Thailand Industry & Manufacturing - Industrial Policy

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Industrial Policy

The Thai industrial sector was under the supervision of seven governmental agencies. The Ministry of Finance administered taxes and duties and provided tax refunds on exports. It was involved in large-scale industrial projects in the role of deciding on government equity participation, arranging public foreign borrowing to support the project, and extending protection through tariffs. The Board of Investment provided investment incentives, and the Ministry of Commerce controlled prices and international trade. The Ministry of Industry issued factory licenses, drew up industrial regulations, and enforced zoning laws. It also provided technical assistance, management training, and financing for small- and medium-sized enterprises. The Industrial Finance Corporation of Thailand lent long-term funds to medium- and large-scale firms from credit given by the government. The Bank of Thailand provided foreign exchange and rediscount facilities to selected industries and exporters at concessionary terms. Finally, the National Economic and Social Development Board established policy guidelines and targets for the industrial sector. In 1982 the Industrial Restructuring Committee was created to coordinate the various agencies and to formulate detailed policy proposals in line with economic development plans.

Import tariffs were the most important protective measure used for the industrial sector. In the 1960s, the nominal tariff rates were low, ranging from 25 to 30 percent. In the 1970s, the rate went up to a range of 30 to 55 percent for consumer goods. By the end of 1978, nine import categories had tariff rates above 90 percent, including alcoholic beverages, shoes, perfume, cosmetics, and automobiles. In the early 1980s, the government attempted a more uniform tariff structure and lower protectionism in conformity with the Fifth Economic Development Plan. The adjustments included a reduction in tariffs to 60 percent on 270 categories of imported commodities; a change in tariffs to 30 percent for 1,970 items; and an increase in rate to 5 percent for those nonessential items that had been exempted. Goods considered essential, such as milk for infants or fibers used in textiles, remained exempted.

Other protective measures included price controls, which were quite pervasive in the 1970s but were relaxed at the beginning of the 1980s, except on petroleum products, white sugar, and sweetened condensed milk. Quantitative restrictions on imports were increased in the early 1980s to cover forty-six products. Regulations requiring a certain percentage of domestic content in manufactured imports included 30 to 40 percent for commercial vehicles, 45 percent for automobiles, and 70 percent for motorcycles.

In order to encourage investment, the Board of Investment provided incentives, such as guarantees against nationalization and price controls, tax exemptions of up to 8 years, and tariff surcharges of up to 50 percent to protect against competing imports. The basic objectives of the board were to promote labor intensive industries, exports, and regional decentralization of industry.
 
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