RESTRICTED
WORLD TRADE G/SCM/Q2/THA/5
7October 1996
ORGANIZATION(96-4059)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Questions from theUNITED STATES Regarding theNew
andFullNotification ofTHAILAND1
Thefollowing communication, dated 27September 1996, hasbeenreceived fromthePermanent
Mission oftheUnited States.
_______________
Section I General
Please provide information concerning thefollowing programmes which didnotappear tobe
included within Thailand ’snotification, yetmaymeet thenotification requirements ofGATT 1994
and/or theSCM Agreement. Iftheseprogrammes areencompassed elsewhere inThailand ’snotification,
please explain. Ifnot,please include information relevant totheelements requested inthenotification
format, orexplain thebasis onwhich Thailand determined thateachprogramme didnotmeet the
notification requirements referenced above:
1. TaxCertificates forExports -Under theTaxandDuty Compensation ofExported Goods
Produced intheKingdom Actof1981(TaxandDuty Act), theRoyal ThaiGovernment (RTG) issues
taxcertificates totheexporter ofrecord torebate indirect taxes andimport duties oninputs usedto
produce exports. Therebate ratesarecomputed onthebasis ofaninput/output (I/0)study initially
published in1980 based on1975 data, andupdated in1985 using 1980 data.
2. Export Packing Credits -Export packing credits (EPCs) areshort-term pre-shipment and
post-shipment export loans. Exporters apply tocommercial banks forEPCs andthecommercial banks,
inturn, submit theapplications totheBank ofThailand (BOT) forapproval. TheBOT repurchases
promissory notes issued bycreditworthy exporters through commercial banks. Toqualify forthe
repurchasearrangement,promissorynotesmustbesupportedbyaletterofcredit,salescontract,purchase
order, usance billorwarehouse receipt. Thenotes areavailable foramaximum of180daysandinterest
ispayable ontheduedateoftheloan.
3. International Trade Promotion Fund -Thisfundisusedtofinance export promotion activities,
suchasmarketing research andtrade fairs.
4. Electricity Discounts forExporters
5. Repurchase ofIndustrial Bills
1G/SCM/N/3/THAG/SCM/Q2/THA/5
Page2
6. Rediscount ofIndustrial Bills-TheBOTauthorizes rediscounts forshort-term promissory notes
arising from industrial activity. TheBOT's"Regulations Governing theRediscount ofPromissory
Notes Arising from Industrial Undertakings" permit commercial banks torediscount short-term
promissory notes forindustrial purchases. Commercial banks maycharge theirindustrial customers
amaximum of7percentperannum, while theratecharged tocommercial banks bytheBOTis5per
centperannum.
7. Export Processing Zones -Under theIndustrial Estates Authority ofThailand Act,firms located
indesignated export processing zones andindustrial estates receive taxandimport dutyexemptions
on:(1)machinery usedforfactory construction andoperation; (2)goods imported foruseinthe
production ofexports; (3)items produced forexport; and(4)items imported forre-export.
8. Reduced Business Taxes forProducers ofIntermediate Goods forExport Industries
9. Incentives Under theInvestment Promotion Act(IPA)
A. Assistance toTrading Companies under theIPA(Section 16)
- Exemption ofbusiness taxes forsuppliers
- Exemption ofbusiness taxes forsubcontractors
- Entitlement toExport Packing Credits
- Adouble deduction fromtaxable income oftaxespaidbybranch offices outside
Thailand
- Adouble deduction from taxable income offoreign marketing expenses
- Permission tomaintain foreign currency bankaccounts
B. Other Incentives
- Section 28,Exemption onimport duties andbusiness taxesonmachinery used
toproduce promoted products
- Section 31,Income taxexemption
- Section 33,Goodwill androyalties taxexemption
- Section 34,Additional taxdeduction fordividends paidonpromoted activities
- Section 36(2), Exemption ofimport duties andbusiness taxesonitems imported
forexport
- Section 36(3), Exemption onexport duties andbusiness taxes onproducts
produced orassembled bypromoted firms
- Section 36(4), Deduction formassessable income ofanamount equal to5per
centoftheincrease overtheprevious yearofincome derived from exports
Does theInvestment Incentive Scheme listed inThailand ’sresponse include alloftheabove provisions
under theInvestment Promotion Act?
10. Various Other Programmes oftheThailand Board ofInvestment -e.g.engineering, testing
andtraining services, consulting services, andinformation oninvestment opportunities, industrial
subcontracting, investment matchmaking, promotion ofThaiinvestment overseas, andsoftware design
anddevelopment.
11. Thailand Development Research Institute (TDRI) -policy research tobedisseminated tothe
public andprivate sectors including thefollowing research areas: Human Resources andSocial
Development, International Economic Relations, Macroeconomic Policy, Natural Resources and
Environment, Science andTechnology Development, andSectoral Economics.G/SCM/Q2/THA/5
Page3
12. ProgrammessupportingindustryoftheDepartmentofExportPromotionincluding:TradeFairs,
publication oftheWeekly Trade News &“Exporter Review ”Magazine, andnewproducts
advertisements.
44. Programmes under the1979 Industrial Estate Authority ofThailand Act
Section II Agriculture
A. WenotethatThailandomittedreferencetoitsricepricesupportandexportsubsidyprogrammes.
Regarding pricesupport, weunderstand thatThailand hascontinued itspaddy mortgage scheme which
allocated baht836.80 perMMT in1996 tocover production loans tofarmers whoputatargeted
2.5MMT ofpaddy upascollateral. TheThaiGovernment alsomaintains several ricepurchase
programmes tosupport prices, valued atapproximately $100million for1996. Forexport subsidies,
despite theThaiGovernment announcement thattheprogramme wasdiscontinued for1996duetostrong
paddy prices, the1995subsidy wasvalued at$10/mt toencourage forward salesbytheprivate sector.
