Thailand To Limit Foreign Stake In Firms To 50 Per Cent

[Naam]

The current president could care less about the needs of ordinary Americans despite his rhetoric. He even joked about it at a fund raiser sponsored by the corporate interests one time. He was put in power by corporate interests and the religious right.

let's not forget that the texan village idiot was voted by a majority of american voters TWICE into power. i have lived 15 years in the States and have some idea about the extreme naiveté of the average american citizen and the influence of Rupert Murdoch's "FAUX News" on his/her thinking. people with a half-@ssed education like Bill O'Reilly are in high regard. add to this personalities like Rush Limbaugh et al, a few headlines of the "National Enquirer" and... "what you see is what you get".

that your business venture went sour is unfortunate and i sympathize with you. i also admire your plans (contacting senators, etc.) but what results do you expect? wouldn't it be better to concentrate your abilities on projects with a potential more positive results?

good luck!

[ChiangMaiAmerican]

<br />

The current president could care less about the needs of ordinary Americans despite his rhetoric. He even joked about it at a fund raiser sponsored by the corporate interests one time. He was put in power by corporate interests and the religious right.

<br /><br />let's not forget that the texan village idiot was voted by a majority of american voters TWICE into power. i have lived 15 years in the States and have some idea about the extreme naiveté of the average american citizen and the influence of Rupert Murdoch's "FAUX News" on his/her thinking. people with a half-@ssed education like Bill O'Reilly are in high regard. add to this personalities like Rush Limbaugh et al, a few headlines of the "National Enquirer" and... "what you see is what you get".<br /><br />that your business venture went sour is unfortunate and i sympathize with you. i also admire your plans (contacting senators, etc.) but what results do you expect? wouldn't it be better to concentrate your abilities on projects with a potential more positive results?<br /><br />good luck!<br />

<br /><br /><br />

My current venture has not gone sour. I reopened under the AER though I have discovered that the only Commerce Ministry acknowledges any obligations under the Treaty. Officials in other Ministries claim they are exempt from compliance despite language in the Treaty to the contrary. With the current powers that be in the White House aznd their timid reaction to trade agreement violations that effectively makes those Ministries exempt except for Bush's "base". With the new US House and Senate majority tolerance of violations make become an issue.

In the past few years I also met and married a wonderful Thai woman. We had planned to spend the rest of our lives here. I would love to see Thailand integrated into the world economy with benefits flowing in both directions. Given the recent past and current political rhetoric here it seems likely the government intends to make life intolerable for foreign small businessmen of all nationalities. If things continue to degrade it will leave me with no choice but to withdraw from the Thai market. I have viable opportunites to return to in the US. If American and other nationality foreign small businessmen are forced out,which seems to be the current thrust, I will work to bring change in my country's policies to return the favor as much as is possible under the US Constitution. I have successfully led a group that brought about change in national policy the past despite strong opposition from corporate interests. I believe I can organize another group with the similar results. I still hope things change here for the better. I still hope my wife and I can fulfill our dream of living the rest of our lives here. But it appears the anti-foreigner rhetoric, at least what is being reported and fanned in the Thai language media, is growing daily. If this continues the government will enact more draconian measures to appease the masses.

Edited January 13, 2007 by ChiangMaiAmerican

[ChiangMaiAmerican]

BTW,

The Bush was not elected the first time. He was effectively appointed by his father's allies on the US Supreme Court. His brother's friends in Florida were able to stop the recount and force the issue into the courts. Katherine Harris got her pay back in the last election though. And it is now unlikely brother Jeb would ever succeed if he ran for President. He might get elected to the Senate in Florida or Texas should he move there but George appears to have effectively ended his shot at the presidency. I would have loved to have been a fly on the wall at the last Bush family gathering. I wonder what they talked about?

Edited January 13, 2007 by ChiangMaiAmerican

[jumnien]

"I do not know what many Farangs think or feel about given subjects, but I do know there is often NO common view about anything.

Regards, Dave"

Brilliantly put and evidenced ad nauseum in this particular forum! Anyway, don't take any of this all too seriously. Don't spend too much time buried in an internet forum arguing this or that. Love your loved ones and enjoy the sunshine of the spirit! By the way, I've been a guest here in Thailand for nine years and if they'll have me I'll stay a lot more. I treat them as my hosts, with reverence and respect and in return I receive far more than I could dream of.

