WORLD TRADE
ORGANIZATIONG/SCM/N/48/THA
10 January 2001
(01-0096)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Updating Notification Pursuant to Article XVI:1
of the GATT 1994 and Article 25 of the SCM Agreement
THAILAND
The following communication has been received on 5 January 2001 from the
Permanent Mission of Thailand.
_______________
TABLE OF CONTENTS
I. INVESTMENT PROMOT ION INCENT IVES .................................................................. 1
II. CREDIT REFINANCING  SCHEMES................................................................................ 4
III. PACKING CREDIT FACILITY.......................................................................................... 5
IV. DIRECT PACKING CREDIT FACI LITY ......................................................................... 7
V. SPECIAL PACK ING CREDIT............................................................................................ 9
VI. MERCHANT MARI NE FINANCI NG .............................................................................. 10
VII. MACHINERY UPG RADING FI NANCING .................................................................... 12
VIII. INDUSTRIAL ESTATE AUT HORITY OF TH AILAND ............................................... 13
I. INVESTMENT  PROMOTION  INCENTIVES
1. Title of the subsidy programme
Investment Promotion Incentives
2. Period covered by the notification
1 January 1998–31 December 1998G/SCM/N/48/THA
Page 2
3. Policy objective and/or purpose of the subsidy
Investment promotion incentives aim at promoting the establishment of industries in Thailand
to accelerate the country’s industrialization process and encouraging regional development.  During
recent years, investment incentives have been gear ed towards decentralization to address the on-going
development disparities between the urban and rural areas as one of the Thai Government’s policy
themes is regional development.
4. Background and authority for the subsidy
The legal basis of the investment promotion incentives is the Investment Promotion Act
(1977)  amended in 1991.  The responsible authority is the Office of the Board of Investment (BOI)
5. Form of the subsidy
Tax concessions such as exemption/reduction corporate income tax, exemption/reduction of
import duties on machinery, reduction of import duties on raw materials, and special deduction ofcertain expenditures.
6. To whom and how the subsidy is provided
General
A wide range of activities covering primary, secondary, and tertiary sectors are eligible for
investment promotion incentives, The scheme is not specific to any particular sectors.  Moreover,
companies in every province in Thailand can have access to investment promotion incentives.  The
Board  of Investment has established the criteria in granting tax incentives which are generally basedon the locations of investments.  The entire country is divided into the following 3 zones:
Zone 1: Bangkok and vicinities (Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi, and
Nakhon Pathom)
Zone 2: Samut Songkram, Rachaburi, Kanchanaburi, Suphanburi, Ang Thong, Ayutthaya, Saraburi,
Nakhon Nayok, Chachoengsao, and Chonburi
Zone 3: the remaining provinces
11  (the least developed area of which per capita income is below
85 per cent of the national average)
Zone 1 is granted the least incentives whereas Zone 3, the most disadvantaged and least
developed area, is granted the maximum incentives.   The Board of Investment may require certain
activities to be located in zone 2 or 3 only in order to be eligible for investment promotion incentives.
Factory Relocation
In order to further encourage decentralization, the Board of Investment also provides
incentives for the relocation of existing factories in zone 1 to zone 2 or 3, or from zone 2 to zone 3.
The following criteria are applied:
                                                     
1 Plus the Laem Chabang Industrial EstateG/SCM/N/48/THA
Page 3
Factories facing environmental problems and required by the Ministry of Industry to relocate
1. The factory must be relocated to an industrial estate or promoted industrial zone.
2. The former factory must be closed down and all machinery must be moved to the new
facility.  The new facility must be ready for operation within 2 years of receiving the
promotion certificate.
Other types of factories
1. The existing operation must employ not fewer than 50 people.
2. Main production machinery must be moved to the new location, and the new factory must
start operating within 2 years of receiving the promotion certificate.
The following incentives are granted:
For relocation to zone 2: corporate income tax exemption2  for 3 years, extendible to 7 years if
projects are relocated to industrial estates or promoted industrial zones.
Relocation to zone 3:  8-year corporate income tax exemption, 50 per cent reduction of
corporate income tax for 5 years; double deduction, from taxable income, of water, electricity, andtransportation costs for a period of 10 years; and deduction of up to 25 per cent of costs of installation
or construction of infrastructure facilities.
Research and Development
With a view to upgrading the country’s technological capabilities, the Board of Investment
grants additional incentives to promoted projects which invest in research and development activities.
Additional 3 years of corporate income tax exemption will be granted to promoted projects which
invest in research and development activities.  However, when combined with the existing corporate
income tax exemption, the total period cannot exce ed 8 years.  This programme is not targeted to
research and development in any particular sectors.
