Foreign Investors Less Attentive To Thai Property Market

[george]

Foreign investors less attentive to Thai property market

BANGKOK: -- Foreign investors are paying less attention to Thailand's property market following unfavourable incidents in the past month, according to a leading real estate service agency.

Jones Lang LaSalle president Supin Meechucheep said the company had previously projected that the property market in Bangkok would be quite promising this year, with property firms enjoying strong operating results.

Such a projection had not factored in several unfavourable incidents that have occurred in the past months.

Although the market fundamentals remain strong, she said, the incidents had undermined the overall economic atmosphere including the property market sentiment.

She said the firm found foreign investors interested in investing in property in Thailand had slowed their decision because they are uncertain about state measures taken recently such as the 30 per cent reserve requirement imposed by the Bank of Thailand in December, and the amendment to the Foreign Business Act which followed.

"The property market is likely to grow, at a slower pace this year," Ms. Supin said. if there are no untoward incidents. It is expected the demand will remain intact since the market has strong fundamentals.

"It is possible buying activities planned in the first half of this year will be postponed to the second half of the year since potential buyers and leasers will adopt a wait-and-see attitude.

"However, we believe the situation will ease and uncertainties will end soon. This, coupled with the stability of the government's polices and economic stimulus through an interest rate cut, will help restore investor confidence and make the property market recover this year," she said.

--TNA 2007-01-22

[John K]

wishful spin sounds ......

[Pattayatony]

What a load of Crap!!!! Thailand is going down the shute fast and it will take a long time for investors to get any confidence back about investing in Thailand.

The Govt keep changing the rules and have stated they dont want foreigners here only their money.

[The Skipper]

It would be nice if the Condo owner was actually allowed to stay in Country, agreed?

[Pattayatony]

It would be nice if the Condo owner was actually allowed to stay in Country, agreed?

Why would any foreigner want to invest money here when the Govt keep moving the Goal post and as a foreigner in Thailand You have no rights!!!!

[jumnien]

It would be nice if the Condo owner was actually allowed to stay in Country, agreed?

Why would any foreigner want to invest money here when the Govt keep moving the Goal post and as a foreigner in Thailand You have no rights!!!!

Some of us love the challenge of moving goal posts and as to no rights.... no responsibilities!

[Heng]

That's the spirit!

[Barney_the_Dinosaur]

This is a typical example of posters who like the sound of their own voice not reading the original post.

Their reaction is 'grrr, spindoctoring'

But if you read the piece, it is clearly downbeat and has a broadly pessimistic angle.

[Tornado]

time for a year long holiday!.

Business is finished as we know it. If you buy a property here at the moment your an idiot - simple.

Some of the major law firms are offering 3 30 year leases to their clients and they take over the power of attorney

Ive closed down 1 company already, two more to go. South America is on the cards for me.

The fun will be getting the money out of the country, thank god for the Indian money men in Bangkok.

[dvk1951]

Foreign investors less attentive to Thai property market

"However, we believe the situation will ease and uncertainties will end soon. This, coupled with the stability of the government's polices and economic stimulus through an interest rate cut, will help restore investor confidence and make the property market recover this year," she said.

--TNA 2007-01-22

"the imposition of capital controls, restrictions on tourist visas, a military coup, turbulence on the stock and currency markets, a wave of terrorism in southern Thailand and nine bomb blasts in Bangkok"

Quoted from Post #1 of "Will Ownership Restrictions Lead To Panic In Propery Market?" thread curtesy of George.

Sorry, couldn't help it, I feel much better now, carry on.......................................

[Barney_the_Dinosaur]

I'd like to buy a house in BKK for around THB 20-25 million, but there is little interesting on any agent's books. I don't want to spend THB 40 million for something flash.

Edited January 23, 2007 by Barney_the_Dinosaur

[Mai Krap]

Whos kidding who around here? The guys I know with houses and condos worth real money now (Bought in 90s) were the same guys who were buying everything they could get in stocks 4 years ago. These are the very same guys who last year on the first gatherings of crowds sold every single stock and bailed out while the ship was still steaming forward. Some even sold property holdings and ones who would be buying more condos with their cash from the stock sales just bought up whatever was a sure thing for export, exported it, sold, and banked the booty in the Caribbean right along beside the cash from our number one pirate in exile.

In old Vegas the money went by suitcase to Kansas City and Chicago, Since 97 the smart Thai money has gone by suitcase first class to the Bahammas, sometimes whole plane loads of suit cases at a time. Things never looked better for Thailand 3 months after the Tsunami, everything was holding together even through that. Then one man and his insistence on keeping his hand in the cookie jar even when the average Joe Noi could see it in plain view has detoothed the tiger we all knew and loved.

In late 2005 I was having to call friends on holliday to warn them to beware of political protests downtown because it could get nasty and some folks are just now seeing possible problems?

