RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/63
17 November 1999
(99-4877)
Trade Policy Review Body
TRADE POLICY REVIEW
THAILAND
Report by the Secretariat
This report, prepared for the third Trade Policy Review of Thailand, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Thailand on its trade
policies and practices.
Document WT/TPR/G/63 contains the policy statement submitted by the
Government of Thailand
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Thailand.Thailand WT/TPR/S/63
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) E CONOMIC ENVIRONMENT vii
(2) T RADE AND FOREIGN INVESTMENT REGIME viii
(3) P OLICIES AND MEASURES AFFECTING TRADE AND FOREIGN INVESTMENT ix
(i) Border measures ix
(ii) Internal measures x
(4) S ECTORAL TRADE POLICIES x
(5) O UTLOOK xii
I. THE ECONOMIC ENVIRONMENT 1
(1) R ECENT ECONOMIC PERFORMANCE 1
(2) M AIN POLICY DEVELOPMENTS 6
(i) Macroeconomic policies 6(ii) Structural policies 8
(3) D
EVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT 10
(i) Trade patterns 10(ii) Trends in foreign direct investment (FDI) 14
(4) O
UTLOOK 16
II. POLICY FRAMEWORK AND OBJECTIVES 17
(1) I NTRODUCTION 17
(2) C HANGES IN THE INSTITUTIONAL FRAMEWORK 17
(3) D EVELOPMENTS UNDER INTERNATIONAL AGREEMENTS 21
(i) Thailand and the WTO 21
(ii) Other multilateral agreements 25
(iii) Regional trade agreements 25(iv) Bilateral trade agreements 30
(4) F
OREIGN INVESTMENT REGIME 30
(i) Basic framework 31
(ii) International initiatives and agreements 32
III. DEVELOPMENTS IN TRADE AND INVESTMENT POLICIES AND PRACTICES 33
(1) I NTRODUCTION 33
(2) M EASURES DIRECTLY AFFECTING IMPORTS 33
(i) Changes in border taxation 33(ii) Recent developments in customs procedures 44
(iii) Import restrictions and controls 46
(iv) Trade defence measures 49
(3) D
EVELOPMENTS IN EXPORT POLICY 50
(i) Registration and documentation procedures 50(ii) Export prohibitions, quotas and charges 51(iii) Export assistance 53WT/TPR/S/63 Trade Policy Review
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Page
(4) I NTERNAL MEASURES 55
(i) Taxation 55(ii) Investment incentives 59(iii) Protection of intellectual property rights 63(iv) Standards and other technical requirements 68
(v) Government involvement in production and trade 71
(vi) Regulation of corporate practices 74
IV. TRADE POLICIES BY SECTOR 78
(1) I
NTRODUCTION 78
(2) A GRICULTURE , FISHERIES AND AGRO-FOOD PRODUCTION 78
(i) Overview 78
(ii) Developments in import policy 80(iii) Export policy measures 82(iv) Trade in selected crops and products 82(v) Trade in fish, meat and dairy products 86(vi) Beverages and spirits 88
(3) P
OLICY DEVELOPMENTS IN THE ENERGY SECTORS 89
(i) The Petroleum Authority of Thailand (PTT) 89(ii) Petroleum refining and products 90(iii) Pipeline transport services 91(iv) The natural gas market 92(v) Electricity 93
(4) P
OLICY DEVELOPMENTS IN SELECTED MANUFACTURING SECTORS 94
(i) Trade in textiles and clothing 96(ii) Steel products 97(iii) Motor vehicles 98
(5) D
EVELOPMENTS IN FINANCIAL SERVICES TRADE 99
(i) Origin and extent of the financial crisis 99
(ii) Insurance services 101(iii) Banking and other financial services (excluding insurance) 104
(6) T
RADE IN TELECOMMUNICATION SERVICES AND EQUIPMENT 107
(i) Current market access conditions in telecommunication services 107(ii) International commitments 108
(iii) Progress of the Thai Telecoms Master Plan 109
(iv) Telecommunications equipment 111
(7) T
RADE IN BUSINESS SERVICES 111
(i) Accountancy services 112(ii) Legal services 112(iii) Architectural and engineering services 113
(iv) Other professional services 113
(v) Computer and related serv ices, rental and leasing 113
(vi) Other business services 113
(8) D
EVELOPMENTS IN TRANSPORT POLICY 114
(i) Air transport services 114(ii) Maritime transport 115Thailand WT/TPR/S/63
