure of proprietary
information on product content and production methods has reportedly been an impediment to
imports.
31
Registration
130. Strict additional registration requirements are imposed on a large number of
"specific-controlled" processed and packaged food items, as well as on drugs, cosmetics, and most
other regulated products, at a cost of B 5,000 per item, not including expenses for analysis.  The
registration is published in the Royal Gazette  and specifies the name of the products, the address of
the company or applicant, the licence registration number and the dates of approval and expiry(Table III.13).
131. Applications for product registration must be made by the manufacturer or by a company
empowered legally to represent the foreign manufacturer.  The company must file a notarized power
of attorney from the foreign manufacturer, and be in the position to effect a recall of the product when
necessary.  Evidence of registration of imported products must be provided in the form of aCertificate of Analysis by the competent health authority in the country of manufacture.  The foreign
manufacturer must be licensed to manufacture the regulated product for sale in the country of origin,
and the licence must be authenticated by the Thai diplomatic mission in that country, which delivers a
                                                     
30 European Commission (1999);  and USTR (1999).
31 European Commission (1999);  and USTR (1999).WT/TPR/S/63 Trade Policy Review
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certificate of free sale.  This creates, in effect, a system of exclusive importers, as only one applicant
holds the information required for the obtention of the Certificate of Analysis for each product, which
is required for port clearance.  Approval and issuance of these certificates generally requires an
average of three months for generic products, four months for biological produces, and six months for
new drugs, however, up to one year may be necessary in exceptional cases.
Table III.13
"Specific-controlled" food products administered by the Ministry of Public Health, 1999
Type of food Notification No. (year)
1. Food colouring 21 (1979) and 66 (1982)
2. Fats and oils 22 (1979) and 134 (1991)
3. Peanut oil 23 (1979)
4. Milk 26 (1979)
5. Butter 30 (1979)
6. Cheese 31 (1979)
7. Ghee 32 (1979) and 53 (1980)
8. Ice cream 33 (1979) and 101 (1986)
9. Flavoured milk 35 (1979) and 109 (1987)
10. Other milk products 36 (1979)
11. Food enhancers 38 (1979)
12. Semi-processed foods 39 (1979) and 88 (1985)
13. Chilli sauce, tomato sauce, papaya sauce, etc. 42 (1979)
14. Butter oil 45 (1980)
15. Cultured milk 46 (1980) and 99 (1986)
16. Vinegar 48 (1980)
17. Cream 49 (1980)
18. Palm oil 56 (1981)
19. Coconut oil 57 (1981)
20. Tea 58 (1984)
21. Drinking water in sealed containers 61 (1982) and 135 (1991)
22. Non-alcoholic beverages in sealed containers 62 (1982)
23. Soybean milk in sealed containers 70 (1982)
24. Coffee 77 (1984) & 132 (1990)
25. Ice 78 (1984) & 137 (1991)
26. Food additives 84 (1984)
27. Modified milk for infants and young children 156 (1994)
28. Modified food (other than milk) for infants and young children 157 (1994)
29. Supplementary food for infants and young children 158 (1994)
30. Jam, jelly and marmalade in sealed containers 89 (1985)
31. Mineral drinks 108 (1987)
32. Fish sauces 118 (1989)
33. Food for weight control 121 (1989)
34. Margarine 129 (1990)
35. Royal jelly & royal jelly products 133 (1990)
36. Honey 139 (1991)
37. Food in sealed containers 144 (1992)
38. Mineral water 146 (1992)
39. Sodium cyclamate and food containing cyclamates 113 (1988)
Source : Ministry of Public Health, Government of Thailand.Thailand WT/TPR/S/63
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132. Sanitary certificates are required for imports of certain live animals and their products, and a
phytosanitary certificate is needed for the import of most plants and plant materials.  Quarantine
restrictions on animals and their products are under the preview of the Department of Livestock
Development of the Ministry of Agriculture and Cooperatives.  The Department of Agriculture is
responsible for quarantine restrictions on edible and inedible plants.
