Thailand: December 1995
Thailand's implementation of more outward-oriented policies, which include placing export and domestic sectors on a more equal footing, have created a more open economy and have increased the exposure of Thailand's industry to international competition.
Thailand's economic success set to continueas exports keep growing
Thailand's implementation of more outward-oriented policies, which include placing export and domestic sectors on a more equal footing, have created a more open economy and have increased the exposure of Thailand's industry to international competition. According to a WTO Secretariat report on Thailand's trade policies and practices, the country's rapid economic growth has led to a high degree of resource utilization and higher unit costs. It has also exposed infrastructural weaknesses and exacerbated environmental problems. Consequently, manufacturing is now moving away from low value-added activities to more technology intensive goods. In 1992, the government updated a variety of environmental regulations and increased penalties for pollution, adopting the "polluter pays" principle.
Thailand is one of the world's fastest-growing economies. After achieving an average GDP growth rate of more than 11.5 per cent from 1986 to 1990, the government, in an effort to prevent the economy from overheating, began to tighten its financial policies and managed to slow average GDP growth down to slightly more than 8 per cent from 1990 to 1994.
The report attributes Thailand's strong economic growth to the government's prudent financial management. Its policies have resulted in a government budget surplus since 1988, an inflation rate of less than five per cent and an unemployment rate of less than three percent. The share of exports in GDP has risen continuously for the past four years, from 32 per cent in 1990 to 41 per cent in 1994.
Thailand has continued with its tariff reform which it began in 1990. Measures initiated in January 1995 will reduce the maximum tariff from 100 per cent to 30 per cent in most cases and will lower rates on some 4,000 items, thereby cutting the average applied tariff from about 30 per cent in 1994 to 17 per cent by 1997. One main exception, states the report, concerns automobiles where the average tariff will remain about 38 per cent, with other rates ranging to 80 per cent.
The report states that under Thailand's Uruguay Round commitments, virtually all agricultural tariffs have been bound. Tariffication applies to 23 agricultural product groups. To date, tariffs are in effect for 12 such groups with the remainder, including such products as unconcentrated milk, copra, pepper and garlic, to be implemented by the end of 1995. The level of bindings for industrial products has increased from two to 68 per cent. Agricultural bindings are generally at applied rates, while bound rates for industrial products are somewhat higher than applied rates. According to the report, tariff concessions and exemptions are currently in effect, but detailed information on their applicability is not available. Revenue losses from exemptions and reductions on machinery and raw materials was estimated in 1994 to total $2.3 billion. By 2003, the average tariff of products in the ASEAN (Association of South East Asian Nations) Free Trade Area (AFTA) are to fall to 2.45 per cent, down from the current 19 per cent tariff which Thailand applies to imports from the region. See footnote 1
Trade in services accounts for nearly half of Thailand's GDP and some 30 per cent of total employment. According to the report, Thailand is among the world's top twenty services traders. The main source of services income is tourism, with remittances from overseas labour a distant second. In spite of limits on ownership by foreigners, foreign direct investment is strong in pipeline transport, telegraph and telephone services and tourism. The report states that Thailand is convinced that the General Agreement on Trade in Services (GATS) will promote the expansion of world services trade. Thailand, however, fears that domestic firms will not be able to compete with foreign service providers, especially in such areas as financial services, marked by weak capitalization and a lack of banking experience. Thailand's schedule of commitments for services covers 95 activities and 10 major sectors, including financial services, tourism and transport.
Thailand has accepted the Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) and intends to implement the agreement by the year 2000. As of September 1995, a bill to set up an intellectual property and international trade court was before Thailand's National Legislative Assembly.
In world trade, Thailand has continued to shift more of its trade to the seven ASEAN member countries. The report states that there has also been a re-orientation of Thailand's exports away from Europe and towards neighbouring Asia. The share of Thailand's trade with ASEAN countries and the East Asian newly-industrialized economies has increased to more than 25 per cent. Japan and the United States remain Thailand's largest individual trading partners and accounted for about 38 per cent of the country's trade in 1994. Thailand receives General System of Preferences (GSP) advantages from 27 of its trading partners. Last year, Thailand exported goods worth about $9 billion under the GSP, equalling some 34 per cent of total exports.
