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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00928R000200130003-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: January 12, 2017
• Document Release Date: June 30, 2011
• Sequence Number: 3
• Publication Date: February 1, 1984
• Content Type: REPORT

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Set-ret
Directorate of
Intelligence
in Economic Growth
Thailand: Foreign Investment
Plays Increasing Role
Secret
EA 84-10016
February 1984
Copy 318
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Intelligence
Thailand: Foreign Investment
Plays Increasing Role
in Economic Growth
This paper was prepared by
of the Office of East Asian Analysis. Comments and
queries are welcome and may be directed to the
Chief, Southeast Asia Division, OEA,
Secret
EA 84-10016
February 1984
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Secret
Thailand: Foreign Investment
Plays Increasing Role
in Economic Growth F__1
Key Judgments A slowdown in the growth of investment financing is forcing Bangkok to
Information available actively recruit private foreign investment for the first time. The govern-
as of 20 January 1984 ment is:
was used in this report.
? Sending regular, high-level investment missions abroad; Prime Minister
Prem will head one such mission to the United States and Western
Europe in April.
? Centralizing and streamlining investment-related decisionmaking.
? Trying to attract funds from Hong Kong.
Thailand's warmer attitude toward foreign investment, plus its steady
economic growth, low labor costs, and free enterprise environment, will
make it attractive to foreign businessmen. Moreover, Thailand is likely to
attract some of the companies moving away from the higher wage areas of
Singapore, Hong Kong, and Taiwan. As a result, we expect foreign
investment to triple to about $600 million annually by the end of the
decade. Although still small in relation to the foreign investment in
neighboring countries, this increase will stimulate economic growth and
help relieve balance-of-payments pressures.
US companies remain at a disadvantage as compared with knowledgeable-
Japanese firms in the growing Thai market, but there will be profitable op-
portunities for US businesses in petroleum exploration and development,
petrochemicals, and labor-intensive, export-oriented manufactures such as
electronics where Thai officials believe the United States holds the
technological edge.
The drive to recruit foreign investment will generate opposition from senior
military officers if they believe their lucrative ties to the business
community are in danger, but Prem can probably enlist their support
through promises of positions on the boards of directors of newly formed
companies. If, however, the opposition party gains control of the govern-
ment-an event we think unlikely in the near future-we would expect a
reversal of the current investment policy and an increase in protectionist
measures against foreign competition.
Secret
EA 84-10016
February 1984
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Thailand: Foreign Investment
Plays Increasing Role
in Economic Growth
The Role of Foreign Investment
Private foreign investment has played a small role in
the Thai economy. We estimate that total accumulat-
ed foreign investment in Thailand reached $2.8 billion
or 7 percent of GDP at the end of 1982.' This is less
than one-quarter of the value of foreign investment in
the other ASEAN states of Indonesia, Malaysia, and
Singapore and about half that in the Philippines. Over
the past decade net foreign investment in Thailand
accounted for less than 3 percent of total investment
and provided relatively little foreign exchange-last
year equal to about 3 percent of export earnings. F_
Foreign investment has fluctuated widely in the last
15 years, from $43 million in 1970 to a record $288
million in 1981 (see table 1). In the 1970s, average
annual foreign investment grew more slowly than the
economy as a whole; after adjusting for inflation,
inflows actually fell by about 50 percent. In the early
1980s, however, foreign investment picked up sharply.
The development of the country's first natural gas-
field by Union Oil accounted for a large share of the
nearly fivefold increase in foreign investment from
1979 to 1981. Foreign investment reached about $225
million in 1983, nearly triple the $80 million average
of the 1970s.
Japanese companies provide the largest share of for-
eign investment-nearly half. Total US involvement
approaches $600 million.' Japanese firms are the
dominant foreign presence in the manufacturing sec-
tor-automobile assembly, small appliances, and food
processing-and are involved to a small but growing
degree in Thai energy projects.
