I.                   Overview

1.                   Since the last trade policy review in 1999, two years after the 1997 economic and financial crisis, Thailand has continued its efforts to stabilise the economy towards full recovery and sustainable growth.  The Royal Thai Government has implemented ambitious domestic reforms in the areas of financial sector restructuring, institutional capacity building and human resource development so as to increase the level of productivity and efficiency of market participants, especially small and medium enterprises.  The external sector also plays an important role in speeding up the recovery.  Since 2001, the current government has pursued a dual-track economic policy in which a new emphasis on tackling poverty, boosting domestic demand, strengthening the grass-roots domestic economy is coupled with promoting Thailand’s traditional openness to international trade and investment.

2.                   Presently, Thailand is back on track towards a fully recovered and vibrant economy.  Exchange rate stability has been achieved in 2003.  Thanks to the fiscal stimulus and robust external demand, the economy registered a GDP growth of approximately 4% in 1999 and 2000.  The growth rate remained positive at 1.9% in 2001 despite the global economic slowdown.  In 2002, the Thai economy expanded by 5.3%.  It should be noted that the growth is export-oriented with at least 12 manufactured export items growing at double-digit rates.

3.                   Overall, Thailand’s macroeconomic fundamentals are strong and the outlook is favourable.  It has been forecast that the economic growth for the year 2003 will be around 5-6%.  The export performance in the first half of the year is impressive – an increase of 18.9% compared to the same period the previous year while the economy expanded by 5% in the second quarter of 2003.  Export is forecast to grow by 10.58% in 2003.  At the end of June 2003, international reserves stood at almost USD 39 billion, covering more than seven months of imports.

II.                Economic Environment

(a)      Economic developments, 1999-2003

4.                   In 1998, one year after the financial crisis, the economy moved into stagflation.   The GDP growth dropped from 5.9% in 1996 to minus 1.4% and minus 10.5% in 1997 and 1998, respectively.  This was accompanied by relatively high inflation of 8.1% in 1998 compared with the past 10-year average rate of 5.1%.  Several economic indicators hit the ten-year lowest, including export growth, import growth, net capital movement, domestic credit growth and the 12-month fixed deposit interest rate.  Non-Performing Loans (NPLs), defined as the over 3 months past due loans, in the financial institutions (commercial banks and finance companies) declined from a peak of 45% in year-end 1998 to 15.7% of total loans as of June 2003 (preliminary result).

5.                   The effect of the overshoot in the exchange rate on inflation during 1997-1998 was quite low.   The period-average exchange rate of Baht against USD depreciated by 23.8% and 31.9% in 1997 and 1998, respectively, but the inflation declined from 5.8% in 1996 to 5.6% in 1997 and increased by 8.1% in 1998.  This was partly due to the tight monetary policy where interest rates were kept high to ensure exchange rate stability as well as the restoration of confidence in Thai financial assets, while the negative repercussions on private investment and consumption turned out to be stronger than expected.

6.                   The supportive monetary and fiscal policies were partly responsible for the economic recovery in 1999-2000.  After 1998, the authorities attempted to speed up reforms of key economic sectors and revamp the policy framework to accelerate economic recovery, so that negative social impacts could be alleviated as quickly as possible.  Both fiscal and monetary policies were eased to stimulate domestic demand and improve liquidity.  The easing of economic policies coupled with the favourable exports resulted in the 4.4% and 4.5% economic growth in 1999 and 2000, respectively.  The net capital outflow declined from the maximum of USD 15.5 billion in 1998 to USD 13.5 billion in 1999 and USD 9.8 billion in 2000.  

7.                   In 2001, the economy slowed down, notably due to the external shock, even though the government expenditure continued to stimulate the domestic demand strongly.  On the whole, the economy grew by 1.9% led by the domestic demand expansion of 3.1%, corresponding to a large public sector deficit of 3.5% of GDP in FY2001.  This was because Thai exports in US dollar terms contracted by 6.9% following the slowdown in demand from trading partners, in particular the United States and Japan.  Despite the export contraction, the current account balance and the balance of payments remained in surpluses.  Meanwhile, the establishment of various Asset Management Corporations (AMCs) improved the distressed asset problem by reducing the NPL ratio from 17.9% at end-2000 to 10.5% at end-2001.

8.                   In 2002, a number of government measures, initiated since 2001, supported by a recovery in the external sector bore fruit.  The 5.2% economic growth was largely supported by the 4.4% growth in domestic demand, in line with the government policies and the financial sector restructuring.   The latter has resulted in a 7.3% year-on-year expansion in adjusted domestic credit[1] as of June 2003 (preliminary result).  The recovery in the external sector from the previous year was mainly attributed to the decline in net capital outflow holding up the Baht against US dollar.  As a further step towards financial transparency, from December 2002, the NPL definition has been broadened without backward revision, to re-include loans that have been fully provisioned and written off leading to a jump in the NPL ratio to 17.9% from 10.5% under the old definition of NPL in November 2002.

(b)     Economic situation in 2003

9.                   In the first half of this year, the Thai economy remains strong despite a number of external shocks, particularly the US-Iraqi war and the outbreak of Severe Acute Respiratory Syndrome (SARS) in Asia.  The problems had fortunately been resolved rapidly leaving little impact on the Asian economies.  The impressive growth performance of the Thai economy was derived largely from the private sector, highlighted by private consumption, private investment and exports.  Here, the decline in real interest rates in tandem with the policy of rate cuts and high liquidity in the banking system also helped to prod along the expansion in domestic demand.

10.               For the first seven months of the year 2003, the export sector has shown robust performance.  Exports were up 18.1% to 44.6 billion USD while imports are expected to reach 41.4 billion USD, up by 14.57%.  The Thai economy is expected to grow between 5-6% with inflation between 1-2% in 2003, supported by the accommodating monetary policy.  This projection is in spite of the assumption that Thailand’s trading partners’ economies will grow only moderately with Asian economies marginally dragged down by SARS, and the Euro remaining weak in its economic performance.  The private consumption is expected to continue to expand as a result of the accommodating monetary policy, favourable farm income, low inflation, and better employment prospects.

(c)      Trade environment

11.               In 2002, the country’s top six export markets were ASEAN, the US, the EU, Japan, Hong Kong and China.  The principal exports of Thailand to the world were automatic data processing machines, electrical integrated circuits, motorcars, parts and accessories, garments, precious stone and jewellery.

12.               The principal exports of Thailand to ASEAN were automatic data processing machines, refined fuels, electronic integrated circuits, chemical products, electronic motors and generators whereas the principal exports to the US were automatic data processing machines, garments, prepared or preserved fish, radio-broadcast receivers, television receiver and parts thereof, and electronic integrated circuits.

13.               Principal imports into Thailand were electrical machinery and parts, machines for industrial use, crude oil, electronic integrated circuits, chemicals, computer parts and accessories.