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Page
REFERENCES 117
APPENDIX TABLES 119
CHARTS
I. THE ECONOMIC ENVIRONMENT
I.1 Real GDP, 1970-99 1
I.2 Gross domestic product by industrial origin, 1995 and 1997 5I.3 Thailand's exchange rate indicators, 1995-99 7
I.4 Evolution of Thailand's external trade, 1990-99 11
I.5 Merchandise trade by product, 1995 and 1998 12I.6 Merchandise trade by partner, 1995 and 1998 13
II. POLICY FRAMEWORK AND OBJECTIVES
III. DEVELOPMENTS IN TRADE AND INVESTMENT POLICIES AND PRACTICES
III.1 Average applied tariff, September 1999 34
III.2 Evolution of applied tariffs on selection products, 1994-1999 38III.3 Applied tariff average 1991, 1995 and 1999 39III.4 MFN tariff distribution, September 1999 39
III.5 Tariff escalation by ISIC 2 digit, September 1999 41
III.6 Composition of tax revenue 1997/98 56
IV. TRADE POLICIES BY SECTOR
IV.1 Aggregate measurement of support and actual support levels, 1995-1998 79
IV.2 Trade in refined petroleum products, 1990-97 90IV.3 Structure of the gas supply industry, 1999 92IV.4 Electricity supply industry, 1999 94IV.5 Production, consumption and trade in steel products, 1985-98 98IV.6 Non-life direct premia, 1998 101
IV.7 Existing and proposed market structure of the telecommunications sector, 1999 110
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Thailand's basic economic indicators, 1990-99 2
I.2 Thailand's balance of payments 1994 -99 4
I.3 Net inflows of foreign direct investment 15
II. POLICY FRAMEWORK AND OBJECTIVES
II.1 Status of Thailand's notifications to the WTO, as at September 1999 21
II.2 Dispute-related WTO matters involving Thailand, September 1999 23WT/TPR/S/63 Trade Policy Review
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Page
III. DEVELOPMENTS IN TRADE AND INVESTMENT POLICIES AND PRACTICES
III.1 Structure of applied tariffs in Thailand 35
III.2 Selected applied tariffs exceedin g WTO bound rates, August 1999 36
III.3 Products subject to import surcharges or special duties, 1999 40III.4 Thailand's commitments under the AFTA, 2000 43
III.5 Selected products subject to import licensing in Thailand, 1999 48
III.6 Anti-dumping measures, as at 31 December 1998 49III.7 Products subject to export licensing, 1999 51
III.8 Applied export duties and surcharges in Thailand, 1999 53
III.9 Excise taxes imposed in Thailand, September 1999 57
III.10 Trade-related investment measures in place in September 1999 62
III.11 Trade mark and patent statistics for Thailand, 1990-98 65
III.12 Thai industrial standards (TIS), 1995-98 68III.13 "Specific controlled" food products administered by the Ministry of Public Health, 1999 70III.14 Selected publicly owned commercial companies, 1999 72
IV. TRADE POLICIES BY SECTOR
IV.1 Applied tariff rates on agri-food pr oducts exceeding WTO bound rates, 1999 80
IV.2 Tariff quota commitments, actual imports under tariff quotas and bound tariffs, 1995-2004 81IV.3 Rice exports, 1990-97 83IV.4 Selected indicators for the manufacturing industry, 1995-99 95IV.5 Changes in applied tariffs
 on selected clothing products, 1995 and 1999 96
IV.6 Thailand's WTO-ITA tariff concessions on selected telecommunications equipment
and applied tariffs 111
IV.7 Cargo tonnage of vessels, 1994-98 115
APPENDIX TABLES
I. ECONOMIC ENVIRONMENT
AI.1 Thai imports by product group, 1990-98 121
AI.2 Thai exports by product group, 1990-98 123
AI.3 Thai exports by main region and partner, 1990-98 125
AI.4 Thai imports by main region and partner, 1990-98 126
III. DEVELOPMENTS IN TRADE AND INVESTMENT POLICIES AND PRACTICESAIII.1 Imports, exports and MFN applied tariffs, by ISIC 4-digit heading 1995-99 127Thailand WT/TPR/S/63
Page vii
SUMMARY OBSERVATIONS
1. The principal economic development
since Thailand's previous Trade Policy Review
