I.                   OVERVIEW

1.                   Since its previous trade policy review in 2003, the Thai economy has grown steadily at an average annual rate of 5.5%.  Overall, Thailand's macroeconomic fundamentals have been strong.  Despite some risks of political instability and external uncertainties, the economy has performed well as a result of significant growth in private consumption and investment, as well as exports.

2.                   The Government is firmly committed to a flexible market-determined exchange rate regime notwithstanding the continued appreciation of the Thai currency, intervening only to contain excessive volatility.  The Government also adheres to the inflation targeting framework as a monetary policy.  However, in order to enhance the policy’s efficiency, the authority has changed its policy rate from a 14-day repurchase rate to a 1-day repurchase rate.  Moreover, to support economic growth and maintain fiscal stability, the Government has adopted a fiscal sustainability framework, whereby an expansionary fiscal policy has been implemented in connection with a limit on the amount of public debt.

3.                   Thailand continues to recognize the importance of trade policy in its development.  The trade policy direction remains open to foreign trade and investment.  Efforts continue to support free and fair trade, together with gradual changes and progressive liberalization.  At the same time, several trade and trade-related measures that are designed to strengthen the competitiveness of domestic industries have been introduced to enhance the private sector's ability to compete in the rapidly changing trading environment and increasing global competition.

4.                   Since 1 January 2007, Thailand has adopted the 8-digit commodity classification code of ASEAN Harmonized Tariff Nomenclature (AHTN), and is applying the code to all imports.  Most of Thailand’s applied tariff rates are under a new tariff structure, which is not higher than 10%.  In accordance with the Government's policy to liberalize trade, both import and export controls have been limited to a minimum.  In addition, the Electronic Data Interchange (EDI) system and "e‑Customs" have been implemented to further facilitate the trading environment.

5.                   Overall sectoral policies focus on promoting Thailand's economic development.  The Government has emphasized enhancing productivity and competitiveness in both the agricultural and manufacturing sectors.  As for services, policy has been geared towards not only comprehensive reforms, but also progressive liberalization.  For instance, a liberalization plan for the insurance sector is underway.  The telecommunication sector has been liberalized; foreign ownership in telecommunication operators has been increased from 25% to 49% up to 100%.

6.                   On the whole, Thailand will maintain its support and commitments to international trade liberalization.  Government policy will remain open to foreign investors and FDI from all countries is welcome.  Thailand's economic fundamentals are strong and the outlook is satisfactory.  The economy is expected to grow by more than 3.8-4.8% in 2007 and pick up further in 2008 to 4.3-5.8%.

II.                ECONOMIC ENVIRONMENT

(a)                Economic developments, 2003-2007

7.                   The Thai economy expanded sharply in 2003, by 7.1%, higher than the 5.3% growth in 2002.  Despite concerns about the global economic impact of the US-Iraq War, and the outbreak of the Severe Acute Respiratory Syndrome (SARS) in the first half of 2003, the domestic economy rebounded robustly in the second half.  In 2004 and 2005, Thailand's economic growth moderated somewhat to 6.3% and 4.5% respectively.  The moderation was due primarily to the tsunami that struck the Andaman coast in December 2004.  Moreover, significant increase in oil prices, which resulted in surging inflation, caused a slowdown in both the demand and supply sides.  For 2006, overall economic conditions improved as oil prices became less volatile, resulting in GDP growth of 5.0%.

8.                   Regarding the fiscal position, government revenue grew strongly, by 15.1%, in 2003, reflecting the strong expansion in economic activities, particularly in household spending and business performance.  This trend continued in fiscal year 2004, with 16.8% growth.  In fiscal year 2006, government revenue collections increased by 7.3% from fiscal year 2005.  The increase in revenue was slightly lower than projected, partly due to the cuts in the tax imposed on diesel oil and the reduction of import tariffs.

9.                   The 2003 and 2004 growth was relatively balanced, with continued increases in private consumption and investment, as well as exports.  In 2005, however, economic activities decelerated to some degree, particularly in terms of production for domestic consumption.  The services sector, in particular, expanded at a slower pace in 2005, due mainly to the tsunami that affected the six Andaman coastal provinces, which resulted in a declining number of foreign tourists and average hotel occupancy rate.  The decline in tourism receipts, together with the surge in world oil prices, led to a current account deficit in 2005.  However, the current account returned to surplus in 2006 as a result of strong export growth and a slowdown in imports.

10.               The net flow of foreign direct investment (FDI) increased from US$3.4 billion in 2002 to US$10.4 billion in 2006, with an average growth rate of 21% during that period.  The main destination sectors for FDI into Thailand were industry (45%) and services (40%).  In 2006, FDI in electrical appliances and machinery and transport equipment accounted for approximately 58% of total FDI into the industrial sector.  The major sources of FDI flows into Thailand were:  Japan (30%), ASEAN member countries (27%), the countries of the European Union (14%), and the United States (8%).

11.               Overall economic stability remained sound throughout 2003-2006, despite significant increases in global oil prices in 2005-2006.  Unemployment continued to decline from 2.2% in 2003 to 1.5% in 2006.  Although average headline inflation accelerated from 1.8% in 2003 to 4.7% in 2006, core inflation generally remained at the lower end of the target range of 0-3.5 %.  Meanwhile, the baht appreciation over the period was due to the following domestic and external factors:  (1) the appreciating trend of regional currencies, (2) increased foreign investment into the Thai capital market, and (3) the weaker U.S. dollar.  The baht appreciated from an average of 41.53 baht per U.S. dollar in 2003 to 37.93 baht per U.S. dollar in 2006.

12.               Following the upward cycle of the policy rate, which started in August 2004, short-term money market rates had been rising gradually.  The policy rate (14-day repurchase rate) was raised from 1.25% in May 2004 to 5.0% per annum by June 2006.  As inflation pressure declined, in line with the reduction in oil prices in the world market, the policy rate was maintained at the 5.0% level throughout the second half of 2006.  The overnight interbank rate averaged 4.69% per annum in 2006, compared with the average of 1.35% per annum in 2003.

13.               In response to the policy rate hike, most commercial banks started to raise deposit and lending rates.  Nevertheless, commercial bank claims to both corporate and household sectors accelerated in 2004 and 2005, while intense competition among banks, as well as the rise in deposit rates, increased the incentive to save.  Commercial bank deposits increased from 4.4% in 2003 to 8.4% in 2005.  However, for 2006, due to less competition among banks, deposit growth slowed to 5.7%, while loans to the private sector moderated somewhat during the second half of the year.  Excluding the effect of the newly established commercial banks, and adding back debt write-offs and net transfers to AMCs, bank claims expanded by 4.6% in 2006, compared to 8.1% in 2005.

(b)               Economic situation in 2007

14.               In the first quarter of 2007, the Thai economy expanded satisfactorily at 4.3%.  Despite some political uncertainties, the economy is expected to grow at 3.8-4.8% in 2007, as private consumption and investment are both expected to rebound in the second half of the year.  The key supporting factors are low inflationary pressures, a decline in the public debt-to-GDP ratio, a current account surplus, and low unemployment.  Exports continue to trend upwards, in line with economic growth in major trading partners.  Exports of electronics, electrical appliances and automobile and parts remain strong.  For the second half of 2007, a decrease in interest rates and the inflation rate, as well as increased investment by state enterprises and the export sector, are expected to facilitate future economic expansion.

15.               Given the absence of inflationary pressure, the Monetary Policy Committee (MPC) reduced the policy rate four times in the first half of 2007, totaling 1.5 percentage points.  Improvement in private consumption and investment is expected to be evident in the latter half of the year, while export growth in 2007 should remain strong at 9.0-12.0%.  Economic stability remained sound, with the average inflation rate expected to be around 1.5-2.5% and core inflation in the range of 1-2%.  The current account is projected to be in surplus at around US$4.0-6.0 billion.

(c)                Trade environment

16.               In 2006, Thailand's exported US$129,744.1 million in goods, a 16.9% increase from the previous year.  All product groups expanded, led by agricultural and agro-industrial products (19.5%), manufacturing (13.9%), and others (26.7%).

17.               Principal Thai exports were:  automatic data processing machines;  motor-cars, parts and accessories;  electronic integrated circuits;  rubber and rubber products;  plastics;  iron and steel;  precious stones and jewellery;  chemical products;  air conditioning machines and parts;  radio‑broadcast receivers, televisions;  garments;  prepared or preserved fish and crustaceans;  and rice.

18.               The country's major export markets remain the U.S., EU, Japan and ASEAN.  However, there has been an attempt to lower the dependence on these few markets by introducing exports to new markets such as China, Latin America, Eastern Europe, Chinese Taipei, Australia, Canada, India, and Middle East.  In 2006, exports to the major markets grew steadily at 11.7% while exports to the new markets expanded by 24.7%, raising the proportion of Thai exports to the new markets to 43.2% from approximately 37% in 2003.

19.               In 2006, Thai imports totaled US$126,830.5 million, a 7.3% increase from 2005.  Product groups that increased were:  fuel lubricants (20.9%), capital goods (3.9%), raw materials and intermediate products (4.3%), and consumer goods (13.8%);  products whose imports declined included vehicle and transport accessories (4.4%), and arms, munitions used in official services and others (7.7%).

20.               The principal imports were:  crude oil;  machinery and parts, chemicals;  electrical circuit panels;  electrical machinery and parts;  iron, steel and steel products;  computers, accessories and parts;  other metal ores;  jewellery, including silver bar and gold;  electrical household appliances;  vegetables and vegetable products;  scientific, medical, and testing appliances;  metal products;  plastic products;  fertilizer and pharmaceutical products;  finished oils;  and fresh, chilled or frozen aquatic animals.

21.               The balance of trade in services was in surplus every year during the period under review.  In 2006, the surplus was US$4.66 billion, compared to US$4.79 billion in 2005, US$5.29 billion in 2004, and US$5.06 billion in 2003.

22.               International trade in services has become more important to the Thai economy.  From 2003 to 2004, the growth of exported services was 20.56% (increasing from US$15.80 billion to US$19.05 billion).  This is far greater than the 2.66% growth from 2002 to 2003 (US$15.39 billion to US$15.80 billion).  However, from 2004 to 2005, the rate of growth declined to 5.85% (US$19.05 billion to US$20.16 billion), due mainly to the significant plunge in tourism revenue following the tsunami in December 2004.

