In particular, the Kularb Keaw nominee case involving ousted prime minister Thaksin Shinawatra has prompted the ministry to re-amend the Foreign Business Act for the first time since it was amended from the Alien Business Law.

The Alien Business Act restricts foreign ownership to a maximum of 49 per cent of companies in many sectors. It had long been recognised that this law was unnecessarily restrictive and there were proposals to replace it with a new Foreign Business Act 1999.

Late in December, the ministry's committee to amend the Foreign Business Law proposed that any company in which foreign shareholders' voting rights reach 50 per cent can be defined as a nominee.

However, the new Act has not been completed and contains many flaws for dishonest businesspeople to benefit their own interests.

The main amendment of the Foreign Business Act is to define "nominee" to give clearer regulations to foreign investors. Consideration will focus on foreign shareholders' voting rights. Any foreign shareholder whose voting rights exceeds 49 per cent will be defined as a nominee.

Moreover, the committee has to determine which businesses foreign investors can or cannot do in the Kingdom. Consequently, it will help not only the ministry but also the police to further investigate and take legal action against Kularb Keaw nominees. Under the law, this would also create a domino effect on the suspicious acquisition deal between Temasek Holdings and Shin Corp.

Thus the ministry has to carefully amend the law since the result of the amendment will not only affect foreign investors' confidence, but also Thai enterprises struggling to survive amid high competition.

The Kularb Keaw judgement on whether it is a nominee will also affect foreign investors' confidence since the case will be seen as an example for other foreign companies.

Moreover, the result of Kularb Keaw case will also provide the ministry with a guideline to investigate another 16 foreign companies as to whether they have breached the Foreign Business Act on the nominee issue. Among those targeted companies for investigation is DTAC, the second-largest mobile service provider.

Since the Commerce Ministry's committee was scheduled to finish their study of the amendment of the Foreign Business Act in 2006, Thai and foreign investors are now looking forward to the outcome. They said they would like to see a clearer specification of what types of business will remain reserved for Thai people.

Foreign investors have remarked that they would like the government to allow more foreign investors to conduct business in the Kingdom in order to boost the operation capacity for Thai enterprises.

Foreigners are afraid that a clear nominee definition will cover land purchases in Thailand by their representatives. So far, most foreigners who purchase land or property assets have managed to do so via the practice of nominees.

Commerce Minister Krirk-krai Jirapaet pointed out that the law amendment is a guideline for consideration but different businesses should be considered in line with the special law.

Companies whose shareholder structure is an illegal nominee

would have from six months up to three years to restructure to comply with Thai law.

Peter J Van Haren, chairman of the International Chamber of Commerce, suggested that the government accelerate to amend this law according to up-to-date circumstances.

He said the government should

not do anything about the definition

of "foreigners" since it was clear enough and in accordance with World Trade Organisation regulations. Instead, the government must clarify the businesses reserved for Thais in Annex III and decrease the types of business as much as possible to maintain current foreign investors' confidence and increase the competitiveness of local enterprises.

 Concerning any specific businesses that the government still wants to protect for Thai enterprises, the government must ensure that the law will not damage foreign investors' confidence.

In addition, Van Haren advised the government to enforce a specific law to control business expansion such as the Retail Business Act, the Telecommunications Act and the Media Act. A clear and up-to-date amendment of the Foreign Business Act will increase foreign investors' confidence and attract more investors.

Retail Business Act

Several rounds of serious protests by small local retailers against large multinational operators for the rapid expansion of their local branches has prompted the ministry to halt any new investment by these modern retailers. So far, the major retail operators have changed their investment strategy from large-scale prototypes to small outlets. The smaller shop plans have allowed the retailers to penetrate all locations, not only in Bangkok but also in upcountry communities.

The ministry is amending the Retail Business Act's draft for implementation after many small retailers protested against the aggressive expansion of multinational retailers into their communities.

The Retail Business Act has been drafted since 2000. However, it has never been implemented because the Thaksin government did not approve.

Although the Act should have been implemented before the flood of multinational retail stores into the Kingdom, it is not too late for the government to accelerate implementation of the law. Otherwise, small retail shops will soon disappear, leaving only giant multinational companies to control the retail industry.

Some multinational enterprises, therefore, are urgently expanding their business in a smaller form of outlet to dominate the industry before the government approves the law.

The government should seriously review its policy on retail business control to balance the interests of foreign investors as well as protect traditional small enterprises.

The amendment of the Foreign Business Act and the Retail Business Act's draft implementation are large responsibilities for the Commerce Ministry under the control of an interim government. Although the problems did not arise during the current administration, it is a big challenge since they involve the Kingdom's economic growth.

If the government fails to effectively implement these two acts, the country will face more complicated problems waiting for a better solution in this new year.

Achara Pongvutitham,

Petchanet Pratruangkrai

The Nation