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  1. #1
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    Cabinet approves controversial foreign business amendment

    Cabinet approves controversial foreign business amendment

    The Cabinet approved Tuesday the foreign business law amended by the Commerce Ministry.





    The amended act would include the requirement on the voting rights of the board members and increase the penalty for violators.

    Earlier, Joint Foreign Chambers of Commerce warned that the amendment might affect their decisions to do business decision.

    Commerce Ministry and Finance Ministry are scheduled to make seperate press conference at 3pm.
    Earlier Finance Minister Pridiyathorn Devakul vowed to press ahead with legal change that could overhaul the way foreign companies do business here despite warnings of potentially disastrous economic fallout.

    Pridiyathorn insisted that foreign companies would not be scared off by the final version of the law, which has not yet been released.

    Foreign business community in Thailand has urged the government to postpone the changes for at least six months.

    "Why should we withdraw it? They have not yet seen the details. If they had seen the details, I am sure that they would be happy," Pridiyathorn said.

    "Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

    The minister was speaking after attending the cabinet meeting which will consider the changes.

    Pridiyathorn said he had consulted some foreign investors about the changes to the Foreign Business Act and more than half of them had found the new rules acceptable.

    "I myself will talk with them. I have held talks with many investors but they have not seen all of the details and the commerce minister cannot disclose the bill before the cabinet gives its approval," he said.

    "We have a record of welcoming foreign investment. We are not hostile to them. Foreign investors have made Thailand develop and we are certainly still adhering to this policy," he said.

    The revised law is expected to redefine shareholder rights and ownership structures for local subsidiaries of international firms.

    Companies have traditionally set up their operations in Thailand so that the local subsidiaries are nominally owned by Thais but controlled by foreigners.
    Agence France Presse/The Nation

  2. #2
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    The Ghost Of The Moog's Avatar
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    "This is Thailand"

    Is it?

  3. #3
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    ^ I liked that line too. Along with "I myself will talk with them." Yeah, like that's going to make a huge difference.

  4. #4
    watterinja
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    Click!

  5. #5
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    Anything to do with SET's swoon from the afternoon bell? Naa.

  6. #6
    Thailand Expat
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    ^it only fell 10 points mate..

    ..no worries

  7. #7
    I am in Jail
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    SET going down like a $2 whore

    They are going to destroy Thaksin legacy for sure, he is going to look very good very soon with players like these in the government.

  8. #8
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    there seems to be some clever games being played by some one, but whom.

    and if the country starts to go silly, could that leave a door slightly ajar for hier toxin to peep through

  9. #9
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    Quote Originally Posted by meepho
    and if the country starts to go silly,
    Starts to go silly? Where you been hiding?

    Snippets form the Bangkok Post:

    The Government script:-

    Commerce Minister Krirk-krai Jirapaet said the move was part of the government's efforts to close the loopholes abused in the past. Foreign companies had used these loopholes to operate in businesses restricted to Thais, he said. The amendment was likely to make investors feel more optimistic about investing in Thailand.
    Meanwhile in the REAL world:-

    The chairman of the Federation of Thai Capital Market Organisations warned Thailand to brace for a halt in new foreign investment and the gradual withdrawal of foreign investment because the amendments to the Foreign Business Act passed by the Cabinet Tuesday are construed as unwelcoming signs.

    Foreigners yesterday poured scorn on moves by the Thai government to regulate foreign businesses by dismantling the widely used practice of using local nominee shareholders. ''If this government's aim is to scare away foreign investors, then I think they are doing a very good job here; they have the perfect strategy in place to do this,'' said Lance Depew, the portfolio manager of Quest Capital, a $250-million fund management company that has been very positive about Thailand even at the peak of
    the economic crisis in 1997.

    ''What is Thailand doing? Countries like Vietnam are looking to relax foreign limits, and we are looking to tighten them?'' Mr Depew asked.
    .............
    Peter Van Haren, the chairman of the Joint Foreign Chambers of Commerce, said: ''We are very disappointed with the moves, but we still have a ray of hope that things will be amended when it goes through the various processes before it becomes a law.''

    Other analysts were more vocal, saying that the interim government's poor understanding of business could have long-term implications.
    ''The main problem with this army-sponsored government represented largely by retired army generals is lack of experience in politics. ...

    Ministers are using a 'learn on the job' method. The result is simple - confusing policies exposing their inexperience and hurting foreign investment, investor confidence, domestic consumption and the country's image [further],'' Vikas Kawatra, head of institutional sales at Kim Eng Securities, said in a note to clients. ''Imposing restrictions on FDI is simply wrong - even though the intention behind the move is to punish the deposed PM Thaksin Shinawatra. I think these two steps aren't the last silly moves expected from this government.''

    Citicorp Securities said hopes of a possible compromise were shattered, and called the moves the ''worst-case scenario''. It recommended its clients remain underweight in the Thai equity market.

    Mr Tan of S&P agreed. ''Even in the best-case scenario I would say it is negative news for Thailand. ''In the short term people are going to pull out of Thailand and you will see less interest from foreign investors into Thailand,'' he said, adding that most foreign investors were looking for
    majority stakes to increase the efficiency of the companies in which they invest.
    Personally I have seen various governments pull some stupid stunts but this one ranks well up there near the top of the 'suicide' table.

