Thailand WT/TPR/S/9
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I. THE ECONOMIC ENVIRONMENT
(1) Recent Economic Performance andPolicy Objectives
1. Inthe1960s andearly1970s Thailand wasanagrarian, less-developed economy. Agriculture
contributed toGDP almost twice asmuch asmanufacturing in1970. Theemphasis indevelopment
strategy wasimport-substitution. Inthemid-1970s economic policies became more export-oriented
andeconomic growth picked up.Bytheearly 1990s rising unitcosts andinfrastructural constraints
promptedamoreoutward-orienteddevelopmentstrategy,includingmovestowardsequalizingincentives
between theexport anddomestic sectors. Since themid-1980s Thailand hasbeenoneofthefastest
growing economies intheworld.
2. TheGovernment ofThailand hasmaintained itsgeneral direction ofeconomic liberalization
during thefirstyears ofthe1990s. According totheauthorities, themajor policy objectives havebeen,
first, toconduct aliberal economic policy through afreeandopen market mechanism, eliminating
monopolistic situations andunfair competition; second, toraisethestandard ofliving inevery sector;
andthird, toincrease Thailand 'seconomic andexport potential intheworld market. Toachieve these
objectives, theGovernment hasadopted measures suchasrestructuring thetariff system, providing
incentives forinvestment intherural area, andprivatizing stateenterprises.
Table I.1
Basic economic andsocial indicators ofThailand, 1970-93
1970 1980 1990 1991 1992 1993
Population (million) 35.7 46.7 56.3 57.2 58.0 58.8
Growth ofpopulation (percentage change) ... 2.7 1.9 1.5 1.5 1.4
Urban population (percent) 13 17 22 23 23 24
Female participation (percent) 47 47 45 44 44 44
Birth rate 5 ... ... ... 2 ...
Lifeexpectancy 58 ... ... ... 69 ...
Real GDP atmarket prices (US$ million) 21,543 42,122 72,146 78,162 84,469 91,342
GNP percapita (US$, current) 210 720 1,510 1,640 1,840 2,040
Share inGDP (percent)
Agriculture 24.7 18.9 12.9 12.6 12.0 11.2
Industry 23.9 29.9 37.4 38.7 39.4 40.5
Manufacturing 16.6 22.6 27.1 28.1 28.9 29.9
Services 50.2 51.2 49.7 48.7 48.6 48.3
Employment ('000) ... 22,524 30,844 31,138 32,385 ...
Share inemployment (percent)
Agriculture 79.8 70.8 64.0 60.3 60.8 ...
Industry 6.0 10.3 14.0 11.7 ... ...
Manufacturing ... 7.9 10.2 11.1 11.1 ...
Services 14.2 18.9 22.0 28.0 ... ...
Primary school enrolment ratio 83 99 114 113 ... ...
Secondary school enrolment ratio 17 29 33 ... ... ...
... Notavailable.
Source: World Bank (STARS 1994); IMF, International Financial Statistics andILO(1986 and1993).WT/TPR/S/9 Trade Policy Review
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3. Thailand continued torecord highgrowth ratesofrealGDP(over 8percentonaverage) during
theearly 1990s, andlow,declining unemployment ofunder 3percentwithlowinflation (Tables I.1
andI.2). Theprimary engines ofgrowth wereexports, tourism andforeign investment. Recently,
domestic demand alsoplayed asignificant rôleinstimulating growth, withahighgrowth ratein
construction1,increased spending byindividuals andrising private andpublic sector investment.
Table I.2
Economic performance ofThailand, 1980-94
1980 1985 1990 1991 1992 1993 1994
Income andabsorption Average annual growth rates
RealGDP 4.8 4.6 11.6 8.4 7.9 8.2 8.5a
Private consumption ... 2.8 12.3 6.6 7.6 7.9 8.5a
Government consumption ... 7.2 7.8 6.5 6.4 5.7 4.1a
Gross domestic investment ... 4.6 30.8 11.5 2.8 7.8 ...