in 1995 has been the financial crisis that
erupted in mid-1997.  This crisis manifesteditself initially in a sharp depreciation of the
Thai currency (the baht).  Real GDP dropped
12% over the period 1997-1998 and
unemployment rose sharply.  Notwithstanding
the severity of the crisis and the consequentrecession, the Thai Government has, by and
large, resisted protectionist pressures, opting
instead for measures aimed at reinforcing its
already increasingly outward-oriented trade
and investment policies so as to fostereconomic recovery.
(1) ECONOMIC ENVIRONMENT
2. Prior to 1997, Thailand's economic
performance had been outstanding, with real
GDP growth averaging almost 9% annually
since 1990.  This strong expansion was partly
the outcome of market-oriented structuralreforms, undertaken by successive
governments during the 1980s, including
reductions in barriers both to imports and
exports, and the liberalization of the foreign
investment regime.  Strong growth of theeconomy was also greatly helped by
Thailand's high saving rate, which averaged
more than one third of GDP throughout the
1990s.  Nonetheless, savings were insufficient
to finance domestic investment and theresulting gap was bridged by inflows of
foreign capital averaging 10% of GDP
annually, attracted to Thailand by prospects of
profitable investments and by its open foreign
investment regime.  The correspondingly largeand growing current account deficit, together
with the progressive accumulation of public
and private external debt, was not a problem
as long as investments in Thailand were
allocated efficiently to projects whose returns
were at least sufficient to cover the cost of
capital.  Unfortunately, by 1997 this was nolonger perceived to be the case, leaving the
Thai financial system vulnerable to a sudden
loss of  confidence, which led the economy into
a severe recession.3. This vulnerability was highlighted
when commercial banks reported a significant
increase in non-performing loans at the end of
1996;  in addition, exports declined in 1997,
indicating a possible fall in external
competitiveness.  There followed a dramaticflight of capital and heavy losses of foreign
reserves, which culminated in a large
depreciation of the Thai baht in July 1997.  In
turn, the currency depreciation immediately
translated into heavy losses in corporations'balance sheets because of their high reliance
on foreign debt, and many faced bankruptcy as
a consequence.  The outcome of this financial
crisis was that real GDP fell by nearly 2% in
1997 and by over 10% in 1998.  Increasedunemployment and falling personal incomes
resulted in many people falling below the
poverty line.  Hence, the financial crisis
became a full-blown economic crisis of major
proportions with far-reaching social
repercussions.
4. The origins of this crisis and the
resulting deep recession have been attributed
mainly to generalized weaknesses in the
governance of financial institutions and
corporations;  these weaknesses included in
particular poor accounting practices and alack of transparency in management as well as
inadequate supervision of banks and financial
institutions.  In the absence of adequate
company data, many investments were not
based on accurate assessments of financialrisks.  The financial crisis has thus highlighted
the need for a more transparent, competitive,
and rules-based business environment.
Moreover, the maintenance of a fixed nominal
exchange rate until mid-1997, combined withthe encouragement of special offshore banking
facilities, led banks and companies to borrow
heavily from abroad in foreign currencies,
mostly on a short-term and unhedged basis, so
as to exploit interest rate differentials, thereby
exposing themselves unduly to the risk of a
sharp decline in the exchange rate.
