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Published on August 23, 2007

Former deputy premier MR Pridiyathorn Deva-kula yesterday urged the interim government to leave the controversial amendment to the Foreign Business Act on the backburner, saying the elected government expected in a few months should process this crucial piece of legislation.

Another suggestion would be to slash the services protected from foreigners, as listed in Appendix 3, to zero or near zero in order to minimise strains on the country's investment climate, he told a seminar organised by Sasin Graduate School, the Commerce Ministry and Nation Multimedia Group.

On August 8, the National Legislative Assembly voted 76-64 to adopt a new version of the amendment which Pridiyathorn said was "far too strict" towards foreign investment.

The original version drafted by the government, which was rejected by the NLA, was only aimed at ensuring shareholder control of businesses set up here and had nothing to do with management control, he said.

"The NLA twisted the draft in a bad direction," he said, adding that this only further complicated the issue while dampening foreign investment sentiment.

According to the NLA's August 8 decision, the Com-merce Ministry would revise the draft by expanding the definition of foreigners in the FBA, which would make the law even more restrictive towards inward investment.

Kanissorn Navanugraha, director-general of the Business Development Department, also said the revision as required by the NLA might not be finished before the Surayud government steps down following the general election scheduled at the end of the year.

Deepak Mittal, vice chairman of the Joint Foreign Chambers of Commerce in Thailand, told the seminar that the FBA debate had created a bad impression among existing and new foreign investors.

Mittal, a top executive of Aditya Birla Group of India, which has invested substantially here over the past three decades, warned Thailand to be cautious because there was fierce competition for foreign projects in this region. Vietnam, Malaysia, India and China are the key rivals.

The FBA as it stands was fine with him, with no need for adjustments, although it was abused in some recent high-profile cases.

"This should not disturb the whole investment atmosphere," he said, adding that Thailand would be better off just enforcing the existing law strictly.

The whole FBA issue should be left as it is for now and the next government should be allowed to make the final decision, he said.

Vincent Milton, managing director of Fitch Ratings Thailand, said foreign direct investment (FDI) had been falling in Thailand and other Asean countries because China and India have become more attractive.

Thailand had raised several uncertainties for FDI, such as the FBA amendment, the September 19 coup, compulsory drug licensing and the 30-per-cent capital reserve requirement, he said.

Pridiyathorn defended the government's version of the FBA as reasonable since most investments would not be subject to the proposed law.

More than 1,000 companies have been set up to skirt the law by using "voting rights" to own real estate here, he said.

The trick is to set up firms with 49-per-cent foreign shareholding so that they are regarded as Thai firms eligible to buy and hold property, but in fact these entities are majority-owned by foreigners using Thai nominees as shareholders, he said.

Nophakhun

Limsamarnphun,

Petchanet Pratruangkrai

The Nation