Fixed investment ... 4.4 29.6 12.6 6.9 8.7 10.8
Imports ofgoods 23.1 -9.1 29.9 15.5 6.1 11.6 19.0
Exports ofgoods 23.2 -3.8 15.0 23.6 13.8 13.7 22.1
Consumer price index (1990=100) 18.9 2.5 5.9 5.7 4.1 3.8 4.6
Wholesale price index (1990=100) 20.1 0.0 3.5 6.1 1.3 2.2 4.4
Money supply (M1) 12.4 -3.4 11.8 13.8 12.3 18.6 16.9
Discount rate(percent) 13.5 11.0 12.0 11.0 11.0 9.0 9.5
Unemployment rate(percent) ... ... 3.9 3.1 3.0 2.6 2.6a
Fiscal balance PercentofGDP
Central government revenue (US$ million) 4,732 6,143 15,812 18,816 20,002 22,486 22,780
Central government revenue 14.6 15.8 19.1 18.1 18.2 18.7 18.5a
Central government expenditure 14.4 16.6 14.4 15.3 16.1 17.0 17.3a
Central government balance 0.2 -0.8 4.7 2.8 2.1 1.7 1.2a
Balance ofpayments
Merchandise trade balance -5.9 -3.4 -7.8 -6.2 -3.7 -3.1 -2.4
Current account balance -6.4 -3.9 -8.3 -7.5 -5.5 -5.4 -5.7
International reserves (US$ billion)b3.0 3.0 14.3 18.4 21.2 25.4 30.3
Memorandum : Percent
GDI/GDP 29 28 41 42 40 40 40a
GDS/GDP 23 26 35 35 35 35 ...
Official exchange rate(Baht/US$) annual average 20.476 27.159 25.585 25.517 25.400 25.319 25.150
... Notavailable.
a Estimated.
b Including gold, atnational valuation.
Source: Dataprovided bytheThaiauthorities; IMF(1994 and1995); andWorld Bank (STARS 1994).
1Theconstruction boom, together withaconsiderable foreign capital inflow, mayalsohave contributed to
upward pressures ontheexchange rateofthebaht, perhaps tending toweaken theprice competitiveness ofexport
sectors inmanufacturing.Thailand WT/TPR/S/9
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4. Tables I.1andI.2illustrate thechanges thathavetaken place intheThaieconomy since1970.
Thedecline inagriculture 'sshare ofGDP from almost one-quarter in1970 to13percentin1990
continued, reaching some 11percentin1993, although itstillaccounts forsome 60percentof
employment. Manufacturing increased itsshare from17to27percentbetween 1970and1990, rising
to30percentin1993. More detailed figures for1989-92 showmarked increases in"banking, insurance
andrealestate" and,toalesser extent, inconstruction, where thefullimpact ofthebuilding boom
maynotbecaptured inthedata(Table I.3).
Table I.3
GDP composition bysectoral origin (percentage ofGDP)
1989 1992a
Agriculture 15.1 11.9
Crops 9.4 7.1
Livestock 1.6 1.3
Fisheries 1.5 1.5
Forestry 0.5 0.2
Agriculture services 0.6 0.4
Simple agricultural processing products 1.5 1.4
Non-agriculture 84.9 88.1
Mining andquarrying 1.7 1.5
Manufacturing 26.7 28.3
Construction 5.5 6.6
Electricity andwater suppply 2.3 2.3
Transport andcommunications 7.4 7.2
Wholesale andretail trade 16.7 16.6
Banking, insurance andrealestate 4.6 6.2
Ownership ofdwellings 3.2 2.7
Public administration 3.5 3.8
Other services 13.3 12.9
GDP 100.0 100.0
a Predicted value.
Source: Bank ofThailand, Quarterly Bulletin, 1994:IV.
5. Rapid growth wasassociated withacontinuing re-orientation oftheeconomy, assisted bythe
new, more outward-looking policy stance andtheliberalization measures introduced. Theshare of
exports inGDP increased continuously from 32percentin1990 to41percentin1994 (Chart I.1).
