Foreign Investors Anxious Of Revision To Investment Rules

[OlRedEyes]

http://www.ft.com/cms/s/5f1eee3c-9f17-11db...00779e2340.html

Main item on the Financial Times as well.

“They haven’t seen the details yet and so how do they know what is the impact,” he retorted to Thai journalists, shortly after the Joint Foreign Chambers of Commerce of Thailand -- backed by diplomats from Western and Asian countries -- held a rare press conference to express its mounting distress.

Think this just got a lot bigger than they expected. Raging apparantly from what I saw on Thai TV.

Set coming down again as well.

This is getting really interesting

We all know what happens when a Thai loses face. And cannot get things done their way.

Thing is that here they are dealing with international investors thats not simply going to accept what Thailand decides.

Wonder if the Big Red Button is gonna be pressed in rage.

Edited January 9, 2007 by OlRedEyes

[boes]

Are they changing the playing rules only for "foreign companies - operating here -" ???

Or are farang private investors affected as well ??

If that's a fact, we who have set up a legal business in a Co.Ltd. really are in BIG trouble - and it will be almost impossible to sell our businesses to make a restart in a more farang friendly country !!!!! Which I'm definitely considering looking back on the development here during the last months.

[LPCustom69]

I think it's been becoming fairly obvious over the last 2-3 years or so, that the "powers that be" really do not want farangs here. Last years visa tightening was just the start of what will be further tweaking of visas. Thaksin had made it perfectly clear that he preferred Chinese business owners over those of us from UK, Aus, Europe or US. They are going after asian tourists big time, and in all honesty, many in power would prefer that we not come here, even on vacation, just send the money. Would rather have Asians come in.

The list of businesses that foreigners aren't allowed to compete in was to be reviewed and new businesses added last year before the coup. I'm sure that someone here has a link to those businesses, and some farangs do work in them anyways. So new businesses that farangs can't work in or own will probably be reviewed this year. Worst case scenario: they add real estate (owning more than one condo) rentals, bars/entertainment establishments, and retail outlets. Where would that leave a lot of the farang business owners?

That way they could eliminate a large portion of the business visas, and the individuals associated with them. Maybe they change the retirement rules, and don't grandfather those that are here already. They may change the rules about being here to support family, after all we can make deposits from out of country, and come for visits. Is all this going to happen soon. Probably not, but nothing surprises me any more.

I hope I'm wrong!

Protectionism is not neccessarily a bad thing.

But it certainly seem as though the current leaders have decided they want to go against the trend that most of the rest of Asia is following.

If it's simply to remove foreign influence from getting control of the key assets it makes sense. If it's really an ulterior motive to let Chinese infiltrators get more control then it stands to reason that the Chinese system will be applied eventually undoing all of the protectionist policies that are being put into place now.

Looks to me like the King and his peeps are just trying to protect their own and save Thailand from dilution by foreign investors ready to ransack the economy at the first chance. Also makes it harder for people like Taxsin to sell key national assets...

[bkkandrew]

Are they changing the playing rules only for "foreign companies - operating here -" ???

Or are farang private investors affected as well ??

If that's a fact, we who have set up a legal business in a Co.Ltd. really are in BIG trouble - and it will be almost impossible to sell our businesses to make a restart in a more farang friendly country !!!!! Which I'm definitely considering looking back on the development here during the last months.

Of course it applies to all sizes of business, those trading and those not, such as those set-up to "own" property or other assets. You should know if you have lost 51% of it in an hour or so...

[Gaudente]

we all know how much the government and thais in general worship money and i doubt that there aim will be to scare business away.

The problem is they worship it so much they can hardly wait to seize IT ALL....these people have the intelligence and the morality and the GREED of a three years child in front of a pastry-shop. But while the three years kid has no power and can just press his face on the window, these have UNLIMITED POWER ....

[John K]

It almost seems like the Thais are trying to prove everyone wrong. We shall see.

