It is difficult to obtain details of government intervention in the livestock sector. A comprehensive study was carried out in 1989 by a team sponsored by the Asian Development Bank, but since then there appears to have been little analysis and/or discussion of livestock policies. According to Burch (1996), the state played only a minor role in agricultural development in Thailand. In the pre-war period, state investment was directed at railways in preference to irrigation. While rice remained the cornerstone of the agricultural sector[8], diversification began in the early 1960s, with farmers starting to cultivate cassava and maize. Burch, citing Krongkaew (1995), points out that the first National Economic and Social Development Plan (produced for 1961-66) shifted the emphasis to some degree with the state providing support for infrastructure development while leaving the major role for investment in productive facilities to the private sector. Farmers received support from the Bank of Agriculture and Agricultural Cooperatives (BAAC) and the agro-processing sector from the Board of Industrial Promotion (superceded by the Board of Investments in 1977). Burch argues that Thailand's agricultural sector was grossly undercapitalised, with 14 percent of the cultivated area being irrigated and only 4 percent of the rice area being double cropped. A second wave of diversification began in the early 1970s, and it was based upon the production of a wide variety of value added and semi-processed foodstuffs. There was also extensive state involvement (Burch 1996).
That there is relatively little information available on intervention in Thailand's livestock industries is not surprising. These industries, with the exception of the poultry industry and the pig meat industry, have been a relatively minor part of Thailands agricultural sector. Burch (1996) provides information on government policies and the agro-processing industries. He explains how the Fourth Economic and Social Development Plan (covering 1977 to 1981) indicated the government should encourage industrialisation concurrently with agricultural development and give support to basic industries, supporting industries and agro-industries. Incentives have taken the form of guarantees against nationalization and competition from state enterprises; protection from import competition, and tax exemptions and deductions for exporters. The Board of Investments offered incentives designed to encourage industry to locate in rural areas outside of the Central Plains region.
With few exceptions, project located in Bangkok and five of the surrounding provinces (Zone 1) were not entitled to tax exemptions on machinery and corporate income
Projects located in 10 provinces a little further out from Bangkok (Zone 2) were entitled to a 50 percent reduction on machinery. A full tax exemption on machinery and corporate tax exemptions was awarded to firms in agro-based activities and/or using domestic raw materials for at least 60 percent of total raw materials.
Thailand's remaining 57 provinces were designated as Special Investment Zones. Agro-based activities receive special support, which means that the sector is entitled to tax exemptions on machinery, 50 percent reduction of import duty and business tax on raw or essential materials used in production for the domestic market for one year. This was extended to five years if the goods produced were for exports. Firms also were exempt from corporate tax for eight years. Other promotional benefits are outlined in Burch (1996).
Table 8.1 Tariff rates on meat products, Thailand
Tariff item |
Existing tariff |
GATT base tariff |
GATT bound tariff |
Reduction |
Period |
|
(%) |
(%) |
(%) |
(%) |
|||
Meat of bovine animal fresh, chilled or frozen |
||||||
|
· Bone in |
60 |
60 |
50 |
16.6 |
1995-2004 |
· Boneless |
60 |
60 |
50 |
16.6 |
|
|
· Carcass |
60 |
60 |
50 |
16.6 |
|
|
Meat of sheep, lamb or goats, fresh, chilled or frozen |
||||||
|
· Lamb |
60 |
50 |
30 |
40 |
|
· Sheep |
60 |
50 |
30 |
40 |
|
|
· Carcass |
60 |
50 |
30 |
40 |
|
|
· Bone in |
60 |
50 |
30 |
40 |
|
|
· Boneless |
60 |
50 |
30 |
40 |
|
|
· Goat |
60 |
50 |
30 |
40 |
|
|
Edible offal of bovine animals, sheep or goats, fresh, chilled or frozen |
||||||
|
· of bovine animals |
60 |
60 |
30 |
50 |
|
· of sheep or goats |
60 |
60 |
30 |
50 |
|
|
Sausages & similar products, of meat, meat offal or blood; food preparations based on these products |
||||||
|
· homogenised preparations |
60 |
60.5 baht/kg |
40.34 baht/kg |
33.3 |
|
· of liver of any animals |
60 |
60.5 baht/kg |
40.34 baht/kg |
33.3 |
|
|
· of bovine animals |
60 |
60.5 baht/kg |
40.34 baht/kg |
33.3 |
|
|
· other, including preparations of blood of any animal |
60 |
60.5 baht/kg |
50.42 baht/kg |
16.6 |
|
|
Whole hides & skins of bovine animals, sheep or goats, fresh wet-salted or otherwise preserved |
||||||
|
· of bovine animals |
60 |
30 |
27 |
10 |
|
· of sheep or goats |
60 |
30 |
27 |
10 |
|
|
Live bovine animals |
||||||
|
· pure bred breeding animals |
free |
free |
free |
na |
|
· for slaughter |
60 |
40 |
30 |
25 |
|
|
Live sheep or goats |
||||||
|
· pure bred breeding animals |
free |
free |
free |
na |
|
· for slaughter |
60 |
40 |
30 |
25 |
|
Burch (1996) goes on to explain that the Board of Investments sets out rules regarding the capital used in industry, including those industries that are agro-based.
