This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 12 BANGKOK 000944 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV TH
SUBJECT:  THAILAND - INVESTMENT CLIMATE STATEMENT, 2006 
 
REF: SECSTATE 202943 
 
Following is the 2005 Investment Climate Statement for Thailand. 
Section headings conform to those provided in reftel paragraph 4. 
OPENNESS TO FOREIGN INVESTMENT 
The Royal Thai Government (RTG) has long maintained an open, 
market-oriented economy and encouraged foreign direct investment as 
a means of promoting economic development, employment, and 
technology transfer. Thailand welcomes investment from all countries 
and seeks to avoid dependence on any one country as a source of 
investment. 
In the wake of the 1997-98 Asian Financial Crisis, the RTG 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 
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. Many aspects of the IMF reform measures were 
controversial, and were resisted strongly by the political 
opposition and other powerful elements of Thai society. Inconsistent 
political will for reform, weak bureaucratic implementation of some 
measures and a strongly recovering economy has meant that reform 
efforts have slowed considerably since the Thaksin administration 
took office in 2000 and focused its efforts on stimulating domestic 
consumption 
Replacing the 1972 National Executive Council Announcement Number 
281, otherwise known as the Alien Business Law, the Alien Business 
Act 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. 
The Thaksin government has begun a series of Free Trade Agreement 
negotiations in an effort to gain a comparative advantage for Thai 
products in key markets/regions. In addition to completed FTAs with 
Australia, New Zealand,  Bahrain, Peru and BIMSTEC, and 'early 
harvest agreements with China and India, Thailand is holding talks 
with, Japan, ASEAN-China, European Free Trade Area and the U.S. An 
agreement with Japan is expected to be singed in April 2006. 
On taking office, the Thaksin government implemented a "dual track" 
development approach that combines building domestic economic 
capacity with facilitation of foreign trade and investment. By all 
accounts, this approach has been successful in reviving the Thai 
economy. In 2003, gross domestic product (GDP) grew by 7.0 percent 
as Thailand posted one of the fastest growth rates in East Asia. 
Although the regional SARS outbreak affected tourism, it had little 
impact on overall economic growth. Although consumer demand and 
exports remained strong in the first part of 2004, the avian flu, 
political unrest in the South, and rising oil prices moderated the 
pace of GDP growth to 6.2 percent for the year. 
On December 26, 2004, a tsunami hit six provinces in southern 
Thailand, one of the country's most important tourist areas. As a 
result of the resulting downturn in the tourism sector, higher oil 
prices and a decline in consumer demand, the pace of economic growth 
slowed to 4.4 percent over the first three quarters of 2005 and is 
expected to have increased by 4.75 percent for the entire year. 
Since the latter half of 2005, the RTG has been struggling to retain 
its popular support amid clear signs of slowing economic growth and 
persistent unrest in southern Thailand.  It is widely anticipated 
that both budget and current account will record deficits for the 
next few years as the RTG raises expenditure to stimulate the 
economy and restore its popularity with the electorate.  Monetary 
conditions have also been tightening in response to inflationary 
pressures and the need to stabilize the Baht.  With higher 
investment demand from the RTG's infrastructure development 
programs, GDP growth is forecast to improve to 4.5-6.0 percent in 
2006 with a lower rate of inflation. 
Treaty Of Amity: The U.S.-Thai Treaty of Amity and Economic 
Relations (AER) was 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 Thais, exempting them from 
most of the restrictions on foreign investment imposed by the Alien 
Business Act of 1999. 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. Notwithstanding their treaty rights, many 
Americans choose to form joint ventures with Thai partners, allowing 
them to hold the majority stake because of their familiarity with 
the Thai economy and local regulations. 
In the Uruguay Round trade negotiations, all parties agreed that the 
privileges provided by the Treaty of Amity to U.S. investors in the 
service sector would be exempted from "Most Favored Nation" (MFN) 
requirements for ten years, beginning with the establishment of the 
World Trade Organization in January 1995. During this ten-year 
period, Thailand was expected to liberalize its investment regime to 
provide roughly equivalent treatment to all foreign investors in the 
service sector. This has not yet been the case. Both the U.S. and 
Thailand anticipate that the rights granted investors under the AER 
will be replicated in the bilateral FTA currently under negotiation. 
 
Free Trade Agreement: In October 2003, President Bush and Prime 
Minister Thaksin announced the intention to begin bilateral free 
trade agreement (FTA) negotiations. The first round of FTA 
negotiations was held during June, 2004 in Hawaii, and the most 
recent in January 2006 in Chiang Mai, Thailand.  The Thailand FTA 
will be the United States' second such agreement in Asia, following 
the FTA with Singapore. In September 2005, the two leaders agreed to 
target the completion of negotiations for the first half of 2006. 
Registration, Work Permits: 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. American 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 non-immigrant 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. 
