INVESTMENT LEGAL RESTRICTIONS
Foreign Business Act attacked by experts
UMESH PANDEY
Officials in charge of amending the Foreign Business Act (FBA) should either suspend the process or amend the contentious ''List 3'' to avoid a mass exodus of foreign investors, local experts say. ''Whatever the government does, its next step is going to be crucial and all I can do is to advise them two ways. First is that we hope that the government drags its feet and lets the bill die its own death, and second it is that the government revises 'List 3' down to zero or near zero,'' said M.R. Pridiyathorn Devakula, a former finance minister and central bank governor.
''The new revised version of the FBA is going to scare investors away, especially the services sector _ a sector where Thailand continues to need the expertise of foreign partners,'' he said at a seminar on the FBA at the Sasin Institute of Business Administration at Chulalongkorn University on Tuesday.
The FBA was passed by the cabinet and needed NLA approval but it was withdrawn after some NLA members proposed a stricter version.
On Aug 8 a majority of the NLA voted in favour of expanding the definition of foreigners to include: a) the power to appoint or remove a majority of directors, b) the power to determine the company's future direction, and c) in the case of multi-tier holding company structure, a proposal to categorise each tier in the structure as foreign.
''What we want to stress is that one single case should not be used as a benchmark to disturb the entire structure, because if the Commerce Ministry wants it can use the existing rules and regulations to punish and catch those who are breaking the law,'' said Deepak Mittal, the vice-chairman of the Joint-Foreign Chambers of Commerce.
''Usage of nominees is not permitted even under the current structure.''
Kanissorn Navanugraha, a Commerce Ministry official, said the amendments under the proposal approved by the cabinet were made in order to clarify the definition of who was a ''foreigner''.
He said that businesses in the manufacturing, export and some other industries were not affected and that investors should not panic. Instead the laws were being drafted to create greater transparency and accountability.
He said companies that were already operating in Thailand should not worry as most could seek to ''grandfather'' their operations by applying for a permit from the ministry within a year after the law is passed and restructuring their operations within two years.
Other panelists disagreed, saying that applying for the grandfather clause would mean that the company was admitting it had breached the law.
''What happens if the next government says that it is getting rid of the grandfather clause? The companies that admitted to the breach of law would then be in clear violation of the law,'' Mr Mittal said.
Mr Kanissorn said that his agency was already working to amend the rules but was not sure if they can be passed during this government's tenure, as new elections are set for late December.
''What we are drafting is legislation that would give fair treatment to both Thai and foreign investors, and thus create a level playing field for all parties,'' he said.
Kittipong Urapeepatanapong, a partner at Baker & McKenzie, was opposed to the law, arguing that nearly all companies listed on the Stock Exchange of Thailand could need restructuring, adding that no country in the region had such restrictive laws.
''If these laws passed by the NLA are put into force, we could see a lot of companies in Thailand close and move out,'' added M.R. Pridiyathorn, who was a proponent of the FBA in its earlier form.
''Those who proposed the new amendments are living in a different world, thinking that by closing Thailand they still can attract investments, but the on-the-ground realities are different. Other countries such as China, India, Vietnam, Malaysia, and Indonesia have all opened up and investors can go anywhere they like.''
Vincent Milton, managing director of Fitch Ratings Thailand, said it was Thailand's own decision on where it wanted to go in the long term and policies needed to be drafted in line with those goals.
Bangkok Post