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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. During the period under review, overall sectoral  policy has been aimed at raising export 
competitiveness and reducing anti-export bias.  The form and extent of government intervention 
depends on the sector, but has remained virtually unc hanged over the last four years, except when 
circumstances or multilateral commitme nts have required specific action. 
2. Agriculture, where labour productivity is relativel y low, remains an important component of 
the Thai economy, external trade and employment, as well as a tool for food sufficiency, and poverty 
reduction.  Government policy has been geared no t only towards raising productivity and per capita 
income in the sector, but also agricultural output and self-sufficiency in basic foodstuffs.  Average 
applied MFN tariff protection for agricultural go ods, at 25%, has remained unchanged at almost 
three times the average for non-agricultural goods.  Domestic producers have benefited from product- 
and non-specific support, including market price interv ention, soft loans, price controls for certain 
inputs, and subsidized electricity tariffs for agricult ural pumping;  such support is equivalent to about 
1% of GDP and more than 6% of total governme nt expenditure.  Support has remained focused on 
non-specific measures (75% of total support expenditure ).  A paddy support scheme remains in place;  
and incentives have been available for sh ifting away from garlic production to other  crops, including 
planned assistance for bio-fuel crops. 
3. During the period under review, steps were taken to promote energy conservation and 
increase domestic energy production so as to, inter alia , reduce dependence on energy imports;  
several regulatory reforms are under way.  State fi rms continue to dominate the oil and electricity 
sectors;  privatization of the state monopoly Electricity Generating Authority of Thailand (EGAT), which was ruled out in 2006, has remained a contentious issue as well as a concern for power supply.  To cope with recent fuel bill increases, the author ities subsidized retail gasoline and diesel prices 
temporarily, and cut the excise tax on diesel;  retail pr ice subsidies have been maintained for liquefied 
petroleum gas and bio-fuels.  Electricity has al so been subsidized, as the state-owned oil and 
electricity firms were instructed to  absorb fuel costs in 2004;  despite the restructuring of electricity 
tariffs in 2005, cross-subsidization among consum er groups remains in favour of certain low 
consumption residential categories and agricultural pu mping.  The new electricity tariff seems to be a 
market-based pricing structure that reflects actual costs. 
4. Manufacturing's contribution to merchandise exports has risen slightly, with electronics 
maintaining its role as an important export earner.  Overall average MFN tariff protection has been 
reduced, to 8.7%;  reductions have been focussed on raw materials and semi-finished items, so as to 
reduce anti-export bias.  Extensive ta x and non-tax incentives are provided to, inter alia,  encourage 
investment in promoted industries, remote areas, and SMEs.  As a result of the expiry of the 
Agreement on Textiles and Clothing (ATC) and efforts to clamp down on re-exports aimed at 
circumventing or exploiting preferential treatment in third markets, the share of textiles and clothing 
in total exports dropped slightly , to 6.2% in 2005.  High tariff protection and escalation favoured 
assembly activities in the rapidly growing automotiv e industry, which meets 95% of domestic demand 
for cars;  imports of all used cars are prohibited.  Furthermore, reductions in excise tax rates together 
with soft loans have assisted sales growth and promot ed "clean" (natural gas) vehicles;  a scheme to 
promote investment in eco-cars has been approve d and the formulation of a promotion policy for 
eco-cars is under way. 
5. Overall the services sector has benefited from progressive liberalization as well as  reform 
efforts in line with Thailand's existing GATS commitm ents.  State involvement persists to a varying Thailand WT/TPR/S/191/Rev.1 
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degree in certain financial services, basic telecomm unications, and air transportation.  In line with 
GATS undertakings, the maximum allowable foreign ownership in telecom operators was increased, from 25% to between 49% and 100%, depending on the type of business (effective in January 2006).  
Nevertheless, foreign-owne rship limitations remain or are under c onsideration in several sectors (e.g. 
tourism); for instance, a three-stage foreign ownershi p liberalization plan for insurance, initiated in 
1997, remains at its second stage, while the amendm ent of the current Life and Non-Life Insurance 
Acts is under way.  The banking sector has been improving its balancesheet and non-performing loans 
portfolio, as the migration to more stringent B asel II capital adequacy rules is under way.  The 
domestic maritime services industry remains prot ected by a cargo reservation requirement and 
cabotage restrictions;  furthermore, it has bene fited from promotional measures to attract Thai 
operators to fly the Thai flag.  Privatization and di vestment in Thai Airways and airports as well as the 
negotiation of and plans for "open skies" agreem ents with major countries from the region have 
increased competition in the industry.  The distribut ion sector has experienced significant growth, but 
a number of measures have been introduced recently to regulate large store expansion; a retail law is 
being prepared. 
(2) A
GRICULTURE  
(i) Features 
6. Thailand was responsible for over 2% of world ag ricultural exports in 2005;  it is the world's 
largest rice trader:  in 2004 it accounted for 34.4% of world trade in rice.1  The share of agriculture, 
forestry and fishing in GDP increased slightly from 9.4% in 2002 to 10.7% in 2006 (Table I.2) despite 
the impact of natural factors such  as drought and the tsunami.  The share of agricultural exports to 
total merchandise exports fell from 18.3% in 2002 to 16.2% in 20052, and the sectoral share in total 
employment decreased from 42.5% in 2002 to 39.7% in 2006.  With the sector's contribution to GDP 
rising during the same period, labour productivity ha s improved from less than one-seventh to almost 
one-fifth of the level in the rest of the economy;  according to the authorities, better technology as 
well as capital inputs have largely contributed to this improvement.  This comparatively low labour 
productivity in agriculture is because most of the labour force in the sector consists of subsistence 
farmers in rural areas;  as their small and medi um-sized farms cannot achieve economies of scale, 
their production costs are high.  The main crops pr oduced in Thailand are rice, rubber, sugarcane, 
tapioca root, and maize.  
(ii) Policy objectives and measures 
7. Since 2003, there have been some policy cha nges in response to trade liberalization and 
economic developments.  At present, the authorities' ke y priorities for agriculture are:  the structural 
adjustment plan to, inter alia , mitigate the negative impact on garlic producers of the Thailand/China 
(FTA) (Chapter II);  the introduction of the Suffici ency Economy Philosophy (Chapter II and below) 
to ensure sustainable development of the sector;  th e introduction of alternative energy crops;  and the 
introduction of Thai standards for key domestic pro ducts in order to strengthen food safety and to 
enhance quality in both the domestic and the world markets. 
8. Under its 2005-08 implementation plan of the agricultural development strategy, the 
Government aims to increase agriculture's c ontribution to GDP to US$22.5 billion by 2008 (from 
US$17.5 billion in 2005), and raise annual farm house hold income to US$1,000.  To achieve these 
goals the Government plans to provide landless farm ers with land, provide education and technical 
skills with regard to farming me thods, adjusting the agricultural product mix so as to encourage 
                                                      
1 WTO (2006c). 
2 UNSD Comtrade data. WT/TPR/S/191/Rev.1 Trade Policy Review 
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production of commodities with export potential, and the efficient management of water and other 
natural resources.3  
9. In its policy statement in November 2006, the Government emphasized its support for 
implementing the Sufficiency Economy Philosophy (Chapter II) under the sustainable agricultural 
theory, which was introduced by  His Majesty the King in 1998.4  The essential part of this theory 
concerns the proper management of land use aimi ng to reduce farmers' risk from producing only one 
commercial agricultural product.  The same theory  suggests that farmers manage their land by 
dividing it into four parts:  approximately 30% as rice field;  30% for pond;  30% for farm plants/crop;  
and the remaining 10% for housing and other buildi ngs.  Production diversity reduces the risk of 
single commodity dependence and enhances land fertility.  No information on Thailand's self-
sufficiency situation (from 2002 onwards) and targets set for main agricultural items was available 
from the authorities. 
10. The Ministry of Agriculture and Cooperatives is in charge of sectoral policy formulation and 
implementation. 
(a) Border measures 
11. Tariff protection on agricultural goods remain ed unchanged during the period under review, 
at an average rate of 25% or almost thr ee times the average tariff on non-agricultural goods 
(Table III.1).  Thailand improved its tariff rate quotas, which apply on 23 agricultural commodities 
(Chapter III).  Garlic and palm oil quotas are ad ministered by the Public Warehouse Organisation 
(PWO);  onion seeds by the Cooperative League of Onion Growers of Thailand;  onion by the Market 
Organisation for Farmers;  tobacco by the Thai Tobacco Monopoly;  and the remaining TRQ products 
are imported through the Department of Foreign Trade.   Foreign trade of certain agricultural and food 
products is subject to certain requirements such as import licences and permits, sanitary and 
phytosanitary (SPS) measures, labelling and food pro duct registration, and export taxes (Chapter III).  
According to the authorities the Thai Tobacco M onopoly does not control the export of tobacco. 
(b) Domestic support 
12. Domestic producers receive support equivalent to  about 1% of GDP and more than 6% of 
total government expenditure (Table IV.1).  Between 2002 and 2004, domestic support remained 
focused in non-specific "Green Box" measures (75% of total support expenditure).  Although both the 
absolute amount and the share of domestic suppor t expenditure to GDP have dropped slightly, the 
share of product-specific support to the total valu e of production of maize, manioc, coffee, and 
mangosteen has increased significantly , while remaining below the 10% de minimis  level.  
Product-specific support was provided mainly in the fo rm of market price intervention;  rice and 
onion producers benefit from soft/preferential loans.5  Electricity tariffs for agricultural pumping are 
subsidized (section (3)(ii)).  The Central Commission on Price of Goods and Services fixes the purchase and distribution prices of controlled goods  or services (including most agricultural goods 
and agricultural inputs, such as fertilizer and pesticid es) to prevent what are considered to be price 
                                                     
 
3 Ministry of Agriculture and Cooperatives (und ated).  The authorities indicate that adopting the 
Sufficiency Economy Philosophy does not mean that Thailand is being closed to external trade.  While 
agriculture is the main area of the country's exports, Tha iland imports a lot of products such as maize, soybeans, 
and dairy products.   
4 Thailand Legislative Assembly (2006). 
5 The authorities indicate that the state-owned Bank of Agriculture and Agricultural Cooperative 
operates on a commercial basis;  its loan rate is higher  than the minimum retail rate (MRR).  The MRR is the 
rate at which commercial lending banks char ge most credit-worthy retail borrowers.  Thailand WT/TPR/S/191/Rev.1 
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manipulation or other unfair business practices, where these may affect consumers directly 
(Chapter III). 
Table IV.1 
Domestic support to agriculture and livestock notified to the WTO, 2002-04 
(Baht million and per cent) 
 2002 2003 2004 
Total domestic support (I+II+III) 60,818.18 62,550.53 60,602.02 
Share of total domestic support to GDP (%) 1.12 1.06 0.93 
Share of total domestic support to total tax 
revenue (%) 7.74 6.93 .. 
Share of total domestic support to total 
government expenditure (%) 6.69 6.55 6.08 
I. Aggregate Measurement of Support (AMS)    
Current total AMSa 18,709.16 14,150.30 14,818.67 
Product-specific AMS    
Rice 16,878.56 11,476.33 14,112.67 
Longan 1,630.60 2,001.47 485.05b (8.80) 
Lychee 200.00 0.00b (0.00) 220.00 
Maize 209.32b (1.21) 225.41b (1.22) 959.85b (5.13) 
Manioc 965.49b (5.51) 116.11b (0.67) 1,612.05b (8.45) 
Coffee 18.55b (1.27) 21.31b (1.35) 83.50b (4.67) 
Onions 0.00b (0.00) 0.00b (0.00) 486.00 
Rambutan 250.00b (6.78) 672.50 0.00b (0.00) 
Mangosteen 100.00b (4.23) 0.00b (0.00) 320.00b (9.30) 
II. Measures exempt from the reduction commitment  
(Green Box) 
General services 42,043.02 45,346.30 45,188.85 
Agricultural research and development plan 8,863.84 8,721.70 2,678.88 
Pest and disease control project 239.47 547.55 1,257.33 
National extension and advisory  services 5,580.90 4,786.63 4,830.23 
Agricultural training services 934.28 864.82 397.89 
Infrastructural services 24,968.33 29,478.52 33,727.84 
Environmental promotion programmes .. .. .. 
Inspection services 9.72 547.55 1,718.55 
Marketing and promotion of farmers' 
organization programme 1,446.48 399.53 578.13 
III. Measures exempt from the reduction commitment – Special  
and Differential Treatment – (Development Programmes) 
Soft-loan for agricultural investment .. .. .. 
Farming input assistance programme 66.00 3,053.93 594.50 
.. Not available. 
a Current total AMS excludes items under the de minimis  clause. 
b AMS is not subject to reduction nor to inclusion in the current  total AMS because it is less than 10% of the value of product ion 
(de minimis  exclusion). 
Note: Figures in parenthesis indicat e percentage of production value. 
Source:  WTO document G/AG/N/THA/59, 13 July 2006;  and calcula tions by the Secretariat. 
13. Thailand's rice policy consists, inter alia,  of ensuring domestic price stability and supply 
(through control of the buffer stock), providing soft  loans to farmers through the state-owned Bank for WT/TPR/S/191/Rev.1 Trade Policy Review 
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Agriculture and Agricultural Cooperatives and the operation of a pledging scheme.6  This support 
programme starts at the beginning of each harvest season in order to delay the selling decision of rice 
farmers.  A Rice Policy Committee, under the chairm anship of the Deputy Prime Minister, sets the 
floor price, which seems to be always below market price for rice;  the scheme is administered by the 
PWO.  Since 2003, this arrangement  has covered less than 5% of rice growers and less than 20% of 
total production.   The authorities indicate that there is no government support for sugar producers, 
instead, the Government acts as a facilitator betw een sugar farmers and millers in setting the 
minimum farm gate price, which is below market price.  Under this arrangement, 70% of the net 
revenue from sugar and molasses is paid to farmers and 30% to the mills. 
14. Action has been taken to mitigate the possibl e negative impact of the Thailand/China FTA 
(effective since October 2003, Chapter II) on producers of certain fruit and vegetables.7  In May 2005, 
a production-limiting programme was introduced to enc ourage garlic farmers to  switch to other crops, 
such as potatoes and capsicum:  more than 1,000 gr owers accepted a deal to sell garlic to state 
agencies at a set price, committing to reduce their pl antation areas and to switch to crops other than 
those of onions, red onions, lychee, longan, and oranges.  The programme was completed in 2005. 
15. Bio-fuels such as bio-diesel and ethanol from palm oil and cassava are important alternative 
sources of energy for Thailand, and their pump prices have been subsidized (section (3) and 
Chapter III).8  Reportedly, Thailand pr oduces ethanol and bio-diesel from cassava and oil palm:  
target production of ethanol is 8.5 million litres per day.  The Government plans to provide support, 
such as technical assistance, technology, seeds, and bio-fuel plants, for fuel-related crops. 
(3) ENERGY  
16. Thailand remains highly dependant on energy imports, especially oil; reportedly, energy 
conservation schemes have proved successful, and domestic energy production is increasing, thus 
reducing reliance on imports.9  Thailand's Energy Conservation Pr ogramme has been implemented in 
three phases (phase 1:  1995-99, phase 2:  2000-04, phase 3:  2005-11 (revised:  2007-11).  Its Energy Efficiency Improvement Plan, covering industry, transport, and equipment/appliance standards, is 
expected to reduce commercial energy utilization by 7, 676 kiloton oil equivalents (ktoe) by 2011;  on 
the other hand, its Renewable/Alternative Energy  Development Plan, covering power generation and 
heat from renewable energy, bio-fuels and compressed natural gas, aims to replace commercial energy 
of the order of 11,310 ktoes. 
17. Thailand's latest Energy Policy and Devel opment Plan was announced in November 2006.
10  
The thrust of the plan in the short term is to:  restructure and improve the energy industry 
management;  ensure sufficiency and security of energy supply;  promote energy conservation and 
energy efficiency;  promote alternative renewable energy suitable for Thailand;  establish the energy 
price structure;  establish measures pertaining to clean energy and safety with due consideration of the environment and communities;  and promote the priv ate sector and general public participation in 
policy-making.  In the long run, it aims, inter alia,  to promote competition in the energy business.   
                                                     