[pantarei]

Opinions of people who play with billions of US$:

“S&P Says Increasing Chance for Thai Debt Outlook Cut”, 9 January 2007

http://www.bloomberg.com/apps/news?pid=new...id=acAgvkdadccU

“ING, Aberdeen Stop Buying Thai Debt, Lifting Yields”, 13 January 2007

http://www.bloomberg.com/apps/news?pid=new...id=a41Er4FAFX4Q

The first link shows that they are talking about "perception", not the actual changes in FBA. Perception after reading this thread, for example, would be that immediate withdrawal of all investment, economy collapse, and mass exodus of foreigners is imminent, but all the talk so far has been groundless. Perception is important but can be easily manipulated if one wants to and serious investors and fund managers are not easily swayed by perceptions, they just play on them to their advantage.

Nowhere in that article they mention the impact of new changes in Foreign Business Act, btw.

The second article is the same - it talks about bonds and market reaction to last year capital control measures. That was a screw up alright, but it's not related to this thread, which is also somewhat misleading - Thailand is not limiting foreign stakes any further, it's limiting the use of nominees to avoid the law.

Let's see if on Monday our real pundits return and clarify the issue, so far we all are mostly speculating on matters beyond our comprehension.

Thank you for your comment.

You and other pontificators on this thread have no influence on the market (this is not an impression, this is a fact). The people whose views were discussed in the Bloomberg articles make decisions involving billions (and tens of billions) of dollars (this is not an impression, this is a fact). The decisions involving billions of $$ are strongly influenced by impressions (+emotion) because the future of financial markets cannot be accurately quantified. Although risk cannot be quantifed, most investors prefer lower risk (=difference between gambling and prudent investing).

[ChiangMaiAmerican]

Malaysia likely to open doors to US investors while Thailand's actions make the future uncertain

The preferrence referred to in the article is only in government procurement not the entire economy

From the Washington Post

U.S.-Malaysia trade deal possible by March: USTR WASHINGTON

(Reuters) - Malaysia could reach a free trade agreement with the United States by the end of March if the majority Muslim country can reform its long-standing preference programs for native Malays, the top U.S. negotiator said on Friday.

http://www.washingtonpost.com/wp-dyn/conte...7011201697.html

And from Forbes

http://www.forbes.com/feeds/ap/2007/01/12/ap3323680.html

[yoshiwara]

...the big picture is that Thailand has never effectively been colonised and the ruling elite has historically sought to protect the countries independence from outside control (internal corruption being an 'unfortunate' side effect). Toxin was seen as going against the 'independent' spirit with his singapore sale. The country is being increasingly buffeted by globalisation and does not want to be bought and sold on the open market. the resulting policies are the result of tilting at windmills. falang attempts to run a small/medium sized business in LOS might be caught in the crossfire but the screams and shouts are from those who do not fully appreciate the country's history. BTW, in this week's FT a leading insitution is recommending further strengthening of portfolio exposure to Thailand. Everybody but everybody who was a participant in the creation of a nominee company to purchase land/houses etc ###### well knew it was a 'fiddle'. The justification was that the assessed risk was 'low'. Well blow me down the double zero came up on the roulette table........................................................

[Dupont]

"I do not know what many Farangs think or feel about given subjects, but I do know there is often NO common view about anything.

Regards, Dave"

Brilliantly put and evidenced ad nauseum in this particular forum! Anyway, don't take any of this all too seriously. Don't spend too much time buried in an internet forum arguing this or that. Love your loved ones and enjoy the sunshine of the spirit! By the way, I've been a guest here in Thailand for nine years and if they'll have me I'll stay a lot more. I treat them as my hosts, with reverence and respect and in return I receive far more than I could dream of.

Your reply should be compulosry reading mate.

So we have a few business worries where we may or more likely may not loose half of a business that most of us set up in the first place to help the missus out and give us a legal footing.

What else do we have? Sunshine, friendly people, fantastic food, beautiful beyond belief, diverse scenery throughout the land, the incredible Buddhist festivals of Loy Krathong and songkhran.

Breath!! Warm seas, best diving in the world, beautiful wildlife more incredible than most of us (english espescially) could ever dream of seeing in real life. For most of us leaving school in the 70's, these things were things we thought we would ever see on television documentaries. Nowadays, stick you head out of your front door and you are right in the middle of it.