Atthesame time, themanufacturing sector moved away from lowvalue-added activities; Thailand
isbecoming aproducer andexporter ofhigher value-added, technology intensive industry suchas
petroleum products, transportation equipment andintegrated circuits.
6. Thestrength ofeconomic growth hasexerted upward pressure onwage rates, weakening the
rationale foralabour-intensive growth strategy forThailand. Thismayinfluence further growth to
theextent thatothercountries intheregion (including VietNamandChina) canattract investors through
favourable investment incentives andlowwage rates. TheThaiauthorities arenowconcentrating on
technology intensive industry asthefuture engine ofgrowth.WT/TPR/S/9 Trade Policy Review
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7. Thefastpaceofdevelopment hasalsorevealed bottlenecks indeficient infrastructure andhuman
capital. Income disparities increased, degradation oftheenvironment accelerated andthelabour market
became tighter. Infrastructure hascome under particularly severe strain, particularly intransport and
power generation. Serious environmental degradation hasresulted from rapid economic growth,
especially intheBangkok metropolitan areaandtheeastern seaboard region where airpollution isa
major problem andmany water resources arealsocontaminated.2Theauthorities aretrying toovercome
these bottlenecks invarious ways. Thus, forexample, Bangkok 'ssecond international airport is
scheduled tobecompleted in2000; allstages ofthesecond-stage expressway areexpected tobe
completed by19953;and,tohelpalleviate traffic congestion, construction ofamass transit system
forBangkok isalsoscheduled. In1992, theGovernment enacted acomprehensive National
Environmental Quality Actupdating avariety ofprevious environmental regulations andincreasing
penalties forpollution. Underlying thenewactwastheadoption ofthe'polluter pays'principle.4
2Rondinelli(1994),"Thailand'sExpandingMarketsforEnvironmentalTechnologyandServices:Opportunities
forU.S.TradeandInvestment",JournalofAsianBusiness,Vol.10,No.1,AsianWallStreetJournal(5Decemb er
1994), andDunandBradstreet (1994), Exporter 'sEncyclopaedia fordetails oftheproblems ofenvironmental
degradation.
3Asian Wall Street Journal, 5December 1994.
4Rondinelli (1994), pp.11-12.Thailand WT/TPR/S/9
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8. While Thailand hasahighliteracy ratioof93percentandprimary education isavailable
throughout thecountry, middle school enrolment isstilllow,though improving (17percentin1970,
29percentin1980 and33percentasof1990).5Thiseducation level maywellserve tohinder
Thailand 'sefforts todevelop itshuman capital.6Thecurrent Government recognizes thisproblem,
andintroduction ofcompulsory education fornineyears (asagainst thepresent sixyears) hasbeen
started andwillbeintroduced throughout thecountry from 1996.
9. Kawai (1994) notes thatalthough totalfactor productivity inThailand apparently increased
during 1970-90, itisstilllower thanthelevel ofdeveloped countries: forexample, totalfactor
productivityofThailandwasslightlyaboveone-quarterofthatoftheUnitedStatesin1990.7Productivity
increased byanannual average of1.2percentduring the1970s and2.6percentduring the1980s;
intheperiod1987-90,productivityincreasescontributedapproximately40percentofeconomicgrowth.
Policies toliberalize trade andforeign direct investment, theintroduction ofantitrust lawsandother
policiestostrengthencompetitioninthedomesticmarket,andthepromotionofresearchanddevelopment
(R&D) activities were important inbringing about theincrease inproductivity.
10. ThePrice Fixing andAnti-Monopoly Actwasadopted in1979. Under thelaw,cartels are
prohibited; noexceptions aremade forexport orimport cartels. TheStateEnterprise Improvement
Committee, chaired bythePrime Minister, wassetupinFebruary 1993 toformulate andmonitor
policiestowardsstateenterprises,policiestowardsincludingprivatization.InFebruary1995theMinistry
ofFinance setupaworking group todraftanewcorporation law.
