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OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #0206/01 0260152
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O 260152Z JAN 10
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UNCLAS SECTION 01 OF 16 BANGKOK 000206 
 
STATE FOR EEB/IFD/OIA, EAP/MLS 
STATE PASS TO USTR FOR WEISEL AND KLEIN 
COMMERCE FOR EAP/MAC/OKSA FOR JKELLY 
TREASURY FOR OASIA 
SINGAPORE FOR FINATT BLEIWEIS 
 
SIPDIS 
 
E.O. 12958:N/A 
TAGS: ECON EFIN EINV ELAB ETRD KIPR OPIC KTDB USTR TH
SUBJECT: THAILAND: 2010 INVESTMENT CLIMATE STATEMENT 
 
REF: 09 STATE 124006 
 
¶1. (U) Per reftel request, below is Post's draft of the 2010 
Investment Climate Statement (ICS) for Thailand. We also e-mailed a 
Microsoft Word version to EB/IFD/OIA (David J. Ahn and Thomas J. 
Walsh), per reftel instructions. 
 
¶2. (U) Begin text: 
 
Chapter 6: Investment Climate 
----------------------------- 
 
- Openness to Foreign Investment 
- Conversion and Transfer Policies 
- Expropriation and Compensation 
- Dispute Settlement 
- Performance Requirements and Incentives 
- Right to Private Ownership and Establishment 
- Protection of Property Rights 
- Transparency of Regulatory System 
- Efficient Capital Markets and Portfolio Investment 
- Corporate Social Responsibility 
- Political Violence 
- Corruption 
- Bilateral Investment Agreements 
- OPIC and Other Investment Insurance Programs 
- Labor 
- Foreign Trade Zones/Free Ports 
- Foreign Direct Investment Statistics 
 
Openness to Foreign Investment 
------------------------------ 
 
Despite several major investment disputes in 2009, Thailand 
continues to maintain an open, market-oriented economy and 
encourages foreign direct investment as a means of promoting 
economic development, employment, and technology transfer. In recent 
decades, Thailand has been a major destination for foreign direct 
investment, and hundreds of U.S. companies have invested here 
successfully. Thailand continues to welcome investment from all 
countries and seeks to avoid dependence on any one country as a 
source of investment. 
 
In 2009, most investors remained cautiously hopeful that the 
political situation would become less tumultuous and allow the 
government to pursue more business-friendly policies. Unfortunately, 
the November 2008 closure of Bangkok's airports, widely watched 
political protests in April, and the onset of the global economic 
crisis made it difficult for Prime Minister Abhisit to restore the 
business and investor confidence in Thailand's economy after several 
years of political turmoil. By the end of the year, the dominant 
issues with regard to Thailand's investment climate revolved around 
the court-ordered shutdown of 65 construction projects at Map Ta 
Phut, one of Thailand's most important industrial estates, over 
allegations that the government failed to follow the 2007 
Constitution's requirements for environmental and health impact 
assessments when approving the new industrial projects. However, 
implementing legislation for these constitutional provisions had 
never been finalized -- a significant legal quandary that the 
government hopes to resolve in 2010. The affected companies, 
including many major foreign investors, remain concerned about how 
and when the dispute will be resolved. 
 
After posting 4.8 percent growth (year-on-year) in the first nine 
months of 2008, the Thai economy dropped 4.2 percent in the last 
quarter -- the first contraction of the economy since the 1997-98 
Asian Financial Crisis. The global financial crisis of 2008 and the 
continued political tension in Thailand led to a 2.6 percent drop in 
GDP in 2008, much lower than the 5 percent average growth of recent 
years. This slippage continued in 2009, with the economy contracting 
by 5 percent (year-on-year) through September. The hardest hit 
sectors were exports and private investment, both of which represent 
around 80 percent of GDP. As the global markets recover from the 
recessions, the Thai government revised its projections for 2009 to 
negative 3 percent, with a turnaround in the last quarter of 2009. 
The government estimates GDP growth of 3 to 4 percent in 2010. 
 
In the wake of the 1997-98 Asian Financial Crisis, Thailand embarked 
on an International Monetary Fund (IMF)-sponsored economic reform 
program designed in part to foster a more competitive and 
transparent climate for foreign investors. Legislation establishing 
a new bankruptcy court, reforming bankruptcy and foreclosure 
procedures, and allowing creditors to pursue payment from loan 
 
BANGKOK 00000206  002 OF 016 
 
 
guarantors was enacted in 1999. Other 1999 reforms include 
amendments to the Land Code, Condominium Act, and the Property 
Leasing Act, all of which liberalized restrictions on property 
ownership by non-Thais. The Foreign Business Act (FBA) of 1999 
governs most investment activity by non-Thai nationals and opened 
limited additional business sectors to foreign investment. 
Nevertheless, foreign investment in most service sectors is limited 
to 49 percent ownership. 
 
Many U.S. businesses, however, enjoy investment benefits through the 
U.S.-Thailand Treaty of Amity and Economic Relations (AER), 
originally signed in 1833. The 1966 iteration of the Treaty allows 
U.S. citizens and businesses incorporated in the U.S., or in 
Thailand that are majority-owned by U.S. citizens, to engage in 
business on the same basis as Thai companies, exempting them from 
most of the restrictions on foreign investment imposed by the 
Foreign Business Act. Under the Treaty, Thailand restricts American 
investment only in the fields of communications, transport, 
fiduciary functions, banking involving depository functions, the 
exploitation of land or other natural resources, and domestic trade 
in agricultural products. Prospective U.S. investors who would like 
to benefit from the Treaty must first verify their nationality by 
obtaining a certified letter from the U.S. Embassy in Bangkok. The 
investor must then present the letter to the Ministry of Commerce, 
along with an application form for a business operation certificate. 
This process typically takes less than one month. Notwithstanding 
their Treaty rights, many Americans choose to form joint ventures 
with Thai partners, allowing the Thai side to hold the majority 
stake because of the advantages that come from familiarity with the 
Thai economy and local regulations. 
 
Americans planning to invest in Thailand are advised to obtain 
qualified legal advice. Such advice is particularly important given 
the fact that Thai business regulations are governed predominantly 
by criminal law, not civil law. While foreigners rarely are jailed 
for improper business activities, violation of Thai business 
regulations can carry heavy criminal penalties. 
 
Thailand has removed tax disincentives on buying domestic financial 
institutions. The Financial Institutions Act passed at the end of 
2007 gave power to the Bank of Thailand (the country's central bank) 
to raise the foreign ownership limit in a local bank from 25 percent 
to 49 percent on a case-by-case basis. The Act also allows the 
Minister of Finance to authorize foreign ownership above 49 percent. 
In January 2009, the Ministry of Finance allowed Malaysian's CIMB 
Group to hold majority shares (around 93 percent) in BankThai Bank, 
the country's ninth largest commercial bank. 
 
Under the Bank of Thailand's new five-year Financial Sector Master 
Plan Phase II (FSMP II), which was approved by the Cabinet in early 
November 2009, foreign banks, which were restricted to a single 
branch, will be allowed to open two more additional branches from 
¶2010. The FSMP II will also allow existing foreign full branches to 
upgrade to subsidiaries and open a maximum of 20 branches and 20 
off-premise ATMs. Details of the FSMP II are available in English at 
http://www.bot.or.th/. 
 
The 2008 Life Insurance Act and the 2008 Non-Life Insurance Act 
requires that an insurance company must have Thai shareholders who 
possess more than 75 percent of total number of 'voting' share sold. 
Foreign ownership is therefore capped to 25 percent of voting share 
sold. The 2008 laws provide a five-year compliance period until 
February 2013. If companies do not comply by 2013, they will be 
unable to open new branches and can be fined up to 200,000 Thai baht 
(approximately US$6,000) plus daily fines of up to 10,000 Thai baht 
(approximately US$300). However, the new laws also allow the 
government insurance regulator (the Office of Insurance Commission) 
to authorize foreign ownership up to 49 percent on a case-by-case 
basis. The Minister of Finance, with a recommendation from the 
Office of Insurance Commission, could grant approval to allow 
foreign ownership limit to exceed 49 percent. 
 