Nice sunday post this one, and I'm getting the bike out now and off for a ride on the Island with my wife of 6 years as I do every weekend, with the same contented and amazed smile on my face that i have had this past 15 years.

Business Smizzness, who gives a shit. Think this post is running out of steam now and common sense prevailing.

[Paul MBMG]

One thing for you to bear in mind is that this amendment will only be applied to only a few industries. It won't be applied across the board. This point has been stated again and again in this thread by the way. Experts (foreigners and Thais alike) seem to all agree that, in practice, the new amendment won't have much impact to the overall picture of foreign investment, but psychologically, it could have a significant impact. I hope all the foreigners who look to invest in Thailand will study it carefully and won't just panick [sic] and jump to conclusion.

Couldn't agree more, goon.

Also majority votes doesn't confer control (except in 5 specific areas, which can all be handled non-contentiously anyway.)

The Finance Ministry is keen to stress business as usual - short of drawing a diagram for you of how to control a business what else do the ranters want them to do?

[drummer]

...the big picture is that Thailand has never effectively been colonised and the ruling elite has historically sought to protect the countries independence from outside control (internal corruption being an 'unfortunate' side effect). Toxin was seen as going against the 'independent' spirit with his singapore sale. The country is being increasingly buffeted by globalisation and does not want to be bought and sold on the open market. the resulting policies are the result of tilting at windmills. falang attempts to run a small/medium sized business in LOS might be caught in the crossfire but the screams and shouts are from those who do not fully appreciate the country's history. BTW, in this week's FT a leading insitution is recommending further strengthening of portfolio exposure to Thailand. Everybody but everybody who was a participant in the creation of a nominee company to purchase land/houses etc ###### well knew it was a 'fiddle'. The justification was that the assessed risk was 'low'. Well blow me down the double zero came up on the roulette table........................................................

Corruption is HARDLY result of Thailands "independent" spirit. Laos, Burma, Cambodia, Vietnam, China, Syria, Nigeria et al were ALL colonized, and all are rife with corruption. **Extremely** Eurocentric to think that if only Europeans had control here that there would be no or little corruption. On the contrary, evidence suggests that colonization, if anything, promotes it.

Toxin was going against Thailand's "Thailand for Thai" nationalism. We are mostly Western here, and don't need to feel the need to save face by "walking through the roses" This is hardly unique to Thailand. One aspect that I think (I could be wrong) is fairly unique to Thland is how this plays out in the percption of a Thai "team", and how selling to Tamasek would thus be felt as 'treasonous' and 'backstabbing' to other Thais who thought he was on 'their side'. This is really not the same as an "independent spirit"

[Old Man River]

In real life - let's find any MNC that is affected by these changes to the law. I saw the list somewhere but no usual big names. I remember only Asia Cement.

Theoretically, this is correct, but in real life that isn't how it works. Decision makers of MNC's, sitting in home offices, view any changes to a country's ownership laws negatively, irregardless of whether their companies are immediately affected or not. In addition, they don't view things separately, but rather in the aggregage. It is a perception. For Thailand, in just a few short months, decision makers have seen a coup, bombings, capital controls and changes in ownership laws. Thailand's investment climate is no longer being perceived as stable. Hopefully, everthing will work out, but decision makers over highly illiquid assets normally don't take a wait and see attitude. For them, there is too much at stake. The first thing they do is shift new projects to more stable neighboring countries.

Incidentally, the Japanese have recently announced that new projects that were slated for Thailand are being shifted elsewhere.

[jumnien]

Oh no, Japanese factories will pollute neighboring countries instead of Thailand, farang businessmen will move out, rent and purchase prices for condos will plummet, tourists will flee this unstable land and leave beaches deserted, there will be no more traffic jams; wait a minute, doesnt' sound that bad at all for those of us enjoying living here!

[Old Man River]

Oh no, Japanese factories will pollute neighboring countries instead of Thailand, farang businessmen will move out, rent and purchase prices for condos will plummet, tourists will flee this unstable land and leave beaches deserted, there will be no more traffic jams; wait a minute, doesnt' sound that bad at all for those of us enjoying living here!

Unless you have to make a living here. If you are on a pension, then the only thing you would have to worry about would be the increasing crime rate from locals that were used to having and then lost their jobs. There is no unemployement insurance here. Your money would fill that gap.