The Alien Occupation Law of 1972 (Decree Number 322) lists 
occupations reserved exclusively for Thais, including professional 
services such as accounting, architecture, law, engineering, the 
manufacture of traditional Thai handicrafts, and manual labor. The 
Law also states that all non-Thais working in Thailand, with limited 
exceptions, must possess a work permit issued at the discretion of 
the Ministry of Labor, although some foreigners already working in 
Thailand were 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 
prompted by the Board of Investment (BOI) usually have little 
difficulty obtaining work permits. The government's "Buy Thai" 
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. However, in the second half 
of 2005, the RTG is considering relaxing rules and regulations on 
foreign engineers and skilled technical personnel.  This may be 
in-line with the government's implementation of  a Baht 1.7 trillion 
(US$ 43.2 billion) 5-year megaproject infrastructure development 
program.  Currently, Thai laws allows the import of migrant workers 
from three countries, Burma, Laos and Cambodia for manual labor in 
certain industries such as textiles. 
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, foreigners who invest a minimum of 40 million baht 
(around $1 million) are permitted to buy up to 1,600 square meters 
of land for residential use with the permission of the Ministry of 
Interior. Petroleum concessionaires may own land necessary for their 
activities. Many foreign businesses instead sign long-term leases, 
and then construct buildings on the leased land. Under the 1999 
Property Leasing Bill, non-Thais are allowed to own up to 100 
percent of a condominium building, although other restrictions 
apply. 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. Violation of Thai 
business regulations can carry heavy criminal penalties, and 
criminal liability can be assessed under numerous laws. 
Privatization: With the aim of encouraging capital inflows and 
relieving resource constraints in many key sectors of the economy, 
the RTG has embarked on a privatization program for state-owned 
economic enterprises and state monopolies. State-owned enterprises 
operate primarily in the utility, energy, telecommunications, 
banking, tobacco, and transportation sectors. In 2004, Thailand's 61 
state-owned enterprises had total revenues of around 1.8 trillion 
Baht (about $45.5 billion), employed over 272,549 (7 percent of the 
Thai labor force), and accounted for approximately 28 percent of 
Gross Domestic Product (GDP). 
In 1998, the Cabinet approved a "Master Plan for State Enterprise 
Reform". The Master Plan lays out a comprehensive strategy and 
timetable for privatization of infrastructure and various 
state-owned enterprises (SOEs). 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. In 
2001, the RTG partially privatized the Petroleum Authority of 
Thailand (PTT) and Internet Thailand (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.) 
In 2002, the RTG corporatized BankThai Bank and Krung Thai Card, a 
subsidiary company of Krung Thai Bank, the Airport Authority of 
Thailand (renamed to Airports of Thailand), and Telecommunication of 
Thailand. In 2003, the RTG corporatized the Communication Authority 
of Thailand, and partially privatized Krung Thai Bank. In March 
2004, the RTG conducted a successful initial public offering of 30 
percent of the shares in Airports of Thailand, and a second public 
offering of Bangchak Petroleum Public Company and Thai Airways 
International. 
In early 2004, labor protests prompted the government to postpone 
the planned corporatization of the Electricity Generating Authority 
of Thailand (EGAT). The Stock Exchange of Thailand's (SET) 
relatively weak performance in the first half of 2004 further 
dampened the pace of privatization.  In late June 2005, the RTG 
successfully corporatized EGAT. However, EGAT's anticipated listing 
in November was delayed following an order by the Supreme 
Administrative Court that suspended its stock offering until the 
court finishes its consideration of a petition filed by civil groups 
which oppose the privatization.  The RTG believes that the halt will 
be only temporary, and the initial public offering will be able to 
resume in 2006. 
In mid-August 2004, the government corporatized the Mass 
Communication Authority of Thailand (MCOT), which is listed on the 
stock market a month later with an initial public offering in 
November.  However, the Ministry of Finance still is the majority 
shareholder of the company (77.28 percent).  The Metropolitan 
Electricity and the National Waterworks Authority are next on the 
docket of state-owned enterprises for corporatization. 
Corporatization timetables have slipped repeatedly in the past, 
however, and it is not clear if the share offerings will actually 
take place before the end of the year. 
Draft legislation for a State Investment Corporation (SIC) is 
designed to set up a supervisory entity for state enterprise 
privatization. The SIC will be 100 percent owned by the Ministry of 
Finance, and will regulate state enterprises that have been 
converted into private companies under the 1999 State Enterprise 
Corporatization Act. The legislation, however, was rejected by the 
Cabinet, and it will be reviewed and revised before forwarding to 
the Cabinet to reconsider. 
Other than PTT, AOT and MCOT, few significant privatizations have 
occurred. Thailand has removed tax disincentives on buying domestic 
financial institutions. The previous foreign ownership limit of 25 
percent was raised to 49 percent in 1997. Foreign banks are still 
limited to operation of a single branch. 
