THAI DEPUTY PRIME MINISTER PLEDGES GREATER

C O N F I D E N T I A L SECTION 01 OF 03 BANGKOK 001684

SIPDIS

E.O. 12958: DECL: 07/13/2024
TAGS: PREL ECON ETRD TH
SUBJECT: THAI DEPUTY PRIME MINISTER PLEDGES GREATER
OPENNESS ON CUSTOMS CONCERNS

REF: A. BANGKOK 1574 (FINANCE MINISTER KORN DISCUSSES
CUSTOMS ISSUES)

B. BANGKOK 1338 (AMBASSADOR MEETS WITH DEPUTY
COMMERCE MINISTER)

C. BANGKOK 1305 (DEPUTY PRIME MINISTER SUTHEP ON
CUSTOMS)

D. BANGKOK 1223 (FOREIGN MINISTER KASIT ON CUSTOMS
AND COMMERCIAL ISSUES)

E. BANGKOK 707 (PM ABHISIT ENGAGES AMERICAN BUSINESS)

F. BANGKOK 370 (AMBASSADOR DISCUSSES TRADE WITH
COMMERCE MINISTER)

G. 08 BANGKOK 3774 (AMBASSADOR MEETS WITH COMMERCE
MINISTER)

H. 08 BANGKOK 3747 (FINANCE MINISTER ON US BUSINESS
CONCERNS)

Classified By: Ambassador Eric G. John, Reasons 1.4 (b) and (d)


1. (C) Summary: As part of the Mission,s campaign to
improve the treatment of American firms in Thailand,
Ambassador John, accompanied by representatives of the
American Chamber of Commerce in Thailand, raised July 2 with
Thailand's Deputy Prime Minister Korbsak Sabhavasu issues of
concern to the U.S. business community. The focus of
discussion was the negative impact Thailand's customs law and
draft revised customs law have, and will continue to have, on
Thailand's business and investment climate. The Ambassador
also raised Thailand's excise tax and price support regimes
as issues which, if improved, would help increase Thailand's
competitiveness. Korbsak, responsible for the Thai
government's economic-related ministries, pledged to have the
draft revised customs law returned to the Finance Ministry's
Customs Department so that the business community, led by
groups like AMCHAM, can have the opportunity to provide
comments on the draft. While not making promises on the
outcome of a renewed consultative process, he expressed
gratitude for hearing these concerns directly. Korbsak also
informed of the Thai government's intent to go on-line in
October with a "one-start" window in the Prime Minister,s
office to facilitate business across ministries. End
Summary.


2. (C) Comment: Like Finance Minister Korn, with whom the
Ambassador met June 29 (ref A),Korbsak appears to "get it,"
in the sense of the importance of improving Thailand,s
competitiveness in the face of competition from other nations
in the region. He also appeared to be a straight shooter,
unafraid to challenge his staff for information during the
meeting: after receiving a mumbled, confused answer to one of
his questions, he stated plainly to the Ambassador "As you
can see, I can't get the facts." Like Korn, Korbsak,s
apparent willingness to address our concerns will be
challenged by his ability make the systemic changes needed to
do so. Given the personal financial interest in maintaining
the status quo of key figures in the Thai bureaucracy,
including some who are members of other parties in the
Abhisit government,s coalition, great leaps forward may be
hard to come by.


3. (C) Comment continued: Still, Korbsak,s commitment to
renewing the consultative process regarding the draft customs
law is encouraging. What,s more, it is clear that the
Mission,s continuous effort to ensure the fair and
transparent treatment of U.S. firms in Thailand continues to
show appreciable results (see reftels). This meeting with
Korbsak was the highest-level to date in the Embassy,s "Meet
the Minister" series in which the Ambassador engages key
economic-related Cabinet-level officials while accompanied by
private U.S. business representatives. Our strategy, teaming
up with business leaders so that they can directly address
the top decision makers in the Thai government on the issues
of most concern to them, appears to be working. We will
continue our full court press through the Meet the Minister
initiative and other efforts to engage the Thai government at
all levels. End Comment.


4. (SBU) Ambassador John met with Thailand's Deputy Prime
Minister Korbsak Sabhavasu the morning of July 2 to discuss
issues of concern to the U.S. business community, in
particular Thailand,s customs regime. The meeting was one
in a series of "Meet the Minister" events in which the
Ambassador is joined by members of the American business
community in an approach to relevant ministries to discuss
issues of concern. (NOTE: Soon after taking office, Prime
Minister Abhisit agreed to the Ambassador's suggestion for
the program, understanding it to be an opportunity to improve
the Thai government,s transparency and Thailand's business
climate. End Note.) The Ambassador was accompanied by

BANGKOK 00001684 002 OF 003


members of the Embassy,s senior economic and commercial
staff as well as the President and Executive Director of the
American Chamber of Commerce (AMCHAM) Thailand, David Carden
of FedEX and Judy Benn, respectively. Korbsak, one of three
Deputy Prime Ministers, oversees the Royal Thai Government's
(RTG) economic team that includes the Ministries of Finance,
Commerce, and Industry. He was accompanied by senior
officials from various ministries, including from the
Ministries of Foreign Affairs, Commerce, Labor, and Finance.