14.               At present, Thailand’s export destination is concentrated on a few markets (the US, the EU, Japan, and ASEAN).  However, there is an attempt to lower the current dependence on these few markets.  The Commerce Ministry aims to raise the proportion of Thai exports to secondary and new markets to approximately 40% within two years, from approximately 37% at present. 

15.               In 2003, exports to all markets have increased especially in the main markets (the US, EU, Japan and ASEAN), which make up 67% of the country’s total export value, at the average rate of 18.9%.  The US market will likely see a growth of 3.4%, Japan 16.1%, the EU 18.1% and ASEAN countries 18.1%.

16.               Secondary export markets, which constitute 14.5% of total exports, will likely increase 13.3% with exports to Hong Kong rising 8.1%, Taiwan 10%, South Korea 15%, Australia 16.5% and Canada 20%.

17.               New export destinations, which represent 19.9% of the total export revenues, will also increase 22.2%, while the Indochina market could grow 19.9%, the Middle East 11%, South Africa 8.8%, South America 9%, Eastern Europe 9.7%, South Asia 9% and China 49.7%.

18.               The Services Income and Transfer Account has shown a significant increase since 1999 and has been greater in its value as compared to the trade balance.  The account started to exceed the level of USD 3 billion in 1999 due to a considerable improvement in the tourism revenue to reach USD 7 billion as a result of the Amazing Thailand Year campaign.  In the following year, the net services income and transfer continued to grow due to both tourism growth and increased investment income from higher interest rate in the world financial market.

19.               However, in 2001, the slowdown in global economy resulted in the lower tourism revenue, while the terrorist attack in the US in September affected the international traffic and income from tourists for only a short period and recovered in the following December.  Despite the two negative impacts, the services income and transfer account still recorded a surplus of USD 3.7 Billion.

20.               In 2002, the Services Income and Transfer Account reached a record high of USD 4.2 billion due to a sharp increase in tourism revenue to almost USD 8.0 billion, or 12% per annum growth despite the uncertainty of the US-Iraq war and fear of terrorism.  Moreover, corresponding to the declining debt outstanding in both private and public sectors, the drop in interest payments also contributed to the high performance of the account.

21.               In 2003, the impact of the SARS outbreak has proven to be greater than that of the war in Iraq as the former has direct and immediate effects on tourism, aviation, hotels, and other tourism-related businesses.  During the first quarter, the number of tourists declined by 2.1% due to the uncertainties from the war in Iraq.  The impact of SARS was most severe in April and May in both inbound and outbound tourism.  In the second quarter, the number of inbound tourists and tourism revenue declined by 40% and 41% as compared to the same period of last year.  The SARS outbreak also had a severe impact on the outbound tourism with the drop in the number of Thai tourists and tourism expenditures in the same quarter by 32% and 35% respectively.  The data reveal that the net services income and transfer account in the first half of the year still recorded a surplus of USD1.2 Billion despite the deficit in the second quarter.

22.               The global tourism has improved markedly since the SARS has been under control and the World Health Organization (WHO) has removed all infected countries from the list of local transmission.  Therefore, Thai tourism is expected to recover towards the end of this year under the condition that the SARS situation does not reverse.

(d)     Medium-term outlook

23.               Over the medium term, the Thai economy is expected to grow around 5.0-6.0% per annum, in line with its potential output growth.  Private spending will continue to serve as the main engine of growth for the economy as the government stands by its dual-track policy aiming to strengthen the role of domestic demand to complement exports.  While private consumption is expected to increase at a rate comparable to output growth, private investment is expected to gather pace, raising the share of private investment gradually from 14% of GDP at present towards the historical (1986-1990) average of 26% of GDP over the next five years.  This will, in turn, be supported by rising returns on investment foreshadowed by improved corporate profitability, higher industrial capacity utilization, and low costs of investment in tandem with falling interest rates.  Public spending, however, is expected to expand only moderately in light of fiscal consolidation.

24.               Exports, on the other hand, will remain supportive of the overall economic growth as Thailand continues to promote export diversification under expanding regional markets.  Along with this trend, imports are also expected to accelerate, especially with the pick-up in investment and tariff structure rationalization under global and regional free trade arrangements, eroding the current account surplus at present to a more balanced position over the next five years.

*              The adjusting factors include write-offs, transfers to AMCs and TAMC loans, and loss portion of loans from debt restructuring.

Source:    National Economic and Social Development Board Office;  Ministry of Commerce;  and Bank of Thailand.

III.             Progress on Economic Policy Reform

(a)      IMF

25.               On 19 August 1997, Thailand requested financial assistance from the International Monetary Fund through the IMF’s Stand-by Arrangement programme.  Of the SDR 2.9 billion (about US$ 4 billion) approved by the IMF, total drawings amounted to SDR 2.5 billion (about US$ 3.5 billion).  Besides the IMF, Thailand received financial assistance from bilateral contributors, as well as the World Bank and the Asian Development Bank, with a total credit line of US$ 17.2 billion, of which only US$ 12 billion was drawn down.

26.               The 34-month stand-by arrangement came to an end in June 2000, and subsequently, Thailand was not obliged to abide by the conditionality of economic and financial policies that was associated with the programme.  Nevertheless, Thailand entered the IMF’s Post-Programme Monitoring (PPM).  This is an increased assessment of a member country’s economic and financial developments after exiting from an IMF financing facility from the usual annual Article IV consultation.

27.               Thailand commenced repayments to the IMF on 22 November 2000 and later to other bilateral creditors.  These repayments were originally scheduled to be completed by 2004 for the IMF and by 2005 for the final bilateral creditor.  Nevertheless, with the rapid economic recovery, the Cabinet of the Royal Thai Government on 2 July 2003 instructed the Bank of Thailand to prepay the outstanding liabilities of US$ 4.8 billion of the official financing package, of which US$ 0.4 billion was from the IMF, by July 2003.  This prepayment was completed on 31 July 2003.

28.               Nevertheless, Thailand is still an active participating member of the IMF, and Article IV consultation missions to Thailand are back to a 12-month cycle again.   In the IMF Executive Board, Thailand is represented by the Southeast Asian Voting Group, and plays an active role in the deliberations on IMF policy matters, particularly issues relating to quota reviews, streamlining conditionality and country ownership in IMF programmes, surveillance of member countries, and most recently the increase of voice and participation for developing countries in the IMF.

(b)     Monetary policy

29.               The Bank of Thailand formally adopted an inflation targeting framework in May 2000 with the objective to ensure transparency and efficiency.  The use of monetary policy to maintain price stability fosters investment and sustainable growth.  The Bank of Thailand chooses to target core inflation, which excludes volatile raw food and energy prices, to move within the range of 0 – 3.5%.  While the target range is relatively low in comparison with past inflation, it is consistent with inflation trend of Thailand’s trading partners and the structure of the Thai economy. 

