This thesis looks at the effect of the formation of the ASEAN Free Trade Area (AFTA)on Thailand's particularly on cement industry. It first deals with the historical background of ASEAN, the economic grouping of Southeast Asia; the Thai and other ASEAN countries' cement industries. Then it analyses in detail the impact of AFTA on the Thai cement industry by comparing cement prices (including freight) in each ASEAN member country (except Brunei) before and after the establishment of AFTA. The study concludes that among AFTA member countries Indonesia has an advantage over Thailand on the industry. This largely is due to the fact that, Thailand has a higher costs of production due to the imported coal to generate the energy which is an important cost compact in cement production. However, to make the Thai industry more competitive, a reduction of import tariff coal from 25% to 10% is required. This would enhance the competitiveness of the Thai industry when compare with its main competitor, Indonesia.