Latest news with #CompetitivenessEnhancementFund
Bangkok Post
6 days ago
- Business
- Bangkok Post
Ministry prepares stimulus measures to counter tariff
The Finance Ministry is preparing to roll out stimulus measures to offset the negative impacts of US tariffs, while also revving up its regulatory guillotine to enhance the country's competitiveness. STIMULUS MEASURES According to Pornchai Thiraveja, director-general of the Fiscal Policy Office, the ministry plans to implement stimulus measures to compensate for possible negative effects from a slowdown in exports. "If net export revenues decline and affect economic growth, the government is ready to consider measures to stimulate domestic spending and investment to support the economy," he said. "These measures may include accelerating disbursement of public investment budgets for various infrastructure projects to stimulate economic activity and create domestic jobs, introducing tax policies to encourage consumption [such as tax deduction programmes for domestic tourism or shopping] to offset the slowdown in foreign demand, and supporting the tourism and service sectors, which are key engines of the Thai economy." The government plans to implement these stimulus measures with caution, taking into account fiscal discipline and long-term economic stability, said Mr Pornchai. TAX EFFORTS The administration is preparing domestic tax measures to help reduce costs and increase liquidity for businesses. Examples include speeding up value-added tax refunds for exporters, extending deadlines for tax or social security payments for businesses affected in the initial phase, and offering tax incentives for affected companies if they invest in projects to improve production efficiency or adapt their products. These measures aim to help Thai businesses stay afloat and prepare for competition when the situation stabilises, he said. The government's Competitiveness Enhancement Fund with a budget of 10 billion baht can also help Thai businesses adapt to changing trade conditions, said Mr Pornchai. This fund supports various projects in partnership with the private sector, targeting vulnerable industries or those needing urgent adaptation. Examples include financial grant or co-investment programmes for factories wanting to upgrade machinery and adopt new production technologies, or training and business consulting programmes for small and medium-sized enterprises (SMEs) to improve product standards and find new markets. In the agricultural sector, the government may use part of the budget to help small farmers adapt, such as projects to switch to alternative crops or improve production efficiency. This programme could benefit farmers affected by increased US imports, such as corn and soybean growers. If Thailand must open its market further to these imports under agreements and domestic crop prices are affected, the government may consider temporary income compensation or providing production inputs at lower costs to farmers during an initial adjustment period, said Mr Pornchai. REGULATORY REFORM Regarding the revision of relevant regulations and laws to comply with US trade agreements, he said the government recognises Thailand may need to urgently amend many legal details. The first step is to draft statements and agreements with the US to submit to parliament for approval. In the short term, the laws requiring amendment include the Customs Act and the Customs Tariff Act, restructuring import tariffs on US goods as Thailand committed to reduce tariffs for certain products immediately, with others cut gradually over 3-5 years. Some sensitive products will continue to be taxed. This rejig covers laws or regulations related to import quotas and sanitary standards, said Mr Pornchai. For example, Thailand previously set import quotas and tariffs on feed corn and soybeans to protect domestic farmers. With the new agreement, Thailand may need to amend ministerial regulations governing import quota allocations to make them more flexible, possibly linking them to quality requirements (such as requiring imported corn to be produced without crop residue burning), as negotiated by Thailand. In addition, he said some sanitary and food safety regulations that act as non-tariff barriers will be reviewed and revised to better align with international standards, without compromising Thai consumer safety. For pork imports from the US, Thailand agreed to open the market only slightly (not exceeding 1% of domestic demand), and confirmed that pork containing ractopamine remains prohibited under Thai law. However, the inspection system for these imports will be strengthened to be more rigorous and transparent, said Mr Pornchai. To prevent circumvention of rules of origin regulations or transshipment, a major reason for the US tariff measures, he said Thailand has taken steps to strictly enforce the law. The Customs Department and the Commerce Ministry will cooperate with US authorities to monitor the supply chains of goods exported from Thailand, said Mr Pornchai. If a genuine case of origin evasion is found, the goods will be subject to a tariff as high as 40%, as determined by the US, a principle with which Thailand agrees. In the short term, Thailand will focus on revising regulations to facilitate compliance with the agreement, he said. Once these immediate issues have been tackled, the government plans to proceed with structural regulatory reforms to sustainably enhance the nation's competitiveness. In the medium term, key measures include review of outdated laws and reducing bureaucratic procedures that hinder business operations, said Mr Pornchai. The government wants to make Thailand's business environment more favourable to investors and entrepreneurs by eliminating unnecessary licences, updating labour and investment laws to be more flexible and modern, and expanding the use of digital systems in public services, he said. These efforts align with Thailand's goal of attracting new investments and supporting domestic business growth, similar to the recent amendments to the Investment Promotion Act and laws related to the Eastern Economic Corridor that have accelerated project approvals and offered more attractive incentives to investors. In the future, Mr Pornchai said Thailand will consider revising the Trade Competition Act and other anti-monopoly laws to create a fairer market and encourage new players, especially SMEs and startups, to enter more easily. Moreover, improvements to intellectual property laws and legislation related to the digital economy (such as the Personal Data Protection Act and e-commerce laws) are necessary to build an ecosystem that fosters innovation and online trade, thereby enhancing the nation's competitiveness in the new economy, he said.