23.               After the tsunami, revenue from passenger transportation services and travel services decreased by 16.05% (from US$3.01 billion in 2004 to US$2.53 billion in 2005) and by 4.78% (from US$10.06 billion in 2004 to US$9.58 billion in 2005), respectively.  Nevertheless, revenue from other services increased during the same period.

24.               The pickup in exports of passenger transportation and travel services resulted in 19.71% growth in exported services in 2006 (from US$20.16 billion in 2005 to US$24.14 billion in 2006).  Revenue from passenger transportation and travel services, which accounted for 65% of total revenue from exported services in 2006, increased by 27.56% and 29.92%, respectively.

25.               From 2002 to 2006, Thailand’s import of services increased from US$10.38 billion to US$19.48 billion, corresponding to an annual average rate of import growth of 18%.  The major source of imported services in 2006 was transportation and travel services, which accounted for 47% of total imported services.

(d)               Medium term outlook

26.               Based on the Bank of Thailand's projections, the Thai economy is expected to grow by 3.8‑4.8% in 2007 and pick up further in 2008 to 4.3-5.8% (Table 1).  Despite lower growth in 2005‑2006, which was mainly due to the high global oil prices and domestic political uncertainties, Thailand's economic fundamentals remain strong.  As these negative factors subside, private consumption and investment should pick up in accordance with improved domestic demand, particularly after the general election, which is scheduled for the end of 2007.  Moreover, the lower rate of inflation should enhance purchasing power and confidence, while government spending and investments from state enterprises are also expected to improve.

Table 1:  Economic Projection for 2007-08

	Preliminary				Projection
					NESDB1/	BOT2/
	2003	2004	2005	2006	2007	2007	2008
GDP (at constant 1988 price)	7.1	6.3	4.5	5.0	4.0-4.5	3.8-4.8	4.3-5.8
Consumption (at constant price, %)	5.9	6.1	5.5	3.2	2.8	3.5-4.5	4.0-5.0
Private	6.5	6.2	4.3	3.1	2.2
Public	2.5	5.6	13.7	3.4	6.3
Investment (at constant price, %)	12.1	13.2	11.1	4.0	2.1	4.0-5.0	7.5-8.5
Private	17.7	16.2	10.9	3.9	1.5
Public	-0.6	5.0	11.3	4.5	4.0
External account
Export value (%)	18.2	21.6	15.0	17.4	12.4	9.0-12.0	5.5-8.5
Table 1 (cont'd)
Import value (%)	17.4	25.7	25.9	7.0	8.3	7.5-10.5	8.0-11.0
Trade balance (Billion US$)	3.8	1.5	-8.5	2.3	7.7	3.0-5.0	0-3.0
Current account balance (Billion US$)	4.8	2.8	-7.9	3.2	8.5	4.0-6.0	1.0-4.0
Current account/GDP (%)	3.3	1.7	-4.4	1.5	2.0-2.5
Inflation, CPI (%)
Headline	1.8	2.7	4.5	4.7	2.0-2.5	1.5-2.5	1.0-2.5
Core	0.2	0.4	1.6	2.3	2.0-2.5	1.0-2.0	1.0-2.0
Unemployment rate (%)	2.2	2.1	1.8	1.5	1.5-2.0

Note:       ^1/ projection as of 4 June 2007

                ^2/ Inflation Report, April 2007.

Sources:  Office of National Economic and Social Development Board (NESDB) and the Bank of Thailand (BOT).

27.               A significant recovery in domestic demand should become evident from 2008 onwards. Exports of goods and services are also expected to expand, in line with strength in trading partners’ markets, particularly China, Japan, ASEAN and India.  Increasing income from export goods and tourism will help strengthen economic growth.  Nevertheless, Thailand's export competitiveness is likely to be constrained from a slowdown in the global economy and continued appreciation of the baht.

III.             MACROECONOMIC AND STRUCTURAL POLICIES

(a)                Monetary and exchange rate policies

Monetary Policy

28.               The Bank of Thailand (BOT) has put in place an independent and open decision-making process, including the establishment of a Monetary Policy Committee (MPC) and mechanisms to ensure accountability and transparency.  Changes in the monetary policy stance and the operational framework are promptly announced and explained to the public.  

29.               Under the inflation targeting framework adopted since May 2000, monetary policy aims to maintain price stability and foster sustainable growth.  The BOT targets core inflation, which excludes volatile raw food and energy prices, within a range of 0-3.5%.

30.               The MPC is one of the main committees of the Bank of Thailand and is responsible for setting monetary policy direction.  The MPC comprises the BOT Governor, two Deputy Governors and four experts from outside the BOT.  The MPC works closely with BOT staff in monitoring domestic and international economic conditions.  The MPC signals shifts in monetary policy stance through announced changes in the policy rate.

31.               In the first half of 2006, the BOT raised the policy rate four times from 4.0% to 5.0% to curb inflationary pressure.  After the latest tightening in June 2006, the MPC decided to hold the policy rate at 5.0% throughout the latter half of 2006 in response to slowing domestic spending and reduced inflationary pressures. 

32.               From 17 January 2007 onward, the BOT changed its policy rate from a 14-day repurchase rate to a 1-day repurchase rate in order to enhance the efficiency of monetary policy.  In light of the slowdown in domestic demand and declining inflation, the policy rate has been reduced by a total of 1.5 percentage points in the first half of 2007.

33.               Despite some weaknesses in the current legal framework, the BOT is able to maintain its operational independence in the formulation of monetary policy, in line with a transparent inflation targeting regime.  Currently, the Government is in the process of amending the BOT Act.  The proposed amendments would help address existing institutional shortcomings in the conduct of monetary policy, including defining the objective of monetary policy and enhancing the operational independence of the BOT.  The draft of the amended Act has been approved in principle by the Cabinet and is being reviewed by the Council of State for legal clearance.  After approval from the Council of State is obtained, the draft will be resubmitted to the Cabinet before being presented to the National Legislative Assembly for approval.  This process is expected to conclude by the end of 2007.

Exchange rate policy

34.               The Government is committed to a flexible market-determined exchange rate.  The BOT intervenes in the foreign exchange market only to contain the excessive volatility of exchange rates.  Intervention is believed to help limit the extent of exchange rate overshooting, thus avoiding the disruptive impact and the need for costly real economic adjustment.  It would also enable the private sector to gradually adjust to the changing environment more effectively.

35.               Since the adoption of the floating exchange rate in July 1997, interventions were carried out from time to time, as deemed appropriate.  The rapid 16.5% appreciation of the baht against the U.S. dollar (from the beginning of 2006 to 15 December 2006) led the BOT to adopt several measures in 2006 in order to maintain economic and financial stability, and to allow some time for the external sector to adjust to this volatile financial development.  These measures were aimed at discouraging short-term capital inflows into short-term debt and money market instruments.

36.               However, the baht appreciation continued to be out of line with regional currencies, especially during in November and December 2006.  By mid-December, the baht reached its nine-year high at 35.23 baht per U.S. dollar.  The BOT, thus, imposed a 30% capital reserve requirement on short-term capital inflows to end the one-way speculation on the baht.  This measure has been gradually relaxed, and the BOT has monitored the situation closely to ensure financial system stability.

(b)               Fiscal policy

37.               To counter the possible negative effects of the global economic slowdown in 2007, the government has committed to an expansionary fiscal policy to promote domestic demand in fiscal year 2007 and 2008.  The planned fiscal deficit of 1.7 % of GDP in FY2007, along with the planned infrastructure projects (including five lines of mass-transit systems), are expected to bring Thai economic growth back on a sustainable path (Table 2).

38.               In essence, the government has set the following seven strategic priorities in the FY 2007 budget:  (1) poverty alleviation and rural development;  (2) quality of human and societal improvement; (3) balancing economic growth;  (4) natural resource management and environmental sustainability;  (5) efficient energy consumption;  (6) promotion and sustaining of good governance;  (7) enhancing public sector management.

39.               While expansionary fiscal policy is important for supporting economic growth, the government still adheres to its framework for maintaining fiscal stability.  The fiscal sustainability framework, which is designed to keep the ratio of public debt to GDP at less than 50% and the ratio of debt service to the budget at less than 15%, has been used as a guideline to conduct fiscal policy.  Currently, the public debt to GDP ratio is only at 38.1% and at the end of January 2007, the debt service to budget ratio stood at 11.26%.

Table 2:  Budget Framework for Fiscal Year 2006-2007

Budget Framework	FY 2006		FY 2007
	Million baht	Increase/ Decrease (%)	Million baht	Increase/ Decrease (%)
1.   Budget Expenditures       (Ratio to GDP)	1,360,000.0            17.5	8.8	1,566,200.0            18.5	15.2
-   Current Expenditures      (Percent of Budget Expenditures)	958,477.0 70.5	8.8	1,136,060.8 72.5	18.5
-   Capital Expenditures      (Percent of Budget Expenditures)	358,335.8 26.3	12.4	374,648.7 24.0	4.6
-   Principal Repayment      (Percent of Budget Expenditures)	43,187.2 3.2	-13.8	55,490.5 3.5	28.5
2.   Receipts       (Percent of GDP)	1,360,000.0 17.5	8.8	1,566,200.0 18.5	15.2
-   Revenue	1,360,000.0 (1,339,385.0)	8.8	1,420,000.0	4.4 (6.0)
-   Deficit financing	-	-	146,200.0	100.0
3.   GDP	7,886,200.0	9.6	8,471,400.0	8.8

 

 

40.               In addition, the Government plans to continue its expansionary fiscal policy in FY 2008 by setting the budget expenditure framework at 1,660 billion baht, even though the estimated revenue collection is 1,495 billion baht.  Hence, the planned fiscal deficit is estimated at 165 billion baht, equal to 1.8% of GDP.  This fiscal stimulus aims to further boost long-term private consumption and investment since the slowdown in the current economic situation poses a threat to long term economic stability.  Therefore, the revised budget expenditure framework will play an essential role as a fiscal policy instrument, both for the current economic situation and to support crucial government policies.

(c)                Trade and investment policies

41.               Thailand recognizes that the global trading system has become much more liberalized and individual countries' economies are becoming increasingly integrated.  To chart the future direction for trade policy, Thailand continues to support free and fair trade that gradually introduces changes and to promote progressive liberalization.  One implication of pursuing a liberal policy, from the development perspective, is that there is a need to strengthen the competitiveness and efficiency of domestic industries to be able to compete in the rapidly-changing trading environment and be able to prosper amid increasing competition.  In addition, Thailand also aims to promote transparency and good governance by closing loopholes and strengthening the enforcement of the existing laws. 