' In this paper "foreign investment" refers to net private direct
foreign investment measured on a balance-of-payments basis. This
measure adds the inflow of funds from foreign businesses to Thai
firms and represents a net addition of both foreign exchange and
foreign savings to the Thai economy.
'Recent US Embassy estimates, which place US investment in the
$1-2 billion range, include reinvested earnings and funds borrowed
Figure 1
Thailand: Foreign Investment by
Country, Yearend 19828
Foreign investment has had little impact on most
sectors of the Thai economy. The large state enter-
prise sector-which includes public utilities, commu-
nications, and transportation as well as state monopo-
lies in liquor and tobacco-is off limits to foreign
companies. Most agricultural land is owned by small
cultivators, although there are a few large agricultur-
al operations such as a French rubber and a US
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Table 1
Thailand: Balance-of-Payments Summary
1978
1979
1980
1981
1982
19838
1984b
-1,154
-2,087
-2,078
-2,556
-1,125
-2,300
-2,000
-859
-1,551
-1,903
-2,032
-831
-2,930
-2,600
4,045
5,234
6,449
6,898
6,839
6,420
7,400
513
764
953
1,208
979
950
1,100
Sugar
195
235
145
441
563
600
600
Tapioca
535
484
727
754
859
850
900
Rubber
395
605
603
500
413
550
650
Tin
356
453
554
423
338
450
400
Corn
208
276
356
382
362
300
600
Manufactures
548
699
886
830
1,014
900
1,350
Imports f.o.b.
4,904
6,785
8,352
8,930
7,670
9,350
10,000
Oil
1,016
1,423
2,552
2,519
2,352
2,300
2,500
Services (net)
-439
-783
-760
-1,169
-1,085
-630
-600
Transfer (net)
144
247
585
645
791
800
1,200
Nonmonetary capital (net)
489
1,743
2,351
2,446
1,332
1,700
1,800
Long-term (net)
646
1,477
2,107
2,352
1,585
2,000
2,200
Direct investment
50
51
189
288
183
225
300
Short-term d
-157
266
244
94
-253
-300
-400
Balance
-665
-344
273
-110
207
-600
-200
2,557
3,129
3,026
2,727
2,652
2,200
2,300
a Estimated.
b Projected.
c End of period.
d Includes errors and omissions and allocations of SDRs.
Sources: Bank of Thailand
International Monetary Fund
pineapple plantation. The basic consumer goods man-
ufacturing sector is also largely Thai, although there
are a number of joint ventures with foreign-princi-
pally Japanese-firms. According to the Bank of
Thailand, the 14 foreign banks in Thailand control
about 5 percent of the assets of the banking system
and only one foreign bank has been permitted to open
since 1964. Finance companies, which operate under
fewer restrictions than banks, have a much larger
foreign ownership. Thailand does not have an offshore
banking sector such as exists in the Philippines.
Foreign investors, however, dominate new or risky
industrial ventures. The burgeoning electrical compo-
nent industry, for example, is controlled by US firms,
and oil and gas exploration and development are
almost entirely in the hands of international oil
companies.
The low level of foreign involvement in the Thai
economy has resulted from several factors. Thailand
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was never colonized and developed fewer long-lasting
relationships with foreign businesses than did many of
its Asian neighbors. It did not discover any commer-
cially exploitable energy resource until the mid-1970s.
And the investment climate has been clouded by the
country's proximity to the Indochina wars, its fre-
quent military coups,
is reputation for corruption and redtape.
Moreover, until recently, Bangkok has not actively
sought foreign investment, preferring to sacrifice in-
creased economic growth to maintain domestic con-
trol of the economy.