The Star
08-08-2025
- Business
- The Star
Thai govt prepares compensation package to mitigate impact of Trump's tariffs
BANGKOK (The Nation Thailand/ANN): The Thai government plans a compensation package to counter Trump's tariffs, with a proposal for tax cuts in the works, aimed at supporting affected sectors. Following successful negotiations between Thailand and the United States, an agreement has been reached to reduce reciprocal tariffs from 36% to 19%, effective from August 7, 2025. This reduction comes with a significant condition: Thailand will open its market to over 10,000 US products at a 0% tariff, including agricultural goods, while increasing quotas for sensitive agricultural imports from the US. Detailed discussions are still ongoing, and a list of products to amend customs duties will soon be presented to parliament for approval, a process that could take several months. Deputy Prime Minister and Finance Minister, Pichai Chunhavajira, revealed that the government has tasked relevant agencies to expedite the finalisation of measures to alleviate the impact of Trump's tariffs. These will be tailored to each sector, with different businesses being affected in distinct ways, such as the electronics, processed foods, and electrical appliances industries. 'Some industries, like diamond and gemstone exporters, may be asked by buyers to bear part of the cost burden, such as half of the tariff. Meanwhile, other sectors, with high competition and multiple source countries, may pass most of the cost onto the American buyers or consumers,' Pichai said. Sources from Government House revealed that the government is currently preparing a compensation package for affected entrepreneurs, exporters, and farmers. This will be presented to the Cabinet alongside the national economic restructuring plan. The compensation package will be divided into three main measures: 1. Subsidy Measures to Support Affected Groups The government is implementing subsidy measures to support those impacted by the Trump tax, using existing funds to provide financial assistance to those affected. These measures include: Competitiveness Enhancement Fund for Targeted Industries: The Cabinet has approved an additional 10 billion baht for the fund, sourced from the central economic stimulus budget for fiscal year 2025. This funding will be used to help upgrade machinery to digital technology, aiming to help restructure the country's economy. Adjustment Fund for Production and Service Sectors: The FTA Fund will support farmers impacted by trade liberalisation by aiding in the restructuring of agricultural production. The Ministry of Commerce is preparing a budget proposal to further supplement the FTA Fund. Since 2006, the FTA Fund has supported 35 projects for agriculture, totalling 1.208 billion baht. However, new adjustments may be needed to align with US tax policies. Budget Allocation for US Tax Impact: The government is also preparing a budget to address the impact of US tax measures, including 25 billion baht in the central economic stimulus budget for fiscal year 2026. This amount will be used to mitigate the effects of US tariffs during that period. 2. Low-Interest Loan Measures The government is introducing soft loan measures through state-owned financial institutions, initially providing 200 billion baht. Additionally, the Ministry of Finance is working with commercial banks to prepare further soft loans to cushion the effects of the US tax measures. These loans may be directed at businesses that need to stock inventory or those that require liquidity to continue operations during this period. Furthermore, the government is studying the possibility of using the remaining 24 billion baht from the 2025 economic stimulus budget to repay debts to state-owned banks, such as the Bank for Agriculture and Agricultural Cooperatives (BAAC), the Export-Import Bank of Thailand (EXIM Bank), and the Small and Medium Enterprise Development Bank of Thailand (SME Bank). By repaying 20 billion baht, the government could increase the lending capacity of these state banks by up to five times, or 100 billion baht. 3. Tax Measures to Support Business Adaptation To help businesses adjust during the transition to a 19% tax rate, the government is considering various tax measures, including tax reductions, corporate income tax cuts, and tax credits. The Ministry of Finance is currently reviewing the details of these measures. Previously, the Bank of Thailand (BOT) advised the government to continue monitoring and evaluating the effectiveness of the remaining 24 billion baht from the 2025 economic stimulus budget. Additionally, there should be processes in place to ensure transparency and public accountability. The remaining funds may be allocated towards projects or measures that reduce the impact of the war and help the economy adapt in the long term. Further actions, such as strict enforcement of laws to prevent import flooding, thorough product standard inspections, and resolving trade disputes with foreign markets, are also being considered to mitigate the influx of foreign products in Thailand. Government Aims to Turn Business Adaptation into Opportunity Pichai stated that the 10-billion-baht Competitiveness Enhancement Fund, approved by the Cabinet, is under consideration to support businesses affected by US tariffs, including those that do not currently benefit from the Board of Investment (BOI) incentives. This will require an expansion of the fund's scope to include such businesses. Pichai explained that in the long term, Thailand must transition from traditional manufacturing platforms to more modern ones. While the BOI's tax incentives may not directly apply, the government could use funding to support affected sectors and industries. Each case will be considered individually, focusing on the industries most impacted. The government plans to provide special support to target industries, especially those affected, and those the government wants to remain competitive. This support will aim to help businesses remain competitive, as high costs could otherwise hinder their ability to compete in export markets. Private Sector Requires Different Types of Support Pongsarun Assawachaisophon, Deputy Secretary-General to the Prime Minister, stated that the government's support measures have been continuously discussed with business operators, with a focus on the specific product groups affected. The needs of each group of businesses differ. For example, jewellery and gem exporters have raised concerns about the increased US import tariffs. Initially, importers may bear 40% of the increased import tariff, with another 40% requested to be covered by the government. The remaining 20% could be passed on to US consumers or reflected in price increases by US importers. The jewellery and gem export group may request a 1-2 year adjustment period, asking for tax measures such as tax reductions, rather than soft loans. During this period, the government will look for other mechanisms to recover taxes concurrently. Furthermore, the 10-billion-baht Competitiveness Enhancement Fund has been approved as part of the strategy to help businesses adapt and remain competitive during this tax transition. Pongsarun added that the Thai team is currently negotiating the details of a Joint Trade Agreement with the US for over 10,000 items, including agricultural products. For some agricultural items, such as corn, the government will first purchase all domestic produce before considering imports. The government will set a market price for domestic produce to ensure that all local products are bought up first. - The Nation Thailand/ANN