The report concludes that Thailand's economy stands to benefit from the strengthened trade rules agreed in the Uruguay Round and from its own efforts to further liberalize its economy. Such developments will not only help Thailand achieve a more complete integration into the multilateral trading system but will provide increased market access opportunities for Thailand's trading partners. The report also encourages Thailand to be more transparent, especially in regard to providing detailed and up-to-date statistical information.
Notes to Editors:
The WTO Secretariat's report, together with a report prepared by Thailand, will be discussed by the WTO Trade Policy Review Body (TPRB) on 19 and 20 December 1995.
The WTO's TPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO member at regular periodic intervals and monitors significant trends and developments which may have an impact on the global trading system.
Two reports, together with a record of the TPRB's discussion and of the Chairman's summing up, will be published in due course as the complete Trade Policy Review of Thailand and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
The reports cover development of all aspects of Thailand's trade policies, including domestic laws and regulations, the institutional framework, trade practices by measure and by sector. Since the WTO came into force, the "new areas" of services trade and trade-related aspects of intellectual property rights are also covered. Attached are the summary observations from the Secretariat and government reports. Full reports will be available for journalists from the WTO Secretariat on request.
Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Costa Rica (1995), C˘te d'Ivoire (1995), Egypt (1992), the European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 and 1995), Kenya (1993), Korea, Rep. of (1992), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1995), New Zealand (1990), Nigeria (1991), Norway (1991), Pakistan (1995), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991), Thailand (1991), Tunisia (1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995), Uruguay (1992) and Zimbabwe (1994).
The Secretariats report: summary
TRADE POLICY REVIEW BODY: THAILAND
Report by the Secretariat Summary Observations
Thailand over the past four years has made progress in implementing more outward-oriented policies, seeking to equalize incentives between the export and domestic sectors. Integral to this has been a shift in investment incentives away from export promotion, and a further opening of the economy, increasing the exposure of Thai industry to international market forces and thus promoting efficiency. However, a certain lack of transparency remains; for example, the last published tariff dates to 1992.
Economic growth has been rapid since Thailand's previous Trade Policy Review in 1991, led in part by external demand. The share of exports in GDP has increased continuously, from 32 per cent in 1990 to 41 per cent in 1994. Growth, however, has led to a high degree of resource utilization, raising unit costs. Consequently, manufacturing is moving away from low value-added activities, and Thailand is becoming a producer and exporter of more technology intensive goods.
The fast pace of development has further exposed infrastructural weaknesses and exacerbated environmental problems. The authorities are acting to overcome the resulting bottlenecks in various ways, including an increase in compulsory education, incentives to locate industry outside the Bangkok area and new transport facilities. In 1992, the Government updated a variety of environmental regulations and increased penalties for pollution, adopting the 'polluter pays' principle.
Thailand in World Trade
Thailand has been one of the world's fastest-growing economies since the mid-1980s. After averaging over 11.5 per cent in the four years to 1990, real GDP growth moderated to somewhat over 8 per cent in the next four years. This reflected mainly a tightening of financial policies, as the authorities sought to prevent an overheating of the economy. Nevertheless, since 1990 unemployment has declined to well under 3 per cent. Concurrently, the deficit on the current account was about 6 per cent a year. These deficits were more than financed by an inflow of foreign capital, which together with a high rate of domestic savings supported investment levels close to 40 per cent of GDP. Since 1990, international reserves have risen from some US$14 billion to more than US$34 billion by end July 1995, equivalent to about six months of imports of goods and services.
Thailand's sustained economic growth has been underpinned by prudent financial management. The Government's budget has been in surplus since 1988. Disciplined monetary policy has helped to bring inflation to under 5 per cent a year, although recently the rate has again risen, partly as a result of a drought-induced surge in food prices.