133. In August 1997, the Ministry of Health approved a Ministerial Rule on product composition
under the Tobacco Products Act of 1992.  The regulation entered into effect in February 1998.
According to this new regulation, tobacco manufacturers and importers will have to notify all
cigarette and cigar ingredients by brand.
(v) Government involvement in production and trade
(a) Privatization and reform of the state-owned enterprise sector
134. For over two decades the Government has sought to divest control of productive assets
through privatization programmes.  Since 1988, over 40 entities have been sold to the private sector,
reducing from 100 to 59 the number of state-owned enterprises.  However, as noted in the Master Plan
for State Enterprise Reform, state enterprise reform has not been undertaken as part of a concerted,
broad economic reform effort, and the largest publicly owned companies, most of which operate asmonopolies, remain to be privatized.
32  These 59 state enterprises can be grouped into five broad
sectors:  telecommunications, water, energy, transport, and others, the latter consisting of agricultural,
industrial, or services suppliers, notably financial services.  The privatization programme has been
described by the Government as one of the keys to restoring economic vitality in the country.
135. A "fast-track" schedule in the Master Plan envisages the sale of shares of several state
enterprises, including Thai Airways, the Airport Authority of Thailand, Esso Thailand, and one of the
country's largest power plants, the Ratchaburi.  Other privatizations include that of the national oil andgas company, the Petroleum Authority of Thailand.  Delays in the privatization process, reflect late
passage of the corporatization law and other sector-specific legislation.  The consequences of the
privatization process on opportunities for foreign direct investment will depend on a number of
factors, including the degree of control retained by the State in these companies, and the limits on
foreign shareholdings in domestic companies.
(b) Publicly owned enterprises involved in external trade
136. Thailand's only notification to the WTO Working Party on State Trading Enterprises,
communicated in 1995, referred to three state trading enterprises:  the Public Warehouse Organization
(PWO), the Liquor Distillery Organization (LDO) and the Thailand Tobacco Monopoly
(Chapter IV(2)).
33  In addition, as noted in the 1995 Secretariat Report on Thailand, a number of other
publicly owned companies are directly or indirectly involved in trade of goods or services
(Table III.14).
                                                     
32 Royal Thai Government (1998).  Most of the section draws on this source.
33 WTO document G/STR/Q1/THA/1, 5 July 1995.WT/TPR/S/63 Trade Policy Review
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Table III.14
Selected publicly owned commercial companies, 1999
Organization (affiliated Ministry in parenthesis)aFunction and trade-related privileges
Agriculture and agri-industry
Dairy Farming Promotion Organization of Thailand (MoA) Promotion of dairy farming including sales of domestic output to meet
domestic-content requirements.  No external trade.
Fish Marketing Organization (MoA) Fish marketing facilities.  No external trade.
Forest Industry Organization (MoA) Plantation management, re-afforestation, logging, sawmilling and
forest industries.  According to the authorities:  not responsible for
export or import;  generates income from forest industry and related
activities;  without special privileges;  and freely competes with the
private sector.
Marketing Organization for Farmers (MoA) Marketing of agricultural products and supply of services.  No external
trade.
Rubber Estate Organization (MoA) Production, purchase and distribution of rubber and rubber
by-products.  No external trade.
Thai Plywood Company Limited (MoA) Production of plywood, import and export of wood, and forest planting
and conservation.
Thailand Tobacco Monopoly (MoF) Supply and production of cigarettes (domestic monopoly).  Imports of
tobacco.
Public Warehouse Organization (MoCM) Purchase and distribution of agricultural products.  Exclusive import
rights for potatoes and tea.
Liquor Distillery Organization (MoF) Production and supply of alcohol (sole domestic producer), and
production of liquor.  Exclusive production rights for 95% ethyl
alcohol.
Thai Cane and Sugar Corporation (MoA, MoCM, MoID) Production, distribution, and export of sugar and by-products of sugar.
