The BoI criteria require auto-makers to submit investment proposals for auto assembly and engine and parts production.

Another condition states each project must turn out at least 500,000 cars annually by the fifth year.

Engines must have fuel consumption of less than 5 litres per 100 kilometres and emit not more than 120 grams of carbon dioxide per kilometre.

Each car must comply with the Euro IV standard or higher for reducing emissions.

To win tax breaks, auto-makers must produce at least four-fifths of fixed auto-parts in Thailand. These include cylinder heads and blocks, crankshafts, camshafts and connecting rods.

Deputy Prime Minister and Industry Minister Kosit Panpiemras said each maker would receive privileges based on proposed investment plans.

"We'll consider the country's benefit first. The more investment the manufacturers make here, the more privileges they will get," he said.

Last week, the Finance Ministry decided it would collect 17-per-cent excise tax on eco-cars with engines smaller than 1,300cc for petrol and not more than 1,400cc for diesel.

Asian Honda Motor senior vice president Adisak Rohitasune said the government's direction was the "clearest ever".

He said the conditions challenged auto companies.

"The government does not want to distort the auto industry, so it offered the most privileges possible," he said.

He said it was not easy for companies to make eco-car investment decisions.

"Six months should be enough for those that do intend to invest here," he stressed.

Seventeen-per-cent excise tax and BoI tax exemptions for importing machinery will reduce production costs to between Bt70,000 and Bt100,000 a unit, he said.

He said BoI conditions for minimum investment would not be an obstacle. They have invested at least Bt10 billion for each new model in the past few years.

The BoI approved special incentives for those planning to spend on manufacturing in the deep South.

They will be exempted from corporate tax for existing projects located anywhere up to an amount equal to that investment. For example, Bt100 million in spending in a deep-South plant could be deducted from the tax for three years.

In addition, new projects will be granted maximum tax breaks for eight years.

From 2003-06, there were eight applications in the three southernmost provinces, with investment of Bt2.42 billion.

Meanwhile, the board approved six projects with total investment of Bt26.68 billion yesterday.

Secretary-general Satit Chanjavanakul said total value of net applications in the first five months of the year were about Bt200 billion, up 74 per cent year on year.

"Despite the political turmoil, the figure showed it has barely affected investor confidence," he stressed.

Chalida  Ekvitthayavechnukul

The Nation