[slimdog]

The Cabinet Tuesday approved the Commerce Ministry's proposal to amend the foreign business law.

Details to follow

Source: http://www.nationmultimedia.com/breakingne...newsid=30023666

New url: http://www.nationmultimedia.com/2007/01/09...es_30023662.php

Edited January 9, 2007 by slimdog

[Foggy Bottom]

Foreign investors anxious of revision to investment rules

Pramon Suthiwong, chairman of Thailand's Board of Trade business group, said he expected the law to limit foreign ownership in Thai companies to about 50 per cent, while redefining voting rights for local subsidiaries.

-- AFP 2007-01-08

Foreign businesses urge government to delay alien business law

Of particular concern to the foreign businesses operating in Thailand is the clause demanding that Thai shareholders have over 51 per cent voting rights, enforcement of which would drive the majority of current and potential investors away from the kingdom, he said.

What the government appears to be doing here is to extend the 49:51 rule from the restricted list of business activities onto ALL businesses that have foreign shareholding - that could seriously mess up the stock market as well as FDI investments in businesses (start-ups by farangs). It also flies directly against the last decade of BOI promotions for foreigners to own 100% of companies that export 80% or more of output, and will kill almost all companies that were not on the restricted lists, and in which foreigners were naturally permitted to have 100% ownership - e.g. if a particular type of activity was neither mentioned on the restricted lists A, B, or C, nor in BOI priviledges lists, foreigners have been able to own 100%, although in practise, most provincial company registration offices (private and governmental) applied the 49:51 rule unless you fought tooth and nail and had a lawyer willing to battle the law with them.

I am not investment savvy, anyone want to fill those of us that are not too wise on the implications of this Act being passed?

In a nut shell a company has to be 51% Thai owned. But each one of your shares had 10 times the value of the shares held by the Thais. Put simply you had 490 votes and they had 51 votes.

This has not been true since the middle of the TRT regime - they ammended the law that Thais had to pay into the bank the value of thier shares (company current or deposit account) and the face value of the shares determined the ownership as well as the voting rights - withthose ammendments, Thais had to own 51% of the company capital as well as 51% of the voting rights.

Additionally, those ammendments made it that more than 50% of shareholders (the persons) and directors had to be Thai. This was aimed at stopping offshore shell companies holding more than 51% or tipping the farang-owned balance over the 49% - obviously Thaksin tried to get around this with the Shin-Temasek deal.

Most Thai proxies actually sign away their shares BEFORE the company is set up and as thus never take part in the voting process anyway. If they kick up, they have signed away their shares so you just put sombody elses name on the bottom of the share transfer certificate and repeat the process.

........... So before anybody groans on about exploited Thais, they were the ones that were getting something for nothing anyway. Something they will loose out on if this Junior High School devised policy is ever implemented.

Switched on lawyers / investors had the proxies sign the share transfer form BEFORE they signed the share ownership form, and kept the signed, undated, blank transfer form in a very safe place.

ahh, so how do you think it would effect Thailand as a country?

If they take over businesses etc. they will not retain the value they once had. Further, there will be no new capital with which to expand, diversify or keep up with technology or trends. Nobody will want to deal with them as they would be viewed as totally untrustworthy so it would spiral slowely downwards.

won't happen though.

This was already happening under TRT (suprised this government isn't aware ot it - but then Thai memories are short)

BOI published stats (before TRT closed the public access to them on the website) showed that in 1999, there were over 2000 foreign-funded inward investments approved for BOI sponsorship and privileges. By 2002 (2nd year of Thaksinism and after THAT lunch for the Foreign Chambers of Commerce in Bangkok) it fell to just over 200 for the year - DOWN to 10% of a few years before.

This was partly caused by China and Vietnam opening up, but mainly by the perceived xenophobic nationalism of the TRT party.

[Mid]

the 3pm press conference may have the answers ???

[bkkandrew]

the 3pm press conference may have the answers ???

