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Copyright SGA 2003

Thailand and India Sign Historic Trade Agreement

In October 2003, Thai and Indian officials signed a free trade agreement that is designed to eliminate trade barriers between the two countries by 2010. While the trade agreement is one aspect of a larger agreement that hopes to boost cooperation between the nations on a variety of fronts, it is expected to have immediate economic effects. Currently, trade between the two countries stands at approximately 1.2 billion U.S. dollars per year, but is predicted to double by next year. Thailand hopes that increased access to India's enormous population will boost exports to that country, while Indian companies anticipate more freedom to invest in Thai software and technology sectors, among others.

As for particular tariff reductions, the agreement calls for a 50% reduction on selected products beginning in March 2004, 75% by 2005, and ultimately complete tariff eradication by 2006. 84 products are included in the "early harvest" phase of the trade agreement, including a variety of Thai fruits. Other products will be phased into the agreement as the two sides agree that their respective sectors are ready for open competition. 80% of products and services are scheduled to be included in the next five years and the rest by 2010.

Guarantee for Creditors Lifted

Since the economic crisis of 1997, the Financial Institutions Development Fund, a unit of the Bank of Thailand, has provided a blanket guarantee on deposits made in local banks and finance companies. The objective of the 1997 guarantee arrangement was to establish consumer confidence in Thailand's financial system. In reponse to the apparent recovery of the Thai financial system, in November 2003 the government prosposed the lifting of the guarantee. The lifting of the guarantee would also include the removal of the surcharges charged to each bank by the government for the protection provided.

A government spokesman stated that the Cabinet approved the central bank's proposal to revoke the guarantee and lift the surcharge assessed on the local banks.

New Witness Protection Law

The new witness protection law came into effect in late December 2003. The law is intended to provide fair and appropriate treatment to witnesses and pay them for expenses incurred during the court hearing process. The law is intended to assist the prosecution of powerful and influential persons, but the details of payment under the Act are still being completed. Under the Act, witnesses in cases involving money laundering, drugs, corruption and organized crime are eligible for special protection. The Act also provides for compensation to the witness's family in the event the witness is killed or injured. Protection may also be available to the witness's family and close associates.

Import/Export Inspections Reduced

Companies operating within industrial estates will now have to face fewer inspections on goods imported to or exported from Thailand. The Customs Department and the Industrial Estate Authority of Thailand signed an agreement on the reductions in November, 2003. The reductions are intended to boost the country's competitiveness in foreign markets by facilitating trade. The purpose of the inspections is to prevent goods designated for import or export from being sold internally. A bar code system will be implemented in an attempt to prevent an increase in this type of fraud: selling goods in Thailand without having to pay appropriate tariffs on the items.

In a related development, two additional X-ray machines are scheduled to be installed at Laem Chabang Port. The new machines are part of a heightened inspection requirement for goods exported to the United States. While Thai exporters have complained about the costs of the new security measures, the United States is requiring Thailand to increase examination of outgoing containers or risk potential delays or even prevention of acceptance at ports of entry in the United States.

Thai exporters of food products and pharmaceuticals will be particularly affected by new US regulations. The US Bioterrorism Act, which became effective on December 12, 2003 requires businesses that export food and pharmaceutical goods to the United States to register with the US Food and Drug Administration (FDA). Shipments of these goods will be carefully and tracked and monitored, and Thai exporters are encouraged by the Thai Department of Foreign Trade to strictly comply with the new regulations.

Credit Information Bureau Act Increases Individual Privacy

In November 2003 a new draft, amending the 2001 data protection and privacy law, was initiated to give individuals increased privacy in regards to their financial records. Under the new law, individuals would need to give permission to the Credit Information Bureau prior to any examination of their personal credit history. In addition, the new law would extend this protection to both electronically and manually collected or processed personal data, defined as "any fact in connection with a person (individual or legal entity), capable of identifying such person, either directly or indirectly." In order to secure these benefits individuals must take proactive measures such as clearly outlining their privacy policies and making the policies available for interested parties. The law will help protect these new rights with the establishment of the Commission on Data Protection/Privacy. The impetus behind the new law is the rapid development of computers for storing and accessing personal data, and the increasing ability for some to legally or otherwise obtain such data.

Hire Purchase Law Looming

In December, 2003 the Commerce Ministry was preparing draft legislation to provide more protection to purchasers involved in hire-purchase sales. The legislation will cover areas such as interest rates, installment payments, maximum amounts and terms of payment.