Changing Attitude Toward Foreign Investment
We believe this attitude is changing, largely because
traditional sources of investment financing look to be
insufficient for the investment of $25-30 billion that
Bangkok has planned for the 1980s. Domestic savings,
although high in comparison to countries with similar
incomes, have stagnated for more than a decade at 21
percent of GDP because of low interest rates and
large government budget deficits. In addition, Bang-
kok can expect little real growth in the approximately
$2 billion a year it receives in multilateral and
bilateral aid because of slower growth in the resources
of the development banks and reduced foreign aid
from the industrial countries. Finally, we believe that
Bangkok's desire to avoid the foreign debt troubles
plaguing the neighboring Philippines will cause it to
restrict foreign commercial borrowing. Prime Minis-
ter Prem has already taken measures to slow the
growth of the foreign debt, which roughly doubled
between 1979 and 1982 to $11.1 billion.
Officials in Bangkok will also look for foreign invest-
ment to upgrade the country's scientific and technical
base-now the lowest in ASEAN after Indonesia.
Agricultural research and development efforts are
rudimentary in Thailand, which has some of the
lowest rice yields in Asia. The manufacturing sector
consists largely of simple consumer goods and food-
processing firms, automobile assembly, and a textile
sector with a mix of modern and outdated equipment.
And Thai workers-while willing to learn-are well
below those in Singapore, Malaysia, and even the
Philippines in technical and engineering training,
Prime Minister Prem's Foreign Investment Drive
Although Bangkok has had in place since 1977 most
of the investment incentives available elsewhere in
Asia-including exemptions from or reduction of
import duties, excise and income taxes, and guaran-
tees against nationalization-the Prem administration
is the first to actually encourage foreign investment.
The results have been mixed. One attempt-the
"Thai, Inc." strategy of the influential former Deputy
Prime Minister, Boonchu Rojanastien-was a com-
plete failure. The attempt involved a proposal by
Boonchu in 1980 to open all sectors of the economy,
including public utilities and land ownership, to for-
eign multinationals. The proposal raised widespread
concern among influential military officers, industri-
alists, and technocrats, who feared the Thais would
lose control of the economy and were concerned about
large-scale foreign competition, according to the fi-
nancial press. As a result, the proposal was dropped
when Boonchu resigned from the Cabinet in 1981
over a controversy involving crude oil contracts. F_
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After the "Thai, Inc." strategy failed, Prem developed
a more low-key effort to promote increased foreign
investment. The government began a campaign to
increase awareness in the international business com-
munity of Thailand's impressive economic record, its
improving creditworthiness, and its free enterprise
environment. most US 25X1
businesses have a negative impression of Thailand
based on the country's proximity to Vietnam and its
history of frequent government changes by military
coup. Firms that make political risk assessments have
reflected this view when ranking Thailand as a foreign
investment prospect. To counter this impression,
Bangkok since 1981 has been sending regular foreign
investment missions abroad.
Prem has also made some progress in centralizing
investment-related decisionmaking in the Industry
Ministry, and US companies consider the new Indus-
try Minister far easier to deal with than his predeces-
sor. We believe Bangkok will be less successful in its
attempts to streamline the rest of the foreign invest-
ment application process and reduce the corruption
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that discourages many new investors. Even simple
matters often drag on until the Prime Minister or the
Cabinet decides the issue, and final decisions have a
way of coming unstuck. The checkered history of
Bangkok's relations with Texas Pacific-a US com-
pany that holds a natural gas concession with proved
reserves in the Gulf of Thailand-is a good example.
Negotiations over the price of gas for domestic use
have gone on sporadically since the late 1970s. Last
summer, in the space of a few months, the Thai
Cabinet approved Texas Pacific's plans for exporting
liquefied natural gas (LNG) to Japan and then re-
versed itself by declaring that any LNG project would
have to be majority Thai owned.'
existing regulations favorable to
foreign investment are frequently not translated into
action at the working level of the bureaucracy.
