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TITLE:  THAILAND ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                             THAILAND

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                  1991      1992 /1   1993 /2
Income, Production,
 and Employment

Real GDP (1988 prices)             82,602    88,976    96,047
Real GDP Growth Rate (pct.)         8.2       7.4       7.5
GDP at Current Prices              98,315   110,236   123,320
By Sector:
  Agriculture                      12,413    13,096     n/a
  Energy and Water                  2,096     2,520     n/a
  Manufacturing                    27,776    31,227     n/a
  Construction                      6,478     7,342     n/a
  Rents                             2,805     3,007     n/a
  Financial Services                5,295     6,442     n/a
  Other Services                   12,781    14,248     n/a
  Government, Health
   and Education                    3,389     4,067     n/a
Net Exports of Goods and
  Services                         -1,524    -1,850     n/a
Per Capita GDP (current $)          1,630     1,807     2,115
Labor Force (000s)                  31,790    32,390    33,000
Unemployment Rate (pct.)            3.1       3.1       3.3


Money and Prices
 (annual percentage growth)

Money Supply (M2)                  19.8      15.6      16.8
Base Interest Rate                 14.0      11.5      11.25
Personal Savings Rate              12.6       n/a       n/a
Wholesale Inflation                 6.9       0.2       1.1 /4
Consumer Price Index                5.7       4.1       3.2
Exchange Rates (B/US$ avg.)
  Official                        25.52     25.40     25.32
  Parallel                             -- Not Applicable --    


Balance of Payments and Trade

Total Exports (FOB) /3             28,233    32,102    19,858
  Exports to U.S.  /5               6,046     7,000     2,965
Total Imports (CIF) /3             37,923    40,181    25,833
  Imports from U.S.  /5             3,988     4,000     2,257
Aid from U.S. (FY)                     12        14         7
Aid from Other Countries (FY)         123     n/a       n/a
External Public Debt (long term)   12,103    12,517     n/a
Debt Service Payments (paid)        3,578     4,382     n/a
Gold and FOREX Reserves            18,400    21,200    23,900
Trade Balance  /3                  -9,690    -8,079    -5,975
  Balance with U.S.  /5             2,058     3,000       708


Notes:

1/ Preliminary.
2/ Estimates based on data available in October 1993.
3/ For 1993, January to July.
4/ For 1993, January to June.
5/ For 1993, January to May.

Sources:  Bank of Thailand; Ministry of Commerce; National
Economic and Social Development Board; U.S. Department of
Commerce; and Embassy estimates.



1.  General Policy Framework

    Thailand's economic development policies are based on a
competitive, export-oriented, free market philosophy.  Its
economy is in transition, from an agricultural economy to a
more open and broadly based one with a large manufacturing
sector.  Although the majority of the Thai labor force remains
engaged in agricultural production, this sector now accounts
for only 12 percent of GDP.  Manufacturing, wholesale and
retail trade, and service industries are the most rapidly
growing sectors and now account for almost two-thirds of
Thailand's GDP.

    Real economic growth averaged over ten percent per annum
from 1987 to 1991.  Economic growth and investment have slowed
modestly since, and the events of May 1992, which culminated in
political violence, temporarily undermined domestic and foreign
investor confidence.  However, the Thai economy remains
fundamentally strong.  Net recorded flows of foreign direct
investment topped $2 billion in 1992, up slightly from the year
before.  Exports continued to expand during the first eight
months of 1993, up nine percent over the same period in 1992. 
Barring further domestic or external shocks, Thailand should
maintain solid economic growth in the seven to eight percent
range for the foreseeable future.

    The Chuan government, which took office following free
elections in September 1992, has maintained the general
direction of economic liberalization, making modest additions
in some areas.  It has also adressed imbalances created through
rapid industrialization by emphasizing rural development and
reducing disparities in the distribution of income.

    Rapid growth has had some drawbacks: infrastructure
bottlenecks remain a problem, and environmental degradation has
worsened considerably in recent years.  Thailand's
infrastructure bottlenecks and shortages of skilled personnel
will limit the pace of future growth.  Metropolitan Bangkok's
public works (communications facilities, ports, roads and mass
transit, and electricity grid) are already overtaxed and will
come under increasing pressure.  A drought in northern
provinces may also force reductions in agricultural output
dependent on irrigation, and may affect water supplies to the
Bangkok metropolitan area in 1994.  Wage gains continue
substantially to outpace the growth of the consumer price
index.  The level of education of the work force will have to
be raised to maintain Thailand's development pace and
competitiveness with neighboring countries with lower wage
rates.