11. AlthoughoverallGDP(andmeasuredGDPpercapita)hasgrownrapidly,thedisparityofincome
distribution hasincreased inthepast20years. According toTDRI (1994), theincome share ofthe
richest 40percentwas70.2percentinfiscal year1975/6; thatshare hadincreased to76.9percent
by1994. Decentralization oftheeconomy isseenasonewayofreducing inequalities ofincome;
newcriteria forinvestment issued bytheBoard ofInvestment in1993 (Chapter III)seektopromote
bothindustrial decentralization andsectoral diversification.
12. Thesavings rateinThailand increased significantly from23percentofGDPin1980toaround
35percentinthe1990s, underpinning ahighlevelofinvestment (Table I.4).Thesaving performance,
broadly comparable tothatoftheother dynamic Asian economies andsurpassed onlybySingapore,
ranks Thailand asoneofthehighest-saving economies intheworld. Inconsequence, therapidexpansion
oftheeconomy hasbeenfacilitated byconsistently highlevels ofinvestment, bothdomestic andforeign.
However, thegrowth ofinvestment peaked in1990-91 anddecelerated during 1992and1993, affected
byslowimplementation oflarge investment projects bytheprivate sector andbyadecline inforeign
direct investment, asinvestment inlabour-intensive manufacturing wasincreasingly redirected tolower
wage countries.
5ILO,InternationalLabourStatistics,1993.AccordingtotheThailandDevelopmentResearchInstitute(TDRI
(1994), TheThai Economy: First StepinaNew Direction), asof1990, 83percentoftheworkforce were at
primary level orbelow andonly4.1percentofthose areinthelevel ofuniversity. TDRI projected thatthe
share oftheworkforce withonlyprimary education willbereduced to72.9 percentandthose withuniversity
education willincrease to5.4percentby2000.
6Authors suchasKrugman (1994) castdoubt upon thecontinued rapid growth ofeastAsian economies in
thesense thatgrowth hasbeenduetothemobilization oflabour andcapital rather thanincreases inefficiency.
SeeKrugman, "The Myth ofAsia'sMiracle", Foreign Affairs, December 1994.
7Kawai, Hiroki (1994), "International Comparative Analysis ofEconomic Growth: Trade Liberalization
andProductivity", TheDeveloping Economies, December 1994, Vol. 27,No.4,pp.373-398.WT/TPR/S/9 Trade Policy Review
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Table I.4
Investment inThailand
1989 1990 1991 1992a
Baht
billionGrowth
ratesBaht
billionGrowth
ratesBaht
billionGrowth
ratesBaht
billionGrowth
rates
Gross domestic investment (GDI) 651 28.1 900 38.2 1,053 17.0 1,125 6.9
Private business 549 37.4 748 36.2 852 14.0 881 3.4
Public sector 94 79.0 134 43.0 181 35.0 232 28.5
Change ininventories 8 -72.2 18 118.7 20 9.0 12 -40.8
GDI/GDP (percent) 35.1 41.1 42.0 40.1
GNS/GDP (percent) 34.1 33.7 34.0 33.5
a Provisional estimates.
Source: Bank ofThailand, Quarterly Bulletin (1994:IV).
(a) Macroeconomic policies
13. Thailand 'sfiscal policy isguided byamedium-term objective ofbudget balance, combined
withtheaimofreducing thediscrepancy between urban andruralincomes. Since thebeginning of
theeconomic boom in1988, increased revenues haveresulted ineight consecutive years ofbudget
surpluses, which have, however, declined asashare ofGDPsince1992duetoincreased infrastructure
spending.
14. In1993about 70percentofgovernment revenues werederived fromindirect taxes(Chart I.2).
On1January1992,indirecttaxationwasrationalizedwiththeintroductionofthevalue-addedtax(VAT),
generally imposed atasingle rateof7percentonallgoods andservices, withveryfewexceptions.8
ZeroVAT rateapplies toexported goods. VAT isalsoimposed ongoods andservices onimports.9
15. In1992governmentexpenditureonsocialservicesandeconomicservicesconstituted35percent
and24percentofthetotal. Defence expenditure accounted for16percent,asmall decline compared
withthelate1980s. Onafunctional basis, government expenditure hasbeenconcentrated ontransport
andcommunications, mainly roadconstruction andhousing, reflecting government priorities established
under theSeventh Five-Year Development Plan.
