RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/THA/13
19 September 2001
(01-4462)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1 and the
EUROPEAN COMMUNITIES2 Regarding the New and Full Notification of THAILAND3
The following communication, dated 17 September 2001, has been received from the
Permanent Mission of Thailand.
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QUESTIONS FROM THE UNITED STATES
Investment Promotion Incentives
Q1. Are the results of the research and de velopment which receive funding under this
programme made public?
Reply
None of the research and development projects receive funding from the Office of the Board
of Investment.  Instead, tax incentives, such as additional three years of corporate income tax
exemption, will be granted to the promoted projects.  Indeed, the promotion scheme is based on the
Investment Promotion Act B.E. 2520 as amended by the Investment Promotion Act (No. 2) B.E.
2534, and can be changed from time to time depending on the government's policy.  These projects
will conduct R&D to serve their clients' demand on a contract basis.  Therefore, the results of suchR&D will be kept confidential and released to clients only.  [BOI]
Q2. You noted that as of August 2000, that the local content requirements and export
requirements were no longer in existence.  Can you  provide the notation for the legislation that
amended this programme?
Reply
In November 1991 the requirements for local content were revoked for the first three
activities as listed:
1. Production of milk or dairy products
2. Manufacture of motorcycles
                                                     
1 G/SCM/Q2/THA/11
2 G/SCM/Q2/THA/12
3 G/SCM/N/71/THAG/SCM/Q2/THA/13
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3. Manufacture of vehicle engines
Following this announcement, in order to respond to current and future economic situations
and to be in line with WTO Agreements in trade and investment, the Board of Investment amended its
policy.  Therefore, in August 2000, the Board of Investment's Announcement No. 1/2543 (1/2000)
was launched which repealed previous conditions on exports and the use of local material.  [BOI]
Credit Refinancing Scheme
Q1. It appears from the details provided under this programme, that there are actually two
separate programmes, a loan programme for small- and medium-sized enterprises (SMEs) and
a working capital support programme for SMEs that have non-performing loans.  Are these twoseparate programmes?  If so, would you please supply complete information for both?
Reply
There is one programme under the Regulation Governing the Purchase of Promissory Note
arising from the Small and Medium Enterprises B.E. 2543.  In fact, the Bank of Thailand previously
provided SMEs only working capital;  however, after the financial crisis the Bank has extended its
assistance by providing SMEs with NPL both working capital and long-term loan.  [Bank of
Thailand]
Q2. What are the terms of the loans that are provided under this programme?  If the loan
terms vary, please provide a brief explanation of how it is determined under what terms each
loan will be granted and repaid.
Reply
Currently, the term loan for each SME is not more than three years, but the loan for SMEs
with NPL must be applied and utilized within two years from 26 July 2000 to 7 April 2002.  The
reason for giving a shorter loan period is to push SMEs to execute the loan quickly.  [Bank of
Thailand]
Packing Credit Facility
Q1. Is there a minimum percentage rate at whic h loans are provided to exporters?  How is
that rate determined?
Reply
EXIM Bank determines the ceiling of interest rate charged to exporters, but there is no
minimum interest rate at which loans are provided to exporters.  [EXIM Bank]
Direct Packing Credit Facility
Q1. Is there a minimum percentage rate at whic h loans are provided to exporters?  How is
that rate determined?
Reply
Direct Packing Credit Facility is provided under the same terms and conditions as Packing
Credit Facility, therefore, there is no minimum inte rest rate at which loans are provided to exporters
under this programme.  [EXIM Bank]G/SCM/Q2/THA/13
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Export Market Diversification Programme
Q1. You stated under the information for the Direct Packing Credit Facility that out of the
B 6 billion credit line that the Bank of Thailand provided to the EXIM Bank for that
programme, B 2 billion was for the Export Market Diversification Promotion Programme.However, as far as we can tell, no where in the information provided under the Export Market
Diversification Promotion Programme is this 2 billion figure identified.  Can you please
explain?
Reply
In 1999, the Bank of Thailand allocated a credit line of B 6 billion for EXIM Bank's Direct
Packing Credit Facility.  Out of this B 6 billion credit line, B 2 billion was mentioned for the use of
the Export Market Diversification Promotion Programme.  However, in practice, exporters who are
eligible for the Export Market Diversification Programme must be customers of either the Direct
Packing Credit or Packing Credit through commercial  banks, in order that EXIM Bank can verify the
exporters' drawdown of lending and their ability to incr ease trade transaction in that particular market.
Therefore, the B 2 billion mentioned for the Market Diversification Promotion Programme was
actually drawn down under the Direct Packing Cred it lending, and there was no drawdown of lending
under the Market Diversification Promotion Programme.  [EXIM Bank]
Under this programme, are funds not used one year rolled over into the next year?
Reply
Under the Export Market Diversification Promotion Programme, the B 2 billion credit line is
rolled over into the next year;  however, it is subject to the Bank of Thailand's consideration.  [EXIMBank]
Machinery Upgrading Financing
Q1. Can you please provide the list of 13 industries from the Industrial Restructuring Plan?
Reply
The 13 industries eligible under this programme are as follows:
1. Food and animal food
2. Textiles and articles of apparel and clothing accessories3. Footwear and parts and leather and bovine leather products
4. Wood and wood sheets and houseware
5. Pharmaceutical and chemical products
6. Rubber and rubber products
7. Plastic products8. Ceramic products and tableware and kitchenware of glass
9. Electrical equipment and electronic appliances
10. Motor cars, parts and accessories
11. Precious stones and jewellery
12. Iron or steel products13. Petrochemical industry and its related [EXIM bank]G/SCM/Q2/THA/13
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Q2. What was the minimum lending rate under this programme?