Bangkok is also trying to attract funds from Hong
Kong residents concerned about the expiration of the
British lease in 1997. Under a plan announced this
summer, resident visas will be granted to foreigners
who invest at least $430,000 in a new project or a
minimum of $348,000 in long-term government
bonds. If a foreigner brings in a family, he will be
required to invest large additional sums. Financial
analysts, however, believe that most speculative capi-
tal flight will go to the well-developed financial
markets in Singapore or the United States. So far
Bangkok has received only one application for a
resident visa under this program, according to the
local press.
Roadblocks to Success
As Prem's foreign investment program expands, influ-
ential groups in Thailand will probably put up some
resistance. The Thai elite-including businessmen,
bureaucrats, and military officers-have traditionally
expressed an ambivalent attitude toward foreign in-
vestment, and many Thais, according to Western
academics, consciously or subconsciously fear foreign
economic domination. Even Industry Minister Ob-
while strongly promoting foreign investment in new
industries-advocates measures to protect existing
Thai companies from foreign competition.
Influential officers in the military-the most powerful
political group in Thailand-will probably be the
most resistant. Senior officers generally augment
their incomes by serving on boards of directors of both
private Thai companies and state enterprises. In
addition, one faction in the faction-ridden Army-the
"Democratic Soldiers"-is strongly nationalistic and
vaguely socialistic; public and private statements by
this group have frequently been critical of foreign
capital and its connection with the Sino-Thai banking
and commercial elite.
The opposition Thai Nation Party is another potential
stumblingblock to increased foreign investment. The
party represents civilian, largely ethnic Thai industri-
alists and tends to be protectionist with respect to
trade. It also favors government intervention to pro-
mote indigenous manufacturing. Moreover, according
to the US Embassy, Thai Nation-which has the
largest number of seats in Parliament-might seize
on the issue of foreign control of the economy in its
maneuvering to bring down Prem's four-party coali-
tion.
Some ethnic Thai also fear that an increasingly open
economy will enhance the role of the Chinese in
Thailand. Many restrictions on foreign investors-
especially those having to do with land ownership and
immigration-are directed at limiting Chinese influ-
ence in the economy rather than at Western business-
es. Although the Chinese community is better inte-
grated in Thailand than elsewhere in Southeast Asia
and is a key constituency of the Social Action Party-
the dominant partner in Prem's coalition-it is still
envied and resented by much of the Thai population,
including the military.
Finally, measures to attract foreign investment will
probably conflict with several other economic goals
pursued by Bangkok-including increased Thai con-
trol of petroleum development and the modern manu-
facturing sector as well as increased government
revenues to offset the large budget deficit.
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Prospects for Increased Foreign Investment
If Prem remains in office in a government where key
Cabinet posts are not controlled by Thai Nation
members," we believe he will be able to overcome this
opposition. Despite his reputation for indecisiveness,
Prem has shown more willingness than his predeces-
sors to implement politically controversial reforms.
He was able to raise domestic energy prices, for
example, to near world levels less than two years after
his predecessor, Kriangsak, was forced from office for
attempting to do so. Financial and trade liberalization
measures are under way-if somewhat behind sched-
ule. Moreover, we believe Prem will encourage joint
ventures with foreign firms where members of the
potential opposition-both in the military and private
sector-will receive lucrative positions on the board of
directors.
In any case, we expect the Thai economy to become
increasingly attractive to foreign investors in the years
ahead. The objective indicators of economic growth-
market size, low labor costs and labor stability,
manageable foreign debt, and prudent economic poli-
cies-rank Thailand high among Asian countries as a
foreign investment prospect. Rapidly rising wages in
the Asian newly industrializing countries-Taiwan,
Hong Kong, Singapore, and South Korea-and in-
creasingly Malaysia are already causing many foreign
investors in these countries to seek other locations for
their labor-intensive products. Moreover, the financial
problems of the Philippines and Indonesia, the com-
munal violence in Sri Lanka, and concern over the
possibility of growing Islamic fundamentalism in Ma-
laysia all increase the probability that Thailand will
be the next destination for these footloose industries.
