Thailand To Limit Foreign Stake In Firms To 50 Per Cent

[pap]

I for one would really appreciate Sunbelt's take on all of this......you guys know your stuff!

Personally, I would like to know if this means I can still set up my own Limited Company, still become a Director and be in control of my business when I move to LOS?

Any advice would be greatly appreciated from the experts

I agree. They were involved in one of my test ventures and I respect their opinion. It would be nice to hear it. They may still be trying to get thier people all on the same page at this point though.

I am not sure they can freely give it yet though.

[dr_Pat_Pong]

Thailand....tiger economy...how about the mouse that roared.

University education in Thailand, is anybody graduating in business economics here?

I bet the Vietnamese and Cambodians are rubbing their hands, at yet another masterstroke from the law makers of Thailand.

If you were ever going to make it...you would have made it by now...pride comes before a fall, and if you are too proud to admit that farang investment is crucial to your countries future, then go ahead and carry on with policies like this, and see the business disappear.

This is not just Farang investment. It is foreign investment. Its the concept that fails to work in todays world.

Thailand should be wary of outside investment but there are ways to be careful and not kill the golden goose.

This is not one of them.

The loonies are in charge of the asylum.

[Mid]

In short existing companies may need to convert all shares to a single class and therefore foreign voting rights as ascribed to shareholders will be accordingly reduced but prior to this a review of the corporate documents and protocols means that measures can be taken to ensure that de facto control can remain effectively in place. MBMG International can provide a full review of existing corporate documentation and an individual detailed proposal of any changes that might be required.

MBMG International - no-one knows less about business

What rubbish. What "measures"? I wish Thai Visa had more robust ways of dealing with advertisment spam...

Agreed ,

thanxs for nothing Paul

[John K]

Although the intent is good from a Thai point of view, I suspect that because of the poor Thai education system and the no fail policy, there are only a handful of truly qualified Thais to make business decisions. Simply I suspect the Thais that coasted in school will quicky scuttle companies if allowed to make business decisions.

Just look around Bangkok and see what areas are growing, and what areas are stagnant, and what areas are in decline. Then overlay a demographic map and I think you will see what I am saying has a high chance of coming true.

For this to work the Thais simply must trash the education system and replace it with one that meets international standards. If the Thais have to keep making tests easier in school and lowering the standard just so they can get that piece of paper at graduation, Thailand is in for rough times. This change will take at least 15 years to implement as that the young Thai children that will be entering school in May will need to complete their education before they can run a company and maintain international standards.

[MrPlum]

What pattern? Please provide examples to support your assertion.

You may be correct but many members are posting negatively and speculating before actually seeing the facts. Knocking Thailand seems to be the primary entertainment. Clearly if the changes are draconian then capital will flee Thailand and inward investment will dry up.

Corporates are only interested in making the maximum profit, without any concern for local impact, and repatriating 100% of such profit into their own coffers with tax-free status for umpteen years. Just take a look at some of the proposed Iraqi contracts... local firms are squeezed out completely. Unless there are some controls on corporate excess, they will plunder Thailand just as they do in places like Haiti.

It is not only Thailand that is seeking to create limits on foreign ownership of assets considered vital to national interest and if these measures reduce 'abuses', it should be welcomed. Perhaps the new proposals are also in keeping with the King's desire for a sufficiency economy, less dependant and vulnerable to external forces.

I have a business in Thailand with 97% (ish) ownership. But I doubt if my small Trading company will be affected by these changes. Since I provide employment to several Thais, and there are many other similar foreign-run businesses which do the same, the impact would be major if companies were 'driven out'.

What is clear is that with a new government in place there will be changes in a number of areas. No different to legislative and economic measures being made on a regular basis in one's own country. However, any changes in Thailand seem to offer only more 'grist to the mill' for the resident Thai bashers, who, if Thailand is so bad, should have pissed off a long time ago.