16. Monetarypolicycurrentlyaimsatmaintainingeconomicgrowthwithstabilityindomesticprices
andtheexchange rate. Although rapid economic growth caused anupturn ininflation after1988, with
theCPIgrowth rateover 1989-91 averaging 5.7percentandhighM2growth rates ofaround
24percent,reduction inmonetary growth andtheslowing ofeconomic growth brought inflation down
tobetween 3and4percent(Chart I.3). In1994, however, thisdownward trend wasreversed.
8ThefollowingareVATexempt:smallentrepreneurswithannualsalevolumelessthanBaht600,000;domestic
supply ofunprocessed agricultural products andcertain farm inputs, fertilizers, animal feeds, pesticides, etc.;
import ofunprocessed agricultural products, certain farm inputs, etc.andgoods exempted from import duties
(Chapter IV(2)(vi)).
9VAT onimports iscollected bytheCustoms Department atpoint ofimport onbehalf oftheRevenue
Department. TheVAT ongoods thatarealsosubject toExcise Taxiscollected bytheExcise Department for
theRevenue Department. Otherwise VAT ispaiddirectly totheRevenue Department.Thailand WT/TPR/S/9
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WT/TPR/S/9 Trade Policy Review
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17. Several steps inthederegulation ofinterest rateshavebeentaken since 1989. Theceiling on
savings deposit interest rateswasremoved inJanuary 1992, completing theliberalization ofinterest
ratesondeposits. Theceiling onlending interest rateswasalsoeliminated inJuly1992.
18. According totheauthorities, pricecontrol measures areusedonlyinextreme situations inorder
toprotect consumers orproducers fromunfair business practice. Price controls areapplied onbasic
consumer goods orwhere anuncompetitive market structure causes irregular pricemovements. Since
April 1995, three commodities aresubject toprice control: pork, refined sugar andcooking gas.
(b) Balance ofpayments andexchange rates
19. Thesavings-investment gapandtherapid economic growth ofrecent years arereflected in
acontinuous tradedeficit. Asgrowth hasslowed, however, themerchandise tradedeficit hasnarrowed,
fromUS$6.7 billion in1990 toUS$3.5 billion in1994 (Table I.5). Thecurrent account deficit also
felluntil1994, butlessrapidly, reflecting agrowing deficit onservices account. Inflows ofcapital
havemore thancompensated forthecurrent account deficit andthelevelofreserves hasrisenmarkedly,
reaching about sixmonths ofmerchandise imports ofgoods andservices in1994 (Table I.5).
Table I.5
Balance ofpayments ofThailand, 1990-94
(US$ billion, calendar year)
1990 1991 1992 1993 1994
Current account -7.1 -7.4 -6.1 -6.8 -8.1
Trade balance -6.7 -6.1 -4.1 -3.9 -3.5
Exports (FOB) 22.9 28.3 32.2 36.6 44.7
Imports (FOB) 29.6 34.2 36.3 40.5 48.2
Services 2.8 -0.5 -1.1 -1.4 -5.7
ofwhich Travel 2.9 2.6 2.4 2.1 1.4
Capital account 9.7 11.3 10.1 11.3 14.2
Errors andomissions 1.2 0.3 -1.0 -0.6 -1.9
Overall balance 3.8 4.2 3.0 3.9 4.2
International reserves 14.3 18.4 21.2 25.4 30.3
Debt outstanding 25.1 33.4 37.4 45.7 53.7
Debt service ratio(percentofGDP) 9.1 9.8 10.5 10.7 10.7
Source: Bank ofThailand.