30.               In implementing monetary policy, the Bank of Thailand has vested the Monetary Policy Committee (MPC), comprising the Governor, 6 Bank of Thailand executives and 2 advisers, with the power of setting the direction of monetary policy in order to maintain price stability.  The MPC is also responsible for adapting the inflation targeting framework to needs of Thailand.

31.               By working closely with the Bank staff, the MPC uses various data and information to assess domestic and international economic conditions and to determine the monetary stance.  The MPC decided to use 14-day repurchase rate as the operational target to signal the monetary policy stance.  In the event of pressures on the exchange rate of short-run liquidity shortages in the money markets, the 1-day and 7-day rates can be adjusted, while the 14-day rate can be kept steady to reflect the long-run direction of monetary policy.

32.               Together with a managed float currency regime, the inflation targeting framework gives the Bank of Thailand sufficient flexibility to respond quickly to fast changing domestic and external developments while ensuring price stability in the long run.  So far, the new monetary policy framework and currency regime has served Thailand well in facilitating the economic recovery. 

(c)      Fiscal policy

33.               The expansionary fiscal policy has played a crucial role in stabilising the Thai economy post the financial crisis in 1997 whereby the budget deficit peaked in FY2002 at 3.6% of GDP and has been declining continuously ever since.

34.               As a small open economy, Thailand is susceptible to external market volatility.  For this reason, a "Dual Track Development Strategy" has been introduced to create more balanced growth and to lessen its relative exposure to adverse external shocks, and as a new alternative to replace the pre-crisis, low value-added export model - the single-track East Asia Economic Model (EAEM) which was excessively dependent on FDI by MNCs and mass manufacturing.  Such a dual-track option involves the simultaneous pursuit of certain types of mass manufacturing facilitated by FDI from MNCs as well as the second track through the skill-driven small and medium enterprise model.   The new paradigm aims to lay a solid base for sustainable growth and stability by strengthening domestic activities and promoting linkages between the domestic economy and the world economy.

35.               On the domestic economy side of the dual track strategy, the government focuses on strengthening grass-roots economy, enhancing Small and Medium Sized Enterprises and modernising other large-scale domestic sector whereby the fiscal policy has been actively utilised to achieve these goals.

36.               Many initiatives have been launched to stimulate productive activities by providing people at the grass-roots level with greater access to capital, such as the 75 billion baht revolving Village Fund.   Some budget spending initiatives, such as "the One-Tambon-One-Product Scheme[2]," are included in the budget as a new programme to foster entrepreneurial and productive capacity, which is fundamental to greater grass-roots self-reliance. 

37.               To promote SMEs, Thailand has introduced new tax schemes for SMEs, including a reduction in the corporate income tax rates and a tax-deductible incentive for investments in certain plants and machinery.

38.               In addition, the fiscal policy has been used to stimulate the real estate sector.  Many tax packages were launched to stimulate the real estate sector such as extending the reduction of the Specific Business Tax rate and transfer fees on real estate transactions, and an exemption on Personal Income Tax for selling existing houses for the purpose of new purchases.  Attempts to revive the sector through off-budget programme include special mortgage programme from the Government Housing Bank for civil servants and State-Owned Enterprise employees.  Recently, a new initiative aiming at building homes for low-income people has also been introduced.

39.               In implementing such expansionary fiscal policy, the government is well aware of the consequential public debt that has been created as a result.  To ensure the soundness of the fiscal stance, a framework for fiscal sustainability has been set.  It aims to keep the ratio of public debt to GDP below 55%.  Therefore, deficits will decrease until the cash balance is accomplished by 2005.   As revenues continue to improve strongly in 2003, the public sector deficit is, in fact, expected to be eliminated this year.  The debt service burden in the budget is also kept below 16% to ensure that there is enough room for capital expenditure.  These targets, as well as the debt projection, are made public on a regular basis.

(d)     Trade and investment policy

40.               Thailand remains open to foreign trade and investment.  Its active engagement in bilateral, regional and multilateral economic arrangements reflects the readiness to integrate itself into the world economy.

41.               Thailand is supportive of a multilateral trading system.  Thailand played a part in launching the Doha Development Agenda (DDA), which focuses on the development dimension of trade, greater market access and clearer and fairer rules. 

42.               Thailand is also engaging in free trade area arrangements with a number of partners.  These FTA arrangements are perceived as a means to ensure that goods produced in Thailand will have access to markets far beyond Thailand’s population of over 62 million, and rendering Thailand a strategic investment location in the region.  It is also believed that these FTA arrangements will act as a building bloc for multilateral trade and investment liberalization through gradual domestic adjustment process.  Moreover, regional cooperation and interdependence would help it deal with the challenges of globalisation and pursue regional peace and prosperity.

43.               With regard to investment, the Thai government is committed to improving the overall investment environment.  Thailand has sought to promote investment in industries namely agro-business, automobile, fashion including textile, leather and jewellery, electronic industries, as well as high-value services.  FDI is a means of promoting employment, economic growth, and technology transfer.  Foreign direct investment in Thailand totalled USD 3.8 billion in 2001, up from the year 2000 but below the USD 5 billion received in 1998.  Europe, Asia and North America are the major sources of foreign direct investment, however, investment from all sources is welcomed.

44.               There has been some improvement in the level of private investment, which has grown by 13.3% in 2002, compared with 4.7% in 2001.  However, this has been confined to the construction sector, especially for construction of residential homes.

(e)     Industrial policy

45.               The industrial sector grew 9% in the 3rd quarter of 2002 compared to 6.8% in the 2nd quarter.  The capital and technology goods expanded 15.8% due to improved and increased domestic demand in certain sectors.  Raw material industry expanded 9.8% with the expansion of construction industry.  Light industry expanded 2.7%.  The major industries contributing to growth have been non-metal and metal industries, machinery, electrical appliances and automotive industry.

46.               At present, the government through the Ministry of Industry places the importance on the sectoral industrial development with specific strategies in each sector as follows:

47.               Global industry, that is, highly competitive industry in the world market, i.e. food, fashion, automotive and electrical and electronics with strategies consisting of developing new products through R&D and creating design, brand name and country image, in response to the market’s need and taste in accordance with international safety and quality standards.

48.               Regional and domestic industry, that is, fairly competitive industry in the world market, i.e. agro-industry, chemicals, ceramic and glass with strategies consisting of developing higher value-added in the value chain through R&D of Thai traditional knowledge and technology transfer through linkage between large and small scale industries and cottage industry.

49.               Basic and strategic industry, that is, essential industry to the country’s industrial development, i.e.  petrochemicals, iron and steel and machinery with strategies consisting of linking inter- and intra- industries through value chain system and developing productivity and product efficiency to reduce cost.

(f)       Privatisation

50.               Thailand has a total of 84 state owned enterprises (SOE), as at the second quarter of 2003.  Of these 84 SOEs, 61 are owned and regulated by the Ministry of Finance;  2 are independent SOEs;  3 are Financial Institutions in which the Ministry of Finance has taken control;  and 18 are subsidiaries.