42.               Promoting the export of goods and services, including an expansion of export markets, remains one of the key areas for Thailand.  To achieve such goal, the Government insists on continuing the long-standing practice of close collaboration with the private sector in order to maintain the momentum of export growth and to enhance it in the future.  The creation of new exporters, in particular small and medium size entrepreneurs and the “One-Tambon[1]-One-Product” (OTOP) producers, is encouraged.  Moreover, in order to reduce the costs of production relating to international business management, the Government focuses on the improvement of supply chain management and domestic logistic providers, especially those in the freight forwarding, warehouse, and insurance businesses.  Apart from these measures, there is an intention to lay the groundwork for promoting outward investment in areas in which Thai entrepreneurs are already competitive, such as agriculture and agri-business.

43.               As many Thais attach their livelihood to agriculture, it is important for the Government to ensure that the agriculture sector and those dependant on it will thrive within a fair and equitable trade environment.  The first priority is to set guidelines leading to agriculture price stability that is fair to producers, consumers and the overall economy, with a minimum of government intervention and reliance, instead, on market mechanisms.  Furthermore, to strengthen the vast number of people engaged in the agricultural sector, the Government places great importance on forging producers' cooperatives to achieve a three-prong goal of increasing their bargaining power; acting as focal points for dissemination of trade and market information; and laying a basis to link real markets to futures markets trading.  Aside from the aforementioned tasks, the Government has also been trying to make the distribution of agriculture produce more efficient by improving logistics systems in regional areas.

44.               In terms of consumer welfare protection, the short term goal is to ensure consumer interests primarily through close monitoring of commodity and consumer prices.  For the long run, the Government plans to revise the Competition Law to make it credible, practicable and more enforceable, in order to forge greater competition in the economy.  Consumer group networking and engagement is also encouraged, and channels to provide information on standards and products to consumers are to be improved.

45.               By recognizing the benefit of services to the long-term development of the Thai economy, the Government has taken steps to nurture service sectors that have high export potential and to assist them to go abroad on a strong footing.  Domestically, particular support is to be given to services provided by small and medium enterprises at the local level.

46.               To attain a strong, accountable and modern legal framework, the Government places importance on revitalizing and improving the legal environment for doing business in Thailand.  At present, several existing laws, i.e., the Competition Law, Foreign Business Act, and three Insurance-related Acts, are under review.  Some new bills, such as a draft law on safeguards, laws or regulations on retail and wholesale trade, and a bill to spin out the Insurance Department into a new entity will also be submitted to the Parliament for approval.  All have been amended or drafted by taking into account the full recognition of the role of foreign investment in the Thai economy, as well as common business practices, with an aim of building a ‘level playing field’ for all players, both local and international, to ensure that consumers are the ultimate beneficiaries.

47.               Another area that the Government considers necessary is enhancing competitiveness and building capacity.  Efforts have been made to provide a basic understanding to local and provincial communities, schools, education institutions and consumers and producers’ associations of issues relating to trade, investment and the global economy.  In addition, attention has been focused on better appreciation and utilization of intellectual property rights protection and how it could help Thailand in the future.

48.               On the international trade front, Thailand still adheres strongly to the principles of free and fair trade.  The Government will continue to liberalize policy, with phased, gradual and progressive trade liberalization, by focusing on multilateral and regional initiatives.  For the WTO Doha Round, Thailand is ready to cooperate actively with all Members to help steer the DDA back on track and bring the Round to a successful conclusion.  The aim on multilateral commitments remains the creation of fair and equitable trading rules and the strengthening of global development.  In terms of regional engagement, Thailand has continuously played a constructive role in supporting ASEAN, in particular the ASEAN integration plan to further solidify the region.  Moreover, the Government views it necessary to introduce a mechanism that involves broader public participation in the negotiations process and a clear procedural framework for the approval of future trade arrangements.

49.               With regard to investment, the Government is committed to improving the overall investment environment.  Thailand, through the Board of Investment (BOI), promotes investment in industrial and services sectors, namely agro-business;  mining, ceramics and basic metals, light industry, metal products, machinery and transport equipment;  electronic industry and electrical appliances;  chemicals, paper and plastics;  and services and public utilities.  FDI is recognized as a means to generate employment, economic growth, skills and technology transfer.  While Asia, Europe and North America are the major sources of FDI, investment from all sources is welcomed.

(d)               Privatization

50.               Presently, there are 59 state-owned enterprises (SOE) that are owned by the Ministry of Finance.  These SOEs can be grouped into nine broad sectors:  energy, transportation, telecoms, infrastructure, social and technology, agriculture and natural resources, manufacturing, financial (specialized financial institutions: SFIs) and other services activities.

51.               In 2004, the Mass Communications Authority of Thailand, presently known as MCOT Public Co., Ltd, was successfully incorporated and listed on the Stock Exchange of Thailand.

52.               The present administration has proposed a new law to replace the Corporatization Act B.E. 2542 (1999).  The new legal framework will focus on three fundamental aspects.  The first is the criteria on the selection of SOEs to be corporatized.  The second is an improved corporatization process that will be more transparent and accountable by prescribing mandatory public hearing requirements in key stages, requiring the establishment of relevant independent regulators prior to corporatization, and share listing and imposing abolition of legal privileges and powers previously enjoyed by the SOEs.  The third principle is establishment of a clear guideline covering the offering of shares, which will be primarily allocated randomly.

IV.              TRADE AND TRADE-RELATED POLICY DEVELOPMENTS

(a)                Tariffs

53.               Customs tariffs, imposed under the Customs Tariff Decree B.E. 2530 (1987) are levied on both imports and some exports.

54.               Thailand is a member of the Harmonized System Convention and currently applies the HS2007 tariff nomenclature.  As an ASEAN member country, Thailand has adopted the 8-digit commodity classification code of AHTN (ASEAN Harmonized Tariff Nomenclature) that applies to all imports, i.e. imports from ASEAN member countries and from any other countries.  Under the 8‑digit classification, Thailand has 8,301 national tariff lines, corresponding to the AHTN classification.

55.               Thailand's customs tariff rates can be categorized as follows:

-                      Statutory Rate:  The Decree stipulates the tariff rate for each tariff line (8 digits) as an ad valorem rate, specific rate, or both.  If goods are subjected to both ad valorem and specific rates (mixed rate), the higher amount of duty shall be paid.

-                      General Rate:  With the Cabinet's approval, statutory rates can be adjusted, i.e. rates can be reduced or a special duty can be imposed (but not more than 50% of the statutory rates).  The general rates can be applied to imports from all countries (WTO and non-WTO members).  If the general rate exists, the statutory rate will no longer be applied.  However, the general rates cannot be applied to the 23 tariff quota products.

-                      WTO Bound Rate:  The WTO bound rate is the tariff rate that is committed under the WTO.

-                      WTO Applied Rate:  In general, the WTO applied rate is simply the WTO bound rate.  However, there are some tariff rates reduced below their WTO bound rates, such as some tariff quotas of agricultural products.  These tariff rates are called WTO applied rates.

-                      Preferential Rate:  With the Cabinet's approval, the statutory rate can be reduced, increased or kept at the same rate in order to fulfill the obligations under international treaties or agreements, e.g. WTO, CEPT (AFTA), AISP (ASEAN Integration System of Preferences), GSTP (Generalized System of Tariff Preferences), TAFTA (Thailand-Australia Free Trade Agreement), TNZCEP (Thailand-New Zealand Closer Economic Partnership), and ASEAN-China.

56.               If the WTO bound rate or preferential rate is higher than the general rate, the general rate can be applied.

57.               The customs tariff rates are listed in Part 2 of the Customs Tariff Decree B.E. 2530 (1987).  Duties are levied on either a specific or an ad-valorem basis, whichever is the higher.  The value of imports is based on their CIF prices.  Customs tariffs at present range between 0%-80%.

58.               Nowadays, the General Rate has been reduced and the range has narrowed to apply four rates for production processes:  0% for inputs not produced locally, 1% for raw materials, 5% for semi‑finished products, and 10% for finished products.

(b)               Import system

59.               In accordance with the government trade policy to liberalize trade and minimize trade distortion, most products can be imported freely into Thailand.  However, goods that are obscene, dangerous to health, or harmful to the national economy may be prohibited from import in accordance with Thailand's international trade rights and obligations.  Specific goods may be restricted from time to time, and these require prior government permission before being imported.  Apart from that, most goods may be imported after complying with the necessary customs procedures and the payment of customs tariffs, where applicable.

(c)                Export system

60.               Thailand's trade policies have been geared towards promoting exports by limiting export control to a minimum.  As in the case of imports, most products can be exported freely, while a 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.

61.               Thailand does not provide any export subsidies to its producers.  Moreover, as per Thailand's multilateral trade commitments, export incentives in terms of local-content and/or export performance requirements are no longer in place.

(d)               Customs procedures

62.               The Customs Department has adopted the WTO Agreement on Customs Valuation and thus the relevant rules, under the Agreement are being applied.  The primary basis for customs valuation is the "Transaction Value", which means the price actually paid or payable for the goods when sold for export to Thailand, adjusted in accordance with the provisions of Articles 9-12 of Ministerial Regulation No. 132 B.E. 2543 (2000).

63.               The Customs Department has also introduced clear customs appeal procedures which covers a variety of custom-related areas, including valuation, tariff classification, amount of duty payable, origin of goods, and quantity of imported goods.

64.               The Electronic Data Interchange (EDI) system has been established to reduce paper consumption.  Currently, approximately 85% of declarations are administered by using EDI.  However, in recent years, the Customs Department has shifted its focus from EDI to an open system philosophy, ebXML, that would enable it to electronically exchange information by different means.

65.               Starting on 1 January 2007, the "e-Customs", comprising e-Import, e-Export, e-Manifest, e‑Payment, and e-Warehouse, has been implemented.  It provides clients, such as exporters, importers, customs brokers, and shipping companies, with a paperless environment and a one-stop service.  Under the "e-Customs", several steps, such as verification of classification and valuation, are processed automatically.

66.               In terms of transparency enhancement, all customs-related laws and regulations, as well as important customs information, are publicly available on the Customs Department website [http://www.customs.go.th].

(e)               Contingency Measures

67.               Thailand conducts anti-dumping investigations and imposes anti-dumping measures in accordance with the Anti-Dumping and Countervailing Act that was promulgated 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.  Since 2004, Thailand has initiated eight new anti-dumping cases.  Thailand has never imposed any countervailing measures.

