Economists and academics believe that Kularb Kaew Co has violated the Alien Business Act by being a nominee for Singapore's Temasek Holdings, in order to acquire the majority stake in Shin Corp from the Shinawatra and Damapong families.

They said it did not make good business sense for Pong Sarasin and Suphadej Poonpipat, the two major Thai shareholders in Kularb Kaew at its inception, to accept such a low rate of return and only a small percentage of voting rights, despite their 51-per-cent investment through preferred shares in Kularb Kaew.

At a seminar titled "Towards Clarifying Government Rules and Regulations: Issues Stemming from the Sale of Shin Corp", Thitipan Chueboonchai, dean of Chulalongkorn University's Faculty of Law, said, "It makes no business sense for someone to invest so much for only a fixed return of 3 per cent. They could have gained much more by buying bonds, which would generate profits of 4-5 per cent," he said. "It shows that the Thai investors didn't invest in Kularb Kaew in good faith."

But Thitipan said he was not opposed to foreign investment in the Kingdom.

The Commerce Ministry is investigating whether Kularb Kaew was used by Temasek to buy Shin on its behalf. If that is found to be the case, the Thai shareholders would have violated the law, because the telecommunications sector is subject to protection under the Alien Business Act, which limits foreign shareholding in a company to no more than 49 per cent of the capital.

Deunden Nikomborirak, an economist at the Thailand Development Research Institute (TDRI), said the Thai shareholders would have to prove that the source of funding to acquire Kularb Kaew came from their own pockets, because the law did not allow Thai shareholders to hold shares on behalf of foreigners.

She added that at the start of the company, Pong and Suphadej held a combined 51-per-cent share in Kularb Kaew but were entitled to fixed returns of only 3 per cent, with only 10-per-cent voting rights, which did not make good business sense.

The investigation will now focus on their source of funding for investing in the company. The investigation continues, even though Thai businessman Surin Upatkoon has emerged as a major shareholder of Kularb Kaew, with Pong and Suphadej's stake reduced to a combined 4.25 per cent.

Ammar Siamwalla, an honorary adviser to the TDRI, said that in the future, the government should look not only at the shareholding structure, but also at the company's conduct, corporate control and intention behind the investment.

"What happens in Thailand has frightened foreign chambers of commerce. What we can do to alleviate their fears is modify the law to make it more clear, instead of overhauling it," he said.

Kasikornbank president Prasarn Trairatvorakul said an independent body of commissioners should be assigned to look into the Shin case. He said assigning the Securities and Exchange Commission (SEC) to investigate the case was like an employee investigating his boss, because caretaker Finance Minister Thanong Bidaya was also SEC chairman. Even though Thanong said he never chaired an SEC board meeting, Thanong would have been required to sign SEC documents.

He suggested a group of independent commissioners be set up to look into the case, to ensure public faith in the findings.

Thitipan also echoed Prasarn's view, saying that in the case of Kularb Kaew, ministry officials had been assigned to investigate their big boss.

"It's hard for them to come up with neutral findings, because they may be worried about putting their careers on the line, while manipulating the findings would erode the credibility of the officials."

Wichit Chaitrong,

Jeerawat Na Thalang

The Nation