Energy
Petroleum Authority of Thailand Oil and gas production, distribution, and import.  According to the
authorities:  PTT operates as a normal private enterprise;  receives no
special privileges from the Government;  and freely competes with
other international and domestic en terprises.  Source for government
purchases.
Esso Oil, gas, and petrochemicals production and trade.
Electricity Generating Authority of Thailand Sole rights for distribution and trade in electricity.
Provincial Electricity Authority Supply of Electricity.  No external trade.
Metropolitan Electricity Authority Supply of Electricity.  No external trade.
Manufacturing
Glass Organization (MoD) Production of glass and glass by-products, under the supervision of the
Ministry of Defence.  Established primarily for the purpose of military
utilization;  10% price advantage for government sales.  No external
trade.
Battery Manufacturing Organization (MoD) Same
Leather Tanning Organization (MoD) Same
Government Pharmaceutical Organization (MoPH) Procurement of drugs, and drug manufacture.  Source for government
procurement.
Playing Cards Factory (MoF) Monopoly supply and production of playing cards.  Exclusive import
rights (to be lost upon privatization).
Services
Communications Authority of Thailand Telecommunications services
Telephone Organization of Thailand Telecommunications services
Thai Airways International Air transport services
Airport Authority of Thailand Air transport services
Table III.14 (cont'd)Thailand WT/TPR/S/63
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Organization (affiliated Ministry in parenthesis)aFunction and trade-related privileges
Krung Thai Bank Financial services
Bank Thai Financial services
Bangkok Metropolitan Bank Financial services
Siam City Bank Financial services
Radanasin Bank Financial services
Bank for Agriculture and Agricultural Cooperatives Financial services
a MoA = Ministry of Agriculture and Cooperatives.
MoCM = Ministry of Commerce.
MoD = Ministry of Defence.
MoPH = Ministry of Public Health.MoF = Ministry of Finance.
MoID = Ministry of Industry.
MoI = Ministry of the Interior.
Source: Information provided by the Government of Thailand.
(c) Government procurement
137. Thailand's regulations on government procurement have recently been amended in the
Regulations on Procurement (Volume 4) B.E. 2 541 (1998).  According to the authorities, the
objective of the new regulations is to enhance openness, transparency, and fair competition in the
government procurement market.  The authorities have noted that under the new regulations, the
entire procurement process must be transparent.  It has not been possible to obtain a copy of the new
regulations.  The authorities have indicated that under these Regulations, the head of the procuring
agency will "normally allow foreign bidders to compete for a contract".  However, in cases wherethere are at least three domestic products available, and these products meet national standards and are
manufactured by quality-certified factories, only such products will be considered.  Most domestic
products are given a 3% price preference margin in procurement.  Products that meet the national Thai
Industrial Standards Institute standard and are manufactured by a factory accorded the TIS/ISO 9001
or TIS/ISO 9002 certificate, are given a preference of 7%.  The margin of preference for domesticproducts registered with the Ministry of Industry is 5%.  For government contracts for consultancy
and engineering services, Thai consultants must be engaged as the leading firm.  Data on the total
annual value of procurement are not available, partly because no centralized agency is responsible for
public purchases.  The Office of the Prime Minister administers the new regulations but state
enterprises have their own procurement regulations , as do provincial authorities, municipalities,
sanitation companies, and Pataya Town, and the Bangkok Metropolitan Administration.
138. Thailand has participated in the WTO Working Group on Transparency in Government
procurement, and is considering membership in the WTO Government Procurement Agreement.
(d) Countertrade
139. Thailand's countertrade policy dates from the mid-1980s when it was developed as an option
to dispose of surplus agricultural output.
34  Current countertrade policy stipulates that all
procurement contracts by government agencies and state enterprises that involve imports aboveB 300 million (approximately US$7 million) have a related countertrade transaction of at least one
half of the procurement value.  The coordination of countertrade is the responsibility of the
Department of Foreign Trade at the Ministry  of Commerce.  Since 1994, over 100 countertrade
                                                     
34 GATT (1991).WT/TPR/S/63 Trade Policy Review
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contracts have been concluded, with a corresponding value of exports reaching nearly
US$679 million.  This amount  represents a negligible proportion of Thailand's total exports.
