I. COMMERCIAL OVERVIEW (Executive Summary) Overview of the Import Market Thailand is one of the fastest growing, most attractive markets for U.S. exporters and investors. Major factors beckoning U.S. exporters include continued rapid economic growth (8% per year), massive investments in infrastructure development ($60 billion to year 2000), and an increasingly affluent consumer base of 60 million ($6,000 per capita GNP in Bangkok and $2,114 nationally in 1993). Thailand is a large and increasingly open market for U.S. exporters. U.S. exporters have done well in Thailand's market, but they could do much better. Our sales, excluding aircraft, were about $3.5 billion in 1993, an increase of $580 million or 12% over 1992. With aircraft included, our total exports were down slightly in 1993, still totalling $3.8 billion. Because of the high value of even a single aircraft deliver, annual trade statistics can be volatile Thailand's imports grew 12% in 1993, about twice the 1992 rate, to $45.1 billion. The Japanese supplied 29% of the market last year, followed by the EC with 15%. The U.S. was third with 12%. Thailand was the U.S.' twenty-fourth largest export market in 1993. Commercial Environment Thailand has developed an open market economy based on the free enterprise system. Despite frequent government changes, consistently conservative fiscal, monetary, and private sector oriented policies have been pursued. Close cooperation exists between the public and private sectors. Political and economic stability are assured by a balance of crown, military, bureaucratic, and business interests. Although the government controls much of the public infrastructure through 65 state enterprises, private sector participation is increasing in the telecommunications, transportation, and other sectors in the form of concessions and build, transfer, operate schemes. Manufacturing and construction, the fastest growing sectors of the economy in recent years, are firmly in the hands of the local and foreign investors. The government encourages trade and foreign direct investment. The U.S.-Thai Treaty of Amity 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. The treaty exempts them from most of the restrictions on foreign investment imposed by the Alien Business Decree. U.S. exporters and investors will find the legal environment familiar and not complex. Executing distributorship agreements and setting up offices in Thailand are not difficult tasks. Local lawyers usually can complete the paperwork easily and quickly. Major steps taken to reduce and simplify import tariffs over the past few years and at present are increasing substantially the import market opportunities. However, as one of the few rapidly growing markets in the world, U.S. firms will find the competition from foreign and Thai firms quite stiff. Major Business Opportunities Major sectors of opportunity for U.S. exporters and investors are: telecommunications; computers and software; electric power; aircraft and airport equipment; food processing/packaging; chemicals; process controls; defense; health care; chemical and plastics; construction equipment and services; scientific instruments; machine tools; pollution control equipment; automotive; oil and gas; outbound travel. On the agricultural side, major opportunities exist for the sale of temperate hardwood lumber, wheat, soybean meal, cotton, and consumer-oriented food. Major Obstacles Thailand's present high import tariffs and arbitrary customs valuation procedures constitute significant barriers to U.S. exports. However, in compliance with GATT Uruguay Round commitments, Thailand is making major import duty reductions on many manufactured goods. While the import licensing process remains a barrier to many food products because of its cost, duration, and requirement for proprietary information, some positive revisions are being made. Improved protection for U.S. copyright, patent, and trademark holders remains a prominent bilateral trade issue. Thailand continues to take major steps to improve both its regulatory and enforcement regimes. Under current Thai regulations, only persons of Thai nationality may be licensed in many professional services, including accounting, architecture, engineering, construction management, brokerage services, and legal services. However, Thai services market access commitments under the Uruguay Round should bring improvements. Finally, lack of a double taxation treaty raises the cost of business in Thailand for U.S. firms. Nature of Local and Third Country Competition U.S. firms must do what U.S. firms do well, namely, draw on their marketing advantages and technical skills to compete against Thai firms, and against third country competition (especially the Japanese and European firms). U.S. firms should choose their market niches carefully and constantly upgrade and improve their product offerings. Competitive advantages include the ability to offer more styles and designs, new models, and new technology. They must push quality and customer service. Perhaps the greatest obstacle to a larger market share for the U.S. is that not enough U.S. firms are entering the market to challenge the Japanese and Europeans. The primary advantage of Thai competitors is price. Local manufacturers will cut prices to the bone to compete, and draw on life long relationships and local knowledge for advantage. Many Japanese and European firms have a good understanding of the Thai operating environment and they have strong market experience. These firms use financing and customer service to the maximum. They often show greater flexibility, a willingness to do things the Thai way. Japanese firms, in particular, are very aggressive and are highly committed to the Thai market. They take the long view and many have been exporting to Thailand for the last 30 years. The Thais have come to appreciate that the Japanese push quality and customer service the hardest of all.