Well, no. As far as I read it they have gone for the full nuclear button, i.e. non-amended version of the amendment (if you can follow that) . The amendments and/or delay was what was being sought by foreign chambers etc..

Guess this is not what S&P had in mind when they called for "decisive action"!!

[Mid]

the 3pm press conference may have the answers ???

Well, no. As far as I read it they have gone for the full nuclear button, i.e. non-amended version of the amendment (if you can follow that) . The amendments and/or delay was what was being sought by foreign chambers etc..

Guess this is not what S&P had in mind when they called for "decisive action"!!

if true my legit company , complete with Thai employees , social security , tax payments etc will be closed .

luckily i turn 50 next month

[Foggy Bottom]

DPM Pridiyathorn to submit draft of Foreign Business Act to Cabinet meeting today

Deputy Prime Minister and Finance Minister ..... M.R.Pridiyathorn said he had discussed the draft with foreign investors and will hold a meeting on January 10 to inform them about the draft in detail.

Source: Thai National News Bureau Public Relations Department - 09 January 2007

2 points -

Were the foreign investors Singaporean?

Will he invite me (as a foreign investor) to that meeting on the 10th?

This stinks to the high heavens of vested interests and cronyism - exactly why Thaksin was removed.

[kmart]

Wonder if all this is just a big roll of the SET dice for the connected few?

[Brutiniero]

Hey, this is a good time to pick up cheap thai stocks !!!!

It's obvious that in this way that thai will buy back their companies. Someone have to buy if others (farrangs) sell, isn't it.

In the end the companies belong to thai investors again.

Maybe thats the intention.

Mr. Sarcastic

[cclub75]

What the government appears to be doing here is to extend the 49:51 rule from the restricted list of business activities onto ALL businesses that have foreign shareholding - that could seriously mess up the stock market as well as FDI investments in businesses (start-ups by farangs). It also flies directly against the last decade of BOI promotions for foreigners to own 100% of companies

Wrong.

The idea is to change the rule that make a company "thai" or "foreigner". If a compagny is "foreigner" then the Foreign Business Act shall apply.

Before it was the % of shares.

The project now (adopted) should be : % of voting rights.

It's a complete revolution, I agree, but it's not what you say.

Furthermore the amendement of Business Foreign Act will not change BOI (the working comittee for the amendement of FBA didn't speak about BOI).

BOI is a specific set of rules for FDI.

BOI published stats (before TRT closed the public access to them on the website) showed that in 1999, there were over 2000 foreign-funded inward investments approved for BOI sponsorship and privileges. By 2002 (2nd year of Thaksinism and after THAT lunch for the Foreign Chambers of Commerce in Bangkok) it fell to just over 200 for the year - DOWN to 10% of a few years before.

Wrong again. They have the list of BOI projects, per country, since.... 1970. On line. Or total worldwide, since 2001 (890 projects in 2001... 1358 in 2005)...

http://www.boi.go.th/english/about/statist...ntry.asp?id=119

[Dupont]

Hey, this is a good time to pick up cheap thai stocks !!!!

It's obvious that in this way that thai will buy back their companies. Someone have to buy if others (farrangs) sell, isn't it.

In the end the companies belong to thai investors again.

Maybe thats the intention.

Mr. Sarcastic

Thats how they think.

The reality is that a 10 million Baht company will be worth less than half this at the rate they are going. Maybe they will get a short term Thai gain by expropriation, but the companies will be ruined.

As they lack foresight, planning and development skills, they will also quickly become outdated.

Interesteing times again.

[cclub75]

(typing error. complete message to follow)

Edited January 9, 2007 by cclub75

[Brutiniero]

I dont know if this is out of topic, but in the last times I ask myself if this is compareable to the Jews destiny.

We are walking to the tombs and thinking "interesting times" again.

[Sing_Sling]

It amazes me how so soon after the stock exchange fiasco the leading bright light economists can come up with another failsafe way to stuff up foreign investment . . .