[chownah]

The more the rules change the more important it is for foreign investors to cozy up to some Thai officials in order to stay in business. Frequent rule changing clears the fields of foreign investors who don't know how to cozy up and creates a bigger market for those who do.

Just an ideas...I'm sure its wrong.

Chownah

[midas]

This is a typical example of posters who like the sound of their own voice not reading the original post.

Their reaction is 'grrr, spindoctoring'

But if you read the piece, it is clearly downbeat and has a broadly pessimistic angle

how can you say that ???

" the market fundamentals remain strong, " - bull****t - no they dont !

"The property market is likely to grow, at a slower pace this year- It is expected the demand will remain intact since the market has strong fundamentals " you tell me where the market has strong fundamentals - it is total crap I wish they had the honesty to once to

describe the outlook for the market as it truly is.

[cclub75]

It is this very pessimistic indeed.

Because... before they were talking about amazing growth, volume and value as well.

But if you read the piece, it is clearly downbeat and has a broadly pessimistic angle

how can you say that ???

" the market fundamentals remain strong, " - bull****t - no they dont !

Edited January 23, 2007 by cclub75

[Mai Krap]

This is a typical example of posters who like the sound of their own voice not reading the original post.

Their reaction is 'grrr, spindoctoring'

But if you read the piece, it is clearly downbeat and has a broadly pessimistic angle

how can you say that ???

" the market fundamentals remain strong, " - bull****t - no they dont !

"The property market is likely to grow, at a slower pace this year- It is expected the demand will remain intact since the market has strong fundamentals " you tell me where the market has strong fundamentals - it is total crap I wish they had the honesty to once to

describe the outlook for the market as it truly is.

Anyone who has ever gone to the banks here to see the large qauntity of overrated property they have for sale and the prices they ask know the market is total BS! There are some great and valuable properties here but then take a drive around and get a good look at all the empty and half completed structures, the half assed half completed neigborhood projects and all the first class VIP homes boarded up and overgrown then tell me how great the property market is.

You can call it <deleted>, ballsacs, keeqwai or whatever you want but people here tend to overprice land and structures and just sit on them. In my own family I was recently offered a Rai of land for 300,000 baht for my wife and I turned it down flatly as it was overpriced and then learned the aunt later sold for 70,000 but would not sale to my wife for that price??? The old loosing face thing I guess. Many deals go down like this, big signs, big prices, then secret cheep deals behind closed doors only to have bigger signs and bigger prices posted in public.

The bottem line is field workers have no money to buy, Farangs for the most part can not be bothered to buy, and Toxin has flown the coop with the petty cash. I realize idiots (ATMs) arrive every hour by plane but at what point will more folks start to withdraw funds and less folks continue to deposit them at a loss? I truly believe that time has arrived, for me I planned to start construction on a new home for my wife this year but have now put that plan far onto the back burner, other spending plans have also been put on hold. Until recently I would spend a week in Bangkok every month staying at hotels and eating out and that to is being replaced by trips to other countries so I will be spending my money elswhere, Im sure Im not the only one.

[wintermute]

By estate agent standards, thats a pessimistic report.

Jones Lang caters for foreigners, and there's still a lot of people with money burning holes in their pockets in Hong Kong and Singapore wanting to buy posh villas on dips.

After the recent diplomatic hijinks with Singapore I think singaporeans will be looking elsewhere for their own financial safety. HK'ers I know usually buy homes in the U.S. and mainland China..both are a hel_l of a lot more secure than buying anything in Thailand.

Edited January 23, 2007 by wintermute

[midas]

By estate agent standards, thats a pessimistic report.

Jones Lang caters for foreigners, and there's still a lot of people with money burning holes in their pockets in Hong Kong and Singapore wanting to buy posh villas on dips.

After the recent diplomatic hijinks with Singapore I think singaporeans will be looking elsewhere for their own financial safety. HK'ers I know usually buy homes in the U.S. and mainland China..both are a hel_l of a lot more secure than buying anything in Thailand.

Exactly - why on earth would " people with money burning holes in their pockets in Hong Kong and Singapore "

want to keep investing here now after recent events when they can make just as much money

- perhaps even more - in their own backyard or mainland China ! The Thai property market has had its day

- time to move the money to greener pastures

[gharknes]

said it before and I'll say it again, greedy falangs that got involved in the property market simply out priced themselve, when you can build 10 houses - sell 3 and make a profit there has to be something wrong

some poor people that bought these properties at highly inflated prices because they thought they where getting a bargain are in the s--t

you see although property here seemed to be cheap compared to western prices it should actually have been REALLY CHEAP not just cheap, some cleaver falags and Thais monopolised on this and basically ripped many people off, my rule of thumb in Thailand is everything should be mostly 1/4 the price of same item in the west excluding of course imported goods

when I came here to live people asked me why i rent and not buy = obvious now

the next thing that is going to happen is rents will come down, there are already new condo's popping up around Pattaya offering very nice condo's for 4-5k per month, the falangs that think 12-14k per month is acceptable really need to take a rain check, if you bought a property at and inflated price don't expect an inflated rent to bail you out

[Mid]

[Mai Krap]

Agreed!