Could Thailand confirm thatallsuchschemes which lower export prices have been permanently
discontinued?
B. Thailand notified under theLivestock Raising andAqua-Culture Credit programme, thatthe
Bank ofThailand willpurchase from commercial banks promissory notes drawn byfarmowners to
finance theiroperating costs. Could Thailand provide more information onthisprogramme andit’s
eligibility requirements?
C. Please provide information concerning thefollowing programmes which didnotappear tobe
included within Thailand ’snotification, yetmaymeet thenotification requirements ofGATT 1994
and/or theSCM Agreement. Iftheseprogrammes areencompassed elsewhere inThailand ’snotification,
please explain. Ifnot,please include information relevant totheelements requested inthenotification
format, orexplain thebasis onwhich Thailand determined thateachprogramme didnotmeet the
notification requirements referenced above:
1. Public Warehouse Organization
2. Market Intervention Programme oftheMinistry ofInterior
3. Supplementary Programme toImplement theGovernment 'sRicePolicy-Preferential Financing
toRiceMillers
4. Price Support andStabilization Programmes -Thepricesupport andstabilization programmes
aredetermined eachyearbytheRicePolicy andMeasures Committee (RPMC) oftheRoyal Thai
Government (RTG). TheRPMC iscomposed ofrepresentatives oftheOffice ofthePrime Minister,
theDefenseMinistry,theAgricultureandCooperativeMinistry,theCommerceMinistryandtheInterior
Ministry.
5. Marketing Organization forFarmers (MOF) -TheMOF operates under theMinistry of
Agriculture andCooperatives (MAC). MOF administers twoprogrammes designed toassist paddy
ricefarmers:
A. Payment-in-Kind Programme (PIK) -Under thisprogramme, theMOF accepted paddy
riceaspayment forfarmers 'andagricultural organizations 'fertilizer debt. Forthe
purposes ofthistransaction, thevalue ofthericepertonwasnotmore than10per
centhigher thantheprevailing localprice. MOF thengenerally soldthepaddy rice
ataprofit of100bahtpertonoveritspurchase price.G/SCM/Q2/THA/5
Page4
B. Paddy RicePurchase Programme -Under thisprogramme, theMOF purchases, on
thesame terms asthePIKprogramme, additional paddy ricefrom farmers and
agricultural organizations whosettled theirfertilizer debts under thepayment-in-kind
programme.
6. Short-terminterest-freeloansprovidedunderthe“linkageproject”oftheCooperativePromotion
Department oftheMinistry ofAgriculture andCooperatives totheAgriculture Cooperative Federation
ofThailand.
7. BankofAgriculture andAgricultural Cooperatives (BAAC) Paddy RiceMortgage Programme
-TheBAAC isastate-owned bank thatprovides low-interest loans toqualifying farmers, farmer
associations andcooperatives. Although theloansareavailable tofarmers producing several agricultural
products including rice,livestock andpoultry, treecrops, cassava, maize, fisheries andothers, the
BAAC offers "special" low-interest loans under thisprogramme toriceproducers infurtherance of
theRTG'spolicy tosupport andstabilize paddy riceprices. Thepurpose oftheloans istoallow farmers
toholdbacksalesofpaddy riceatthebeginning oftheharvest season, when market prices arelow,
andtosellitlaterintheseason when prices aremore favourable.
8. Bank ofAgriculture andAgricultural Cooperatives Second Crop Paddy Rice Purchasing
Programme -Tosupplement theprice stabilization effects ofthepaddy ricemortgage programme,
theBAAC implemented asecond-crop paddy ricepurchasing programme. Thepurpose ofthis
programme wastobuysecond-crop paddy ricefrom farmers when prices werelow(atharvest time)
inorder tostabilize prices overthecourse oftheyear. These purchases weremade atpremium prices,
established attheprovincial levelbyacommittee designated bytheGovernor.
9. Paddy PriceRaising Project andCompensatory Financing Programme forMillers -Thismarket
price intervention programme, implemented bytheMinistry ofInterior (MOI), required ricemillers
andtraders topurchase paddy ricefromsmall andpoorricefarmers ataprice 10percenthigher than
market prices during peakharvesting seasons. TheMOIallocated funds totheprovincial governors
whoprovided interest-free loans toricemillers andricetraders participating intheprogramme.
10. Bank ofThailand Agricultural Purchase Project -According toBOT regulations, effective
November 11,1988, commercial banks could provide short-term loans forupto100percentofthe
amount ofapromissory noteissued byricetraders ormillers against thevalue oftheirstocked paddy
rice. Thecommercial bankthendiscounts 50percentofthefacevalue ofthepromissory notewith
theBOT. Themaximum interest charged bythecommercial banktotheborrower is10percent;the
principal andinterest aredueeither attheendof90daysoruptothree daysafterthepaddy issold,
whichever isearlier. Ifrepayment oftheloanisnotmade when dueorifother terms oftheloanare
violated, apenalty interest amount isimposed bytheBOT on50percentofthefacevalue ofthe
promissory noteoverthetermoftheloan. Thispenalty isthenpassed ontotheborrower bythe
commercial bank.
11. Department ofAgricultural Extension (DAE) Loans toFarmer Associations -Although the
DAEprovides awidevariety ofextension services foralloftheThaiagricultural sectors, ithasprovided
aspecial interest-free short-term loanprogramme tofarmer associations forthepurpose ofbuying paddy
riceatharvest when prices arelow,storing it,andselling itwhen prices arerising.
12. Department ofForeign Trade (DFT) Purchase ofMilled Rice