Banana Republic is far too kind a way to describe Thailand.

[Foggy Bottom]

What the government appears to be doing here is to extend the 49:51 rule from the restricted list of business activities onto ALL businesses that have foreign shareholding - that could seriously mess up the stock market as well as FDI investments in businesses (start-ups by farangs). It also flies directly against the last decade of BOI promotions for foreigners to own 100% of companies

Wrong.

The idea is to change the rule that make a company "thai" or "foreigner". If a compagny is "foreigner" then the Foreign Business Act shall apply.

Before it was the % of shares.

The project now (adopted) should be : % of voting rights.

It's a complete revolution, I agree, but it's not what you say.

Furthermore the amendement of Business Foreign Act will not change BOI (the working comittee for the amendement of FBA didn't speak about BOI).

BOI is a specific set of rules for FDI.

BOI published stats (before TRT closed the public access to them on the website) showed that in 1999, there were over 2000 foreign-funded inward investments approved for BOI sponsorship and privileges. By 2002 (2nd year of Thaksinism and after THAT lunch for the Foreign Chambers of Commerce in Bangkok) it fell to just over 200 for the year - DOWN to 10% of a few years before.

Wrong again. They have the list of BOI projects, per country, since.... 1970. On line. Or total worldwide, since 2001 (890 projects in 2001... 1358 in 2005)...

http://www.boi.go.th/english/about/statist...ntry.asp?id=119

Those figures have been "adjusted" - I have the original web pages (from Q1 2003) saved on hard disk

Regarding figure massaging - refer para 4 & 5 of http://www.chiangmainews.com/ecmn/viewfa.php?id=233 which is a bad web conversion of the original article

A better and more complete version is here - http://www.gazlannathai.com/Editorials/Tou...ite-LanNa-4.htm

Edited January 9, 2007 by Gaz Chiangmai

[birago23]

Can't wait to see the Thai Stock Exchange tomorrow if the minister insists on : THIS IS THE THAI WAY! We worked three months on it...so we will go through with the new regulations...

So, lets close our Thai companies, fire all staff, hire them the same time, but this time they will work for lower wages for an illegal pirate company which doesn't pay any tax nor invests in Thailand, just makes sure to transfer as much money out of this country to a more secure safe harbor.

Is it that what the government wants?

Or maybe I should ask the 85 year old grandmother of one employee of sunbelt, who got 1000 baht signing as a shareholder, to step up and become CEO of the board of directors. Surely in Thai hands, this company is destined to prosper and with her wisdom the right decision with a bit of faith in the military junta will be taken.

THAILAND land of the shortsighted people!

Let's see how this will have an impact to the baht...maybe they get it to fall 50 %....I will have half the problems paying back my companies debts...wait a minute...why should I care...grandmother will take care of it...I am off to sunny VIETNAM

At least thanks to this regime, reading thai news has never been that amusing.

MICKEY MOUSE COUNTRY

[John K]

Well they just approved it according to The Nation

http://www.nationmultimedia.com/2007/01/09...es_30023662.php

[Jai Dee]

Cabinet approves controversial foreign business amendment

The Cabinet approved Tuesday the foreign business law amended by the Commerce Ministry.

The amended act would include the requirement on the voting rights of the board members and increase the penalty for violators.

Netpreeya Chumchaiyo, deputy government spokesman, said after the Cabinet meeting that the Council of State is assigned to review the draft amendments.

Earlier, Joint Foreign Chambers of Commerce warned that the amendment might affect their decisions to do business decision.

Commerce Ministry and Finance Ministry are scheduled to make seperate press conference at 3pm.

Earlier Finance Minister Pridiyathorn Devakul vowed to press ahead with legal change that could overhaul the way foreign companies do business here despite warnings of potentially disastrous economic fallout.

Pridiyathorn insisted that foreign companies would not be scared off by the final version of the law, which has not yet been released.

Foreign business community in Thailand has urged the government to postpone the changes for at least six months.

