In fact, in 1972, the investment promotion law was replaced by the National
Executive Council Announcement No.227 which was, in substance, intended to give rise to
greater incentives for export industries. Exemption from export duties and business taxes for
export products of promoted firms was included. In addition, imported material inputs and
imported products to be re-exported were exempted from import duties and business taxes
when the income was derived from export activities. Promoted firms were permitted a 2 per
cent deduction on the increases of income over the previous year for income tax purposes.
It should also be noted that BOI had considerable discretionary authority to determine
the list of activities or/and firms eligible for promotion privileges. The 1972 investment law
and the 1977 revision of the Industrial Promotion Act empowered BOI to grant and provide privileges to promoted firms. In the early 1970s, Thai technocrats started to realize that
serious problems confronting them were (i) inefficiency of some import-competing industries
as a result of high wall protection from tariffs and heavy reliance on imported capital goods
and intermediate products, (ii) limited employment absorptive capacity and (iii) heavy
concentration of manufacturing activities in Bangkok and the surrounding provinces. In
addition, the Third national Plan specified poverty problems created by rapid
industrialization. It emphasized increasing income disparity between households in different
regions, between residents in rural and urban areas and rising trade and current account
deficits which were symptomatic of inadequate domestic savings to finance rapidly growing
investment.