Thailand's intra-industry trade has grown significantly, especially with ASEAN countries; such trade is particularly high in precious stones and metals, non-electrical machinery, electrical machinery, and office supplies. In addition, there has been some reorientation of Thailand's exports away from Europe towards neighbouring Asia; the share of ASEAN countries and the East Asian NIEs has increased to over 25 per cent. Japan and the United States remain Thailand's largest individual trading partners, together with about 38 per cent of total trade in 1994.
Thailand adopted a new Constitution in December 1991, establishing a parliamentary democracy under the King as constitutional monarch. Executive authority is exercised by the Cabinet, chaired by the Prime Minister and currently comprising 14 Ministries. Cabinet approves policy actions, which are normally formulated and implemented by the Ministries. The Prime Minister's Office co-ordinates inter-ministerial issues such as preparation of the budget and Thailand's five-year plans.
The Government reviews trade policy principally through the agency of the National Economic and Social Development Board in the Office of the Prime Minister. The Government also seeks advice from the Thailand Development Research Institute, a private body, as well as from relevant departments in universities. The private sector participates in policy issues through such organizations as the Joint Public-Private Consultative Committee.
Trade Policy Features and Trends
Thailand's trade policy objectives are outlined in its five-year development plans and implemented through legislation, notifications and regulations. These policies have evolved over the past decades. An initial emphasis on import-substitution was followed from the mid-1970s by a switch to export orientation, which helped fuel growth of about 7 per cent a year. This began to expose constraints and lead to rising costs, eroding the external competitiveness of Thailand's labour-intensive agricultural and manufacturing base. Thus, since the early 1990s, Thailand has sought to move its economy in an outward-oriented direction, towards a more neutral balance of incentives. Besides trade liberalization, an important element in this has been a redirection of the investment incentives offered by the Board of Investment (BOI) away from export promotion to regional development, with all remaining export-related incentives to be phased out by 2002.
Thailand became a member of GATT in October 1982, and is a founding member of the WTO. It applies at least m.f.n treatment to all WTO members. Thailand is also a founding member of ASEAN, whose members agreed in 1992 to establish the ASEAN Free Trade Area (AFTA) by 2008, a date that in 1994 was advanced by five years. In 1993, ASEAN brought into operation the Common Effective Preferential Tariff (CEPT) as the core mechanism for implementing AFTA: by 2003 the average tariff on AFTA products is scheduled to be an estimated 2.45 per cent, compared to Thailand's current rate on AFTA imports of 19 per cent; and rates on manufactures that are presently above 20 per cent will decline to a maximum of 5 per cent, thus sharply reducing intra-regional tariff peaks. Thailand also receives GSP preferences from 27 of its trading partners; in 1994, Thailand exported goods worth about US$9.0 billion under GSP, some 34 per cent of total exports.
Thailand is a member of the Asia-Pacific Economic Cooperation (APEC) forum. Almost three-quarters of Thailand's external trade is with APEC members. Under the 1994 Bogor Declaration, APEC is to achieve full and open trade and investment in the region by 2020.
Thailand encourages foreign direct investment (FDI) through the BOI. Both non-tax and tax incentives, such as tax holidays and waivers of duties on imported capital goods, are offered as part of general investment policies. With certain exceptions, foreign equity participation may not exceed 49 per cent of registered capital; for many financial services, the maximum equity limit is 25 per cent.
Thailand has continued with the tariff reform it began in 1990. Measures initiated in January 1995 will reduce the maximum tariff from 100 per cent to 30 per cent in most cases and lower rates on some 4,000 items, thus cutting the average applied tariff from about 30 per cent in 1994 to 17 per cent by 1997; the number of tariff rates will decline from 39 to 6. A notable exception is the motor vehicle sector where the average tariff will remain about 38 per cent, with rates ranging to 80 per cent.
