Loophole could give foreign firms investment privileges
Thailand and other Asean countries are considering issuing a common regulation to protect regional enterprises when investment is liberalised under the Asean Economic Community.
The worry is that liberalisation could encourage non-Southeast Asian investors to circumvent the system as “Asean equals” if they register businesses within the upcoming single market.
Pongpun Gearaviriyapun, director-general of the Business Development Department, said this week that Thailand had its own guidelines to prepare for investment liberalisation under the AEC, which comes into effect next year.
However, the country needs to wait for an Asean-wide move in this area, as the region should be subject to the same regulation in order to ensure fair and equal treatment for all member states, she said.
She added that as each Asean country currently had a different playing field in this respect, the regional grouping should issue a regulation to protect all member nations from businesses based in non-Asean countries from investing in the region under preferential terms reserved for Asean-based enterprises under the fully liberalised internal AEC market.
The department chief said Asean needed to observe closely entities known as “substantial business operations”, which are operations that are non-Asean but which have in effect acquired Asean-nationality status by investing in the region.
For instance, Singapore has allowed many foreign countries to use the island-state as a headquarters for parent companies, which entails non-Singaporean interests getting Singaporean nationality, she said.
Asean should be aware of the problem, as many foreign investors could employ the current loophole to invest in the region as Asean equals when investment is liberalised under the AEC, she added.
Meanwhile, the Business Development Department is considering removing two types of business – stock trading and the trading of agricultural goods in the futures market – from the constraints of the Foreign Business Act (FBA), after finding that Thais are increasingly successful in rivalling foreigners in these highly competitive fields.
In addition, the department reported that a total of 3,443 foreign firms had been approved to operate in Thailand under the FBA exception allowing foreign interests to hold majority stakes in protected businesses, as they had transferred technology or the Thai companies required high technology from abroad.
Most of the companies are from Japan, Singapore, Germany, Hong Kong and the Netherlands. The types of business most often opened up to majority foreign investment are service, agency, construction and retailing.