51.               The change in government in 2001 re-prioritised the existing Master Plan for the Reform of State Owned Enterprises to focus on the development and improvement of state enterprise performance.  It accelerated the corporatisation process for commercially oriented SOEs and focused on listing shares on the Stock Exchange of Thailand as a strategy to contribute to their development.  Since 2001 the following SOEs have been listed:  Internet Thailand, PTT PLC, Bank Thai, Krung Thai Card.  The Government is working on the preparation of additional SOEs for corporatisation and listing, including the Metropolitan Waterworks Authority, the Electricity Generating Authority of Thailand and the Provincial Electricity Authority.  The timing of future transactions will be based on commercial readiness of the enterprise and the conditions of the capital market.

(g)     Restructuring of government offices

52.               In 2002, a broad-based re-organisation of government agencies and regulatory bodies was announced.  The government's bureaucratic reforms started in October 2002.  Under the government's changes, the number of ministries would increase to 20 from 14 and departments to more than 150 from 125, reflecting the changing landscape of necessary public service.  The changes will restructure and regroup ministries and agencies according to activity and eliminate the duplication of duties, while at the same time attempting to limit the number of civil servants to a minimum. 

IV.              Trade Policy and Trade-Related Policy Developments

(a)      Export system

53.               Thailand is a small and open economy.  Its trade policies have been geared towards promoting exports by limiting export controls to a minimum.  Few items are subject to the requirements of prior approval for reasons such as public health, economic stability, national security, and protection of public morals, etc.  There are some measures on export control in order to meet its importers’ requirements on food standards.  In order to increase awareness of the importance of food safety, Thailand has designated the year 2004 as the "Food Safety" Year.

(b)     Import system

54.               Thailand is restructuring tariff lines to further reduce applied tariff rates.  At present, out of 5,505 tariff lines, Thailand applies tariff quotas to 23 agricultural products.  The average applied tariff is 14.61% and 16.84% for WTO Members and non-WTO members respectively.  At present, about 74% of Thailand’s HS seven-digit tariff lines are bound. 

55.               To increase the country’s competitiveness, we have initiated the restructuring of the tariff regime and the customs procedures.  Thailand’s restructured tariff system, which should be completed within 2003, will have 3 primary tariff rates:  1% for raw materials, 5% for intermediate products and 10% for finished articles. 

56.               A frequently asserted contention that specific rates often hide a much higher actual tariff rates than ad valorem rates does not generally apply to Thailand.  In any case, if a product has a compound tariff rate and is bound under WTO, WTO Members are eligible to use the ad valorem rate regardless of what the specific rate is. 

(c)      Customs procedures

57.               Thailand has adopted the WTO Customs Valuation Agreement and thus the relevant rules under the Agreement are being applied.  Thailand has also introduced clear customs appeal procedures which cover a variety of customs-related areas, including valuation, tariff classification, amount of duty payable, origin of goods and quantity of imported goods.

58.               Electronic Data Interchange (EDI) system has been established by the Customs Department to reduce paper load.  Currently, approximately 85% of declarations are administered using EDI.  Thailand plans to establish and expand the EDI system nationwide with the objective of achieving an all e-based trading system by 2010.  In terms of increased transparency, all customs laws are published in the Official Gazette.  In addition, the important customs information is also posted in the Customs Department website.

(d)     Trade defence

59.               Thailand introduced the Anti-Dumping and Countervailing Act in 1999.  The legislation is consistent with the Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures.  In addition, Thailand has consistently submitted semi-annual reports on trade defence measures taken as required by the WTO. 

(e)     Agriculture

60.               In addition to farming activities, the government has encouraged rural communities to join the One Tambon One Product scheme (OTOP).  Through this scheme, farmers can produce goods using local materials, and hence, sell products for additional income.  Silk, textiles, handicrafts, and processed food are some examples of the products under the scheme.  The Ministry of Agriculture and Cooperatives (MOAC) has assisted farmers in developing marketable products through 1,008 farmers’ cooperatives.  Evaluation of the OTOP scheme’s performance revealed that within a year average farmers’ net income increased to 4,700 baht per head, accounting for an annual average of 800,000 baht in each farmers’ group.

61.               To increase competitiveness, MOAC has undertaken research and development to apply "the Good Agricultural Practice (GAP)" method, i.e. the use of high yield crop variety and proper fertilizer.  The GAP method has now been transferred to farmers to increase productivity and product quality which is safe for consumers.

62.               In addition, MOAC has set up the National Bureau of Agricultural Commodity and food standards (NBACFS), responsible for standardizing, inspecting and also certifying food and agricultural products.  In the meantime, MOAC has already set up the standard for 14 agricultural commodities, namely longan, orchid, Hom Mali rice, rambutan, mango, mangosteen, lychee, orange, pomelo, pineapple, Pathumtanee 1 rice, banana and durian.  The standard consists of the identification of the commodity, qualification for the standard size, arrangement, brand and label regulation, as well as sanitary regulations on food contaminants.

63.               On agricultural infrastructure development, MOAC has developed water resources for agriculture in order to make them widely distributable for farm irrigation and household consumption.  Large, medium, and small-scale irrigations have been constructed and have improved irrigation efficiency.  Natural water resources, such as canals, have been widely rehabilitated.  As a result of water resources development, areas benefiting from irrigation and water development have increased to 32 million rais, accounting for 24% of the total area for agriculture.

64.               In terms of agricultural services, MOAC has improved its agricultural service system in such a way the farmers can now quickly access information on agriculture as well as benefit from agricultural services provided by the MOAC.  There is also the establishment of centres for agricultural services and technology transfer at village level.  The centre will provide farmers with agriculture-related knowledge and technology in the field of crops, livestock and aquaculture.  Presently, 7,175 centres have been established.  Another service is the Agricultural Mobile Clinic programme, which was set up in July 2002.  Its major activities consist of clinical services for farmers in the fields of crops, livestock, fisheries, soil and fertilizer.  At present, there have been 97 movements of Agricultural Mobile Clinic in 76 provinces, providing services for 91,528 farmers.  Of note is a different Mobile Unit to visit and help solving farmers’ problems, provide technology transfer as well as legal knowledge for farmers in remote areas.  There have been 400 Mobile Units providing services throughout the country.

65.               With the efforts of agricultural development put by MOAC, the agricultural sector has been growing at the average rate of 3% annually.  Therefore, the agricultural sector will continue to play an important role as the main source of food supply and labour force for the economy.  Furthermore, agricultural exports have helped to reduce the overall trade balance deficit as well as earning foreign exchange.  In general, agriculture has contributed to the growth and development of many other sectors in the Thai economy.