The Benefits to Thailand
Assuming Prem persists in his efforts to liberalize
foreign investment regulations and carries out the
projects put forth in the current five-year economic
development plan, net foreign investment will double
or triple in the next four to five years to about $500-
600 million a year, up from about $200 million in
1983. Three-quarters of this increase will come from
' Prem is a widely-respected, unifying force in Thai politics and
may be chosen to head a government that includes the Thai Nation
Figure 2
US Investment in ASEAN, Yearend 19828
a Balance-of-payments basis
b Figures for US investment in the Indonesian petroleum
sector are incomplete.
the scheduled expansion of Thailand's offshore natu-
ral gas production by US and Japanese companies
and the establishment of a fertilizer and petrochemi-
cals complex, which is to be owned jointly by the Thai
Government and Thai and foreign companies. The
remainder will come from increased foreign invest-
ment in Thai manufacturing. This approximately
$400 million increase in annual investment could add
about 1.5 percentage points to the rate of economic
growth.' The projected increase in foreign investment
' Most economic studies of developing countries indicate expendi-
ture multipliers of 2 to 2.5. Assuming a conservative expenditure
multiplier of 1.5, the $400 million increase in investment would
raise Thai GNP by $600 million annually-a 1.5-percentage-point
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Table 2
US Companies in Thailand: A Sampler
Holds concession for the only produc-
ing gasfields.
Holds concession for proved offshore
gasfield but no production because of
price disagreement.
Bank of America
Financial services
One of 14 foreign banks in Thailand.
Castle and Cook
Canned pineapple
Thailand is now the world's second-
largest exporter of canned pineapple.
Upgrading its product to include video
terminals.
Largest semiconductor assemblers,
employing about 2,000 people.
Expects to increase its activities in
Thailand.
Considers concession in the northeast
promising.
Determining whether gas discoveries
on Khorat plateau are commercial.
Business is good because of Bangkok's
condo boom.
Required to take a Thai partner this
year in order to expand.
would also provide a welcome boost to the deteriorat-
ing balance of payments by increasing the inflow of
foreign exchange.
Substantial increases in manufacturing investment
may make Thailand-because of its low labor costs-
a major new exporter of electrical components and
small appliances. Electronics exports have been the
most rapidly growing export since 1980. Because its
export of manufactures is a small share of world trade
in such products, Thailand will probably be able to
increase these exports substantially before running
into export limitations in industrial countries.
Implications for the United States
In the near term, US companies seeking to invest in
the energy sector or the export-oriented manufactur-
ing sector will probably be welcomed for providing
jobs, capital, and technology. Thai officials in recent
months have also expressed strong interest in increas-
ing the role of US firms in the economy as a
counterweight to the dominant influence of the Java-
Bangkok is pursuing the acquisition of sophisticated
communications systems from the United States al-
though they are available more cheaply from Japa-
nese companies. And Industry Minister Ob strongly
desires to reduce the Japanese role in the economy,
according to the US Embassy.
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Table 3
Thailand and Its Neighbors: Economic Indicators
Thailand
6.1
5.8
7.0
4.2
5.5
Philippines
5.7
4.4
3.8
2.6
1.0
Indonesia
6.3
9.9
7.6
2.2
0.8
South Korea
6.4
-6.2
6.4
5.3
9.0
Malaysia
9.4
8.6
6.7
4.6
5.6
Thailand
14.9
19.7
12.7
4.8
4.5
Philippines
18.9
17.8
13.3
11.0
16.0
Indonesia
20.8
17.0
10.2
9.5
15.0
South Korea
18.3
28.7
21.3
7.3
4.0
Malaysia
3.6
6.7
9.7
5.8
4.2
South Korea
-4.2
-5.3
-4.7
-2.6
-2.0
Malaysia
0.8
-0.2
-2.9
-3.4
-2.7
Creditworthiness b (percentage points)
Thailand
0.75
0.80
0.60
0.40
0.35
Philippines
0.83
0.80
0.90
0.82
0.94
Indonesia
0.68
0.75
0.50
0.38
0.50
South Korea
0.70
0.85
0.62
0.50
0.70
Malaysia
0.55
0.52
0.40
0.28
0.53
a 1983 figures projected.
b Average percentage point cost over LIBOR of public-sector loans;
through August 1983.