 
6 Rice producers continue to be eligible for a paddy pledging programme run by the Bank of 
Agriculture and Agricultural Cooperatives.  Under this sc heme, farmers can pledge up to 90% of their crop to 
the Bank in exchange for low interest loans.  
7 Bangkok Post,  "Farmers Free Trade Pact Losers So Far", 5 August 2005.  Viewed at:  http://www.boi. 
go.th/english/how/sectors_detail.asp?id=46 [1 May 2007]. 
8 Ministry of Agriculture an d Cooperatives (undated). 
9 EIU (2006c). 
10 Thailand National Legislative Assembly (2006);  and Ministry of Foreign Affairs (2006b). Thailand WT/TPR/S/191/Rev.1 
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18. A draft Energy Industry  Act aimed at separating policy-ma king and regulatory functions in 
the electricity and natural gas sectors, is being developed.11  The Act will establish the Energy 
Regulatory Board.  The Ministry of Energy and the National Energy Policy Council will focus on the 
national energy policy-making function, and the En ergy Regulatory Board will regulate the operation 
of the electricity and natural gas industry, as we ll as related interconnecti on networks.  During the 
transitional period, four sub-committees have b een appointed by the Committee on Energy Policy 
Administration, under the National Energy Policy C ouncil (NEPC), to regulate important aspects in 
the electricity industry:  power tariffs and service charges, load forecast, power system interconnection, and purchase of power from indepe ndent power producers.  For the natural gas 
industry during the transitional period, the amendm ent to the Royal Decree Describing Powers, Rights 
and Benefits of the PTT Public Company Limited, B.E. 2544 (2001), is being carried out.  The PTT 
Regulatory Board will be established to regulate the market power of PTT Pcl.  Once the Energy Industry Act takes effect, the sub-committees and the PTT Regulatory Board will be dissolved. 
(i) Hydrocarbons 
19. In 2006, domestic crude oil production was 129 kbd (thousand barrels a day), accounting for 
13.46% of the total crude supply (958 kbd);  the remainder was imported.  Although oil prices are 
expected to remain high, it is estimated that there will be a slight increase in gasoline and diesel 
consumption in 2007 (i.e. 2.9% and 3.9%, respec tively) because consumers have alternative fuel 
options, such as liquefied petroleum gas (LPG), natural gas for vehicles (NGV) and bio-fuels.  
Reliance on gas imports is much lower, as 73% of  domestic demand is met by local production and 
the rest imported from Myanmar.
12  Demand for gas has been growing strongly in recent years, partly 
because of high international oil prices, a nd because it is considered a cleaner fuel.13  Natural gas 
demand in 2007 is forecast to increase by 7.6%  along with increases in domestic production and 
imports from Myanmar.  Most of the natura l gas is used for electricity generation. 
20. The oil sector is dominated by PTT Public Co mpany Limited, which has exploration and 
production interests as well substantial shares in fi ve (out of seven) refineries in Thailand.  In 
December 2006, PTT accounted for 3.4% of the total refining capacity.  PTT was partially privatized 
in November 2001 when a 32% stake was divest ed through the Bangkok Stock Exchange;  at end 
2006, 52.3% of PTT shares were in public sector hands (Ministry of Finance), and 32.1% were held 
by institutional and public investors.14  Chevron Texaco is the largest natural gas producer in 
Thailand, with production of 1,600 mmscfd (million standard cubic feet  per day) or about 66.6% of 
total domestic production.  PTTEP is the second largest , with about 28.4%;  Hess (Thailand) and 
Exxon Mobil have market shares of about 3.7% and 1.2%, respectively. 
21. Thailand's oil intensity is high due to  the low domestic price of petrol.15  The price reflects the 
relatively lower taxes and fees levied on gasoline and diesel.16  Prices are monitored by the NEPC and 
                                                      
11 As of 13 March 2007, the draft Act had been approved in principle by the cabinet, pending further 
consideration by the Council of State and the National Legislative Assembly, respectively. 
12 Domestic gas production has been expanding, reaching 836.6bn cu ft in 2005, up from 692.6bn cu ft 
in 2001 (EIU, 2006c;  and APEC, 2006a). 
13 EIU (2006c). 
14 PTT Public Company Limited online informa tion.  Viewed at: http://www.pttplc.com/en/ 
ptt_core.asp?page=ir_sh [2 August 2007]. 
15 Oil intensity is defined as the number of barrels of oil required to generate US$1,000 of GDP.  Oil 
intensity in Thailand in 2004 was roughly 6 more than six times that of Japan and roughly three times that of the 
United States (World Bank, 2006c). 
16 For example, in May 2006, these taxes and fees  accounted for 30% of th e price of gasoline in 
Thailand, compared with 60% in the EC (World Bank, 2006c). WT/TPR/S/191/Rev.1 Trade Policy Review 
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the Energy Policy and Planning Office of the Ministry of Energy.  Since early January 2004, the 
authorities have used the Oil Fund to subsidize re tail prices of gasoline and diesel temporarily by 
capping retail prices.  However, this practice ce ased in October 2004 and July 2005 when gasoline 
and diesel prices, respectively, were allowed to fl oat;  in tandem the authorities lowered the excise tax 
on diesel to absorb the effect on consumers, resulting in a negligible effect on domestic retail prices.  
The budgetary cost of the subsidy has been B 92 billion (B 85 billion for diesel subsidies and 
B 7 billion for gasoline).  The subsidy has been financed by two tranches of Oil Fund bonds and 
commercial-bank lending.17  To repay the borrowings, the author ities levy a "contribution" on petrol;  
the ceiling amount was raised in October 2006 to B 4 per litre, up from B 2.5.18  The retail price of 
liquefied petroleum gas (LPG) used for cooking h as been "stabilized" (i.e . blanket price freeze) 
nationwide since 7 May 2004 at B 16.81 per kg, representing an estimated budgetary cost of 
B 360.09 million per month based on May 2007 figures. 
22. The Government promotes the use of biofuels (gasohol and biodiesel) with the objective of 
environmental conservation.  The Government a pproved the establishment of fuel ethanol production 
plants and distribution in December 2006.  More over, the Government has introduced a new ethanol 
price formula between producers and distributors,  based on the f.o.b. price on the São Paulo 
Commodities Exchange (BMSP) in Brazil.  The Committee on Energy Policy Administration (CEPA) approved the improvement of high-speed diesel quality by allowing the voluntary blending of 
biodiesel (B100) at a maximum rate of 2% by volume (B2).  The actual costs of bio-fuels are covered by the gas price.  However, to motivate consumers to use bio-fuels, the Government has introduced a 
pricing measure via the Oil Fund Mechanism allowing for lower retail prices for bio-fuels;  retail 
price variations from B 0.7 to B 3.3 per litre (May 2007) between bio-fuels (gasohol, biodiesel) and gasoline/diesel are due to different contribution ra tes to the Oil Fund (and the Energy Conservation 
Promotion Fund).  This mechanism is temporary;  when biofuels replace gasoline and high-speed 
diesel, the mechanism will be phased out. 
23. The gas pricing structure depends on the consumer  group;  the authorities indicate that actual 
costs are covered by gas prices charged to consum ers and that no direct or indirect subsidy is 
available.  The price for power sector customers – EGAT, independent power producers (IPPs) and small power producers (SPPs) – is cost plus, which is equal to the average wellhead price of gas plus 
the pipeline tariff.  For industrial customers, the retail price is based on two components, i.e. the 
commodity charge (price charged on the basis of alte rnative fuels) and the capacity charge (charge for 
using the gas pipeline).  Gas prices are mostly agreed under long-term contracts and price volatility 
pass-through mechanisms to ensure stable returns.  Contract periods are around 25-30 years or until 
depletion of gas fields or the expiry of concessions.  The tariff rate will be reviewed every five years, 
and adjusted if there is any additional investment or expansion, or any material change in the gas 
volume or gas heating value.  During the five-year interval between reviews, the Energy Policy and 
Planning Office (EPPO) of the Ministry of Energy re serves the right to review tariff calculations as 
well as the supply and distribution of gas in the even t of any major economic or social changes.  For 
NGV vehicles, the gas price is set to be competitive with diesel prices. 
24. According to the 2006 Energy Policy and Development Plan, the authorities intend to 
establish a fair, market-based, and transparent ener gy pricing structure that would reflect actual 
costs.
19  They also aim to reduce the debt burden due to the Oil Fund's retail price stabilizing 
measures, and put in place guidelines for its future use.  The stabilization measures had put the Oil 
Fund in a precarious financial position, running up B 83,147 million in debt in 2005.  To increase the 
                                                      
17 The Energy Fund Administration Institute sold B 26.4 billion in Oil Fund bonds in October 2005 and 
issued another B 20 billion worth of bonds in February 2006 (EIU, 2006a). 
18 EIU (2006a). 
19 Ministry of Foreign Affairs (2006b). Thailand WT/TPR/S/191/Rev.1 
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net cash inflow to the Oil Fund, the Government raised the ceiling of the Oil Fund levy on gasoline 
and diesel in November 2005 (from B 1.50 to B 2.50 per litre), and in October 2006 (from B 2.50 to B 4.00 per litre).  The new levy scheme will allow th e government to discharge the Oil Fund's debt by 
March/April 2008.  The Government plans also to r estructure/adjust the pricing and subsidy for LPG 
to better reflect costs and reduce the "distorted u se" of LPG, and to revise the calculation method for 
the automatic adjustment mechanism and possibly the rate of return fo r the "pipeline" tariff 
(section (ii) below).
20 
25. In accordance with the provisions of the Fore ign Business Act B.E. 2542 (1999) and the 
Petroleum Act B.E. 2514 (1971), a foreign business licence, issued by the Ministry of Commerce, is 
required for foreign participation in petroleum expl oration, or production/distribution of petroleum 
products, or any company with foreign shareholding  of 50% or more.  Oil and gas exploration and 
production rights are granted by the Ministry of Energy with approval of the Cabinet.21   
26. The Ministry of Energy announced the 19th Petroleum Concession Bidding Round in 
July 2005.  The bidding round was open for one year  (July 2005 to June 2006);  19 applications were 
submitted for 25 exploration bloc ks.  Approvals (in batch, starting from January 2006 up to 
April 2007) were granted for 16 concessions for 21 exploration blocks:  nine onshore blocks, 
nine offshore blocks in the Gulf of Thailand and th ree offshore blocks in Deep Andaman Sea.  Such 
bidding is in compliance with the government po licy of speeding up the exploration of additional 
domestic energy resources in order to increase the national petroleum reserve.  This will eventually 
strengthen national energy security, particularly am idst the current world oil price hikes.  On 
23 May 2007, the 20th Bidding Round was announced by the Ministry of Energy, for 65 exploration 
blocks:  56 onshore blocks and 9 offshore blocks in the Gulf of Thailand.  The round is open for 
one year (until 22 May 2008):  bids are to  be received and considered by the 15th of each calendar 
month (the first batch considera tion was to be by 15 July 2007). 
(ii) Electricity 
27. In April 2007, total installed power capacity  was 27,788.5 MW, including production from 
the state-owned electricity generator and distribut or (15,794.6 MW or 56.8% of total production), 
private suppliers, and imported capacity.  Around 66% of electricity generation is fuelled by gas.  
Electricity is provided by hydro power plants (13.6%  of total capacity), thermal power plants (34.8%), 
"combined cycle" power plants (46%), gas turbin e and diesel power plants (3.5%), renewable power 
plants22 (1%), and the Thai-Malaysia interconnection (1.1%).  Power generation is vulnerable to 
supply disruptions and price volatility.23  Thailand also imports electricity from Myanmar, Lao PDR, 
and China.  Total electricity consumption in  2006 was around 141,947 MWh;  domestic generation 
accounted for 136,791 MWh (96.4%).24 
28. Thailand's electricity is generated mainly by  the SOE Electricity Generating Authority of 
Thailand (EGAT), which is responsible for ge nerating and transmitting power across the whole 
country.  EGAT has the monopoly in transmission.  Pr ivate participation in electricity generation is in 
                                                      