  10. #10
    watterinja
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    Mai penray

  11. #11
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    Quote Originally Posted by William View Post
    ^it only fell 10 points mate..

    ..no worries
    Happy to wager it'll see the wrong side of 600.

  12. #12
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    This is really bad timing, I just had a new client pouring a few millions in the SET recently

    What a mess. They should focus on their Thaksin investigations instead of throwing wrench. A bunch of clueless monkeys.
    Last edited by Butterfly; 10-01-2007 at 01:40 PM.

  13. #13
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    Quote Originally Posted by meepho View Post
    there seems to be some clever games being played by some one, but whom.

    and if the country starts to go silly, could that leave a door slightly ajar for hier toxin to peep through
    Look at what's happened on the floor since Toxin left...from virtually day one the junta made it clear they're more interested in keeping the people happy than trivialities like economics or how their meddling may be viewed by the rest of the world, the while going out of their way to leave their credility in tatters.

    For example, the 10 Dec fiasco was created on the principle of sacrificing the SET to weaken the baht, without consideration of the likely reaction, which was swift and brutal. Don't forget, this was done in a climate where suspicion was already reigning supreme, and then incredibly diluted when the nasty farangs demonstrated the value of their input to the Thai economy.

    What they come up with next, only time will tell, though there's little hope unless and until those who seem to know so much about taking control and little about using it wisely, realise they need the farang more than the farang needs them.

    Half of my investments are already out of the country, and the other half will follow when the SET rebounds before it crashes further.

  14. #14
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    Quote Originally Posted by keda
    ...from virtually day one the junta made it clear they're more interested in keeping the people happy than trivialities like economics
    Rather say 'keeping certain people happy' - the majority would have been quite content to vote him back in had the planned election taken place. On the economics side, I think that once again they simply focused on one specific group who were being hurt by the Baht/Dollar exchange rate.
    Lord, deliver us from e-mail.

  15. #15
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    and the Dec 10 measure didn't achieve anything, THB is still 36, not the 40 THB level that exporters were expecting.

    Maybe time to leave the SET as next year earnings are going to be brutal

    Property stocks have lost 20% so far

  16. #16
    Thailand Expat
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    an interesting take on developments from the FT today. I particularly liked the last sentence.

    A military coup and a submerging market

    Published: January 10 2007 02:00 | Last updated: January 10 2007 02:00

    For the third time in a month, Thailand has been exposed as the high-risk emerging market that has always lurked under the country’s veneer of relaxed, foreigner-friendly capitalism.
    First, the government installed by the army after a coup d’état imposed capital controls to try to hold down the surging local currency, and then hurriedly withdrew most of the controls when the stock market predictably plunged. Next, a mysterious series of bombs exploded in Bangkok on New Year’s eve, killing three people.

    The government on Tuesday added to the confusion by announcing new limits on foreign ownership of Thai companies, ignoring the pleas of foreign chambers of commerce in Bangkok and prompting yet another decline in Thai equities to their lowest level for more than two years.
    It can be argued that the previous arrangements were opaque and unsatisfactory: for decades, Thailand had allowed foreigners to breach the spirit of the law by using Thai nominees, permitting an investor who was technically a minority shareholder to have de facto control of a company.
    For many existing investors, furthermore, the direct impact of the latest proposals will not be significant. Hoteliers and law firms, for example, will be permitted to retain majority foreign control, although they will have to report their shareholdings to the state.
    But the Thai government has introduced these changes to the Foreign Business Act in the wrong way and for the wrong motives. As with its earlier blunders, it has acted without transparency or sufficient consultation. It has not even moved with the firmness and determination expected of a military-installed regime, leaving domestic and foreign investors full of doubt about the possibility of yet more changes to investment legislation in the future.
    On the face of it, Tuesday’s announcement might look like a nationalist attempt to protect Thai companies from foreign competition, but the real reason is doubtless to punish Thaksin Shinawatra, the prime minister ousted by the coup. He was overthrown after the controversial, tax-free sale of his family’s telecoms empire to Temasek, the Singapore state holding company, for $1.9bn. It is no surprise that telecoms is not one of the sectors exempted from the new requirement that foreigners reduce their voting rights to below 50 per cent of a Thai company within two years.
    The result is that the changes to the law will be bad for the business climate in Thailand, and not only because some investors will be pushed into a forced sale of their assets. Perversely, both Thai and existing foreign investors in most service industries will profit from discrimination against new entrants, to the detriment of competition. Above all, business will be more reluctant than ever to invest in a country where the authorities do not seem to know what they are doing.

    Copyright The Financial Times Limited 2007

  17. #17
    I am in Jail
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    Quote Originally Posted by William
    Perversely, both Thai and existing foreign investors in most service industries will profit from discrimination against new entrants, to the detriment of competition. Above all, business will be more reluctant than ever to invest in a country where the authorities do not seem to know what they are doing.
    This is exactly what I was thinking. This is great for existing businesses as market will be difficult for new players, even though opportunities here are not that great in the first place. Small fishes in a small pond. But at the same time, it will stop those same businesses from growing with the help of additional capital, so at the end it's a net loss for everybody. I certainly do not want to see Thailand turn into a business oriented Singapore, and if Thais are happy to live in a third world country, then it's up to them really, not to us. If this government doesn't want the money, fine, it's hard to blame them.

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