FOREIGN BUSINESS ACT
Reconsider amendment, envoys urge
Embassies call for compensation at least for those businesses that stand to lose
Foreign embassies in Bangkok have appealed to the Thai government to rethink the draft amendment of the Foreign Business Act (FBA), arguing the amendment will hurt existing foreign investors, who they say should receive compensation if they are forced to restructure their business ownership.
The embassies are those of Canada, the United States, Switzerland and Japan and the Delegation of the European Commission.
Some of them have already written separately to Deputy Premier and Finance Minister MR Pridiyathorn Devakula, Commerce Minister Krirk-krai Jirapaet, and Foreign Affairs Minister Nitya Pibulsonggram to express their concern about the draft amendment to the foreign-business law. Others will write next week.
A business source said foreign embassies working on behalf of companies of their home countries would be calling on the Surayud government to reconsider the amended FBA because they think it will hurt foreign investment and business sentiment in Thailand.
The Canadian Embassy and the Delegation of the European Commission were reported to have written to the Thai ministers yesterday, while Switzerland, Japan and the US will do so next week.
A local diplomat said the letters would point out similar points of concern that Thailand may have violated the World Trade Organisation (WTO) rules through its attempt to amend the foreign business law.
"The changes in Thailand's FBA go beyond the WTO commitment," a local diplomat said.
The letter will urge the government to suspend the amendment or compensate foreign companies which suffer, he added.
The Surayud Cabinet has approved the draft amendment in principle, sending shock waves through the international business community.
The new law, if passed by the National Legislative Assembly, will spell out a clear-cut foreign shareholder structure and prevent the use of nominees to circumvent the foreign-ownership law.
The amended law was introduced in the aftermath of the sale of Shin Corp to Temasek Holdings of Singapore, which allegedly used nominees to overcome the foreign-ownership limit.
One commercial counsellor said foreign companies which had invested in Thailand in the past had been assured by law firms and local officials that they could overcome the ownership law.
But now, he added, the Thai government says the practice will not be acceptable, which is creating confusion.
Another local diplomat said the foreign embassies in Bangkok agreed that the Thai government's attempt to revise the foreign business law would be in violation of the WTO rules.
"Thailand would be violating the WTO rules, which require that any changes of commitment need consultation with the trading partners who might be affected by the changes," he said.
Previously the Joint Foreign Chamber of Commerce in Thailand, comprising 28 countries, had called on the Thai government to suspend the move to amend the foreign
business law, arguing that the foreign companies doing business here should be consulted first.
"Although the government has attempted to create understanding among foreign investors in the Kingdom, they are not sure whether it has any other hidden agendas," the source said.
"Unclear explanation of the amendment has worsened the confusion among foreign investors," said the source, who asked for anonymity.
Under the General Agreement on Tariff and Trade (GATT) rules, foreign investors should be compensated by the Thai government for any losses caused by the amended law, he said, which will lose foreign investors in Thailand business opportunities, particularly in terms of their ownership.
The one year given them to comply with Thai law on voting rights and shareholding structure is too short to find suitable new partners and to sell stakes at reasonable prices, the diplomat said.
Foreign investors have expressed concern about some service businesses not contained in Annex III, such as banks, insurance and transportation. Investors are uncertain whether the amended law will affect them.
The government has tried to explain that the amended act will not affect any manufacturers or companies which were obtained under Board of Investment privilege.
It could nonetheless have a domino effect, he said, since foreign companies would be unable to operate service businesses which are a part of the selling process, such as logistics.
He questioned whether the amended act would benefit the majority of the population or only some groups of Thai millionaires, who owned businesses on the protection lists.