20. Thecomposition ofcapital inflows hasevolved. Netforeign direct investment peaked at1990,
slowing somewhat thereafter. Portfolio investment rosetoarecord levelin1994, contributing toa
US$14 billion surplus onthecapital account. Theinterest ratedifferential between major investor
countries andThailand, together withtheresults ofthegeneral election inSeptember 1992, which
boosted investors 'confidence, contributed totheboom. External debtincreased tosome US$54 billion
attheendof1994, withthedebtservice ratiodeteriorating alittletoaround 10.7percentofGDP.
21. Since November 1984, theexchange rateoftheThaibahthasbeendetermined onthebasis
ofaweighted basket ofcurrencies ofThailand 'smajor trading partners. TheExchange Control Act
governs allmatters involving foreign exchange. InMay1990 Thailand accepted theobligations of
Article VIIIoftheInternational Monetary Fund, committing theauthorities nottoimpose exchange
restrictions forcurrent payments ongoods andservices. Foreign exchange deregulation measures since
1991 areoutlined inAppendix I.1.Thailand WT/TPR/S/9
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22. During theperiod, thebahtwasgenerally relatively stable vis-a-vis theU.S.dollar, although
appreciating slightly since 1989. However, thetrade-weighted realeffective exchange ratehas
depreciated markedly since 1990 (Chart I.4).
(2) Trade Performance
23. Since 1990, Thailand hasmoved fromtheexport-promotion-based trade policy ofthe1980's
toamore outward-oriented strategy. In1990, tariffs oncapital goods usedinmanufacturing were
reduced, followed bylargereductions induties onautomobiles andcomputers in1991andcutsinrates
onchemicals, textiles, iron, aluminum, andglass in1992.10Effective from 1January 1995, tariffs
werereduced on3,908 categories ofimports. During theperiod 1989-93, import volume increased
by58.5percentandtheU.S.dollar unitvalue ofimports increased by10.6percent.
24. Thailand hasrecorded fastexport growth ratesinrecent years; during theperiod 1989-93,
export volume increased by67.2percent, with export prices rising by7.7percent. Export
competitiveness inanumber oftraditional labour-intensive manufactured products suchasgarments,
shoes andcanned seafood wasmaintained through quality improvements. Theefficiency ofproduction
of"new" manufactured items wasreflected inasubstantial increase inexports ofhightechnology
products suchaselectrical appliances, computers andcomputer parts, integrated circuits andparts,
transformers andgenerators, optical instruments andvehicle parts.
10Christensen et.al.(1993), TheEastAsian Miracle: Thailand -theinstitutional andpolitical underpinnings,
TheWorld Bank, p.10.WT/TPR/S/9 Trade Policy Review
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(a) Commodity pattern oftrade
25. Manufactured exports havegrown rapidly andtheirstructure hasalsochanged overtime, as
theimportance oflabour-intensive exports hasbeenreduced andhigher value-added exports have
increased. Though theabsolute value oftextile andfootwear products exports increased during the
1990s, theirshare oftotalexports declined from 27percentin1989 toaround 21percentin1993.
Thefastest growing manufacturing exports -often increasing more thanthreefold invalue -were
electricalapparatus,integratedcircuits,machineryandmechanicalappliance,plasticproductsandvehicle
parts. Theshare ofagricultural exports decreased significantly (Chart I.5andTable AI.1).
26. Theshare ofcapital goods inimports increased to44.6percentin1993 from 36.5percent
in1989, reflecting therecovery inprivate domestic investment. Theshare ofoilandoilproducts fell,
duetoadecline intheunitvalue ofoilimports. Thevalue ofconsumer goods imports more than
doubled andtheirshare inthetotalalsoincreased, inlinewithgrowing domestic demand. Imports
ofmotor vehicles andparts alsomore thandoubled (Chart I.5andTable AI.2).
27. Thailand 'sintra-industry trade withtheworld hasgrown significantly intherecent past; in
particular, thedegree ofintra-industry trade withASEAN quadrupled toover40percentsince 1985
(ChartI.6).Intra-industrytradeisparticularlyhighinpreciousstonesandpreciousmetals,non-electrical
machinery, electrical machines andapparatus, andoffice andstationery supplies. Such"traditional"
labour-intensive items asfootwear andtravel goods aregenerally characterized byone-way trade
(Table AI.3).