5. During the months immediately
following the crisis, the Thai economy
underwent internal and major external
adjustments.  A sharp drop in privateWT/TPR/S/63 Trade Policy Review
Page viii
investment contributed to a fall in domestic
demand and a major contraction in imports.
The current account moved from a deficit of
8% of GDP in 1996 to a surplus of 12% of
GDP in 1998.  A correspondingly large swing
also occurred on the capital account, whichmoved from net inflows of nearly
US$20 billion to net outflows of nearly
US$10 billion.
6. In response to the crisis, the Thai
authorities established a market-basedexchange rate system, thereby abandoning the
peg to a basket of currencies.  Initially, they
also tightened monetary and fiscal policies to
restore confidence in the economy, but later
relaxed both as the recession turned out to bemore severe than anticipated.  Aware of the
far-reaching social consequences of the crisis,
the authorities have targeted low-income
groups in recent public expenditure increases.
One of the most striking aspects of the
Government's policy response to the crisis,
however, is its liberalization of several aspectsof its trade and foreign investment regime in
order to speed up structural adjustment.
(2) TRADE AND FOREIGN
INVESTMENT REGIME
7. Thailand's trade and foreign
investment policies are aimed at promoting
economic cooperation in international fora
and avoiding frictions with trading partners.
Accordingly, the Thai Government has
actively participated in the work of the WTO,where it has expressed its regret that only a
few quantitative restrictions have been
eliminated in areas of significant export
interest to Thailand, notably agri-food and
textiles;  it has called for further efforts toabolish market-access restrictions.  Moreover,
Thailand has encouraged regional trading
partners within ASEAN, APEC, Asia-Europe
meetings, South Asia, and the Greater Mekong
region to liberalize faster and further, in the
conviction that liberalization will assist
economic recovery.  The Government alsofavours MFN tariff reductions over GSP
schemes because the graduation mechanisms
in some GSP schemes can trigger thereinstatement of higher MFN tariffs, thereby
eventually disrupting Thai exports.
8. On the domestic front, a long-term
priority is to ensure greater government
transparency and accountability.  A 1997
Constitutional amendment introduces the rightof the Prime Minister to request a referendum,
provides for a National Counter-Corruption
Commission and establishes an independent
advisory body in charge of consumer
protection.  In addition, the customsauthorities have set up a special task force to
create transparency, resolve complaints, and
thereby improve the integrity of the customs
regime.
9. Economic infrastructure should also
benefit from the planned privatization of
state-owned enterprises;  a 1999 competition
law is aimed at ensuring that such enterprises
do not become private monopolies in the
privatization process.  However, the law does
not extend to those enterprises that will remain
state-owned.  Recurrent legislative delaysreflect the difficulties faced by the Government
in passing necessary legislation through
Parliament.  These difficulties include
opposition to the sale of domestic enterprises
to foreign interests.
10. As a consequence of legislative delays,
after seven years of parliamentary
deliberations, a new legislative framework for
foreign investment has yet to obtain approval.
Meanwhile, conditions for foreign investmentcontinue to be determined according to the
latest ministerial announcement.  The
authorities have also relied on such
announcements to implement border tax
changes, regulate trade defence, change theconditions for export assistance, implement
changes in direct and indirect internal taxes,
and amend government procurement rules.
Although use of ministerial announcements
has the advantage of flexibility, it reduces the
stability, predictability, and perhaps the
overall coherence of the trading andinvestment regime.  Accordingly, the
Government is reviewing import-export and
investment legislation to ensure that it reflectsThailand WT/TPR/S/63
Page ix
the actual openness of Thailand's trading
system and provides a clear and stable
framework for business decisions.