(vi) Regulation of corporate practices
140. Since the last Trade Policy Review of Thailand in 1995, and particularly in response to the
1997 financial crisis, the Government has taken steps to create a more transparent, competitive, and
rules-based business environment.  This includes inter alia,  the entry into force of a new
Competition Act, a new Bankruptcy Act, measures to enforce intellectual property rights, and the
adoption of more stringent accounting and disclosure practices.  Given the extent of the crisis, the
Government has also embarked on a massive corporate debt restructuring programme covering
amounts equivalent to about 30% of GDP.  In mid-1999, it was also in the process of amending the
Foreclosure Act.
(a) Competition policy developments
141. Until 1999, competition legislation consisted of the Price Fixing and Anti-Monopoly Act of
1979.  According to the authorities, provisions relating to monopoly practices have rarely been
invoked and the legislation has mainly been used  to combat unfair retail pricing of consumer
products.  A major step towards reinforcing competition came in the 1997 amendment to theConstitution.  Under Section 87, the Government must support an economic system based on the free
market;  it has to ensure fair competition, provide consumer protection, and combat monopoly
practices.  Two new have replaced the Price Fixing  and Anti-Monopoly Act:  the Price of Goods and
Services Act, which entered into force on 1 April 1999;  and the Business Competition Act, which
entered into force on 30 April 1999.
142. The Price of Goods and Services Act of B.E. 2542 (1999) prohibits international manipulation
of goods and services, including hoarding.  The Act establishes a Central Committee on Price ofGoods and Services to supervise all transactions and other actions regarding controlled goods and
services.  Subject to Cabinet approval, the Committee has the power to introduce minimum purchase
prices, maximum selling prices or other measures in order to prevent price manipulation or other
unfair business practices, where these may affect consumers directly.  Measures may not last for more
than one year, unless a new assessment is made of economic and market conditions.
143. The objective of the Business Competition Ac t is to promote fair business practices by
preventing abuse of market power, as well as ensuring market access for new entrants.  The Act
provides for an enforcement agency, the Committee on Business Competition, which will consist of
8-12 persons appointed by the Cabinet from the public and private sectors;  its office will be located
in the Department of Internal Trade at the Ministry of Commerce.  The Committee will be empoweredunder the Act to appoint investigating subcommittees to inquire into anti-competitive practices.
144. The Act focuses mainly on the conduct of large businesses with dominant market power
rather than small and medium-sized enterprises.  It specifically prohibits dominant businesses from
setting unfair prices, unfair trading conditions, li miting supply, and intervening in other businesses
without proper reason.  The Act also subjects all mergers that may reduce competition to priorapproval from the Committee on Business Co mpetition Conspiracy and collusion among
entrepreneurs are also specifically prohibited.  The Business Competition Act does not apply to state
enterprises, or to groups of farmers who are juridic persons operating businesses for the benefit of
farmers.
145. Regulations that are likely to distort competition in the Thai economy include limits on equity
participation by foreigners in large sectors of the economy, such as in accounting and legal servicesThailand WT/TPR/S/63
Page 75
and in the banking and insurance industries.  Thus, the private sector was not given access to the
widest choice of firms for these crucial services, which may have resulted in lower quality supply,
less efficiency, and more vulnerability in the wake of the financial crisis.  Also, "public infrastructure"
– telecommunications, water, energy, and transport – has traditionally been dominated by the public
sector;  as a result, private competition, domestic or foreign, could not take place.  In order to attract
foreign capital, many regulations that differentiate between firms with foreign participation andwholly owned Thai companies, or  that bar private sector participation in general, are being
progressively dismantled.  This should lead to a re duction in those distortions facing private investors,
increase the efficiency of investment, and accelerate economic growth.
146. Reform of competition law is a cornerstone of the privatization programme, intended to
enable private enterprises to compete effectively in  sectors formerly dominated by public enterprises.