WT/TPR/S/9 Trade Policy Review
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(b) Direction oftrade
28. JapanandtheUnitedStateshavebeenThailand'stwomostimportantindividualtradingpartners,
totalling about 38percentoftotaltradeduring 1989-94. Trade withtheEuropean Union andASEAN,
particularly Singapore, followed. Thailand 'sfourmajor partners (Japan, theUnited States, Singapore
andGermany) accounted forapproximately halfoftotaltrade value inthesame period (Chart I.7).
Inthefirsthalfof1995, trade withtheASEAN countries increased significantly, making ASEAN
Thailand 'ssecond-largest market, behind Japan.
29. Theregional pattern ofThailand 'simports hasnotchanged significantly since thelate1980s;
imports fromSingapore andChina fell,butthose fromtheRepublic ofKorea increased. Imports from
Japan werearound 30percentofThailand 'stotalimports in1989-94; suchimports were, inthatperiod,
more thantwice thevalue ofexports toJapan. Bycontrast, Thailand hasrecorded atrade surplus
withtheUnited States forthepastseveral years (Chart I.7).Since 1993, tradewiththeEuropean Union
hasbeenindeficit, while trade withASEAN hasbeeninsurplus.
30. Participants intheforum fortheAsiaPacific Economic Cooperation (APEC) arecurrently
themarket foralmost three-quarters ofThailand 'sexports. Unlike thesituation forimports, therecent
restructuring ofThailand 'sexport basket isreflected inachange inthedirection oftrade, away from
Europe andtowards neighbouring Asia. Over theyears 1989-94, theshare ofASEAN countries and
theEastAsian NIEs11hasincreased from about 17percenttoover25percent, making thegroup
themost important destination forThailand 'sexports (Chart I.7).
(3) Outlook
31. Thestrong economic growth trend ofthelastseveral years isexpected tocontinue.
Manufacturing exports arelikely tobeanimportant factor inhigheconomic growth, reflecting, in
particular, robust regional demand.12Growth isalsoexpected tobesupported bystrong domestic
demand, ledbyinfrastructural improvements andprivate consumption. These factors arelikely to
continue putting pressure onresource use,andhence onwages andultimately therateofinflation.
Inthisrespect itwillbeimportant thattheauthorities maintain disciplined financial policies, helping
toameliorate aweakening ofexternal competitiveness andmaking easier thecontinued liberalization
oftheeconomy.
11Chinese Taipei, theRepublic ofKorea andHong Kong.
12Defining income elasticity ofexports (imports) asthepercentage growth ofexports (imports) withrespect
to1percentgrowth ofworld (Thai) income, income elasticities ofThaiexports andimports areestimated as
3.164 and1.802 respectively. Source: WTO Secretariat estimates.WT/TPR/S/9 Trade Policy Review
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ANNEX I.1
Foreign Exchange Deregulation Measures since 1991
1. Transactions allowed bymeasures adopted inApril 1991 included thefollowing:
(1) Anunlimitedamountofforeigncurrencypurchasesfromauthorizedbanksbyresidents,exceptforpurchase
ofimmovable assets andsecurities abroad; foreign direct investment byresidents orlending toaffiliates abroad
exceeding US$5 million peryear; transfer ofThaiemigrants 'personal assets exceeding US$1 million peryear;
transferofsumsoverUS$100,000peryeartorelativeslivingabroad;travellingexpensesintheformoftraveller's
cheques anddrafts exceeding US$20,000.
(2) Extension ofthesurrender period forforeign currency receipts from 7to15days. Receipts could
otherwise bedeposited inforeign currency accounts withauthorized banks inThailand; however, thedaily
outstanding balance inallaccounts combined could notexceed US$500,000 foranindividual, orUS$5 million
foralegal person.