Nibble, nibble, nibble, nibble. . . Where will it lead? When will it stop? Up to now, one might have been accused of being paranoid and spinning conspiracy theories. However, over the past few months a pattern is clearly emerging of limiting falang interest, participation, and presence in the Kingdom. Whether it is an outright campaign of xenophobia or merely a lot of people hitching a ride on the bandwagon, there are forces in high places which regard regard foreigners as threatening in some way, and are taking steps to deal with that threat. One assumed that this was due largely the mindset of the Thaksin government, but now it appears that assumption was largely errnoeous. If the trend continues, if the reputation of Thailand as being falalng-unfriendly becomes imbedded in the mindset of the public, no good will come of it, at least not for Thailand.

ing on contracts

Oh, well. Sigh! Nothing to be done about it. Watch and see what happens. Don't paint yourself into any corners. Have an escape route in place in case the shit really hits the fan one day.

It is kind of interesting viewed from a detached perspective like watching a movie.

Aloha,

Rex

[BKK90210]

Ok, according to the latest "opinion poll" done by one of the thai newspapers(Manageronline)

Here is the result on this lastest news released and it indicated a very broad support for this among the thais.

เห็นด้วย - agree

78 %

ไม่เห็นด้วย - disagree

22 %

[skiman1]

The problem is not with the new law or if it affects the majority of small businesses directly. The problem is that the now government in their wisdom, or lack of it, can change the rules instantly and don't seem to be the least concerned about the impact of their act. While the new law may not affect many businesses directly the possibility of an escalation or rule changes that do is very real. This has to be troubling to anyone that has investments in Thailand.

Before all the government trouble and the protests in Bangkok we pulled out of 2 major projects and have now pulled out all our investments. We now only have our house, in wife's name, and a few thousand baht in the bank (for house repairs) and it's going to stay that way until the situation stabilizes, which could take years.

This is so true - It is investor confidence that will be impacted regardless of how the final watered down version of this legislation actually impacts anyone - I for example was planning to purchase another property here and have put the purchase on hold and left the cash outside Thailand. I am sure that the way the government is "operating" at present will cause thousands of people planning to Invest here at whatever level to think again before commiting capital in the current climate.

This country has so much to offer - I would hate to see it fall apart financially due to badly thought out and enforced decisions from the current Government.

[John K]

If you are referring to me MrPlum, there is another factor I did not mention because I could not be sure the practice would follow. Companies that have little or no internal corruption grow and prosper because they have money to reinvest. Companies that have a high level of corruption simply strangle themselves. The later seems to be the standard for Thai business.

Edited January 10, 2007 by John K

[Jaonghais]

[Thailand to limit foreign stake in firms to 50 per cent

"The Council of State is authorized to work on the details to make the law precise and transparent, without any need to be resubmitted for cabinet approval again," he told reporters.

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

"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.

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.

-- AFP/The Nation 2007-09-09

How can more than half of them find the new rules acceptable if you take note of the highlighted red text above

Transparent = See-through. Clear. Translucent. Crystal clear. Easily seen through. Frank. Obvious and easy to recognize. Fine enough to see through. (Take you pick)

[barrythai]

The Minister of Finance was quoted, "Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

Can someone expound on what he means when he says that?

I reckon it means do not bother investing in Thailand as we THAIS must own it all.

Guess ex pats who are locked in to property have no chance in selling their property.

Drop of only 20% of house prices, that is far to optimistic.

"Why should we postpone it when we have worked on it for three months." great George Bush should quote this as it is a wonderful quote.

You could say "Why should we postpone it when we have worked on it for six months so it must be right and everyone will love to live, buy in Thailand after all we have worked on it for six months so it must be right as we are in power."

Guess I'll skip holidays in Thailand this year. Lovely country but in deep trouble with minsters who state things like this. I hope it is a misquote.

[paulmw]

Thailand....tiger economy...how about the mouse that roared.

University education in Thailand, is anybody graduating in business economics here?

I bet the Vietnamese and Cambodians are rubbing their hands, at yet another masterstroke from the law makers of Thailand.