Business Registration: Any entity wishing to do business in Thailand 
must register with the Department of Business Development at the 
Ministry of Commerce. Firms engaging in production activities need 
to register with the Ministries of Industry and Labor and Social 
Welfare. If the entity falls under the definition of non-Thai 
national as defined by the Foreign Business Act, they have to obtain 
a 'foreign business license' (or a certificate for US investors as 
mentioned above), which must be approved by the Council of Ministers 
(Cabinet) or Director-General of Department of Business Development 
at the Ministry of Commerce depending on types of restricted 
businesses. 
 
BANGKOK 00000206  003 OF 016 
 
 
 
Work Permits: U.S. citizens can enter Thailand without a visa for 
visits of up to thirty days. In order to apply for a work permit, a 
foreigner must enter Thailand on a non-immigrant visa (issued at 
Thai embassies and consulates) for a stay of three months or, for 
foreigners with well-defined work or business plans, for a stay of 
one year. Issuance of the three-month visa usually is completed 
within two or three days; the one-year visa requires approval from 
the Immigration Bureau of the Royal Thai Police in Bangkok. Upon 
obtaining a work permit, a holder of a three-month visa may apply 
for a one-year visa, which generally can be extended every year. 
Foreigners holding nonimmigrant visas who have lived in Thailand for 
at least three consecutive years may apply for permanent residence 
in Thailand if they meet strict criteria regarding investment or 
professional skills. 
 
Many occupations are reserved exclusively for Thai nationals, 
including professional services such as accounting, architecture, 
law, and engineering. The 2008 Alien Occupation Act, which lists 
these prohibited occupations, also states that all non-Thai persons 
working in Thailand must possess a work permit issued by the 
Ministry of Labor. Some foreigners already working in Thailand are 
exempted through a "grandfather" clause. Factors that influence the 
granting of work permits include the degree of specialization 
required by the position; the size of the firm in terms of number of 
employees and registered capitalization; and the ratio of Thai 
nationals to foreigners employed by the firm. Foreigners working for 
the Thai government or working on projects promoted by the Board of 
Investment (BOI) usually have little difficulty obtaining work 
permits and typically receive their permits within seven days of 
application. The duration of the work permit is generally tied to 
the length of stay permitted by the person's visa. Government policy 
creates a preference for Thai nationals in the hiring of government 
consultants, although the government continues to hire foreign 
consultants. Work permits in other areas are sometimes difficult to 
obtain, despite the fact that senior manager and technical personnel 
are in short supply. 
 
Foreigners who want to do volunteer work are also required to obtain 
work permits according to the law. Foreigners found to be working 
(including volunteers) without work permits could be imprisoned up 
to five years and/or fined between 2,000 and 100,000 Thai baht 
(approximately US$60 to US$3,000). However, the law does not apply 
to individuals in officially recognized delegations (e.g. diplomatic 
or consular); persons performing duties or missions in accordance 
with an agreement between the Royal Thai Government and foreign 
governments or international agencies; person performing duties or 
missions to the benefit of education, culture, arts, sports or other 
activities stipulated by Thai laws; or persons otherwise authorized 
by the Council of Ministers. 
 
The law allows migrant workers from Burma, Laos and Cambodia to work 
as manual labor in certain industries such as textiles. Under the 
Alien Occupation Act, employers of unskilled workers are required to 
deduct a certain amount (to be specified by a Ministerial regulation 
issued by the Ministry of Labor) from salaries of their foreign 
workers and submit to a newly established 'Deportation Fund' which 
will be managed by a committee. The amount is made in a single 
payment and can vary depending on the associated cost of deporting 
such foreign workers back to their native country if necessary. If 
the amount is not fully collected from the foreign workers, 
employers are ultimately responsible for the payments. Foreign 
workers will be given receipts and will be reimbursed within 30 days 
after they have returned to their home country at their own expense. 
However, foreign workers must make a reimbursement claim with 
receipts within two years after their departure from any immigration 
check-point. Interest (7.5 percent per annum) will be paid only if 
the refund process exceeds 30 days after a claim. 
 
Land Ownership: In general, non-Thai businesses and citizens are not 
permitted to own land in Thailand unless the land is on 
government-approved industrial estates. Under the 1999 amendment to 
the Land Code Act, foreigners who invest a minimum of 40 million 
Baht (approximately US$1.2 million) are permitted to buy up to 1,600 
square meters of land for residential use with the permission of the 
Ministry of Interior. If the required land is not used as a 
residence within two years from the date of acquisition and 
registration, the Ministry has the power to dispose of the land. 
Petroleum concessionaires may own land necessary for their 
activities. Rather than purchasing, many foreign businesses instead 
sign long-term leases, and then construct buildings on the leased 
land. Under the 1999 Condominium Act, non-Thais were allowed to own 
up to 100 percent of a condominium building if they purchased the 
 
BANGKOK 00000206  004 OF 016 
 
 
unit between April 28, 1999 and April 28, 2004. Under the newer 
Condominium Act of 2007, foreign ownership in a condominium 
building, when added together, must not exceed 49 percent of the 
total space of all units in the building, except for those purchased 
between 1999 and 2004. 
 
Privatization: With the aim of encouraging capital inflows and 
relieving resource constraints in many key sectors of the economy, 
the previous government of Thaksin Shinawatra eagerly embarked on a 
privatization program for state-owned economic enterprises and state 
monopolies. The interim government that followed the September 2006 
coup considered privatization too controversial and put these plans 
on hold. Other than the Petroleum Authority of Thailand (PTT), the 
Airport Authority of Thailand (later renamed Airports of Thailand 
(AOT)) and the Mass Communication Organization of Thailand (MCOT), 
few significant privatizations have occurred. The 1999 State 
Enterprise Corporatization Act provides the framework for the 
conversion of state enterprises into stock companies, and 
corporatization is viewed as an intermediate step toward eventual 
privatization. (Note: "corporatization" describes the process by 
which an SOE adjusts its internal structure to resemble a 
publicly-traded enterprise; "privatization" means that a majority of 
the SOE's shares is sold to the public, and "partial privatization" 
refers to a situation in which less than half a company's shares are 
sold to the public.) The current State Enterprise Policy Office 
under the Ministry of Finance does not have a power to regulate all 
SOEs, but the Ministry of Finance is in the process of drafting a 
comprehensive bill to set up a new regulatory and policy body to 
supervise all SOEs including those with partial privatization. 
 
The following is a summary of Thailand's rankings in several 
international indexes, as well as the Millennium Challenge 
Corporation's score card. 
 
Measure                     Year      Index/Ranking 
TI Corruption Index         2009      3.4/84 
Heritage Economic Freedom   2009      63/67 
World Bank Doing Business   2010      12 
MCC Govnt Effectiveness     2009      0.54/87 percent 
MCC Rule of Law             2009      0.41/63 percent 
MCC Control of Corruption   2009      0.01/53 percent 
MCC Fiscal Policy           2009      0.4/64 percent 
MCC Trade Policy            2009      75.6/50 percent 
MCC Regulatory Quality      2009      0.27/77 percent 
MCC Business Startup        2009      0.971/69 percent 
MCC Land Rights Access      2009      0.796/74 percent 
MCC Natural Resource Mgmt   2009      97.79/93 percent 
 
Conversion and Transfer Policies 
-------------------------------- 
 
Exchange controls are governed by the Exchange Control Act of 1942, 
amended in 1984, and Ministerial Regulation Number 13 of 154, and 
are administered by the Bank of Thailand. Inward remittances are 
free of controls. However, the Ministry of Finance issued a 
Ministerial Regulation, effective from October 28, 2007, to require 
any person who brings foreign currencies in or out of Thailand 
exceeding US$20,000 or the equivalent must declare the amount at a 
Customs check point. Foreigners staying in Thailand for less than 
three months, foreign embassies, and international organizations are 
exempt from this requirement. 
 