[jumnien]

Doesn't sound like anything important enough to spend an entire day worrying about now does it? Is it as wonderfully cool and breezy where you are as it is here?

[ChiangMaiAmerican]

New from the BBC on Thailand's investment climate:

"From the standpoint of international investors, the news has been negative ever since the coup," said Christopher Wong, an investment manager at Aberdeen Asset Management.

"I would say that foreign investors and companies here should be very concerned, especially in certain sectors," added Piyanuj Ratprasatporn, a partner at the Thai law firm Tilleke and Gibbins.

And

Until it makes its economic agenda clear, foreign businesses and investors can only fear the worst, and assume that Thailand is going in completely the opposite direction.

http://news.bbc.co.uk/1/hi/business/6260357.stm

Doesn't help restore confidence does it?

Edited January 15, 2007 by ChiangMaiAmerican

[sriracha john]

Oh no, Japanese factories will pollute neighboring countries instead of Thailand, farang businessmen will move out, rent and purchase prices for condos will plummet, tourists will flee this unstable land and leave beaches deserted, there will be no more traffic jams; wait a minute, doesnt' sound that bad at all for those of us enjoying living here!

arrrghhhh.... ohhhhhh.... owwwwww.... someone.... please.... call............ 191 Medical Emergency now!!..... ohhhh... owwww....

I'm having.... a... heart.......... attack.....

I'm....... agreeing.... with............................................... mdeland

*disclaimer: I'm not really having a heart attack.*

[Paul MBMG]

Remember that this is just a draft and not yet a law. Therefore the final terms let alone the intentions are far from clear. However I believe that the general tone of governmental comments has been positive. It's not going to be possible to say until the law has been passed and starts to operate what is or isn't included BUT I think that legitimate businesses in all of the fields will be given various opportunities to continue to operate largely unhindered, especially nominally Thai businesses that don't require the approvals of the FBA lists.

Sunbelt

List 1 # 9 land trading. Does this only refer to land, or can they consider multiple condo, bought and sold in violation. I have a friend who does this, a lot. He has a thai company with himself controlling.

[Paul MBMG]

I think that there is a problem that even if the new policies are as operable as I believe them to be that perception has been negative - time to import some 'Spin doctors'??

New from the BBC on Thailand's investment climate:

"From the standpoint of international investors, the news has been negative ever since the coup," said Christopher Wong, an investment manager at Aberdeen Asset Management.

"I would say that foreign investors and companies here should be very concerned, especially in certain sectors," added Piyanuj Ratprasatporn, a partner at the Thai law firm Tilleke and Gibbins.

And

Until it makes its economic agenda clear, foreign businesses and investors can only fear the worst, and assume that Thailand is going in completely the opposite direction.

http://news.bbc.co.uk/1/hi/business/6260357.stm

Doesn't help restore confidence does it?

[jumnien]

Oh no, Japanese factories will pollute neighboring countries instead of Thailand, farang businessmen will move out, rent and purchase prices for condos will plummet, tourists will flee this unstable land and leave beaches deserted, there will be no more traffic jams; wait a minute, doesnt' sound that bad at all for those of us enjoying living here!

arrrghhhh.... ohhhhhh.... owwwwww.... someone.... please.... call............ 191 Medical Emergency now!!..... ohhhh... owwww....

I'm having.... a... heart.......... attack.....

I'm....... agreeing.... with............................................... mdeland

*disclaimer: I'm not really having a heart attack.*

After more than 300 posts I'm glad I've at least had one post that makes a little sense. I suppose a monkey with a typewriter could have done just as good a job! Cheers

[Paul MBMG]

Cclub,

If I understand you right let me explain what I know

There are structures that allow majority foreign control (BoI, ToA and FBA list approved companies)

Companies who applied using these structres were generally larger cos.

Smaller cos often used the 2-tier voting structure and remained Thai companies. This had become an accepted pratice but fell outside the strict terms of the Thai legal code.

The FBA is being revised and asa result non-FBA list ostensibly Thai companies will also be affected by the restriction on foreign votes to less than/not more than 50% (please note that two-tier share capital remaisn legal, but the boting rights in foreign hands is now restricted.