If you were ever going to make it...you would have made it by now...pride comes before a fall, and if you are too proud to admit that farang investment is crucial to your countries future, then go ahead and carry on with policies like this, and see the business disappear.

This is not just Farang investment. It is foreign investment. Its the concept that fails to work in todays world.

Thailand should be wary of outside investment but there are ways to be careful and not kill the golden goose.

This is not one of them.

The loonies are in charge of the asylum.

Would love to be a fly on the wall of most japanesse companies now.

Oh well have to be very sweet to the G/F in future aHHHHHHHHH.

Paul

[Dupont]

Ok, according to the latest "opinion poll" done by one of the thai newspapers(Manageronline)

Here is the result on this lastest news released and it indicated a very broad support for this among the thais.

เห็นด้วย - agree

78 %

ไม่เห็นด้วย - disagree

22 %

Greed, nationalism and crass stupidity explain this away.

The very idea that a Thai Comic's readership can play a useful part in a debate on Financial matters is absurd.

The wording will have been somthing like: Agree - Disagree

Do you think the beloved Thai Minister MR ML Whatever, was right to stop the foreigner baby eaters raping our beloved country, taking our women and threatening our morals based culture?

Most ministers even in other third world countries, consult BEFORE the go ahead with stuff like this. But what do falangs know about finances?

We only live in the most developed wealthy countries in the world and attend PROPER UNIVERSITIES where you CANNOT buy your degree.. so obviously not as much as a Thai!

Edited January 10, 2007 by Dupont

[John K]

Where can I find real time stock market reports?

[LaoPo]

Investment Cost Comparison for Thailand, China, and Vietnam

source: business-in-asia

This is a report from 2005 and I wonder what's left of it after the new Laws...

"Thailand can be a very cost competitive location to manufacture or locate a business. Although China is currently getting much more publicity, a close analysis of cost and other factors shows that Thailand is very competitive and generally exceeds China and even Vietnam which sometimes is thought of as a low-cost option for some operations. When factors such as long term consistent government pro-business policies, government stability, stability of legal provisions, rule of law, right to own land (as opposed to lease), mandated additional personnel benefits, tax incentives and quality of life for company executives sent to manage operation are factored in to the decision process, Thailand looks like a very good choice"

http://www.business-in-asia.com/investment_comparison.html

LaoPo

[konangrit]

Would love to be a fly on the wall of most japanesse companies now.

Oh well have to be very sweet to the G/F in future aHHHHHHHHH.

Paul

Aren't most Japanese companies involved in manufacturing and thus not affected by these changes?

[kmart]

Ok, according to the latest "opinion poll" done by one of the thai newspapers(Manageronline)

Here is the result on this lastest news released and it indicated a very broad support for this among the thais.

เห็นด้วย - agree

78 %

ไม่เห็นด้วย - disagree

22 %[/quote]

Greed, nationalism and crass stupidity explain this away.

The very idea that a Thai Comic's readership can play a useful part in a debate on Financial matters is absurd.

The wording will have been somthing like: Agree - Disagree

Do you think the beloved Thai Minister MR ML Whatever, was right to stop the foreigner baby eaters raping our beloved country, taking our women and threatening our morals based culture?

Most ministers even in other third world countries, consult BEFORE the go ahead with stuff like this. But what do falangs know about finances?

We only live in the most developed wealthy countries in the world and attend PROPER UNIVERSITIES where you CANNOT buy your degree.. so obviously not as much as a Thai!

There is a mis-placed sense of entitlement here, to things that Thais have never earned for themselves. Or had the discipline to earn for themselves. They are standing on the shoulders of giants, and are easily knocked off when the giant wakes up.

The old elites are all educated abroad and know the score. The militarists know only nationalism and blind allegiance to their country above all else. This is worrying when the latter are allowed free reign over economics and politics. Oh, and nationalism is always the last refuge of a scoundrel, as someone famous once said.