A sharply increased US business presence nonetheless
will probably increase the chances for bilateral fric-
tions. Those seeking to invest in the growing domestic
market will probably have problems-Bangkok is
making it hard for existing foreign-owned companies
to expand without taking a Thai partner, according to
the local press. Moreover, Bangkok is already moving
in a more restrictive direction on energy concessions
and is attempting to increase tax revenues to reduce
the large budget deficit-measures that would hit
foreign investors hard. Last summer's retroactive tax
increase on employee salaries drew sharp protests
from the US Chamber of Commerce in Bangkok.
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Appendix A
Foreign Investment in Thailand:
The Rules of the Game
Foreign investors in Thailand have the same basic
rights as Thai nationals unless those rights are specifi-
cally reserved for nationals or denied to or restricted
to aliens. US firms seeking to operate in Thailand
under the provisions of the 1966 Treaty of Amity and
Economic Relations between Thailand and the United
States, except for those firms engaged in banking,
communications, transport, exploitation of land or
other natural resources, or domestic trade in indige-
nous agricultural products, are accorded national
treatment.
The most important laws governing foreign-controlled
businesses in Thailand are the following:
The Alien Business Law of 1966 establishes three
categories of businesses: A, B, and C. In the context
of the law, an alien company is one in which half or
more of the capital belongs to foreigners, half or more
of the shareholders or partners are foreigners, or the
managing partner or manager is a foreigner. Busi-
nesses falling into categories A and B are closed to
foreigners unless promotional privileges have been
received from the Board of Investment. The placing of
businesses into these categories is subject to change by
royal decree.
The Alien Occupation Law of 1973 lists a number of
occupations prohibited to aliens. The law also provides
that any alien, with a few exceptions, must obtain a
work permit prior to commencing employment in
Thailand. Work permits may be issued only to holders
of nonimmigrant or immigrant visas.
The Immigration Act of 1979 sets conditions for
acquiring nonimmigrant and immigrant visas. Non-
immigrant visas issued for business may not exceed
one year. Nonimmigrant visas issued for investments
authorized by the government may not exceed two
years. Nonimmigrant visas issued in connection with
a promoted investment may be for as long as the
Board of Investment determines. Immigrant visas are
subject to restrictive quotas.
The Land Code states that aliens may not generally
own land in Thailand. For industrial purposes, howev-
er, a company promoted by the Board of Investment
may be granted the right to own land. An alien
company may lease land for up to 30 years, receiving
secure tenure.
The Investment Promotion Act of 1977 is adminis-
tered by the Board of Investment (BOI), whose func-
tion is to promote domestic and foreign investments
considered important and useful to the social and
economic development of Thailand. The BOI defines
priority areas for investment and decides which in-
vestments will qualify for promoted status and privi-
leges. The BOI emphasizes investment in agrobusi-
ness, labor-intensive industry, and export-oriented
industry. There is no legal bar to a new business
opening without promotion, whether or not the activi-
ty is eligible for promotion. Promoted companies may
be granted certain guarantees and privileges
including:
? Protection from nationalization.
? Protection from competition by a government-spon-
sored enterprise.
? Free remittance of foreign currency.
? Certain deductions or exemptions from taxes and
import duties.
? Prohibition of imports into Thailand of like
products.
? Permission to own land.
Exchange Control Act of 1942 and Bank of Thailand
Notification. Although importation and repatriation
of capital are discretionary, there are few obstacles in
practice. Permission is routinely granted for remit-
tances for profits and dividends, principal and interest
on loans, and proceeds of the liquidation of a business.