[Tywais]

Please remember the rules about discussion/comments of the Royal Family. One post removed for not following.

[alexth]

If I was in their shoes, doing what they are doing, I wouldn't even dream about foreign investors. Something makes me think that they on their way on becoming a new Burma, I hope I'm wrong. Anyways, right now, the futures looks like sh1t for Thailand.

[Jai Dee]

Thailand risks losing property buyers to neighbours

Thailand risks losing some of its resort home market to Southeast Asian rivals Malaysia and the Philippines if it goes ahead with plans to close a loophole that lets foreigners own freehold property.

Foreigners cannot own landed property, according to Thai law, only apartments. But many buyers have sidestepped the rule by holding property through a local company, which they control because Thai "nominee" majority shareholders waive voting rights.

The Thai government wants to change the Foreign Business Act to outlaw such nominees, leaving foreigners with only the option of a maximum 30-year lease.

The proposal has made some home owners and prospective buyers nervous, analysts say.

The southern islands of Samui and Phuket have become hotspots in the last couple of years, with US$100,000 (RM350,000) apartments and US$5 million beach villas selling quickly at property fairs from Stockholm and Moscow to Hong Kong.

Although some projects were still seeing steady sales, David Simister, chairman of property consultants CB Richard Ellis in Thailand, said the government should not take demand for granted.

"You can't assume you'll have people's interest forever," Simister said.

"Thailand is seen as a desirable place for resort property, but Malaysia has, quite frankly, a better legal framework," he said, adding that he was about to fly to Langkawi to visit a residential project.

Thailand should raise the maximum leasehold to 90 years to attract new buyers and allow owners of property held in nominee companies to convert to a long-term lease, Simister said.

The limit on foreign ownership of a condominium project also should be raised to 90% from 49% to reflect the foreign share of property sales in Thai resorts, he added.

Thailand's government, installed after a military coup in September, jolted markets this month when it said it would amend the Foreign Business Act, admitting that the revision derived from probes into former Prime Minister Thaksin Shinawatra.

In particular, the move stemmed from the US$1.9 billion sale by Thaksin's family of its controlling stake in the Shin Corp telecoms empire to Singapore state investment firm Temasek. Temasek executed the deal through a complicated web of Thai holding companies.

The proposed rule changes have been approved by the cabinet but there is no word on when the military-appointed National Legislative Assembly will pass them into law.

Major Thai developers, such as Land and Houses PCL, are unlikely to feel a big pinch from the rule change because they concentrate on mass market housing targetted at Thais.

But luxury home builders, such as Raimon Land PCL and unlisted TCC Capital Land, a joint venture by Singapore's CapitaLand Ltd, could be hit, according to a research note by Macquarie Research analyst Moonchai Jaturanpinyo.

These developers, popular with foreigners, could be left with unsold units as closing the nominee option will now allow them to sell up to only 49% to overseas buyers.

Songkran Issara, managing director of developer Charn Issara, said his firm's projects in the resort towns of Hua Hin and Cha-am were not overreliant on foreign buyers.

"I have heard the proposed rule changes have slowed sales of property projects targetting foreign buyers, but that isn't the case for us," Songkran said.

But he complained the government, which wants to promote high-end tourism, was sending out mixed signals.

"I want the government to be clear on its policies about foreign investments in Thailand, whether we want to boost them or we don't want to," he said.

While Thailand has made it more difficult for foreigners to own property, neighbouring Malaysia eased curbs on foreign ownership of residential property in December in an effort to cut red tape and spur economic growth.

Foreigners who buy homes valued at more than around US$70,000 no longer need approval from Malaysia's Foreign Investment Committee and can now buy an unlimited number.

Malaysia has been vying with Thailand and the Philippines to draw wealthy retirees, giving a package of a 10-year renewable multi-entry visa and tax exemptions on pensions.

The Philippines government is also promoting the building of retirement villas and hopes to attract a million foreign retirees by 2015 to create four million related jobs.

Simister said Thailand still wanted to draw wealthy visitors and had no intention of killing the luxury property market.

"Thailand has never been somewhere where they get everything right, but that's part of its charm," he said of the proposed rule changes.

Source: The Edge Daily - 24 January 2007

[somtaamgaiyang]

Foreign investors less attentive to Thai property market

BANGKOK: -- Foreign investors are paying less attention to Thailand's property market following unfavourable incidents in the past month, according to a leading real estate service agency.

Jones Lang LaSalle president Supin Meechucheep said the company had previously projected that the property market in Bangkok would be quite promising this year, with property firms enjoying strong operating results.

Such a projection had not factored in several unfavourable incidents that have occurred in the past months.

Although the market fundamentals remain strong, she said, the incidents had undermined the overall economic atmosphere including the property market sentiment.