This in effect sanctions the past practice but modifies it for these ostensibly Thai companies.

each one needs to look at its own situation and decide on the best course of action. However only a very narrow rnage of issues need to be controlled by voting rights and most properly set up companies ahev provisions for this anyway. For properly set up companies there may need to be a share transfer but this will have little impact on the business. For more loosely put together structures then more serious rectifications will be required once the final terms are known. Check your M&A, Company Affadavits, Shareholder agreements, covenants, directors' employment contracts and all other relevant cororate documentation - if it was done right then you'll just need the share transfer - if not, then you'll need to correct the shoddy documentation.

Does that help?

By the way, Thai F&B operators receive a bug business boost by taking advantage of the provisions of RD11, so I don't think that noodel stalls, Thais at large or the government see any need to protect the som tam sellers at Hua Lumphong from McDs!

In fact, no change, if you have a restaurant or other type of business on list 3. If you are not an Amity treaty company or have a Alien Business License, you still can have 99% of the voting rights even if you have 49% of the shares with preferred shares.

Where the changes are with telecommunications companies, mining companies or with property developer companies. You now can only have 49.999% of the shares and 49.999 % of the voting rights if the company is on the List 1 and List 2.

For most small companies, no change.

I'm rather disappointed by your first reaction...

Question : do you know one company that operates a restaurant for instance, and that is classified as "foreign" by FBA and who have successfully asked a licence or special authorization as stated in FBA for List 3 activities ?

We need to stop playing silly games.

All the foreigners who have created food/beverage businesses for instance went for the easiest way : being a "thai" company, AKA owning officially less than majority of shares and using dual shares system or nominees to keep control.

To reformulate : I believe foreigners are not concerned by the companies that are already within the field of FBA. Because actually... there are none.

FBA was right from the begining a total dead law. The best proof : the content of list 3 has never evolved. Because nobody cares, all investors simply bypassed the FBA, by being "thai" or by using special systems like BOI.

If you put aside BOI and Amity Threaty... we can say (don't laugh) that there are no "foreign" companies in Thailand, as they are described in FBA old version... Must be shocking for our thai friends, huh ? !

Now, the gvt after 30 years, aknowledge that everybody is cheating. It's not a few : it's everybody, from Temasek at the top, to Lotus, Carrefour, to the small LTD that operate a bar, a travel agency, a restaurant whatever.

So they change the key criteria that make a company "thai" or "foreign".

So you shouldn't say "nothing change". Because by saying that, you simply continue the hypocrite game.

How will react a genuine foreign investor who wants to create a business in Thailand ? If he can't go BOI, if being "thai" is now impossible, and if because of FBA he can't choose his activity, and can't keep the control of his company... do you believe that he will go for it ?

So I repeat, the "nothing change" posture looks to me very... limited. On the contrary, as I said before, it's bigger than the pandora box. Unless of course, the gvt make another... U turn. It has already happened yesterday (exemption of telecom companies).

The best analysis to this date, is coming from a... Thai. Published this morning in Bangkok Post. Read it and you will understand the real issue.

http://www.bangkokpost.com/News/11Jan2007_news17.php

finally .................................

this is the reality for the average ' foreign investor '

Edited January 15, 2007 by Paul MBMG

[jumnien]

Oh no, Japanese factories will pollute neighboring countries instead of Thailand, farang businessmen will move out, rent and purchase prices for condos will plummet, tourists will flee this unstable land and leave beaches deserted, there will be no more traffic jams; wait a minute, doesnt' sound that bad at all for those of us enjoying living here!

Unless you have to make a living here. If you are on a pension, then the only thing you would have to worry about would be the increasing crime rate from locals that were used to having and then lost their jobs. There is no unemployement insurance here. Your money would fill that gap.

Seems a bit paranoid in the context of Thailand. I was here in the crash of 1997 and did not witness any increase in crime or any sense that those who lost there jobs were coming after my money. I did see office workers driving taxis and selling sandwiches and former rich selling toys? Any others with comments?

[ThaiGoon]

Incidentally, the Japanese have recently announced that new projects that were slated for Thailand are being shifted elsewhere.

Oh really? The Japanese personally told you that? Because in public they said the short term inverstments (up to 3 years from now)are still in tact. While the longer term ones will be put on hold for now until they see what's gonna happen politically in the next few months. If there's stability, everything will go ahead as planned.

Any thing else they told you personally you would like to share with us, so that it would look all doom and gloom for Thailand?

