A more balanced way to treat thai and foreign investors

Service investments are classified into twelve sectors according to the WTO GATS, while non-service investments are classified into five sectors, namely manufacturing, agriculture, fisheries, forestry and mining. There are three pillars of investment activity, namely investment promotion, protection and liberalisation. 

  As a developing country, Thailand has made a great effort to attract foreign direct investment from aboard as a means to enhance economic and technological development. The Board of Investment (BoI) has been established to promote investment by providing incentives to foreign investors who have chosen Thailand as their preferred destination.

  In addition, Thailand has signed a number of bilateral investment treaties (BITs) with its trading partners to provide protection for each other's investments. In addition, the Asean Investment Guarantee Agreement (IGA) provides protection for investments among Asean member states. However, Thailand will accord such protection only to investments that have been specifically approved in writing for protection by the Ministry of Foreign Affairs of Thailand.

  The Foreign Business Act (FBA) has defined the terms and conditions for foreign investors to comply with, should they wish to make investments in the Kingdom. It lists the sectors or sub-sectors that require approval from the director-general of the Department of Business Development under the Ministry of Commerce (List 3); those that require approval from the Cabinet (List 2); as well as those that are prohibited (List 1).

  Even though specific laws and regulations exist for sectors and sub-sectors such as finance, telecommunications, logistics and insurance, there is still some resistance to taking them off the reservation lists.

  The dilemmas are how we can balance our desire to attract as much foreign investment from abroad as possible and our concern for national security; plus the nationalistic pressure to preserve particular service sectors or sub-sectors for our own people; and also how we can balance our desire to get protection for our investments abroad and our concern about the protection we have to give in return for investments by foreign investors.

  At present, we have available a one-stop service for foreign investors asking for investment incentives and exemptions from the FBA requirements at the BoI Office under the Ministry of Industry. Those who want to have majority holdings in any service sector or sub-sector in List 2 or List 3 have to file for approval from the Department of Business Development, while those who want investment protection provided for under a treaty have to first get prior consent in the form of a certificate of approval for protection (CAP) from the Committee under the Department of International Economics of the Ministry of Foreign Affairs, unless permits are given under the FBA or BoI.

Of course, there is a level of coordination among the agencies involved with foreign investment. However, their bureaucratic nature tends to limit the scope of their involvement up to the implementation of laws and regulations they are responsible for.

But how about the policy co-ordination on investment? The problem is that we do not have a single agency to formulate, coordinate and implement national investment policies that are integrated, coherent and consistent with the policy objectives of the government.

  Our investment policy should not be limited to investment promotion without looking at investment protection and investment liberalisation. Many questions may be raised with respect to the consistency of our current investment regime. For example, one of the reasons we have FTAs with various countries is to encourage foreign investments, but we do not allow permanent residents of our FTA partners to enjoy the privileges given under the FTAs. Liberalisation of portfolio investment is to be excluded from our commitments under FTAs, even though this type of investment is much larger in volume than foreign direct investment. And it is still a question whether we can extend investment liberalisation of sectors or sub-sectors to other countries once we have done it with a trading partner.

 Investment liberalisation alone cannot guarantee increased foreign investment but it must be coupled with many other factors such as incentives, facilitation, stability of the exchange rate and costs of production. While our neighbours like Indonesia, Laos, Cambodia and the Philippines are keen on foreign investment in the agriculture sector, this is seen as political taboo or even treason in Thailand.

  Well, when it comes to dollars and cents, money owners will want as much assurance as possible! Investors may accept low risk and high returns, low risk and low returns, or high risk and high returns, but definitely not high risk and low returns.

  How are we going to balance the rights and obligations of investors with that of the host country?

  As a lady ambassador to the WTO put it to the General Council with respect to national treatment in investment: does she have to treat her guests in the same way she does her husband?

Winichai Chaemchaeng is commercial advisor to the Commerce Ministry.