(f)       Financial services

Banking

66.               The economic and financial crisis of 1997 brought on significant changes in the financial sector landscape of Thailand.  Comprehensive reform measures were undertaken to restore stability and investor confidence.  The multi-faceted reforms addressed strengthening the capital base of financial institutions, supervisory reforms based on internationally accepted standards of risk-based supervision and good governance.

67.               One material change implemented in 1997 to help resolve the banking crisis included measures to relax foreign equity limits by allowing foreign investors to hold up to 100% in a locally incorporated bank for a period of ten years after which the foreign investors will not be allowed to purchase additional shares in the bank until their shareholding declines to below 49%.[3]  Consequently, the relaxation led to substantial foreign majority ownership in four Thai commercial banks with equity holdings ranging from 52 to 79%.

68.               The measures undertaken by the authorities, together with the far-reaching adjustments by the financial institutions, have met with considerable success.  Since 2001, financial institutions have returned to profitability, showing improvements in business operations.  Enhanced internal risk management, greater awareness of corporate governance and more strategic business plans have all helped to strengthen the financial position and capital base of commercial banks.  Commercial banks’ average BIS ratio and reserve levels have been in excess of official requirements – as of second quarter 2003 average BIS ratio of the banking sector was 13.2%, while the ratio between existing reserves to required reserves comfortably stood at 138.4%.

69.               Regardless of such progress in financial sector performance, relevant authorities remain vigilant in continuing with ongoing reforms to enhance the financial sector’s ability to withstand future shocks.  Going forward in terms of regulatory oversight, the new Financial Institutions Businesses Act, currently being deliberated by the government, will provide the Bank of Thailand with the authority to undertake consolidated supervision, prompt corrective actions, and assist in Thailand’s adoption of international supervisory standards by emphasising corporate transparency, good governance, and consumer protection.  The authorities consider the Act to be the first step towards enhancing Thai financial institutions’ competitiveness and efficiency in servicing both sophisticated and unsophisticated users.  Currently, the government is deliberating the Act and will present the final draft version to Parliament for confirmation and approval.

70.               Furthermore, with an aim to fostering competitive, efficient, stable and balanced financial system, the Bank of Thailand is in the process of completing work on the medium to long-term strategy for the financial sector with the formulation of the Financial Sector Master Plan.   As such, the Financial Sector Master Plan entails policy prescriptions for levelling the playing field among players.  The Financial Sector Master Plan is currently being deliberated by the Ministry of Finance and is expected to be completed and announced by the end of 2003.

Securities

71.               Thailand attaches great importance to deepening its capital market to better serve as an alternative for fund mobilisation and investment.

72.               In 2002, the total value of securities issued in the primary market was 165 billion baht (USD 4 billion) while the total value of market capitalisation in the Stock Exchange of Thailand (SET) was 1,986 billion bath (USD 47 billion), with 24 newly listed companies in both the main market and the MAI of the SET as compared to 10 newly listed companies in 2001.  The SET index at the end of the year was at 356.48 as compared to 303.85 in 2001 representing an increase of 17.32%.  The net buying volume in 2002 was as high as 14 billion baht (USD 0.34 million) for foreign investors and 13 billion baht (USD 0.32 billion) for domestic institutional investors.

73.               In the past 5 years, the Office of the Securities and Exchange Commission (SEC) has remarkably changed its thinking in regard to the supervision of activities and organizations in the capital market.  For instance, the supervision on non-essential issues was relaxed, with the emphasis being shifted principally towards risk management of securities companies.  The government has given priority and contribution to the development of the capital market in various aspects, such as the tax privileges given to listed companies and investment in the retirement funds, the active promotion for privatisation of state enterprises, as well as the implementation of various important measures which would provide a good start for the revival and development of the capital market to regain its significance in the country’s economy.  Moreover, the promotion of a higher standard of good corporate governance among listed companies and market intermediaries through regulatory discipline, market discipline and self discipline has been an important measure to increase the level of confidence in all areas of the capital market.

74.               The Capital Market Master Plan, which was issued in 2002, emphasized corporation of the SET and the restructuring of the SEC with a view to improving efficiency and accountability of capital markets.  For liberalization measure, regulatory reforms are ongoing as a plan was made to liberalize in the near future mutual fund management licence to provide a greater number of professionals to investors.  Moreover, the Derivatives Act, which will come into force by the end of 2003, would be the beginning of the development of a derivatives market.

Insurance

75.               In 2001, Thailand shared 0.14% of the world insurance market and ranked 35^th in terms of total premium volumes.

76.               The penetration rate registered at 2.94%, which is relatively low when compared to other countries in Asia.  The insurance density level, or premiums per capita was at 53.9 USD. 

77.               At present, Thailand has altogether 104 insurance companies, of which 25 are life insurers (24 domestic companies and 1 foreign branch), 71 are non-life insurers (66 domestic companies and 5 foreign branches) of which 6 are domestic specialised health insurers, and the remainder of 2 are domestic reinsurers.

78.               The sector is governed by 2 pieces of legislations namely the Life Insurance Act B.E. 2535 (1992) and the Non-Life Insurance Act B.E.  2535 (1992) which are administered by the Department of Insurance (DOI), Ministry of Commerce.

79.               Currently, the Department of Insurance is in the process of amending the current Life and Non-life Insurance Acts to facilitate insurance business operations in a more competitive environment and maintain soundness and long-term viability.  Apart from streamlining the licensing regime and prudential measures such as security deposit, capital fund (solvency margin), one of the key areas is the proposed amendment on foreign equity participation of up to 49% (from 25% currently applied).

80.               The life insurance industry in Thailand has expanded substantially in recent years thanks to the differential between the bank deposit interest rates and the required rate of return to be built into Thai life insurance products, and the recent government's decision to increase the tax deductibility of life insurance premiums to 50,000 baht annually from 10,000 baht. 

(g)     Transportation

Air transport

81.               Thailand is now gradually implementing services liberalisation policy on air transport and allows private airlines to provide the same air transport services on all routes operated by the national carrier.  As a result, the number of international and domestic scheduled Thai airlines increases from 4 airlines in 2001 to 6 airlines in 2003.

82.               The market shares for international traffic at Bangkok international airports are dominated by the Thai Airways International and foreign airlines.

83.               Limitations and restrictions imposed on foreign airlines involving the capacity and frequency, as well as route schedule and traffic rights are gradually removed and capacity arrangements set in advance are more in line with the traffic demand and long-term plan.  Moreover, foreign airlines are encouraged to operate extra flights and charter flights to every custom airport in Thailand. 

84.               At present, Thailand has the air services agreements with 93 economies, entitling frequency of approximately 1,300 flights per week.  The Bangkok International Airport is being corporatised by allowing 30% of the shares to be sold to the general public in 2003.

85.               Operators who are interested in providing ground handling services and aircraft repair and maintenance services at the Bangkok International Airport must obtain ramp and technical services licences from the Minister of Transport.  As for foreign airlines, the conditions under relevant bilateral air services agreements also apply.