"Why should we withdraw it? They have not yet seen the details. If they had seen the details, I am sure that they would be happy," Pridiyathorn said.

"Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

The minister was speaking after attending the cabinet meeting which will consider the changes.

Pridiyathorn said he had consulted some foreign investors about the changes to the Foreign Business Act and more than half of them had found the new rules acceptable.

"I myself will talk with them. I have held talks with many investors but they have not seen all of the details and the commerce minister cannot disclose the bill before the cabinet gives its approval," he said.

"We have a record of welcoming foreign investment. We are not hostile to them. Foreign investors have made Thailand develop and we are certainly still adhering to this policy," he said.

The revised law is expected to redefine shareholder rights and ownership structures for local subsidiaries of international firms.

Companies have traditionally set up their operations in Thailand so that the local subsidiaries are nominally owned by Thais but controlled by foreigners.

Source: The Nation - 9 January 2007

[cclub75]

Okay, a lot of people seem totally confused.

Let's try to stick to the text.

http://www.dbd.go.th/eng/law/fba_e1999.phtml

With one example.

-I want to open a restaurant, a factory to make frozen food or meals, a website to sell stuff, a bar, etc.

Buzz !

You are on List 3. Wrong. You may ask however for a special authorization.

Only a crazy businessman would do it. So the solution is to bypass the FBA, by saying that your company is "thai".

Easy to do before : take some nominees (your driver, secretary, or your maid like did our dear Thaksin, or ask your lawyer he has a bag full of professional nominees). They have on the paper the majority of shares. Your company is "thai", so you can have an activity prohibited by FBA. You keep vote rights. You stay in full control.

This has been working like that since 1972. Everybody knows it.

-The revolution today : they have changed the rule to classify a company thai or foreigner. With voting rights.

-at that point : you have 2 solutions :

1- you say "ok my company is foreign", you want to keep share and voting rights. So you try to ask for a special authorization under FBA. Good luck...

2- you change the shareholding and/or voting rights structure of your company, to stay thai. You loose control.

So basically : you are fxxxxed.

As I say before : it's a real revolution. And it's even bigger than visa issue or capital control of BOT.

At that point, there is only 2 ways to get out of from what look like a total mess :

1-the gvt will quickly make a U, Z, or X turn (to avoid loose of face, and to ease the mess)

2-Play with the content of list 3.

If they remove all the items of list 3, then problem solved. Everybody is happy again. You can keep shares and voting rights, your company will be classified as "foreign" but with an activity that is not forbidden.

So the key issue now is : the content of List 3 ("The business which Thai nationals are not yet ready to compete with foreigners")

http://www.dbd.go.th/eng/law/fba_e1999.phtml

[Sing_Sling]

. . . and my monthly Thai Baht transfers to Singapore are going to lose in value . . . I'll have to charge more . . . hang on, isn't that inflationary???

Surely the boffins have thought of this with a cunning plan to combat this.

Mickey Mouse, Banana Republic . . .

Umm - - - - nice beaches.

[bkkandrew]

Okay, a lot of people seem totally confused.

Let's try to stick to the text.

http://www.dbd.go.th/eng/law/fba_e1999.phtml

With one example.

-I want to open a restaurant, a factory to make frozen food or meals, a website to sell stuff, a bar, etc.

Buzz !

You are on List 3. Wrong. You may ask however for a special authorization.

Only a crazy businessman would do it. So the solution is to bypass the FBA, by saying that your company is "thai".

Easy to do before : take some nominees (your driver, secretary, or your maid like did our dear Thaksin, or ask your lawyer he has a bag full of professional nominees). They have on the paper the majority of shares. Your company is "thai", so you can have an activity prohibited by FBA. You keep vote rights. You stay in full control.

This has been working like that since 1972. Everybody knows it.

-The revolution today : they have changed the rule to classify a company thai or foreigner. With voting rights.

