TRADE POLICY FRAMEWORK

Thailand retains relatively high protection by the standards of other ASEAN-5 countries, despite trade and investment liberalization in the 1980s and 1990s. Its average applied tariff is approximately 16 per cent — almost twice as high as that for Malaysia, Indonesia, and the Philippines (Table I). Thailand also has greater tariff dispersion and escalation, with forty-six different rates and peak tariffs on agriculture and food products, alcoholic beverages, cars and car parts, and textiles. Import surcharges were levied in the wake of the Asian crisis, followed by piecemeal trade liberalization. Non-tariff barriers were reduced through the 1990s but are still not insignificant, especially in the form of a complex licensing system. Thailand has hardly ever used anti-dumping measures or other trade remedies.

The Foreign Business Act provides the legislative framework for FDI, with foreign equity limits of 49 per cent in services sectors, unless otherwise indicated, and of up to 100 per cent in manufacturing. FDI in manufacturing is encouraged, as it is in Malaysia. The Thai Board of Investment (BOI) is the lead agency on FDI and reports directly to the Prime Minister's Office. It operates a complex system of selective incentives to attract inward investment in goods sectors, and often grants 100 per cent foreign ownership.

Thailand also resembles Malaysia in having a protectionist trade-in-services policy. Ownership, entry, establishment, and operating restrictions are higher and more rigid in services sectors than they are in manufacturing.

In telecommunications, there are two quasi-monopolistic state-owned operators which effectively control domestic and international services. Concessions have been granted to large, well-connected local companies for wireless and fixed-line operations. The planned corporatization and privatization of the state-owned operators have been delayed due to political wrangling. In 2001, the Thai Parliament passed legislation limiting foreign ownership in local telecoms firms to 25 per cent, but the government is attempting to increase the ownership limit back to the previous 49 per cent. Two independent regulatory agencies are supposed to be established to oversee the telecoms and broadcasting sectors, but this has proved politically messy, with allegations of nepotism and corruption in making appointments.