Under Thailand's Uruguay Round commitments, virtually all agricultural tariffs have been bound and the level of bindings in industry increased from 2 to 68 per cent. Agricultural bindings are generally at currently applied rates, with the bound average to decline by some 33 per cent over the implementation period to 2004. Tariffication applies to 23 agricultural product groups; to date this has been put into effect for 12 such groups with the remainder, including for unconcentrated milk, garlic, pepper and copra, due to be implemented by end 1995. In industry, bound rates are to decline by an average of 28 per cent. Domestic support to agriculture will decrease by about 13 per cent in value terms by 2004. In the area of services, Thailand's schedule of commitments as of end-July 1995 covers 95 activities and 10 major sectors, including financial services, tourism and transport.
In 1992, Thailand removed import surcharges on motor vehicles, which had ranged from 20 to 50 per cent. Since its previous review, however, Thailand has introduced excise taxes on motor vehicles, ranging from 27 to 45 per cent. Exemptions from these taxes are currently granted to passenger cars and certain trucks provided their manufacturer satisfies local-content provisions. On countertrade, Thailand's policy is aimed at promoting exports and mitigating the trade imbalance; it requires that any imported procurement valued above Baht 500 million by State enterprises must apply countertrade measures.
Under Thailand's obligation to phase out performance requirements inconsistent with the Uruguay Round Agreement on Trade Related Investment Measures (TRIMs), 14 local content measures were abolished for investment projects that received approval after April 1993 for BOI incentives. However, local content requirements still apply to such items as dairy products and motor vehicle engines; a substantial number of projects previously approved for BOI incentives are also obligated to continue observing local-content requirements for a fixed time period. Thailand's remaining local content requirements are to be eliminated by the end of 1999.
Thailand accepted the Uruguay Round Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and intends implementation within the transition period permitted to developing countries. As of September 1995, a bill to set up an intellectual property and international trade court was in the approval process of the National Legislative Assembly.
Type and incidence of trade policy instruments
Thailand's applied import tariffs in 1995 range from zero to 100 per cent (excluding the effect of specific rates), with a simple average of about 23 per cent. Tariff peaks, up to 100 per cent, apply to imports of certain knitted goods, footwear, rubber products and motor vehicles. The highest average tariffs are for distilled spirits and malt liquors (60 per cent), canned fisheries products (55 per cent), wine and beverages (about 54 per cent). Escalation is not a general feature of the Thai tariff, but is significant in some sectors, including textiles, paper and rubber products and basic and fabricated metals.
Specific rates apply to less than 3 per cent of tariff lines. However, alternative tariffs apply on about 50 per cent of lines for agricultural raw materials and livestock, and on about 30 per cent of those for industry. Surcharges or special duties are imposed on fish meal, wheat and meslin flour, corn for animal feed and sheets and plates of iron and steel. Tariff concessions and exemptions are in effect, but detailed information on their applicability is not available; total estimated revenue losses from exemptions and reductions of tariffs on machinery and raw materials was Baht 59 billion in 1994. The lack of transparency in this area undermines the transparency of the Thai tariff.
Import licensing in Thailand has been reduced significantly since the previous review, but non-automatic licensing continues to apply to a number of imports, including fish meal, coffee beans, pepper, sugar, jute and certain gunny bags. A number of products, such as liquified petroleum gas, kerosene, motorcycles and certain buses, are subject to conditional import prohibitions. Thailand's only remaining import quota is imposed on garlic. Thai food standards and regulations, according to the authorities, are mostly in conformity with CODEX and other international standards. As of April 1995, 1,446 Thai industrial standards had been published, of which 41 were compulsory technical regulations.
Government procurement in Thailand is through various types of tenders of the Ministry concerned; there is no centralized purchasing agency, and information is not available on the amount or distribution by tender of government procurement. Thai products and services, except construction, receive a 10 per cent price preference in procurement, provided they meet the requirements of the Thai Industrial Standards Institute; certain State-trading organizations get the same advantage in procurement. The Government is currently privatizing or liquidating a number of its 22 State-trading organizations.
Thailand's restraints on its exports of textile and clothing that had been negotiated under the aegis of the MFA were "rolled over" as the starting point for the 10-year phase-out of the Arrangement. For tapioca products, the Thai voluntary export restraint was eliminated following tariffication of imports by the European Union. Quota and monopoly export arrangements for sugar were cancelled in 1994.