Maritime Transport

86.               Thailand’s international seaborne trade has been increasing rapidly, particularly during the past decade.  Nevertheless, only approximately 10 to 12% of the total trade volume is carried by Thai flag vessels.  Despite a relatively small size, the Thai merchant fleet has increased from 133 vessels with the total carrying capacity of 585,873 DWT in 1981 to 365 vessels with the capacity of 3,074,355 DWT in 2001.

87.               The Ninth National Economic and Social Development Plan (2002-2006) envisages the development of service quality of major ports, maritime transport and related activities to meet international standards in order to support the increase of capabilities for manufacturing and services sectors.

88.               According to the Thai Vessels Act, B.E.2481, Maritime transport services in Thailand can be classified into two categories.  (1) International shipping which is open to both Thai and foreign vessels.  Section 7 bis of the Act provides that, for a registered Thai vessel used only in international maritime transport, the owner shall be a juristic person established under Thai law with head office in Thailand and at least 51% of Thai equity.  (2) For domestic shipping which is exclusively reserved for Thai vessels for national security reason, Section 7 requires that the owner of a registered Thai vessel for trading in Thai waters must be a juristic person with at least 70% of Thai equity.

89.               A package of substantial legislation specifically applied to the maritime services sector involves Mercantile Marine Promotion Act, B.E.  2521;  Thai Vessels Act, B.E.  2481 (as amended by the Act, B.E.2540);  and Navigation in Thai Waters Act, B.E.2456 (as amended by the Act, B.E.2540);  the Prevention of Collision of Vessels Act, B.E.2522;  the Carriage of Goods by Sea Act, B.E.2534;  the Arrest of Ship Act, B.E.2534 and the Ship Mortgages and Maritime Liens Act, B.E.2537.  Thailand also has a great deal of subsidiary legislation regulating ship survey, maritime safety, training of seafarers and marine environment protection which are based on international standards.

90.               Maritime transport auxiliary services conducted within the Thai territory, including port services and other related services, are subject also to the Foreign Business Act, B.E.2542.  The port operator must conform to the Notification of the Revolutionary Council No.58 (control of business affecting public safety and well-being) and it is also required to obtain permission for the construction and operation of the port from the Marine Department.

91.               Up until now, Thailand has concluded bilateral maritime agreements with certain countries, namely, Vietnam, China, Peru, Morocco and Republic of Korea.  Those maritime agreements are mainly based on free competition and contain principal provisions involving reciprocal recognition of certificates on board a vessel and identity documents of crew members, facilitation on the arrival/departure of ships and immigration procedure and formalities for ship crew and cooperation/assistance in search and rescue for ships in distress.

(h)     Telecommunications

92.               In October 2002, The Ministry of Information and Communication Technology (MICT) was set up to formulate ICT policies and plans, promote and develop ICT activities as well as implement the national ICT projects.  In the meantime of privatisation process, two state-owned telecommunication operators, TOT and CAT have been corporatized on 31 July 2002 and 14 August 2003 respectively and will distribute their shares to the public or individual investors by Initial Public Offering (IPO) in the near future.

93.               In the past couple of years, important telecom laws, namely the Act on the Organisation to Assign Radio-Frequency Spectrum and to Regulate the Sound Broadcasting, Television Broadcasting and Telecommunication Services B.E.  2544 (2001) and the Telecommunications Business Act B.E.2543 (2000) came into effect, establishing independent regulators and regulating telecommunication business respectively.  Under the telecommunication Business Act, foreigner equity participation in some types of telecommunication business operation is limited to 25%.  However, the Cabinet is deliberating on further relaxation of such a limitation to 49%.

94.               The sector is undergoing a major domestic regulatory reform.  The National Telecommunication Commission, once it comes into existence, will deliberate on key policies such as licensing regime, technical standard setting and compliance, certification of telecom equipment and the adoption of the Reference Paper on Basic Telecommunications. 

95.               The International Telecommunications Union has recently revealed that the price level of telecom services in Thailand is lower than the average price level of countries in region.  The cost of Internet usage in particular is the lowest in the Asia Pacific.

(i)       Tourism

96.               Indeed, Thailand's economy is highly dependent on the tourism and related industries.  Tourism has been an effective means of creating job opportunities and increasing local income and foreign exchange revenue.  Tourism generates more than 300 billion baht (USD 7.14 billion) in revenue each year.  It accounts for more than 6% of GDP.

97.               The number of tourists coming to Thailand has grown steadily.  Thailand receives approximately 8-10 million tourists per annum, one of the highest figures for Southeast Asia.

98.               The tourism industries, ranging from leading five star hotels and a world-class airline to a continuum of restaurants, one-person tour operators and secondary businesses such as primary food producers, health care providers and domestic transportation industries are Thailand’s major services export interest.

99.               The income accrued from tourism contributes substantially to the economy, accounting for about 6% of the country's GDP.

100.            The public sector has been active in upgrading infrastructure, e.g. roads, telecommunications, water facilities, waste disposal and the safety standards of public facilities to keep abreast with the industry's growth and to assure the industry's long-term stability.

101.            The newly established Ministry of Tourism and Sports takes care of product development and administrative issues while the Tourism Authority of Thailand (TAT) remains responsible for marketing strategies, campaigning and promotional schemes.  Priority is now being the long-term protection of the environment, the encouragement of "eco-tourism", training of personnel, and measures to prevent the exploitation of tourists.  The TAT also puts emphasis on the Meeting Incentive Convention and Exhibition market (MICE).  The Thailand International Convention Association suggested that the public and private sectors should form a bidding fund as a mechanism to help support various organisations bidding for international events.

102.            The Severe Acute Respiratory Syndrome (SARS) outbreak led to a dramatic decrease in tourist arrivals.  After the emergency SARS summit in Bangkok and the WHO announcement that Thailand is "SARS free" due to the lack of any local transmission, the travel and tourism industry in Thailand expects a gradual and steady recovery.

(j)       Intellectual property rights

103.            Thailand recognises the importance of IP protection particularly in the area of copyright.  It has dedicated considerable human and financial resources to eradicating the problem of piracy, both in the analog and digital means.

104.            The Thai authorities have introduced a package of legislation to protect IP rights.  Thailand is stepping up its efforts to suppress IP piracy.  Equipment used to duplicate copyrights is subject to import licensing.

105.            Almost 2,000,000 pieces of pirated goods (of which a large number are pirated CDs) were confiscated by the police in the year 2001, the number went up to 2.3 millions in the year 2002.  As for the first six months of this year, almost 4 million pieces of pirated goods have been confiscated so far.  The Royal Thai Police has also removed CD machines from 12 pirated CD factories to the police warehouse in order to eliminate further production and theft.  Thailand is drafting a new law on Optical Disc Manufacturing Control to prevent the infringement of software and other copyright works in the form of optical media.