In July 2007, the Ministry of Finance and the Bank of Thailand 
agreed to relax regulations on capital flows to balance capital 
movements and to increase flexibility for Thai businesses in 
managing their foreign currency holdings. The changes included 
abolishing the surrender requirement for all foreign currency 
receipts from abroad to be sold or deposited within 15 days; 
doubling the amount of foreign currency deposited with financial 
institutions in the country from US$0.5 million to US$1 million for 
individuals and from US$50 million to US$100 million for juristic 
persons with future foreign exchange obligations within the 
following 12 months, and increasing to US$0.1 million for 
individuals and to US$0.3 million for juristic persons without 
obligation. The deposit ceiling applies only to foreign currencies 
that are borrowed from financial institutions, but if foreign 
currencies are earned (not borrowed), the deposit ceiling 
restriction is not applied. 
 
Thai nationals are subject to quantitative limits on the amount of 
foreign currency that can be remitted abroad without specific 
permission of the Bank of Thailand. The limits vary depending upon 
the purpose of the transaction, and range from US$100 million per 
 
BANGKOK 00000206  005 OF 016 
 
 
annum for business investment or loans to subsidiaries, to US$1 
million per annum for remittances to family members. The Bank of 
Thailand must approve the purchase of immovable assets or securities 
abroad. The new regulation, however, also increases the limit of 
overseas fund remittances in foreign currencies up to US$1 million 
by Thai individual. In addition, the authorities also relaxed the 
repatriation requirement for exporters with foreign currency 
receipts by extending the period in which such receipts must be 
brought into the country from within 120 days, to within 360 days 
and requiring that the foreign currencies be deposited or sold with 
financial institutions within another 360 days. 
 
Commercial banks are authorized to undertake most routine foreign 
remittance transactions without prior approval of the Bank of 
Thailand. Nonresidents can open and maintain foreign currency 
accounts without deposit and withdrawal ceilings with authorized 
banks in Thailand. Such accounts must use funds that originate 
abroad. If nonresidents have underlying liabilities or transactions 
in Thailand, they can open and maintain Thai baht accounts under 
Nonresident Baht Accounts (NRBA) with authorized banks in the 
country; however, the combined outstanding of all NRBAs for each 
nonresident at the end of the day cannot exceed 300 million Baht 
(approximately US$9 million). Since February 2008, the Bank of 
Thailand has segregated the NRBA into two types: Nonresident Baht 
Account for Securities (NRBS) for investment in securities and other 
financial instruments, and Nonresident Baht Account (NRBA) for 
general purposes. Funds under the two types of NRBA could not be 
transferred to each other. The cap on NRBAs was introduced in 
October 2003 with the goal of limiting speculation on the Thai baht. 
All remittances exceeding US$10,000 for any purpose other than 
export must be reported to the Bank of Thailand. 
 
Expropriation and Compensation 
------------------------------ 
 
Private property can be expropriated for public purposes in 
accordance with Thai law, which provides for due process and 
compensation. In practice, this process is seldom used and has been 
principally confined to real estate owned by Thai nationals and 
needed for public works projects. U.S. firms have not reported any 
problems with property appropriation in Thailand. 
 
Dispute Settlement 
------------------ 
 
Thailand has a civil code, commercial code, and a bankruptcy law. 
Monetary judgments are calculated at the market exchange rate. 
Decisions of foreign courts are not accepted or enforceable in Thai 
courts. Disputes such as the enforcement of property or contract 
rights have generally been resolved through the Thai courts. 
Thailand has an independent judiciary that generally is effective in 
enforcing property and contractual rights. The legal process is slow 
in practice, however, and litigants or third parties sometimes 
affect judgments through extra-legal means. 
 
In addition, companies may establish their own arbitration 
agreements. Thailand signed the Convention on the Settlement of 
Investment Disputes Between States and Nationals of Other States in 
1985, but has not yet ratified the Convention. Thailand is a member 
of the New York Convention and enacted its own rules on conciliation 
and arbitration in the Arbitration Act of 2002. The 2002 Arbitration 
Act adopted the principles under the United Nations Commission on 
International Trade Law (UNCITRAL). The Arbitration Office of the 
Ministry of Justice administers these procedures. 
 
The Bankruptcy Act was amended in 1999 to provide Chapter 11-style 
protection to debtors, and to give debtors and creditors the option 
of negotiating a reorganization plan through the courts instead of 
forcing liquidation. The Act now allows creditors to extend 
additional loans to insolvent firms without losing the right to 
claim compensation during a future restructuring or liquidation 
process, but only if the new loan is intended to keep the firm in 
operation. Also in 1999, the Act was amended to facilitate the 
financial restructuring process. Higher minimum levels for 
individual and corporate bankruptcies were established, and the 
previous ten-year period of bankruptcy status was reduced to three 
years. The 1999 Bankruptcy Act also established a specialized court 
for bankruptcy cases. The Bankruptcy Courts are divided into the 
Central Bankruptcy Court which has jurisdiction throughout the 
Bangkok Metropolitan areas and the Regional Bankruptcy Courts. 
 
In 2004, Parliament approved changes to the Bankruptcy Act including 
tightening the rules under which some debtors can emerge from 
 
BANGKOK 00000206  006 OF 016 
 
 
bankruptcy status and streamlining the legal appeals process in 
bankruptcy and restructuring cases. In an effort to quicken the 
foreclosure process, amendments to the Civil Procedure Code on 
Execution of Judgments have limited appeal options available to 
debtors. Under the old regulations, debtors were free to appeal each 
action taken with respect to the execution of a bankruptcy judgment. 
Such appeals, often frivolous in nature, were one of the tactics 
debtors used to delay the foreclosure process. In June 2001, the 
Supreme Court set an important legal precedent by ruling in favor of 
implementing a creditor-backed corporate restructuring plan opposed 
by the former owner of the business in question. The Act was later 
amended in 2005 by granting the Bankruptcy Court the power to 
consider bankruptcy cases that involve criminal matters. 
 
Individual cases can take months or even years to work their way 
through the legal system, however, and many businesses have urged 
the government to speed up the bankruptcy procedure. In 2006, new 
procedural rules were established to accelerate the bankruptcy court 
proceedings by encouraging the use of electronic equipment and 
express mail in communications between courts. Under the new rules, 
provincial courts have the authority to issue search warrants and 
arrest warrants, and to imprison or release a defendant. Other 
amendments to the Bankruptcy Act are currently under consideration. 
 
 
In 2009, the Bankruptcy Court issued verdicts on 33,061 cases. 
 
Performance Requirements and Incentives 
--------------------------------------- 
 
Thailand committed to implement all WTO agreements, including 
Trade-Related Investment Measures (TRIMS). In its latest Trade 
Policy Review in November 2007, the WTO noted, "Thailand has 
maintained its support and commitment to the liberalization of the 
multilateral trading system, especially for agriculture. It also 
remains committed to "open regionalism" and considers regional trade 
liberalization an effective catalyst for freer trade and 
complementary to multilateralism." The report continued that WTO 
negotiations would improve market access and the predictability and 
stability of trade and investment. The report notes that a key 
challenge for Thailand's future economic performance is the 
government's ability to restore private investor confidence and to 
proceed with pending structural reforms, including stalled 
privatizations that would help improve the country's 
competitiveness. The report also underlines the need for Thailand to 
expand its tariff bindings and to simplify its relatively complex 
tariff regime. The services sector, which makes up a large part of 
the Thai economy, has benefited so far from liberalization but would 
grow further if multilateral commitments under the GATS were 
expanded, according to the review. 
 
