RESTRICTED

(95-1902)

Original: English

Committee on Subsidies and Countervailing Measures

SUBSIDIES

Notifications Pursuant to Article XVI:1 of the GATT 1994

and Article 25 of the Agreement on Subsidies and

Countervailing Measures

THAILAND

The following updating notification, dated 30 June 1995, has been received from the Permanent Mission of Thailand.

In view of the decision taken by the CONTRACTING PARTIES of the GATT 1947 on Avoidance of Procedural and Institutional Duplication (L/7582, dated 13 December 1994) this notification is deemed to be also a notification under Article XVI:1 of the GATT 1947.

_______________

In accordance with Article 25 of the Agreement on Subsidies and Countervailing Measures, the Permanent Mission of Thailand to the World Trade Organization, would like to submit, herewith, the Notification of Subsidies under the Agreement on Subsidies and Countervailing Measures.

Notification of Subsidies Pursuant to Article 25

of the Agreement on Subsidies and Countervailing Measures

1. Industrial Credit Refinancing Scheme

1.1 Medium and large scale industries

(a) Nature and extent of the programme

(i) Background and authority

Under the Royal Decree Regulating the Affairs of the Bank of Thailand B.E. 2485, Section 12(4), the Bank of Thailand is authorized to provide financial assistance to priority sectors and projects through refinancing schemes.

(ii) Incidence

Each manufacturer, with a total fixed asset not exceeding B 200 million, will be allotted credit lines for issuing promissory notes (P/N). The Bank of Thailand (BOT) will purchase from commercial banks and the Industrial Finance Corporation of Thailand (IFCT) P/N drawn by those manufacturers to fund their working capital. The amount of refinancing is 50 per cent of the P/N's face value with a maturity period of 120 days. The rate charged by the BOT to commercial banks or the IFCT is set at 5 per cent p.a. In turn, commercial banks can charge issuers not more than 10 per cent p.a. of the notes' face value.

(iii) Amount of payment (total)

The following table represents the amount of BOT's purchase of P/N:

(b) Effect of the programme

The objective of the scheme is to provide financial support to the industries essential to rural development, particularly those with the labour intensive or highly utilized local agricultural products.

1.2 Small scale industry

(a) Nature and extent of the programme

(i) Background and authority

Under the Royal Decree Regulating the Affairs of the Bank of Thailand B.E. 2485, Section 12(4), the Bank of Thailand is authorized to provide financial assistance to priority sectors and projects through refinancing schemes.

(ii) Incidence

The small scale industries with no fixed asset of no more than B 20 million, are eligible for this scheme. The Bank of Thailand (BOT) will purchase from commercial banks and the Industrial Finance Corporation of Thailand (IFCT) promissory notes (P/N) drawn by manufacturers for use as working capital. The amount of refinancing is 50 per cent of the P/N's face value with a maturity period of 120 days. The BOT charges commercial banks or the IFCT 3 per cent p.a. for the refinancing amount while permitting them to charge their customers not more than 10 per cent p.a. for the full amount of the P/N.

(iii) Amount of payment (total)

The total amount of refinancing by BOT are as follows:

(b) Effect of the programme

This scheme is aimed at providing low cost funds for small scale industries.

2. Livestock Raising and Aqua-Culture Credit

(a) Nature and extent of the programme

(i) Background and authority

Under the Royal Decree Regulating the Affairs of the Bank of Thailand B.E. 2485, Section 12(4), the Bank of Thailand is authorized to provide financial assistance to priority sectors and projects through refinancing schemes.

(ii) Incidence

The Bank of Thailand (BOT) will purchase from commercial banks promissory notes (P/Ns) drawn by farm owners to finance their operating costs. The amount of refinancing is 50 per cent of the face value of the P/N. However, maturity of P/N depends on the types and products of the farm, but not more than 5 years. The BOT charges commercial banks 5 per cent p.a. for the refinancing amount while permitting commercial banks to charge issuers for the full amount of P/N not more than 10 per cent p.a.