    For the past six years, Thailand has had a substantial
government budget surplus as revenues were fueled by growth and
government investment expenditures for major infrastructure
projects lagged.  For 1992 the government's overall surplus
reached $3 billion, or 13 percent of GDP.


2.  Exchange Rate Policy

    Since November 1984, the Thai baht has been pegged to a
basket of currencies of principal trading partners.  The
composition of the basket is a closely guarded secret, but the
U.S. dollar appears to represent well over half of the value of
the basket.  The exchange equalization fund, chaired by a
deputy governor of the Bank of Thailand, determines the
exchange value of the baht each working day.  There is no
parallel market in Thailand.  Global currency realignments
since 1985, and especially the recent appreciation of the
Japanese yen, have tended to make U.S. exports to Thailand more
price competitive.

    In May 1990, the Thai government announced a series of
measures to significantly liberalize the exchange control
regime.  It accepted the obligations of the International
Monetary Fund's Article VIII covering reduction of restrictions
on international transactions.  Commercial banks were given
permission to process all foreign exchange transactions, and
substantial increases were allowed in ceilings on money
transfers not requiring Bank of Thailand pre-approval and on
spending by Thai tourists and businessmen abroad.  In April
1991 and May 1992, additional rounds of foreign exchange
liberalization substantially simplified foreign exchange
reporting requirements and allowed banks to offer foreign
currency accounts to individuals and businesses.  The central
bank also raised limits on Thai capital transfers abroad and
allowed free repatriation (net of taxes) of investment funds,
dividends, profits and loan repayments.  It allowed exports to
be paid for in baht without prior permission, and companies to
transfer foreign exchange between subsidiaries without having
to change those funds into baht.


3.  Structural Policies

    The appointment of the first Anand administration in March
1991 set the stage for a flurry of legislative and regulatory
reforms.  The Anand government reduced market distortions, made
tax policies more transparent and, in general, liberalized the
domestic market.  Although the nation's trade and current
account deficits are large in relation to total GDP, the
overall balance remains in surplus due to large inflows of
foreign capital.  This payments surplus and a substantial
budgetary surplus have allowed the Thai government to reduce
customs duties and liberalize its import regime.  A wider
reform of the import regime, reducing the number of tariff
rates and eliminating most tariffs above 30 percent, is being
pursued.  Thailand is also planning broad tariff reductions 
over a 15-year period as part of the ASEAN free trade area
which began in January 1993.  However, implementation has been
slower than planned.  Thailand's trade relations have
traditionally been oriented toward distant markets,
particularly North America, Europe, and Japan, but the
government hopes the ASEAN free trade area will increase
intra-ASEAN trade as well.

    The Thai government has largely implemented a major reform
of its taxation system.  In 1992, the government increased
personal income tax deductions and lowered the top marginal tax
rate to 37 percent, and the corporate income tax rate was
unified at 30 percent.  On January 1, 1992, Thailand
implemented a value-added tax (VAT) system replacing a
multi-tiered business tax with a single rate of seven percent
on value added.  U.S. transportation and shipping companies in
Thailand are at a competitive disadvantage vis-a-vis firms from
third countries which "zero rate" Thai companies under their
own VAT systems.  As the United States does not have a VAT
system, U.S. firms are "exempt" from the Thai system and unable
to claim rebates for taxes paid on inputs.  Firms which are
"zero-rated" are able to offset VAT paid on inputs in paying
their own taxes.

    Thai financial authorities have taken additional steps to
open up the commercial banking system.  As noted, foreign
exchange controls have been liberalized, and the government has
lifted the ceiling on deposit rates.  It is gradually reducing
the amount of government bonds that commercial banks are
required to hold to satisfy reserve and other requirements.  In
May 1992 the central bank authorized banks and finance and
security companies to engage in additional activities, and
banks are now able to underwrite securities.  In March 1992 the
Finance Ministry licensed seven new mutual fund companies,
ending a 17-year monopoly.  The Finance Ministry is considering
allowing more foreign banks to establish branches, but no
decisions have been announced.  Foreign banks are allowed to
participate in the Bangkok International Banking Facility
(BIBF), created to develop an offshore banking industry in
Thailand.  Thai officials are considering allowing foreign
banks participating in the BIBF additional access to the Thai
banking market.