[gdhm]

Watch the baht in the coming days and months............

It is about time that the Thai politics, do a little more to weaken the Baht. The loss of around 7 per cent since April 2005 is a shame for the country. Lets go back to 50 Baht per Euro. That is even easier to calculate for everybody and a little "Thank you" for those farangs who permanently spending their money in Thailand.

Would suit me too, BUT it would make millions of Thai Nationals who are much poorer than most Farangs in Thailand POORER as many items would be more expensive. If more expensive then firms may lay off employees if they cannot sell so well in Thailand or overseas.

I hope the Baht does weaken for a day or two for my sake when I finally manage to sell my Spanish house and wish to move the money here to buy a car and house for me and my family BUT I am under no illusion that I and most Farangs here can afford to deal with a strong Baht than most Thais can.

Dave

[Heng]

One assumed that this was due largely the mindset of the Thaksin government, but now it appears that assumption was largely errnoeous.

[Tornado]

Ok, according to the latest "opinion poll" done by one of the thai newspapers(Manageronline)

Here is the result on this lastest news released and it indicated a very broad support for this among the thais.

เห็นด้วย - agree -

78 %

ไม่เห็นด้วย - disagree

22 %

TIT.

question: The Elite card - still going on or has it been shelved permanently?

If a foreign buyer invest 5 mil USD into land here, is their any help from the government or BOI?

Is there anything in place to help major investors own land/have voting rights???

[Barney_the_Dinosaur]

a little "Thank you" for those farangs who permanently spending their money in Thailand.

ah...diddums.

I'm sure if you say it as nicely as that, the farang-loathing Thai plutocrats will oblige.

[george]

Baht weakens to 36.02-36.05 in morning trade

BANGKOK: -- The Thai currency weakened to Bt36.02 - 36.05 per US dollar when the currency market opened Wednesday morning, a trader from a commercial bank said.

Baht depreciated from the closing of Bt35.88 - 36.00 Tuesday evening.

-- The Nation 2007-01-10

[Plus]

Loonies in charge of the asylum - that is surely about this thread on Thaivisa.

People here make into an economic disaster, xenophobia, ugly head of rising fascism etc etc while in fact only 2-4% of foreign companies will be effected.

Please also note this quote:

"The amendment brings the Thai direct investment regime broadly in line with international practice," said Frederic Neumann of HSBC Markets (Asia) Ltd.

From Bangkok Post:

"M R Pridiyathorn believed the impact on the investment climate would be slight as businesses under all three lists of the current law total 10,000-20,000 companies, compared with the total of 500,000 foreign-owned businesses in the country."

The Nation puts the number of companies under Annex 1 and 2 at 8,800.

[cclub75]

Reading the press this morning is a totally baffling experience., with many infos and comments that contradict each other.

I think we need to "go back to the text", to -try- to understand what really the FBA is.

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

Here is the process of this law :

-the key is the following question : is your company "thai" or "foreign" ?

1- If "thai", then FBA don't apply : do what you want

2- Your company is "foreign", then FBA applies. And especially the famous "lists" (1, 2 and 3). Those lists contain activities that are TOTALLY forbidden to "foreign" companies (list 1) or PARTIALLY forbiden (list 2 and 3) or need to ask for a special authorization.

3-if the activity of the company is not listed, then FBA applies (your company is "foreign"), but you are free to operate the company.

Now, with the previous FBA, the criteria to judge the "nationality" of a business was majority of shares. If a "non thai entity" (person or juristic entity) owns the majority, then the company is "foreign" then the FBA applies.

Basically, the FBA is a real bureaucratic monster. It's complicated.

So how things were working since 1972 ? Foreign investors who wanted to operate a business in Thailand went through the easiest way. It means : being "thai". It means own in direct less than 51 % of shares, but keep control with various schemes. It means having thai nominees.

I should add that this scheme was of course compulsory for a foreign investor who wanted to operate an activity prohibited by FBA (with list 1, 2).

