EU objects to Thai test of ‘foreign firm’

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Amy Kazmin, Bangkok
February 12, 2007

THAILAND’S trading partners have formally objected to the military-installed Government’s plans to expand its definition of a foreign company. They claim the proposed changes would violate Bangkok’s World Trade Organisation commitments.

In a letter
sent on Friday, the European Union urged Thai authorities to reconsider
a proposal to use voting rights to determine whether a company is
“Thai” or “foreign” – a change diplomats say would force many existing
foreign investors to reduce their holdings in their Thai subsidiaries.

The EU letter says the proposed changes to the Foreign Business Act
contravene Thailand’s past promise in international trade agreements to
look only at nominal shareholding levels to decide whether a company is
entitled to “national treatment”, or be viewed as a Thai company.

The US, Japan, Switzerland, and Canada have sent, or are expected to
send in the coming days,
letters expressing similar concerns.

“Thailand has made commitments under the general agreement on trade
in services to afford foreign enterprises national treatment without
any limitations other than those on equity or share ownership,” an EU
diplomat said.

“The fact that they now want to add a new limitation, based on
voting rights, is a new condition,” he said. “But you cannot freely add
a new condition.”

The Government, installed after a military coup ousted former prime
minister Thaksin Shinawatra last September, decided to revise Thai
investment laws following the takeover of Shin Corp, the telecoms
company Mr Thaksin founded before entering politics, by Singapore’s
Temasek Holdings.

Last month Thailand stunned the foreign business community when it
said it would change the Foreign Business Act to require firms to be
majority-Thai owned and controlled by Thai citizens, to qualify as Thai
companies.

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