-at that point : you have 2 solutions :

1- you say "ok my company is foreign", you want to keep share and voting rights. So you try to ask for a special authorization under FBA. Good luck...

2- you change the shareholding and/or voting rights structure of your company, to stay thai. You loose control.

So basically : you are fxxxxed.

As I say before : it's a real revolution. And it's even bigger than visa issue or capital control of BOT.

At that point, there is only 2 ways to get out of from what look like a total mess :

1-the gvt will quickly make a U, Z, or X turn (to avoid loose of face, and to ease the mess)

2-Play with the content of list 3.

If they remove all the items of list 3, then problem solved. Everybody is happy again. You can keep shares and voting rights, your company will be classified as "foreign" but with an activity that is not forbidden.

So the key issue now is : the content of List 3 ("The business which Thai nationals are not yet ready to compete with foreigners")

http://www.dbd.go.th/eng/law/fba_e1999.phtml

Very good post. I only wish it was compulsory reading for all foreigners considering setting up businesses or attempting to purchase property here...

[BKK90210]

From Bloomberg news

Thailand Tightens Foreign Investment Laws, Imposes New Limits

By Suttinee Yuvejwattana and Beth Jinks

Jan. 9 (Bloomberg) -- Thailand's junta-appointed government tightened foreign investment rules, imposing new limits on stake holdings and the use of the country's citizens as nominee owners of companies.

Foreign investors will be given one year to disclose their holdings and up to two years to reduce their holdings and voting rights to less than 50 percent to comply with the new rules approved by Thailand's Cabinet today, Finance Minister Pridiyathorn Devakula said. The laws redefined alien business classifications, and gave a 90-day deadline for Thai nominees to disclose their holdings, and a one-year deadline for them to comply with revised limits.

Thailand's investment climate is worsening amid political instability, foreign ownership probes and recent capital control policies, Standard & Poor's said in a report yesterday. There is a ``very strong'' chance the company will lower its outlook on the Southeast Asian nation's credit rating, S&P's Singapore-based analyst Kim Eng Tan said today.

``A lot of previous investments that have gone into Thailand will have to be restructured and even if not a lot of them pull out there will be some pull out,'' Tan said in an interview before the rule changes were announced. ``You are going to see less investment coming in.''

Foreign investors have been ``unsettled'' by ``setbacks'' in 2006, including political unrest leading to the Sept. 19 coup and probes into the takeover of Shin Corp. led by Singapore's Temasek Holdings Pte, and other nominee arrangements, S&P said yesterday. S&P didn't change its BBB+ foreign currency rating, the third- lowest investment grade, and its stable outlook.

Overseas Investment

Overseas companies and investors yesterday warned they may pull out of Thailand if the rule change proves to be too onerous.

``This will potentially lead to erosion of foreign investment in Thailand,'' Peter Van Haren, chairman of the Joint Foreign Chambers of Commerce, said yesterday.

Political turmoil has already eroded foreign direct investment, halving the value of new projects approved by the Board of Investment in the 10 months to October from a year earlier. About 63 percent of approved projects in the period were owned by overseas investors.

Amata Corp., Thailand's biggest developer of land for factories, said Nov. 22 its sales plunged 62 percent in the first nine months of 2006 as investors delayed projects because of political concerns.

Details of the legislation were kept secret ahead of today's Cabinet approval, ignoring calls by the foreign business council, which represents 28 chambers of commerce comprising more than 10,000 businesses, that its officials be shown the draft.

Temasek, Shin

Investors led by Singapore's state-owned Temasek last year bought more than 96 percent of Shin, owner of Thailand's biggest mobile-phone company, from investors, including the family of former Prime Minister Thaksin Shinawatra. The deal exacerbated protests and a political stalemate in Thailand that led to Thaksin's ouster in the coup.

The revised legislation comes after new currency controls designed to deter speculators in the baht currency triggered a stock market crash last month.