The reason for he new law is increased use of hire-purchase contracts anticipated and the absence of clearly applicable legislation in the current Civil and Commercial Code. The legislation is intended to cover transactions that involve the purchase of products by installment purchase where ownership is transferred after a certain number of payments.

Under the Acts sellers may be held liable for criminal or civil penalties for violation of the Act.

The list of products to be covered includes: motorcycles, automobiles, agricultural machinery, electrical appliances, furniture, mobile phones, kitchenware and computers. It is forecasted that the hire purchase market will amount to 40 billion baht this year alone.

Lawyers Oppose New Scheduling System

New Rules introduced by the judiciary late last year mandate the scheduling of trials on consecutive days. This change was made in hope that the scheduling of trials would be made more speedy and effective. In the past, trials were typically scheduled one day at a time and protracted to span several months or years with multiple one-day appearances.

The Law Society of Thailand, which is the organization representing the lawyers of Thailand believes that the changes introduced to the scheduling system violate certain fundamental human rights and also violates the Constitution. The Law Society has filed a petition to the president of the Supreme Court objecting to the change in the scheduling procedure.

At the center of the controversy is that under the new procedure the authority for scheduling trials is vested in an administrative office charged with the task of designating court scheduling. Under the former system the scheduling of trial dates was with the judges. The Law Society believes that the power should be returned to the judges. It is also unclear whether the new system will actually speed up trials. Some believe that the new system will only speed up certain cases but not all cases.

Funds May Be Drawn from Provident Funds

Under revised provisions of Provident Fund law, employees may take up to 50% of the total savings of Provident Funds in the event of an emergency. Employers, however, would be charged with administering the provisions of the Act. The earlier version of the Act did not allow employees to withdraw funds prior to their retirement. The Securities and Exchange Commission is the organization charged with reviewing the law. Under the revisions, an employee would also be able to transfer savings form his old company to his new company.

Commerce Ministry defends Thai Piracy Crackdown

Following a May 2003 report by the European Commission that criticized music, video, and software piracy in Thailand, the Commerce Ministry issued a statement in October refuting those claims. The report, based on information gathered in 2001, placed the level of sound recording piracy at 45-50% of market value. resulting in an overall loss of 500 - 600 million U.S. dollars annually. The report urged Thailand to take remedial action, including increased criminal punishments and simplified intellectual property rights enforcement procedures. The Commerce Ministry countered that the information that the report was based on was out-of-date, inaccurate, and unsubstantiated. In addition, the Ministry explained that they had begun a 3 month, intensified crack-down at the time of the reports release and had received only little assistance from European music and video distributors.

Deposit Guarantee Rescinded

In November 2003 the Thai government rescinded a bank deposit and liability guarantee enacted during the 1997 financial crisis. The Financial Institutions Development Fund (FIDF) was created in 1997 as a subsidiary of the Bank of Thailand to protect both individual creditors and smaller financial institutions. The original intent of the protective measure was to maintain public confidence in the financial system during a period of instability. Because of the continuing expansion of the Thai economy and stability of the financial sector the guarantee on deposits was deemed to be no longer necessary. While a blanket guarantee has now been annulled, depositor guarantees will still exist to provide limited protection to individual creditors. Local financial institutions will, however, no longer be required to pay surcharges to the FIDF to maintain the blanket guarantee. Payment of these surcharges was considered problematic disruptions of money markets at the time banks were required to submit the fees. Waiving the surcharges is expected to facilitate development of the capital market but otherwise not affect investor or creditor confidence.

Update on Biodiversity Law

Thailand became a signatory to the United Nation's Convention on Biodiversity in 1992. As a result of the Convention, equal access to environmental resources was allowed. Thailand then introduced the Law on the Protection and Prevention of Thai Intelligence and Traditional Medicine in 1999. Although Thailand Plant Protection Law is currently in effect, there has been no list describing the particular plants that are to be protected by the Law. The Law states that plants listed in the protection list would be required to be cultured and maintained in nurseries if they were near extinction and that any export of said plants would require official permission. In December 2003, the Public Health Ministry was encouraged to begin identifying local herbal and medicinal plants that require protection.

Migrant Workers Encouraged to Register in Bangkok

In an effort to facilitate payment of welfare benefits and increase participation in voting, migrant farm workers have been asked to register with the Labor Ministry in Bangkok. Although the migrant farm workers may have family and a residence in the countryside, they should be considered residents of Bangkok and the Labor Ministry wishes them to register themselves with their Bangkok residences. Government subsidies are allocated according to the registered population and workers residing in Bangkok should register there so that funds can be distributed appropriately. Additionally, if individuals are working and residing in Bangkok, they should also vote in Bangkok.