If production is mainly for the domestic market, Thai nationals must own 51 percent of the equity.
If the venture is in agriculture, animal husbandry, fisheries, mineral exploration, mining or services, Thai nationals must own 60 percent of the equity.
If 50 percent of the output was exported, foreigners may own the majority of shares.
If 100 percent of the output is exported, foreigners may own 100 percent of the shares.
Board of Investment data obtained by Burch are presented in Table 7.2.
Investment applications submitted from 1 August 2000 are subject to revised regulations (Investment 2001). Priority activities are as follows.
Agriculture and agricultural products. This includes animal breeding, animal husbandry, feed manufacture, slaughtering, the manufacture of food made from animals and the manufacture of products from raw milk.
Technological and human resource development.
Public utilities and infrastructure.
Environmental protection and conservation.
Targeted industries.
Unlike the earlier policy, corporate tax exemption and exemption from import duty on machinery is provided, regardless of location. There are a number of other privileges according to zone. Investments in Zone 1, made up of Bangkok and five provinces, receive the following benefits:
50 percent reduction of import duty on machinery subject to an import duty of not less than 10 per cent;
Exemption for one year of import duty on raw or essential materials used in the manufacture of export products; and
Corporate income tax exemptions for three years for projects in industrial estates or promoted industrial zones, provided that the capital invested is Bht 10 million or more and that ISO 9000 or similar international certification is obtained within two years. Otherwise, the corporate income tax exemption is reduced by one year.
Projects in Zone 2, made up of 12 provinces, have similar (but more generous) benefits and projects in Zone 3 (made up of the remaining 58 provinces) are treated even more generously. For example, Zone 3 projects are exempted from import duty on machinery, and corporate tax exemptions are available for up to eight years, subject to the project satisfying certain conditions laid out in Investment 2001. Regulations on shareholding have been altered. For projects in agriculture, animal husbandry, fishery, mineral exploration and mining and service businesses under Schedule One of the Foreign Business Act B.E. 2542, Thai nationals must hold shares not less than 51 percent of the registered capital. Manufacturing projects in all zones may have majority or complete foreign ownership. The Board of Investment has discretion to fix shareholding at whatever level it deems appropriate.
Table 8.2 Structure of investment in selected agri-food sectors, 1990
Item |
Number of companies |
Total investment |
Investment in 100 percent Thai companies |
Investment in joint ventures |
Investment in wholly owner subsidiaries |
Thai capital in total investment |
||||
(mill. Bt) |
(mill. Bt) |
% |
(mill. Bt) |
% |
(mill. Bt) |
% |
(mill. Bt) |
% |
||
Milk and dairy products |
12 |
631 |
173 |
27 |
358 |
57 |
100 |
16 |
305 |
48 |
Animal feed |
84 |
5 159 |
1 420 |
28 |
369 |
71 |
60 |
1 |
2548 |
77 |
Livestock raising or meat processing |
|
|
|
|
|
|
|
|
|
|
Aquaculture |
84 |
4 490 |
1 621 |
36 |
2 869 |
64 |
na |
na |
3535 |
79 |
Other |
11 |
905 |
na |
na |
na |
na |
na |
na |
na |
na |
Slaughtering and processing of chickens for export |
14 |
2 055 |
1 152 |
56 |
903 |
44 |
na |
na |
1721 |
84 |
Source: Burch (1996), p.328-9
[8] In the 1960s, the two main
taxes on rice - the rice premium and the rice export tax - provided 20 percent
of government revenue. The rice premium was zero rated in 1986 and the export
tax was abolished in 1990 (Burch 1996). |