4.  Debt Management Policies

    Domestic credit is expanding, helping fuel some of the
growth in consumption in the economy.  Domestic credit expanded
18 percent in 1992 and is expected to grow by 20 percent this
year.  The prime rate has declined from 14 percent in 1991 to
12 per cent in 1992 and 11 percent in 1993.  Rates for one-year
fixed deposits have declined from 10 percent to 8.5 percent
over the same period.  Due to the disparity between relatively
high domestic rates and declining international lending rates,
Thai private sector external borrowing has grown rapidly since
1990, when private external debt was almost $14 billion,
reaching $20 billion in 1991 and $24 billion in 1992.  Net
capital inflows, almost completely via the private sector,
totalled $8 billion in 1992.  Total public sector debt was
about $13 billion in 1991 and 1992.  The total debt service 
ratio (including private and short-term debt) was ten percent
in 1991 and 11 percent in 1992; the public sector debt service
ratio is about four percent.


5.  Significant Barriers to U.S. Exports

    Import duties of 30 to 60 percent ad valorem and/or
specific taxes of an equivalent or higher rate are currently
assessed on most agricultural imports, especially processed
food products, and many manufactured goods, greatly limiting
the market for these goods.  The Thai government is pursuing a
broad reform of its import regime, and customs duties overall
will be significantly lower, but it remains unclear how
agricultural products will be affected.  Thailand has also
offered to lower duties on some agricultural products as part
of the Uruguay Round.

    Arbitrary customs-valuation procedures sometimes constitute
a serious import barrier.  The Thai Customs Department keeps
records of the highest declared prices of products imported
into Thailand from invoices of previous shipments.  Those
prices can then be used as "check prices" for assessing tariffs
on subsequent shipments of similar products from the same
country.  Customs may disregard actual invoiced values in favor
of the check price for assessment purposes, a practice which
may particularly affect agricultural products with seasonally
fluctuating prices.  For products shipped from other than the
country of origin, the Customs Department reserves the option
of using the check price of either the country of origin or the
country of shipment, whichever is higher.  These rules are
applied to imports from all nations.

    Food and pharmaceutical product importers are required to
apply for import licenses from the Thai Food and Drug
Administration.  This licensing process can pose an important
barrier because of its cost, duration, and demand for
proprietary information.  Licenses cost baht 15,000 (about
$600) per item.  Products imported in bulk require laboratory
analysis at a cost of baht 1,000 to 3,000 ($40 to $120) per
item.  Products imported in sealed containers (consumer-ready
packaged) require laboratory analysis at a cost of baht 5,000
($200) per item.  Some 39 items must be registered as "specific
controlled food items" at an additional cost of baht 5,000
($200).  Although the Thai Food and Drug Administration has
made efforts to streamline the registration process, it usually
requires three months or more to complete.  All items must be
accompanied by a detailed list of ingredients and a description
of the manufacturing process.  Some U.S. suppliers have
declined to export to Thailand rather than provide the
proprietary information requested.

    The Thai Ministry of Commerce requires import licenses on
certain raw material, petroleum, industrial, textile, and
agricultural products.  These licenses can be used to protect
uncompetitive local industry, encourage greater domestic
production, maintain price stability in the domestic market,
and for phytosanitary reasons.  Import licensing is also used
to protect intellectual property rights and to comply with
international obligations.  Import licensing is required for
some 37 categories of items.  In the food products area, 
licensing requirements remain for powdered skim milk and fresh
milk, potatoes, soybeans and soybean oil, refined sugar, and
corn for animal feed, among others.

    Largely by restricting foreign bank entry, branching, and
acquisition of Thai banks, Thai authorities have limitited
foreign banks to a roughly five percent share of the Thai
banking market (as measured by commercial bank assets). 
Although an existing foreign bank license was bought in 1984,
no new foreign bank licenses have been issued since 1978. 
However, Thai authorities regularly approve representative
offices of well-established foreign banks.  In aggregate,
foreigners are limited to a maximum 25-percent shareholding in
any Thai bank.  In addition, no person or group of related
persons, whether Thai or foreign, may hold more than five
percent of the shares of any Thai bank.  The Thai government
has indicated it is reviewing its regulations on foreign bank
activities and may allow new foreign bank branches during the
next three to seven years.