20 According to the authorities, a major concern in considering the rate of return is pipeline investment. 
21 The royalty rate ranges from 5% to 15%, and the compulsory exploration period is six years.  The 
concession is for 20 years, and the total exploration area of any single concessionaire may not exceed five 
blocks of 20,000  square kilometres.  Concessionaires are allowed to sell or otherwise dispose of the petroleum 
produced insofar as they meet their royalty and tax obligations. 
22 Renewable power plants are solar cell, wind , and small power produ cers (SPPs) (biomass). 
23 EIU (2006c). 
24 EGAT (2007). WT/TPR/S/191/Rev.1 Trade Policy Review 
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the form of independent power producers (IPPs), sm all power producers (SPPs) and very small power 
producers (VSPPs).25 
29. Thailand's Power Development Plan (PDP ) 2004-2015 was revised and a new PDP 
2007-2021 completed in June 2007.  The Plan serves as an investment framework for EGAT in the 
expansion of electricity generati on and transmission systems.  Du ring 2007-10 new power projects are 
to remain under construction;  during 2011- 15, the new projects will cumulatively supply 
10,541 MW;  and during 2016-21, the proposed projects are to supply around 21,250 MW.  These figures include purchases from neighbouring countries.   The next bidding round for IPPs for an 
additional 3,200 MW generation capaci ty was planned to come online during 2012-14;  the terms and 
conditions for proposals were to be announced by J une 2007.  Besides the investment in expanding 
generation capacity, EGAT will need to invest in transmission systems to provide additional 
generation capacity. 
30. The objectives of the current electricity tariff struct ure are:  (i) to reflect costs of electricity 
provision and promote efficient use of electricity;  ( ii) to allow the power utilities sufficient revenue to 
cover efficiently incurred operation costs and to finance further efficient investment;  (iii) to be fair to 
consumers;  and (iv) to provide greater flexibility in automatic tariff adjustment so that the tariffs 
reflect fluctuating fuel prices.  Since October 2005,  Thailand's electricity tariffs have been set in 
three different structures, to reflect production cost s (marginal costs), load pattern (changing patterns 
of electricity consumption), revenue requirement, and social requirements.
26  In addition, according to 
the authorities, the electricity tariff structure is fo cused on promoting efficient use of electricity, and 
providing greater fairness for all power customer categories by reducing cross-subsidization.  The 
"bulk supply tariff structure", is the EGAT tariff fo r electricity sold to the Metropolitan Electricity 
Authority (MEA) and Provincial El ectricity Authority (PEA) at a wholesale rate based on the time of 
use (TOU rate), as classified by generation and tran smission businesses;  the "retail tariff structure" 
(Chapter III), is used by MEA and PEA to sell el ectricity to power customers in seven categories 
(residential;  small enterprises/businesses;  medium  enterprises/businesses;  large enterprises/ 
businesses;  specific businesses (hotels);  government institution and non-profit organization;  and 
agricultural pumping services, including standby rate, and temporary power customers of the PEA).  
These two tariff structures comprise the base tariff, which is based on assumptions of fuel prices, inflation rates or the CPI, foreign exchange rate, and efficiency improvement in the transmission, distribution, and retail business.  The third structure,  the "electricity supply  in accordance with the 
automatic adjustment mechanism (Ft)", was introduced  to reflect actual costs and reduce the impact of 
fuel price volatility on the power utilities' financial status.  The calculation of EGAT, MEA, and PEA electricity charges includes the derived Ft rate in th e base tariff structures.  Additionally, the Ft must 
be reviewed every four months.  
31. According to 2005 estimates
27, the average retail electricity tariff is about the same as the 
marginal cost-based retail tariff, i.e. it is  only 0.6% higher than the marginal cost.28  Power consumers 
                                                      
25 In December 2003, the Government approved th e Enhanced Single Buyer (ESB) Model, which 
establishes EGAT's position as a single electricity buyer, tr ansmitter, and wholesaler.  In addition, EGAT is the 
operator of the country's power grid.  However, to ensure transparency , generation and transmission accounts 
would be separated. 
26 The NEPC, at its meeting No. 4/2005 (102nd Meeting) on 17 October 2005, passed a resolution 
concurring with the electricity tariff restructuring (Ministry of Energy, 2005). 
27 Study by PricewaterhouseCoopers (PwC) for the Thai authorities (Ministry of Energy, 2005). 
28 The marginal costs of the genera tion, transmission, a nd distribution systems takes due account of 
different periods of consumption, losses in transmission, voltage levels and geographical locations, including the 
loss of load probability (LOLP), in order to determine the capacity costs of the generation, transmission and Thailand WT/TPR/S/191/Rev.1 
 Page 113 
 
 
under the following categories receive tariff subsidiz ation:  agricultural pumping (-43.8% of marginal 
cost), government institutions and non-profit making organizations (-10.3%), a nd residential (-13%);  
others have to pay a rate higher than the marg inal costs:  small general services (+6.6%), 
medium/large general services (+6.5%, +8.1%) and specific business services (+5.5%).  Reportedly, 
EGAT and PTT Pcl were instructed to jointly absorb these fuel costs worth B 1.74 billion for 
electricity production in order to keep the energy co st adjustment charge (i.e. the Ft rate, for the 
January-October 2004 period) at 9.42 satang pe r unit (kilowatt/hour) below the actual cost.29  T h e  
authorities indicate that actual fuel costs for the quarter are calculated later and passed on to 
customers through the Ft tariff in the next bill. 
32. Privatizations, and especially the listing of E GAT, have been contentious and an issue of 
concern for power supply.30  Despite a March 2004 call off of the planned privatization of EGAT due 
to protests by various interest groups, the compan y was "corporatized" in June 2005 and an initial 
public offering (IPO) was scheduled for November  2005.  The IPO was suspended by the Supreme 
Administrative Court following the filing of a number of complaints, and in March 2006 the 
two Royal Decrees relating to the corporatization of  EGAT were overturned, and EGAT reverted to a 
statutory corporation.  Furthermore, according to th e verdict of the Court, EGAT cannot be privatized 
and must remain a state-owned enterprise.  E GAT currently operates as a state enterprise.  
Nevertheless, its development will continue under the 2003 electricity  supply industry's Enhanced 
Single Buyer (ESB) model, where EGAT retains its roles as the largest wholesale producer to supply 
bulk electricity, and the sole purchaser or singl e buyer from IPPs, SPPs, and neighbouring power 
utilities.  It also remains the national system operator, controlling system-wide generation and 
dispatch and serving as the State's mechanism in ma intaining the balance in the power supply systems 
and electricity price. 
33. Regulatory reforms are under consideration by the National Energy Policy Council (NEPC).  
An Energy Industry Act is being drafted to reflect government policy on restructuring the 
management of the energy industry;  it aims to separate the functions of policy-making, regulating, 
and operating, through establishment of an Energy Regulatory Board.  Furthermore, the Act is to 
enhance the participation and roles of the priv ate sector, communities, and the general public.  
(4) MANUFACTURING  
(i) Features 
34. The share of manufacturing in Thailand's GDP rose from 34.8% in 2003 to 35.1% in 2006 
(Table I.2);  the sector's participation in tota l merchandise exports also increased, from 74.8% to 
76.6% (2005), consisting mainly of machinery and transport equipment.31  Its share in total 
employment remained stable over the review period (15.4%, 2006). 
(ii) Policy objectives and measures 
35. No significant sectoral policy or regulatory cha nges have been undertaken in Thailand since 
2003.  Thailand places emphasis on structural reforms aimed at enhancing the country's 
                                                                                                                                                                     
distribution systems.  The cost of service provision for each customer category are al so calculated (Ministry of 
Energy, 2005).  
29 Bangkok Post (2004b). 
30 Reportedly, EGAT's power plants are too old to  run at full capacity, and some are fuelled by 
expensive bunker oil.  Persistent opposition from cons ervation, farming, and environmental groups to new 
power stations is also leading to slow progress on developing the power sector (EIU, 2006c). 
31 UNSD Comtrade data. WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 114 
 
 
competitiveness, and advancing to a high-perform ance economy by making its production base more 
skill- and knowledge-intensive.  Its current sectoral strategic plans classify industries into four groups:  (i) potential industries (electronics, automotives, te xtiles, rubber, petrochemicals and plastics, and 
processed food);  (ii) improving industries (e lectrical appliances, furniture, steel, and 
pharmaceuticals);   (iii) survival industries (machinery a nd shipbuilding);  and (iv) new wave 
industries (bio-fuel and bio-products). 
36. Overall average applied MFN tariff protecti on for manufacturing declined from 11.0% in 
2003 to 8.7% in 2006/07 (Table III.1).  In par ticular, as from January 2005, under the so-called 
three-rate programme:  import duties were cut to 1%  on raw materials (from an average of 7%);  to 
5% on intermediate products (from 12.13%);  a nd to 10% on finished products (from 20.30%).
32  
Nevertheless, action has been taken to, inter alia,  protect or promote a few sectors through import 
restrictions, anti-dumping or export duties, and preferential pricing for local bidders for public 
procurement contracts (Chapter III). 
37. Thailand continues to use extensive tax incen tives (e.g. duty and tax concessions, drawbacks) 
and non-tax incentives (e.g. concessional credit) to, inter alia,  encourage investment in manufacturing 
in remote areas and  SMEs (Chapter III).  These are operated under Board of Investment (BOI), 
Industrial Estate Authority of Thailand (IE AT), EXIM Bank and other schemes (e.g. bonded 
warehouse, export processing zones, free zones). 
(a) Textiles and clothing 
38. Following the expiry of the Agreement on Textiles and Clothing (ATC) on 1 January 2005 33, 
Thailand's textiles and apparel exports to the United States and the EC markets decreased by 1% and 
9%, respectively.  The authorities expected fiercer competition from countries with lower labour costs, such as China, In donesia, and Viet Nam, in major market s, such as the United States, the EC, 
and Canada.
34  As from September 2006, the authorities strengthened efforts to clamp down on 
re-exporting aimed at circumventing or benefitin g from origin-related pref erential treatment in 
third markets (Chapter III);  garments are among  the monitored products as ten Thai garment 
manufacturers were allegedly re-exporting garments ma de in China to the United States, where they 
are subject to anti-dumping duties.  As a result, the share of textiles and clothing exports to total Thai 
exports dropped from 7.9% in 2002 to 6.2% in 200535;  employment also decreased slightly, from 
1.08 million to 1.06 million persons.  The share of the textiles sector in GDP fell slightly, from 5.9%  to 5.4% over the same period and that of wearing apparel from 5.4% to 5.3%. 
                                                     
 
32 EIU (2006b). 
33 Under the ATC, Thai exports of textiles and cl othing were restricted by quotas in four major 
markets:  the EC, the United States, Canada, and No rway.  Thailand administered these quotas under 
two different methods.  The first was the "basic quota", allocated to exporters based on shipments in the preceding years;  the second was the "supplementary quota" derived mainly from:  (i) the balance of quota 
remaining after the basic quota had been allocated, (ii) the surrendered quota, and (iii) the quota from those who 
failed to fully utilize their allocated quotas.  This supplementary quota wa s available to all exporters and was 
allocated, in principle, accord ing to demand.  If the availa ble quota was insufficient, allocation of supplementary 
quota was made pro rata or by other methods (WTO, 2003). 
34 Although the abolition of quotas opened up new op portunities by providing Thai exporters access to 
new markets, the termination of the ATC did not lead to the complete elimination of protection in the major 
world markets where relatively high tariff averages contin ue to apply for items of th e sub-sector.  The simple 
applied MFN tariff averages in textiles and clothing rema in significantly higher than for total non-agricultural 
products (e.g. Canada 11.3% versus 4.0%;  EC 7.9% ve rsus 4.0%;  and the United States 8.7% versus 3.3%) 
(WTO, 2006b). 
35 UNSD Comtrade. Thailand WT/TPR/S/191/Rev.1 
 Page 115 
 