The Board of Investment (BOI), established by the Investment 
Promotion Act of 1977, is Thailand's central investment promotion 
authority. 
Complete information on BOI policies, programs, incentives, and 
application procedures can be found on the BOI web site at 
www.boi.go.th. 
 
In November 2009, BOI established the 'One Start One Stop Investment 
Center' as a centralized location to assist investors with the 
requirements of the various investment-related government agencies. 
Staff at the Center provide guidance to investors on how to register 
a company, obtain BOI's investment promotion privileges, obtain a 
foreign business license, complete an environmental impact 
assessment, request permission to use land for industrial 
operations, obtain utilities, and other related investment issues. 
 
BOI identifies priority sectors (detailed below), covering hundreds 
of types of businesses eligible for investment incentives. 
Generally, the most generous incentives are offered to those 
projects that bring new technology to Thailand and those that invest 
in less-developed provinces. There are two basic types of BOI 
incentives: tax-based (including tax holidays and tariff exemptions) 
and non-tax privileges (guarantees, special permissions, services, 
etc.). The minimum investment amount is 1 million baht 
(approximately $30,000), excluding the cost of land and working 
capital. Projects with an investment of 10 million Thai baht 
(approximately US$300,000) or more, excluding the cost of land and 
working capital, are typically required to obtain international 
standards certifications, such as International Standards 
Organization (ISO) 9000. BOI requires investors to submit evidence 
of compliance with the conditions of their approval in order to 
claim incentive benefits. BOI previously lifted all local content 
 
BANGKOK 00000206  007 OF 016 
 
 
and export requirements. 
 
Specific BOI incentives include: 
 
- Tax incentives: exemptions or reductions of import duties on 
imported machinery; reductions of import duties on imported raw 
materials and components; exemptions from corporate income taxes for 
three to eight years; and, deductions from net income of 
infrastructure costs. 
 
- Permissions: to bring in foreign nationals to undertake investment 
feasibility studies; to bring in foreign technicians and experts to 
work under promoted projects; to own land for carrying out promoted 
activities. 
 
- Guarantees: against nationalization; against competition by new 
state enterprises; against state monopolization of the sale of 
products similar to those produced by promoted firms; against price 
controls; against tax-exempt import by government agencies or state 
enterprises of competitive products; and, of permission to export. 
 
Tax incentives offer the greatest advantages, though their relative 
value has declined in recent years with the general reduction of 
import duties and elimination of the former business tax system. The 
Value Added Tax (VAT) Law, which eliminated the business tax 
exemption, has no provision for BOI to offer VAT exemptions or 
reductions. Investors must submit an application form along with 
supporting documentation to be considered for incentives. In most 
cases, BOI decides within sixty days whether or not a project is 
eligible for investment privileges. BOI typically completes its 
review of applications for projects valued in excess of 750 million 
baht (approximately US$22 million) within 90 days. 
 
The maximum allowable debt-to-equity ratio is 3:1 for a newly 
established project, but expansion projects are considered on a 
case-by-case basis. With the exception of electronic and 
agricultural investments, projects valued less than 500 million baht 
(about US$15 million), regardless of overall investment size, must 
produce added value equal to at least 20 percent of sales revenue. 
For projects valued more than 500 million baht (about US$15 
million), excluding land and working capital, a feasibility study 
must be presented at the time of application. Adequate environmental 
protection systems must be installed for projects with a potential 
environmental threat. 
 
BOI's priority areas for investment privileges include: 
- agriculture and agricultural products; 
- environmental protection and/or restoration; 
- direct involvement in technological and human resource 
development; 
- public utilities, infrastructure, and services; 
- Mining, ceramics and basic metals; 
- Light industry; 
- Metal products; 
- Chemicals, paper and plastic; 
- Services and public utilities. 
 
Other targeted industries include agro-industry, automotive, 
information technology/electronics, high value-added services, 
semi-conductors, manufacture of machinery and equipment, software 
parks, and high-quality upstream steel. In 2009, BOI expanded the 
list of eligible businesses for promotion to include four additional 
sectors: 
- technology and healthcare, specifically the production of 
nano-technology materials or products; 
- manufacture of musical instruments; 
- manufacture of 'completely built unit' (CBU) houses or 'completely 
knock-down' (CKD) houses; and 
- service-related industrial estates, as well as activities related 
to tourism and tourism-related real estate. 
 
State-enterprise projects are not eligible for BOI promotion, but 
concession projects (either Build Transfer Operate or Build Operate 
Transfer) by the private sector are eligible with some restrictions. 
For privatization of state enterprises, only expansions after the 
privatization are eligible for BOI promotions. 
 
BOI actively encourages investment in the least-developed provinces 
of Thailand, offering maximum incentive packages to projects that 
locate in one of these provinces. BOI typically classifies these 
provinces as those whose average per capita income has been below 85 
percent of the national average during the previous three years. 
These provinces have included: Sisaket, Nong Bua Lamphu, Surin, 
 
BANGKOK 00000206  008 OF 016 
 
 
Yasothon, Maha Sarakham, Nakhon Phanom, Roi-Et, Kalasin, Sakon 
Nakhon, Buri Ram, Amnat Charoen, Phraea, Phayao, Nan, Satun, 
Pattani, Yala, and Narathiwat. 
 
In June 2004, BOI introduced special investment privileges to 
promote investment in four northeastern provinces, namely 
Chiayaphum, Nong Khai, Ubon Ratchathani, and Udon Thani. With this 
designation, all operations located in these four provinces will 
receive special privileges, regardless of their location within or 
outside of an industrial estate. These incentives include: 
- A 50 percent reduction in corporate income tax for an additional 
five years beyond the initial 8-year exemption; 
- Double income tax deduction of costs for transportation and 
utilities for a period of 10 years; 
- Deduction of 25 percent of the project's infrastructure 
construction costs from net profit (for tax purpose) for a period of 
10 years. 
 
In an attempt to revive the economies of the three southernmost 
provinces (Pattani, Yala, and Narathiwat), BOI launched a special 
package for investment projects in the area in mid-2007. The package 
includes maximum tax incentives, including eight-year corporate 
income tax holidays plus a 50 percent reduction on corporate income 
tax for the following five years, an exemption of import duties on 
machinery and raw materials, and deduction of infrastructure 
construction and installation cost up to 25 percent of capital 
investment. The applicable period for double deduction of public 
utilities and transportation costs was extended to 15 years. In 
2009, BOI broadened the investment promotion scope to allow all 
types of eligible activities to apply for the promotion incentives 
in Pattani, Yala, and Narathiwat. In addition, the deadline for 
applications was extended from December 2009 to December 2012. 
 
As part of its policy to encourage investment throughout the 
country, BOI divides the country into three zones: Zone 1 (Bangkok 
and 5 surrounding provinces), Zone 2 (a grouping of 12 other 
provinces), and Zone 3 (the remaining 58 provinces). BOI promotes 
the relocation of projects from Zone 1 to Zone 2 and Zone 3; 
however, in order to be eligible for new incentives, these projects 
must relocate to an industrial estate or a promoted industrial 
zone. 
 