She said the firm found foreign investors interested in investing in property in Thailand had slowed their decision because they are uncertain about state measures taken recently such as the 30 per cent reserve requirement imposed by the Bank of Thailand in December, and the amendment to the Foreign Business Act which followed.

"The property market is likely to grow, at a slower pace this year," Ms. Supin said. if there are no untoward incidents. It is expected the demand will remain intact since the market has strong fundamentals.

"It is possible buying activities planned in the first half of this year will be postponed to the second half of the year since potential buyers and leasers will adopt a wait-and-see attitude.

"However, we believe the situation will ease and uncertainties will end soon. This, coupled with the stability of the government's polices and economic stimulus through an interest rate cut, will help restore investor confidence and make the property market recover this year," she said.

--TNA 2007-01-22

Thai property is virtually unsellable in the second hand market. Once you are in you are in. Therefore, only buy if you intend to keep it for 20 years and do not consider making one cent of profit on it in capital terms. If you do, good luck and well done. Realising the profit is next to impossible and usually can only be achieved thru equity release or redevelopment.

Property in Thailand is for living in or renting. Resale is an alien concept in Thailand, do not get in if you ever expect to get out unscathed. Hang on for not a very soft landing in the condo and apartment market in Bangkok.

All the BS that these foreign companies are peddaling about ROI etc is so tenuous as to be criminal. Just look at the skyline in BKK, not exactly a shortage of new apartments coming on line in the next year are there, but a reduced amount of buyers coming to market in the next year for sure.

I have my house, I have my apartment, I may even buy an apartment for rental, but what I will not do, is work on the premise that I can sell it in 2 years for a handy profit. To play that game in the Thai market is very very risky, and with these new rules, no one can even predict the buoyancy of the Thai property market next week, let alone next year.

[John K]

TCC Land Commercial cuts rents for top-end space

WORANUJ MANEERUNGSEE

The property rental specialist TCC Land Commercial has reduced the rents of its premium office space in response to a more uncertain economy since the New Year's Eve bomb blasts in Bangkok and Nonthaburi.

The affiliate of the TCC Group owned by liquor billionaire Charoen Sirivadhanabhakdi controls some of the most expensive office space in the capital. However, it was reducing its asking prices to 800 baht per square metre per month from earlier rates of 900 to 1,000 baht at its brand-new Athe{aac}ne{aac}e building on Wireless Road, with usable space of 40,000 square metres, according to president Chaiyapong Poosunthornsri.

Mr Chaiyapong said the building, scheduled to open mid-year, targeted foreign companies, some of which had been taking a second look at their business plans for Thailand.

Foreign business sentiment has been badly affected by the capital controls imposed last month by the Bank of Thailand and imminent amendments to the Foreign Business Act.

TCC Land Commercial has renovated another high-end office building, with 100,000 square metres, on Ratchadaphisek Road near the Thailand Cultural Center, to be completed next year. Its flagship site is Empire Tower on Sathorn Road.

Mr Chaiyapong said demand for office space in the central business district, such as the Sathorn and Silom areas, had not dropped, but property owners were just unable to raise prices.

The company also operates the Tawanna lifestyle retail complex and will open four new complexes in Bangkok by the end of this year. He said the new ones would be different from the original Bang Kapi branch, which focused on IT. But all new branches would focus on the medium-to upper market, with more high-fashion and trendy goods.

Tawanna Square, located on 32 rai in Lat Phrao near the first Tawanna, opened recently. The other three sites, in Bang Bo, Ngam Wong Wan and Chaeng Watthana, are under construction.

The four projects will cost about 800 million baht in total, excluding land. The company forecasts total revenue from the projects to reach nearly 300 million baht per year.

It also plans retail complexes under the Tawanna brand in upcountry locations such as Chiang Mai, and a 100-rai complex near the Burmese border in Mae Sai district.

Mr Chaiyapong said the firm was focusing on the medium- to upper-end retail market as there was limited competition.

''There's only a single rival, Chatuchak weekend market, and it is just one site, while we have Tawanna in many locations, like a shopper's neighbour,'' he said.

Bangkok post

[amarka]

TCC Land Commercial cuts rents for top-end space

WORANUJ MANEERUNGSEE

The property rental specialist TCC Land Commercial has reduced the rents of its premium office space in response to a more uncertain economy since the New Year's Eve bomb blasts in Bangkok and Nonthaburi.

The affiliate of the TCC Group owned by liquor billionaire Charoen Sirivadhanabhakdi controls some of the most expensive office space in the capital. However, it was reducing its asking prices to 800 baht per square metre per month from earlier rates of 900 to 1,000 baht at its brand-new Athe{aac}ne{aac}e building on Wireless Road, with usable space of 40,000 square metres, according to president Chaiyapong Poosunthornsri.

Mr Chaiyapong said the building, scheduled to open mid-year, targeted foreign companies, some of which had been taking a second look at their business plans for Thailand.

Foreign business sentiment has been badly affected by the capital controls imposed last month by the Bank of Thailand and imminent amendments to the Foreign Business Act.