7. Amount of the subsidy
There is no specific budget earmarked for investment promotion incentives.  The information
on the subsidy per unit therefore cannot be provided.  No statistics on corporate income tax exemption
and reduction are available  However, figures on import duty concessions  (exemption and reductionof import duties on machinery and reduction of import duties on raw materials)  are provided.  These
figures also include assistance given to disadvantaged region.
                                                     
2 starting from the date when income is first derived from the promoted activityG/SCM/N/48/THA
Page 4
Import Duty Exemption and Reduction
Granted to BOI-Promoted Projects
(1 January–31 December 1998)
   Unit : million baht
Machinery
Exemption 11,551.98
Reduction 49.85
Raw Materials
Reduction 418.39
Total 12,020.22
Source:  Customs Department, Ministry of Finance, Thai Government
8. Duration of the subsidy and/or any time limit attached to it
The duration of the programme is indeterminate.  However, the incentives granted to each
investment are subject to certain time limits.
9. Statistical data permitting an assessment of the trade effects of the subsidy
Statistics on Start-up of Investment Projects Granted Promotion by the Board of Investment
Year Number of Investment Projects Total Investment Volume
(billion baht)
1996 611 230.3
1997 479 273.5
1998 740 294.6
Source:  Office of the Board of Investment, Office of the Prime Minister, Thai Government
II. CREDIT REFINANCING SCHEMES
1. Title of the subsidy programme
Credit Refinancing Schemes
2. Period covered by the notification
1 January 1998–31 December 1998
3. Policy objective and/or purpose of the subsidy
To provide financial assistance to priority sectors3 and projects through refinancing schemes
4. Background and authority for the subsidy
The legal basis of this scheme is  the Royal Decree Regulating the Affairs of the Bank of
Thailand B.E.2485, Section 12(4). The responsible authority is  the Bank of Thailand (BOT).
                                                     
3 Economic sectors deemed important to the development of the national economy and its national
growth.G/SCM/N/48/THA
Page 5
5. Form of  the subsidy
Loan
6. To whom and how the subsidy is provided
In April 1998, the BOT had revised the interest rate in any Bank of Thailand Regulations
Governing the Purchase of Promissory Notes that the financial institutions in participation could
charge the borrower from not exceeding 10 per cent p.a. to the maximum rate of MLR-2.75 per cent
p.a. of each promissory note.  After then, in September 1998, the interest rate has been adjusted; the
BOT allows the financial institutions in participation to charge the general and small-scale industrial
undertakings at the MLR-1 per cent p.a.  However, the interest rate charged for those industries underthe BOI’s privileges on Zone 3 investment programme remains unchanged.
7. Amount of the subsidy
In 1998, the outstanding loans under the BOT financial assistance granted to producers
through the financial institutions total B1, 131.64 million as shown below.
Outstanding as Interest rate
Schemes of December31,1998
(million Baht)Charged by the
BOT
(%)Charged by the
Financial Institutions
(%)
Industrial Credit 119.37 5.0 MLR-1
Small-scale industry 167.49 3.0 MLR-1
Livestock raising 421.10 5.0 MLR-2.75
   And aqua-culture
Rural development 4.27 3.0 MLR-2.75
Zone 3 investment 419.41 3.0 MOR/MLR-2
TOTAL 1,131.64
8. Duration of the subsidy and/or any time limit attached to it
Indefinite
9. Statistical data permitting an assessment of the trade effects of the subsidy
Not determined
III. PACKING CREDIT FACILITY
1. Title of the subsidy programme
“Packing Credit Facility”
Packing credit facility is an export financing scheme provided by the Bank of Thailand with
co-financing from commercial banks.  Under this facility, commercial banks obtain fund, provided by
the Bank of Thailand through the Export-Import Bank of Thailand (EXIM Bank), at the concessionary
interest rate on condition that commercial banks co-finance the other half in order to on-lend to
exporters.  The facility is provided for both pre-shipment and post-shipment financing.G/SCM/N/48/THA
Page 7
3 Exporters issue promissory notes to commercial banks.
4 Commercial banks grant the loan to exporters with interest rate of no more than 13 per cent
p.a.
5 Commercial banks issue promissory notes to EX IM Bank with the amount of up to 40 per
cent of promissory notes issued by exporters. (as stated in 3)
6 EXIM Bank disburses the fund to commercial banks.
7 Exporters ship out their merchandise.
8 Exporters bring export documents to commercial banks for negotiation.
9 Commercial banks negotiate export bills, disc harge the exporters’ promissory notes and give
the remaining proceeds to exporters.