68.               Thailand's application of safeguard measures is governed by the Ministry of Commerce Notification on Safeguard Measures B.E. 2542 (1999).  To date, Thailand has never adopted any safeguard measures under such Notification.

69.               In addition, Thailand has consistently submitted semi-annual reports on its contingency measures as required by the relevant WTO agreements.

(f)                 Agriculture

70.               In the globalization era, the agricultural sector of Thailand remains relatively significant to the country and to the world.  Thailand is the world's 15^th largest exporter of food and agricultural products.  Approximately 80% of Thai food products are exported to supply 250 million people, or around four times the Thai population.  Thailand is the world’s number one exporter of many agricultural products, including natural rubber products, cassava products, canned pineapple, and black tiger prawn.

71.               The Ministry of Agricultural and Cooperatives is the principal authority responsible for implementing Thailand's agricultural policies.  During 2005-2008, agricultural development will center on the farmer.  The objectives are to increase agricultural gross domestic product (Agricultural GDP) to 900,000 million baht and to raise the average net income of farmers to 40,000 baht/farm household/year.  Such policies have been driven by following five strategies:

72.               First, rural poverty eradication, with the objectives of providing farmer's with lands and skills to be able to earn sufficient income for living;  supplementing basic infrastructure in rural areas;  and creating effective administration and management systems of production, processing, and marketing of agricultural products.

73.               Second, restructuring of the agricultural sector, aiming to improve the competitiveness of agricultural products by creating brand names, developing marketing and advancing logistic systems that are in accordance with farmers' abilities to compete in the global markets.

74.               Third, natural resource management, with goals to enhance the balance between utilization and conservation of fishery, soil, and water resources by encouraging the effective management of soil and water, as well as conservation systems, and the dissemination of knowledge, including an understanding of effective utilization of resources; and to promote public awareness of natural resource conservation.

75.               Fourth, improving regulation of domestic production to meet the quantity and quality demands of both local and foreign consumers by emphasizing greater market access, reduction of non-tariff barriers, and enhanced trade facilitation during international trade negotiations.

76.               Finally, enhancing efficiency of bureaucratic administration and management, with the objectives of restructuring government organizations; establishing standards for knowledge-based organizations;  providing fast and efficient public services;  and developing the most up-to-date agricultural database.

77.               The Ministry of Agriculture and Cooperatives, in cooperation with core-economic ministries as well as producers and processors, has also been implementing plans to alleviate the impacts of current trade agreements.  The main activities focus on improving the quality and safety standards[2] of food and agricultural products according to consumers' demand.  Other activities include the establishment of agricultural economic zones for each product, proactive marketing strategies, technology and input support, training and workshops, and farmer adjustment programs, etc.

(g)               Industry

78.               In 2006, the growth of the industrial sector increased from 5.5% in the 3^rd quarter to 5.8% in the 4^th quarter, mainly due to the expansion of the light and raw material industries.  In contrast, the capital and technology goods industries slowed down during the same period. Major industries that performed well in the 4^th quarter of 2006 were food and beverage, computer and parts, as well as the oil refinery industry.

79.               At present, the Ministry of Industry pursues industrial development through six principle policies:  development of local products;  promotion of small and medium size industries;  improvement of the efficiency and productivity of the industrial sector;  creation of intellectual capabilities;  introduction of environmental governance;  and enhancement of industrial standards.

80.               To develop local and regional products, such as OTOP, the Government stresses self-reliance for local producers, building sustainable economic growth, and promoting production in response to the market's needs and tastes.

81.               Three levels of promotion are designed for small and medium enterprises.  First, the sector level includes production, trade and services.  Second, the firm level comprises start-up businesses, growing or expanding enterprises, as well as firms operating in the transitional/adapting period.  Third, the promotion is at the individual level.

82.               The Ministry of Industry also focuses on enhancing the efficiency and productivity of the industrial sector by adopting specific strategies, such as elevating human skills, improving the capabilities of management, enhancing efficiency, advancing logistics systems within industrial groups, and developing business alliances and the supply chain.

83.               In addition, the Government issued a Master Plan on knowledge improvement with the objective of creating intellectual ability in society to support the "Sufficiency Economy" and enhancing the sustainability of Thai industry, as well as supporting the cooperation between the public and private sectors in creating innovations.  The plan consists of three strategies:  advancing technological and innovative capability in the production sector, strengthening knowledge centers, and creating linkages between knowledge centers and knowledge users.

84.               The environment has always been another area of concern for Thailand.  To solve environmental problems, the Government has adopted the philosophy of "Environmental Governance", which requires good information, disclosure of information, consent for examination or verification, and coordination with locals.  An important operating tool for achieving this goal is the utilization of an emission charge measure.

85.               Finally, it is necessary to raise the level of industrial standards in order to create the entrepreneur's ability to respond to the needs of trading partner, vis-à-vis quality, safety, and sanitary and environmental concerns to correspond to the global situation.

(h)               Financial services

Banking

86.               Comprehensive reforms continue to strengthen the stability and efficiency of the Thai financial sector following the aftermath of the Asian financial crisis.  The performance of banks has improved, while reforms are progressing on many fronts, including the adoption of International Accounting Standards (IAS 39) for loan appraisal and provisioning, implementation of the Financial Sector Master Plan (FSMP), issuance of new prudential regulations and related policy guidelines under Basel II, and the participation in the IMF-World Bank Financial Sector Assessment Program (FSAP).

87.               The banking system has continuously recorded profits since 2001, with non-performing loans declining to 7.5% of total loans as of December 2006.  Continued profitability, capital increases, and moderate growth in risk assets resulted in the increase in the BIS ratio of the banking system to 14.1% as of December 2006, higher than the minimum regulatory requirement of 8.5%.

88.               The FSMP further guided the broadening of financial services access, efficiency enhancements and consumer protection.  The licensing regime was rationalized in order to clarify the overlapping scopes of business of different types of financial institutions.  As a result, financial consolidation reduced the number of financial institutions from 83 in 2003 to 44 in 2006.[3]  The next phase – the FSMP II – is currently under formulation, with the aim of enhancing the efficiency and stability of the financial system.

89.               Prudential regulations have progressed in support of risk-based supervision and good governance in financial institutions.  Important prudential guidelines introduced in the past five years include, for example:  Market Risk Supervision Policy, guidelines on consolidated supervision, prudential guidelines on credit card and personal loans, guidelines on governance and Board's committees and fit-and-proper criteria for directors of financial institutions, adopting IAS 39 for loan provisioning, and guidelines on business contingency plans.  These are all aimed at enhancing risk-based supervision and strengthening the robustness of financial institutions.

90.               Implementation of Basel II is scheduled for 2008.  Since 2005, the BOT has issued series of policy guidelines, with close industry consultations, on minimum capital requirements relating to credit risk, operational risk and market risk.

Securities

91.               Thailand attaches great importance to deepening its capital markets to better serve as an alternative for capital mobilization and investment.  Foreign investors are welcome to invest in the Thai securities market.

92.               In 2006, the total value of securities issued in the primary market was 136 billion baht and the total value of market capitalization in the Stock Exchange of Thailand (SET) was 5,079 billion baht, with 12 newly listed companies in the SET (main market) and six newly listed companies in the Market for Alternative Investment (MAI).  The SET index at the end of the year stood at 679.84.  The SET's dividend yield was 4.23% while the MAI's dividend yield was 3.91%.  Total trading value in 2006 was 7,967 billion baht.  Among the groups of investors, the trading value of foreign investor was 4,365 billion baht;  local institutional investor was 921 billion baht; and non-institutional investor was 2,682 billion baht.

93.               The Securities and Exchange Commission (SEC) has, as its principal function, the supervision and development of the primary and secondary market of Thailand's capital market system.  Its primary role is to formulate policies, rules and regulations regarding supervision, promotion, and development of securities businesses, as well as other activities relating to securities businesses, securities exchange, other organized securities trading centers, and entities related to securities businesses, including the issuance and offering of securities for sale to the public, the acquisition of securities for business takeovers, and the prevention of unfair securities trading practices.

94.               In recent years, the SEC has focused its efforts towards promoting good corporate governance of listed companies, raising standards of securities regulation for the Thai capital market to be on a par with international best practices, and developing new products and market infrastructure to enhance market access by participants, both local and overseas.  Some of the highlights of the SEC's efforts are as follows:

95.               Since 2002, the SEC has implemented an Action Plan on Good Corporate Governance, which included amending relevant laws, issuing a set of best practices, introducing incentive schemes, and launching educational programs.  The Plan is aimed at promoting shareholders' rights, transparency and accounting standards, and enhancing good corporate governance, directors' accountability, a good corporate governance rating program, and educational and public relations programs.[4]  These were last updated in March 2006, when more principles were added to be more comprehensive and comparable to the Principles of Corporate Governance of the Organisation for Economic Cooperation and Development (OECD), as well as to include the recommendations made by the World Bank in its Report on the Observance of Standards and Codes related to Thailand corporate governance (CG‑ROSC).[5]  The 2006 principles and recommended best practices cover the rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency and responsibilities of the Board. 

96.               With its successful participation in the CG-ROSC as mentioned above, the authority decided to undergo assessment of securities regulation as part of the IMF-World Bank conducted Financial Sector Assessment Program (FSAP).  The assessment program, in which the Thai regulatory regime would be evaluated against international standards, will help the SEC identify weaknesses in the system that need to be removed or improved in order to be on par with international best practices.  The expected result is that enhanced effectiveness in market regulation will help raise the confidence in the Thai capital market as a place where high quality products and services are offered under internationally-accepted supervision standards.

97.               To further develop the capital market structure, a number of measures were carried out.  For example, to enhance local players' competitiveness in the global arena, the authority encouraged securities companies to introduce new products and services to lessen their dependency on brokerage fees.  The product innovations include ETF (Exchange Traded Fund), TCR (Transferable Custody Receipt), FIF (Foreign Investment Fund), as well as futures and options.

98.               For bond market development, measures launched include increasing market channels for foreign issuers by allowing multinational corporations (MNC) to issue baht-denominated bonds in Thailand and allowing full branches of foreign banks to issue bonds.  In addition, to streamline the issuance process, the authority allows shelf-registration (3-year) for issuers, both local and foreign, accepts English prospectus when offering is made by foreign issuers and accepts credit rating by international CRAs.

