Thread: Foreign Firms Fear Tighter Restrictions

Nominee Loopholes In The Firing Line

Bangkok Post
November 2, 2014
Writer: Nanchanok Wongsamuth

Foreign business chambers and embassies have expressed concern about a government proposal to restrict foreign control over joint-venture companies in Thailand.

In an internal briefing document circulated among foreign embassies and seen by the Bangkok Post Sunday, fears are raised about possible amendments to the Foreign Business Act (FBA), which governs the activities of foreign businesses in Thailand.

The amendments, which the document says are being mooted by the Commerce Ministry's Business Development Department, propose closing loopholes that allow Thai nominees to be used by foreign companies.

One embassy believes the initiative is being pushed by the Thai Chamber of Commerce (TCC) as a means to benefit local businesses who are afraid of competition from foreign companies, according to the document. "The minister of commerce is planning to present this amendment and it appears that the PM might be supportive as well," the document says.

Chatchai Mongkolvisadkaiwon, who chairs the TCC's trade in services and investment policy committee, confirmed that Thai businesses have requested an amendment to the FBA to limit foreigners having the majority say in company boards, mainly in the service sector.

"There has been an attempt by many [Thai business] associations, but it would not be easy to pass as a law in the current context of liberalization," he told the Bangkok Post Sunday.

Currently, Thai nationals need to hold more than 50% of stock in a joint venture for it to qualify as a local company.

However, the FBA does not prohibit foreigners from making up the majority of the board of directors. It also does not prohibit them having different classes of shares with different voting rights. This means that in some instances a company may appear "local" even though foreign interests control it.

Mr Chatchai said allowing foreigners to determine the policy of the company may harm the interests of Thai shareholders. "Business operators are afraid that it will be a case of the big fish eating the small fish," he said.

The document also raises the prospect of removing restrictions on some industries that are off-limits to non-Thais, which could appease some foreign companies.

The Commerce Ministry is expected to organize a public hearing for foreign and local chambers of commerce and businesses in the next few weeks, before finalizing the draft amendment at the end of this year, the document said. The law could be passed as early as next year.
Business Development Department director-general Pongpun Gearaviriyapun confirmed the Commerce Ministry is pushing to amend the FBA, and added that the first meeting with foreign and local business groups would be held this week. She said a key proposal would be to classify a company as "foreign" even if foreigners hold only 49% of the shares but have control of the board and "company direction".

When asked if foreign investment would suffer if the changes went ahead, she said the government would have to offer other incentives, such as tax breaks, to offset any negative impact.

David Lyman, a former chairman and founder of the Joint Foreign Chambers of Commerce, said if the proposal was adopted there would be dire consequences for Thailand's foreign investment environment and the economy in general. "The stated policy of the government is to rebuild confidence in the country and to expand Thailand's reach and GDP, not to contract them, which would indeed happen," Mr Lyman said.

He said any inkling that the government and local business organizations were seriously contemplating amending the FBA to further limit foreign ownership and control of Thai enterprises will "scare the hell out of both existing investors and those contemplating investing in this country. Unless I am mistaken, such a reaction is not what is sought or desired, unless the powers that be do not really care."

Simon Landy, the immediate past chairman of the British Chamber of Commerce, said such changes would send the wrong signal to the international business community. "As competitors in the region are liberalizing, Thailand is in danger of giving the impression that it is going the other way, which could be in breach of its obligations under [the World Trade Organization's] General Agreement on Trade in Service," he said.

The changes would likely be strongly opposed, not only by the foreign business community but also by the majority of Thai businesses who are aware of the benefits of an open economy, Mr Landy said. Questions concerning the proposals were raised with deputy prime minister MR Pridiyathorn Devakula at a meeting last week by American businesses, a participant said.

However, MR Pridiyathorn, also the economic adviser to the military-led National Council for Peace and Order, said while he proposed the changes seven years ago as Finance Minister, it was not on the agenda this time, as "he had learnt his lesson".