10 Commercial banks pay back for settlement of their corresponding promissory notes.
11 EXIM Bank discharges commerci al banks’ promissory notes.
7. Amount of the subsidy
The Bank of Thailand extended a total line of 33 billion baht for the packing credit facility, to
which commercial banks co-finance another 40 per cent.
The interest rate that the Bank of Thailand charged EXIM Bank was 4 per cent p.a., while
EXIM Bank channeled fund to commercial bank at 5 per cent p.a..  Commercial banks blended their
fund and on-lent to exporters at the interest rate not more than 13 per cent p.a. as of end 1998.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement : 1994
9. Statistical data of permitting an assessment of the trade effects of the subsidy
(billion baht)
1995 1996 1997 1998
/g167 Total packing credit financing
disbursed182.0 178.0 170.4 179.9
/g167 Total BOT’s financing 91.0 89.0 85.2     108.0
/g167 Credit outstanding at year-end 41.9 44.6 42.1   12.3
IV. DIRECT PACKING CREDIT FACLITY
1. Title of the subsidy programme
“Direct Packing Credit Facility”
2. Period covered by the notification
1 January 1998–31 December  1998
3. Policy objective and/or purpose of the subsidy
 
To encourage fuller utilization of the packing credit fund.
To provide liquidity to the exporter sector, particularly during the recent financial crisis.G/SCM/N/48/THA
Page 8
4. Background and authority for the subsidy
In early 1998, Thailand faced a severe liquidity shortage and most commercial banks slowed
down their lending, including the co-financing under the packing credit facility.  Utilization of
packing credit fund stayed around 20 billion baht in January 1998 compared to the available fund of33 billion baht,.  The packing credit fund remained under-utilized despite the badly needed export
financing because commercial banks had limited fund to co-finance, as well as faced constraints on
the NPLs and the capital adequacy basis.
In order to alleviate the credit crunch in export financing and to encourage fuller utilization of
the idle packing credit fund provided by the Bank of Thailand, EXIM Bank asked for EXIM’s direct
lending to exporters under the packing credit scheme.  The Bank of Thailand approved the credit lineof 5 billion baht for EXIM’s direct packing credit facility to on-lend under the same terms and
conditions as commercial banks under the packing credit facility.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank cofinanced, with the Bank of Thailand’s fund, 40 per cent of the total credit
granted and on-lent to exporters.
In such co-financing, EXIM Bank was obliged to the same regulations and work procedure as
commercial banks under the packing credit facility.  Functions in the part of commercial banks were
carried out by Banking Department of EXIM Ba nk, while the Packing Credit Department of EXIM
Bank was responsible for the documentation and the settlement with the Bank of Thailand.
7. Amount of the subsidy
The Bank of Thailand allocated a line of 5 billion baht for EXIM Bank’s direct packing credit
facility, to which EXIM Bank co-financed another 40 per cent.
The interest rate that the Bank of Thailand lent to EXIM Bank was 5 per cent, while EXIM
Bank cofinanced 40 per cent of the total lending to exporters at the interest rate not more than 13 per
cent as of end 1998.
8. Duration of the subsidy
Date of Commencement : 27 April 1998.
9. Statistical data permitting an assessment of the trade effects of the subsidy
- Total financing disbursed in 1998* 6.0 billion baht
- Total Bank of Thailand’s financing disbursed 3.6 billion baht
- Credit outstanding at end 1998 2.3 Billion baht
Note   * From the BOT’s line of 5 billion baht, EXIM bank provided the credit line to exporters
totally 5.759 billion baht due to the fact that total utilization would scarcely be over
80 per cent at one moment.  Of the approved credit line, total business turnover
accumulated to 6.0 billion baht in 1998.G/SCM/N/48/THA
Page 9
V. SPECIAL PACKING CREDIT
1. Title of the subsidy programme
“Special Packing Credit”
2. Period covered by the notification
1 January–31 December  1998
3. Policy objective and/or purpose of the subsidy
To alleviate the severe credit crunch in the financing market, and consequently the export
financing, in the aftermath of the Baht floatation (July 1997.)
4. Background and authority for the subsidy
Having foreseen the coming of the credit crunch towards the end of 1997, as most
commercial banks’ credit line from abroad had gradually been suspended, EXIM Bank arranged for
the short-term syndicated loan of US$500 million from international market to accommodate the
financial needs of the export sector.
This borrowing was arranged by EXIM Bank on its own, without the government guarantee
nor the Bank of Thailand’s financing export
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank provided the $500 million fund to commercial banks to on-lend to exporters in
US dollar denomination, without co-financing from commercial banks.