99.               In preparation for intra-regional securities trading and freer flows of capital among member countries, at the ASEAN Capital Market Forum (ACMF), initiated by the SEC, Thailand agreed to work towards mutual recognition and harmonization of standards in certain key areas, namely, (1) information disclosure, (2) accounting and auditing, (3) comparability of credit rating, (4) securities distribution rules, and (5) cross-recognition of qualifications and certification of capital market professionals. 

100.            The SEC has already announced planned liberalization of the securities business licensing within 5 years.  Starting on 1 January 2012, the SEC will accept unlimited applications for new securities business licenses, if the applicants meet the "fit and proper" requirements, and securities brokerage fees will be fully negotiable.

Insurance

101.            The insurance industry in Thailand has expanded substantially in recent years due to continual economic growth and the expansion of motor vehicles.  In addition, the growth of life insurance premiums has been fueled by the differential between the bank deposit interest rates and the rate of return required to be built into Thai life insurance products, and the Government's decision to increase the annual tax-deductibility of life insurance premiums from 10,000 baht to 50,000 baht.

102.            In 2005, Thailand had a 0.19% share of the world insurance market and ranked 34^th in terms of total premium volumes.

103.            The penetration rate registered at 3.61%, which is average when compared to other countries in Asia.  The insurance density level or premium per capita was US$53.9.

104.            At present, Thailand has 99 insurance companies, of which 24 are life insurers (23 domestic companies and 1 foreign branch), 68 are non-life insurers (63 domestic companies and 5 foreign branches), 5 are domestic specialized health insurers, and two are domestic reinsurers.

105.            The sector is governed by two pieces of legislation: the Life Insurance Act B.E. 2535 (1992) and the Non-Life Insurance Act B.E. 2535 (1992), which are both administered by the Department of Insurance (DOI), Ministry of Commerce.

106.            A three-stage liberalization plan for insurance, which was initiated in 1995 to allow greater foreign participation, has completed its first stage.  Thailand's insurance market has been opened up by creating a more competitive environment and a better service standard through the invitation of applications for new insurance licenses.  As a result, 12 new life and 13 new non-life insurers were approved.

107.            Currently, Thailand is in the second stage of the plan, with the Government in the process of amending the current Life and Non-Life Insurance Acts.  In March 2004, the Cabinet approved the proposed draft amendments of the Life and Non-Life Insurance Acts.  The Acts are now under the consideration of the Office of the Council of State before being submitted to the National Legislative Assembly for deliberation.  The proposed amendments, if approved, would 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, calculation of capital fund, corporate governance, and policyholder protection fund, one of the key areas is the proposed amendment on foreign equity participation from 25% to 49%.

108.            The final stage aims at removing barriers in order to provide market access for foreign insurers.  When completed, there shall be full market liberalization and domestic and foreign insurance entities will operate in Thailand on equal footing.

(i)                 Transportation

Air transport

109.            Thailand continues to implement a liberalization policy on air transport by allowing Thai private-owned airlines to provide air services on the same routes operated by the national carrier.  As a result, the number of international and domestic scheduled Thai airlines has increased from six in 2003 to nine in 2007.

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

Maritime transport

111.            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 total carrying capacity of 585,873 DWT in 1981, to 354 vessels, with total capacity of 3,708,687 DWT in 2006.

112.            The Tenth National Economic and Social Development Plan aims to enhance transport infrastructure development and logistics management by promoting the use of cost-effective and energy-saving modes of transport, including rail, water and pipeline transportation.  The Plan also emphasizes the necessity of having transparent infrastructure management, with the participation of stakeholders and relevant parties.

113.            A package of substantial legislation specifically applied to the maritime transport sector includes;  The Thai Vessels Act B.E. 2481 (1938), as amended by the Act B.E. 2540 (1997);  The Navigation in Thai Waters Act B.E.2456 (1913), as amended by the Act B.E.2540 (1997);  The Prevention of Collision of Vessels Act B.E.2522 (1979);  The Carriage of Goods by Sea Act B.E.2534 (1991);  The Arrest of Ships Act B.E.2534 (1991);  The Ship Mortgages and Maritime Lien Act B.E.2537 (1994);  The General Average Act B.E. 2547 (2004);  and The Multimodal Transport Act B.E. 2548 (2005).  Thailand also has a great deal of subsidiary legislation regulating ship surveying, maritime safety and security, training of seafarers and marine environment protection, all of which are based on international standards.

114.            Thailand's international shipping is open to both Thai and foreign maritime transport operators, except those operating Thai flag vessels, which must conform to the Thai Vessels Act B.E. 2481 (1938) and the Navigation in Thai Waters Act B.E. 2456 (1913).

115.            According to the Thai Vessels Act B.E.2481 (1938), maritime transport services in Thailand can be classified into two categories.  The first category relates to international shipping, which is open to both Thai and foreign vessels.  Section 7 bis of the Act provides that, for a registered Thai vessel engaged only in international shipping, the owner must be a juristic person established under Thai law with a head office in Thailand and at least 51% Thai equity.  The second category covers domestic shipping and is exclusively reserved for Thai vessels for reasons of national security.  Section 7 of the Act requires that the owner of a registered Thai vessel for trading in Thai waters must be a juristic person with at least 70% Thai equity.  However, Section 46 bis of the Navigation in Thai Waters Act B.E. 2456 (1913) states that employing a foreign vessel in domestic shipping may be allowed under certain conditions on a case by case basis by the Minister of Transport.

116.            Maritime transport auxiliary services that are conducted within Thai territories, including port services and other related services, are also subject to the Foreign Business Act B.E.2542 (1999).  Currently, there are six ports under the administration of the Thai authorities and approximately 120 private ports that are capable of accommodating sea-going ships of 500 DWT and up.  The port operators are required to obtain permission and conform with the Notification of the Revolutionary Council No.58 (control of business affecting public security and well-being) and are also required to obtain permission for the construction and operation of the port from the Marine Department.  The operations of terminals at Laem Chabang Port, the largest port in terms of cargo throughput, have been contracted out to private operators.

117.            Up until now, Thailand has concluded bilateral maritime agreements with certain countries, namely, Viet Nam, 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, identity documents of crew members, facilitation of the arrival/departure of ships, immigration procedures and formalities for ship crew, and cooperation/assistance in search and rescue for ships in distress.

(j)                 Telecommunications

118.            Thailand has made considerable progress toward reforming its telecommunications regulatory regime during the period under review.  Efforts have also been made to advance sufficient telecommunications and services extensively at reasonable prices.  In addition, the services must be able to support economic growth, electronic commerce, knowledge transfer, and management of the country.

119.            The National Telecommunications Commission (NTC) was appointed by His Majesty the King of Thailand on 1 October 2004 to as an independent state telecommunications regulator pursuant to the provisions of the Organization to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunications Services Act B.E. 2543 (2000) and the Telecommunications Business Act B.E. 2544 (2001), with responsibilities for managing radio frequencies and telecommunications regulation.

120.            The Telecommunications Master Plan 2005-2007 was publicized in the Government Gazette on 3 August 2005.  The essence of the Plan is to frame regulatory guidelines and promote telecommunications services.  A series of Notifications[6] have been prescribed to enhance free and fair competition;  support industry development;  manage the allocation and use of telecommunications resources;  provide universal services obligation and consumer protection;  encourage the liberalization of telecommunications markets and facilitate the operations of service providers;  promote education, culture, and social benefits as well as non-commercial telecommunications services, and provide disaster and emergency preparedness.

121.            In terms of foreign equity participation, the Parliament has approved the revision of Section 8 of the Telecommunications Business Act B.E. 2544 (2001) as follows:  "the applicant for type two and type three licensees shall not be a foreigner under the law on foreign business.  In this regard, the Commission may prescribe the prohibition that the applicant for certain natures or categories of telecommunications business who is a juristic person, shall not commit any other act which has the nature of business takeover by a foreigner".  The revision came into effect on 9 July 2006.

122.            As of 31 July 2007, the NTC had granted 104 telecommunications licenses to operators.  These are divided into 22 Type I (without network) licenses, 6 Type II (with or without network for specific groups or users) licenses, 11 Type III (with network for public telecommunications services) licenses, and 65 internet licenses.

123.            There have been three Institutes set up to support related works in telecommunications.  The first, the Telecommunications Research and Industrial Development Institute (TDIRI) was established to be a center for promoting research and development in the telecommunication technology and information technology industries.  The second, the Interconnection Institute (ICI) was established to be the administrative unit for the Dispute Resolution Committee in the telecommunications sector, as well as the academic unit to educate, develop, and improve the interconnection regulation to be in conformity with existing technologies.  Finally, the establishment of Thailand Consumer Protection Institute (TCPI) aims to strengthen and balance the interests of consumers, resolve disputes impartially, and encourage consumers' participation in the telecommunication services.

(k)               Tourism

124.            Tourism and related industries is one of the key sectors providing immense contribution to the Thai economy.  It has been an effective means of creating job opportunities and raising local incomes as well as foreign exchange revenue.  Foreign tourists generate more than 300 billion baht in national income each year, e.g. 309.27 billion baht in 2003 and 384.36 billion baht in 2004.

125.            The number of tourists coming to Thailand has grown steadily.  In 2006, there were approximately 13.8 million international tourist arrivals, up from 10.1 million in 2003.

126.            The tourism industries, ranging from leading five-star hotels and world-class airlines to a continuum of restaurants, one-person tour operators, and secondary businesses such as primary food producers, health providers and domestic transportation industries, are Thailand's major source of export service revenue.  From 2003-2005, income generated by hotels and restaurants has significantly increased from 299.5 billion baht to 346.9 billion baht, equaling to 15.8% growth.

127.            The Government has been very active in upgrading infrastructure, for example, roads, telecommunications, waste disposal and the safety standards of public facilities to keep abreast with the industry's growth and to ensure the industry's long-term stability.

128.            The Ministry of Tourism and Sports is mainly in charge of the promotion, support and development of tourism industry, while the Tourism Authority of Thailand (TAT) is responsible for marketing strategies, campaigning and promotional schemes.  Priority has been placed on the long‑term protection of the environment, the encouragement of "eco-tourism", training of personnel, and adoption of measures to prevent the exploitation of tourists.  The Thailand Conventions and Exhibition Bureau, in partnership with the TAT, also places emphasis on the Meeting Incentive Convention and Exhibition market (MICE) and has suggested that the public and private sectors should form a bidding fund as a mechanism to help support various organizations in bidding for international events.