106.            The Department of Intellectual Property (DIP) has set up an operation centre to receive complaints and information about IPRs violations and to provide advice and remedies to the complainants.

107.            In addition, the Royal Thai Police has set up an operation centre for intellectual property in its Investigation Division, whose jurisdiction covers the entire country.

108.            In an effort to increase the effectiveness and efficiency of the overall IPRs violation suppression in Thailand, 13 government agencies have signed a Memorandum of Understanding on the Cooperation of Relevant Government Agencies regarding the Enforcement of Intellectual Property Rights.  One of the important objectives is the utilisation of other non-IP legislation and measures to strengthen the overall suppression efforts.  These 13 government agencies are:  the Royal Thai Police, the Office of Consumer Protection Board, the Customs Department, the Revenue Department, the Excise Department, the Department of Industrial Works, the Department of Foreign Trade, the Department of Internal Trade, the Department of Business Development, the Department of Intellectual Property, the Special Investigation Department, the Metropolitan Electricity Authority, and the Provincial Electricity Authority.

109.            Public awareness remains one of the key challenges for long-term intellectual property protection.  Accordingly, Thailand has intensified its efforts to enhance awareness of the importance of IP protection.

110.            Since the end of the Uruguay Round, Thailand has revised and enacted several laws to comply with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs).  Thus, the Thai Government has passed the following legislation:

- The Copyright Act, which entered into force in 1995.

-           The Patent Act, which was amended in 1995 and came into force on 27 September 1999.

-       Protection of Plant Varieties Act, which came into force in December 1999.

-           The Trademark Act, which was revised and entered into force at the end of June 2000.

-           The Act to Protect Topographies of Integrated Circuits, which came into force on August 10, 2000.

- The Trade Secrets, which came into force in 2002.

-           The Geographical Indications Bill is being reviewed by the joint committee of the House-Senate.

(k)     Investment

111.            Thailand's investment regime is among the most liberal in the region.  The Board of Investment (BOI) imposes no foreign equity restrictions in the manufacturing sector.  The law governing foreign direct investment in Thailand, Alien Business Law, has been revised.  The Foreign Business Act B.E.  2542 (1999) is currently in effect and allows more foreign participation in a wider range of activities such as brokerage services, wholesale and retail trade, construction, non-silk textile, garments, footwear, hotel, beverage production, and auction business.

112.            Since August 2000, the criteria for granting investment incentives have been free of local content requirements and export requirements.  Moreover, the BOI is putting increasing emphasis on business facilitation and services.  It is poised to become more proactive in targeting investors in order to improve both the quality and quantity of investment.

(l)       Competition policy

113.            Thailand is revising its competition legislation to ensure it can meet changing global conditions.  Thailand’s policy approach emphasizes transparency, accountability, non-discrimination and comprehensiveness.

114.            Thailand has introduced two new competition laws, namely the Trade Competition Act of 1999 and the Act on the Price of Goods and Services of 1999.

115.            The main objective of the Trade Competition Act of 1999 is to promote free and fair trade by encouraging better business operations.  The TCA also seeks to encourage greater efficiency, improved quality of products, reduced cost of production, innovation, fair price and prevention of unfair trade practices (including prohibiting abuse of dominant position and abuse of marker power).

(m)   Technical cooperation

116.            Technical assistance is instrumental in helping the developing and least-developed countries in transition adjust to WTO rules and disciplines, implement obligations and exercise the rights of membership, including realising the benefits of an open, rule-based multilateral trading system.

117.            Thailand has received WTO-related technical assistance from JICA and CIDA with great appreciation.  In return, it is doing its utmost to assist CLMV countries by sharing experiences in the WTO with them and try in order to ensure that they are ready to adhere to the rights and obligations associated with WTO Membership.

(n)     Initiative in the WTO

118.            Thailand has been and will continue to be an active player in the multilateral trade negotiations.  It has submitted a number of proposals in the areas of agriculture, rules, DSU for other Members to consider. 

119.            Thailand is also supportive of the timely conclusion of the Doha Development Agenda within the agreed timeframe of January 1, 2005.  As an economy where agriculture plays a significant role, Thailand attaches great importance to the WTO’s agriculture negotiations.  Along with the CAIRNS Group, the country is in favour of substantial improvement in market access, substantial reduction of domestic support and elimination of export subsidies.  Thailand also gives priority to S&D provisions which are necessary to ensure that developing countries can fully and effectively implement all WTO provisions and that their participation will not only lead to increased obligations but also yield greater commensurate benefits.  Equally important are rules and disciplines under the WTO’s Agreement on Anti-Dumping and on Subsidies and Countervailing Measures which could be further clarified and improved so that they cannot be easily used as a disguised form of non-tariff barriers.

V.                 Regional Trade Arrangement and Economic Cooperation

120.            While much of the liberalisation which has occurred in Thailand has been driven by multilateral commitments, Thailand has recently decided to expand the scope of its bilateral and regional agreements either individually or through ASEAN.  Thailand believes that bilateral/regional trade arrangements are complementary to the multilateral trade goals towards free trade.  

(a)      ASEAN

121.            The key instrument of ASEAN Free Trade Area (AFTA) is the Common Effective Preferential Tariff (CEPT).  The Agreement envisages tariff reduction on all ASEAN products included in the Common Effective Preferential Tariff (CEPT) scheme to 0-5% by the beginning of 2003 and to 0% by the year 2010.

122.            At present, the average tariff on intra-ASEAN trade has been lowered to approximately 3%.  Thai exports to ASEAN have increased at the rate of 20% per annum since 1992.

123.            Thailand is firmly committed to effective implementation of AFTA.  Currently, all product items are under the CEPT scheme (9,211) and the tariff rates of those items are between 0-5%.   Moreover, 60% of those items (5,525) have the tariff rates of 0%.  Additionally, Thailand is committed to reducing 80% of all tariff lines to 0% in 2007.  After the completion of CEPT scheme, the country is planning to work towards an ASEAN Economic Community (AEC) by the year 2020.

124.            Thailand is also a key player in the area of liberalisation of trade in services within the ASEAN framework.  Since the ASEAN Framework Agreement on Services (AFAS) was signed in 1995, three packages of service commitments have been concluded and Thailand has made GATS Plus concessions in all seven priority sectors, namely air transport, business services, construction, financial services, maritime transport, telecommunications and tourism.

125.            The commitments undertaken under AFAS are GATS plus in the sense that they are improvements over the ASEAN Member Countries’ existing GATS commitments or involve the addition of a new sub-sector which was not previously committed under the GATS.  In the case of non-WTO members, the offers are stated as being no less favourable than its existing regime and more favourable than those accorded to non-ASEAN countries.

126.            In order to accelerate the liberalisation process both in terms of quality and depth so that free flow of all services can be achieved by 2020, Thailand is an advocate of the ASEAN-X modality recently adopted by all ASEAN member states.