A Corporatization Act has been drafted to govern the transition of rights and privileges of public
companies to "corporatized" public companies during a limited period of time.  This legislation is
intended to avoid a regulatory vacuum until the establishment of regulators.  Independent regulatory
bodies are to be established to ensure fair competition, enforce transparency in pricing and other
management, and account to the public for the companies' operations.  In the past, these self-regulated(public-sector) companies have reportedly encountered difficulties in raising their standards and
practices and imposing sanctions on irregular behaviour.
35
(b) Changes in accounting and disclosure practices
147. Recent analyses of the East-Asian financial crisis have highlighted inappropriate accounting
and disclosure practices, and insufficient accounting requirements.36  Prior to 1998, many of the
largest corporations and banks did not follow international accounting standards (IAS) in reporting
those transactions that subsequently triggered the massive corporate bankruptcies.  In particular,financial statements did not apparently reflect the extent of risk exposure because of several
disclosure deficiencies:  the actual level of debt was frequently dissimulated through related party
transactions and off-balance sheet financing;  large short-term foreign exchange exposure was not
appropriately reported;  excessive lending to the real estate and non-traded sectors was not revealed
by audits;  and levels of loan-loss provisions were inappropriate.
37
148. This lack of transparency and accountability in corporate management prevented investors
and creditors from choosing between successful and potentially unsuccessful enterprises.  For
example, one half of a recently surveyed sample of Thai companies disclosed information regarding
third-party lending and borrowing;  most surveyed  companies did not comply with IAS regarding the
recognition and reporting of foreign currency gains and losses;  and the levels of interest and losses
relating to the use of derivative financial instruments were disclosed by only one fifth of the
companies surveyed.38  The local subsidiaries of the five largest international accounting firms were,
however, involved in auditing most of the large corporations and banks in Thailand.39  Full adherence
to the IAS would perhaps have enabled them to provide better indications regarding potential
financial difficulties of many of the corporations or banks that subsequently collapsed or becametechnically bankrupt.
                                                     
35 World Bank (1998).
36 See for example Trairatvorakul (1998).  Mr. Trairatvorakul is Deputy Secretary-General of
Thailand's Securities and Exchange Commission.
37 Rahman (1998).
38 Rahman (1998).
39 See Chapter IV(5) for details regarding market access.WT/TPR/S/63 Trade Policy Review
Page 76
149. The Institute of Certified Accountants and Auditors of Thailand (ICAAT), has stated  that it
intends to revise all Thai accounting standards using IAS as a basis as of June 1999.  The
Thai Government is also expected to require companies to prepare financial statements using these
revised standards as of 1999.  The Government has also announced the creation of a new independent
self-regulatory board with responsibility both to set standards and to oversee compliance.
150. In 1999, the Stock Exchange of Thailand (SET) introduced the mandatory requirement that
listed companies establish an audit committee by 31 December.  The committees will oversee
companies' financial reporting processes and disclosure, review internal control procedures and ensure
compliance with relevant legislation.  As of June 1999, 145 out of 400 listed companies had set up
such a committee.  Also, since January 1998, the Stock Exchange Commission (SEC) and the SET
require the establishment of an effective internal  control system for all companies wishing to make
public offerings or be listed on the stock exchange.  In order to determine whether the requirements
are met, an independent external auditor must gi ve an opinion on the company's compliance with the
established control procedures.  In this respect,  the restrictions on foreign participation in the
accounting industry may be an obstacle to upgrading practices as they limit the choice of accounting
firms.40  According to the authorities, more stringent scrutiny could be introduced in the future in
order to upgrade practices.  To ensure that International Accounting Standards are actually enforced,
the SEC has also announced that, as of 1999, it would begin disclosing information about offences of
directors, management, auditors, and other regulated entities.41
(c) The Corporate Debt Restructuring Programme
151. The process of corporate debt restructuring is another important part of the Government's
strategy for economic recovery.  A Corporate Debt Restructuring Advisory Committee (CDRAC) has
been set up by the Bank of Thailand, in cooperation with the Federation of Thai industries and theBoard of Trade of Thailand, which represent debtor companies, as well as the three creditors'
associations, namely the Foreign Banks' Asso ciation, the Thai Banks' Association, and the
Finance Companies' Association.  In October 1998, CDRAC accepted the first target list of 351
restructuring cases proposed by the member associations.  Thereafter, on 19 March 1999, the
Inter-Creditor Agreement (ICA) and Debtor-Creditor Agreement (DCA) were signed by willingThai and foreign banks and finance companies.  This has effectively been referred to as the
Bangkok Approach.  On 23 April 1999, a second target list of 316 restructuring cases was added.  In
May 1999, a simplified version of the DCA was signed by Thai financial institutions in order to
accelerate the restructuring of small and medium-size loans.  Together, the outstanding credits of
these three groups amounted to more than B 1,500 billion as of 10 August 1999.