The proposed amendments to the FBA in 2007 did not go through because of "timing issues", according to the internal briefing document. But with the current government, "there is concern that the amended FBA could be fast-tracked to become law", it said.

Foreign firms fear tighter restrictions | Bangkok Post: business

I would have to check my information but i was under the impression that under the AEC any ASEAN company could acquire majority ownership and control of any ASEAN company.
The proposals above would be contrary to the AEC

^Correct. However, it has not taken effect, yet. Look for more self interest to be served by this regime. Personal wealth seems to be a high priority for them.

Yes, they seem To have conveniently forgotten about ASEAN, When is this xenophobia going to stop?Cant see an end to it anytime soon. In Laos the xenophobia and anti farang sentiment is nowhere near as bad, but it's changing, they copy the Thai to a certain extent.interesting times ahead? It will also be interesting to see if country's such as Lao who worked so hard and jumped through all the hoops to gain ASEAN member status will actually follow the rules, somehow I doubt it. Did it work with the states and Canada aligning with central america(NAFTA)?

They really are monkeys...

Thailand is going to last about one month in ASEAN.....

^i suspect your right! The Lao are in for a shock themselves but they are coming from a low base economy wise and have more to gain from it than the Thais , I still think the average somphone (long lost cousins of Somchai) don't really get it, The shit will hit the fan when the Flips turn up with better skills and a work ethic and under cut the Local engineers, geologists etc , we will really see some animosity then

Originally Posted by ltnt

^Correct. However, it has not taken effect, yet. Look for more self interest to be served by this regime. Personal wealth seems to be a high priority for them.

Well sure.

Might you be expecting anything less.
A general mindset that is universally prevalent throughout ASEAN countries and most of the world.

Any Thai regime hasn't a market on these activities.

Infrastructure in place here in the North with all the new bridges completed, ports ready for free trade zones, Chinese buying up land in giant gulps, major roadways almost complete in and out of Laos and Burma. Todays BP says land prices are being quoted at 6 million baht per rai.

Chamber Predicts Nominees Will Vanish

Bangkok Post
November 3, 2014
Writer: Phusadee Arunmas

The Business Development Department is hosing down fears about Thailand's move to restrict foreign control over joint-venture companies run by Thais, with director-general Pongpun Gearaviriyapun saying such businesses will get a temporary reprieve to comply with the changes.

Ms Pongpun said the proposed amendment to the Foreign Business Act (FBA), which governs the activities of foreign businesses in Thailand, is intended to improve foreign business operations in Thailand to bring them on a par with international standards.

The change will also revise accounting standards, known as Thai Financial Reporting Standards, to address the issue of Thais being used by foreign companies to qualify the company as "local".

She said the proposed amendment will not affect foreign businesses which operate under international agreements, nor businesses that have representative offices in Thailand and businesses that have been given investment promotion privileges by the Board of Investment.

"We focus on improving the standard of existing businesses and those contemplating investing in the country to be consistent with current global trade practices and prepare for the launch of the Asean Economic Community at the end of 2015," Ms Pongpun said.

Pornsin Patcharintanakul, vice-president of the Thai Chamber of Commerce (TCC), said he backed the department's efforts to amend the FBA to control foreign activities. ''If we are able to control the nominees of foreign business in Thailand, local businesses will benefit greatly,'' Mr Pornsin said. ''The change could also be an instrument to help deal with corruption in the business sector,'' he said.

Nominees appointed by many foreign businessmen to run local companies would disappear from the business sector after the amended law is enforced, he predicted. He said past governments had proposed similar proposals to restrict foreign control over joint-ventures companies in Thailand but they were unsuccessful because the change was opposed by politicians.

Referring to firms which might be affected by the law change, Ms Pongpun said industries that will be reviewed under the amendment include e-commerce, telecommunications, logistics, technology-related businesses, and foreign businesses that have been granted permission, but have not begun operation.

Ms Pongpun said the proposed change will also ease restrictions on some industries, such as banking, insurance and stock brokerages. Under the change, foreign businesses will no longer be required to seek permission from the Foreign Business Committee, she said.