TCC Land Commercial has renovated another high-end office building, with 100,000 square metres, on Ratchadaphisek Road near the Thailand Cultural Center, to be completed next year. Its flagship site is Empire Tower on Sathorn Road.

Mr Chaiyapong said demand for office space in the central business district, such as the Sathorn and Silom areas, had not dropped, but property owners were just unable to raise prices.

The company also operates the Tawanna lifestyle retail complex and will open four new complexes in Bangkok by the end of this year. He said the new ones would be different from the original Bang Kapi branch, which focused on IT. But all new branches would focus on the medium-to upper market, with more high-fashion and trendy goods.

Tawanna Square, located on 32 rai in Lat Phrao near the first Tawanna, opened recently. The other three sites, in Bang Bo, Ngam Wong Wan and Chaeng Watthana, are under construction.

The four projects will cost about 800 million baht in total, excluding land. The company forecasts total revenue from the projects to reach nearly 300 million baht per year.

It also plans retail complexes under the Tawanna brand in upcountry locations such as Chiang Mai, and a 100-rai complex near the Burmese border in Mae Sai district.

Mr Chaiyapong said the firm was focusing on the medium- to upper-end retail market as there was limited competition.

''There's only a single rival, Chatuchak weekend market, and it is just one site, while we have Tawanna in many locations, like a shopper's neighbour,'' he said.

Bangkok post

hello everyone,

house ownership, business ownership....

thought this might be interesting, you may have already seen it - not sure.... ( i only received it today ) anyway any comments welcome.....

amarka

As of 22 Jan 07

The Foreign Business Act Amendment: a Brief Explanation Introduction The Ministry of Commerce (MOC) submitted a draft bill to amend the Foreign Business Act 1999 (FBA) to the cabinet on 9 January 2007. It was approved in principle by the cabinet and are forwarded to the Council of State for legal clearance. After it is approved by the Council of State, the draft (with changes, if necessary) will be resubmitted to the cabinet again before being sent to the National Legislative Assembly for consideration. Once approved by the NLA and published in the Government Gazette, the amendment will become effective. IMPORTANT NOTE: This fact sheet explains features that appear in the draft bill that was submitted by the Ministry of Commerce to the cabinet and approved on 9 January 2007 only. Subsequent changes of the draft bill by the Council of State and the NLA, if any, will be addressed later. Explanation outline 1. Reasons for amendments 2. Current law 3. Detail of amendments 4. Scope of application 1. Why the amendment? 1.1 MOC has been receiving complaints and requests to investigate cases on violation of the Foreign Business Act (FBA) on 2 issues: o Abusing voting rights 1 o Using “nominee” – a person holding shares on behalf of someone else – to enable foreigners to do businesses which are restricted under the FBA without permission. A nominee is not a genuine investor but is a person that simply allows foreigners to use its name to hold shares in a company and who will act in accordance with the foreigners’ instruction. 1.2 At the moment, there are 12 pending cases. 1.3 Because of these complaints, the MOC believed an amendment of the FBA is necessary to achieve the following objectives:-

1 A company can specify in bylaw or its voting agreement conditions on voting rights of preferred shares and ordinary shares. In many cases, such differential voting rights enable foreign shareholders that have preferred shares of less than 50% to have voting power more than 50%. As such, that company appears to have foreigners holding its share less than 50% (ie., remains a Thai company in accordance with definition of Foreigners in the FBA) but in fact, foreign shareholders have control over the company through the higher voting power than Thai shareholders. Although such differential shareholding arrangements are not against commercial laws in Thailand, it should not be used as a means to let foreigners to engage in businesses that are restricted under the FBA without permission (ie., should not be used to circumvent the FBA). The proposed amendment will address this issue by requiring that if a company has its foreign shareholders holding shares less than 50% but have combined voting rights more than 50%, it will now be considered a foreign company and thus must get permission from the Ministry of Commerce.

As of 22 Jan 07 2

o To promote good governance – The amendment will forbid the abuse of preferential voting rights for and by foreign shareholders in prohibited businesses and thereby closing an important legal loophole in the FBA o To strengthen compliance – It will impose heavier fine on nominee shareholding in restricted business which is against the law (Section 36) o To provide flexibility – It will allow grace period and “grandfathering” clause for compliance to avoid business disruption o To clarify what constitutes a foreign business o To strengthen enforcement and oversight capacity o To increase transparency and good governance in foreign business regime; 1.4 Three key amendments: o Definition of “foreigners” o Punishments o List of businesses under the FBA 2. The current law 2.1 “Foreigners” are defined as 1) A natural person not of Thai nationality 2) A juridical person not registered in Thailand 3) A juridical person registered in Thailand which has 1) or 2) having 50% shares or more 4) A juridical person registered in Thailand which has 1) or 2) or 3) having 50% shares or more 5) A limited partnership or a registered ordinary partnership with foreign managing partners or managers 2.2 “Nominee and punishments”: shareholding through nominee to enable foreigners to engage in restricted businesses is against the FBA (Section 36) Punishments ■ Imprisonment : 3 years ■ Fine : 100,000 – 1 million baht 2.3 “List of restricted businesses” includes List 1 – foreigners not permitted to have majority ownership for special reasons List 2 – businesses related to national safety, security, culture, natural resources and environment. Foreigners can have majority ownership (maximum of 75%) if granted permission from the Minister of Commerce with cabinet approval. List 3 – businesses in which Thais are not ready to compete. Foreigners can have 100% ownership if granted licenses by the Department of Business Development.