    Foreign branches (except for certain grandfathered
branches) are legally precluded from establishing subbranches
in Thailand.  Because Thai officials considered offsite
automatic teller machines (ATM's) equivalent to branches,
foreign banks were precluded from joining domestic Thai bank
ATM systems or establishing their own systems.  However, Thai
officials have said that these regulations are being revised to
allow foreign banks to join domestic ATM systems.

    Thai law and regulations limit foreign equity in new local
insurance firms to 25 percent or less.  This denies new U.S.
property/casualty and life insurers access to the local market
on terms equal to local insurers.  A long-established U.S.
firm, however, controls a major share of the Thai life
insurance market.

    Under Thai law aliens, except Americans, are forbidden to
engage in the brokerage business.  A 1979 law limits all
foreign ownership of Thai finance and credit foncier companies
to 25 percent;  however, a maximum of 40 percent participation
in firms already licensed when the law was enacted is permitted.


6.  Export Subsidies

    Thailand is not a signatory to the GATT Subsidies Code, and
it maintains several programs which benefit manufactured
products or processed agricultural products and may constitute
export subsidies.  These programs include:  subsidized credit
on some government-to-government sales of Thai rice;
preferential financing for exporters in the form of packing
credits; and tax certificates for rebates of taxes and import
duties on inputs for products made for export.  Thailand has
established an export-import bank, which will take over some of
these functions, particularly the packing credit program, when
it begins operations early next year.  Thai officials say that
Thailand is considering acceding to the GATT Subsidies Code.


7.  Protection of Intellectual Property

    While improved protection for U.S. copyright, patent and
trademark holders remains one of the most prominent bilateral
trade issues, Thailand has made significant progress in
intellectual property protection in the past year.  Enforcement
of existing copyright laws has been more vigorous, and the
government has stated its intention to bring its copyright
regime into conformity with international standards and to
provide protection through administrative means for certain
pharmaceutical products not entitled to full patent protection
under Thai law.  In recognition of that progress, Thailand's
designation as a "priority foreign country" under the special
301 provisions of the 1988 amendments to the Trade Act of 1974
was revoked in September 1993.  However, Thailand remains on
the "priority watch list."

    Efforts on the part of the Thai Government to enforce
existing copyright laws have improved since 1991, when most
enforcement activities against intellectual property
infringement were centralized.  In December 1991, the U.S.
formally concluded a section 301 investigation of Thailand's
copyright enforcement in response to a petition filed by three
U.S. trade associations.  Efforts to reduce copyright piracy
increased significantly in early 1993, with raids by police
expanding to cover computer software and into the provinces. 
U.S. industry associations have been instrumental in securing
more energetic enforcement.  While significant improvements
have been made, especially during 1993, copyright piracy of
audio and video tapes and computer software remains extensive. 
The government of Prime Minister Chuan Leekpai has publicly
stated its commitment to continuing and vigorous enforcement.

    There is concern that the current Thai copyright law does
not specifically protect computer software as a literary work,
provides inadequate penalties, and contains overly broad
exceptions for unauthorized use.  The Thai government has
pledged to address these concerns in proposed legislation for a
new copyright law, which the parliament was considering in late
1993.  The Thai Government has said that it aims to bring its
copyright regime into conformity with the international
standards of the draft text on Trade Related Aspects of
Intellectual Property Rights (TRIPs) in the Uruguay Round and
with the provisions of the Bern Convention (Paris Act).

    Concerns remain that Thailand's legal procedures do not
provide adequate deterrence against copyright and trademark
infringement.  The government has established a special
division in the courts to concentrate on intellectual property
matters and has proposed the creation of an entirely separate
intellectual property court, with judges trained in
intellectual property matters.  Thai officials expect that
these measures will speed up consideration of copyright cases
and improve the efficiency of the legal system in dealing with
them.

    Legislation extending patent protection to pharmaceutical
products and agricultural machinery and increasing the length
of protection to 20 years became effective September 30, 1992,
and in October 1992, the U.S. formally concluded a section 301
investigation of Thailand's patent protection of 
pharmaceuticals in response to a petition filed by the U.S.
Pharmaceutical Manufacturers Association.  Bilateral
discussions continue on ways to resolve remaining U.S. concerns
over Thailand's patent protection.  Chief among these are
finalizing measures to provide the transitional or "pipeline"
protection lacking in Thai law.