(b)     APEC

127.            Thailand attaches great importance to the APEC process, as it does to liberalization and the multilateral trading system.  APEC’s core values of open regionalism, consensus and voluntarism as well as work in the areas of Trade and Investment Liberalization and Facilitation (TILF), WTO-related capacity-building and Economic and Technical Cooperation (ECOTECH) allow the Thai economy to keep pace with the world economy.  In APEC, Thailand is in the company of some of the world’s most dynamic economies.  In fact, APEC member economies account for some 47% of world trade and over 60% of global GDP. 

128.            In 2003, Thailand plays host to APEC and will be seeking to advance APEC work under the main theme of "A World of Differences:  Partnership for the Future" and sub-themes in the areas of the Knowledge-Based Economy (KBE), Human Security, Financial Cooperation, SMEs and Micro-Enterprises and Development.  The APEC Meeting in 2003 is expected to reaffirm member economies’ commitment to the Bogor Goals of "free and open trade and investment" in the Asia-Pacific region by 2010/2020 as well as acknowledge APEC’s work in the area of ECOTECH.

129.            APEC continues to support the WTO process.  The Meeting of APEC Ministers Responsible for Trade (MRT), which was held in June 2003, provided strong political impetus for progress in the DDA/WTO, significant particularly in the lead-up to the Fifth WTO Ministerial Meeting in Cancun in September 2003.  Moreover, the APEC Caucus in Geneva has been reactivated as a forum for the exchange of views and information between APEC and the WTO, particularly on how APEC can contribute to and support the WTO process.  Thailand is currently serving as Chair of the Caucus.

(c)      ASEM

130.            The Asia-Europe Meeting (ASEM) was officially established in 1996 in Bangkok.  The principal goals of the ASEM are to establish a new and comprehensive partnership between Asia and Europe, to create favourable conditions for economic and social development of the two continents, and to maintain world peace and stability.  To this end, ASEM addresses three main pillars, namely politics, economics, and finance, as well as social, cultural and educational fields.  Thailand has played an active role in ASEM and has been a co-facilitator for three sectors of the Trade Facilitation Action Plan:  standards and conformity assessment issues, sanitary and phytosanitary issues, and intellectual property.

(d)     BIMST-EC

131.            Enhancing sub-regional economic ties with countries to the West, Thailand had adopted a "Look West" Policy a decade ago.  In 1997, the Declaration on the establishment of the Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC) was launched in Bangkok.  The membership was later extended to Myanmar.  BIMST-EC was intended to serve as a crucial link between the nations of South Asia and Southeast Asia.

132.            Thailand is particularly pleased to see progress being made towards the establishment of a BIMST-EC FTA.  At the Fourth BIMST-EC Trade/Economic Ministerial Meeting in March 2003 in Colombo, Ministers agreed to establish a Group of Experts (GOE) chaired by Sri Lanka to start working on a Framework Agreement of BIMST-EC FTA.

(e)     Free Trade Agreements

133.            For Thailand, the multilateral trading system remains a priority.  At the same time regional cooperation is seen as an important instrument in complementing one another’s strengths and cushioning regional economies from external shocks.  Thailand views free trade agreements as stepping stones towards free trade at the multilateral level as it allows gradual increase in market access for FTA partners, while granting domestic industries time to adjust and exposure to gradual increase in the level of competition.

134.            Thailand has taken a pro-active approach in strengthening trade ties with its major trading partners.  It has been engaging in negotiations to establish bilateral free trade areas with India, Australia, Bahrain, China, and Japan.  It also participates in the negotiations of regional FTAs (as a Member of ASEAN) with China, India, Peru and Japan.

(f)       ACD (Asian Cooperation Dialogue)

135.            Characterized by non-institutional and informal consultations, the ACD is a top down process which is intended to be a forum for Asian Foreign Ministers to freely exchange views among themselves on how to identify Asia’s common strength and potentials, in order to enhance the continent’s economic competition and create synergy in the areas of cooperation of which ACD countries are prime movers.  The forum serves as a "missing link" to bring together all existing regional and sub-regional cooperation mechanisms in Asia, feared by a positive thinking.  ACD is a forum for consolidating political will among Asian leaders and decision-makers to develop a common approach to issues and situations that may affect peace and security of Asia.

136.            At the 2nd ACD meeting in Chiang Mai, Thailand on 22 June 2003, all the ACD foreign ministers adopted the Chiang Mai Declaration on Asian Bond Market Development – the Declaration highlights the ACD’s full political support to jointly develop efficient and sustainable development bond markets in Asia.

(g)     Financial cooperation

137.            The 1997 crisis emphasized the need to redress the imbalance in the financial infrastructure in Thailand and Asian countries.  Given the over-reliance on traditional bank lending prior to the crisis, various regional fora have launched a number of initiatives to develop bond markets in Asia.   Thailand has committed to fully participating in these bond market initiatives.  Thailand believes that the development of bond markets will provide an economy with a more balanced financial infrastructure as well as lower the risk of double-mismatches, both for the currency and maturity.  Some of the ongoing initiatives include the Asian Bond Fund (ABF) under the EMEAP (Executives Meeting of East Asia and Pacific Central Banks)[4] forum;  the Asian Bond Market Initiative (ABMI) under the ASEAN+3 finance ministers forum;  and the APEC Regional Bond Market Development Initiative.

VI.              Future Economic and Trade Policy Directions

138.            Evidence shows that the dual-track policy is working well for Thailand as a means to pre-empt any abrupt changes in future economic and trade policy directions.  The government will continue its government-assisted programmes at the grass-roots levels.  The efforts to strengthen the country and the region should not be construed as inward-looking policy.  Thailand’s trade policy remains open to foreign trade and investment.  Thailand recognises that the country needs foreign investment and exports to thrive.  In tandem with ongoing efforts to build an entrepreneurial class and strengthen the domestic economy, international trade policies will be implemented to help secure sustainable economic growth and improve the living standards of Thai people.  The One-Tambon-One-Product (OTOP)’s product champions are well received in several overseas markets.  Thus producers are encouraged to continue to improve and maintain the quality for their goods.  Thailand is now working on all fronts, be they in bilateral, regional or multilateral, to achieve meaningful market access for our goods and services.

139.            The government has also emphasised the enhancement of Thailand’s competitiveness.  A National Competitiveness Committee (NCC) has been established to develop strategies and implement measures to improve Thailand’s competitiveness.  As the country moves towards becoming a more knowledge- based economy, measures aimed at improving the education system, promoting innovation systems and R&D in firms, and investing in information communications technology (ICT) will be implemented.  Thailand will also continue its work in strengthening the private sector and in coping with international competition.  It is poised to become a centre for trade in goods and services in the region as well as centre for international exhibitions (such as fashion, health care, and tourism, etc.).  The Royal Thai Government will continue to pursue policies aimed at greater economic liberalisation together with more sustained development at the grass-roots economy.

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