So basically, it's possible to say that ZERO companies are runing currrently under FBA, even for activities that are not listed as prohibited.

Or worst : some companies DO NOT EVEN KNOW that they are under FBA (because let's face it : I doubt there is one civil servant in Thailand who is able to understand the law and apply it).

The rational choice for a foreign investor was :

-being "thai" (with less than majority of shares)

-or use BOI (or other derogatory system like the US amity threaty)

Now, the new FBA is really a true revolution, because it changes the key, AKA the criteria to judge the nationality of a company.

With the voting rights as the new criteria, it's impossible to use nominees anymore (unless lawyers come up with some crazy ideas....).

The second revolution is the fact that the new FBA is RETROACTIVE, it means businesses who are currently "thai" (but actually foreign controled) MUST CHANGE the structure of their shareholding to comply.

(It's my interpretation. Another one would be : only companies who are currently FBA (AKA "foreign") would have to comply to the new FBA...)

So it's a huge trap : many businesses that could have been legit under previous FBA (with an activity not prohibited) but who have decided to go the easy way (being "thai" with nominees) are traped : they must come forward and change their shareholding structure.

That's the main issue.

What can happen now ?

I guess : many companies will simply... don't report. On the other hand, one quote from Bloomberg yesterday after the press conference was : "All thais nominees must report all their holdings in 90 days".

It means that gvt could trace the "real-fake thai but foreign controled companies" by tracing the holding of the thais nominees.

But then again, I can't see why a thai would come forward to admit that he's a shareholder of XX differents companies !

Of course, there are penalties, but it's not the first time (neither the last) that people would ignore the law...

The other issue (and a big one) now is the future businesses.

What can be the choice of a rational foreign investor who would like to create a business in Thailand now ?

Well, no need to have been through Harward Business School :

1- he will use BOI (if he can)

2- he will be discouraged and will go somewhere else (it's a dream to think that common entrepreuneurs are willing to not control their company)

3- he will use some complex schemes provided by lawyers to by pass to some extend the law.

4- he will accept the huge risk to not have control, and will let control to "good" thais nominees (family, girlfriend etc.)

Yesterday, along with 19 december and capital control decisions, will stay in memory as a perfect example of.... very bad communication...

I'm sure that even the Finance Minister hasn't got a clue of what he's talking about, nor the effects that the new FBA can have.

It's not a pandora box they have opened : it's a huge black hole.

Anyway, I might be wrong. We will have more details with the meeting this morning...

[konangrit]

Loonies in charge of the asylum - that is surely about this thread on Thaivisa.

People here make into an economic disaster, xenophobia, ugly head of rising fascism etc etc while in fact only 2-4% of foreign companies will be effected.

Please also note this quote:

"The amendment brings the Thai direct investment regime broadly in line with international practice," said Frederic Neumann of HSBC Markets (Asia) Ltd.

From Bangkok Post:

"M R Pridiyathorn believed the impact on the investment climate would be slight as businesses under all three lists of the current law total 10,000-20,000 companies, compared with the total of 500,000 foreign-owned businesses in the country."

The Nation puts the number of companies under Annex 1 and 2 at 8,800.

Well said, a lot of posters are panicking about companies which aren't even under Annex 1 or 2.

Edited January 10, 2007 by konangrit

[animatic]

The 50-per cent cap will only apply to companies that deal with areas considered important to national security, or that have an impact on natural resources or Thai culture, he said.

Ok this is a very important point...

it says little about regular companies, but specifically states

this applies to certain areas.

And would seems to address the Temasek Shin deal,

mining, oil, gas etc, and handicrafts or inherantly Thai products.

And not little companies such as tourist support, housing,

exporting of commercial items, and other 'non crtitical functions.

Don't ya just wish they would make it ALL clear when they do it,

and not put it out in dribs and drabs,

with VERY salient points hidden in the fine print.

This little sentance above would have done a lot to slow

the SET tanking over the anouncement.