The Export Import Bank of Thailand was established in February 1994, assuming operation of the export refinancing facilities formerly administered by the Bank of Thailand. The Packing Credit Scheme, continues to be the main export refinancing facility for supplying export credits through commercial banks; small-scale exporters have some access to commercial credits.
The Government has identified agro-industry and food-processing, textiles and garments, electronics, metal-working, petrochemicals and iron and steel as industries where Thailand has an international competitive advantage; in this context, government support takes the form of investment incentives. In agriculture, government policies are currently geared to increasing productivity and making higher value added products, while shifting development emphasis to the rural sector as a whole, including the promotion of local industries.
Agricultural growth lags the rest of the economy, although exports remain substantial. The reduced availability of new farmland and weak commodity prices are the main factors behind the lower growth rate. In recent years production has been shifting away from coffee, rice, cassava and pepper into such higher value-added activities such as cattle-raising, orchards and fisheries. In some agricultural sectors, such as sugar, labour shortages are developing.
Agriculture is a low-productivity sector, with a substantial difference between its 60 per cent share of employment and 11 per cent contribution to GDP. This is reflected in the accelerating income gap between the farm and non-farm sectors, from a ratio of 1 to 8 in 1990 to 1 to 11 by 1994. Measures to achieve Thailand's agricultural policy objectives include tariff protection for "sensitive" products, soft loans to farmers, the supply of input factors at either no cost or at reduced prices, providing water supplies, encouraging research and facilitating technology transfer. Investment incentives are available from the BOI for a variety of agricultural activities.
Current applied tariffs for agricultural raw materials and livestock range from zero to 65 per cent, with a simple average of 38 per cent. For fisheries and forestry products, applied tariffs range from zero to 60 per cent, with simple averages of 55 and 15 per cent. Thailand's exceptions to Uruguay Round agricultural tariff bindings include certain live animals, animal fats and coral. State-trading organizations are the exclusive recipients of the import allocations under the in-quota part of the tariff quotas established for a number of products subject to tariffication.
Domestic support levels will drop from Baht 21.8 billion to 19 billion between 1995-2004 as a result of the Uruguay Round. Thailand maintains export subsidies on agricultural products in a manner, according to the authorities, consistent with those of developing-country members under the Uruguay Round Agreement on Agriculture; no information on these subsidies was available. Thailand has no Uruguay Round commitments for the reduction of such export subsidies.
Textiles and clothing remains Thailand's dominant manufacturing activity in terms of gross output, followed by machinery (including electronics), food products and transport equipment. Manufacturing output expanded by 18 per cent in 1991, 13 per cent in 1992 and 11 per cent in 1993, with value added increasing by slightly higher rates over the same time period. Manufactured imports expanded by about 10 per cent in 1992, 15 per cent in 1993 and 20 per cent in 1994; exports expanded by 15, 17 and 22 per cent over the same time period.
Export competitiveness in some labour-intensive manufactured products such as up-scale garments, shoes and canned seafood has been maintained through quality improvements. Production efficiency in "new" manufactured items is reflected in a substantial increase in exports of high technology products such as electrical appliances, computers and computer parts, integrated circuits and parts, transformers and generators, optical instruments and vehicle parts. The importance of intra-industry trade in radio, television and telecommunications equipment, Thailand's major assembly industries, means that this product group had the largest share of both imports and exports in 1994.
Infrastructural weaknesses and a shortage of skilled labour are seen by the authorities as the greatest hurdles to continued manufacturing growth. The Government has increased fiscal expenditure, privatized state enterprises and sought joint ventures with the private sector to address the infrastructure. In addition, an increase in the compulsory education level will be implemented nationwide from 1996, and scholarships will be increased for studies in areas suffering labour shortages, such as engineering and the sciences.