As of 22 Jan 07 3

3. Details of the proposed amendments Current law Proposed amendments Definition of “Foreigners” juridical persons with ≥50% foreign equity shareholding are considered “Foreigner” voting right will be included as another determining criterion: 'Juridical person with foreigners holding majority voting right ( ≥50%) will now be regarded as a foreign business' Punishments Imprisonment: 3 years Fine: 100,000 – 1 million baht Imprisonment: remain unchanged Fine: increases 5 times (to 500,000 – 5 million baht) Lists of restricted businesses List 1 – foreigners not permitted to have majority ownership for special reasons e.g. Newspaper business, radio broadcasting, television station business, rice farming, animal farming, etc. List 2 – businesses related to national safety, security, culture, natural resources and environment e.g. Production/selling/repairing and maintenance of firearms, ammunition, gun powder, explosives, domestic land, waterway or air transportation, trading of antiques or art objects being Thai arts and handicraft, production of carved wood, manufacturing sugar from sugarcane, etc. List 3 – businesses which Thais are not ready to compete e.g. Rice milling and flour production, fishery, forestry from forestation, accounting service, legal service, other services etc. List 1 and 2 remain unchanged List 3 – Businesses that are under jurisdiction of other authorities will be taken out: o Tour operating business o Futures trading and related businesses o Securities, derivatives and related businesses o Finance, banking and credit foncier o Retailing/wholesale trade: all foreign retailing / wholesaling companies will have to get permission Adjustment period Existing businesses with foreigners’ voting right ≥ 50%: ● List 3 – must report to MOC within 1 year to get a certificate to continue operating the business (“grandfathered”); ● Lists 1 and 2 – must report to MOC within 1 year; will be given 2 years to reduce foreigners’ voting right to below 50% after which they could continue their business operation. Otherwise,

As of 22 Jan 07 4

Current law Proposed amendments

List 2 businesses that want to continue operation as foreign companies (i.e., with foreign voting rights ≥ 50%) can apply for licenses after such 2 years. List 1 businesses cannot apply to have foreign voting rights ≥ 50% and will have to cease their business operation after such 2 years. Existing businesses where foreigners, through nominees, hold ≥ 50% of total shares: ● Lists 1, 2 and 3 – Must report to MOC within 90 days Will have 1 year to comply with the law No grandfathering 4. Scope of Application The amendments will not affect: ● existing foreign companies in manufacturing industries and export business ● businesses not listed under or exempted from the Act ● BOI-promoted businesses Ministry of Commerce 22 January 2007

As of 22 Jan 07

The Foreign Business Act Amendment: Q&A The Ministry of Commerce submitted a draft bill to amend the Foreign Business Act 1999 (FBA) to the cabinet on 9 January 2007. It was approved in principle by the cabinet and are forwarded to the Council of State for legal clearance. After it is approved by the Council of State, the draft (with changes, if necessary) will be resubmitted to the cabinet again before being sent to the National Legislative Assembly for consideration. Once approved by the NLA and published in the Government Gazette, the amendment will become effective. IMPORTANT NOTE: This fact sheet explains features that appear in the draft bill that was submitted by the Ministry of Commerce to the cabinet and approved on 9 January 2007 only. Subsequent changes of the draft bill by the Council of State and the NLA will be addressed later. What is the Foreign Business Act? The Foreign Business Act (FBA) is the main law that regulates scope of foreign business activities in Thailand. It does that through a simple 3-step procedure: 1. Defining who “foreigners” are 2. Listing categories of businesses that foreigners cannot do without permission 3. Setting out procedures for foreigners to obtain such permission In addition to the procedure, the FBA also contains provisions: • Establishing authorities that are empowered to grant permission • Setting level of punishment for violation of the law Why is it necessary to enact the FBA? Although enacted in 1999, the FBA is not a new law. Its predecessor was called “Alien Business Law” (ABL) or better known in Thailand as “Por Wor 281”. The ABL was promulgated in 1972 in order to limit foreign participation in some business activities either because they were sensitive sectors for Thailand (on security, natural resource, culture, etc. ground) or because the Thai people were not competitive in those sectors. The ABL was revised twice in 1978 and 1992 to make it gradually more liberal. But in 1999 a major revision was called for and the parliament passed the current law which is now called the Foreign Business Act 1999. The rationales behind the enactment of the FBA were • to make foreign business regime more liberalised in line with Thailand’s need for investment and capital inflows; • to reclassify businesses that should be reserved for Thais so as to make the lists better suited for Thailand’s competitiveness; • to implement international agreements to which Thailand is party.

