POLICY / FOREIGN BUSINESS ACT

PM says Thailand is not closing up

FBA changes aim to level playing field

POST REPORTERS

Thailand remains open to foreign investors and committed to implementing structural reforms aimed at long-term sustainable growth, Prime Minister Surayud Chulanont told foreign investors yesterday. ''Close scrutiny of the government's record shows that we promote openness. We remain committed to the free market, to the liberalisation of trade in goods and services,'' Gen Surayud said at a luncheon organised by the Joint Foreign Chambers of Commerce yesterday.

More than 700 business leaders and diplomats, many sceptical and apprehensive about the government's direction, attended the event, as did key economic ministers from the cabinet.

Business sentiment has been poor over the past two months due to security uncertainties following the New Year's Eve bombings, and apprehension regarding the central bank's capital controls on foreign inflows and moves to tighten controls under the Foreign Business Act.

''Thailand has thrived and will continue to thrive on foreign trade and investments,'' Gen Surayud stressed.

He said that the government was looking to amend more laws to make Thailand more attractive to foreign investors.

Changes to the Foreign Business Act were aimed at clarifying existing regulations, he said. He insisted that the government was dedicated to complying with its commitments to the World Trade Organisation and other agreements.

Thailand had no intention of ''killing the goose that lays the golden eggs'', Gen Surayud said, referring to foreign investors.

''We merely seek to put an end to the previous precarious position many investors had been put into as a result of the investigation into complaints about FBA violations,'' he said.

Although acknowledging that he was aware of the grievances of the Joint Foreign Chambers of Commerce, Gen Surayud insisted that changes were necessary for the country to move forward.

''It should be clear to you all that [since the Sept 19 coup], Thailand has entered another period of strategic transition,'' he said. ''We are moving through uncharted waters, but with a clear destination to be reached within a very limited time.''

He vowed that the influence of ''deeply entrenched vested interests'' would be eliminated, with the rule of law strengthened and corruption eliminated.

Questions have been raised by the foreign investment community over the openness of Thailand's economy and its willingness to welcome foreign investors after the government moved to tighten the screws on the widely practiced and accepted nominee structure among foreign companies that operate in Thailand.

''We know businesses welcome predictability. We know businesses like to see fairness and transparency, without selectivity,'' Gen Surayud said. ''The [FBA reform] is aimed at achieving these objectives by creating a level playing field.''

Commerce Minister Krirk-krai Jirapaet, who is directly overseeing the FBA reforms, chided critics for misunderstanding the intentions of the changes.

He said the reforms were aimed at strengthening compliance with the law, and that in fact, Thailand offered foreign businesses considerable freedom to operate and benefits beyond those granted to domestic industries.

Under the proposed reforms, foreign businesses in violation of the 49.99% shareholding limit must report their structures within 90 days and will have one year to overhaul capital structures.

Voting rights will also be used to help define foreign companies. All companies where foreigners hold a majority in voting rights must report to the Commerce Ministry within one year, although existing firms operating under List 3 of the FBA, comprising mostly service industries, will be exempt under a grandfather clause.

Companies in violation of the voting limit and operating under List 1 or List 2 of the FBA must reduce their voting rights to a minority within two years.

Mr Krirk-krai noted that foreign companies could seek exemptions to hold majority shareholdings even in List 2 or List 3 sectors by petitioning the Commerce Ministry and the cabinet.

The move to clarify the FBA was aimed at promoting transparency in Thailand's corporate culture, he said, and clamping down on those who deliberately sought to circumvent the law.

''The use of nominees was the cause of the fall of a government in this country, and there are enough reasons to believe that companies didn't want to follow the approval process for restricted industries. We want to make it clear that this circumvention of the FBA is not allowed.''

The Thaksin Shinawatra government faced massive protests last year after the premier's family sold off its shareholdings in telecom giant Shin Corp to Singapore's Temasek Holdings. Temasek was later accused of violating the FBA through the use of nominee vehicles, prompting a review of the law and its enforcement.

Although an election was scheduled for November, the military overthrew Mr Thaksin and tossed out the 1997 constitution on Sept 19.

General News
Bangkok Post
Thursday January 25, 2007