(3) POLICIES AND MEASURES
AFFECTING TRADE AND
FOREIGN INVESTMENT
(i) Border measures
11. The Government has continued to
streamline actual import and export measures
in order to facilitate international trade.  Thus,
for example, the authorities are in the processof amending the legislation on customs
valuation, which should reduce the incidence
of arbitrary "uplifts".  Furthermore, despite
complex licensing legislation, which remains
un-notified to the WTO, Thailand maintainsfew import licences, quotas, or other
quantitative restrictions on imports.  Few
trade defence measures are in place, although
a new Anti-Dumping and Countervailing Duty
Act in 1999 replaced the previous much
debated regulations notified to the WTO.  As a
result, border measures consist essentially oftariffs.  In this context, the publication of a
single and comprehensive tariff containing
MFN and preferential duties would, as already
noted in Thailand's 1995 Review, greatly
enhance the transparency of the importregime.
12. The trend in tariffs is downwards
although rates have fluctuated since 1995.  In
September 1999 applied MFN tariffs averaged
18%, compared with 23% in 1995.  But tariffpeaks can be as high as 60%, down from
100% in 1995;  they protect domestic
producers of agri-food products, clothing and
motor vehicles.  The simple average of bound
tariff lines will be 26% for industrial productsand 34% for agri-food products, once the
Uruguay Round of tariff reductions is fully
implemented.  However, 31% of national tariff
lines covering industrial tariffs are unbound.
Under the 1997 Information Technology
Agreement, Thailand is committed to
eliminating MFN duties on productsaccounting for approximately one quarter oftotal trade.  Reductions were due to start in
1999.
13. Tariff increases during the period
under review have in several cases caused
applied MFN tariff rates to exceed WTO
bound rates, but the authorities note that insuch cases MFN bound rates apply to
WTO Members, on condition that a certificate
of origin is provided at Customs.  Such
certificates are likely to complicate trading
procedures as does the fact that tariff ratestend to be higher for non-members than for
Members of the WTO.
14. Thailand is actively implementing
tariff reductions under the ASEAN Free-Trade
Agreement (AFTA).  By the year 2000,Thailand's AFTA tariff will slightly exceed 7%,
less than half of the applied MFN rate.  This
divergence between MFN and AFTA tariff
rates may have contributed to trade diversion,
particularly in an environment of falling
imports and GDP.  The share of imports from
ASEAN members in total imports hasincreased since the last Review of Thailand in
1995.
15. The financial crisis created the
concern that bank failures would deprive
producers of access to export finance.  Theauthorities therefore have greatly expanded
the number and funding of export financing
schemes, some of which involve preferential
terms.  For example, the value of exports
financed under the Packing Credit Facilityamounted to 10% of total exports in 1998.
The authorities have also taken advantage of
transitional provisions contained in the WTO
Agreement on Subsidies and Countervailing
Measures to introduce additional taxincentives in favour of exports.  Generally,
however, Thailand competes on world
agri-food and other markets without any
significant export subsidies.
16. Substantial progress has been made to
expedite the customs clearance process for
exports, as part of an overall strategy toachieve an export-led recovery.  In order to
conform with quantitative restrictionsWT/TPR/S/63 Trade Policy Review
Page x
maintained by trading partners, export quotas
are in place on textiles and clothing products
destined for Canada, the European Union,
Norway and the United States;  and on cars
exported to Chinese Taipei.
(ii) Internal measures
17. Numerous tariff and other tax
concessions are intended to neutralize the
effect of relatively high tariffs on exports,
investment, and production.  Several of these
measures are administered by the Board ofInvestment (BOI), which grants not just tax but
also non-tax incentives, such as the right to
own land or to invest in activities otherwise
closed to foreigners.  Changes in incentives
may be introduced by ministerial notificationand do not need to be approved by Parliament,
provided they fall under the purview of the
Investment Promotion Act.  A number of
incentives have been notified to the WTO as
subsidies or as trade-related investment
measures;  the authorities intend to abolish the
latter by 1 January 2000.  Overall, investmentincentives may have resulted in an inefficient
allocation of capital, as witnessed by the large
number of unprofitable investments, which
contributed to the recent crisis.
