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U.S. DEPARTMENT OF STATE
THAILAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             THAILAND

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


                                     1992      1993      1994 1/

Income, Production and Employment:

Real GDP (1988 prices)             89,934    97,595   104,857
Real GDP Growth Rate (pct.)           7.9       8.2       8.0
GDP (at current prices)           111,495   124,772   140,321
By Sector:
  Agriculture                      13,446    12,472    13,838
  Energy/Water                      2,579     3,053       N/A
  Manufacturing                    31,233    35,578    38,975
  Construction                      7,523     8,578       N/A
  Rents                             3,008     3,237       N/A
  Financial Services                7,079     9,019       N/A
  Other Services                   42,438    48,162       N/A
  Government/Health/Education       4,189     4,673       N/A
  Net Exports of Goods & Services  -5,533    -6,310       N/A
Per Capita GDP (current USD)        1,930     2,130     2,351
Labor Force (000s)                 32,420    33,100    33,800
Unemployment Rate (pct.)              3.0       3.2       3.3

Money and Prices:  (annual percentage growth)

Money Supply (M2)                    15.6      18.4      12.6 1/
Base Interest Rate                   11.5     10.25      11.5
Personal Savings Rate                 4.9       N/A       N/A
Retail Inflation                      N/A       N/A       N/A
Wholesale Inflation                   0.2      -0.4       3.1 5/
Consumer Price Index                  4.1       3.3       4.9 3/
Exchange Rates (B/USD avg.)
  Official                          25.40     25.32     25.22 2/
  Parallel                             -- Not Applicable --    

Balance of Payments and Trade:

Total Exports, (FOB)               32,466    37,159    28,360 2/
  Exports to U.S.                   7,284     7,287     6,046 2/
Total Imports (CIF)                40,679    46,242    34,448 2/
  Imports from U.S.                 4,772     5,373     3,985 2/
Aid from U.S. (FY-DA obligation)      0.7       6.4       5.1
Aid from Other Countries (FY)         N/A       N/A       N/A
External Public Debt (LT)          12,518    14,171    14,973 4/
Debt Service Payments (paid)        4,713     5,391     1,658 4/
Gold and Foreign Exch. Reserves      21.2      25.4      29.1
Trade Balance                      -8,213    -9,083    -6,088 2/
  Trade Balance with U.S.           2,512     2,614     2,061 2/


N/A--Not available.

1/ Preliminary estimates based on data available, October 1994.
2/ January through August (eight months).
3/ January through September (nine months).
4/ First Quarter 1994
5/ June 1993-June 1994

Sources:  Bank of Thailand, Thai Ministry of Commerce, Thai
National Economic and Social Development Board, U.S. Department
of Commerce and U.S. 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 10 percent from 1987 to
1991 and has since hovered around eight percent.  Economic
growth and investment have slowed modestly and the political
events of May 1992, which culminated in violence, temporarily
undermined domestic and foreign investor confidence.  However,
the Thai economy remains fundamentally strong and has rebounded
in the intervening two years.  Recorded flows of foreign direct
investment fell to $1.5 billion in 1993, down from $2 billion
in 1992.  Exports continued to expand to record levels during
the first eight months of 1994, to $28 billion.  The Thai
government estimates that total Thai exports for 1994 will
reach almost $48 billion, up 18.5 percent over 1993.  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 stressed addressing imbalances
created through rapid industrialization by emphasizing rural
development and reducing disparities in the distribution of
income.

    Rapid growth has had its drawbacks:  infrastructure
bottlenecks remain a problem and environmental degradation has
worsened considerably in recent years.  If unresolved,
Thailand's infrastructure bottlenecks and shortages of skilled
personnel will limit the pace of future growth.  Metropolitan
Bangkok's public works (communications facilities, roads and
mass transit) are already overtaxed and will come under
increasing pressure.

    A drought in northern provinces during 1993 reduced
agricultural output dependent on irrigation and reduced water
supplies to the Bangkok metropolitan area in 1994.  Abundant
rainfall in 1994, however, has largely refilled reservoirs to
capacity.  Severe flooding in the north of Thailand during
August 1994 destroyed some crops.  Added to changes in Thai 
policies which reduced production, this has led to increased
prices for agricultural goods in 1994.