 
39. In 2005, upstream production of synthetic fibre and spinning contracted by 9.49% and 8.36%, 
respectively, mainly due to a shortage of quality raw materials and a shift to imported raw materials 
instead of local supplies.36  Meanwhile, downstream production, su ch as apparel, continued to expand 
despite increased competition in the world market;  garment exports rose by 1.56%.  U.S. and EC 
safeguard measures on Chinese textiles from Ju ly 2005 contributed to this expansion. 
(b) Automotive 
40. According to the authorities, the automotive industry generated the second highest level of 
export revenue in 2005, after computer and electr onic parts;  between 2002 and 2005, exports of 
motor vehicles and motorcycles37 grew at an average 35.31%.38  During the same period, the share of 
automotive products in total exports rose from 4.2% to 7.2%.39  Average production growth in the 
industry was 21.71%;  it manufactured 4,619,328 units (1,125,316 vehicles and 3,494,012 motorcycles) in 2005.
40  In November 2005, Thailand became the 14th country to achieve 
1 million locally assembled units.41  The automotive industry accounted for 5% of GDP in 2003;  in 
2005, it employed approximately 300,000 people.  Locally assemble d vehicles accounted for 95% of 
the domestic market in 2005, which is do minated by Japanese-made automobiles.   
41. Several major auto manufacturers rely on thei r Thai operations to serve both domestic and 
regional demand, and while most export growth has come from Europe, Australia, and the Middle 
East, ASEAN is becoming a major market.42  In 2005, the major car assemblers in Thailand ranked by 
production capacity, were Toyota (27.62%), Isuzu (15.75%), Mits ubishi (13.40%), Auto Alliance 
(10.63%), Honda (9.45%), Genera l Motors (9.05%), and Siam Ni ssan (8.03%).  The auto-part 
industry incorporated approximately 700 first-tier or original equipment manufacturers (OEMs), and 
1,100 second and third tier manufacturers.43  Since around 80% of auto assembling capacity belongs 
to Japanese makers, most of th ese OEMs are members of Japanese keiretsu  groups supplying their 
own customer base.  The majority of Thai companies are in the second and third tiers. 
42. Tariff escalation remains particularly pronoun ced in automotive activities.  Under the 2003 
import tariff reforms, tariff rates are classified into three categories:  raw materials at zero;  
semi-finished products at 5%;  and, finished products at 10%44;  nevertheless, these reforms have not 
yet been applied in the automotive industry.  Acco rding to the authorities, duty rates on completely-
knocked-down (CKD) automobiles range from 10% (c hassis with engine under HS87.06) to 30% 
(most items), while rates on completely build-up (CBU) automobiles range from 20% (truck tractor) 
to 80% (motor vehicles under HS87.01) depending on the type of vehicle45 (Chapter III);  this 
information does not appear in the version of  the 2006 Customs tariff available to the WTO 
Secretariat for the preparation of this report, but the authorities state that it may be found under HS code 8708.99.  A 60% duty is levied on CBU motorcycles, as no CKD exists.
46 
                                                      
36 Bank of Thailand (2006). 
37 In 2005, motorcycles represented 75% of the exported units. 
38 Ministry of Industry (2006). 
39 UNSD Comtrade. 
40 Ministry of Industry (2006). 
41 Thailand was poised to move ahead of the Russian Federation (about 1.3 million units) in 2006 
(Board of Investment, undated (a)). 
42 Board of Investment (2005). 
43 In recent years, many new inve stments from non-Japanese first tier suppliers have entered Thailand. 
44 Ministry of Industry (2006). 
45 Ministry of Industry (2006). 
46 USTR (2006). WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 116 
 
 
43. Excise duties on motor vehicles have ranged from 3% to 50% since 2005, depending on their 
engine capacity.47  The strong domestic demand for automobiles in 2005, was partly due to excise tax 
reductions, from 35% to 30% on passenger cars with e ngine capacities of two litres or less, estimated 
to represent about 70% of cars on the market.48  In 2004, the Cabinet revised the automotive excise 
tax, adding two new classifications for passenger car s:  (i) alternative fuel vehicles, natural gas 
vehicles (NGV) or ethanol (E-20) (20% rate)49;  and (ii) energy saving vehicles with hybrid engine, 
electric or fuel cell (10% rate).50  The main emphasis for NGV appli cation, which has been promoted 
over the past 20 years, is placed on large vehicles, such as trucks, trailer tractors and transport vehicles.  The state oil firm PTT is playing an im portant role in promoting the use of NGV;  and 
cheap loans are provided for vehicle owners  willing to switch to NGV-powered engines.
51  Loans with 
instalment payments for as long as 36 months offer zero interest if the vehicle owner applied before 
March 2007;  25,000 applications were expected for such loans.  As of January 2007, there were 
approximately 30,000 NGV cars and about  102 NGV stations in Thailand.  
44. Quantitative import restrictions in the form of non-automatic licensing remain in place on 
certain used diesel engines (331-1,100 cc).52  Imports of used motorcycle engines (except for  those of 
50 cc) are absolutely prohibited.53  Imports of used passenger cars are also prohibited.  No 
local-content requirements have been in force since 1 January 2000.54  No automobiles have been 
exported to Chinese Taipei under the bilateral voluntar y export restraint arrangement (still in place) 
since its accession to the WTO in 2004 (Chapter III).   
45. In November 2006, the BOI approved a scheme to promote investment in eco-cars and is now 
in the process of formulating a promotion policy (Chapter III).55  Thailand's International Car Policy, 
which seems to offer fair and equitable opportunities to local and foreign inv estors, has helped turn 
the domestic automotive manufacturing base into one of the world's leading producers, especially for 
1-ton pick-up trucks.  The quality of Thai automotiv e products seems to be internationally recognized 
because domestic regulations on the sector follo w the United Nations Economic Commission for 
Europe motor vehicles standards.56   
46. Under a B 8.7 billion (US$217.5 million) Master Plan for Thai Automotive Industry 
2002-2006, proposed by the Thailand Automotive Institute (TAI), Thailand was to achieve a 
1.8 million production goal and fulfil its "Det roit of Asia" aspiration (Vision 2011).57  The proposed 
plan, which apparently has never been endorsed, c onsisted of five key projects:  a B 1.5 billion 
(US$37.5 million) human resources development pr ogramme;  a B 500 million (US$12.5 million) 
automotive experts dispatching programme to estab lish clusters and upgrade auto parts manufacturing 
                                                      
47 Ministry of Industry (2006). 
48 This change resulted in vehicle price reductions ranging from B 14,000 (US$350) to B 100,000 
(US$2,500).  More widespread credit availability also helped to boost demand (Board of Investment, 2005). 
49 Thailand expects 260,000 NGV cars to be in use by the end of 2008.  Asia Pacific Energy Research 
Centre (2007). 
50 Ministry of Industry (2006). 
51 Asia Pacific Energy Research Centre (2007). 
52 WTO (2003). 
53 U.S. & Foreign Commercial Service and U.S. Department of State (2006). 
54 Local-content requirements comprised:  not less than 54% of local parts for passenger cars;  a 
compulsory parts list amounting to 60-70% for small trucks;  incorporation of seven specified locally produced 
parts and at least 40% domestic content for trucks and buses;  and motorcycles were required to incorporate a 
local engine (Ministry of Industry, 2006). 
55 EIU (2006b). 
56 Thailand has been a contracting party to the1958  UNECE WP.29 agreement since May 2006. 
57 This Plan was proposed to the Office of Industrial Economics of the Ministry of Industry in 
September 2002 (Thailand Automotive Institute, 2002;  and Board of Investment, 2005). Thailand WT/TPR/S/191/Rev.1 
 Page 117 
 
 
technology;  a B 6 billion (US$150 million) fund fo r the establishment of research and development 
centres (auto parts and car testing centres);  a B 500 million (US$12.5 million) information 
technology centre to analyze industry trends;  a nd a B 200 million (US$5 million) automobile export 
promotion centre.  If fully implemented, the automotive and auto parts industry could be worth 
B 1.3 trillion (US$32.5 billion) by 2010.  No information was available from the authorities on this 
Plan. 
(c) Electronics 
47. The electronics industry has maintained its significant role in Thailand's economy as an 
important export earner, ai ding overall development.58  Nevertheless, the industry's share of total 
merchandise exports declined progressively  from 24.9% (2002) to 21.7% (2005).59  During the period 
under review, the industry has benefited from subs tantive tariff reductions in raw materials, 
components, and finished goods (e.g. televisions , fibre optics) under multilateral and ASEAN Free 
Trade Area commitments (Chapter III).  On top of other incentives, in December 2005, the BOI announced extended tax breaks for the electronics sect or, which went into effect in January 2006.
60  
Furthermore, the EC's GSP regime, in force as of 1 January 2006, restored GSP benefits for Thailand 
in several sectors including consumer electronics. 
(5) SERVICES  
(i) Features 
48. Services make up a large part of the Thai economy.  Despite a slight drop in share of GDP, 
from 46% in 2003 to 44.7% in 2006, their contribution to total employment (mainly in trade, hotels 
and restaurants) rose slightly from 37.4% to 38.4%  (Table I.2).  The sector remains dominated by 
wholesale and retail trade, followed by transport and communication, hotels and restaurants, and financial intermediation. 
49. Between 2003 and 2006,  exports of non-factor services rose by 51.8% to approximately 
US$24 billion, which is around 19% of merchandise exports (Table I.3).  However services imports 
over the same period grew more than 80% r esulting in the services ba lance declining from 
US$5.1 billion to US$4.7 billion. 
(ii) Overall commitments under the GATS 
50. Thailand has not changed its GATS commitments si nce its previous Review.  In the ongoing 
negotiations, Thailand submitted initial and revised offers, to further liberalize trade in services, in 
August 2003 and October 2005, respectively.
61  Thailand offered to widen the scope of specific 
commitments by including a new category of mode  4 in its horizontal section and improved its 
                                                      
58 Royal Danish Embassy Bangkok (2006). 
59 UNSD Comtrade data covering:  storage units for data processing, electronic integrated circuits and 
micro assemblies, parts and accessories, colour television receivers, data processing equipment, and input or 
output units for automatic data processing machines. 
60 Investors in electronics in Zone 1 (Bangkok and its neighbouring provinces) are now offered a 
corporate income tax holiday of up to five years.  Previously, project s in this zone could receive only a 
three-year tax holiday if they were on an industrial estate .  Investments in Zone 2, but outside industrial estates, 
receive a six-year tax holiday (up from  three years);  investment within an  estate benefit from a seven-year tax 
holiday (unchanged from before).  The eight-year tax holiday for projects in Zone 3, covering 60 less-developed 
provinces, remains unchanged (EIU, 2006b). 
61 WTO documents TN/S/O/THA, 15 September 2003 ;  and TN/S/O/THA/Rev .1, 8 November 2005. WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 118 
 
 
sector-specific section in:  business services, distributi on, education, tourism, recreational, maritime, 
and air transport services. 
51. Thailand's Schedule covers almost half of  the 160-odd services sectors falling under the 
GATS.62  Foreign equity limitations of 49% on comme rcial presence are scheduled for a range of 
professional services, such as legal, accounting, and architecture, as well as for certain construction, 
education, environmental, tourism, recreational, cultural and sporting, and maritime, rail, and road 
transport services.  In other sectors, foreign equity limitations range from 20% to 49% for 
telecommunication services, and 25% to 49% for most banking and non-banking financial services 
(including insurance).  In financial services, although new branches are subject to discretionary 
licensing, as from 2004 the Financial Sector Mast er Plan (section (iii)(a)) has allowed qualified  
financial institutions to upgrade and created new types of licence.63  At present, there are two types of 
Thai financial institution (commercial banks and re tail banks), and two type s of foreign financial 
institution (foreign bank branch and foreign bank s ubsidiary).  Access through locally incorporated 
banks is limited to the acquisition of shares of ex isting banks, and foreign e quity participation is 
limited to 25%.  Thailand has also listed MFN exemptions on computer reservation services as well as 
certain transport and business services. 
(iii) Banking, finance, and insurance 
(a) Banking and finance 
52. Since the Asian financial crisis, Thailand has main tained a process of financial sector reform.  
The number of financial institutions was reduced to 48 in December 2006 from 58 in December 2003.  
There are now 34 commercial banks and 14 finance companies, credit foncier companies, and 
state-owned specialized financial institutions (Chapter III).64  The changing landscape of the sector is 
due to consolidation and to the issuance of new banking licences. 
53. In 2006, Thai banks accounted for more than 70% of the banking sector's assets and 71% of 
liabilities, while foreign banks account for 10.5% of assets and 9.4% of liabilities.  Furthermore the 
four largest banks (Bangkok Bank, Kasikorn Bank,  Siam Commercial Bank, and Krung Thai Bank 
(KTB)) account for over 43% of the sectors assets and 43.3% of liabilities;  public sector banks 
account for 17.1% of assets and 17.6% of liabilities. 
54. There are three public sector banks, Krung Thai Bank, Siam City Bank, and BankThai Bank 
(Bangkok Metropolitan Bank, merged with Siam City Bank in 2002).  The Government divested 
some of its shares in KTB in 2003, while still ma intaining a controlling stake of 57% (as of June 
2007).65  Additionally, the Bank for Agriculture  and Agricultural Cooperatives (BAAC) was 
transformed into a rural bank on 16 March 2006,  through an amendment to the BAAC Act.66  This 
was in line with the Government's objective of improving access to financial services in rural areas, including through micro-credit operations.  Current ly, the BAAC provides credit not only to farmers 
for agricultural purposes, but also to rural people fo r various purposes.  Interest rates charged vary 
according to each borrower's risk profile.  The inte rest rates quoted are based on the minimum retail 
                                                     