``The current political disarray has not been helped by the Bank of Thailand's policy error,'' Standard & Chartered economists Usara Wilaipich and Nicholas Kwan said in a note to clients today. ``Thailand's political and economic stability could be heading for tougher times ahead.''

The Standard Chartered economists cut their forecast for Thailand's economic growth this year to 4.4 percent from 5.2 percent, and warned of a ``raised risk'' of large capital outflows.

Currency Controls

The Bank of Thailand imposed currency controls on international investors buying Thai assets on Dec. 18. A day later it was forced to exempt share transactions after the benchmark stock SET Index dropped 15 percent, the most in 16 years. The central bank kept the rules in place for bonds, real- estate mutual funds and foreign-currency borrowings.

Banks are required to lock up 30 percent of new foreign- currency deposits earmarked to buy bonds, property funds and other non-stock investments and will deduct penalties from those held for less than a year. The rules will stay in effect for at least three months to six months, central bank Governor Tarisa Watanagase said on Dec. 26.

Tarisa yesterday reiterated the central bank isn't considering relaxing the regulations or penalties ``for now.''

Eight bomb blasts in Bangkok on Dec. 31 killed three people and injured 38, including nine foreigners. Prime Minister Surayud Chulanont blamed the attacks on ``people who lost their political power'' following the military coup.

``The perception of Thailand as politically stable was damaged,'' S&P said in yesterday's report. ``Local sentiment had turned against foreign investors.''

To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at [email protected] ; Beth Jinks in Bangkok at [email protected] .

Last Updated: January 9, 2007 03:02 EST

[cclub75]

Jan. 9 (Bloomberg) -- Thailand's junta-appointed government tightened foreign investment rules, imposing new limits on stake holdings and the use of the country's citizens as nominee owners of companies.

It's even much worse that we have anticipated.... !

Waiting for the details ! But already with the "90-day deadline for Thai nominees to disclose their holdings" it's going to be a furious "Jailhouse rock" in thailand tonight !

They are insane.

Can you imagine ? My maid has shares in 4266 companies. That's look uggly, huh ? !

Ah ah ah ah

Edited January 9, 2007 by cclub75

[jetjock]

BREAKING NEWS

Cabinet approves changes for foreign firms

(Bangkokpost.com, Agencies)

The Cabinet on Tuesday approved in principle changes to regulations on foreign businesses but the law still must go before a panel of legal experts for revisions, a deputy spokeswoman said.

"They approved in principle the Foreign Business Act but the Council of State will study the legal details for proper implementation,'' said Netrpreeya Chumchaiyo, deputy government spokeswoman said.

The crux of the changes centres on the redefination of the word ''alien''. That means any company in which foreign partners hold more than 50 percent of the voting rights, including the voting rights of their nominees, will be considered as alien company.

The amended law will, from now, go to the Council of State which will fine-tune it before it is submitted to the National Legislative Assembly for debate.

Prime Minister Surayud Chulanont's cabinet met for nearly five hours Tuesday to consider the changes, which could redefine shareholder rights and ownership structures for local subsidiaries of international firms.

Commerce Minister Krirk-krai Jirapaet was set to brief the revised Foreign Business Act to reporters at 3 p.m. on Tuesday.

The foreign business community has warned of potentially severe economic fallout from the mooted changes and urged the government to delay the new measures by six months.

Companies have traditionally set up their operations in Thailand so that the local subsidiaries are nominally owned by Thais but controlled by foreigners.

Immediately after the Cabinet's decision was announced, the stock market reacted by falling 10.6 points or 1.64 percent. The index plunged further by 14.45 points to 617.43 points before it rebounded to 620 points.

Analysts fear the revised law could force foreign companies to sell off huge amounts of stock to Thai investors, who might not be able to absorb a large number of shares over a short period.

[Dupont]

Looks like its got another two hurdles to go. A panel to revise it, then back to the National Legislative Council for Debate!

Hope when they sh1t themselves and try and reverse it, it goes quicker than this, for their sakes!