EXIM Bank lent to commercial banks at the rate of LIBOR plus 1.0 per cent p.a. and
commercial banks could charge the exporters at the rate of not more than LIBOR plus 3.0 per cent p.a.
The lending mechanism under this programme resembled that of the packing credit, therefore,
it is called “special packing credit”.  However, it had no relations with the Bank of Thailand nor thepacking credit fund.  Instead, it was provided on the market interest rate basis.
7. Amount of the subsidy
US$500  million.
8. Duration of the subsidy
22 October 1997  until 20 October 1998 .
The $500 million loan was totally repaid in October 1998 and the programme, therefore,
terminated.G/SCM/N/48/THA
Page 10
9. Statistical data permitting an assessment of the trade effects of the subsidy
Total business turnover US$1,174.1 million
(during October 1997 to October 1998)
VI. MERCHANT MARINE FIANCING
1. Title of the subsidy programme
Merchant Marine Financing
2. Period covered by the notification
1 January–31 December  1998
3. Policy objective and/or purpose of the subsidy
 To alleviate the country’s deficit on balance of trade & services
 To strengthen the merchant marine business of Thailand
 To accommodate the export sector with good shipping facility.
4. Background and authority for the subsidy
Since 1995, the government took a serious look into the country’s problem of current account
deficit and, in the meantime, found out that the neglected merchant marine business not only incurred
revenue foregone but also brought about substantial outflow of freight and shipping expenses, not tomention the insufficiency of Thailand’s shipping business.
As a result, EXIM Bank launched a financial service for the merchant marine business from
its own fund in early 1996.  Later, in September 1996, the government provided, through the Bank of
Thailand, a credit line of 2 billion baht for merchant marine financing at EXIM Bank.  Then, in
February 1998, a portion of 1 billion baht from the Structural Adjustment Loan (SAL) from the ADB
World Bank Co-financing to the Thai government was provided to EXIM Bank to on-lend undermerchant marine financing together with the machinery upgrading financing.
In the meantime, EXIM Bank still provided financing from its own source of fund
simultaneously, especially to customers who were not qualified by the BOT’s conditions, for
example, when the financed ship aged over 20 years.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank extended credit to entrepreneurs of merchant marine business to buy/renovate
their ships, new or used ones.
Customers who were qualified by the BOT’s cond itions could utilize the BOT’s fund in baht
denomination which offered a low interest rate of up to 7 per cent p.a.  EXIM Bank had to co-finance
another half with the BOT’s fund in baht or US dollar denomination at the market interest rate.G/SCM/N/48/THA
Page 11
From EXIM’s own fund, the financing was provided in baht or US dollar, both at the market
interest rate, with more relaxed conditions.
As for the SAL fund, since the cost of fund was relatively high, above 11 per cent in baht
lending, the fund was not commercially acceptable for customers.
Criteria for Bank of Thailand’s fund for merchant marine financing
The company is registered in Thailand and has Thai ownership more than 50 per cent of total
registered capital.
The main business involves international shipping.
The financing is for the investment in new ship or the used one with up to 20 years of age.
This investment shall include the rehabilitation cost of the used ship.
The financed ship must be registered in Thailand and flies Thai flag.
The term of lending from BOT’s fund was up to 5 years, while that from EXIM’s fund was up
to 7 years, depending on business conditions.
7. Amount of the subsidy
BOT’s fund totalled    2   billion baht
SAL fund totalled       1   billion baht (together with machinery upgrading)
EXIM Bank’s own source of fund was up to customers’ demand for financing and funding
availability.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement :
EXIM Bank’s facility : early 1996.
BOT’s fund : September 1996.SAL fund : February 1998.
9. Statistical data of permitting an assessment of the trade effects of the subsidy
(billion baht)
1996 1997 1998
/g167 Total credit granted 0.98 2.42* 3.89
/g167 Total BOT’s financing 0.07 0.76 1.43
/g167 Credit outstanding at year-end 0.64 2.77* 3.43
Note *  Credit outstanding exceeded credit line because of the exchange rate effect.  Credit line was
quoted at the proxy exchange rate of 30 baht to a US dollar in 1997, while credit outstanding wasquoted at the market exchange rate as of December 30, 1997.G/SCM/N/48/THA
Page 12
VII. MACHINERY UPGRADING FINANCING
1. Title of the subsidy programme
Machinery Upgrading Financing
2. Period covered by the notification
1 January–31 December 1998
3. Policy objective and/or purpose of the subsidy
 To strengthen the competitive edge of Thai exporters.
 
To encourage the renovation/upgrading of the technology of production/quality of products of
Thai exports.