    The average amount of schooling for the Thai work force is
less than six years, the lowest in the Association of Southest
Asian Nations (ASEAN).  The level of education of the work
force will have to be raised to maintain Thailand's development
pace and competitiveness with neighboring countries which have
lower wage rates.  The Thai government is fully aware of this
problem and is in the process of expanding mandatory years of
schooling from six to nine.  Wage gains continue to outpace
substantially the growth of the consumer price index.

    For the past six years Thailand has experienced a
substantial government budget surplus as revenues were fueled
by growth and government investment expenditures for major
infrastructure projects lagged.  For 1993 the government's
overall surplus reached $2.7 billion, 2.2 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 and the Thai baht against the U.S. dollar, have
tended to make U.S. exports to Thailand more price competitive.

    In May 1990 the Thai government announced a series of
measures to liberalize significantly the exchange control
regime.  It accepted the obligations of the International
Monetary Fund's Article VIII which prohibits members from
restricting current 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 preapproval
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 of payments remains in surplus because of
tourism earnings and 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
began implementing the ASEAN Free Trade Area's (AFTA) tariff
reductions in January 1993.  Although it began slowly, AFTA has
picked up speed as the six member nations (Brunei, Indonesia,
Malaysia, Philippines, Singapore and Thailand) have started
seeing results.  At the September 1994 meeting of the ASEAN
Economic Ministers in Chiang Mai, the AFTA members agreed to
reduce the 15 year implementation schedule to 10 years,
gradually to eliminate the exclusion list of protected items
and generally to expand AFTA from a tariff reduction scheme
into a real free trade area.  Thailand has been one of the
leading proponents of this effort.  Thailand's trade relations
have traditionally been oriented toward distant markets,
particularly North America, Europe, and Japan, but the
government sees the ASEAN Free Trade Area increasing
intra-ASEAN trade as well.

    Beginning in 1992 the Thai government 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 unified the corporate
income tax rate at 30 percent.  The government is considering a
further reduction to 25 percent to attract more investment.  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.  Since 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.


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, 19.6 percent in 1993 and is projected to
grow by over 30 percent in 1994; growth for the first nine
months of 1994 has been greater than in all of 1993.  The prime
rate has declined from 14 percent in 1991 to 12 per cent in
1992 and 11 percent in 1993.  It will be between 11 and
11.5 percent for 1994.  Rates for one-year fixed deposits have
declined from 10.5 percent to seven percent over the same
period.  With 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
$25 billion in 1991, $30 billion in 1992 and $36 billion in
1993.  Net capital inflows, almost completely via the private
sector, rose from $9.8 billion in 1992 to $11 billion in 1993
and reached $10.5 billion as of August 1994.  Total public
sector debt was about $13 billion in 1992 and $14 billion in
1993.  The total debt service ratio (including private and
short term debt) was 10.5 percent in 1991, 11.2 percent in 1992
and 11.3 percent in 1993.  The public sector debt service ratio
was about four percent in 1993.


5.  Significant Barriers to U.S. Exports

    Import duties range from zero to 68.5 percent ad valorem,
along with other specific taxes of an equivalent or higher
rate.  These import duties, which have a weighted average of
only 16.03 percent, were assessed on all imports in 1993,
including 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.  There are presently six classifications
of import duties:  zero to five percent on raw materials; one
percent for special items such as medical instruments, ships
and aircraft; up to 10 percent for intermediate products;
20 percent for finished products; 30 percent for special
production items; and, 68.5 percent for luxury sedans.

    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.

    The Thai Food and Drug Administration issues import
licenses for food and pharmaceutical imports.  This licensing
process can pose an important barrier because of its cost,
duration and demand for proprietary information.  Licenses for
importers of food products cost 15,000 baht (about $600). 
These licenses must be renewed every three years.  Licenses for
importers of pharmaceuticals cost 10,000 baht (about $400) and
must be renewed every year.  Sample products imported in bulk
require laboratory analysis at a cost of 1,000 to 3,000 baht
(about $40 to $120) per item.  Food products imported in sealed
containers (consumer ready packaged) require laboratory
analysis at a cost of 5,000 baht (about $200) per item. 
Registration as "specific controlled food items" is required
for 39 food products at an additional cost of 5,000 baht (about
$200) per item.  Registration of pharmaceutical imports costs
2,000 baht (about $80) per item, with the cost of inspection of
each item an additional 1,000 baht (about $40).  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 controlled 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 materials, 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
43 categories of items.  In the food products area, licensing
requirements remain for powdered skim milk and fresh milk,
potatoes, soy beans and soy bean oil, refined sugar, coffee and
others.  Corn for animal feed is among those 10 categories
which do not need import licenses but must comply with
concerned agencies requirements for surcharges, fees or
certificates of origin.

