Thailand's restrictions on foreign equity ownership are among the most stringent in 87 countries, according to a World Bank report.
The Investing Across Borders 2010 report said the majority of the 33 industrial sectors measured by the indicators are subject to restrictions on foreign equity participation.
The Foreign Business Act BE2542/1999 sets out a comprehensive list of sectors and business activities in which foreign capital is limited to a less-than-50 per cent stake. In some of these sectors, the law offers the option to increase the foreign share capital with prior governmental approval.
For example, a company wanting to invest in the electricity industry in Thailand will be subject to the 49 per cent foreign ownership limit. However, in East Asia and the Pacific, the average limit is 75.8 per cent, which is close to the global average of 87.6 per cent.
In addition to this general "negative list," certain sector-specific laws impose additional restrictions. For example, foreign ownership in the telecommunications sectors (fixed-line and mobile/wireless infrastructure and services) is restricted to a maximum of 49 per cent by the Telecommunication Act BE 2544/2001. Sectors that are fully open to foreign capital participation in Thailand include light manufacturing, pharmaceutical, and food products.
The indicators measure the degree to which domestic laws allow foreign companies to establish or acquire local firms. The indicators track restrictions on foreign-equity ownership in 33 sectors, aggregated into 11 sector groups, including primary sectors, manufacturing, and services.
The indicators are designed to identify good practices that offer governments concrete tools for improving their investment climates in the policy areas measured by the indicators.
Globally, "Most of the 87 economies measured by IAB have FDI-specific restrictions that hinder foreign investment. For example, almost 90 per cent of economies limit foreign companies' ability to participate in some sectors of their economies," the report said.
"A fifth of the economies surveyed require foreign companies to go through a foreign investment-approval process before proceeding with investments in light manufacturing. Nearly 10 per cent of IAB economies do not have special statutes for commercial arbitration," the World Bank said.
In Angola and Haiti excessive red tape means it can take half a year to establish a subsidiary of a foreign company. In Canada, Georgia, and Rwanda, this can be done in less than a week. Leasing industrial land in Nicaragua and Sierra Leone typically requires half a year as opposed to less than two weeks in Armenia, the Republic of Korea, and Sudan. In Pakistan, the Philippines, and Sri Lanka it can take up to two years to enforce an arbitration award.
Table: Indicators of foreign ownership restrictions
Sector Group/IAB country score/regional average/global average
Mining, oil & gas/49/75.7/92
Agriculture & forestry/ 49/82.9/95.9
Light manufacturing /87.3/86.8/96.6
Telecom/49/64.9/88
Electricity/49/75.8/87.6
Banking/49/76.1/91
Insurance/49/80.9/91.2
Transport/49/63.7/78.5
Media/27.5/36.1/68
Construction, tourism & retail/66/91.6/98.1
Healthcare & waste management/49/84.1/96
Source: World Bank