18. Thailand has modified its intellectual
property legislation in order to implement the
WTO Agreement on TRIPS.  In particular, the
Patent Act, as amended, introduces the
principle of national treatment and eliminates
the requirement that products under a patentmust be manufactured locally.  Parallel
imports are considered necessary to maintain
competitive prices of products protected by
intellectual property rights.  In 1997, the
Intellectual Property and International TradeCourt began to handle all civil and criminal
cases involving intellectual property.  Despite
the several steps taken to improve
enforcement, the authorities consider that, in
practice, this remains extremely difficult,
partly because of insufficient cooperation from
right holders in conducting raids or takingcases to the courts.19. The Thai Industrial Standards
Institute has participated actively in the work
of the WTO Committee on Technical Barriers
to Trade;  it considers that harmonization of
international standards, transparency,
avoidance of unnecessary obstacles to trade,and non-discrimination would be beneficial to
Thailand as well as to other developing
countries.  All new Thai standards and
regulations are now systematically based on
international norms, and conformityassessment procedures have been greatly
simplified in cases where mutual recognition
agreements have been established.
Meanwhile, however, rather stringent food
and drug regulations, in effect, create a systemof exclusive importers, as only one applicant
holds the information required for registration
and licensing, thereby preventing parallel
imports of such products.
20. The authorities report that Thailand's
regulations on government procurement have
recently been amended with the objective ofenhancing openness, transparency, and fair
competition.  The authorities have indicated
that procuring agencies allow foreign bidders
to compete for contracts unless at least three
domestic products meeting national standardsare available.  Most domestic products are
given a price preference margin in
procurement.  Government contracts for
consultancy and engineering services must be
awarded to domestic companies as the leadingfirm.  All public-sector imports above
US$7 million must have a related countertrade
transaction.
(4) SECTORAL TRADE POLICIES
21. Thailand has continued to participate
actively in the work of the WTO Committee on
Agriculture, urging Members to proceed with
tariff reductions and eliminate market-access
restrictions.  The authorities report no
significant export subsidies and Thailand has
also shown restraint in the use of domestic
subsidies likely to affect trade, particularlysince the recent depreciation of the baht.
Production and trade of several key agri-food
products are organized through marketingThailand WT/TPR/S/63
Page xi
boards and other government-supervised
organizations.
22. High tariffs protect the domestic meat
and dairy, fruit and vegetable, sugar, beverage
and tobacco manufacturing industries.
Thailand does not apply quantitativerestrictions on agri-food imports;  many of the
tariff quotas established under the Uruguay
Round are not used in practice to restrict
imports;  instead, lower or zero duties are
frequently applied when imports of theproducts concerned are needed for the
domestic processing industry.  For the few
products whose importation is impeded by
high tariffs, partners to the AFTA will have
unlimited access to Thailand's market as of2000 at rates not exceeding 20%, thereby
generating substantial pressure on certain
domestic agri-food sectors.
23. Thailand has continued to liberalize
the energy market and has undertaken in
various international fora to enhance
efficiency through greater competition,including by majority foreign-owned
companies.  A transparent regulatory
framework has been announced for the
year 2000 in the petroleum, electricity, and
gas sectors, followed by corporatization andeventual privatization of selected state-owned
enterprises.  In the WTO, Thailand has not
bound tariffs on most petroleum products, and
has not included any energy-related sectors in
its GATS Schedule of Commitments.
24. After two decades of double-digit
growth, Thai manufacturing was severely
affected by the financial crisis that broke in
mid-1997, after which the authorities
substantially increased border taxes onseveral consumer products.  In particular,
tariffs on motor vehicles were raised from
around 40% to 80%.  Production capacity has
increased in the automotive sector as new joint
ventures with foreign multinationals have
started supplying domestic and export
markets.  Investment incentives in theautomotive sector, some of which are due to be
amended by 1 January 2000, include
local-content provisions, themselves attachedto end-use provisions, import and excise duty
concessions, and corporate tax exemptions.