Approximately 80 per cent of Thai industries are small and medium-sized enterprises (SMEs). Few linkages exist between large firms and the SMEs, except in such sectors as textiles, but prospects are seen by the Government for increased linkages in the electronics and automotive sectors. In an effort to help promote SMEs, the BOI in 1993 reduced the minimum capital requirement for promoted projects to Baht 1 million.
Services account for nearly half of Thailand's GDP and some 30 per cent of total employment; Thailand is among the world's top twenty service traders. The main source of services income is tourism, with remittances from overseas labour following well behind.
Despite ownership limitations, FDI has flowed into such Thai services as pipeline transport, telegraph and telephone, and tourism. The authorities are convinced that the GATS will promote expansion of world trade in services; however, they fear that Thai firms will not be able to compete, particularly in financial services, because of weak capitalization and a lack of experience.
To address concerns over competitiveness, BOI investment incentives are authorized for a significant number of services activities. In power generation and telecommunications, privatization is also an important government priority.
Anti-dumping action was taken in 1994 against imports of hydrogen peroxide from India, with provisional and final duties of 30 per cent imposed in June and November 1994, respectively.
Trade Policies and Foreign Trading Partners
From Thailand's perspective, the Uruguay Round results will benefit the economy through tariff reductions on exports, improved long-term rules for agricultural products and the phasing-out of textiles and clothing quotas. Thailand regards the GATS as promoting expanded world trade in services by providing transparency and progressive liberalization. Despite overall satisfaction with the Round, Thailand has a number of concerns, including the perceived absence of meaningful concessions on certain items; exclusion of fisheries products from the negotiations on agriculture; remaining distortions in agricultural trade, despite tariffication; and the reduction of Thailand's investment policy options under the TRIMS Agreement.
Thailand's economy will benefit from the strengthened trade rules agreed in the Uruguay Round, which together with unilateral domestic liberalization, will result in more complete integration into the multilateral trading system. Trading partners will also benefit from increased market access and greater predictability as a result of both domestic reforms and Thailand's implementation of the Uruguay Round Agreements. However, further progress in terms of transparency, including the detailed and up-to-date presentation of statistical information, must also be encouraged.Back to top
TRADE POLICY REVIEW BODY: THAILAND
Report by the Government - Summary Extracts
As one of the fastest growing economies in the world, Thailand has long recognized the importance of trade policy in its development. Trade measures have been instrumental in strengthening the competitiveness of domestic industries to compete in the world market. Being an open economy, Thailand has participated actively in various international forums such as the Uruguay Round of multilateral trade negotiations, the Asia-Pacific Economic Cooperation forum (APEC), and the ASEAN Free Trade Area.
Since its accession to the World Trade Organization on 1 January 1995, the Thai Government has implemented various measures in compliance with its commitments in the WTO. The tariff system has been restructured while a law was enacted in accordance with the TRIPs agreement, to be followed by numerous other laws which are being drafted. Most of the services sector are on the verge of liberalization. In addition, quantitative restrictions on many agricultural products have already been dismantled and replaced by tariff measures in line with the procedure prescribed in the agriculture agreement. In short, Thailand has tried its utmost to quickly and sincerely implement its commitments in the WTO.
Thailand is also enthusiastically participating in various regional cooperation schemes. As a country in the Asia-Pacific region, Thailand closely follows developments in APEC and will endeavour to ensure that this forum will remain consistent with multilateralism, the concept enshrined in the creation of the WTO. As one of the leading economics in ASEAN, Thailand proposed the establishment of AFTA and contributes considerably in its actualization process. In addition, the country is engaged in various sub-regional cooperation with its neighbours, hoping that this would bring about affluence to the region in the future.
In summary, Thailand has realized the importance of free and open trade to the country's development. Thus it shall continue to uphold its belief in liberal trade as well as conduct its trade policy in a transparent and fair manner. With this, Thailand hopes to achieve the double benefits of attaining economic prosperity and remaining a significant player in the world trade arena.
