POSTED: 0308 GMT (1108 HKT), April 22, 2007
A Thai protests Temasek’s takeover
of Shin Corp. in front of the Singaporean Embassy
in Bangkok on March 9.
BANGKOK, Thailand (Reuters) — Thailand’s military-appointed
legislature will debate proposed changes to foreign-business ownership
rules this week that are still making foreign firms nervous despite
government efforts to soothe their fears.
Business chiefs fear
foreign companies will be driven away by the new rules, which emanate
from the furore generated by the takeover of Shin Corp., the
telecommunications giant founded by ousted Prime Minister Thaksin
Shinawatra, by Singapore government investment firm Temasek.
At the least, the changes could stifle foreign investment in the export-dependent economy, business executives added.
other Asian countries, with less political and economic worries and
larger markets, are opening up the doors for foreign investment,
Thailand is doing the opposite,” said Paul Strunk, head of the
German-Thai Chamber of Commerce.
“At present, the risks for
Thailand’s further economic development seem to originate more from the
inside than from outside the country,” he said.
poured money into Thailand over the last 30 years using gray areas in
the old rules to run companies with less than a majority stake by using
But then the government installed by the military
after a coup last September decided to launch an assault on the use of
proxies, which it alleges were used illegally in the Temasek deal to
give it control without a formal majority stake. The Singapore
government investment firm had denied any wrongdoing.
National Legislative Assembly will start debating the rule changes on
Wednesday, with deliberations expected to last 2-3 months, assembly
member Somchai Sakulsurarat said. If passed, the changes would need the
king’s approval before becoming law.
there is still considerable uncertainty over how some of the new rules
will work and how they will be implemented. One change is aimed at
ending the long-standing practice of using proxies to stay under a
49.99 percent foreign-ownership ceiling.
“Many Japanese companies
are very concerned about the new law. If they don’t understand it well,
they may put new investment elsewhere,” said Tetsuji Banno, head of the
Japanese Chamber of Commerce.
That is despite the fact the
changes will not affect foreign manufacturers such as Japanese and
American auto firms which enjoy investment privileges from the Board of
The announcement of the changes in January and
a central bank move in December to impose tough capital controls sent
Thailand’s share market sharply lower.
BoI data show the value of
foreign investment applications, mainly from Japan, dropped 23 percent
in the first two months of this year from a year earlier after the
changes were proposed.
Foreign investment applications in September 2006 through February 2007 dropped about 49 percent from a year earlier.
any investment law more strict and difficult in terms of easing ability
to invest in Thailand will have a negative impact on the flow of
investment,” said Peter Van Haren, head of the Joint Foreign Chambers
of Commerce in Thailand. The coalition of 28 national business groups
represents 10,000 companies.
Thais say foreign companies are overreacting.
amendment would not make such a big change to what has been here. The
government wants to make it clearer. Its intention is good but the
presentation is bad,” SCB Asset Management chief Adisorn Sermchaiwong
Stock exchange chief Patareeya Benjapolchai said no more than 15 locally listed companies would be affected by the changes.
many foreign companies will be forced to undergo serious restructuring
as the new government says it is determined to make Thai rules conform
to generally accepted world practice by putting the stress on control.
give foreign firms three years to ensure they own less than 50 percent
of the shares and voting rights in protected sectors such as media and
Firms in the service sector will be
“grandfathered,” meaning they can continue as they are but will be
regarded as foreign firms which will limit their operating flexibility,
A number of sectors, including retailing, banking
and brokerage houses, will also be exempt from the new rules because
there are separate laws governing them.
But the government is planning a new retail law which could affect firms such as Britain’s Tesco and France’s Carrefour.
investors are exempt from the rules under an 1833 treaty which gives
them almost the same rights as Thais, apart from some restricted
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