8.  Worker Rights

    a.   Right of Association

    The Labor Relations Act of 1975, Thailand's basic labor
law, guarantees to workers in the private sector most
internationally-recognized worker rights, including freedom of
association.  Workers have the right to form and join unions of
their own choosing; to decide on their constitutions and rules;
and to formulate their policies without outside interference. 
Once a union is established, the law protects members from
discrimination, dissolution, suspension, or termination because
of union activities.  In addition, unions have the right to
maintain relations with international labor organizations.  In
April 1991 the government passed the State Enterprise Labor
Relations Act (SELRA) which denied state enterprise workers
many of the labor association rights they had enjoyed under the
1975 law.  The Chuan government, which came to office in 1992,
promised to amend the SELRA.  In 1993, new legislation, drafted
in consultation with state enterprise labor leaders, was being
considered by the government.

    In 1991 the AFL-CIO filed a petition to remove GSP benefits
from Thailand for failure to provide internationally recognized
worker rights.  The review was extended while the Thai
government undertook consideration of appropriate changes in
labor laws and regulations.  A final decision will be made at
the end of the 1993/94 review.

    b.   Right to Organize and Bargain Collectively

    The 1975 act grants Thai workers the right to organize
unions and employee associations without outside interference
and to bargain collectively over wages, benefits and working
conditions.  There are about 600 private sector unions
registered in Thailand.  Until the SELRA is amended, state
enterprise workers, like civil servants, may not form unions,
but are allowed membership in employee associations.  The law
currently denies the right to strike to civil servants, state
enterprise workers, and workers in "essential" services such as
education, transportation and health care.  In the private
sector, collective bargaining usually occurs in individual
firms; industry-wide collective bargaining is almost unknown.

    c.   Prohibition of Forced or Compulsory Labor

    The Thai constitution prohibits forced or compulsory labor
except in the case of national emergency, war, or martial law. 
However, although the government has announced steps to put an
end to forced or compulsory prostitution, credible reports
indicate this remains a problem.
 
    d.   Minimum Age for Employment of Children

    The minimum employment age in Thailand is 13.  Thailand
restricts the employment of children between 13 and 15 to
"light work" in non-hazardous jobs, and requires Department of
Labor permission before they can begin work.  Employment of
children at night is prohibited.  The government has announced
its intent to increase compulsory education from six to nine
years in the next few years; this will make possible further
raising of the minimum employment age to 15.  In the last three
years, the government has also more than doubled the size of
the labor inspector corps concerned with child labor law to
enhance enforcement of those laws.

e.  Acceptable Conditions of Work

    Working conditions vary widely in Thailand.  Medium and
large factories, including those of most multinational firms,
generally meet international health and safety standards
--though a recent fire in a factory producing toys for export
in which nearly 200 workers were killed demonstrates
significant gaps in enforcement.  The government has sought to
address those gaps by increasing the number of safety
inspectors and by increasing the penalties for violations. 
Eight-hour days are the norm, and wages and benefits in export
industries usually exceed the legal minimum.  However, in
Thailand's large informal sector, wage, health and safety
standards are often ignored.  Most industries have a legally
mandated 48-hour maximum work week.  The major exception is
commercial establishments, where the maximum is 54 hours. 
Transportation workers are restricted to no more than 48 hours
per week.

    f.   Rights in sectors with U.S. Investment

    U.S. capital investment is substantial in several sectors
of the Thai economy, including petroleum (exploration,
production, refining, and marketing), electronic components
assembly, and consumer products.  Workers in these sectors,
especially those working for U.S. and other western firms,
usually enjoy labor conditions superior to those of the average
Thai worker:  the degree of unionization is greater; wages and
benefits are higher; and health and safety standards are
better.  Child labor is rare or nonexistent among multinational
firms.

 
         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                               774
Total Manufacturing                                     783
    Food & Kindred Products                    63
    Chemicals and Allied Products             168
    Metals, Primary & Fabricated                D
    Machinery, except Electrical                D
    Electric & Electronic Equipment           213
    Transportation Equipment                    0
    Other Manufacturing                        60
Wholesale Trade                                         254
Banking                                                 230
Finance and Insurance                                     D
Services                                                 47
Other Industries                                          D

TOTAL ALL INDUSTRIES                                  2,459


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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