A three-year income tax holiday applies to qualifying investments in 
Zone 1 and Zone 2, but in Zone 2 if the project is located in 
industrial estates or promoted industrials zones, the period for 
income tax holiday increases to seven years. Projects with capital 
investment of 10 million baht (about US$300,000) or more may be 
eligible for an income tax holiday of eight years if it is relocated 
to Zone 3. Projects must obtain ISO 9000 or similar international 
standard certification within 2 years from their start-up date or 
the income tax holiday period will be reduced by one year. To 
improve the corporate governance, BOI sets a cap on a project's 
corporate income tax holiday at 100 percent of invested capital. In 
September 2002, BOI relaxed its zoning requirement to promote 
expansions and cluster development. Projects formerly required to 
locate in Zones 2 or 3 are now free to expand wherever they wish. On 
environmental protection grounds, however, tanneries, bleaching and 
dying plants, cyanide-based heat treatment facilities, and 
facilities for the recycling/re-use of unwanted materials are 
ineligible for this zoning relaxation. 
 
Majority or total foreign ownership is permitted for BOI-approved 
investment projects in the manufacturing sector; however, for 
projects in agriculture, animal husbandry, fishery, mineral 
exploration and mining, and service businesses under Schedule One of 
the Foreign Business Act of 1999, Thai nationals must hold shares 
totaling not less than 51 percent of the registered capital. 
 
Investment conditions and incentive packages differ for regional 
operating headquarters (ROHs), which are defined by BOI as companies 
or partnerships that provide managerial, technical, or supporting 
services to an associated enterprise or domestic or foreign 
branches. ROH business projects with registered capital of at least 
10 million baht (approximately US$300,000), and in which overseas 
revenue accounts for at least half of annual income, are eligible to 
receive BOI incentives, such as permission to own land, eased 
provisions for hiring expatriate staff, and additional tax breaks 
(such as a preferential corporate income tax rate of 10 percent 
versus 30 percent and a flat 15 percent personal income tax rate for 
foreign employees for four years). In July 2008, BOI waived import 
tariffs on machines for research and development for ROHs in order 
to attract more investments. In September 2009, BOI set up a working 
committee to revise the ROH regulations and improve corporate income 
 
BANGKOK 00000206  009 OF 016 
 
 
tax incentives related to ROH activities, but the results have not 
been announced. There are currently 81 BOI-promoted ROH projects, 
most of which are in the manufacturing and service sectors, 
including U.S. companies such as Exxon Mobil Co., Ltd., Chevron Asia 
South Co., Ltd., General Motors Southeast Asia Operations Co., Ltd., 
and Ford Services (Thailand) Co., Ltd. 
 
In 2005, BOI introduced tax incentives to help boost investments in 
Thailand's electrical and electronics industries. In order to 
qualify for these incentives, companies must be long-term investors 
with total investment of at least 15 billion Baht (approximately 
US$450 million). The incentives include 8-year corporate income tax 
exemption periods for projects in Zone 3. However, priority 
activities such as production of solar wafers and solar cells, will 
receive 8-year corporate income tax holidays regardless of project 
location. BOI also granted duty exemptions for all electrical and 
electronics projects, including shorter-term projects, permitting 
duty-free imports of upgraded or replacement machinery for the life 
of the project. In addition, BOI also expanded zone-based fiscal 
incentives for Zone 1 and Zone 2 (Bangkok and surrounding provinces) 
for electrical and electronics projects. For example, projects in 
Bangkok located outside of industrial estates were previously 
ineligible for corporate income tax holidays; however, these 
projects now are eligible for 5-year exemptions. 
 
BOI has also extended tax incentives to the automotive machinery 
sector so that automobile assemblers are eligible for import duty 
exemptions on machinery, regardless of the BOI geographic investment 
zone in which they operate. Total initial investment costs for 
eligible projects must be at least 10 billion Thai baht 
(approximately US$300 million). BOI also made "call center" 
facilities eligible for tax incentives; however, to be eligible, the 
project must be majority Thai-owned. 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
Private entities may establish and own business enterprises. The 
principal forms of business organization under Thai law are sole 
proprietorships, partnerships, limited companies, and public limited 
companies. In addition, branches of foreign corporations are 
recognized, and a "representative" or "liaison" office of a foreign 
company may receive special recognition. Regardless of the form of 
business organization, most businesses must apply for business 
registration. Establishment of a business in certain sectors by a 
foreign entity may be restricted by the Foreign Business Act, or for 
U.S. investors may benefit from the Treaty of Amity and Economic 
Relations (AER) as discussed above. 
 
A Thai public limited company is similar to a corporation in the 
United States, and may be wholly owned by a foreigner unless the 
corporation is involved in a business activity reserved for Thai 
nationals. A public limited company is allowed to offer its shares 
to the public. Eight laws pertaining to individual industries limit 
foreign ownership of companies listed on the Stock Exchange of 
Thailand. 
 
Protection of Property Rights 
----------------------------- 
 
Property rights are guaranteed by the Constitution against 
condemnation or nationalization without fair compensation. Secured 
interests in property are recognized and enforced. Thailand has a 
civil law system under which all laws are embodied in statutes or 
codes promulgated by the government. This practice is in contrast to 
the common law system in many Western countries, where court 
interpretations of statutes serve as governing legal precedent. 
There is an independent judiciary that provides a forum for 
settlement of disputes. Agencies of the government, as parties to 
commercial contracts, may be sued in the courts, and cannot raise a 
defense of sovereign immunity. However, state property is not 
subject to execution. There are four basic codes: Civil and 
Commercial Code, Criminal Code, Civil Procedure Code, and Criminal 
Procedure Code. In adopting these codes early in the twentieth 
century, Thailand selected features of the two major Western legal 
systems (common law and civil law), and adapted to circumstances in 
Thailand provisions drawn from Britain, Germany, Switzerland, 
France, Japan, Italy, India, and other foreign systems. Decisions 
and rulings of the judiciary and civil service can have considerable 
force as precedents. 
 
There are three levels to the judicial system in Thailand: the Court 
of First Instance, which handles most matters at inception, the 
 
BANGKOK 00000206  010 OF 016 
 
 
Court of Appeals, and the Supreme Court. There are specialized 
courts such as the Labor Court, Family Court, Tax Court, the Central 
Intellectual Property and International Trade Court, and the 
Bankruptcy Court. 
 
Widespread counterfeiting and piracy continue to plague intellectual 
property rights owners in Thailand. Particular areas of concern 
include counterfeiting of pharmaceuticals, cosmetics, apparel, and 
accessories. Piracy rates are high for motion pictures, music, 
business and entertainment software. The lack of sustained and 
coordinated enforcement, and, in particular, the failure to 
prosecute and penalize high-level offenders, remains a substantial 
problem. The vast majority of criminal IP cases in Thailand are 
brought against retailers caught with relatively little infringing 
product. In addition to problems with counterfeiting and piracy, 
rights holders cite concerns about long delays in the patent process 
due to the large backlog of unexamined patent applications. Due to 
these concerns, Thailand has been on the Special 301 Priority Watch 
List since 2007. 
 
Thailand amended its legal regime to comply with the WTO Agreement 
on Trade Related Aspects of Intellectual Property (TRIPs) in the mid 
1990s, but questions remain about Thailand's implementation of 
obligations to protect pharmaceutical and agricultural test data 
from unfair commercial use, treatment of conflicting trademarks and 
geographical indications. Since that time, Thailand has not kept 
pace with international IP legal developments, in areas such as 
broadcasting and digital copyright. Thailand is signatory to 
long-standing IP agreements such as the Berne and Paris Conventions, 
but not the World Intellectual Property Organization Copyright 
Treaty (WCT) or Performances and Phonograms Treaty (WPPT). Thailand 
acceded to the Patent Cooperation Treaty in 2009. 
 
Transparency of the Regulatory System 
------------------------------------- 
 
In 1999, Thailand enacted the Trade Competition Act together with 
the Price of Merchandises and Services Act, replacing the 1979 
Price-Fixing and Anti-Monopoly Law.  The laws were intended to 
strengthen the government's ability to regulate market monopolies 
and price fixing. The Trade Competition Act applies to all business 
activities with the exception of state-owned enterprises, 
cooperatives, agricultural and cooperative groups, government 
agencies, and certain enterprises exempted by the law. The law 
established a Trade Competition Commission with the authority to 
place limitations on market share and revenues of firms with 
substantial control of individual market sectors, to block mergers, 
and other forms of business combinations, and to levy fines for 
price-fixing and other proscribed activities. Since the law's 
implementation, several foreign motorcycle distributors were found 
guilty of violating the law by forcing sales agencies to sell only 
their brands. 
 
The government continues to have the authority to control the price 
of specific products under the Price of Merchandises and Services 
Act. The Department of Internal Trade under the Ministry of Commerce 
administers this law and interacts with the affected companies 
although only the "Committee on Price of Merchandise and Service" 
make the final decision on what products to add or remove from price 
controls. As of December 2009, out of 39 controlled commodities and 
services, only sugar is subject to a price ceiling. Besides the 39 
controlled commodities, practically any producer of consumer 
products is prohibited from raising prices without first notifying 
the Committee of its intention to do so. The government also uses 
its controlling stakes in major suppliers of products and services 
such as Thai Airways and PTT to influence prices in the market. 
 
Thailand has extensive legislation aimed at the protection of the 
environment, including the National Environmental Quality Act, the 
Hazardous Substances Act, and the Factories Act. Food purity and 
drug efficacy are controlled and regulated by a Food and Drug 
Administration with authority similar to its U.S. counterpart. 
Likewise, labor and employment standards are set and administered by 
the Ministry of Labor. 
 
Despite the good intentions of most regulatory regimes, consistent 
and predictable enforcement of government regulations remain 
problematic for investment in Thailand. Gratuity payment to civil 
servants responsible for regulatory oversight and enforcement 
remains a common practice. Through such payment, transactions can be 
expedited. Firms that refuse to make such payments can be placed at 
a competitive disadvantage when compared to other firms in the same 
field. However, most observers believe that the overall trend toward 
 
BANGKOK 00000206  011 OF 016 
 
 
transparency in regulatory enforcement is positive, especially for 
foreign-owned businesses. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
The Thai government maintains a regulatory framework that broadly 
encourages investment and largely avoids market-distorting support 
for specific sectors. Government policies generally do not restrict 
the free flow of financial resources to support product and factor 
markets, and credit is generally allocated on market terms rather 
than by "directed lending." Legal, regulatory, and accounting 
systems are largely transparent, despite significant problems in 
some areas. The Thai government has devoted considerable effort to 
bringing these systems into line with international norms, and 
important progress has been made. However, much remains to be done 
to implement the legal and regulatory changes, and human resource 
constraints will limit overall progress in some areas, particularly 
auditing, for the foreseeable future. 
 
In 2002, Thailand established the National Corporate Governance 
Committee (NCGC), chaired by the Prime Minister, to implement 
international-standard corporate governance policies. In conjunction 
with Thai Rating and Information Services Co., Ltd. (TRIS), the 
Stock Exchange of Thailand (SET) and the Thai Securities and 
Exchange Commission (SEC) began rating companies on their corporate 
governance practices. The NCGC claimed that Thai corporate 
governance policies cover most key points addressed by the 
Sarbanes-Oxley Act in the U.S. 
 
Foreign investors are not restricted from borrowing on the local 
market, but there are a number of regulations that affect foreign 
portfolio investment. Thailand maintains regulatory maximum foreign 
ownership limits, and shares of listed companies are traded on both 
a domestic and alien (or foreign) board to enable authorities to 
track foreign ownership. Limits on foreign ownership of Thai 
companies are perhaps most prominent in the financial sector. Under 
the new Financial Institutions Business Act (implemented in August 
2008), foreign share holders may retain a 49 percent stake in 
financial institutions, up from 25 percent under the previous acts. 
Foreign ownership between 25 percent and 49 percent requires prior 
approval from the Bank of Thailand. The new law also allows the 
Ministry of Finance to authorize foreign ownership above the 49 
percent limit with the recommendation from the Bank of Thailand if 
deemed necessary to support the stability of the overall financial 
system in an economic crisis. This type of emergency action also 
requires the support and approval of the Minister of Finance. In 
theory, the private sector has access to a wide variety of credit 
instruments, ranging from fixed term lending to overdraft protection 
to bills of exchange and bonds. However, private debt markets are 
not well-developed, and most corporate financing, whether for 
short-term working capital needs, trade financing, or project 
financing, is commercial bank or financial institution borrowing. 
The Ministry of Finance is working on developing Thailand's debt 
markets. 
 
Following the 1997 financial crisis, banks generally overhauled 
their lending systems and have since taken a more conservative 
approach. Thai borrowers were also reluctant to take on more debt 
due both to overcapacity and a desire to maintain clean balance 
sheets. In recent years, external factors such as problems in the 
U.S. sub-prime market raised the volatility of international 
investment flows and the global financial system, adding risks to 
Thailand's overall macroeconomic and financial stability. Due to 
perceived increased risk and ongoing concerns about their credit 
quality since the global economic downturn, financial institutions 
have tightened their credit standards for loans and credit lines to 
enterprises, as well as to households despite minimum exposure to 
sub-prime market debt papers. After peaking at 47 percent of total 
lending in May 1999 from the financial crisis, net non-performing 
loans slowly declined to stand at 2.94 percent of total loans in 
September 2009. Total assets of the country's largest six banks 
stood at 7 trillion Thai baht (approximately US$211 billion) or 77 
percent of GDP as of September 2009. 
 
The Thai Asset Management Corporation (TAMC), which was established 
in 2001, is a major component of the government's financial reform 
plan with broad legal powers to expedite debt restructuring and 
press creditors and debtors to the negotiating table. Assets are 
transferred at collateral value, excluding personal guarantee, with 
payment coming in the form of ten-year non-negotiable bonds issued 
by TAMC and guaranteed by the Financial Institution Development Fund 
(FIDF), a financial arm of the Bank of Thailand. Interest paid by 
 
BANGKOK 00000206  012 OF 016 
 
 
the bonds is tied to average deposit rates quoted by Thailand's five 
largest banks. According to the decree that created TAMC, the 
corporation will be resolved in June 2011. All remaining assets will 
be sold to the former institutional transferors (commercial banks, 
finance companies, private asset management companies) at an agreed 
price. If the former institutional transferors are not willing to 
repurchase such assets, TAMC will sell the assets to the other two 
smaller state asset management companies, Sukhumvit Asset Management 
and Bangkok Commercial Asset Management. 
 
In addition to legal limits on foreign ownership in certain sectors, 
Thai firms employ defenses against foreign investment primarily 
through cross- and stable-shareholding arrangements. Such defenses 
against hostile takeovers are typically applied against all 
potential investors, rather than against foreign potential investors 
alone. Companies are permitted to specify limits on foreign 
ownership more strict than those established by the government. In 
general, limits on foreign ownership and participation in the Thai 
economy have eased since the Asian Financial Crisis. 
 
Competition from State-Owned Enterprises 
---------------------------------------- 
 
State-owned enterprises operate primarily in the utility, energy, 
telecommunications, banking, tobacco, and transportation sectors. At 
the end of 2008, Thailand's 58 state-owned enterprises had revenues 
of around 4.8 trillion Thai baht (approximately US$145 billion), 
employed approximately 290,000 people (0.8 percent of the Thai labor 
force), and accounted for approximately 53 percent of Gross Domestic 
Product (GDP). 
 
Private enterprises are generally not allowed to compete with 
state-own enterprises (SOEs) under the same terms and conditions 
with respect to access to markets, credit, and other business 
operations such as licenses and supplies, except in the banking 
sector. The government announced its intention to allow more private 
companies to compete with SOEs, in particular in the 
telecommunications, energy, and transport sectors. The government 
regularly allocates three to four percent of its annual budget 
expenditures to fund the SOEs. The government can temporarily 
provide short-term credit facilities, loan guarantees, or capital 
injections for troubled SOEs. This assistance usually focuses on 
those SOEs that have not been corporatized or are operating in loss. 
 
 
Corporate board seats are typically allocated to senior government 
officials or other politically-affiliated individuals. All SOEs are 
required by law to submit annual financial reports to the Office of 
the Auditor General. Publicly-listed state-owned enterprises, such 
as Thai Airways, are required to publish their financial reports. As 
for procurements, state-owned enterprises, like government agencies, 
reserve the right to accept or reject any or all bids at any time 
and may also modify the technical requirements during the bidding 
process, if, according to regulations, corruption is suspected. The 
latter provision allows considerable leeway to state-owned 
enterprises in managing procurements, while denying bidders recourse 
to challenge procedures.  Allegations frequently surface that 
changes are made in procurements. 
 
Thailand currently does not have a sovereign wealth fund. 
 
Corporate Social Responsibility (CSR) 
------------------------------------- 
 
There is wide recognition and awareness of the value of corporate 
social responsibility (CSR) initiatives among Thai producers and 
consumers, but many companies still lack a full understanding of the 
generally accepted CSR principles such as the OECD Guidelines for 
Multinational Enterprises.  CSR is most often identified as 
individual philanthropic projects or community service of companies, 
rather than as an overall corporate strategy aimed to improve the 
community in which the companies operate. Companies that pursue CSR 
are viewed favorably by the public. 
 
Many business associations, including the American Chamber of 
Commerce, are actively supporting the development of CSR programs in 
Thailand.  Since 2007, the American Chamber of Commerce Corporate 
Social Responsibility Excellence Awards have encouraged the 
expansion of CSR programs by identifying best practices of companies 
in Thailand. 
 
Political Violence 
------------------ 
 
BANGKOK 00000206  013 OF 016 
 
 
 
Throughout the second half of 2008, a political protest group called 
the People's Alliance for Democracy (PAD) held large demonstrations 
against the government. In late August 2008, PAD protestors occupied 
Government House, where the Prime Minister's Office is located; they 
held the compound for months. PAD protestors also occupied Bangkok's 
civilian airports on November 25, 2008, impeding the facilities' 
functioning and departing only on December 3, 2008, following the 
collapse of the government headed by then-Prime Minister Somchai 
Wongsawat. During late 2008, there were occasional firearms 
discharges and explosions in the vicinity of the Government House 
compound and the airports, when they were under PAD occupation. The 
explosions seemed intended to injure PAD sympathizers. Several 
people died as a result, and dozens were injured. 
 
Protestors sympathetic to former Prime Minister Thaksin Shinawatra, 
and opposed to PAD and the current government, have also held large 
rallies in Bangkok.  This group of Thaksin supporters is known as 
the United Front for Democracy Against Dictatorship, aka the 
"red-shirts," and they commenced demonstrations against Prime 
Minister Abhisit in early 2009, culminating in the disruption of a 
major regional Asian summit in Pattaya and riots in the streets of 
Bangkok in April of 2009. Subsequent red shirt protests in 2009 
unfolded peacefully, though concerns about the group's plans for 
large scale demonstrations in 2010 remain. 
 
An important political problem for the Thai government is the 
ongoing political violence in Thailand's southern-most provinces 
(Yala, Narathiwat, and Pattani). Efforts to quell the 
ethno-nationalist insurgency, which has led to over 3,000 deaths 
since 2004, have not yet had much effect. 
 
Tensions with Cambodia persist. Cambodia and Thailand dispute 
sections of their historic boundary; Cambodia has accused Thailand 
of encroaching into Cambodian territory and obstructing access to 
Preah Vihear temple ruins awarded to Cambodia by ICJ decision in 
¶1962. Cambodia's decision to appoint former Prime Minister -- and 
fugitive -- Thaksin as a financial adviser to Cambodia has 
accentuated these tensions. 
 
Corruption 
---------- 
 
Thailand has laws to combat corruption. The independent National 
Counter-Corruption Commission (NCCC) coordinates official efforts 
against corruption. In December 2003, Thailand became a signatory to 
the U.N. Convention against Corruption but delayed ratification 
pending a review of legal issues. In April 2005, Thailand endorsed 
the ADB-OECD Anticorruption Action Plan for Asia and the Pacific, 
and assigned Ministry of Justice to implement the Action Plan. 
 
American executives with long experience in Thailand advise 
new-to-market companies that it is far easier to avoid getting 
started with corrupt transactions than to stop such practices once a 
company has been identified as willing to operate in this fashion. 
American firms that comply with the strict guidelines of the Foreign 
Corrupt Practices Act are able to compete successfully in Thailand. 
 
Recent Thai administrations have stated publicly their intention to 
improve transparency in the evaluation of bids and the awarding of 
contracts. Despite recent improvements, both foreign and Thai 
companies continue to complain about irregularities in the Thai 
Customs Department. Increasing media scrutiny of public figures has 
raised political pressure to curtail favoritism and corruption. 
However, convictions against public officials on corruption-related 
charges are rare, and the legal system offers inadequate deterrence 
against corruption. 
 
The press features frequent allegations of irregularities in public 
contracts, most notably over the use of public lands, procurement 
favoritism (e.g., revising requirements so that a preferred company 
wins over its competitors), and police complicity in a variety of 
illegal activities. In January 2010, the Thai press widely reported 
news of the indictment in the U.S. of a former Thai Tourism minister 
accused of taking bribes from a Hollywood couple seeking to do 
business in Bangkok. In December 2009, the Minister of Public Health 
and Deputy Minister of Public Health resigned over allegations of 
corruption in a medical supplies procurement deal. According to some 
studies of Thailand, a cultural propensity to forgive bribes as a 
normal part of doing business and to equate cash payments with 
finders' fees or consultants' charges, coupled with the low salaries 
of civil servants, encourages officials to accept illegal 
inducements. 
 
BANGKOK 00000206  014 OF 016 
 
 
 
Bilateral Investment Agreements 
------------------------------- 
 
The 1966 iteration of the U.S.-Thai Treaty of Amity and Economic 
Relations (AER), discussed above, allows U.S. citizens and 
businesses incorporated in the U.S., or in Thailand that are 
majority-owned by U.S. citizens, to engage in business on the same 
basis as Thai nationals. Under the AER, Thailand is permitted to 
apply restrictions to American investment only in the fields of 
communications, transport, banking, the exploitation of land or 
other natural resources, and domestic trade in agricultural 
products. 
 
In October 2002, the U.S. and Thailand signed a bilateral Trade and 
Investment Framework Agreement (TIFA). The TIFA establishes a Trade 
and Investment Council (TIC), which serves as a forum for discussion 
of bilateral trade and investment issues such as intellectual 
property rights, customs, investment, biotechnology, and other areas 
of mutual concerns. 
Thailand also has bilateral investment agreements with 42 countries, 
including Germany, the Netherlands, the United Kingdom, China, and 
members of the Association of Southeast Asian Nations (ASEAN). These 
agreements establish guidelines for expropriation compensation and 
the repatriation of capital, but do not include national treatment 
provisions. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
The Overseas Private Investment Corporation (OPIC) can provide 
political risk insurance for inconvertibility and transfer, 
expropriation, and political violence for U.S. investments including 
equity, loans and loan guarantees, technical assistance, leases, and 
consigned inventory or equipment. OPIC Insurance is currently 
insuring three U.S. corporations/organizations involved in 
telecommunications, humanitarian services, and economic development 
in Thailand. Most recently, OPIC provided insurance to the Asia 
Foundation. OPIC direct loans and loan guarantees are also available 
for business investments in Thailand, and cover sectors as diverse 
as tourism, transportation, manufacturing, franchising, power, and 
others. Historically, OPIC has committed over US$32.5 million in 
financing to investments in Thailand. In addition, OPIC supports 
seven equity funds that are eligible to invest in projects in 
Thailand. 
 