In January 2004, the Cabinet approved a new Financial Sector Master 
Plan (FSMP) designed to increase competition by eliminating 
regulatory boundaries within the financial sector. The FSMP 
classifies financial institutions as either commercial banks able to 
provide all financial services except insurance, securities trading 
and brokerage; and retail banks, which will focus on small- and 
medium-sized enterprises (SMEs) and lower-income customers. 
According to the FSMP, retail banks "...may provide virtually all 
types of financial transactions with the same exceptions as 
commercial banks." The FSMP allows foreign banks to operate as full 
branches under the same conditions as Thai commercial banks, but 
without the option of opening branch offices, or subsidiaries, which 
would also operate as Thai commercial banks. Over time, the FSMP 
foresees foreign banks receiving permission to open 3-5 branch 
offices outside Bangkok but no timeframe is specified. All financial 
institutions had six months from February 1, 2004 to apply for a 
change of status. As a result of the FSMP, there are five new 
banking licenses have been granted by the Thai financial authorities 
in 2005.  The FSMP is available in English at 
www.bot.or.th/bothomepage/BankAtWork/FinInsti tute/ 
FISystemDevPlan/ENGVer/pdffile/eng.pdf. 
There is insufficient evidence to comment on how foreign investors 
will be treated under the privatization program. Foreign purchases 
were allotted 30 percent of the PTT and 12 percent of AOT initial 
public offerings, for example. According to management consultants 
retained by privatization authorities, foreign investors will have a 
substantial role in future privatizations. Senior RTG officials have 
also indicated that foreigners will be allowed to participate in 
upcoming privatizations. 
CONVERSION AND TRANSFER POLICIES 
Exchange controls are governed by the Exchange Control Act of 1942 
and Ministerial Regulation Number 13 of 154, and are administered by 
the Bank of Thailand (BOT; Thailand's central bank). Inward 
remittances are free of controls, but foreign currency must be 
deposited in a foreign currency account or converted at an 
authorized bank within seven days of being remitted to Thailand. 
Foreigners staying in Thailand for less than three months, 
embassies, and international organizations are exempt from this 
requirement, however. The proceeds of exports with a value of more 
than 500,000 baht ($12,900) must be remitted as soon as received and 
within 120 days of export, and deposited within seven days of 
receipt. 
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 with authorized banks in Thailand. Such accounts must use 
funds that originate abroad. 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 $10 million per annum for business investment or loans to 
subsidiaries, to $100,000 for remittances to family members. The 
Bank of Thailand must approve the purchase of immovable assets or 
securities abroad. 
All remittances exceeding $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, and we are not 
aware of any pending changes in RTG policies that would adversely 
affect the property rights of U.S. nationals in Thailand. 
DISPUTE SETTLEMENT 
Thailand has a civil and commercial code, including a Bankruptcy 
Act. 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, however, and enacted its own rules on 
conciliation and arbitration in the Arbitration Act of 1987. 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. 
In 2004, Parliament approved changes to the Bankruptcy Act including 
tightening the rules under which some debtors can emerge from 
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 Bankruptcy Court Act established a specialized court for 
bankruptcy cases. Since beginning operation in mid-1999 to October 
2005, the Court has issued verdicts on 15,863 cases. 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. 
PERFORMANCE REQUIREMENTS AND INCENTIVES 
In its December 1999 remarks, the WTO's Trade Policy Review Body 
noted that Thailand has committed to implement all WTO agreements, 
including Trade-Related Investment Measures (TRIMS). In its latest 
review in November 2003, the WTO noted Thailand's steady progress 
towards trade liberalization as well as macro-economic stabilization 
and key structural reforms, including financial sector 
rehabilitation, have promoted growth in the face of unfavorable 
global factors. Further improvement in Thailand's market access as 
well as progress in privatization and regulatory reforms, to make 
domestic markets more competitive, would raise productivity an 
attract much needed foreign direct investment and also assist a 
sustained recovery. Thailand's next review is scheduled for November 
or December 2007. The Board of Investment (BOI), established by the 
Investment Promotion Act of 1977, is Thailand's central investment 
promotion authority. The BOI lists five priority sectors (detailed 
below), covering hundreds of types of businesses eligible for 
investment incentives. Generally, the most generous incentives are 
offered to those economic activities that bring new technology to 
Thailand and locate investment in less-developed provinces. BOI 
incentives are of two basic types: tax-based (including tax holidays 
and tariff exemptions) and non-tax privileges (guarantees, special 
permissions, services, etc.). 
The BOI's revised investment policy, effective from August 1, 2000, 
is as follows: 
- In order to maximize the benefits of investment to the country, 
and in line with policies supporting good governance, the BOI uses a 
performance-based system that requires promoted investors to submit 
evidence of compliance with the conditions of their approval in 
order to claim incentive benefits. 