25. The textile and clothing industry
provides an example of the recent tariff
instability in the manufacturing sector,
causing unpredictability for importers.  After acontinuous process of tariff reduction from
1994 to 1996, whereby tariffs on clothing were
reduced from 100% to 45%, and then to 10%
for some products (in early 1997), tariffs were
raised to 60%, ostensibly on fiscal grounds,but also to assist crisis-stricken industries:
Thailand does not protect its textile and
clothing industry with import quotas; however,
its exports are substantially restricted by
quantitative restrictions and safeguards inexport markets.
26. In the course of implementing
measures to overcome the crisis, the Thai
Government has continued to open its
financial services sector to foreign investment.
Thailand has made new commitments with
respect to insurance, banking, and otherfinancial services, first in its Schedule annexed
to the Second Protocol to the GATS (the
so-called Interim Agreement) on Financial
Services agreed in July 1995, and then, as a
result of the WTO financial servicesnegotiations concluded in December 1997,
six months after the crisis erupted.  These
commitments, and in particular the
elimination of the 25% limit on foreign equity
participation, should strengthen the financialsector by attracting new foreign capital and
expertise and by increasing competition.  One
possible area of concern involves the
provisions allowing offshore banking
(International Banking Facilities) to operateas a conduit for domestic borrowing, and
whose nature may have magnified the crisis.
A new Financial Institution Law is being
drafted to consolidate the supervision of the
financial sector and ensure prompt corrective
action, but apparently no amendments to the
International Banking Facilities or associatedtax privileges are envisaged.
27. Under a series of concession contracts
with the existing public duopoly, privateWT/TPR/S/63 Trade Policy Review
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companies have progressively entered a
variety of telecommunications markets,
creating a thriving market in certain
telecommunications services, such as mobile
phones and Internet services.  The authorities,
aware that these markets are unlikely to betruly competitive in the absence of cost-based
pricing, transparent and fair interconnection
arrangements, and independent regulation,
have undertaken to introduce commitments
regarding commercial presence in voicetelephony and other telecommunications
services, by 2006, on the basis of new
legislation.
28. There have also been developments
towards greater international competition inthe transport sector.  The main airline is being
partially privatized, and amendments were
introduced in Parliament to allow larger
shares of foreign ownership in domestic
airlines and introduce competition in
reservation systems.  In 1997, foreigners were
allowed to hold a de facto majority in acompany owning maritime vessels under the
Thai flag.
29. Thailand included a large number of
business services in its GATS Schedule of
Specific Commitments;  the current regulatoryframework allows foreign presence essentially
through joint ventures with minority foreign
control.  In particular, member firms of the
"Big Five" multinational accountancy
networks supply a large share of domesticaudit services under these joint ventures.
Recent analyses of Thailand's crisis have
highlighted the lack of transparency and
accountability in corporate management and
auditing practices, leading the authorities torevise all Thai accounting standards, and
require companies to apply internationalaccounting standards, as well as establish an
audit committee to oversee companies'
financial reporting process and disclosure.
Market access restrictions, including
nationality and equity requirements,
undoubtedly contributed to the severity of thecrisis.
(5) OUTLOOK
30. The main macroeconomic indicators
suggest that Thailand is recovering strongly
from the economic turm oil of the past two
years.  Major reforms, resulting in greater
transparency, and strengthened governance
and prudential supervision, have underpinned
the recovery by improving consumer and
investor confidence, both domestically andabroad.  Trading partners too have played a
key role in the recovery, aided by Thailand's
welcoming and liberal business environment,
providing greater efficiency through import
competition and direct investment inflows.
They have also kept their markets open to
Thailand's exports.
31. There are still a number of downside
risks, however.  For example, the continuing
need for corporate debt restructuring,
reflected in the high level of non-performing
loans, could hamper the recovery of privateinvestment.  More broadly, the danger remains
that as the recovery gains pace, the
Government might succumb to pressures to
put off fundamental reforms, which although
currently well under way, are still incompleteand yet essential for the achievement of a
stable basis for sustainable and equitable
growth of the Thai economy.