THE ECONOMIC AND TRADE ENVIRONMENT
Economic Developments 1992-1994
After four consecutive years of rapid expansion averaging over 10 per cent per annum, the Thai economy appeared to return to a more sustainable path. Thailand's Gross Domestic Product (GDP) moderated to 8.4. per cent in 1991 due to cautious monetary and fiscal policies and a slow-down in private consumption and investment.
In 1992, the pace of Thailand's economic expansion moderated further in response to the slowdown in the world economy and the domestic political uncertainty early in the year. The economy grew by 7.9 per cent, slightly less than in 1991 but still relatively high by region's standard. Many important monetary and fiscal measures were implemented, in particular, the abolition of interest rate ceilings, the relaxation of foreign exchange control, the broadening in the spectrum of business operated by financial institutions, the promulgation of the Securities and Exchange Act B.E. 2535 (1992), the modification of the tax structure and the substitution, of the value added tax for the business tax.
In 1993, there was an overall improvement in the Thai economy with a growth rate of 8.4 per cent. The expansion was underpinned by buoyant domestic demand, particularly private investment, and supported by a strong performance in manufactured exports. However, in the first half of the year, the pace of economic expansion was constrained by several factors including depressed farm prices, a lacklustre performance of the agricultural sector, and delays in budgetary disbursements and large-scale investment projects.
In an attempt to further deregulate the Thai financial system, the Thai government established the Bangkok International Banking Facility (BIBF) in March 1993 and permitted commercial banks and finance and securities companies to undertake new businesses. These measures are designed to pave the way for Thailand to become a regional financial centre. Furthermore the Export-Import Bank (EXIM Bank) was set up in 1993 to provide comprehensive financial services to business enterprises.
In 1994, the Thai economy recovered strongly for the second consecutive year from the trough of 1992. In line with the pick up in the world economy, economic growth accelerated to 8.7 per cent, driven by strong exports and robust domestic spending. Major factors contributing to the rapid economic growth in 1994 were the improvement in the economies of the Thailand's major trading partners and the associated rise in the demand for Thai exports, an increase in both public and private investment and the buoyant agricultural sector.
TRADE POLICY DEVELOPMENTS 1992-1995
As Thailand's economic performance has become increasingly dependent on international trade, the primary goal of Thailand's trade policy is to ready the country for a greater role in the world community. Thus, the government has emphasized measures such as conducting liberal economic policy through a free and open market mechanism, liberalising trade domestically and encouraging a constructive and competitive economic structure.
The Uruguay Round
Thailand has been actively involved in the Uruguay Round negotiations with an objective to assure greater trade liberalization through reducing or eliminating tariff and non-tariff barriers, improving the effectiveness of the rules governing international trade, bringing about fairness and transparency in the world market and preventing new trade barriers that may obstruct international trade.
In general, Thailand is content with the successful conclusion of the Uruguay Round negotiations. Thailand believes that the establishment of the WTO and the improvement of international trade rules and negotiations would create a more stable economic environment in which greater transparency and predictability would be conducive to progressive liberalization of world trade. With this belief, the country became the 59th founding member of the WTO on 28 December 1994.
The legal status of the UR agreements are similar to other international agreements which Thailand had signed. Prior to signing an international agreement, it must be ensured that the agreement is consistent with its domestic law. In order to ratify the WTO agreements, Thailand enacted the Protection of the WTO's Operations Act and amended the Customs Tariff Regulation B.E. 2531.
To implement its commitments made under the Agriculture Agreement, Thailand has to reduce an average of 24 per cent of tariffs on agricultural products. It will also eliminate non-tariff barriers for 23 agricultural products and convert these NTBs into tariff measures in accordance with the tariffication process. Thailand has also committed to reduce almost 4,000 items or 70 per cent of tariff concessions on industrial and fisheries products, resulting in the average reduction of 28 per cent. In services sector, Thailand has submitted a schedule of market access covering 95 activities and 10 major sectors.
Thailand, however, realizes that the real success of the UR negotiations does not depend solely on the existence of effective disciplines and rules governing the world trade system. All WTO members must honour their commitments and be sincere in implementing their obligations. Back to top
Footnote: 1ASEAN members: Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam