Investors may look elsewhere after revision

Investors may look elsewhere after revision.

UMESH PANDEY

FOREIGN BUSINESS / SHAREHOLDING STRUCTURES

The government's move to plug loopholes in the Foreign Business Act may have solved part of the problem, but lawyers and investment bankers worry the revised rules may hinder new investment flows into the country.

''The moves may have taken place with good intentions, but this is going to create more time required to get licences, and is thus a hindrance to investors,'' said Kittipong Urapeepattanapong, a partner with the law firm Baker & McKenzie.

The result, he said, would be to make Thailand less competitive in the global market.

''This is becoming like a licensing country, similar to what we see in India or other parts of the world,'' Mr Kittipong said.

India's licensing regime, called the ''licence raj'', has been infamous as one of the biggest stumbling blocks to the country's growth.

One Thai investor reported recently that he needed 17 licences just to open a restaurant. Many say it is the key reason why India, despite being a democratic country, has lagged behind communist China in terms of growth.

''If it's going to take six months to get approval for setting up a venture in Thailand, then companies might as well look at other Asean countries or others in the Indochina region to invest,'' Mr Kittipong said.

Others agreed, claiming the move would further reduce investments into the country.

Foreign direct investment (FDI), which during the first 10 months of last year dropped by 50% to about $7 billion, would likely suffer further.

''We have clients who have been waiting to buy some companies here in Thailand, but it doesn't look like the deal is going to go through anytime soon as there is total uncertainty in the market,'' said an investment banker.

Other lawyers were sceptical about the future flow of deals into the country.

''If investors will rethink many times before they put their money into the country, in fact what the government should have done was to try to get List 3 out of the whole process and kept Lists 1 and 2 there,'' said another lawyer who declined to be named.

He said the impact from the rules would likely hurt certain listed companies.

Mr Kittipong, on the other hand, said that companies looking for control or higher returns on investments could still continue to find ways around the revisions, such as issuing preference shares for dividends rather than for voting. Many other ways could be found to beat the new rules, he said.

Even so, further liberalisation would help the economy more than plugging the loopholes in the Foreign Business Act, he said, as Thailand does not command the weight of other countries such as China and India that have large populations to support their economic growth.

''If you are China or India, you can set rules and investors may have to follow,'' he said. ''But we are a small fish, we have to be more lenient when it comes to foreign investors. Thailand is not the only country that is looking to attract investments; there are far more open economies and investors will go there.''

Bangkok Post
Thursday January 11, 2007