- To increase the global competitiveness of Thai exports, projects 
investment 10 million baht ($250,000) or more, excluding the cost of 
land and working capital, will be required to obtain international 
standards certification, such as International Standards 
Organization (ISO) 9000. 
- In order to ensure that Thai investment policy is in line with all 
international obligations, the BOI has lifted all local content and 
export requirements. 
- The BOI pursues a decentralization policy to encourage the 
distribution of opportunities and prosperity to the least-developed 
provinces. Projects locating in the least-developed provinces will 
receive maximum incentives. These provinces consist primarily of 
provinces in which average per capita income has been below 85 
percent of the national average during the past three years, 
including Sisaket, Nong Bua Lamphu, Surin, Yasothon, Maha Sarakham, 
Nakhon Phanom, Roi-Et, Kalasin, Sakon Nakhon, Buri Ram, Amnat 
Charoen, Phraea, Phayao, Nan, Satun, Pattani, Yala, and Narathiwat. 
 
- To support the development of small- and medium-sized enterprises 
(SMEs), the minimum investment amount shall remain at one million 
baht ($26,000), excluding the cost of land and working capital. 
- To promote investment in key sectors, five priority activities 
have been identified: 
-- Agriculture and agricultural products; 
-- Environmental protection and/or restoration; 
-- Direct involvement in technological and human resource 
development; 
-- Basic transportation, infrastructure, and services; and, 
-- Targeted industries, including agro-industry, automotive, 
fashion, information technology/electronics, high value-added 
services, and semi-conductors. 
Specific BOI incentives include: 
- Tax incentives: exemptions/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 won 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 are the BOI benefits that offer the greatest 
advantage over non-promoted industries, 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 the 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, the 
BOI decides within sixty days whether or not a project is eligible 
for investment privileges. BOI policy is to complete action on 
applications for projects valued in excess of 500 million baht ($13 
million) within 90 days. 
As noted above, the following revisions to the BOI investment 
promotion scheme became effective on August 1, 2000: 
- For projects in the manufacturing sector, majority or total 
foreign ownership is permitted in any zone. 
- The maximum allowable debt-to-equity ratio was lowered from 4:1 to 
3:1. 
- Except for the electronic and agriculture industries, projects 
investing less that 500 million baht (about $12 million) must 
produce added value equal to at least 30 percent of sales revenue. 
- For projects of more than 500 million baht (about $13 million), a 
feasibility study must be presented at the time of application. 
- The BOI will continue to promote relocation of projects to Zone 2 
and Zone 3 (special groups of 12 and 58 provinces, respectively). 
However, in order to be eligible for new incentives, projects must 
relocate to an industrial estate. 
- Projects submitted before December 30, 2004 that locate in Zone 2 
industrial estates approved by the BOI before the date of the 
announcement (i.e., August 2000) can enjoy a seven-year income tax 
holiday. After that date, the income tax holiday will be five years, 
in line with the new policy announcement. 
- The 58 provinces of Zone 3 will be divided into two areas, based 
on each province's state of development. New projects in Zone 3 will 
no longer be eligible for a 75 percent reduction of import duty on 
raw materials used for domestic sales but will be eligible for 
exemption of import duty on machinery. 
In 2001, the RTG amended its investment promotion conditions for 
regional headquarters. Business projects with registered capital of 
at least 10 million baht ($260,000), and in which overseas revenue 
accounts for at least half of annual income, are now eligible to 
receive BOI incentives, such as permission to own land, eased 
provisions for hiring expatriate staff, and additional tax breaks. 
In addition, the BOI has extended tax incentives in the automotive 
machinery sector so that all 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 
baht (around $260 million). 
In September 2002, the BOI promoted cluster development by relaxing 
zoning regulations. 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. 
The BOI has also made "call center" facilities eligible for tax 
incentives. To be eligible, however, the project must be majority 
Thai-owned. 
Thailand's membership in the WTO has led to a relative decline in 
the importance of tax-based investment incentives. In general, 
therefore, the BOI is placing increasing emphasis on business 
facilitation and investment services. 
In June 2004, the BOI introduced special investment privileges to 
promote investment in the four northeastern provinces, namely 
Chiayaphum, Nong Khai, Ubon Racchathani, and Udon Thani due to their 
low per capita Gross Provincial Product (GPP). With this 
designation, all operations located in these four provinces will 
receive special privileges (see below), regardless of their location 
within or outside of industrial estates. 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. 
Additionally, the BOI will provide one-stop service center for 
investors in these provinces in order to work and coordinate with 
related government agencies on their behalf. 