 
62 WTO (2006a);  and WTO (2003). 
63 WTO document GATS/SC/85/Suppl.3, 26 February 1998. 
64 World Bank (2006c). 
65 Krung Thai Bank is the largest public sector bank, accounting for 16% of both bank assets and 
liabilities.  On the same basis, Siam City Bank and BankThai Bank account for 5.5% and 3% of the banking 
sector, respectively.  Percentage of KTB's shareholding for the First Quarte r as at 9 April 2007, viewed at:  
http://www.ktb.co.th/PublicApp/ktbweb/en/pid/0700001452 [9 April 2007]. 
66 World Bank (2006b). Thailand WT/TPR/S/191/Rev.1 
 Page 119 
 
 
rate (MRR), such as MRR+1% or MRR+2%.  Th e calculation of MRR is based on the bank's 
operating cost.  The total amount outstanding on micro-credit loans has increased from B 287 billion in 2003 to B 426 billion in 2007. 
55. Non-performing loans (NPLs), which were a ser ious problem and had reached highs of over 
40% of total loans in 1998, have fallen significan tly.  The Bank of Thailand (BOT) target was for 
NPLs of Thai banks to fall to less than 5% of total loans by 2006;  in June 2006, financial institutions' 
NPLs were 8.2% of total loans, down from 15.7% in December 2002.
67  The reduction in NPLs could 
be attributed to BOT measures to expe dite NPL resolution;  these included, inter alia,  the tightening 
of the provisioning requirement on long-standing N PLs, and encouraging Thai private banks to 
voluntarily sell their distressed loans to asset management companies (AMCs).68  The authorities 
indicate that the transfer prices of these loans are negotiated on commercial terms.  There are 
14 AMCs, excluding the Thai Asset Management Corporation (see below), 12 of which are private and 2 are owned by the Financial Institutions De velopment Fund (FIDF).  The amendment of the 
AMC Act, in March 2007, allows AMCs to buy loans from private banks, private AMCs, and 
companies. 
56. The key government agencies responsible for expe diting the process of debt restructuring are 
the Corporate Debt Restructuring Advisory Committee (CDRAC) and the Thai Asset Management Corporation (TAMC).  Since its inception in June 1998, CDRAC has facilitated and expedited private 
debt restructuring negotiations, while TAMC, est ablished in September 2001, has the mandate to 
manage impaired assets transferred from both state-ow ned and private financial institutions as well as 
AMCs.  Since their establishment, CDRAC and TAMC have restructured loans worth B 2,279 billion. 
The CDRAC ceased operations in October 2006 in line with the relevant provision of the Thai Asset 
Management Corporation Emergenc y Decree B.E. 2544 (2001) stipulating its closure within 
five years.
69 
57. Currently, commercial banks and finance companies are subject to two principal laws and 
numerous regulations and notifications:  Commerc ial Banking Act, B.E. 2505 (1962), last amended 
by Emergency Decree Amending the Commercial Ba nking Act (No. 4), B.E. 2541 (1998);  and Act 
on the Operation of Finance, Securities and Cred it Foncier Businesses (1979), last amended by 
Emergency Decree Amending the Act (No. 5), B.E.  2541 (1998).  The BOT, in conjunction with the 
Ministry of Finance, oversees the administration of these two Acts.  
58. The BOT is responsible for overall supervisi on of the financial sector as well as policy 
formulation for the sector.70  The Minister of Finance has the ma ndate to grant, refuse, suspend or 
revoke commercial banking licences.  The Minister has fully entrusted the examination and overall 
supervision of commercial banks to the BOT, and co nsults the BOT on matters under its sole purview.  
The Commercial Banking Act (CBA) provides an ad equate framework for the BOT to supervise 
financial institutions at a minimum prudential st andard.  The Minister, upon recommendation by the 
BOT, is empowered by the CBA to order a "problem atic" bank to promptly rectify its "(financial) 
conditions". 
59. Under its 2004 Financial Sector Master Plan ( FSMP), Thailand aims to develop an efficient, 
stable, and competitive financial sector with greater  balance between the banking sector and the 
capital market, as well as ensuring consumer protection and universal access to financial services.  The licensing regime was rationalized in order to cl arify the overlap in scope of business for different 
                                                     
 
67 World Bank (2006c). 
68 For more information about AMCs, see WTO (2003). 
69 Bank of Thailand (2005). 
70 Chandler and Thong-Ek (2006). WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 120 
 
 
types of financial institution.71  Also competition between foreign and domestic banks appears to have 
improved.  A foreign bank is now allowed to estab lish a subsidiary, which can engage in the same 
range of businesses as a Thai commercial bank and can open up to four branches in addition to its 
head office.  Alternatively, a foreign bank can main tain a single branch status with similar business 
scope as a Thai bank, but is not perm itted to open an additional branch.72  The expansion of the 
foreign ownership limit from 25% to 49% is include d in the new commercial bank law, the Financial 
Institutions Businesses Act (FIBA), which in June 2 007 was being debated in the Council of State.  
The revised foreign ownership limit will take effect once the FIBA passes all remaining legislative procedures.  The FSMP II is at the drafting stage (to be completed in early 2008);  the FSMP II is to 
continue with the aim of enhancing competition a nd efficiency through further deregulation of the 
banking industry's scope of bus iness and its liberalization.  
60. To curb excessive consumer indebtedness and to protect public interest, the BOT issued a 
regulation, effective July 2005, that places a ce iling on loan amounts, dependant upon the borrower's 
income, as well as a limit on total effective costs  (including 15% interest rate, penalty fee, service fee 
and other) at 28% per annum.
73 
61. According to the BOT, consolidated supervision is being introduced to deal effectively with 
the trend towards universal banking.74  The BOT draft guideline on consolidated supervision was 
issued in September 2005 and April 2006, based on the study of international standards, structures of 
five large commercial banks in Thailand, and industr y feedback.  In July 2006, the BOT issued the 
policy statement on consolidated supervision, wh ich defines the scope of a banking group, whose 
operations – together with  subsidiaries, affiliates, and other en tities in which the group has substantive 
holdings – are subject to consolidated supervis ion.  The statement also specified prudential 
regulations on intra-group transactions, capital adequacy (see below), and large exposure on a 
consolidated basis.  Banks were to submit appli cations to the BOT for approval of their financial 
group by September 2006.  They were also require d to prepare and submit their 2005 consolidated 
financial statement by the end of 2006.  In Oct ober 2006, all 14 commercial banks registered in 
Thailand submitted applications to the BOT for the set-up of their financial groups as prescribed in 
the "Guideline".  All applications were approved by December 2006.  Upon their approval, the BOT 
had also imposed prudential conditions for commercia l banks and the financia l groups in addition to 
those prescribed in the "Guideline".  From 2007, a ll financial groups have to comply with all 
requirements set out in the "Guideline".  Moreover, on -site and off-site superv ision is to be conducted 
on a consolidated basis in accord ance with the policy statement by the Supervision Group.   
62. In 1997, the Government announced explicit full guarantees for depositors and creditors of 
commercial banks, foreign bank branch es, financial companies, and credit foncier companies.  Later, 
in 2003, the guarantee for creditors was abolished owing to economic recovery.  A deposit insurance 
agency is to be established as a legally separate entity with initial capital of B 1 billion.  Annual 
premiums collected from members should not exceed  1%.  The existing blanket guarantee will be 
replaced by a limited insurance with coverage of B 1 million.  The authorities plan to reduce coverage 
gradually from full guarantee to the targeted amount, te ntatively within four years.  The full coverage 
will remain for the first year, and will be redu ced each year to B 50 million, B 25 million, 
                                                      
71 Licensing for domestic deposit taking financial institutions has been reduced from four types – 
commercial bank, restricted bank, finance company, and credit foncier company – to two, i.e. commercial bank 
and retail bank.  Minimum tier 1 capital requirements are B 5 billion for a commercial bank, B 250 million for a 
retail bank (World Bank, 2004). 
72 Minimum paid up capital requirements for a full branch or a subsidiary are B 4 billion and 
B 3 billion, respectively. 
73 World Bank (2005b). 
74 BOT (2005). Thailand WT/TPR/S/191/Rev.1 
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B 10 million and B 1 million, respectively.  In June  2007, the draft  Deposit Insurance Act was being 
reviewed by the Council of State;  it will subsequent ly be proposed to the Parliament for approval. 
63. Since January 2005, the BOT has been publishing  a reference rate for short-term interest 
rates, called the Bangkok Interbank Offered Rate (BIBOR) so that banks and companies can have a 
benchmark rate for short-term funding.75  BIBOR is intended to promote longer-term lending in 
addition to the overnight and on-call loans that are pr evalent in the market.  Reforms of the monetary 
operation framework (Chapter I), effective 17 Janua ry 2007, include:  (i) changing the monetary 
policy operating target (policy rate) from the 14-da y repo to the 1-day repo;  (ii) synchronizing 
reserve maintenance periods with Monetary Polic y Committee meetings for all types of financial 
institution required to hold reserves;  and (iii) establishing and End-of-Day Liquidity Adjustment 
Window whereby the BOT offers both overnight lendi ng and borrowing to financial institutions at the 
policy rate +/-50 basis points to limit interest rate volatility. 
64. As regards prudential regulations, the minimum capital adequacy ratio (CAR) is 8.5% for 
locally incorporated banks, 7.5% for branches of foreign banks, 8% for finance companies, and 6% for credit foncier companies.  During the period un der review, banks maintained CARs in excess of 
minimum requirements:  the CAR rose from 12.9%  in December 2002 to 14.3% in April 2007 and 
tier 1 capital rose from 8.9% to 11.4% over the same period.  This development was, inter alia , due to 
continued improvement in operations  of financial institutions, the recapitalization of certain banks, 
and the raising of new capital through the issuance of subordinated debt instruments, common stocks, 
as well as hybrid tier 1 capital instrument.  Capital injection into foreign branches from head offices in 
preparation for upgrading and loan expansion also played a role.
76  The authorities indicate that all 
financial institutions are able to meet their CAR requirement.  
65. A Market Risk Supervision Policy, issued in 2003, aims to offer comprehensive supervisory 
guidelines for all elements of market risk:  interest  rate, equity price, exchange rate, and commodity 
price, and incorporates both quantitative measures, with respect to capital charge, and qualitative 
measures with respect to internal control and tr ading book policy guidelines.  The policy was fully 
implemented at the end of June 2005.  In December  2006, the banks' BIS capital/asset ratio (as set by 
the BIS, Bank for International Settlements) decreas ed slightly, from 13.85% to 13.66% as a result of 
the implementation of market risk capital requireme nt.  Policy guidelines on liquidity risk, credit risk, 
operational risk management, and corp orate governance were also issued.77 
66. Full implementation of the Basel II Accord by Th ai banks is planned for late 2008.  The BOT 
announced that it would initially require Thai banks  to comply at least with the Standardized 
Approach (SA), but they can choose to implemen t the Internal Ratings Based Approach (IRB).  
Before full implementation, banks will have to run risk-weighting under Basel I in parallel with 
Basel II, starting from end 2007:  the BOT would review a bank's risk management system and process;  and banks would be required to make sufficient disclosure, especi ally about their capital 
adequacy and risk profile.  The BOT has also deve loped specific measures for each of the three pillars 
(under Basel II):  minimum capital requirement, supe rvisory review, and market discipline.  All banks 
were required to submit their Basel II implementation timeframe by June 2006
78, indicating the 
approaches that they intend to adopt for capita l calculation, as well as completing self-assessment 
forms.  Based on the submitted preliminary applications, the authorities indicated that most Thai banks plan to adopt SAs for credit risk and for ope rational risk (TSA) capital calculation.  After the 
                                                     
 
75 BIBOR is the rate of interest at which banks can borrow funds from other banks in the Bangkok 
interbank market (Chandler and Thong-Ek, 2006). 
76 World Bank (2006c). 
77 Bank of Thailand (2003). 
78 World Bank (2006c). WT/TPR/S/191/Rev.1 Trade Policy Review 
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preliminary assessment by the BOT, banks had to subm it their final applications by September 2007;  
the final approval process will take place during 2 008.  Following close consultations with the 
industry, the BOT has issued a series of policy guidelines on all pillars since 2006. 
67. Due to the alleged complexity and the conti nuing revision of the International Accounting 
Standard 39 (IAS 39), the Federation of Accounting Professions (FAP), the accounting 
standards-setter in Thailand, has taken a step-by-step  approach in analysing each part of the IAS 39.  
The FAP plans to issue a Thai Accounting Standard  that complies fully with IAS 39 by the end of 
2007.  However, the implementation date will be dete rmined as appropriate after the industry hearing 
and impact assessment.  In the meantime, the BOT has partially implemented IAS 39 with respect to 
loan loss provisioning since Decemb er 2006.  In this regard, banks need to calculate loan reserves 
based on the difference between the book value of lo ans and the present value of expected cash flows 
from the sale of collateral, or the difference betw een the book value of loans and the present value of 
expected cash flows from debtors.  According to the authorities, the IAS 39 is unlikely to significantly 
or abruptly affect banks' performance because the BOT has been enforcing the new standards 
gradually. 
68. From 2003 to mid 2006, interest rates have move d in response to the monetary policy stance 
(Chart IV.1).  Since 2007, the authorities have  adopted an accommodative stance to support growth, 
with the cut in policy rate.79  However, in 2005, several commerc ial banks increased their deposit and 
lending rates despite ample liquidity in the bank ing system.  When small and medium-sized banks 
started to compete for deposits by increasing their de posit rates, large private banks were pressured to 
raise their interest rates to maintain their market shares although their liquidity was not tight 
(Chart IV.1).80  Spreads between lending and deposit rates remain wide, reflecting weak competition 
in the banking sector (Chart IV.1).  During the pe riod under review the interest rate spread fell from 
4.75 to 2.75 percentage points before rising to 4.5 points in May 2007. 
(b) Capital markets 
69. During the period under review the Thai capital markets have expanded with foreign investors 
strengthening their presence.  The SET's (Stock Ex change of Thailand) capitalized value in 2006 was 
B 5,080 billion (B 4,790 billion in 2003).81  The market capitalization of  the Market for Alternative 
Investment (MAI), established in 2001 for small and medium-sized enterprises, was B 21.8 billion in 
2006 (B 13.7 billion in 2003).  Local  retail investors accounted for 55% of total transactions for the 
SET and the MAI in 2006 (76% in 2003), while fo reign investors and institutions accounted for 34% 
(18% in 2003) and 11% (6% in 2003), respectively. 
70. The Securities and Exchange Commission (SEC) is responsible for regulating securities 
businesses in Thailand.  Under the Securities Excha nge Act 1992, the SEC is empowered to supervise 
and develop the primary a nd secondary markets of the country's capital market system as well as 
finance- or securities-related participants and institutions.  Under the Derivatives Act 2003, which 
entered into force in January 2004, the SEC is author ized to formulate policies, promote, develop, and 
regulate markets for derivatives based on securities, secu rities indices, exchange rates, interest rates, 
financial indices, gold, and crude oil.  
                                                      