The proposed law change will also reserve certain businesses and occupations only for Thais such as restaurants, food shops, and tourist guides, after it was found that many of these businesses are run by foreign nominees, particularly in provinces that are major tourist spots, such as Chiang Mai, Phuket, and Surat Thani, Ms Pongpun said.

An internal briefing document circulated among foreign embassies sparked fears about possible amendments to the act. The changes propose closing loopholes that allow Thai designates to be used by foreign companies.

One embassy believes the initiative is being pushed by the TCC as a means to benefit local businesses which are afraid of competition from foreign companies, according to the document.

"The minister of commerce is planning to present this amendment, and it appears that the PM might be supportive as well," the document says. The law could be passed as early as next year.

Full article: Foreigners get 'time to comply' with joint venture changes | Bangkok Post: news

FBA Changes To Affect 'At Least Half' Of Firms

Bangkok Post
November 9, 2014
Writer: Nanchanok Wongsamuth

At least half of all Japanese companies operating in Thailand would be forced to surrender operational control or relocate if proposed changes to the Foreign Business Act go ahead, a senior diplomat has warned.

Mitsugu Saito, minister and deputy chief of mission of the Japan Embassy, said an amendment restricting foreign control over joint-venture companies like the one proposed in 2007 would have a serious impact on existing and future investment.

"The embassy is quite seriously concerned about the draft amendment," Mr Saito told the Bangkok Post Sunday. "If the law is changed, the ownership of a joint venture has to be a Thai national, and they [the Japanese] will have to decide to give up foreign ownership or withdraw their business from Thailand."

Some 45% of 5,000 Japanese companies in Thailand are in the service sector, and the proposed changes to the law would affect 99% of them, Mr Saito said. It wasn't clear how many of the remaining 55% of firms would be affected.

Japanese investment in Thailand is valued at US$57 billion (1.8 trillion baht), according to the Bank of Thailand, contributing to more than half the country’s foreign direct investment.

Japan’s concern comes after last week’s revelation that the Commerce Ministry planned to amend the FBA so that a company would be classified as “foreign” even if foreigners hold 49% or less of the shares but have control of the board and “company direction”.

Full article: Japan envoy warns of investor exodus | Bangkok Post: business

Way to go Thailand!

^Dunno if this is just a share-manipulation scheme, tbh. Can't see that even the daftest xenophobic General would shoot themselves in the foot with this amendment.

Meanwhile, back at the Happy Camp...

Bangkok Post
November 11, 2014
Writer: Post Reporters

Prime Minister Prayut Chan-o-cha has proposed what he calls the "Thai Plus One" investment policy to attract foreign direct investment, particularly from China, to the country.

Under the policy, foreigners who invest in Thailand will be offered the chance to invest in a neighbouring country as well. The government would provide them with investment information and support.

Gen Prayut introduced the policy during a meeting with executives of Thai businesses investing in China and Thailand's Asia Pacific Economic Cooperation (Apec) Business Advisory Council Monday in Beijing ahead of the 22nd Apec leader's summit to be held Tuesday.

Speaking after the meeting, government spokesman Yongyuth Mayalarp said Gen Prayut told the business groups the government hoped to boost foreign investment with the Thai Plus One policy.

"We plan to establish five special economic areas along the borders and have seven more in the next phase. As we hold talks with Asean members about transport connectivity, we will also help foreign investors expand their investments to our neighbours if they decide to invest here," Mr Yongyuth said.

A source said Thailand is the manufacturing base for numerous products exported to developed countries while neighbouring countries, particularly Cambodia, Laos, and Myanmar, have the potential to meet the supply chain development needs of investors in this region.

Meanwhile, Gen Prayut held a bilateral meeting with his Chinese counterpart Li Keqiang on Sunday evening.

Mr Li reaffirmed close ties with Thailand and vowed to support the government and Thais in moving in a political direction which conforms with Thai society and culture, according to Mr Yongyuth.