4. Background and authority for the subsidy
Thailand’s export performance unexpectedly recorded the zero growth in 1996 after a decade
of high growth.  The government deemed it necessary to improve the competitive edge of Thai major
export products, and an awareness arose that some export industries did face a serious problem of out-
of-dated technology of producti on which brought about low quality of products and incompetitive
prices.
EXIM Bank, therefore, introduced a financial service to facilitate the machinery upgrading of
the export production.  The government later supported by the provision of fund from the Bank of
Thailand to co-finance with EXIM Bank in this facility.  Then came the SAL fund to be mutually usedin machinery upgrading and merchant marine financing.
5. Form of the subsidy
Loan
6. To whom and how the subsidy is provided
EXIM Bank extended credit to exporters whose plans to renovate/upgrade their machinery
were approved by bodies authorized by the Ministry of Industry.
Exporters eligible for Bank of Thailand’s fund must be qualified by the following criteria :The renovation plan had been approved by  bodies authorized by MOI,
The financing shall be used for new machinery investment in replacement of the old one.
Exporters qualified by the BOT’s criteria could utilize BOT’s fund in baht denomination by
25 per cent  of total lending at an interest rate not more than average MLR (maximum lending rate of
4 major local banks)  minus 2.0 per cent p.a.  EXIM Bank co-financed another 75 per cent, in baht or
US dollar, at the rate of up to average MLR minus 2.0 per cent p.a. for baht lending; in case of US
dollar lending at a rate of up to average MLR mi nus 40 per cent p.a. or up to LIBOR plus 4.0 per cent
p.a.
Apart from co-financing with BOT’s fund, EXIM Bank also provided machinery upgrading
financing on its own, with a more relaxed condition, for instance, to finance the investment in someG/SCM/N/48/THA
Page 13
particular kinds of machinery that were not included in MOI’s conditions, or in case the investment
would not replace the old machinery  as exporters moved the old ones to another factories.
Lending interest rate of EXIM Bank stayed at EXIM Prime plus 1.5 per cent p.a. in baht
lending, while US dollar lending at the rate up to LIBOR plus 4.0 per cent p.a. (EXIM Prime stayed at11 per cent p.a. as of end 1998.)
The term of lending for machinery upgrading was up to 5 years for both BOT’s and EXIM
Bank’s fund.
7. Amount of the subsidy
BOT’s fund 1 billion baht
SAL fund 1 billion baht (together with merchant marine)
EXIM Bank’s own source of fund was subject to fund availability.
8. Duration of the subsidy and/or any time limit attached to it
Date of Commencement :
EXIM Bank’s facility : Early  1997.
OT’s fund : May  1997.
AL fund : February  1998.
9. Statistical data permitting an assessment of the trade effects of the subsidy
(billion baht)
1997 1998
/g167 Total credit granted 0.33 0.67
/g167 Total BOT’s financing 0.01 0.09
/g167 Credit outstanding at year-end 0.26 0.37
VIII.  INDUSTRIAL ESTATE AUTHORITY OF THAILAND (IEAT)
1. Title of the subsidy programme
Industrial Estate Authority of Thailand (IEAT)
2. Period covered by the notification
1 January–31 December 1998
3. Policy objective and/or purpose of the subsidy
To procure a suitable land for the establishment or expansion of industrial estate which
includes the general industrial zone and export processing zone.
To provide facilities for industrial operators in the industrial estateTo promote and control the industrial estate owned by private sector or other government
agenciesG/SCM/N/48/THA
Page 14
4. Authority for the subsidy
Industrial Estate Authority of Thailand (IEAT)
5. Form of the subsidy
Incentive cover the exemptions of payment of surcharge under the law on promotion of
investment, import duty, value added tax and excise tax on machinery, equipment, tools and supplies
including the component thereof which are essential for the production of goods or trading for export,
as the case may be, and on materials to be used for the construction, assembly or installation of
factory or building and goods imported and taken into an export processing zone by industrialoperator and trader for export for use in the production of good or trading for export.
6. To whom and how subsidy is provided
Incentive is provided to the industrial operato r who is permitted to engage in industrial
activity in an industrial estate.
7. Amount of the subsidy
No specific budget provided
8. Duration of the subsidy and/or any time limit attached to it
Upon operation period.
9. Statistical data of permitting an assessment of the trade effects of the subsidy
YEAR IMPORT VALUE (BAHT) EXPORT VALUE (BAHT)
2538 (1995) 73,139,944,267 73,462,181,499
2539 (1996) 99,350,433,973 96,475,416,167
2540 (1997) 115,506,326,620 139,367,488,253
2541 (1998) 128,270,754,625 200,181,565,655
 (TOTAL) 416,267,459,485 509,486,651,574
__________