[dgoz]

Why all the fuss. There are hundreds of other countries with thousands of other investment opportunities. Take your money somewhere else like a lot of people allready have.

News Flash *** Thailand doesn't want you or your money ***

Don't fight it, go along with it. There are plenty of other countries (maybe even your home nation) who want and understand the benefits of foreign investment. Let these monkeys go it alone and let's see where they are in 5-10 years. My bet is they'll be back to riding buffalos down Sukhumvit Rd.

[ThaiGoon]

Unless you have to make a living here. If you are on a pension, then the only thing you would have to worry about would be the increasing crime rate from locals that were used to having and then lost their jobs. There is no unemployement insurance here. Your money would fill that gap.

Seems a bit paranoid in the context of Thailand. I was here in the crash of 1997 and did not witness any increase in crime or any sense that those who lost there jobs were coming after my money. I did see office workers driving taxis and selling sandwiches and former rich selling toys? Any others with comments?

Nah, the crash of 1997 that affected more than half of the countries in Asia Pacific was nothing compared to these amendments that are believed to affect about a few thousand companies in certain industries in Thailand. There should be a civil war in the next few months. No more foreign investment. The economy would totally collapse. Millions of Thais would migrate to Cambodia. Baghdad and Basra would be a paradise compared to Bangkok by the end of this year.

Edited January 15, 2007 by ThaiGoon

[ThaiGoon]

Why all the fuss. There are hundreds of other countries with thousands of other investment opportunities. Take your money somewhere else like a lot of people allready have.

News Flash *** Thailand doesn't want you or your money ***

Don't fight it, go along with it. There are plenty of other countries (maybe even your home nation) who want and understand the benefits of foreign investment. Let these monkeys go it alone and let's see where they are in 5-10 years. My bet is they'll be back to riding buffalos down Sukhumvit Rd.

It probably would have helped, had you read what's been posted. Reading does help you understand things better, you know? (Unless of course you lack the intelligence to process the information you've receieved....)

[johnnyk]

I smell danger.

We have had a series of events that are not coincidental but form part of a scenario.

First, they tightened up the visa rules. Plainly targeted at those visa runners who were using the country as a cheap place to be on the lam from debt, alimony, failed scams etc and for cheap drinking and whoring. They wanted to track people in and out more effectively (fair enough) and get rid of the bottom feeders in the same motion.

This I think is part of a move to reposition Thailand more upscale for tourists, especially Asians. They don't need/want backpackers anymore nor the guys who live in 3000 baht/month back soi rooms in Pattaya. People like this drag down the image they want to project and there is a huge developing Asian middle class which finds some antics distasteful when practised in full view. Right now this is the only SE Asian country (along w/Malaysia which has Muslim image to overcome and Bali with other pompems) with good beaches and decent infrastructure throughout. Money has been made off the low-end falang tourists which has financed building and services and contributed to building the initial tourist infrastructure and now its time to sell it to Asian families.

Floowing on from that was the 30% currency thing which doesn't cause the big boys like Toyota or Carrefour any pompem. It does tighten things up for small biz people or at least makes them think twice about buying a bar and settling down to...in some measure, a life of sanuk with ample cheap booze and company.

Now this latest 50% business and closing off the nominee loophole can effectively mean a massive devaluation of falang-owned assets. Nobody's real estate or biz owned via nominee with 2-class share structure is worth as much as it was a short time ago. And no small biz guy or vacation home owner is going to be happy about putting their holdings into a Thai-controlled structure. So values are effectively depreciated and the only potential buyers are Thais who will bring a take it or leave it attitude with any offers to buy these assets.

Thus housing projects with storm drains and roads, guest houses and hotels nicely furnished to falang standard all in operating condition, shops and services, well-equipped bars and restaurants etc can be snapped up at fire sale prices.

What I see is a ripoff of huge proportion buying up assets at deep discounts on the dollar and as it will be small business guys affected, individuals not corporations, no one will give a &lt;deleted&gt;. I doubt many tears will be shed for the 60-yr old falang who loses his little business, his family or has to unload his assets for peanuts and return home to the cold.

So Thailand is moving up the ladder, sex tourists, misfits, scammers and drunks can move on to Cambo. And if falang man wants to stay then he will pay. None of this will happen overnight but things will be different in a decade.