(l)                 Investment

129.            Thailand's investment regime is among the most liberal in the region.  Foreign investment from all countries is welcomed as Thailand recognizes its importance for economic development, employment and technology transfer.  Various kinds of investment incentives are offered, with some restrictions for certain industries and activities.

130.            Foreign investment is generally governed by the Foreign Business Act B.E.2542 (1999), the Alien Employment Act B.E 2521 (1978), the Investment Promotion Act B.E 2520 (1977), as amended, and other laws relating to foreign investment.  The subject of such legislation includes, for instance, immigration law, exchange controls, import and export regulations, and stock exchange regulations.

131.            According to the Foreign Business Act B.E. 2542 (1999), foreign participation is allowed in a wide range of activities, such as brokerage services, wholesale and retail trade, construction, non-silk textiles, garments, footwear, hotels, beverage production, and auction businesses.  However, foreign investors are required to obtain necessary permissions from relevant ministries to be able to operate.  Such permissions may take different forms, varying from commercial and tax registrations to licenses to operate a factory and obtain work permits and visas.  Investors seeking protection under Bilateral Investment Treaties to which Thailand is a party are required to apply for approval for protection in accordance with the terms of the treaties, usually in the form of a Certificate of Approval for Protection (C.A.P) from the Committee on the Approval for the Protection of Investments between Thailand and Other Countries.

132.            In terms of incentives, the Board of Investment (BOI) imposes no foreign equity restrictions in the manufacturing sector.  Since August 2000, the criteria for granting investment incentives have been free of local content requirements and export requirements.  The BOI has also continuously eliminated all export subsidies on the pre-existing projects prior to the year 2000, and currently no export subsidies remain.  Moreover, the Government has improved the internal procedures to facilitate businesses and services.  It is poised to become more proactive in attracting projects in industrial sectors that will improve both the quality and quantity of investment.

(m)             Intellectual property rights

133.            Thailand recognizes the importance of all fields of intellectual property rights (IP) protection.  Various strategies and measures have been integrated into national policy to strengthen the whole intellectual property system, i.e. developing comprehensive and efficient IP protection systems, promoting the creation and commercial exploitation of IP, preventing and suppressing IP infringement, and ensuring equitable and fair exploitation of IP.

134.            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) including The Copyright Act B.E. 2538 (1995);  The Patent Act B.E. 2522 (1979), as amended in 1992 and 1999;  The Protection of Plant Varieties Act B.E. 2542 (1999);  The Trademark Act B.E. 2534 (1991);  The Topographics of Integrated Circuits Protection Act B.E. 2543 (2000);  The Trade Secret Act B.E. 2545 (2002), and The Geographical Indications Act B.E. 2546 (2003).

135.            The Intellectual Property Center (IPC) was founded under the Department of Intellectual Property (DIP), Ministry of Commerce, to promote innovations and exploitation of IP, and to improve the capabilities of Thai entrepreneurs in absorbing technology.  The organizational structure of IPC comprises the Intellectual Property Information Center (IPIC)[7], the Intellectual Property Training Center (IPTC)[8], and the Intellectual Property Management Center (IPMC)[9].

136.            In terms of IP enforcement, the Government has demonstrated a strong and steadfast commitment towards the protection and enforcement of IP.  The Ministry of Commerce's Department of Intellectual Property, the Royal Thai Police, and relevant public and private agencies have taken systematic measures to stem IP violations in all aspects: production, distribution, and import and export.

137.            Under the Import and Export Law, the Optical Disc Production Law and other relevant laws, the Government has strictly monitored the optical disc (OD) production business by licensing the import of OD production machineries and by keeping track of optical disc production process.  The OD Production Law requires OD producers to affix a DIP Code (mould code, mastering code and copyright code) on every OD.  In addition, to ensure that OD plants comply with all requirements, a task force consisting of officers from the DIP, the Department of Special Investigation (DSI) and the Royal Thai Police, is assigned to perform daily inspection of the plants.

138.            In order to strengthen cooperation among all concerned agencies such as the Royal Thai Police, the DSI, the Customs Department, the Revenue Department, the Factory Department, the Internal Trade Department, the associations of IP, etc., the DIP has promulgated eight Memorandums of Understanding (MOU) for effective prevention and suppression of IP violations, e.g. MOU on the Cooperation on Prevention and Suppression of IP Violations, MOU on the Cooperation on Prevention and Suppression of Sale of Pirated Products, and MOU on the Cooperation on the Prevention and Suppression of the Import and Export of Pirated Products, etc.  These initiatives have contributed to continuous, rigorous and more effective enforcement activities and results.

139.            Statistics showed that the number of raids by the Royal Thai Police and the DSI increased by 25% in 2006 from 7,649 in 2005 to 9,563, and the number of infringing goods destroyed increased by 25.8% in 2006 from 2,238,386 in 2005 to 2,815,807.  The destruction ceremony of these goods was witnessed by IPR owners, or their representatives, and members of the diplomatic corps.

140.            As for border measures, customs officers stopped 222 pirated shipments and seized 862,607 infringing goods in 2006.  In 2005, customs officers stopped 193 pirated shipments and seized 765,438 infringing goods.  This represents a 15% increase in the number of border actions and 12.6% increase in the amount of infringing goods seized.  All seized goods are destroyed by the Customs Department.

141.            Public awareness remains one of the key challenges for long-term IP protection.  Accordingly, Thailand has intensified its efforts to make people aware of the importance of IP protection.

142.            So far, Thailand has signed three bilateral trade agreements that include IP issues.  The parties to such agreements are Australia, New Zealand and Japan.

143.            Since November 2006, Thailand by the Ministry of Health has issued compulsory licenses (CL), for the purpose of public non-commercial use, for two HIV drugs (Efavirenz and Kaletra^®) and one anti-platelet drug (Clopidogrel).  The implementation of CL is consistent with Thailand's obligations under the WTO and the TRIPS Agreement.  Drugs derived from the CL implementation will be distributed only to those patients under government public health insurance plans.

144.            Currently, the Committee on the Negotiation of Increasing Access to Essential Patented Drugs is negotiating with the patent holders of the drugs under CL.  The negotiations have been positively conducted as many productive proposals have been put forth by both the Ministry of Public Health and the companies.  Thailand is expecting that fruitful and satisfactory outcomes will be reached in the near future.

145.            In the coming year, Thailand will focus its efforts on IP enforcement and the improvement of the patent registration system.  Yet, the misuse and misappropriation of Thai traditional wisdom and generic resources is another important problem to be tackled in an effective means to ensure equitable protection of the communities who hold, maintain and preserve traditional knowledge and generic resources.

(n)               Competition policy

146.            Thailand recognizes that competition policy plays an important role in fostering fair competition in the market and enhances a climate that is conducive for investment and economic growth.  The main purposes of the competition policy are to promote free and fair market competition, encourage business activities and stimulate creative initiatives of enterprises, and assure consumer interests in the long run.

147.            A competition law is a major tool to implement the said competition policy.  In 1999, Thailand introduced the Trade Competition Act for the first time.  The Act came into effect on 30 April 1999 with the objectives of promoting fair and free trade with competitive environment and controlling anti-competitive practices.  It is based on the notion that competitive markets are the best way to promote economic efficiency, and thus maximize total economic welfare.  Moreover, consumers will get benefits from lower prices, increased choices, and improved product quality.

148.            The enforcement and implementation of the Act is under the responsibility of the Trade Competition Commission, which is chaired by the Minister of Commerce.  The Act prohibits business operators from the abuse of dominant position, business combination, collusion, unreasonable agreement with foreign firms, and unfair trade practices.

149.            In order to make enforcement of the law more transparent and effective, the Trade Competition Commission has settled the threshold of business operators with market domination.  The threshold was approved by the Council of Ministers and became effective in January 2007.

(o)               Initiatives in the WTO

150.            Thailand has been and will continue to be an active player in multilateral trade negotiations, as well as a strong supporter of the successful conclusion of the Doha Development Agenda.  Since Thailand's last review it has submitted a number of proposals in the areas of agriculture, NAMA, rules, and DSU for other Members to consider.

151.            As an economy in which agriculture plays a significant role, Thailand attaches great importance to the WTO's agriculture negotiations.  Along with the CAIRNS Group and G20, the country is in favour of substantial improvement in market access, considerable reduction of domestic support while incorporating stricter disciplines, and elimination of export subsidies.

152.            In the negotiations on market access for non-agricultural products, Thailand stepped up its efforts to reach a compromise on extreme positions by joining some developing countries in proposing a possible middle ground solution in NAMA.  The aim was to show the flexibility needed to conclude the negotiations in a timely manner, as well as provide contributions to the Round.

153.            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.

154.            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 ARRANGEMENTS AND ECONOMIC COOPERATION

(a)                ASEAN

155.            ASEAN continues to eliminate tariffs under the Common Effective Preferential Tariff (CEPT) scheme.  In this respect, the ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) have to eliminate tariffs for at least 80% of products in the Inclusion List (IL) by 1 January 2007 and all products on the IL by 1 January 2010;  while the ASEAN-4 (Cambodia, Lao PDR, Myanmar and Viet Nam) have to eliminate tariffs for all products on the IL by 1 January 2015.

156.            To achieve the agreed-upon target on time on 1 January 2007, Thailand had prepared for all related works.  However, technical problems, related to the transposition of the CEPT package into AHTN 2007, have caused some delays.  In consequence, Thailand is now in the process of issuing the legal enactment for eliminating tariffs of products under the IL and expects to issue it by October 2007.  Upon its entry into force, the law will be made retroactively effective from 1 January 2007.

157.            After the completion of the internal process, Thailand will have approximately 8,300 tariff lines in the CEPT scheme.  Tariff rates of over 6,600 tariff lines will be reduced to 0%, with the remaining tariffs (around 1,700 tariff lines) to be eliminated by 2010.

158.            As for services liberalization, Thailand signed the Protocol to Implement the Fifth Package of Commitments under the ASEAN Framework Agreement on Services on 8 December 2006.  Under this package, Thailand has made additional commitments to the GATS on business services, telecommunication, healthcare, tourism, and maritime transport.