79 Bank of Thailand (2003). 
80 World Bank (2005b). 
81 SET (2007) and SET (2005). Thailand WT/TPR/S/191/Rev.1 
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0.01.02.03.04.05.06.07.08.09.010.0
January 2002
July 2002
January 2003
July 2003
January 2004
July 2004
January 2005
July 2005
January 2006
July 2006
January 2007
May 2007
Source:     IMF, International Financial Statistics .Per centChart IV.1
Interest rate spread, 2002-07
Lending rate
Deposit rate
Interest spread
 
71. A Thai Capital Market Master Plan II (2006-201 0), approved in July 2006, was initiated by 
the Federation of Thai Capital Market Organizati ons (FeTCO) and government bodies, to provide 
strategies to further develop an d strengthen the capital market.82  The SEC's three-year Strategic Plan 
implemented in January 2007, incorporates the obj ectives of the Capital Markets Master Plan II.83  At 
present, the SEC Plan aims to:  (i) strengthen  the competitiveness of securities businesses and reduce 
their dependence on brokerage fee revenues through ser vice diversification;  (ii) promote an active 
role for the Thai capital market at the regional level;  (iii) further diversify investment options;  (iv) 
expand bond markets;  (v) raise the standards of th e Thai capital market;  and (vi) enhance the SEC's 
image as an efficient and reliable organization.  The SEC  Plan discussed in Chapter III is  part of this 
Plan. 
72. The Foreign Business Act (1999) covers foreign equity in securities companies.84  
Foreign-owned securities firms (up to 100%) ma y engage in brokerage business.  However, 
non-brokerage securities activities, such as underwr iting, dealing, investment advisory, and fund 
management, are List 3 businesses, i.e. closed to firms with majority foreign equity unless permitted 
by the Director-General of the Department of Business Development under the Ministry of 
Commerce.  Since the Ministry of Finance does not issue new broker or dealer licences, new entry is 
only possible by buying equity in existing securities firms.  The SEC applies its licensing rules uniformly irrespective of foreign equity holdings. 
                                                     
 
82 The first Capital Market Master Plan, issued in 2002, emphasized corporati zation of the SET, better 
corporate governance in securities businesses, and the restructuring of the SEC with a view to improving 
efficiency and accountability of  capital markets (WTO, 2003). 
83 EIU (2007a);  and World Bank (2007). 
84 WTO (2003). WT/TPR/S/191/Rev.1 Trade Policy Review 
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73. Investment management businesses under the SEC Act (e.g. mutual fund management, 
private fund management, and venture capital mana gement) are categorized as List 3 businesses under 
the Foreign Business Act (1999).  There are currently two investment management companies exempted from the majority shareholding clause.  In February 2007, the Cabinet approved a draft 
amendment to the Securities and Exchange Act.
85  The proposed amendments cover key issues such 
as:  (i) restructuring of the SEC Board;  (ii) e nhancement of listed companies' corporate governance so 
as to better protect shareholders' in terests;  (iii) development of th e bond market;  (iv) enhancement of 
the SEC's oversight power over the Stock Exchange ;  (v) extension of the reporting requirement 
coverage for securities acquisition at business takeover;   and (vi) strengthening the auditor duties in 
relation to corporate frauds.  The dr aft is being considered by the O ffice of the Council of State before 
submission to the National Legislative Assembly.   
74. As of 2006, there were 39 active brokerage  companies operating as members of the SET.86  
Brokerage fees, which were deregulated in Octobe r 2000, were re-introduced by SEC in January 2002 
for at least three years;  in May 2006, they were  extended by the SET's Board of Governors for three 
more years, starting 14 January 2007.  Minimum br okerage fees are set at 0.25% of trading turnover 
for non-internet trading, and since January 2007, onlin e trading fees have been at 60% of this rate or 
0.15%.87  As from 1 January 2010, a sliding scale of brokerage fees will be introduced, beginning 
with a minimum rate of 0.25% and decreasing as the trading amount grows.  Also at that time, when the daily trading turnover are over B 20 million, fees w ill be negotiable;  the internet trading rate will 
be 60% of the sliding scale.  As from 2012,  all brokerage fees will be fully negotiable.
88 
(c) Insurance 
75. The insurance industry has continued to grow.  Between 1999 and 2006, the average annual 
growth rate of total direct premiums was 11.05%;  in 2006, they amounted to US$7.44 billion.  Life 
insurance premiums increased by 1.52% to US$4. 81 billion;  and non-life premiums by 9.32% to 
US$2.62 billion in 2006.  Apart from the generally low rates of return in the financial market, continued economic growth, increased exports, and the rise in sales of motor vehicles, growth in life 
insurance premiums was, inter alia,  fuelled by the increase in the annual tax-deductible limit on 
premiums paid to life insurance policies issued by  locally incorporated insurers from B 10,000 to 
B 50,000 on new policies from 1 January 2002 (see below).
89  
76. At present, there are 99 insurance companie s, comprising 25 life insurance companies 
(including 1 foreign branch and 1 life re-insure r) and 74 non-life insurance companies (including 
5 foreign branches, 5 specialized health insurers , and 1 non-life re-insurer).  Most insurance 
companies have foreign shareholdings.90  At end-December 2006, the life insurance market was 
dominated by three companies:  A.I.A. (42.27% of total premiums), Thai Life Insurance (13.96%), 
and Ayudhya Allianz C.P Life (10.55%).  The non- life insurance market shares were more widely 
spread;  the major player was the Viriyah Insura nce, which accounted for 14.35% of total annual 
premiums. 
                                                      
85 World Bank (2007). 
86 Bangkok Post (2006c). 
87 SET (2007). 
88 Bangkok Post (2006c). 
89 WTO (2003). 
90 For example, New York Life International (U.S.)  owns 25% of Siam Commercial Life Assurance;  
Allianz (Germany), 25% of Charoen Pokphand Life Assu rance;  and Zurich Insurance (Switzerland), 25% of 
National Life Assurance (AAR, 2003). Thailand WT/TPR/S/191/Rev.1 
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77. A three-stage liberalization plan for insurance was initiated in 1995 to allow greater foreign 
participation;  the first stage was completed and the plan has remained in its second stage since the 
previous TPR of Thailand in 2003.  During the firs t stage, Thailand started to open up its insurance 
market by creating a more competitive environmen t and a better standard of services by inviting 
applications for new insurance licences for the first time since 1983:  12 new life insurers and 
13 non-life insurers were approved.   The Government is in the process of amending the current Life 
and Non-life Insurance Acts.  A key area is to propose foreign ownership of up to 49% (from 25% 
currently).  In March 2004, the Cabinet approved the proposed draft amendments of Life Insurance 
Act B.E. 2535 (1992) and Non-Life Insurance Act B.E. 2535 (1992).  In June 2007, the Acts were 
under consideration by the Council of State befo re being submitted to the National Legislative 
Assembly.  The final stage of the liberalization plan, aiming to open market access for foreign insurers, will consist of full market liberalizati on, where domestic and fo reign insurance business 
entities operate in level playing field.  
78. The Department of Insurance (DOI) of the Ministry of Commerce supervises insurers. 
Improved supervisory measures have been adopted  on solvency margins, technical reserves, 
investments, and disclosure requirements.  Mini mum capital requirements are set at B 50 million (or 
not less than 2% of policy reserves, whichever is higher) for life insurers, and B 30 million (or not less 
than 10% of net premiums in the preceding year , whichever is higher) for non-life insurers.  For 
supervisory purposes, insurers' financial performance  is subject to inspection and examination; the 
frequency of inspection depends on their performance and operational risks.   
79. In February 2007, the Cabinet approved the draft Office of the Insurance Supervision  and 
Promotion Commission Act
91, which would establish the Office, an independent regulatory agency for 
insurance business.  The draft Act is being inspect ed by the Office of the Council of State before 
submission to the National Legisla tive Assembly for consideration. 
80. As from 1 January 2002, annual life insuran ce premiums of up to B 50,000 (previously 
B 10,000) have been tax deductible for holders of policies issued by locally licensed companies (not 
by companies licensed abroad). 
81. The DOI supervises re-insurance because it is one of the risk transfer techniques that can 
affect insurers' operation and fina ncial position.  Non-life insurers must not assume "risks of each 
specific type of more than 10% of their capital f unds" (Non-Life Insurance Ac t Section 31).  While no 
specific requirements cover the choice of re-ins urer, insurers must submit their reinsurance 
agreements to the DOI within 30 days of signing .  The DOI encourages "domestic retention" in the 
market segments where local companies have capacity  and potential to assume  the risks.  Minimum 
domestic retention levels apply, for example 30% for all-risk property policies exceeding insured 
sums of B 300 million, where an insurance firm wi shes to apply "special premium rates".  Although 
not a legal requirement, according to the authorities, at least 10% of premiums on fire policies 
exceeding sums insured of B 30 million must be re-ins ured with the Thailand Fire Pool (set up by 
DOI and the General Insurance Associati on, and managed by Thai Reinsurance). 
82. Premium rates must be approved or fixed by the Insurance Commissioner.  According to the 
authorities, this is to help protect the insurer and the insured by ensuring that premiums are fair and 
adequately reflect the degree of risk.  Currently, th e compulsory motor premiums are fixed at the rates 
effective as of 1 April 2002. 
                                                      
91 World Bank (2007). WT/TPR/S/191/Rev.1 Trade Policy Review 
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(iv) Telecommunications 
83. Thailand's telecommunications market h as expanded during the period under review, 
especially for mobile services;  the market remain s characterized by a poor fixed-line infrastructure 
providing minimal growth potential and a mature mobile market.92  Fixed-line penetration has fallen 
from 11.56 in 2002 to 10.7% in 200693, while mobile-phone penetration has risen from 27% in 2002 
to over 64% in 2006.  
84. The telecommunications sector in Thailand re mains a de facto duopoly consisting of the 
state-owned "corporatized" enterprises Telephone Organization of Thailand (TOT) now TOT Public 
Company Limited, and the Communications Authority  of Thailand (CAT), now CAT Telecom Public 
Company Limited.94  TOT is responsible for providing dom estic fixed-line telephone services, public 
payphone services, mobile services, wireless communication services, international telephone 
services, data services, multimedia and broadband services, network access and other value-added 
services, such as card phones.  Prior to its "cor poratization", CAT was responsible for providing 
postal services, which are now under the responsibility of Thailand Post Co. Ltd.  Currently, CAT is 
responsible for providing intern ational telephone/fax services, l eased circuits, microwave radio 
networks in rural areas, and mobile phon es and international internet gateway. 
85. Fixed-line services are still largely dominated by TOT, but it has been losing ground to the 
mobile sector in recent years.95  All mobile telephony comp anies in Thailand operate under 
build-transfer-operate (BTO) revenue-sharing agreements.96  The BTO agreements can be granted 
only by the State whose rights were given to CAT Telecom and TOT.  Since the two cannot "sub-let" 
their concessions, private-sector investment takes the form of an agreement:  i.e. the mobile firms' 
networks are owned by TOT and CAT.  At present, there are six mobile operators in Thailand with 
various degrees of foreign ownership.97 
86. No date has been set for the privatization of TO T and CAT;  in addition, there is no policy to 
list the companies on the SET.  Both  companies were corporatized in August 2003.  TOT has been 
considering the acquisition of CAT's stake in Thai  Mobile, which will be repositioned as Thailand's 
first third-generation (3G) mobile services opera tor with Wideband Code Division Multiple Access 
technology.98 
                                                      
92 Business Monitor International (2006). 
93 Industry Canada (2003);  and Bangkok Post (2006a). 
94 TOT was transformed and corporatized into th e TOT Corporation Public Company Limited on 
23 July 2002.  The company changed its logo and name into TOT Public Company Limited on 31 July 2005.  
CAT became CAT Telecom and Thailand Post in August 2003.  Neither company ha s been privatized yet. 
95 As TOT owns nationwide telecommunications networks it has entered into revenue sharing 
arrangements to jointly provide fixed-line telephone services;  these are build-transfer-operate (BTO) 
arrangements with True Corporation Public Company Limited and TT&T Public Company Limited to provide 
domestic fixed-line services in metropolitan and provincial areas. 
96 Under build-transfer-operate schemes, private co mpanies develop telecommunication infrastructure 
and then transfer ownership to the Government in retu rn for concessions to operate services while paying a 
percentage of revenue as a royalty fee (Morse, 2003). 
97 TOT and CAT Telecom have obtain ed licences to provide for mobile  services with revenue-sharing 
arrangements with private mobile serv ice operators.  Advance Info Services (AIS) operates a concession under 
ToT;  and True Move, Hutch, and DTAC operate under CAT Telecom.  The operational mobile companies are:  
AIS, DTAC, True, Hutch, DPC, and Thai Mobile (AIS and DPC are considered as the same company);  their 
respective market shares are 48.6%,  30.4%, 18.8%, 1.8%, and 0.2%. 
98 International Telecoms Intelligence (2006). Thailand WT/TPR/S/191/Rev.1 
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87. In line with its GATS commitments to liberalize the telecommunications sector by 200699, 
Thailand amended the Thai Telecommunications Business Act in November 2005;  the maximum 
allowable foreign ownership in telecommunication operators was changed from 25% to between 49% 
and 100%, depending on the type of business licences.   An independent regulator, the National 
Telecommunications Commission (NTC), was establishe d in October 2004.  The NTC is responsible 
for formulating the telecommunication Master Plan , monitoring and promoting the telecommunication 
industry in Thailand under fair and free compe tition, issuing licences, spectrum management, and 
formulating the universal service obligation (USO) policy.  
88. Under the licences granted by NTC, new licence hol ders and new entrants to the Thai market 
must comply with the NTC rules and regulations, and pay a licence fee to the NTC;  existing players (prior to NTC's establishment) continue to operate under the existing BTO revenue-sharing 
agreements.
100  At end-December 2006, NTC had issued 51 licences to internet service providers 
(ISPs), and 25 licences to telecom firms, including TOT and CAT Telecom, to provide other telecom 
services, such as international direct dialli ng, calling card, network provider, and IIG.101  Under the 
new licences, TOT and CAT are re sponsible for promoting USO, which may involve investments 
equal to 4% of their annual revenue .  In addition, they must pay 3% of their revenue as a licence fee;  
for fixed-line, an annual numbering fee of B 12 per number;  and for mobile, an annual numbering fee 
of B 12 per number for new operators' first alloca tions, and B 24 per number for further allocations, 
along with a spectrum fee to be determined;  however, TOT and CAT Telecom both claim that these 
do not reflect commercial reality.102 
89. Reportedly, a major impediment to the growth in the sector is the non-availability of 
3G technologies and services.103  Because 3G is seen as having both communication and broadcast 
applications, it involves radio spectrum, and the Frequency Allocation Act requires a Joint-Committee 
panel (involving the National Broadcasting Commission (NBC) and NTC)104, to allocate spectrum.  
The NTC is in the process of studyi ng and developing the 3G policy. 
90. Interconnection and access charges are also a concern for certain mobile telephony 
operators.105  Those who have an agreement with CA T have to pay access charges (e.g. B 200 per 
subscriber per month) to TOT, while those who ha ve agreements with TOT pay no access charges.  
Reportedly, this creates an uneven playing field.  However, operators that have an agreement with 
TOT claim that the access charges have been bu ilt into their agreements.  With regard to 
interconnection charges, the NTC Notification on Access and Interconnection B.E. 2549 (2006) 
requires all operators with network to issue refe rence interconnection offers  (RIOs) and reference 
access offers (RAOs), on which access and interconnecti on agreements are to be based.  In May 2006, 
NTC issued a rule for interconnecting between di fferent networks including the interconnection 
charge regime;  this interconnection and charging mechanism will allow the seamless integration of 
different operators' networks and introduce fairness among all mobile  operators regardless of whom 
their concession agreement.  Some operators ha ve already arranged interconnection agreements. 
                                                      