Thailand has undergone tremendous upheaval over the past 30 years with massive development, huge corruption even by their standards, industrialization and "growth without devlopment" (as James Fallows put it in Looking at the Sun) that has wrenched a deeply traditional rural country into the 21st century. I think they feel Viet Nam's footsteps coming behind them. Although VN is still less developed Intel will build a chip factory there and not in Thailand. Not to mention China, the elephant in the Asian room.

But the infrastructure is now in place, there is money around, a solid tourist brand is established, multi-nationals are operating employing thousands and its time to move up the next rung of the ladder from an economy of sewing machines and cheap pleasure. If that invloves throwing out less-than-very-rich falang or making it a bit difficult for them, so be it. It's not about them.

Following on the 30-year breakneck pace comes a power struggle. Conservative elements see the changes and don't completely agree with them. They wanted Toxin out and while I have no love for Mr. T, I think he did understand some things better than others, among them that Thailand was developed enough that it is well-tied in to the world economy and economic liberalization is generally a better way to increase living standards than walling off. Military regimes however are by nature conservative, often seeing themselves as guardians of the true nation. They generally take power as a reactionary force when they perceive excesses or danger. In this case, I believe they may be aiming to preserve or to consolidate the gains of the past 3 decades and prepare for the next stage. If a few individual falangs get tossed over the side they won't worry too much. Falangs don't vote.

I think also they see themselves as independent actors in a globalizing world, not too close to China or to the US and in classic Thai style will attempt to play both ends to the middle and be the leaders of SE Asia which, as the colonialists knew, is one of the world's pearls.

Just a few thoughts.

[Mobi]

In real life - let's find any MNC that is affected by these changes to the law. I saw the list somewhere but no usual big names. I remember only Asia Cement.

Theoretically, this is correct, but in real life that isn't how it works. Decision makers of MNC's, sitting in home offices, view any changes to a country's ownership laws negatively, irregardless of whether their companies are immediately affected or not. In addition, they don't view things separately, but rather in the aggregage. It is a perception. For Thailand, in just a few short months, decision makers have seen a coup, bombings, capital controls and changes in ownership laws. Thailand's investment climate is no longer being perceived as stable. Hopefully, everthing will work out, but decision makers over highly illiquid assets normally don't take a wait and see attitude. For them, there is too much at stake. The first thing they do is shift new projects to more stable neighboring countries.

Spot on once again.

You might have added that the incompetence, confusion and partial backflips in introducing these new laws has added nothing to the international perception of a stable investment climate.

[Mobi]

Duplicate post deleted.

Edited January 15, 2007 by Mobi D'Ark

[Mobi]

Reference was made a few days ago to an article in The Bangkok Post on 11 Jan. I could not access this article via the posted link, but have managed to track it down.

Having read it, I think it is well worth posting in full, as it has certainly helped my understanding of the FBA issues, and how inept the new proposed draft law is.

So here it is:

OPINION/FOREIGN BUSINESS ACT

New investment rules are impractical

Foreign businesses may be forced to leave the country as they don't want to operate in a grey and uncertain legal environment

DEUNDEN NIKOMBORIRAK

Finally, the much anticipated draft amendment of the Foreign Business Act (FBA) was released to the public after the cabinet gave its approval in principle on Tuesday.

I must say that I am rather disappointed with the draft amendment. I was hoping that Thailand, for the first time, would have a foreign investment law that is transparent, sensible and enforceable. By that I mean a foreign investment law that:

(a) allows foreign companies to register as who they really are, rather than hide behind a complex web of cross or pyramidal equity holding or behind Thai nominees;

( effectively protects selected sectors that concern national security, local culture and traditions, environment and small local companies that are not well equipped to compete head-on with large foreign counterparts;

© welcomes foreign investment in sectors where global expertise and network are crucial.

The draft amendment offers none of these.

The failure to remove the current ``blanket restriction'' for foreign business operation in ``all service sectors'' in List 3 in the annex of the FBA implies that Thailand does not welcome thousands of foreign companies currently operating in a variety of services, including advertising, logistics, express delivery, accounting services, legal services, etc., from which Thai citizens and businesses have thoroughly benefited. This sent a very strong negative signal to foreign investors, leading to the dive of the SET index and the threats to downgrade the country's rating.