(iii) Amount of payment (total)

The total amount of BOT's purchase of P/N from farm owners are as follows:

It is Thailand's understanding that a subsidy provided to agricultural producers is subject to commitment as specified in the Agreement on Agriculture only.

(b) Effect of the programme

This scheme is aimed at providing low cost funds for commercial livestock raising and aqua-culture.

3. Rural Development Credit Refinancing Scheme

(a) Nature and extend of the programme

(i) Background and authority

Under the Royal Decree Regulating the Affairs of the Bank of Thailand B.E. 2485, Section 12(4), the Bank of Thailand is authorized to provide financial assistance to priority sectors and projects through refinancing schemes.

(ii) Incidence

The Bank of Thailand (BOT) will purchase from commercial banks in the amount of 50 per cent of the P/N's face value drawn by project operator or project participants (farmer or workers). The loan must be blended with commercial banks credit in supporting each rural project. The maximum period for project support is 5 years. Generally, the BOT charges commercial banks not more than 3 per cent p.a. while commercial banks charge project operator or project participants for the full amount of P/N not more than 10 per cent p.a.

(iii) Amount of payment (total)

The total credit line available for this programme is B 2,000 million. During 1989-1994, the BOT provided credit as follows:

It is Thailand's understanding that a subsidy provided to agricultural producers is subject to commitment as specified in the Agreement on Agriculture only.

(b) Effect of the programme

The objective of the programme is to encourage agricultural or industrial investment in rural areas for better income distribution.

(a) Nature and extent of the programme

(i) Background and authority

Under the Royal Decree Regulating the Affairs of the Bank of Thailand B.E. 2485, Section 12(4), the Bank of Thailand is authorized to provide financial assistance to priority sectors and projects through refinancing schemes.

(ii) Incidence

The establishments eligible for assistance under this scheme must be new investment projects or zone relocation, each with capital funds not more than B 200 million (excluding land cost and working capital). Additionally, they must have been granted investment promotional benefits or the BOI's privileges and located outside Bangkok and 15 nearby provinces.

The Bank of Thailand (BOT) purchases from commercial banks or the IFCT, P/Ns drawn by entrepreneurs for funding the acquisition of fixed assets (excluding land cost) and working capital. The amount of refinancing is set at 40 per cent of the P/N's face value. Term of notes must not exceed 120 days for borrowing to be used as working capital and 5 years for investment in fixed assets. The BOT charges commercial banks and the IFCT 3 per cent p.a. while commercial banks and the IFCT can charge note issuers not more than 11.25 per cent p.a.

(iii) Amount of payment (total)

The total credit line of B 12,000 million is available up until 30 December 1996.

(b) Effect of the programme

The objective of the programme is to encourage industrial decentralization to provincial areas, particularly small and medium scale industries.

5. Investment Incentive Scheme

(a) Nature and extent of the programme

(i) Background and authority

The Board of Investment provides both local and foreign companies with fiscal incentives in an attempt to promote the establishment of industries in Thailand to accelerate the country's industrialization process and regional development. During recent years, investment incentives are geared towards decentralization as one of the government's policy themes is regional development. Investment incentives are offered to attract more investment to regional areas which face disadvantages in various aspects. The legislation that governs the provision of incentives by the Board of Investment is the Investment Promotion Act (1977) amended in 1991.

(ii) Incidence

Major fiscal incentives granted include corporate income tax exemption and reduction; and exemption and reduction of import duties on machinery and raw materials. A wide range of activities covering manufacturing services are eligible for promotion. The magnitude of incentives provided varies according to project locations.

Since the policy revision in April 1993, the Board of Investment also offers incentives for factory relocation and special invectives for research and development activities.

(iii) Amount of payment (total)

There is no specific budget earmarked for investment incentives. The extent of incentives depends on the number of projects promoted by the Board of Investment. Thus, the government revenue foregone in this regard fluctuates from year to year. No statistics on corporate income tax exemption and reduction are available. Only figures on exemption of import duties on machinery and raw materials are available.

Import Duty Exemption and Reduction Granted to BOI-Promoted Firms

Unit: B Million

(b) Effect of the programme

This scheme is aimed for decentralization and regional development.