99 WTO document GATS/SC/85/Suppl.2, 11 April 1997. 
100 Board of Investment (undated (b)). 
101 EIU (2006b). 
102 Bangkok Post (2005). 
103 Bangkok Post (2005). 
104 The creation of a new independent regulator for the broadcast industry, the National Broadcasting 
Commission (NBC) is still pending.  Once established, it will assume regulatory functions, which would include 
the regulation and frequency management of the Post and Telegraph Department under the Radio 
Communication Act B.E. 2498 (EIU, 2006c;  and U.S. Department of Commerce, 2006). 
105 Bangkok Post (2006a). WT/TPR/S/191/Rev.1 Trade Policy Review 
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91. The Internet penetration level has risen shar ply, to around 13.3 users per 100 people in 2005, 
on account of, inter alia,  ongoing communication cost reductions;  however, these are still high as 
compared with neighbouring countries.106  Difficulties appear to remain in the form of regulatory 
constraints, unfamiliarity with co mputer technology, and the limited number of websites in the Thai 
language.  The NTC announced in late 2005 that it w as planning to liberalize International Internet 
Gateway (IIG) services.107  Licences would be issued to qualified operators for provision of IIG 
services, which would, in turn, allow the privat e ISPs flexibility to access the gateway of other 
operators and not to depe nd only on that of the CAT.  This would break the monopoly by CAT, which 
currently provides the sole gateway for internati onal connections, and will enable private internet 
service providers (ISPs) to build direct links with overseas networks.  The move should reduce 
broadband internet tariffs.  The first ISP was issued  June 2005;  all ISPs were granted the right to 
offer voice over IP (VOIP) service.  In December 2006, 51 ISPs were operating;  there were also 
four non-commercial internet hubs;  Un iNet, ThaiSarn, SchoolNet, and Pubnet. 
92. The National Electronic and Computer Technol ogy Centre (NECTEC) has been assigned to 
draft six information and communication laws:  Universal Access Law, Computer Crime Law, Data Protection Law, Electronic Signature Law, Elect ronic Transactions Law, and Electronic Fund 
Transfer Law.  All are at different drafting and legislative approval stages.  The Computer Crime Act 
should be in effect by August 2007.  The offences covered by the Act include any action that causes 
computer malfunctioning or failure to perform as pe r its established program and instruction.  Other 
offences are illegal access that compromises, alters or  destroys data that belongs to another person in 
the computer system;  spamming;  and dissemination of false or pornographic computer data, which 
causes damage and adverse effects to the society, economy, and national security.  
(v) Transport 
(a) Road and railway 
93. The national highway network in Thailand has an  important role with  regard to domestic 
freight and passenger transport.  It measures some 51,400 km (64,000 kilometers per two-lane);  about 
99.6% of which is asphalt road.  The Departme nt of Highways is responsible for proposing 
development plans, setting desi gn and construction standards, carrying out construction, and 
maintenance of the national highways.  However, budge tary constraints and lack of foreign investor 
interest have meant that the upgrading of national highways has been slow.
108 
94. International road transport is subject to  the Land Transport Act B.E. 2522 (1979), under 
which an operator must be either a registered ordinary partnership, a limited company or limited public company.  If the corporate headquarters of an applicant is located outside Thailand, the 
applicant must have a branch office or agency regi stered under Thai laws and located in Thailand.  
Domestic road transport is also subject to the Land Transport Act.  Furthermor e, domestic transport of 
both passengers and cargo must be provided by a person of Thai nationality or a company 
incorporated under Thai laws.
109  The Land Transport Departme nt has amended Ministerial 
Regulations No. 29 (12 September 2006), to allow a na tural person to act as an international transport 
operator;  previously, only regist ered ordinary partnerships, limited partnerships, limited companies or 
limited public companies were permitted. 
                                                      
106 EIU (2006c). 
107 EIU (2006c). 
108 EIU (2006c). 
109 APEC (2006b). Thailand WT/TPR/S/191/Rev.1 
 Page 129 
 
 
95. The State Railway of Thailand (SRT) operates and maintains Thailand's rail services.  The 
SRT has initiated a 30-year development plan, under which it has undertaken 249 km of double tracking and completed 791 km of track rehabilitation.   Construction of track doubling in the eastern 
seaboard area (78 km from Chachoengsao to Laem Ch abang), began in 2007.  The SRT also plans to 
further extend track doubling from Chachoengsao to  Kaeng Khoi (106 km) and track rehabilitation 
phase 5 and 6 for another 586 km in a near future.  The Government tries to implement policies to 
increase efficiency of rail services and to reduce its financial losses, inter alia,  from track 
rehabilitation work, yearly maintenance costs, and social service provisions.
110  Despite legal 
provisions requiring the Government to reimburse  SRT for its annual losses, it does not normally 
allocate the full amount, which causes c ash flow shortages for the SRT. 
96. The SRT applies two basic types of cargo traffic ch arges, freight charges, and fuel surcharges.  
Freight charges are quoted as standard rate and fixed;  fuel surcharges vary to accommodate 
fluctuations in fuel prices.   Freight charges are the same for im port, export, and domestic cargoes and 
are classified by type of industry.  No further information in this regard was available from the 
authorities. 
(b) Maritime transport 
97. Maritime transport carries approximately 95% of  Thailand's international merchandise trade.  
Thailand's maritime fleet consists of 318 ships w ith total tonnage of 3.2 million deadweight tonnes 
(January 2006);  Thai-flagged vessels account for around 11% of total income from freight charges.111  
A Thai State-private joint-venture shipping company (70% private-sector owned) plans to order some 
sea-going vessels to add to its fleet;  the rest of the Th ai merchant fleet is privately owned.  No further 
information on this matter was available from the authorities. 
98. International shipping is open to Thai and foreign operators.  However, operators of 
Thai-flagged vessels providing international services ar e subject to the Thai Vessels Act B.E. 2481 (as 
amended by the Act B.E. 2540), under which the opera tor must:  be majority Thai-owned;  meet 
national safety and marine environmental requirement s;  operate vessels registered with the Marine 
Department to fly the national flag;  and be a regi stered maritime transport operator with the Marine 
Department.112 
99. Although the Thai fleet is among the smallest  among ASEAN countries, it has increased 
significantly during the last decade through promotional measures.113  While official policy provides 
for free market access for international shipping, th e national shipping industry is protected through a 
cargo reservation policy.  Goods im ported directly or indirectly by government agencies or public 
enterprises are reserved for Thai-flagged vessels.  D espite the lack of relevant information, the 
authorities estimate that imported government cargo ca rried by Thai flag vessels accounts for less 
than 1% of total imported maritime cargo.  In add ition, a considerable amount of such cargo has been 
carried by foreign vessels due to the unavailability of  Thai-flag vessels.  Many promotional measures 
are in place to attract Thai operators to fly the Th ai flag, these include administrative, tax relief, and 
funding measures.114  A stated objective is to reduce of the required proportion of Thai seafarers on 
                                                      
110 Thailand Outlook online information, Transport .  Viewed at:  http://www.thailandoutlook.com/ 
thailandoutlook1/about+thailand/transport/ [25 March 2007]. 
111 Bangkok Bank (undated). 
112 Transport operators who buy vessels from other countries can register them without bringing them 
into Thai territory. 
113 APEC (2000). 
114 The authorities indicate that details on these promotional measures are available in the Maritime 
Department online information (www.md.go.th), but no su ch information was available in the English version 
of this site. WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 130 
 
 
Thai vessels involved in international shipping fro m 75% to 50%;  in certain cases, this can be 
reduced by a further 10% subject to ministerial approval.115  The objective is to provide more 
flexibility to Thai ship owners due to the shortage of Thai seafarers. 
100. Cabotage restrictions reserve domestic shipping for national security reasons to Thai-flagged 
vessels that are owned by Thai nationals or companies with at least 70% Thai equity.  Under the Foreign Business Act, a company registered under Thai law with foreign equity not exceeding 49% 
may operate domestic transport, including domestic shipping.  Thus, a company with less than 70% 
Thai equity may hire a "Thai flagged" vessel to provide domestic shipping services.  Under certain 
conditions, e.g. when domestic shipping capacity is inadequate, foreign vessels may be allowed to 
provide domestic services, this is subject to ministerial approval on a case-by-case basis;  the number of foreign vessels authorized to provide domestic services dropped from 14 (September 2003) to 
12 (May 2007).  The Thai Vessels Act B.E. 2481 requires that Thai domestic vessels have at least 
50% Thai crew. 
101. Thailand's five public sector ports are managed by the Port Authority of Thailand (PAT), a 
state enterprise under the supervision of the Minist ry of Transport, under the ambit of The Port 
Authority of Thailand Act B.E. 2494 (1951)  as amended by the Act B.E. 2543 (2000).
116  PAT is 
responsible for the management and op eration of the ports under its control.117  It provides services 
and facilities to vessels and cargoes including:  dre dging and maintenance of the bar channels and 
basins;  supervising stevedoring, handling, moving,  storage, and delivery of cargoes to consignee;  
and coordination and cooperation w ith relevant government agencies a nd international ports.  Foreign 
ships receive MFN treatment, and obtain port access on a first-come-first-served basis.   
102. In order to promote exports, several port charges for export cargo (cargo wharfage, wharf 
handling, cargo storage, container wharfage, lift on/lif t off, rail transfer) are collected at lower rates 
than on import cargo;  for example, the container wh arfage charge (at berth to yard) for 40' is 33% 
higher for an inward container than for an outward container (export).118  No charges seem to be set 
on an ad valorem  basis.  Charges for use of the channel, navigation aids, and other facilities to ensure 
safety in entering and leaving the port areas, and the u se of berths are collected at the same rates for 
domestic and foreign-flagged vessels.  
103. In principle, private domestic and foreign i nvestment participation is permitted in port 
services either by operating the existing facilities in  such ports or funding the development of and 
operating new or additional facilities.  PAT's policy is  to encourage private sector participation in the 
port activities on a commercially oriented basis.  So far, more than 100 private operators have been 
authorized to develop and operate ports;  most of the terminals at the Laem Chabang Port have been 
contracted to private-sector operators.  The priva tization policy relating to maritime transport services 
has concentrated on PAT, but there has been little progress during the review period.119  The third 
phase of Laem Chabang Port is expected to be ready and open for intern ational bidding in 2010, 
provided that a joint-venture company with at l east 51% of Thai equity operates the terminal.120   
                                                      