As of 22 Jan 07 2

Scope of the FBA : Are all foreign businesses in Thailand subject to this law? No. Only businesses that appear in Lists 1, 2 and 3 are subject to the FBA. Most manufacturing activities are not covered by the FBA. Automobile production activity, for example, is not subject to the FBA which means foreigners can have 100% ownership once they register the company and obtain tax payment ID. In addition, businesses that receive certificate from the Board of Investment’s promotion scheme will be exempted from the FBA. Who are considered “foreigners” according to the FBA? The current FBA defines foreigners as: 1. A natural person not of Thai nationality 2. A juridical person not registered in Thailand 3. A juridical person registered in Thailand which has 1. or 2. having 50% shares or more 4. A juridical person registered in Thailand which has 1. or 2. or 3. having 50% shares or more 5. A limited partnership or a registered ordinary partnership with foreign managing partner or manager Following this definition, as a general rule, foreigners or foreign companies can own shares in any company doing any business in Thailand up to 49.99%. Of course, they can own more than that if they engage in businesses not listed in the FBA. But foreigners may be allowed to own shares of less than 49.99% in some sectors that are governed by specific laws. Some of these laws set limit on foreign ownership of shares to be lower than 49.99%, such as banking and insurance laws. Therefore, foreigners must check what kind of businesses they want to do and what law will they be subject to. Are foreigners not allowed to do businesses listed under the FBA at all? No. Foreigners can engage in most of the businesses listed under the FBA. Only the 9 businesses in List 1 are completely prohibited to foreigners. The FBA contains 3 Lists. Foreigners are permitted to engage in businesses provided for under these Lists to a different extent. While they are not allowed to apply for license to engage in businesses under List 1, they can apply for license to engage in businesses and have majority ownership in List 2 or List 3 businesses. Although they cannot have majority ownership in List 1 businesses, they can own up to 49.99% of shares (in accordance with the definition of “foreigners” explained above).

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Table 1: Lists annexed to the FBA How many businesses in the List?How much shares can foreigners own? Who can approve for license to permit foreign majority shareholding? List 1: Businesses that are reserved for special reasons 9 49.99% Foreigners cannot have majority ownership. List 2: Businesses that are reserved due to national safety, security, culture, natural resources and environmental grounds 16 60% or 75% maximum Minister of Commerce with cabinet approval List 3: Businesses in which Thais are not ready to compete 21 100% Director-General of the Department of Business Development with approval from the Foreign Business Committee Why does the FBA have to be amended? • Address legal loopholes Like many laws, the FBA is not without loopholes. There have been 2 major ways to circumvent the FBA – using voting rights and having nominees. Through these arrangements, foreigners can engage in businesses which are regulated in the FBA without applying for a license. - Voting rights – In this case, foreigners hold preferred shares that give them voting rights over Thais so even if they own only 49.99% share, they may have effective control of the company. Generally, holding preferred shares is allowed under commercial laws in Thailand. But it should not be used in such a way that would enable foreigners to engage in businesses which are restricted under the FBA. In such case, holding preferred shares has become a means for foreigners to circumvent the FBA; - Shareholding by nominees – In this case, foreigners arrange to engage Thais to act as their “nominee” shareholders who would act in accordance with the foreign shareholders’ instructions. Nominee shareholder is not a genuine investor and nominee shareholding in restricted businesses is already an offense under the FBA (Section 36) • Revise the Lists In addition to addressing these loopholes, there is a need to revise the attached Lists of businesses to make them more in line with the current level of Thailand’s economic development and legal setting.

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• Increase transparency and good governance By closing loophole and imposing heavier punishment terms, the government believes that it will promote transparency in the system and strengthen good governance in doing business in Thailand. Who was involved in the proposed amendments? Were there any representatives from the private sector – both Thai and Foreign? On 26 October 2006, the Minister of Commerce appointed a 10-member Committee tasked with studying and proposing any amendments to the FBA that it considered necessary and appropriate for the present economic environment in Thailand. The Committee was chaired by Mr. Pramon Suthiwongse of the Thai Chamber of Commerce and comprised of representatives from the Thai private sector key associations (Thai Chamber of Commerce, Federation of Thai Industries, Thai Bankers’ Association), a representative of the Foreign Chambers, the Board of Investment, several academics with the Department of Business Development as its secretariat. The Committee held 8 intensive meetings and completed its deliberation within the 60 days period given to it. Mr. Pramon made recommendations on behalf of the Committee to the Ministry on 26 December 2006 which then formed the basis upon which the Ministry prepared draft language of the amendments. On 28 December 2006, the first draft was tabled for consideration at the Economic Ministers’ Meeting. Several comments were made which the Ministry of Commerce then incorporated into the second draft which was submitted to the full cabinet meeting on 9 January 2007 and received approval, in principle. The draft is now under consideration by the Council of State. What are the amendments? The amendments focused on 3 key elements: definition of “foreigner”; modification of punishment; and revision of the Lists of businesses covered by the FBA. Table 2: Summary of the amendments Current law Amendment 1. Definition of foreigners Define 5 types of foreigner (details above) Add “voting right” as criterion on determining whether a juridical person registered in Thailand is a foreign company or not So now if a juridical person has foreigners having voting rights of 50% or more, it will be considered