However, the Bank of Thailand is authorized to
restrict remittances abroad in order to preserve for-
eign exchange reserves at a reasonable level.
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Appendix B
Restricted Business Activities
Under the 1972 Alien Business Law
Category A (requires majority Thai ownership)
Section 1 - Agricultural Business
(1) Rice farming
(2) Salt farming, including salt mining, except rock
salt
Section 2 - Commercial Business
(1) Internal trade of local agricultural products
(2) Trade in real estate
Section 3 - Service Business
(1) Accounting
(2) Law
(3) Architecture
(4) Advertising
(5) Brokerage or agency
(6) Auctioning
(7) Barbering, hairdressing, and beauty salons
Section 4 - Other Businesses
(1) Building construction
(2) Mining
Category B (new investments require majority Thai
ownership; established foreign firms may continue
under restrictions)
Section 1 - Argiculture Businesses
(1) Farming, except those in category A
(2) Orchard farming
(3) Animal husbandry, including silkworm raising
(4) Timbering
(5) Fishing
Section 2 - Industrial and Handicraft Businesses
(1) Rice milling
(2) Flour milling from rice or other crops
(3) Sugar milling
(4) Production of beverages, with or without alcohol
(5) Icemaking
(6) Manufacturing of pharmaceuticals
(7) Cold storage
(8) Lumber milling or processing
(9) Manufacturing of gold, silver, nielloware, and
stone inlaid products
(10) Manufacturing or casting of Buddha images and
alms bowls
(11) Wood carving
(12) Production of lacquerware
(13) Manufacturing of matches
(14) Manufacturing of white cement, portland ce-
ment, and cement products
(15) Stone quarrying
(16) Manufacturing of plywood, veneer wood, or
chipboard
(17) Manufacturing of garments or footwear except
exports
(18) Silk spinning, weaving, or silk fabric printing;
manufacturing of finished products from silk
Section 3 - Commercial Businesses
(1) Retail trade, except as listed in category C
(2) Trading in mineral ores, except as listed in
category C
(3) Sale of foods and beverages, except as listed in
category C
(4) Trade in antiques, old objects, or works of art
Section 4 - Service Businesses
(1) Tourist agencies
(2) Hotels, except hotel management
(3) Businesses governed by the laws on entertainment
places
(4) Photographic studio, photographic processing, and
printing
(5) Laundry
(6) Tailoring or dressmaking
Section 5 - Other Businessess
(1) Domestic land, water, and air transport
(2) Operation of printing establishments
(3) Newspaper publishing
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Category C (majority foreign ownership allowed with
restrictions)
Section 1 - Commercial Businesses
(1) Wholesale trade, except as listed in category A
(2) Export trade
(3) Retail trade in machinery, engines, and tools
(4) Sale of foods and beverages to promote tourism
Section 2 - Industry and Handicraft Businesses
(1) Manufacturing of animal feed
(2) Extraction of vegetable oils
(3) Production of textile and knitted products, includ-
ing yarn spinning and dyeing and fabric printing
(4) Manufacturing of glassware, including light bulbs
(5) Manufacturing of food cups, bowls, and plates
(6) Manufacturing of stationery and printing paper
(7) Rock salt mining
Section 3 - Service Businesses
(1) Any business not listed under categories A or B
Section 4 - Other Businesses
(1) Construction, except that listed under category A
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Appendix C
The Foreign Investment Bureaucracy
The Board of Investment (BOI) was established in
1959 to promote domestic and foreign investment
considered useful for the country's development by
defining priority areas for investment, identifying
investment opportunities, providing services to inves-
tors, and deciding which investments qualify for
promotional privileges. Described by some as the Thai
economic cabinet, the BOI is chaired by the Prime
Minister. Its members include all the economic minis-
ters as well as the Minister of Defense (currently
Prem), the chairman of the Industrial Finance Corpo-
ration of Thailand, and the Governor of the Central
Bank. Secretary General Chanchai Lithawon has
Prem's ear, according to the US Embassy. BOI
follows a "from the bottom up" procedure of invest-
ment promotion, making decisions on projects sug-
gested by the private sector. Activities eligible for
BOI promotion are concentrated in agro-based, labor-
intensive, or export-oriented sectors. The BOI's in-
vestment policies have led to conflicts with many
other government agencies.
