"Investors, particularly those from Singapore and Hong Kong, as well as from Western countries, are waiting for the government to finalise the Act before they decide whether to proceed," Prakit said.

Previously, investors from these countries poured huge amounts of money into Thailand's hotel industry, particularly during the Thaksin administration.

"Since the [current] government started revising the Act, there is reported to have been no further direct investment from abroad. They're waiting for the government to offer them better incentives [than those offered by the previous government]," he said.

One of the proposed amendments to the Foreign Business Act reportedly attempts a better definition of a "foreign company". While the current law defines a foreign company according to its shareholding, with foreign ownership of local companies capped at 49 per cent, the amended law is believed to base foreign-ownership criteria on voting rights. The move to amend the law has drawn opposition from the Joint Foreign Chambers of Commerce.

Prakit said the move was contrary to a World Tourism Organisation resolution calling on all countries to be fully open for investment by 2010.

"The Thai Hotels Association has not determined the number of properties affected by the proposed amendments, but we believe they have already hit many projects under development or in the planning process," Prakit said.

Wayne Buckingham, regional vice president for the global hotel and leisure company Starwood, said foreign hotel investors were shocked with changes to the proposed amendments, virtually day by day.

Buckingham, who is also managing director of the Royal Orchid Sheraton Hotel and Towers in Bangkok, said a few projects under development had already been halted and foreign investors were waiting for more details about the changed Act before striking Thai investment deals.

International-chain operators planning to manage new properties in Thailand are also expecting management deals to be delayed by the slow investment progress.

All this is happening at a time when Thailand has room for more hotels, he said.

The Thai Hotels Association said problems associated with the Foreign Business Act would exacerbate difficulties for the  industry this year. Thai hotels are expected to record low growth, due to the political uncertainty and the economic slow-down. They are already suffering from the baht's appreciation against international currencies like the yen, which has led to a decline in the number of Japanese tourists.

The number of Japanese tourists is expected to fall 10-20 per cent this year, because of factors such as safety fears and the weak yen, Prakit said.

Suchat Sritama

The Nation