159.            In 2004, ASEAN agreed to accelerate the integration of 11 priority sectors (agro-based products, fisheries, wood-based products, rubber-based products, automotives, textiles and apparels, electronics, e-ASEAN, healthcare, air travel, and tourism) by developing the Roadmap for Integration of 11 Priority Sectors and assigning country-coordinators for each sector.  In this respect, Thailand is responsible for the tourism and air travel sectors.  The measures specified in the Roadmap cover a wide range of activities including liberalization, facilitation, and promotion measures, so as to push forward the integration of these sectors by 2010.  Later in 2005, the ASEAN Economic Ministers (AEMs) agreed to add the logistics sector as one of the priority sectors to be integrated.

160.            Currently, Thailand is working in collaboration with the other ASEAN country members in developing the AEC blueprint, which will be a single and coherent work plan for advancing the AEC.  The blueprint will cover all necessary measures in order to bring ASEAN towards:  (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy.  The blueprint will also be a legally binding document through the Leaders’ Declaration to be signed at the 13^th ASEAN Summit in November 2007.

(b)               APEC

161.            APEC has engaged in extensive work in the area of RTAs/FTAs and is developing model measures chapters that could be used by member economies in their negotiations in order to achieve high-quality and comprehensive RTAs/FTAs.  Thailand has been active in this work, having proposed 4 of the 17 model measures put forward, on Cooperation, Sanitary and Phytosanitary measures, Subsidies and Countervailing measures, and Anti-dumping.  In November 2006, 6 model measures were approved by APEC Leaders:  Cooperation, Trade in Goods, Technical Barriers to Trade, Transparency, Government Procurement and Dispute Settlement.  The remaining 11 model measures remain under discussion.  Once completed, APEC economies can use the model measures voluntarily in their RTA/FTA negotiations.

162.            In APEC, Trade Facilitation is one of the three pillars contained in the Osaka Action Agenda, a template for future APEC works towards achieving the Bogor goals.  Thailand recognizes the significance of trade facilitation in relation to the economy's overall trade strategy and has implemented agreements, conventions, and recommendations supplementing the development of the trade facilitation in areas such as harmonization of standards and conformance, simplification and streamlining of customs procedures, enhanced transparency of customs services to assist traders, improved cooperation and coordination among private-public sectors, use of risk management for trade control, IT and e-commerce for improved trade documentation, and mobility of business people.  Thailand's efforts in the above areas have contributed towards APEC's aim to reduce transaction costs by 5% from 2001-2005.  Furthermore, Thailand will continue to make improvements in trade facilitation in order to meet APEC's future endeavours to reduce transaction costs a further 5% during 2006-2010.

(c)                Asia-Europe Meeting (ASEM)

163.            The first Summit of the Asia-Europe Meeting (ASEM) was held in Bangkok in March 1996.  The principal goals of the ASEM are to establish a 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.  Ten years later, ASEM has expanded from 26 to 45 members, comprising the 10 ASEAN members and its Secretariat, the 27 EU members and the European Commission, and 6 Northeast and South Asian countries, namely China, Japan, Mongolia, South Korea, India and Pakistan.

164.            Thailand has been particularly active in the area of economic cooperation.  It has drafted the Investment Promotion Action Plan (IPAP) and served as co-facilitator of 3 sectors in the Trade Facilitation Action Plan (TFAP) – standards and conformity assessment issues, sanitary and phytosanitary issues, and intellectual property.  A project financed by the ASEM Trust Fund since 1998 to provide technical assistance on restructuring the financial sector and facilitating sustainable poverty reduction was completed in 2006.  Exchange of views on the progress of the Doha Development Agenda among Asian and European members is a regular agenda item during the meetings of Leaders, Foreign Ministers and Economic Ministers.

(d)               Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)

165.            To enhance sub-regional economic ties with countries to the West, Thailand adopted a "Look West" Policy a decade ago.  In 1997, the Declaration on the establishment of Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC) was launched in Bangkok.  The membership was later extended to Myanmar, upon which the name of the grouping was changed to BIMST-EC (Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Cooperation).  Subsequently in 2003, membership was further granted to Nepal and Bhutan.  Then, at the First Summit held in Bangkok on 31 July 2004, the name of this group was changed to the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, or BIMSTEC.

166.            BIMSTEC is the only economic cooperation forum to bridge the nations of South and Southeast Asia, focusing on the Bay of Bengal area.  Its main objectives are to facilitate and promote trade, investment, and technical cooperation among the member countries, as well as develop a free‑trade area.  Currently, there are 13 cooperation sectors:  trade and investment, technical, transport, energy, tourism, fisheries, agriculture, public health, environment and disaster management, counter terrorism and transnational crime, poverty reduction, culture, and people-to-people contact, each with a designated lead country.  Among them, Thailand has the lead in fisheries, public health, and people-to-people contact.

167.            For promoting trade and investment in this region, a framework agreement on BIMSTEC FTA was signed on 8 February 2004, providing for the progressive establishment of a free-trade area between July 2006 and June 2015, as well as the launching of negotiations for the elimination of discrimination and liberalization of trade in services in line with the WTO provisions.  The framework covers Trade in Goods, Trade in Services, Investment and Economic Cooperation, and it is scheduled to be fully implemented by 2012.

(e)               Asia Cooperation Dialogue (ACD)

168.            The Asia Cooperation Dialogue (ACD) aims to tap into Asia's strengths to enhance the competitiveness of member countries and maximize the complementarities of their diverse and rich resources.  The ACD is a top-down process, intended to foster closer dialogue among Asian Foreign Ministers and cooperation on development issues.  The forum also aims to add value to country efforts and serve as a "missing link" to bring together existing sub-regional and regional cooperative mechanisms in Asia.  Its core guiding principles are positive thinking, informality, voluntarism, non‑institutionalization, openness, diversity, and the comfort level of member countries.

169.            The ACD was established in 2002 with 18 member countries.  Now entering into its 6^th year, the forum has expanded to include 30 member countries, representing every geographical sub-region of the continent:  north, east, south, west, and central Asia.  It has made steady progress along two major dimensions:  cooperation and dialogue.

170.            On the cooperation front, the ACD focuses on technical cooperation in various areas.  Some member countries volunteer to serve as prime and co-prime movers in areas where they have expertise;  others participate in areas of interest by sharing their best practices.  There are currently 19 areas of cooperation:  agriculture, standards, biotechnology, e-commerce, e-education, environmental education, energy, financial cooperation, human resource development, infrastructure funding, IT development, natural disaster management, poverty alleviation, road safety, science and technology, SME cooperation, strengthening legal infrastructure, tourism and transport linkages.

171.            On the dialogue dimension, ACD Ministers meet twice annually, once at the ACD Ministerial Meeting to discuss ACD developments, issues of regional cooperation and ways to enhance Asian solidarity.  The ACD Foreign Ministers also meet once again on the sidelines of the UN General Assembly in New York in September to update one another on the progress of ACD cooperation projects and to discuss international issues of mutual concern.  Member countries have taken turns hosting the past six annual Ministerial Meetings.  The 6th ACD Ministerial Meeting was hosted by South Korea in Seoul on 4-5 June 2007.  Kazakhstan and Sri Lanka will host the 7^th and 8^th ACD Ministerial Meetings in 2008 and 2009, respectively.

(f)                 Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS)

172.            The aim of ACMECS, a forum initiated by Thailand in 2003, is to help narrow the economic gaps between Thailand and its neighbouring countries of Cambodia, Lao PDR, Myanmar and, to a lesser extent, Viet Nam.  ACMECS seeks to build upon existing regional cooperation programs and complement bilateral frameworks wherever possible.  The key areas of cooperation under ACMECS are trade and investment facilitation, transport linkages, agriculture, industry and energy, public health, tourism and human resource development.

173.            ACMECS also supports the goals of ASEAN as well as other regional and sub-regional frameworks, and thus continues to form a major component of Thailand's foreign policy.  ACMECS also welcomes the participation of development partners from outside the region in its development assistance projects.

174.            The ACMECS Foreign Ministers' Meeting, held in Mandalay, Myanmar, in May 2007, provided an overview of the significant progress in key areas of cooperation.  The Meeting agreed to expedite the following key ACMECS activities;  (1) the signing of the Memoranda of Understanding on contract farming;  (2) the establishment of more one-stop-service centers along the East-West Economic Corridor;  (3) the exploration of Cambodia's proposal on an association of rice producing countries;  (4) the development of Jatropha plantation and Bio Fuel production in ACMECS Region;  (5) the development of infrastructure support for transport linkages among ACMECS member countries;  and (6) the ACMECS Single Visa pilot project between Thailand and Cambodia.

175.            Thailand's effort to increase its assistance to other developing countries is also implemented through ACMECS.  Together with its efforts in other frameworks, Thailand, as cited in the 2003 UNDP Global Partnership Report, allocated 0.12% of its GDP to the Official Development Assistance (ODA), compared with OECD countries such as the UK (0.12%), Germany (0.10%), France (0.17%) and the United States (0.04%).

(g)               Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT)

176.            Established in 1993, the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) seeks to promote sub-regional cooperation to drive growth and development in the geographical triangle that encompasses southern Thailand, northern Malaysia and Sumatra Island of Indonesia.  The main objective of IMT-GT is to provide economic and social support by encouraging joint usage of resources with the hope that efficient utilization of resources to achieve maximum production capacity, greater technology transfer, and better linkage of basic infrastructure will help reduce transportation costs and increase competitiveness in the world market.

177.            As a consequence, the focus has been on trade and investment, technology transfer, production cooperation, use of natural resources, development of infrastructure and transportation linkages in the triangle area, together with enhanced involvement of the private sector.  Currently, there are ten major areas of cooperation:  (1) land transport and maritime transport, (2) energy, (3) agriculture and fisheries, (4) industry, (5) tourism, (6) trade (7) investment and finance (8) human resources development and labour mobility (9) air transport, and (10) telecommunications.  Thailand is the lead country for Halal Product & Services and tourism.

178.            The future work of IMT-GT will concentrate on promoting trade and investment, identifying common areas for joint development and exploring ways to establish a system for making payments that would reduce reliance in the U.S. dollar amongst the three countries.

(h)               Greater Mekong Subregion (GMS)

179.            Another instance of economic linkages and cooperation illustrating Thailand's close relationship with neighbouring countries is the Greater Mekong Subregion (GMS), which was founded in 1991.  Along with the other five members, Cambodia, China (Yunnan Province and Guang Xi Zhuang Autonomous Region), Myanmar, Lao PDR, and Viet Nam, Thailand shares the GMS vision on sustainable development and poverty reduction, as well as the goal of the GMS becoming a competitive and more globally integrated sub-region. 