OPIC established a special line of credit of up to US$175.75 million 
to mobilize U.S. private sector investment in the reconstruction of 
nations devastated by the December 2004 tsunami. The credit line was 
part of an OPIC Tsunami Reconstruction Finance Initiative intended 
to help speed the rehabilitation of housing and infrastructure in 
affected countries, including Thailand. Thailand became a member of 
the Multilateral Investment Guarantee Agency (MIGA) in October 
¶2000. 
 
OPIC-financed loans of up to US$200 million per project are also 
available for business investments in Thailand, and cover sectors as 
diverse as tourism, transportation, manufacturing, franchising, 
power, and others. In addition, OPIC supports six new private equity 
funds that are eligible to invest in clean and renewable energy 
projects in emerging markets worldwide, including Thailand. Through 
OPIC, investors have access to political risk insurance, debt 
financing, and equity. 
 
Labor 
----- 
 
According to the National Statistics Office, as of October 2009, 
Thailand has a labor force of 37.66 million workers out of a total 
population of 67 million. This figure includes Thai nationals 
fifteen years of age or older. The official unemployment rate 
averaged 1.61 percent during 2009, but the rate is calculated with 
a very generous definition of employment and does not include an 
estimated one to two million seasonally unemployed agricultural 
workers. As a result of the global economic downturn, the 
manufacturing sector began to show signs of increased unemployment 
since the last quarter of 2008, but the situation improved in the 
latter half of 2009. The agricultural and service sectors have been 
able to absorb the unemployed works from the manufacturing sector, 
keeping the overall rate very low. 
 
The Thai government's decision not to forcibly repatriate large 
numbers of foreign migrant workers in the agriculture, fisheries, 
 
BANGKOK 00000206  015 OF 016 
 
 
construction, household service, and other semi-skilled sectors may 
also have affected employment levels. Since 2004, the Thai 
government has allowed illegal migrant workers from the neighboring 
countries of Laos, Cambodia, and Burma, to register with the 
government to legally stay and work in Thailand. As of December 
2009, there were more than a million migrants registered with the 
Thai government; however, private and government sources estimate 
that the number of illegal migrants currently living and working in 
Thailand could be as high as 1.5 to 3 million. 
 
Despite past rapid growth in the industrial and service sectors, 37 
percent of the Thai labor force is still employed in the 
agricultural sector. However, the shift of workers from agriculture 
is continuing, especially in the Northeast, where agricultural 
productivity and investment are lower. As a consequence, recent 
years have seen a constant flow of rural, generally unskilled Thais 
seeking work in Bangkok and the more industrialized regions, both 
seasonally and on a permanent basis. This ready availability of 
migrant labor contributed to the rapid growth of Thailand's 
industrial and construction sectors. 
 
In the past, many multinational firms brought in expatriate 
professionals because qualified local personnel simply were not 
available, even at high salaries. Finding, training, and retaining 
qualified employees to work in the manufacturing facilities being 
developed in industrial estates, such as those along the Eastern 
Seaboard, will continue to be a challenging government priority. 
 
The labor relations climate is generally peaceful, and formal 
strikes are infrequent. There were two worker strikes recorded in 
2008 and four employer lockouts. Less than two percent of the total 
labor force is unionized; unionization rates are high only in state 
enterprises. As of December 2008, there are 44 state-owned 
enterprise unions with 175,000 members, and 1,229 private labor 
unions with 341,520 members. 
 
The Labor Protection Act, enacted in 1998, brought labor practices 
more in line with International Labor Organization (ILO) standards. 
The law cut the workweek to a maximum of forty-eight hours, 
including overtime for all types of work, with overtime payable at 
one and one-half times the hourly rate. Hazardous work may not 
exceed seven hours per day or forty hours per week. All employees 
are entitled to a vacation of six workdays per year, in addition to 
thirteen holidays traditionally observed in Thailand. Under the 
labor law, the employment of children under the age of fifteen is 
prohibited, and there are restrictions on the employment of children 
and youths between the ages of fifteen and eighteen. 
 
The Thai government amended the Labor Protection Act in 2008 to help 
promote standards for contract labor. The Act now requires an 
employer to provide benefits and welfare without discrimination to 
the contract laborers. The Act also extended protection for 
employees against sexual abuse and harassment in the workplace. 
 
Foreign Trade Zones/Free Ports 
------------------------------ 
 
The Industrial Estate Authority of Thailand (IEAT), a 
state-enterprise under the Ministry of Industry, established the 
first industrial estates in Thailand, including Laem Chabang 
Industrial Estate in Chonburi Province and Map Ta Phut Industrial 
Estate in Rayong Province. More recently, private developers have 
become heavily involved in the development of these estates. The 
IEAT currently operates 11 estates, plus 30 more in conjunction with 
the private sector in 14 provinces nationwide. Private sector 
developers operate over 50 industrial estates, most of which have 
received promotion privileges from the Board of Investment. 
 
In addition, the IEAT established thirteen special IEAT Free Zones 
(renamed from export processing zones or free trade zones), reserved 
for the location of industries manufacturing for export only, to 
which businesses may import raw materials and export finished 
products free of duty (including value added tax). These zones are 
located within industrial estates, and many have customs facilities 
to speed processing. The free trade zones are located in Chonburi, 
Lampun, Pichit, Songkhla, Samut Prakarn, Bangkok (at Lad Krabang), 
Ayuddhya, and Chachoengsao. In addition to these zones, factories 
may apply for permission to establish a bonded warehouse within 
their premises to which raw materials, used exclusively in the 
production of products for export, may be imported duty free. 
 
Foreign Direct Investment Statistics 
------------------------------------ 
 
BANGKOK 00000206  016 OF 016 
 
 
 
Foreign direct investment (FDI) (net inflows from non-banking sector 
only), totaled US$4.4 billion in 2009 (Jan-Oct), compared with 
US$7.6 billion in 2008 (full year), and US$10.2 billion in 2007 
(full year). The sectors that received large amounts of FDI included 
machinery and transport equipment (US$1.2 billion), electrical 
appliances (US$1.0 billion), real estate (US$658 million), metal and 
non-metallic (US$355 million), and food and sugar (US$208 million) 
sectors. 
 
Japan was the largest source of FDI in 2009 (Jan-Oct) at US$1.86 
billion, followed by Hong Kong at US$436 million and Singapore at 
US$172 million. U.S. FDI was ranked fourth at US$124 million. The 
sharp decline of FDI in 2009 could be largely explained by the 
global economic recession and domestic political tension. There are 
no reliable statistics available for cumulative investment by 
country of origin. 
 
The Embassy estimates the total present value of U.S. investment in 
Thailand to be in excess of US$23 billion. From January to November 
2009, BOI approved 36 investment projects by U.S. firms, totaling 
approximately US$770 million, including one major automotive 
investment with an estimated value of US$606 million. Other major 
U.S investments included the following (note that a U.S. investment 
is classified as any investment with at least ten percent U.S. 
capital, and the companies listed below are based on January to June 
2009 data only; projects could be either an expansion or a newly 
established project): 
 
- Pepsi-Cola (Thai) Trading Company Limited with 104.3 million baht 
(US$3.2 million) investment; 
 
- Siam Steel Mill Services Ltd. with 93.8 million baht (US$2.8 
million) investment in disposal services of industrial waste; 
 
- Solarlens Company Ltd. with 90.2 million baht (US$2.7 million) 
investment in coated lens manufacturing.