The craft is due to be launched by mid-2007 under a 128 million euromillion US) deal and would allow Thai defence analysts to spot trucks and groups of people from space.
"It will be used for monitoring the country for defensive purposes and also for intelligence," General Vichit Satharanond, the head of the Royal Thai Army Military Technology Centre, told AFP.
"If we let the people in the south know we have this, they will start to worry."
Thailand has been wracked by a southern separatist insurgency that has left more than 200 people dead this year.
The authorities have launched a harsh crackdown against the insurgents but killings continue almost daily and the government is preparing to embark on talks with separatist leaders.
The information from the THEOS (Thailand Earth Observation System) satellite, the kingdom's first, will be supplied to nine ministries, including the defence ministry, said officials here.
Pictures will also be used to provide information for coastal surveys, mapping, agricultre, forestry, irrigation and natural resources.
It will also serve as "a kind of weapon" in Thailand's war on drugs, monitoring trafficking routes particularly along the kingdom's western border with Myanmar, Vichit said.
The deal was signed Monday by officials from the Geo-Informatics and Space Technology Development Agency of Thailand (GISTDA) and the French space company EADS-Astrium at a Bangkok hotel.
The satellite will be built in France and more than 200 Thai staff have already undergone training to run the operation and process the images, French ambassador to Thailand Laurent Aublin said.
Science and Technology Minister Korn Dabbaransi said Thailand will "enter a new era" by acquiring its first-ever image-producing satellite.
"The benefits to be derived will be so great," he told Thai and French dignitaries.
To date Thailand has been purchasing images from the US commercial satellite Iconos, which produces more magnified pictures than THEOS but are costly and can take weeks to arrive.
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