In early December 2005, the BOI approved new incentives in the form 
of tax advantages that are aimed at helping boost the 
competitiveness of companies investing in Thailand's electrical and 
electronics industries.  In order to qualify for the new incentive 
packages, electrical and electronics companies have to be long-term 
investors with total investment of at least 15 billion Baht (about 
$375 million) and other requirements.  Those incentives include 
8-year of corporate income tax exemption periods for projects in 
zone 3.  However, priority activities such as production of wafers 
and solar cells, will receive 8-year corporate income tax holidays 
regardless of project location.  Furthermore, the BOI has granted 
duty exemptions for all electrical and electronics projects - not 
just those designed as long-term projects - permitting duty-free 
imports of upgraded or replacement machinery for the life of project 
operations.  As long as they maintain BOI promotion status, projects 
can import machinery duty free on an on-going basis.  In addition, 
the BOI has also expanded zone-based fiscal incentives for zone 1 
and zone 2 (Bangkok and surrounding provinces) for all electrical 
and electronics projects.  For example, projects in Bangkok located 
outside industrial estates were previously ineligible for corporate 
income tax holidays.  Under new incentives, they will be eligible 
for 5-year exemptions. 
Complete information on BOI policies, programs, incentives, and 
application procedures can be found on the BOI web site at 
www.BOI.go.th. 
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 Alien Business Act, or may 
not benefit from the Treaty of Amity and Economic Relations 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 fair 
settlement of disputes. A great deal of status is attached to being 
a judge, and the examinations to enter the judiciary are very 
difficult. The judiciary jealously guards its independence. 
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 
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. 
Intellectual Property Protection: Thailand has passed all 
TRIPS-mandated legislation by passing the Geographical Indications 
Act which went into force April 28, 2004. Thailand is a signatory to 
the Berne Convention, but not the Paris Convention, the Patent 
Cooperation Treaty (PCT), or the World Intellectual Property 
Organization Performances and Phonograms Treaty (WPPT). With the 
establishment of a specialized Central Intellectual Property and 
International Trade Court in 1997, Thailand has a solid legal and 
administrative infrastructure for intellectual property rights (IPR) 
protection. 
Despite a good working relationship between foreign business 
entities and Thai enforcement authorities, however, IPR piracy 
continues at high levels. U.S. copyright industries reported an 
estimated annual trade loss of more than US$175 million from IPR 
infringement in 2004, and a majority of Thai and foreign companies 
operation in Thailand are estimated to use illegal software. Since 
November 1994, Thailand has been on the U.S. Special 301 "Watch 
List". 
There are many obstacles to effective IPR enforcement. Thailand's 
patent office lacks sufficient resources to keep up with its volume 
of applications, and patent examinations can take more than five 
years. The copyright law is ambiguous regarding de-compilation, and 
regulations for enforcement procedures leave loopholes that 
frustrate effective enforcement. The Thai government is in the 
process of amending the Copyright Law in order to bring it in line 
with the WIPO treaties. The Optical Disk Manufacturing Control bill 
entered into force in August 2005. This legislation is designed to 
enhance the authority and capabilities of the Thai government to act 
against operators of illicit optical disk factories and to control 
the production materials and machines of legal producers. U.S. 
copyright industries express concern that the Act's penalties are 
not sufficiently deterrent to pirates and do not enhance the 
government's enforcement and oversight powers enough. The Trade 
Secrets Act that entered into force in 2002 allows government 
 
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agencies, under certain circumstances, to disclose trade secrets to 
protect any "public interest" not having commercial objectives, 
giving rise to concerns that authorities will not be required to 
protect approval-related data against unfair commercial use. 
Implementing regulations for the Act have yet to be approved. 
Although conviction rates in IP prosecutions are very high, 
corruption and a cultural climate of leniency can complicate some 
phases of case administration. 
TRANSPARENCY OF THE REGULATORY SYSTEM 
In 1999, Thailand enacted a new Trade Competition Act intended to 
strengthen the government's ability to regulate price fixing and 
market monopolies. 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. 
The government continues to have the authority to control the price 
of specific products under the Goods and Services Price Act of 1999. 
In practice, very few commodities are subject to formal price 
controls. Currently, out of 34 controlled commodities, only one 
"sugar" was subject to a price ceiling. In a development related to 
rising oil prices associated with political tensions in the Middle 
East, the RTG imposed price imposed oil price controls between 
February 8 and May 19, 2003 period, and January 10, 2004 to October 
21, 2004 (for benzene), and January 10, 2004 to July 13, 2005 (for 
diesel) . During the second period (January 2004 to July 2005), the 
cost of oil subsidy to the RTG was recorded at 92.1 billion Baht (or 
$ 2.3 billion). 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 remains an 
obstacle to 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 in 
this respect is positive, especially in 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 legal and regulatory changes, and human resource 
constraints will limit overall progress in some areas, particularly 
auditing, for the foreseeable future. 
In 2001, a new Telecommunications Bill reduced the maximum stake a 
foreign firm could own in a telecommunications company from 49 to 25 
percent. The change prompted a widespread outcry from the foreign 
business community, and the Cabinet has approved an amendment to the 
legislation that will raise the foreign ownership limit back to 49 
percent. The amendment has not yet been approved in Parliament, 
however. 