180.            The Asian Development Bank (ADB) has provided technical assistance on the nine areas of:  agriculture transportation, energy, telecommunications, human resource development, tourism, environment, trade facilitation, and investment.  The work program has centered on linking the sub‑region through transport networks such as the East-West Economic Corridor Development project, facilitating movement of goods and people by implementing the GMS Cross Border Transport Agreement (CBTA) by 2008, marketing the GMS countries as a single tourism destination, and improving infrastructure in particular for energy and telecommunications.  By 2003 an action plan on trade and investment facilitation was formulated, which has also supported the ASEAN-China Free Trade Area and ASEAN trade liberalization.[10]  GMS also instigates Phnom Penh Plan for Development Management (PPP) as a capacity building initiative.  The 3rd GMS Summit is to be held in March 2008 in Vientiane, Lao PDR.

(i)                 Forum for East Asia – Latin America Cooperation (FEALAC)

181.            Thailand plays an active role in FEALAC[11], which has been a significant and meaningful forum for promoting closer cooperation between East Asia and Latin America.  As Co-chair for the East Asia of the Science and Technology Working Group[12], Thailand hosted the 4^th meeting of the Working Group and the FEALAC Inter-regional Workshop on Clean Fuels and Vehicle Technologies:  the Role of Science and Innovation during 28-30 June 2006 in Bangkok.  The Workshop was successful in reinforcing partnership between the two regions through sharing of knowledge and experiences in alternative energy.

182.            Thailand also hosted several cooperative projects under the Economy and Society Working Group and the Political, Cultural and Education Working Group which includes training courses on poverty reduction, tourism and hotel management, narcotic drugs control as well as Buakaew Roundtable International for Foreign Officials.  Thailand also has actively participated in projects hosted by other member countries and in discussions to promote trade and investment within FEALAC, such as the establishment of FEALAC Business Council and the promotion of small and medium enterprises (SMEs).

(j)                 Free Trade Agreements

183.            While the multilateral trading system remains a priority for Thailand, regional cooperation is at the same time seen as an important instrument in complementing strengths and cushioning regional economies from external shocks.  Thailand views that free trade agreements are one of the stepping stones towards free trade at the multilateral level as they allow gradual increases in market access for FTA partners, while granting domestic industries time to adjust to progressively liberalized exposure to global competition.

184.            Thailand has taken a proactive approach in strengthening trade ties with its major trading partners.  Not only has Thailand engaged in bilateral negotiations, it has also taken part in the negotiations of FTAs between ASEAN and some dialogue partners such as ASEAN-Japan, ASEAN‑China, ASEAN-Korea, ASEAN-Australia and New Zealand.  On the bilateral front, Thailand is now in the process of negotiations with Peru and India, while negotiations with the United States and the European Free Trade Association (EFTA) have been on hold due to political developments in Thailand.  Such negotiations are expected to resume after a new government is elected.

(k)               Bilateral arrangements

185.            Thailand and Australia signed the Thailand-Australia Free Trade Agreement (TAFTA), on 5 July 2004 which entered into force on 1 January 2005.  It will lead to the complete elimination of Thailand's tariffs across all sectors by 2025.  The agreement also improves the environment for bilateral services, investment and business mobility.

186.            The Thailand and New Zealand Closer Economic Partnership Agreement was signed on 19 April 2005 and became effective on 1 July 2005.  The initial tariff elimination took place upon implementation of the agreement and the second round followed on 1 January 2006.  Subsequent tariff reductions are to be applied on 1 January each year with the remaining tariffs and quotas removed in 2025.

187.            A comprehensive Japan-Thailand Economic Partnership Agreement (JTEPA) was signed in Tokyo on 3 April 2007, covering trade in goods and trade in services, as well as investment.  The agreement is expected to become effective on 1 October 2007.  More than 90% of total tariff lines will be subjected to tariff reduction/elimination or tariff quota, accounting to more than 95% of 2005 import value from the other party.  Additions to or improvements in WTO commitments of the other party are also given to some services sectors.

188.            Thailand and Peru have been negotiating a free trade agreement since 2004.  The protocol on the Acceleration of Liberalization on Trade in Goods and Trade Facilitation, known as the Early Harvest Program, was signed in November 2005, followed by the Additional Protocol on the Rules of Origin, signed in November 2006.  The Early Harvest Program is expected to be effective not earlier than December 2007, while the negotiations on the existing issues are still underway.

Regional arrangements

189.            Through ASEAN, Thailand is actively pursuing regional trade liberalization.  ASEAN together with China, Japan and the Republic of Korea (or ASEAN+3) agreed in November 2002 to explore a possibility to establish an East Asia Free Trade Area (EAFTA).  To conduct a feasibility study on EAFTA, a Joint Expert Group for Feasibility Study on EAFTA (JEG) was established in 2004 and finished the report called "Towards and East Asia FTA:  Modality and Roadmap" in 2006.  Phase II study of EAFTA involving an in-depth sector-by-sector analysis of the EAFTA has also been proposed so as to examine concrete elements of an EAFTA such as market access for goods, services, investment, and rules of origin, etc. 

190.            During the 2^nd East Asia Summit (EAS) in Cebu, Philippines, on 15 January 2007, the leaders of ASEAN member countries and Australia, China, India, Japan, Republic of Korea and New Zealand exchanged views that economic integration in East Asia had increased in importance.  As a result, they agreed to launch a Track Two study on Comprehensive Economic Partnership in East Asia (CEPEA).  To explore possible frameworks for economic integration in East Asia, the Track Two Study shall focus on academic analysis and useful input from the business side, but can also take into account inputs from the report of the Joint Study Group on EAFTA.  In addition, the Track Two Study Group will focus on analyzing specific economic linkages of East Asia, including Australia, India and New Zealand and deepen its discussion by paying more attention to the views of business.

191.            For ASEAN-Japan, at the ASEAN-Japan Summit in Cambodia in November 2002, leaders of ASEAN countries and Japan decided to develop a framework that would provide a basis for concrete plans towards realizing an ASEAN-Japan Comprehensive Economic Partnership within ten years.  In 2003, ASEAN and Japan Leaders signed the Framework for ASEAN-Japan Comprehensive Economic Partnership.  Both sides expect to conclude the negotiations within 2007.

192.            The Framework Agreement on Comprehensive Economic Cooperation providing for the ASEAN-China Free Trade Area (ACFTA) was signed in November 2002.  The negotiations on modalities for tariff reduction/elimination schedules and Trade in Goods and Dispute Settlement Mechanism Agreements were concluded in October 2004.  Later, in December of the same year, ASEAN and China signed the Agreement on Trade in Goods under ACFTA, resulting in elimination of most tariffs by 2010 for ASEAN-6, and by 2015 for ASEAN-4.  Tariffs on the normal track, covering approximately 90% of total products, have been reduced since 1 July 2005.  Furthermore, in January 2007 ASEAN and China signed a Framework Agreement on Trade in Services, which is GATS-consistent and goes beyond the parties' WTO commitments, and which became effective in July 2007. 

193.            The leaders of ASEAN member countries and the Republic of Korea agreed to sign the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea with an aim to establish an ASEAN-Korea Free Trade Area on 13 December 2005.  The Agreement on Trade in Goods was signed by ASEAN member countries (except Thailand) and Korea in August 2006.  Currently, ASEAN and Korea are negotiating on the Agreement on Trade in Services and Investment, which is expected to be concluded within 2007.

194.            In addition, ASEAN is presently negotiating a free trade agreement with Australia and New Zealand.  Negotiations of the ASEAN-Australia and New Zealand Free Trade Area are scheduled to conclude by the end of 2007 with the agreement becoming effective in 2008.

(l)                 Financial and technical cooperation

195.            Thailand has pursued development cooperation with other developing countries.  Cooperation is designed to respond to the needs of the partner countries while taking into account the expertise and capacity of Thailand.  Areas of cooperation include human resource development in the agriculture, education and health sectors.  Priority is given, but not limited, to providing technical assistance to neighbouring countries of Cambodia, Lao PDR, Myanmar and Viet Nam.  Assistance is also extended to developing countries in other regions, such as South Asia and Africa.  In addition, Thailand has cooperated with various development partners in implementing technical assistance programs under bilateral and multilateral frameworks.

196.            An example of Thailand's technical assistance for developing countries in the areas of trade, services and investment is the Annual International Training Course (AITC) on "Managing a Competitive Export Business".  Another example, organized in 2004 by the International Institute for Trade and Development (ITD) and the World Trade Organization (WTO), was the Intensive Workshop on "Trade Negotiation Skills" for 30 participants from Asian countries, including Lao PDR, Cambodia, Viet Nam, Indonesia and the Philippines.  The workshop was co-financed by the Canadian International Development Agency (ClDA), through the Thailand International Development Agency (TICA), Ministry of Foreign Affairs, and the Department of Trade Negotiations, Ministry of Commerce. 

197.            Moreover, since 1999, Thailand has provided financial and technical assistance to the new CLMV ASEAN member countries (Cambodia, Laos, Myanmar, and Viet Nam) under the "Cooperation Program for New Member Countries on ASEAN Regional Integration:  AFTA, AIA and Facilitation in Transport", with the aim of assisting CLMV countries to be able to implement their commitments in ASEAN, to reduce the development gap between ASEAN-6 and CLMV, and to promote economic integration in ASEAN.  The technical assistance provided under this program includes training courses in various areas, such as harmonization of standards under AFTA, CEPT/AFTA implementation, origin certification and Form D issuing procedure, the WTO Customs Valuation Agreement, business registration, computer management, collection of statistics and data management, road transport, port management and operation, etc.  Furthermore, Thailand has provided technical assistance to assist new ASEAN countries through the process for accession to the WTO and to better understand the current status of the Doha Development Agenda.

VI.              FUTURE ECONOMIC AND TRADE POLICY DIRECTIONS

198.            Thailand's economic policy will remain open to foreign investors and partners.  With enhanced confidence of investors, manufacturers and tourists, the Thai economy is expected to achieve a more balanced growth performance after the general election at the end of 2007.

199.            In line with its domestic economic policy, Thailand will also strongly support international trade, with the aim of ensuring sustainable economic growth.  To charter the future course of trade policy direction, Thailand will maintain its steadfast principles of supporting free and fair trade.  An economic liberalization policy that incorporates the gradual introduction of changes through progressive liberalization will continue to be the Government's core strategy.  Thailand will continue to promote bilateral and multilateral arrangements, both regional and global, to achieve market access and boost exports for goods and services.

__________