(d) Amendments to the bankruptcy and foreclosure legislation
152. The Bankruptcy Act of 1940 has been amended twice since the last Trade Policy Review of
Thailand, first by the Bankruptcy Act (No. 4) of 1998, and then by the Bankruptcy Act (No. 5) of
1999, which entered into force on 22 April 1999.  Foreclosure proceedings (as part of the Code of
Civil Procedures) are being amended to streamline the court process for the settlement of claims.  Thedraft Secured Transaction Act will increase the provision of secured credit.  In particular, the purpose
of the draft law is to create a new type of security device in which various kinds of property will be
used as collateral in a secured lending transaction.  The draft law, however, is not designed to
supersede prior legislation dealing with security devices such as mortgages and pledges.  The new law
specifies the types of property that can be used as collateral in a secured lending transaction, and
prescribes fast and fair rules and procedures of enforcement.  The debtor is not bound to deliver
                                                     
40 World Bank (1998).
41 Trairatvorakul (1998).Thailand WT/TPR/S/63
Page 77
secured property to the secured party, nor does he need to relinquish his rights or control over the
secured properties, but can manage, use, dispense such properties in his ordinary course of business.
The secured party will have a preferred status in ranking of claims for the secured property.  These
amendments are designed to increase the effectiveness of legal execution, and hence facilitate
corporate reorganization and debt restructuring.
153. The 1998 amendment to the Bankruptcy Act was designed to provide an opportunity for
financially distressed companies to have their businesses reorganized through court-supervised
procedures, and extend more equitable treatment to creditors in the recovery process.  The new law
aims to overcome the shortcomings of the previous legislation, which, according to the authorities,
deals with liquidation in a very restrictive manner.  Under the 1998 amendment, a company will be
given no more than five years to rehabilitate its business, after which the business may be declaredbankrupt under the old bankruptcy proceedings.
154. The 1998 amendment also stipulates provisions on rehabilitation, and reorganization
procedures to prevent bankruptcy due to short-term factors such as temporary liquidity shortages.
Accordingly, the debtor or creditor may submit a petition to a court for a reorganization order of a
company whose assets are insufficient to meet liabilities.  Upon submission of the petition, the
"automatic stay" provisions come into effect and prevent creditors from pursuing their debts or
bringing civil actions against the debtors.  A court trial must be set to decide if a reorganization order
is to be issued.
155. The 1999 amendments to the Bankruptcy Act include a new method for approval of
reorganization plans, a distinction between various classes of creditor, an increase in the threshold
required to commence bankruptcy proceedings, and the establishment of the Bankruptcy Court in
June 1999.
(e) Measures to combat corruption
156. One of the main objectives of the latest amendment to Thailand's Constitution has been to
address shortcomings in Thai politics, expose administrative conduct to more scrutiny,
and combat graft.  The Constitution therefore provides for the establishment of a
National Counter Corruption Commission (NCCC) to investigate unusual wealth accumulation,corruption or malfeasance in office on the part of state officials, although implementing legislation
was still under consideration in the Senate at the time of finalizing this report.