Reply
There is no minimum lending rate under Machinery Upgrading Financing.  [EXIM Bank]
Industrial Estate Authority of Thailand
Q1. You state under “To Whom and How Subsidy is Provided” that under this programme,
“Incentive is provided to the industrial operator who is permitted to engage in industrial
activity in an industrial estate.”  However, throughout the rest of the explanation under this
programme, it appears that in order to receive benefits under this programme, one must be anexporter.  Can you please clarify?
Reply
Industrial operators who are eligible to receive benefits under this programme must operate in
an export-processing zone and annually export not less than 40 per cent of their total sales value
(using f.o.b. prices).
Products, by-products, and other items resulting from the production in the export processing
zone for use or distribution in the Kingdom are subject to tariffs and duties according to theircondition, price, and customs tariffs on the date of their removal from the export processing zone.
They will be considered as imported into the Kingdom on the date of their removal from the export
processing zone according to Section 51, IEAT Act B.E. 2522, which has been amended by Section 3,
IEAT Act (second) B.E. 2534.  [IEAT]
Q2. What criteria must an entity or enterprise me et in order to qualify to take part or locate
in an Industrial Estate?
Reply
The criteria that an entity or enterprise will meet in order to qualify to take part or locate in an
industrial estate are stated in the IEAT announcement No. 1/2531, No. 4/2535, No. 6/2535 and
No. 2/2538 regarding standard, procedures, and conditions in the application for permission and the
granting of permission to operate in industrial estates (amendment).  [IEAT]
QUESTIONS FROM THE EUROPEAN COMMUNITIES
Q1. Investment promotion incentives
(a) Can Thailand please indicate the scope of the exemption and the level of
reduction of import duties for machinery and raw materials?
Reply
The scope of the exemption of the level of reductions of import duties for machinery and raw
materials are:G/SCM/Q2/THA/13
Page 5
Zone 1
- 50 per cent reduction of import duty on machinery that is subject to import duty of not less
than 10 per cent;
- Exemption of import duty on raw or essential materials used in the manufacturing of export
products for 1 year.
Zone 2
- 50 per cent reduction of import duty on machinery that is subject to import duty of not less
than 10 per cent;
- Exemption of import duty on raw or essential materials used in the manufacturing of export
products for one year.
Zone 3
- Exemption of import duty on machinery;- Exemption of import duty on raw and essential materials used in the manufacturing of export
products for five years.  [BOI]
(b) Which expenditures qualify for "special deduction"?
Reply
Expenditures qualified for special deduction include transportation, electricity, and water
costs which are applicable to projects located in the most disadvantaged area.  [BOI]
(c) Please explain the relationship and the difference, if any, between the two
programmes called "Investment promotion incentives" on pages 1 and 4 of the
notification document.
Reply
The new investment promotion incentives appearing on page 4, which became effective since
1 August 2000, are different from the incentives which appeared on page 1 as follows:
(1) The export and local contents requirement are lifted to comply with WTO
obligations.
(2) There are some relocation of provinces in the three investment zones (details
appeared in the previous notification document).  [BOI]
Q2. Packing credit facility and direct packing credit facility
The notification states that the interest rate  to exporters is "not more than 7 per cent as
of end 2000".    Can Thailand please explain how the actual interest rate charged to the exporter
is calculated?G/SCM/Q2/THA/13
Page 6
Reply
Commercial banks determine the interest rates charged to exporters under the Packing Credit
and EXIM Bank for Direct Packing Credit.  In this light, there are two major factors to be considered.
On one side are all-in costs of fund of commercial banks.  The other is an exporter's creditworthiness
as well as his financial and business performance.  Therefore, the actual interest rate charged by banks
to an individual exporter varies accordingly.  [EXIM Bank]
Q3. Export market diversification promotion programme
Can Thailand please elaborate on how the interest rate rebate is calculated?
Reply
The interest rate rebate is calculated as in the following example:
First step: Limit of eligible amount used for calculation
   Export value to "A" country in 1999 = B 100 million
   Export value to "A" country in 2000 = B 120 million
Therefore:    Eligible amount used for calculation in 2000 - B   20 million
Second step: Actual interest rebate amount:
1. EXIM Bank will use the value of promissory notes, or the value shown in exportdelivery documents issued by the Customs Department, whichever is lesser, to calculate
interest rebate.  Such amount shall not accumulatively exceed B 20 million.
2. EXIM Bank will rebate interest to an exporter equal to the actual interest amount paid
for particular promissory notes or export delivery documents but not higher than 5 per cent.
[EXIM bank]
Q4. Machinery upgrading financing
Can Thailand please list the 13 industries eligible under this programme?
Reply
The thirteen industries eligible under this programme are as follows:
1. Food and animal food
2. Textiles and articles of apparel and clothing accessories
3. Footwear and parts and leather and bovine leather products
4. Wood and wood sheets and houseware
5. Pharmaceutical and chemical products6. Rubber and rubber products
7. Plastic products
8. Ceramic products and tableware and kitchenware of glass
9. Electrical equipment and electronic appliances
10. Motor cars, parts and accessories11. Precious stones and jewellery
12. Iron or steel products
13. Petrochemical industry and its related [EXIM bank]
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