Executives want FBA to be liberalised

Thailand falling behind regional rivals

PHUSADEE ARUNMAS

Foreign business leaders remain adamant that any changes to the Foreign Business Act that expands the definition of foreign firms would be detrimental to Thailand's efforts to attract overseas investment.

The cabinet in January approved a new FBA draft that says voting rights would help determine a company's status and ability to operate in protected sectors. Members of the National Legislative Assembly have proposed a separate law with slight changes in how companies are screened for eligibility under the law.

But members of the Joint Foreign Chamber of Commerce say any moves to tighten the law would be greeted unfavourably by the foreign business community.

"The proposals have led to negative reactions from existing and prospective foreign investors, have created confusion and a negative tone toward the Thai government's view of foreign direct investment," said Stephen Frost, a board member of the British Chamber of Commerce.

"None of the proposals embraces, enhances or mobilises the much wider issue of Thailand's leadership position as a substantial trading nation in Southeast Asia. At a time when Thailand's regional competitors are creating a 'can-do' business environment by putting forth clear, attractive ownership structures and tax incentives to encourage foreign investment, Thailand appears to be going in the opposite direction."

Mr Frost, speaking at a seminar on the FBA yesterday, said the government and NLA drafts both extended the definition of alien and increased penalties for violations.

The 1999 FBA defines the businesses restricted to foreign-owned companies, which to date had been taken to mean firms in which foreign investors have a direct majority shareholding.

But the new drafts would broaden the definition of alien to include indirect, nominee shareholding, as well as companies in which foreigners hold majority voting rights.

One critical distinction between the government draft and the NLA version is that the government would force companies to adjust their shareholding structures to maintain foreign voting rights in the minority, while the NLA version would offer waivers if majority voting rights were taken in good faith and justified for commercial reasons.

Mr Frost said the NLA clause, however, was very general, and could be open to different interpretations by the authorities.

"The result may lead to less transparency and a lack of uniformity in interpretation," he said, adding that the changes potentially breached Thailand's commitments to the World Trade Organisation in addition to long-held precedent in Thailand.

"The definition of an 'alien' in the current FBA simply does not include a reference to voting rights. As a matter of simple logic, it follows that the addition of voting rights to that definition represents a change in the law," Mr Frost said.

If approved, the new changes would represent "compulsory divestiture", as firms were forced to restructure their shareholding structures and find Thai partners.

Mr Frost said the Joint Foreign Chambers of Commerce wanted the government to review the 43 categories listed under the FBA as well as those restricted under separate laws with consideration for Thailand's global competitiveness.

The categories are broken into three "lists". List one represents businesses banned to foreigners, including media and rice farming. List two sectors, which include firearms production and transport, are restricted for national security reasons, while list three covers most service sectors.

Vikrom Kromadit, managing director of industrial estate operator Amata Corp, said both the FBA and proposed retail business law were "dinosaur laws" that had dragged down Thailand's global competitiveness in recent years.

He noted that other countries, including Singapore, India and Vietnam, were liberalising their investment laws even as Thailand was moving in the other direction.

"Thailand is developing as a turtle that has stopped walking, and would rather step backwards into the canal," Mr Vikrom said, adding that industrial estates in Vietnam last year reported 300% growth compared with sharp declines for Thai operators.

Bangkok Post

Last Updated : Tuesday April 10, 2007