In 2002, the National Corporate Governance Committee (NCGC), chaired 
by the Prime Minister, was assigned 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. 
Foreign firms are limited to a 49 percent stake in financial 
institutions. 
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. In fact, 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/finance company borrowing. The 
Ministry of Finance is working on developing Thailand's debt 
markets. 
Following the 1997-1998 financial crisis, banks have generally 
overhauled their lending systems and taken a more conservative 
approach. Thai borrowers were also reluctant to taken on more debt 
due both to overcapacity and a desire to maintain clean balance 
sheets. With the rapid growth of the Thai economy over the last 
several years, however, bank lending has started to increase. As of 
November 2005, total commercial bank credits were 6.4 percent above 
their level of a year earlier, and 5.1 percent above their level 
before the Asian Financial Crisis began in July 1997. After 
factoring in write-offs of outstanding debt and loans transferred to 
asset management companies (AMCs), commercial bank credits in 
November are up 8.2 percent from the same period last year and up 
26.7 percent from July 1997. 
The overall health of the banking sector remains affected by the 
high levels of non-performing loans (NPLs) banks carry on their 
books. After peaking at 47 percent of total lending in May 1999, 
NPLs slowly declined to stand at 9.92 percent of total loans in 
November 2005.  Ongoing debt restructuring will make the NPL level 
decline further, but progress has been slow. 
The Thai Asset Management Corporation (TAMC) 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, the TAMC has taken over 15,302 cases with book 
value of 778.1 billion baht ($19.5 billion) in bad loans from local 
financial institutions and asset management companies as of June 
2005, at the transfer price of 264.7 billion baht or around 34.02 
percent of the book value of the total transferred assets through 
the end of the second quarter of 2005, TAMC has successfully 
restructured 99.27 percent of the total impaired assets transferred 
to the TAMC with the expected recovery rate of 48.2 percent of book 
value. 
Assets are transferred at collateral value, excluding personal 
guarantee, with payment coming in the form of ten-year 
non-negotiable bonds issued by the TAMC and guaranteed by the 
Financial Institution Development Fund (FIDF). Interest paid by the 
bonds will be tied to average deposit rates quoted by Thailand's 
five largest banks. 
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. 
In 2001, the government announced five new investment funds designed 
to stimulate activity in the Thai capital market. Several of these 
funds are open to foreign participation, including the Thailand 
Equity Fund, which is investing $250 million in large Thai 
industrial firms undergoing corporate restructuring, the Thailand 
Recovery Fund, an off-shore fund that focuses on medium-sized Thai 
firms, and the Thailand Corporate Recovery Fund, which is raising 
$500 million for investment in Thai firms, especially businesses 
undergoing restructuring through the TAMC (see above). These funds 
have not yet been fully implemented, however. 
In June 2003, the government announced the creation of the "Vayupak 
Mutual Fund", a new national investment fund. According to 
implementing regulations, the fund is under the authority of the 
Ministry of Finance, and operates according to Thailand Securities 
and Exchange Commission (SEC) regulations. The Vayupak Fund I, with 
capital of 100 billion baht (about $2.3 billion), invests in 
state-owned enterprises and state-owned financial institutions, as 
well as common stocks, bonds, preferred shares, and other debt 
instruments specified by the Ministry and approved by the Cabinet. 
The fund has a 10-year maturity, with the option to extend. It 
offers a yield-guarantee on its investment. The Ministry of Finance 
holds 30 percent of the fund while the rest is held by public. On 
December 3, 2003, the Vayupak Fund I (VAYU1) was listed on the Stock 
Exchange of Thailand with 7,000 million units worth 10 baht ($0.24) 
each. 
Initially the Ministry also planned to launch "Vayupak Fund II" 
after the Vayupak Fund I listed on the stock market with around 50 
billion baht ($1.25 billion) in capital, with a focus on large-scale 
infrastructure investment..  However, the plan has been shelved, and 
there is no clear time frame when the Ministry will dust off the 
plan. 
POLITICAL VIOLENCE 
In recent years, Thailand has developed a much more stable and 
transparent political system, although in the past there were 
frequent changes in government, often by military intervention. The 
last coup was in 1991, followed in 1992 by political unrest and a 
confrontation in the streets of Bangkok in which over 50 civilian 
demonstrators were killed. The "May 1992 events" were a shock to the 
Thai political system, and stimulated a remarkable democratic 
recovery. Since 1992, the military has not interfered in the 
operation of the civilian government, and this situation appears 
likely to remain the case for the foreseeable future. In this 
period, there have been four successful elections (1992, 1995, 1996, 
and 2001), and five peaceful transitions of government. A 
non-partisan assembly re-wrote the nation's constitution, which was 
put into force in October 1997. One of the main reforms of the new 
constitution was the establishment of a number of independent 
agencies to provide checks and balances in the political system. 
Among the most notable are the Election Commission, the National 
Counter-Corruption Commission, and the Constitutional Court. 