(3) Removal ofthelimit onthevalue offoreign currency brought intoortaken outofthecountry. The
maximum amount ofbahtallowed tobetaken outwasincreased from B10,000 toB50,000, except fortrips
toneighbouring countries; March 1993, theamount taken outtocountries bordering Thailand wasincreased
toB250,000.
(4) Foreign capital, loanrepayment andreturns from investment could befreely transferred.
(5) Transferable andblocked non-resident bahtaccounts were combined intoonetypeofnon-resident baht
account thatcould becredited with; (i)proceeds from saleofforeign currencies originating abroad; (ii)amounts
transferredfromothernon-residentbahtaccounts;(iii)importpayments;and(iv)externalobligationsofresidents.
Drawings onsuch accounts could bemade without restriction.
2. InMay 1992 theBank ofThailand tookthefollowing exchange decontrol measures:
(1) Exporters could receive payments inbahtorforeign currencies from non-resident accounts andcould
usesuch foreign currency receipts either topayforimports ortodebit foreign liabilities tonon-residents.
(2) Residents could draw ontheirforeign currency accounts torepay debtonbehalf oftheirsubsidiaries,
ortransfer totheirsubsidiaries foreign currency heldinaccounts atcommercial banks inThailand withobligations
topaywithin three months after thedateofthetransfer.
(3) Expatriates temporarily working inThailand were allowed topurchase foreign currencies
todeposit intheir foreign currency accounts atcommercial banks inThailand.
(4) Government departments, governmental organizations, State enterprises orlegal persons established
byspecific lawswere permitted tobuy, exchange, borrow orwithdraw from their foreign currency accounts
andcould deposit unlimited foreign currencies intheir foreign currency accounts.
(5) Residents were permitted todeposit foreign currency purchased, exchanged, borrowed orwithdrawn
fromtheirforeign currency accounts innon-residents 'foreign currency accounts atcommercial banks inThailand
forthepurpose ofservicing their obligations.
(6) BankssituatedinVietNamandincountriesborderingThailandwithnon-residentbahtaccountsinThailand
were allowed towithdraw unlimited bahtfrom these accounts inanunlimited amount.Thailand WT/TPR/S/9
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3. Further foreign exchange deregulation measures were introduced inFebruary 1994;
(1) Thevalue ofbahtpermitted tobetransferred toVietNam andbordering countries wasraised to500,000.
(2) Theceiling onforeign direct investments orloans thatdomestic residents canprovide totheiraffiliates
wasincreased toUS$10 million ayear.
(3) Theceiling onforeign exchange thatmaybetaken abroad fortravelling expenses waseliminated.
(4) Theceiling onauthorized bank lending tononresidents inforeign currency waseliminated.
(5) With respect toforeign exchange transactions: (i)residents were permitted touseforeign exchange
originating abroad toservice external obligations without being obliged todeposit itindomestic banking accounts;
(ii)foreign currency borrowed byresidents from theBangkok International Banking Facilities, foreign currency
borrowed bynonresidents fromauthorized banks, andforeign currency withdrawn fromnonresident bahtaccounts
could allbefreely deposited inforeign currency accounts.
(6) Non-residents'bahtaccountscouldbefreelycreditedwithbahtresultingfromthesaleofforeigncurrency
withdrawn from non-residents 'foreign currency accounts, aswellasbahtborrowed from authorized banks.
4. According totheauthorities, while there arenorestrictions oncapital inflows, there stillremain some
limitations oncapital outflows:
(1) Certainoutwardinvestments,suchasinvestmentonresidentialpropertyandsecurities,continuetorequire
approval.
(2) Commercial banks andfinance companies inThailand aresubject tolimits ontheirnetforeign exchange
positions.
(3) Currencysubstitutionislimitedtotheextentthatresidents,withtheexceptionofexporters,arenotallowed
toholdforeign exchange denominated deposits.
(4) Transfer ofThai emigrants 'personal assets should notexceed US$1 million peryear.
(5) Transfer torelatives living abroad should notexceed US$100,000 peryear.