The proposed amendment to ``grandfather'' all foreign companies that have been operating legally under the old law (that is companies with minority foreign equity share but majority foreign voting share) is welcome.

But to ``pardon'' all foreign companies that have been operating through a Thai ``nominee,'' which is clearly illegal under both the current version and the proposed version of the FBA, is to make a mockery of our law and does not solve the problem at its root cause.

While it is true that a number of foreign companies are operating through nominees, pardoning these companies does not mean that there will no longer be nominees from this point on. As long as the list of businesses forbidden to foreign companies remains unrealistically prohibitive, it is unlikely that the Department of Business Promotion will ever be able to effectively monitor the nationality of hundreds of thousands of business entities operating in all these sectors.

More importantly, the Department of Business Promotion does not even ``want'' to do that, because it reckons that to do so would be bad for the economy. Perhaps we should have such an amnesty for all foreign companies operating illegally in our economy every 10 years or so, so that we can continue to keep their businesses here and not change our law!

At the more practical level, few foreign com panies are likely to declare themselves a foreign entity and apply for a permit to operate under the proposed amendment for two major reasons.

First, automatic licences will be granted only to companies with majority voting share being foreign. Well, not all foreign companies have preferential shares that restrict voting rights of their Thai partners. Some foreign investors operate through Thai nominees. Some are content with having the sole signatory authority or managing directorship of the company, which already guarantee corporate control. According to my research on foreign multinational corporations (MNCs), out of 12 companies that appeared to be foreign-controlled in a chosen service sector, only two showed a foreign majority voting share.

Second, even if a foreign company qualifies to obtain a permit, it may not choose to do so. This is because foreign companies are denied many rights that Thai companies enjoy.

For example, foreign companies cannot own land, cannot be engaged in any businesses in lists 1-3 of the FBA, which include all service businesses.

That is why large hypermarkets such as Big C, Carrefour or Tesco all chose to operate as a Thai legal entity despite the fact that the current FBA allows large-scale foreign investment in wholesale and retail trade. If they were a foreign entity, they would not be allowed to be engaged in purchase and sale of local agricultural products, sell food or drinks, or even provide logistic services for their own businesses without permission from the competent authority.

What will be the impact of this law? Foreign investors have threatened to flee Thailand for more accommodating investment havens in the region, such as Vietnam.

Going by the letter of the law, they should indeed do so because Thailand is the only country in Asean that has such a blanket prohibition of foreign investment in all service sectors.

But, judging by past enforcement records, the revised FBA law may be treated as a ``joke'' as its predecessors have been over the past 30 years. Foreign investors will still want to invest in Thailand, but will have to think of new ways to get around the more restrictive rule.

But they may be pushed to the limit this time and can no longer take a Thai joke and just decide to leave altogether. No one wants to operate a business in a grey and uncertain legal environment.

Who stands to gain from all this? I would say certain large local businesses would be most delighted to see foreign competitors leave the stage so that the Thai people will once again be at their mercy.

I guess after six years, we have not yet learned how much damage powerful local monopolies can do to our country!

Deunden Nikomborirak is Research Director, Thailand Development Research Institute

Edited January 15, 2007 by Mobi D'Ark

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In real life - let's find any MNC that is affected by these changes to the law. I saw the list somewhere but no usual big names. I remember only Asia Cement.

Theoretically, this is correct, but in real life that isn't how it works. Decision makers of MNC's, sitting in home offices, view any changes to a country's ownership laws negatively, irregardless of whether their companies are immediately affected or not. In addition, they don't view things separately, but rather in the aggregage. It is a perception. For Thailand, in just a few short months, decision makers have seen a coup, bombings, capital controls and changes in ownership laws. Thailand's investment climate is no longer being perceived as stable. Hopefully, everthing will work out, but decision makers over highly illiquid assets normally don't take a wait and see attitude. For them, there is too much at stake. The first thing they do is shift new projects to more stable neighboring countries.

Spot on once again.

You might have added that the incompetence, confusion and partial backflips in introducing these new laws has added nothing to the international perception of a stable investment climate.

Well, yes, perception is important, and coming in the long line of series of unfortunate events, perception suffers regardless of the content of the amendments to the FBA. Perception is in fact formed by "incompetence, confusion and partial backflips", not the facts themselves.

I hope Thailand survives this period of confusion until emotions settle down and investors once again would start looking at facts and numbers.