Although political problems such as vote-buying remain endemic, 
these organizations have taken major steps toward cleaning up the 
system and instituting political reform. An important political 
problem for the RTG is the ongoing political violence in Thailand's 
southern-most provinces (Yala, Narathiwart, and Pattani). Efforts to 
quell the violence, which has been confined only to three provinces, 
through an expanded military presence and increased government 
investment have not yet had much effect. 
CORRUPTION 
Thailand has laws to combat corruption. The independent National 
Counter-Corruption Commission coordinates official efforts against 
corruption. 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 operate under the strict 
guidelines of the Foreign Corrupt Practices Act are able to compete 
successfully in Thailand. 
Despite recent improvements, both foreign and Thai companies 
continue to complain about irregularities in the Thai Customs 
Service. Recent Thai administrations have stated publicly their 
intention to improve transparency in the evaluation of bids and the 
awarding of contracts. 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. Nonetheless, 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. 
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. 
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 Thais. 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 (IPR), customs, investment, biotechnology, and other 
areas of mutual concerns. This framework has helped lay a basis 
foundation for the on-progress free trade agreement between U.S. and 
Thailand, which is expected to be finalized by mid-2006. 
Thailand also has bilateral investment agreements (called agreement 
on the promotion and protection of investment) with 37 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) is open for 
business in Thailand, and has provided a $930,000 direct loan for a 
tourist submarine in Phuket. OPIC is planning to establish a special 
line of credit of up to $175.75 million to mobilize U.S. private 
sector investment in the reconstruction of nations devastated by the 
December 26 (2004) tsunami. The credit line will be part of an OPIC 
Tsunami Reconstruction Finance Initiative that aims to help speed 
 
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the rehabilitation of housing and infrastructure in affected 
countries, including Thailand. The agency claimed that it is 
currently providing almost $904 million in financing and political 
risk insurance support for projects in Indonesia, Thailand, and Sri 
Lanka, the three countries most devastated by the tsunami. Thailand 
became a member of the Multilateral Investment Guarantee Agency 
(MIGA) in October 2000. 
OPIC finance loans of up to $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 equity funds that 
are eligible to invest in projects in Thailand. Through OPIC, 
investors have access to political risk insurance, debt financing, 
and equity. 
LABOR 
According to the National Statistics Office, as of March 2005, 
Thailand had a labor force of 35.28 million workers out of a total 
population of 65.27 million. There are 14.26 million Thai citizens 
over 15 years old who are not considered part of the labor force. 
The unemployment rate was 2.5 percent during the first quarter of 
2005, compared to a recent low of 1.5 percent for the second half of 
2004, and a high of 4.4 percent in 1998 immediately following the 
Asian financial crisis.  The rise in unemployment in early 2005 was 
largely caused by the tsunami disaster of December, 2004, which 
significantly harmed the tourist sector.  Statistics for the second 
half of 2005 are expected to show a rebound in employment fueled by 
strong export growth and a gradual recovery in tourism.  The 
official unemployment rate does not include an estimated 1-2 million 
"seasonally unemployed" agricultural workers. 
The general decline in the unemployment rate since the late 1990s is 
explained by increasing economic growth, especially in the real 
estate, manufacturing, construction, and financial sectors. 
Unemployment is currently close to the level that prevailed before 
the 1997-98 financial crisis, which caused a significant increase in 
unemployment and underemployment through 2000. 
The Thai government's decision not to forcibly repatriate large 
numbers of foreign workers in the fisheries, construction, and other 
semi-skilled sectors may also have affected employment levels.  In 
July 2004, 1.2 million migrants registered during a one-month 
window.  The workers were allowed to remain in Thailand for one 
year, and were granted the right in 2005 to extend their stay for 
another year.  The Thai government concluded labor memorandums of 
understanding (MOUs) with Laos, Cambodia, and Burma in an effort to 
organize workers from those countries, although there are 
significant numbers of non-Thai workers who remain in the country 
illegally. 
Despite past rapid growth in the industrial and service sectors, 35 
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. 
The economic downturn of the late 1990s stemmed labor market 
shortages of workers with at least a secondary education.  As 
Thailand's economy resumes growth, however, highly skilled and 
experience engineers, technicians, and managers are again in short 
supply.  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. 
Thailand's educational system is still geared to the needs of a 
largely agrarian, traditional economy and society and lags behind 
the country's contemporary skills requirements.  The government has 
made great progress over the last two decades in providing basic 
education.  Thailand's gross primary school enrollment in 2005 was 
over 100 percent (note: The official primary enrollment age is 6-11; 
in practice, however, children outside that age group may also 
enroll in school, pushing the figure over 100).  The "learning rate" 
(the ratio of the population over 15 years of age which has 
completed primary education to the total population of 15 years of 
age and over) is estimated by the Thai government at 58.7 percent. 