5. (C) The Ambassador started the meeting with a description
of his recent visit to the United States with the U.S.-ASEAN
Business Council. As explained to the Finance Minister Korn
on June 29 (ref A),the Ambassador told Korbsak that he
believes there is a distinction between the recent political
turmoil in Thailand and the Thai economy. With the severe
exception of the PAD takeover of the airport in late 2008,
the turmoil has not affected daily economic life and is,
rather, part of a process of defining the bounds of discourse
in Thailand and learning the limits of the rule of law. For
American businesses, the Ambassador explained, politics
largely is a diversion. Their real concern is the rule of
law, which the Royal Thai Government (RTG) should understand
is critical to Thailand's business and investment climate.

The Severely Flawed Thai Customs Law -- and Draft Law
-------------- --------------

6. (C) The Ambassador and Korbsak engaged in a productive,
collegial discussion of the broad customs-related concerns of
American firms active in Thailand. The discussion focused on
the severe problems in the existing Thai customs law, which
have led to, and continue to lead to, gross anomalies on how
foreign companies can operate in Thailand (NOTE: ref A
explains the procedural concerns created by the existing law,
and provides details on specific cases of American firms.
End Note.) The Ambassador pointed out, with the AMCHAM
representatives chiming in for emphasis, that the law's
procedures are of concern to all foreign firms, not just
American, and impact companies of all sizes. As the
Ambassador and senior Embassy officials have done in meetings
with Deputy Prime Minister Suthep, Finance Minister Korn, and
Trade Representative Kiat (reftels),the Ambassador
highlighted the case of Amway, which exemplifies the problems
faced in this area: potentially huge financial payouts,
without just cause, to government officials who have no
incentive to provide for an objective appeal. AMCHAM
President Carden noted that AMCHAM is working closely with
both the Thai Chamber of Commerce and Board of Trade,
evidencing the level of concern that the Thai business
community has about Thailand's customs regulations and
procedures.


7. (C) After acknowledging the cooperation the Ministry of
Finance's Department of Customs provides in other areas
(e.g., on the Container Security Initiative, Megaports
Initiative, and on the implementation of a paperless customs
system),the Ambassador (and AMCHAM representatives)
explained that of equal concern to the existing customs law
is the draft revised customs law which, in its current form,
includes provisions (e.g., regarding penalities and customs
valuations) that are not in line with best-practice
approaches outlined by the World Customs Organization and
Kyoto Convention. They explained that the Thai government
did not provide the private sector with an appropriate
comment period through which to suggest improvements to the
law and that doing so could help improve Thailand's business
and investment climate. Carden explained that the Customs
Department provided the joint foreign chambers of commerce
(including AMCHAM) a Thai language draft of the law only
about ten days before it was sent forward to the Finance
Minister. After translating the law and circulating it to
members for review, AMCHAM then presented a comprehensive
paper to the Customs Department for consideration, only to be
told the draft law had already gone forward.


8. (C) Deputy Prime Minister Korbsak responded with empathy
to these concerns, noting that the Thai government had heard
them before and sought to find solutions. He pointed to two
specific customs-related cases of Japanese firms, both of
which the Thai government had resolved favorably for the
Japanese. Referring to these cases as well as to the
transfer of the former Customs Director General to another
position in the Finance Ministry with an inactive portfolio,
he stated that "if the government truly tries, things can get
done," and that since bureaucrats sometimes interpret laws
differently than they should, higher-level officials must
sometimes intervene to get bureaucrats to make appropriate
decisions. The Ambassador responded that while short-term

BANGKOK 00001684 003 OF 003


changes are welcome, the problem is systemic in nature.


9. (C) As In an unplanned (and interesting) exchange,
Korbsak called on members of his staff in the room to explain
to him the disposition of the draft customs law. After a
brief exchange, he confirmed to the Ambassador that the draft
revised customs law had not already been sent back to the
Department of Customs, for additional revisions, by the Thai
Cabinet Secretary's office (as he had previously thought).
Korbsak then assured the Ambassador that the draft revised
law would be sent back, specifically so that the business
community would have an opportunity to provide comment. He
also stated he would personally look into the customs law and
into the specific case of Amway (NOTE: The company name
"Amway," and other specific company names were never spoken
in the meeting, although individual case details were
discussed. End Note).

Additional Concerns: Excise Taxes, Price Supports
-------------- ---

10. (C) The Ambassador and AMCHAM representatives raised
additional issues of concern to the American business
community, namely improperly levied excise taxes and price
supports. With regard to excise taxes, the Ambassador noted
that even companies operating from nations with free trade
agreements with Thailand complain that their excise taxes
inexplicably go up as their import duties go down, so that
they are penalized all the same. On price supports, he
explained how the high cost of energy for the industrial
sector in Thailand makes the cost of production much greater
here than in other nations in the region, impacting
industries ranging from soft drinks to snack foods and from
glass to tires. Pointing to the case of Guardian Glass, the
Ambassador explained that the imposition of what amounts to a
high indirect tax on the firm (through energy costs
approximately 125 percent higher than those found elsewhere
in the region) endangers the jobs of thousands of Thais
employed by the firm, as well as tens of thousands of others.
It also decreases Thailand's competitiveness. Korbsak
thanked the Ambassador for explaining these issues to him
from the U.S. perspective. Pointing to positive steps being
taken to improve Thailand's competitiveness, he also informed
that the Thai government hopes to open the &one-start8
window in the Prime Minister,s office in October to
facilitate business and investment.
JOHN