"The two premiers also agreed in principle to promote three aspects of cooperation, covering Thai-Chinese connectivity, regional connectivity and cooperation in trade and investment, especially agricultural products," he said.

Also on Monday, Gen Prayut held bilateral talks with Papua New Guinea prime minister Peter O'Neill and Philippine President Benigno Aquino on economic cooperation, during which they pledged to deepen trade and investment ties.

Gen Prayut on Sunday also met Thai businessmen and students in Beijing, saying the coup was aimed at solving the country's problems and undertaking reform.

"I intend to resolve the rift among Thais while enforcing the law with fairness to return our country to a peaceful state," he said.

"We have met some obstacles as I have been accused of being a brutal person and seeking power. However, I have remained patient because I was taught to do everything for the sake of the nation," Gen Prayut said.

Prayut makes investment pitch | Bangkok Post: news

One of the BP reader comments:
An investment pitch to foreign investors while in reality foreign investment/ownership laws are draconian and super super super nationalistic xenophobic. You want foreign investment? You are going to have to change your mindset. You cannot have investment with stupid foreign ownership laws. Duh.

^Like you'd want Thai help.

Originally Posted by Sumocakewalk

Meanwhile, back at the Happy Camp...

Bangkok Post
November 11, 2014
Writer: Post Reporters

Prime Minister Prayut Chan-o-cha has proposed what he calls the "Thai Plus One" investment policy to attract foreign direct investment, particularly from China, to the country.

Under the policy, foreigners who invest in Thailand will be offered the chance to invest in a neighbouring country as well. The government would provide them with investment information and support.

Gen Prayut introduced the policy during a meeting with executives of Thai businesses investing in China and Thailand's Asia Pacific Economic Cooperation (Apec) Business Advisory Council Monday in Beijing ahead of the 22nd Apec leader's summit to be held Tuesday.

Speaking after the meeting, government spokesman Yongyuth Mayalarp said Gen Prayut told the business groups the government hoped to boost foreign investment with the Thai Plus One policy.

"We plan to establish five special economic areas along the borders and have seven more in the next phase. As we hold talks with Asean members about transport connectivity, we will also help foreign investors expand their investments to our neighbours if they decide to invest here," Mr Yongyuth said.

A source said Thailand is the manufacturing base for numerous products exported to developed countries while neighbouring countries, particularly Cambodia, Laos, and Myanmar, have the potential to meet the supply chain development needs of investors in this region.

Meanwhile, Gen Prayut held a bilateral meeting with his Chinese counterpart Li Keqiang on Sunday evening.

Mr Li reaffirmed close ties with Thailand and vowed to support the government and Thais in moving in a political direction which conforms with Thai society and culture, according to Mr Yongyuth.

"The two premiers also agreed in principle to promote three aspects of cooperation, covering Thai-Chinese connectivity, regional connectivity and cooperation in trade and investment, especially agricultural products," he said.

Also on Monday, Gen Prayut held bilateral talks with Papua New Guinea prime minister Peter O'Neill and Philippine President Benigno Aquino on economic cooperation, during which they pledged to deepen trade and investment ties.

Gen Prayut on Sunday also met Thai businessmen and students in Beijing, saying the coup was aimed at solving the country's problems and undertaking reform.

"I intend to resolve the rift among Thais while enforcing the law with fairness to return our country to a peaceful state," he said.

"We have met some obstacles as I have been accused of being a brutal person and seeking power. However, I have remained patient because I was taught to do everything for the sake of the nation," Gen Prayut said.

Prayut makes investment pitch | Bangkok Post: news

One of the BP reader comments:
An investment pitch to foreign investors while in reality foreign investment/ownership laws are draconian and super super super nationalistic xenophobic. You want foreign investment? You are going to have to change your mindset. You cannot have investment with stupid foreign ownership laws. Duh.

Seems to be a universal mindset....[example: Thais]
Love the general ideals, yet don't care for the practice.

Regional unification treaties/pacts [worldwide] tend to be amusing at best.