The Division of Industrial and Economic Planning in
the Ministry of Industry follows a "from the top
down" approach in which planners suggest industries
they want to develop and invite interested firms to
respond. This is the approach followed in Bangkok's
Eastern Seaboard Development Project. Technocrats
in the Industry Ministry and the planning agency
decided the country's offshore natural gas reserves
could supply a petrochemicals and fertilizer complex,
designed the specifications for the complex, and asked
firms-both foreign and domestic-to apply.
National Economic and Social Development Board
(NESDB) is Thailand's economic development plan-
ning agency. It is concerned that BOI's operational
objective of stimulating increased investment fre-
quently ignores the harmful side effects of incentives
and privileges such as reduced tax revenue, distortions
in the structure of production, and changes in income
distribution.
The Industrial Finance Corporation of Thailand is one
of the country's development finance institutions with
the objective of accelerating the process of industrial-
ization and assisting in capital market development.
The Central Bank (Bank of Thailand), in its role as
manager of the country's foreign exchange reserves,
oversees requests for foreign currency remittances.
Although these requests are routinely granted, the
Bank is authorized to restrict foreign remittances
temporarily to preserve foreign exchange reserves at a
"reasonable level." Bank Governor Nukun Pra-
chuapmo is also an important economic policy adviser
to Prem and argues strongly against measures that
would threaten Thailand's financial stability or rapid-
ly increase its foreign debt.
The Ministry of Finance is concerned about invest-
ment promotion measures which erode its tax reve-
nues because of continuing large budget deficits. On
specific project evaluations Finance Minister Sommai
is usually much more conservative than the BOI's
Chanchai or Industry Minister Ob.
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Thailand's Major Decisionmakers on Foreign Investment
Prem Tinsulanon
Prime Minister
The former Army Commander in Chief has been
Prime Minister since March 1980. Prem does not
have a good grasp of economic issues, according to the
US Embassy.
Sommai Huntrakun
Finance Minister
The 65-year-old minister is respected for his conserva-
tive economic and financial management. After earn-
ing an economics degree from a Japanese university,
Sommai served on the staff of the Bank of Thailand
(the central bank) for nearly 30 years before becoming
Finance Minister in the early 1970s. His Japanese
connections have enabled him to attract more Japa-
nese investment to Thailand, according to the Thai
press.
Ob Vasuratna
Industry Minister
The 65-year-old former commerce minister is a well-
known business figure and former president of the
Thai Board of Trade and Chamber of Commerce.
Educated in Thailand and Hong Kong, the outspoken
Ob is known for his advocacy of free market econom-
ics and increasing Thai foreign trade.
Nukun Prachuapmo
Governor, Bank of
Thailand
The 54-year-old head of Thailand's central bank has
taken a more active approach to monetary policy than
his predecessors-encouraging interest rate flexibility
and a broadening of the financial sector. Nukun, who
did graduate work at George Washington University,
was appointed to the Thai Senate in 1981.
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Chanchai Lithawon
Secretary General
Board of Investment
The US-educated 56-year-old Chanchai has spent
most of his career with the Ministry of Finance, rising
to Deputy Minister in 1979. He has headed the
Investment Board since September 1982.
Sano Unakun
Secretary General,
National Economic
and Social Development
Board (NESDB)
Bangkok's chief planner is a Columbia University-
educated economist and was the youngest governor
ever of the Bank of Thailand at 43. Now 52, Sano has
worked closely with World Bank and IMF officials
over the years and is the government's spokesman for
the structural adjustment program and the Eastern
Seaboard Development Plan.
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