[kmart]

The 50-per cent cap will only apply to companies that deal with areas considered important to national security, or that have an impact on natural resources or Thai culture, he said.

Ok this is a very important point...

it says little about regular companies, but specifically states

this applies to certain areas.

And would seems to address the Temasek Shin deal,

mining, oil, gas etc, and handicrafts or inherantly Thai products.

And not little companies such as tourist support, housing,

exporting of commercial items, and other 'non crtitical functions.

Don't ya just wish they would make it ALL clear when they do it,

and not put it out in dribs and drabs,

with VERY salient points hidden in the fine print.

This little sentance above would have done a lot to slow

the SET tanking over the anouncement.

Yes, but the three areas outlined can be interpreted as anything here. Usually on a selective whim.

[george]

Some foreign investments to draw back after amendments

BANGKOK: -- Foreign investors are likely to withdraw a certain Thai investments which offer no attractive returns upon the Cabinet approval of amendments to the Foreign Business Act, according to the Federation of Thai Industries.

FTI Chairman Santi Vilassakdanont said the amendments will impact foreign investors, particularly new players, who will need to consider more carefully to see if they will benefit from investments.

He said he believed the foreign investors already implementing investment projects in Thailand will not withdraw their investment.

Those who decided to withdraw the investment might consider investment benefits they receive at present are not attractive. The amount of investment they opt to withdraw would not be significant.

Metha Chanchaemcharas, President of Plus Property Co, said the amendments might affect foreign investment in the property business in the short run.

It might make investors slow their investment in order to consider details of the amendments and see whether it is worth investment and the measure would be adjusted later.

He projected the investors would not withdraw an existing investment amount immediately because they had to wait and see clarity of the amended Act.

Mr.Metha said the investors had not only paid attention to a shareholding portion and managerial power, but also considered economic conditions and investment atmosphere for their decision to invest in Thailand.

He added the investors would need to take time to adjust themselves to the new regulations under the amended Act.

--TNA 2007-01-10

[BKK90210]

The 50-per cent cap will only apply to companies that deal with areas considered important to national security, or that have an impact on natural resources or Thai culture, he said.

Ok this is a very important point...

it says little about regular companies, but specifically states

this applies to certain areas.

And would seems to address the Temasek Shin deal,

mining, oil, gas etc, and handicrafts or inherantly Thai products.

And not little companies such as tourist support, housing,

exporting of commercial items, and other 'non crtitical functions.

Don't ya just wish they would make it ALL clear when they do it,

and not put it out in dribs and drabs,

with VERY salient points hidden in the fine print.

This little sentance above would have done a lot to slow

the SET tanking over the anouncement.

I would think that they might see the land under your house as part of natural resources and therefore is a no no for your company to own it.

[capt_canada42]

Watch the baht in the coming days and months............

Well thats what they wanted devaluation and now they will get it right !

[Paul MBMG]

What most people here are failing to understand is that shareholding votes isn't the only way to control businesses or extract value from them. I've tried to explain this in simple terms (the concepts are simple - you can specify what can or can't be decided by shareholder majority votes and what needs to be decided by other mechanisms, the documentation and structures just need to be prepared quite carefully). The particular measures will vary from situation to situation and therefore personalised, professional advice is absolutely neccessary but anyone who has set up their company in a robust manner and has access to good legal and corporate advice shouldn't lose any sleep but should merely amend their corporate documentation over the next couple of years to reflect the chanegs that may have to be made in shareholding structures. At the risk of repeating myself ad nauseum, this would involve a review of M&A, shareholder agreements, covenants, director's employment contracts and the like.

My previous response, which has been deleted, wasn't an advert (although the full extract did carry the tagline of our corporate solutions division "Nobody knows more about business" which should have been removed, it was a response to a request to post our advisory issued yesterday. Apologies for any offence that the inclusion of that 5 word tagline may have caused to sensitive readers

Anyway, we expect professional operators to be able to carry on largely unaffected and if you're hearing any differently...well, that's your problem, but it's not a general problem.