115 APEC (2000). 
116 The five public ports under the supervision of PAT are:  Bangkok Port, Laem Chabang Port, 
Ranong Port, Chiang Saen Port, and Chiang Khong Port. 
117 APEC (2006b). 
118 PAT brochure, Laem Chabang Port Tariff , pp. 29-30. 
119 Ministry of Transport (undated). 
120 Ministry of Transport (undated). Thailand WT/TPR/S/191/Rev.1 
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(c) Air transport 
104. At present, there are ten international and domestic scheduled Thai airlines.  Thailand, 
liberalized domestic air services in 2001, which allo wed private operators to compete on all domestic 
routes operated by the state-owned national carrier Thai Airways.  Private airlines operating domestic routes in Thailand are Bangkok Airways;  Thai AirAsi a;  Nok Air (subsidiary of Thai Airways, which 
holds a 39% stake in it), PB Air;  Phuket Airlines;  Orient Thai Airlines;  One-Two-Go Airlines (a 
subsidiary of Orient Thai Airlines);  and Siam General Aviation.
121  Of the 48 licences issued by the  
Ministry of Transport for scheduled and char ter-service companies only 31 are in active use.122  
105. Since January 2004, Thai AirAsia, a Thai-Mal aysian joint-venture low-cost airline, has 
benefited from BOI investment priv ileges such as tax exemptions for eight years, including taxes on 
machinery imports.123  These incentives are available to all airlines requesting investment promotion 
within the air transport service category under BOI Announcement No. 2/2543 (2000), which provides for incentives, such as im port duty exemption on machinery regardless of zones, corporate 
income tax exemptions, and other incentives acco rding to zones, to all "priority activities" 
(Chapter III).  
106. During the period under review, privatization and divestment have taken place with regard to 
Thai Airways and Airports of Thailand.  The Gove rnment's stake in Thai Airways was reduced from 
93% to 54% through a public offering and a share issue to its employees;  the company does not plan to issue more shares in the near future.  Thai Airways Internationa l benefits from regulations that 
require civil servants and officers of government-rela ted agencies to use its services.  The Airports 
Authority of Thailand (AAT), a state enterprise under the supervision of Ministry of Transport, was 
corporatized and registered as a public company ca lled Airports of Thailand Public Company Limited 
(AOT), on 30 September 2002.  In March 2004, the G overnment reduced by 30 percentage points its 
stake in AOT through a public offering;  at present,  its stake is 70% and there is no plan for further 
privatization.  AOT's six international airports are responsible for 90% of Thailand's air traffic.
124  
107. Licensed air carriers must meet the rules set by th e Ministry of Transport.  Applicants must:  
have minimum capital of B 25 million (non-sch eduled fixed-wing services) or B 200 million 
(scheduled fixed-wing services);  have no transferab le shares, and maximum foreign equity of 49%;  
have a majority of Thai nationality board member s;  meet minimum insurance requirements;  and 
submit a feasibility study for the proposed service s showing that they will benefit the public and 
respond to market demand.  Additionally, under the Foreign Business Act, foreigners are prohibited 
from operating domestic routes, while, under the Air Na vigation Act, no aircraft other than foreign 
aircraft shall fly outside the Kingdom.125  Foreign international carrier s operate under 98 bilateral air 
services agreements, which cover mainly flight capacity and frequency, route schedule, airline 
designation, and traffic rights. 
                                                      
121 Bangkok Airways has the advantage of operating se lf-owned airports, whic h means that it can fly 
those routes and a cost advantage, while PB Air has taken over loss-making routes of Thai and operates them as 
code-share with Thai ( Travel Daily News,  "Thailand: Aviation- open skies now the order of the day".  Viewed 
at:  http://www.traveldailynews.com/new.asp?new id=18609&subcategory_id=53 [25 March 2007]. 
122 Bangkok Post (2004a). 
123 EIU (2006b). 
124 These are:  Don Muang Intern ational Airport, Chiang Mai International Airport, Hat Yai 
International Airport, Phuket International Airport, Ch iang Rai International Airport, and Suvarnabhumi Airport 
(Airports of Thailand online information.  Viewed at:  http://www.airportthai.co.th [14 June 2007];  and Radio 
Singapore International, 2005). 
125 However, these conditions can be waived throug h a ministerial directive, cabinet resolution or 
written permission from competent officials (APEC, 2006b). WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 132 
 
 
108. Traffic rights regimes are being liberalized.  Thailand and China have had an open skies 
policy, since early 2004 that allows unrestricted f lights between the two countries.  In addition, in 
December 2004, Singapore, Thailand, and Brunei Da russalam signed an open skies agreement that 
would allow airlines from the three parties to operate any number of passenger flights among them.  
Thailand and the other ASEAN members are drafting an agreement targeting full liberalization of air 
freight services by December 2008 and an agreem ent on air services that will allow unrestricted 
flights among the ASEAN members on air freight and all types of air transport services by 
December 2010. 
(vi) Tourism 
109. During the period under review, several factors could have contributed to the slowdown of 
tourism growth in Thailand, including the Seve re Acute Respiratory Syndrome threat in 2003, 
ongoing unrest in three southernmost provinces, th e impact of the tsunami in 2004, and the Thai 
Government developments in 2006.126  The share of tourism to GDP registered a slight drop in 2005, 
before returning to its 6.23% level in 2006 (accord ing to the Tourism Authority of Thailand).  The 
number of tourist arrivals at th e end of 2006 was estimated at 13.82 million (10 million in 2003), 
generating B 487 billion (B 309 billion in 2003);  most tourists were from East Asia.127  Average hotel 
room occupancy rate was 48.98% in 2006.  
110. A Committee for National Tourism Policies (Committee for National Tourism Development 
until 2005), chaired by the Prime Minister, is respons ible for preparing tourism plans and policies.  
According to the authorities, a Tourism Master Plan ai ms to promote foreign tourists arrivals targeting 
an increase of not less than 6% per year and revenue growth of not less than 10% per year;  the annual 
targets for Thai tourists travelling within the c ountry, are 3% and 7%, respectively.  The Board of 
Investment offers tax and other investment incentiv es for hotels with more than 100 rooms.  However, 
firms located in zone 1 and 2 will receive only non -tax incentives, while those located in zone 3, 
except 18 least developed provinces, will receive only import duty exemption on machinery.  These 
incentives are granted to both dom estic and foreign investors. 
111. The Tourism Authority of Thailand (TAT), a state agency, handles tourism promotion.128  Its 
Thailand Tourism Promotion Policies for 2003-2006 include five main objectives:  to promote 
tourism as a major instrument for improving th e economy;  to promote and develop proactive 
marketing operations;  to promote cooperation with  all parties both domestic and international in 
tourist market promotion and development;  to st rive for organizational, management, and personnel 
skills;  and to accelerate the development of an information technology system that facilitates 
e-tourism.129   
112. The Hotel Act B.E. 2478 (1935) was replaced with the Hotel Act B.E. 2547 (2004) 
introducing a hotel grading system in order to establis h a consistent standard for hotels and resorts in 
Thailand.  To increase Thailand's competitive potentia l on the international stage, the Thai hotel 
industry considers it important to raise overall st andards by adopting internationally recognized 
practices, such as the introduction of a 'precise, accurate and reliable' hotel standard and certification process that would enable Thai hotels to compet e with world-class hotel properties on an equal 
footing.  As of September 2005, 116 hotel and reso rt properties were participating in the voluntary 
star rating certification programme. 
                                                     
 
126 Bangkok Post (2006b);  and Bank of Thailand (2006b). 
127 Bangkok Post (2006c);  and Tourism Authority of Thailand (2006). 
128 WTO (2003). 
129 Tourism Authority of Thailand (2006). Thailand WT/TPR/S/191/Rev.1 
 Page 133 
 
 
113. Majority foreign ownership in hotels, rest aurants, and travel services businesses (Travel 
Agency Business and Guide Act of 1992), requi res approval under the Foreign Business Act 
(1999).130  At present, foreign equity participation in the sector is set at no more than 49%.  
114. Tourist guides must be Thai nationals and m eet qualification standards set under the Travel 
Agency Business and Guide Act 1992.  The Immigra tion Bureau issues a one-year work permit to 
only one employee for each foreign operator with regi stered capital of B 2 million, and three staff for 
companies with registered capital of more than B 5 million.  Due to the lack of sufficient guides 
speaking foreign languages, many foreign tour opera tors, particularly from Scandinavian countries, 
send staff to accompany their clients to Thailand.131  These foreign guides and tour leaders cannot stay 
in the country longer than 90 days.   
115. According to the Association of Thai Travel Agents (ATTA) the current work permit rule is 
not realistic because each operator brings 40,000 to  50,000 tourists to Thailand and most of the 
foreign guides have to stay in the country for 3 to 5 months.132  The ATTA has already proposed to 
the Immigration Bureau and Labour Ministry that temporary work permits of 3 to 5 months be 
granted to foreign guides and tour  operators, but no action has been taken so far.  The authorities 
indicate that under Royal Decree on Prescribing Works prohibited to a foreigner (B.E. 2522), 
temporary work permits for foreign guides are not a llowed, however in case of need or urgency, the 
Ministry of Tourism and Sports may consider a llowing other foreign-language speaking tour leaders 
to act as interpreters in Thai territo ry accompanied by a local Thai guide. 
116. The recent Royal Thai Police Orders regarding permission to stay for Aliens B.E. 2549 
(2006), effective 1 October 2006, have tightened regulations on Thailand's Tourist Visa Exemption 
Scheme.  Under the revised scheme, nationals from 41  designated countries or territories may travel to 
Thailand for the purpose of tourism as frequently as they wish without visa and will be permitted to stay for a period not exceeding 30 days on each visit.
133  They may, however, re-enter and stay in 
Thailand for a cumulative stay not exceeding 90 days  within any six-month period from the date of 
first entry.  This is to prevent abuses of the pr ivileges provided to such nationals and curb the rising 
number of illegal entries to Thailand.  
(vii) Distribution services 
117. The distribution sector has grown significantly in recent years and continues to play an 
important role in the Thai economy.  Distribution is second only to manufacturing in terms of contribution to GDP;  according to Thai authorities, the sector contributed 14.26% to GDP (2005).
134   
118. Retail trade in Thailand has been liberalized  gradually since the late 1980s, although a 
number of measures have been intr oduced recently to regulate large store expansion.  Due to the 
benefits of modern distribution to consumers (e.g . lower prices and better choice, more employment 
in the economy, transfer of modern managerial and marketing techniques), the number of stores of the 
                                                      
130 WTO (2003). 
131 Bangkok Post (2006c).  The authorities indicate that  Thai guides can cope with English, which is the 
most common language.   
132 Bangkok Post (2006c). 
133 These are:  Australia;  Austria;  Belgium;  Brazil;  Bahrain;  Brunei;  Canada;  Denmark;  Finland;  
France;  Germany;  Greece;  Qatar;  H ong Kong, China;  Iceland;  Indonesia;  Ireland;  Israel;  Italy;  Japan;  
Republic of Korea;  Kuwait;  Luxembourg;  Malaysia;  th e Netherlands;  New Zealand;  Norway;  Oman;  Peru;  
the Philippines;  Portugal;  Singapore;  Spain;  South Africa;  Sweden;  Switzerland;  Turkey;  United Arab 
Emirates;  the United Kingdom;  the United States;  and Viet Nam. 
134 WTO document TN/S/W/4, 22 July 2002. WT/TPR/S/191/Rev.1 Trade Policy Review 
Page 134 
 
 
top distributors increased from 1,825 outlets in 2001  to 3,712 outlets in 2005, according to Thai 
authorities.135  The number of shops in the traditional distribution sector has decreased, although the 
Thai market remains relatively fragmented overall, as traditional sma ll shops still occupy a large share 
of the market.  Thailand is estimated to have one of the world's highest ratios of retail outlets per 
inhabitant, i.e. 11,580 per million habitants in 2005.136  Hypermarkets have been the major growth 
format in the retail sector, and the one preferred by foreign grocers that have entered the market in the 
last decade.137   
119. Wholesale trade and retailing services are curren tly classified under List 3 of the Foreign 
Business Act, in which majority foreign ownership a nd control is allowed if permission is granted by 
the Ministry of Commerce. 
120. Thailand does not have any specific retail law to  regulate the establishment and expansion of 
new retail stores.  However, the Town Planning Law and the Building Control Law have been used to 
control the expansion and limit the construction of new retail stores.  These laws provide that large 
retail stores (more than 1,000 sq. meters) have to be located at least 15 kilometres from the 
commercial centres of provincial towns.  The laws also apply to all provin ces outside of Bangkok.   
121. In 2006, the Government requested major retaile rs to voluntarily freeze their expansion plans 
while a retail law was being prepared.  In 20 07, the Government endorsed a draft Retail and 
Wholesale Business Law aimed at regulating the expans ion of retail stores.  According to authorities, 
the law would apply without discrimination.  Local governments would assess and approve any 
proposed new retail stores in their province.  In a ddition, the draft law set the criteria for establishing 
new stores, such as zoning, distance between stores, size of sales area, and land use.138  
122. In recent years, the Department of Business Development of the Ministry of Commerce has 
also taken steps to help small retailers run thei r business more competitively by providing them with 
training and operation plans, for example with resp ect to logistics and suppl y chain management and 
the establishment of networks among manufacturers, w holesalers, and small retailers.  A state-backed 
firm, Allied Retail Trade, was set up to help sma ll retailers through such means as financial aid and 
the building up of bargaining power. 
123. Thailand's GATS commitments on distribution services are limited to commission agents' 
services and therefore exclude wholesale trade, retailing, and franchising services. 
 
                                                      
135 The top five suppliers accounted in 2005 for 35.5% of retail sales by modern grocery distribution 
formats, i.e. modern retail formats predominantly sellin g food (e.g. hypermarkets, supermarkets, convenience 
stores, warehouse clubs, but excluding specialist food outlets and open markets).  They are mostly foreign-
owned.  Tesco (UK) is the main supplier, operating hypermarkets and superstores as well as smaller formats.  
The second supplier is a domestic player, Central Re tail;  followed by 7-Eleven (Japan), which operates 
convenience stores;  Casino (France) , which also operates hypermarkets;  and SHV Makro (Netherlands), which 
focuses on cash & carries.  Other important retailers  include Carrefour (France), AS Watson (Hong Kong, 
China), Family Mart (Japan), as well as local suppliers such as PTT, Foodland, and Villa Market (Planet Retail 
online information.  Viewed at:  www.planetretail.net). 
136 Euromonitor (2006). 
137 The number of hypermarkets almost doubled be tween 2000 and 2002, r eaching close to 100, and 
counted close to 150 by 2006 (Planet Retail online information.  Viewed at:  www.planetretail.net). 
138 Planet Retail online information.  Viewed at:  www.planetretail.net;  and Agence France Presse , 
"Thailand Moves to Rein in Foreign Retailers", 8 May 2007.  Viewed at:  http://asia.news.yahoo.com/ 
070508/afp/070508150214business.html [5 June 2007]. Thailand WT/TPR/S/191/Rev.1 
 Page 135 
 
 
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