Asia Expats Forum

[Mike]

Foreign community seeks 6-month delay

Cabinet discussing FBA changes today

POST REPORTERS

The foreign business community in Thailand yesterday launched a last-ditch effort to derail legal amendments that would clamp down on the widespread practice of nominee structures and further tighten local business rules on foreign investors.

Cabinet ministers today are to vote on planned amendments to the Foreign Business Act (FBA) that will tighten rules on shareholding structures.

But members of the Joint Foreign Chamber of Commerce in Thailand (JFCCT) warned that imposing tougher conditions on foreign businesses would only further affect investors' confidence and undermine future growth.

Peter Van Haren, president of the Joint Foreign Chamber of Commerce in Thailand, discusses the FBA amendments at a briefing yesterday. — KOSOL NAKACHOL

"Placing more restrictions will lower the confidence in the country and will therefore result in a decline in investments both from companies operating and from companies that are planning to enter Thailand," said Peter van Haren, the JFCCT president and CEO of the SET-listed multinational pipe manufacturer Wiik & Hoeglund Plc.

Mr van Haren said the JFCCT, representing 28 foreign chambers, including the EU, the US, Australia, Germany and Japan, urged the government to postpone any change to the FBA pending more detailed study of the consequences.

"The government should try to separate politics from business and should understand the consequences of such measures. What we are asking for is a delay of six months and for the government to set up a panel that analyses the impact of such measures before they go ahead and implement it," said Mr van Haren, also a vice-chairman of the Thai Board of Trade.

But Commerce Minister Krirk-krai Jirapaet said that while foreign chambers and envoys had the right to object, the legal reforms would move forward.

He said the ministry would forward the draft changes to the cabinet today, but that details would remain confidential.

But under the proposal forwarded by a 10-member committee set up to study the FBA, companies using nominee structures would be asked to comply with the law within a given timeframe.

Among the options recommended by the committee headed by Pramon Sutivong, chairman of the Board of Trade, was one that would allow companies on "List 3" to operate as is, and all they need to do is register with the ministry, but new companies that apply would need to follow the new regulations.

List 3 in the FBA covers services such as construction, law and accounting. Foreign companies would still be banned from List 1 sectors, which include media, rice farming, forestry and sectors linked to national security, as well as List 2 sectors, which involve culture and handicrafts.

It is estimated that as many as 14,000 companies in Thailand use local nominees holding shares on behalf of foreign investors to effectively keep companies under majority foreign control.

The amendment to the 1999 FBA came into the spotlight after the Shin Corp buy-out by Singapore's Temasek Holdings from the family of ousted prime minister Thaksin Shinawatra in January 2006.

The JFCCT has not received a reply to the proposal it sent to Prime Minister Surayud Chulanont's office and believes that the government should continue to use shareholding as the key criterion in considering the nationality of a company.

"To change the definition of 'alien' and thus Thai law would be to change the rules of the game for investment in Thailand," Mr van Haren said.

"Furthermore, if these rules are applied retroactively ... many investors have told us that they will view such action as compulsory divestiture, no matter what grace period is offered for them to come into compliance," he said.

The JFCCT, whose members represent more than 10,000 companies, said that any action to restrict investment would only erode confidence in the country.

"Thailand has been the destination for foreign direct investment for decades but all this is being threatened by such moves. I have companies that are looking to invest in Vietnam, which is welcoming us with open arms. Some are looking at Malaysia and Singapore, while awaiting clarity from Thailand," said the head of one chamber.

Deunden Nikomborirak, a researcher with the Thailand Development Research Institute (TDRI), said she was not surprised by the foreign business community's reaction, particularly among the Japanese, the largest investors in Thailand.

She said that the various leaks to the media and unclear statements by the Commerce Ministry had helped to fuel negative views about the planned changes to the FBA.

The Board of Investment, meanwhile, said it expected little impact from any FBA changes on existing companies to which it had granted privileges, since most firms subject to the act were in the services sector.

Mr Pramon maintained that even if the revised law would not allow Thai shareholders to vote in the name of their foreign partners, the business environment in Thailand would still be attractive.

Many 49% foreign-owned companies have agreements with Thai shareholders who are asked for nominee votes.

"Such special agreements are not illegal now but the revised act may not allow them in the future," said Mr Pramon.

http://www.bangkokpost.net/Business/09Jan2007_biz01.php
_________________
Asia Expats Forum
Expat Friends Dating

[KoratCat]

Scaring a few prospectors away might also help in controlling the increasing overvaluation of the Thai Baht.
_________________
Thailand Forum - Korat Forum..

[Mike]