    Largely by restricting foreign bank entry, branching and
acquisition of Thai banks, Thai authorities limit all foreign
banks to a very small share of the total Thai banking market. 
That share comprises around seven percent of total commercial
banking assets at present.  Although an existing foreign bank
license was bought in 1994, 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 each Thai bank; no person or group
of related persons, whether Thai or foreign, may hold more than
five percent of the shares of each Thai bank.  The Thai
government has indicated it is reviewing its regulations on
foreign bank activities as part of the extended Uruguay Round
negotiations on services and may allow new foreign bank
branches during the next three to seven years.

    Foreign banks do not receive national treatment in
Thailand.  Foreign banks are prohibited from opening branches
and are not permitted to operate off-site automated teller
machines (ATMs).  Recently, regulations were changed to permit
foreign banks to participate in the local ATM network. 
However, they have been unable to negotiate agreements to
participate in the ATM network with domestic banks.  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.

    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 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

    The Government of Thailand ratified the Uruguay Round
agreements before the end of 1994, and became a founding member
of the World Trade Organization (WTO).  However, it is not a
signatory to the GATT subsidies code.  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 established an export-import bank in
September 1993 which took over some of these functions,
particularly the packing credit program.  Thai officials say
that Thailand is considering acceding to the GATT subsidies
code.


7.  Protection of Intellectual Property

    Improved protection for U.S. copyright, patent and
trademark holders has been one of our most prominent bilateral
trade issues over the past several years.  Thailand has made
significant progress in intellectual property protection over
this period.  Most importantly, Thailand passed a revised
copyright law which addresses most of the U.S. concerns
(especially protection for computer software).  The law is
expected to go into force in early 1995.  This will bring the
Thai copyright regime into conformity with international
standards of the Uruguay Round agreement (TRIPS) and the Berne
Convention (Paris Act).  In addition, the Thai government has
agreed to provide protection through administrative means for
certain pharmaceutical products not entitled to full patent
protection under Thai law.  In recognition of this progress,
Thailand was downgraded from the "priority watch list" to the
"watch list" in November 1994.  The U.S. Trade Representative
(USTR) has begun a review of Thailand's status under the
Generalized System of Preferences (GSP) program to determine
whether to restore any of the GSP benefits lost in 1989 due to
inadequate intellectual property protection.

    Efforts on the part of the Thai government to enforce
existing copyright laws have also improved since 1991, when
most enforcement activities against intellectual property
infringement were centralized and relatively ineffective.  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
by both governments to reduce copyright piracy increased 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 considerable 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 vigorous enforcement.  The Ministry of Commerce set
up a special Intellectual Property (IPR) Department in 1992
which is active in coordinating both the legal structure and
enforcement efforts against all forms of violation of
intellectual property.  The Prime Minister receives a weekly
briefing on the status of enforcement efforts and has seconded
an official to the IPR Department to keep him thoroughly
informed.

    Concerns remain that Thailand's legal procedures do not
provide adequate deterrence against copyright 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.  This court, to be known as the Intellectual Property
and International Trade Court, was proposed to the Thai
Parliament in September 1994.  Thai officials expect that these
measures will speed up consideration of copyright and other IPR
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. 
The United States then formally concluded a Section 301
investigation of Thailand's patent protection of
pharmaceuticals, begun in response to a petition filed by the
U.S. Pharmaceutical Manufacturers Association.  Both
governments continue to discuss ways to resolve remaining U.S.
concerns over Thailand's patent protection.  Chief among these
are finalizing measures to provide the transitional protection
lacking in the law.


8.  Worker Rights

    a.  The 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 constitutions and rules, and
to formulate 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 and restore those rights.  The new
legislation was introduced in the fall 1994 session of
Parliament.

    b.  The 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.

    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 nonhazardous 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,
although a May 1993 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 these 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 workweek.  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 large
multinational firms.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             1,011
Total Manufacturing                                     863
  Food & Kindred Products                    49
  Chemicals and Allied Products             228
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           221
  Transportation Equipment                  (2)
  Other Manufacturing                        79
Wholesale Trade                                         250
Banking                                                 300
Finance/Insurance/Real Estate                           (1)
Services                                                 59
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  2,893    

(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis


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