In 2003, Thailand had 384,875 students enrolled in public and 
private colleges and universities. According to Civil Service 
Commission records for students under its supervision, over 6,000 
Thai students are currently studying abroad, including 1,800 
students studying in the U.S. 
An integral part of Thailand's educational reform program, the 
country's first National Educational Act was promulgated in 1999. 
The Act stipulates the right of all Thai citizens to receive free 
basic education public education for at least twelve years and 
raised the level of compulsory education from six to nine years. 
Pursuant to the 1999 Act, the free basic education and compulsory 
education provisions took effect in August 2002.  Children are 
required to enroll in a basic education institution from the age of 
seven, and must remain in the educational system through the age of 
sixteen. 
All employees must define the terms of employment for their staff, 
and employers with ten or more employees are required to specify 
working regulations.  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. 
Thailand's social safety net is considered inadequate by 
industrialized-country standards.  The social security scheme 
consists of two systems. The Workmen's Compensation Act of 1994 
requires employers with one or more employees to contribute 0.2-1.0 
percent (depending on the assessed risk of the workplace) of the 
employee's annual earnings to the Workmen's Compensation Fund.  The 
Fund provides benefits to employees who are injured, sick, disabled, 
or die from work-related injury.  Pay-outs range from a minimum of 
2,000 to a maximum of 9,000 baht per month.  The second major 
system, the Social Security Act, has been in effect since 1990. 
This Act also covers enterprises with one or more employees. 
Contributions to the Social Security Fund from the government, the 
employer, and the employee are mandated.  The Social Security Fund 
provides compensation to insured workers under six categories: 
injury or sickness, disability, maternity, death, child welfare, and 
pensions.  In the first four categories, each party contributes 1.5 
percent of the wages to the insured.  For child welfare and old age 
cases, three percent is contributed.  Effective January 1, 2004, the 
Social Security Fund covers unemployment compensation.  If an 
employee is laid off, he is entitled to receive 50 percent of his 
wages for 180 days.  In practice, disbursal of unemployment benefits 
is dependent on the state of the economy and the government's 
financial resources. 
The labor relations climate is generally peaceful, and formal 
strikes are infrequent. There were ninety-seven labor disputes 
nationwide in 2003, but most were resolved through mediation.  Only 
one strike was registered in 2003, and there were four employer 
lock-outs.  Less than four percent of the total labor force is 
unionized; nearly 11 percent of the industrial work force is 
organized.  Unionization is high in state enterprises, however, with 
over half of state enterprise employees belonging to a union.  In 
2000, the union rights of state enterprise workers were successfully 
restored after having been abolished in the wake of a 1991 military 
coup.  The State Enterprise Labor Relations Act (SELRA) was 
reaffirmed by the Thai parliament and became law in 2000. 
FOREIGN TRADE ZONES/FREE PORTS 
Thailand has ten 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 (2), Lampun, Pichit, Songkhla, Samut Prakarn, Bangkok (at 
Lad Krabang), Ayuddhya (2), 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. 
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 business. The IEAT operates twelve 
estates, plus 22 more in conjunction with the private sector. 
Private sector developers operate over 50 industrial estates, most 
of which have received promotion privileges from the Board of 
Investment. 
FOREIGN DIRECT INVESTMENT STATISTICS 
The Bank of Thailand (BOT) provided all statistics. 
Foreign direct investment (FDI), including inflows from banking 
sector, totaled 86.3 billion baht ($2.1 billion) in 2005 (Jan-Oct), 
compared with 11.8 billion baht ($296 million) in 2004 (Jan-Oct), 
and 61.8 billion baht ($1.5 billion) in 2003 (Jan-Oct). Major FDI 
recipients included real estate ($237 million), machinery & 
transport equipment ($203 million), financial institutions ($169 
million), and services ($145 million) sectors. 
Japan was the biggest source of FDI in 2005 (Jan-Oct), at $378 
million, followed by Singapore at $305 million and U.S. at $290 
million. 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 $21 
billion. 
According to the Board of Investment (BOI), in 2005 (Jan-Nov), major 
U.S. investment projects approved by the BOI totaled 8.4 billion 
baht ($210 million), including the following (note that a U.S. 
investment is classified as any investment with at least ten percent 
U.S. capital): 
- Innovex (Thailand) Ltd. (printed circuit board; 100 percent 
export) 
- Avery Dennison (Thailand) Ltd. (self adhesive paper & film & 
silicon & coated paper; 50 percent export) 
- Euro Lotus Co., Ltd. (retirement homes and care centers; 100 
percent export) 
- Precision Valve (Thailand) Ltd. (plastic balls; 80 percent 
export) 
- Thai Aerodynamics Co., Ltd. (repair of aircraft component; 80 
percent export) 
- Avanex (Thailand) Ltd. (fiber optic telecommunication equipment; 0 
percent export) 
- Cargill Siam Ltd. (feed for aquatic animal: 0 percent export)