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as a foreign company, even if it has less than 50% foreign equity participation. 2. Punishment Imprisonment: 3 years Fine: 100,000 – 1 million baht for violation (10,000 – 50,000 baht daily for non-compliance with court ruling) Imprisonment: no change Fine: 500,000 – 5 million baht (50,000 – 250,000 baht daily for non-compliance) 3. Lists 3 Lists Lists 1 and 2: no change List 3: (1) exclude the following: tour operating business; futures trading and related businesses; securities, derivatives and related businesses; banking, finance, credit foncier and related businesses (2) remove minimum capital level for retailing and wholesale trade that needs permission – meaning all businesses of retailing and wholesale trade will have to get permission from now on What will happen to a company that was previously Thai (foreigners holding 49.99% shares) but will become a foreign company due to the fact that such foreigners have 50% or more voting rights? Will it be considered as violating the new law or will it be given time to comply? The government understands that such company was not in violation of the current FBA so it will be given time to comply with the new law. All such company will be required to report to the Department of Business Development in order to obtain a Certificate to continue operation of the business. However, the length of operation will differ between businesses in Lists 1, 2 and 3. Table 3 : Adjustment period for companies that have become foreigners due to the “voting rights” criterion Business Period of time to notify Length of operation Lists 1 & 2 1 year 2 years; after that, such company will have to become a “Thai” company i.e., must have less than 50% of foreign shareholdings and voting rights List 3 1 year Until the company is dissolved

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What will happen to a company that have nominee shareholding on behalf of foreigners at 50% or more? Will it be given time to comply? A company that has nominee shareholding is already in violation of the current FBA. However, to avoid major disruption in the economy, the government will allow time for them to comply with the law. But companies which are under legal proceedings at the stage of investigation or trial pursuant to the provisions of the current FBA, will have their cases continued. Table 4: Adjustment period for nominee Business Period of Time to notify Length of time to comply Lists 1, 2, and 3 90 days 1 year to comply. If circumvention of the law was due to both voting rights and nominee, why are the changes on definition of ‘foreigner’ only relate to voting rights? Why there was no change on nominee? There is no need to change the definition to address nominee issue because it is already deemed illegal under the current FBA. As such, it was not necessary to elaborate further on what might constitute a nominee. With regards to nominees, the proposed amendments are the increase in punishment through fine, the 90-day period allowed for notification and the 1-year adjustment period. What the government will do is to step up its enforcement efforts to investigate any company that might be using nominee shareholding and did not report to the Ministry of Commerce. One year after the amendment comes into force, such non-reporting company will be punished in accordance with the provisions of the amendment Act. Is the amendment in violation of Thailand’s international obligations? The proposed amendments do not violate any of Thailand’s international obligations, including those under the WTO. This is self-evident with regards to the amendment of the punishment terms and the attached Lists. The amendment to introduce voting rights as criterion for determining the nationality of a company is consistent with Thailand’s obligations under the WTO Agreement and other treaties to which Thailand is party. As far as the WTO is concerned, the definition of ‘foreign service supplier’ is part of domestic regulation, an area in which Members have flexibility. Moreover, the definition as amended is more in keeping with the definition of ‘juridical person’ under Article XXVIII of the GATS. As it has always been the case, Thailand will continue to observe its international obligations, including those under the WTO Agreement and FTAs to which Thailand is party. Companies already established in Thailand that are deemed

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under the new definition to be a ‘foreigner’1 will be allowed, in accordance with formalities to be published, to operate in Thailand in sectors in which Thailand has commitments for an indefinite period for sectors under List Three, and for two years for sectors under Lists One and Two. The Royal Thai Government welcomes any interested governments to make enquiries and representations at the Department of Trade Negotiations on matters relating to Thailand’s international commitments. What plan does the government have to liberalise services and investment under the FBA in the future? The Government plans to progressively liberalise services and investment currently restricted under the FBA through an annual review of the Lists. Such annual review is mandated by Section 26 of the current FBA. The Ministry of Commerce invites any associations, academic institutes or companies to submit propositions with supporting data to withdraw any businesses from the Lists. Ministry of Commerce 22 January 2007 1 For example, a company established in Thailand in which 49% or less of capital shares is held by a national of a WTO Member, but in which such national has control of the voting rights, is deemed to be a ‘Thai’ company under the current definition of the FBA. Under the new definition, this company will be deemed to be a ‘foreigner’, i.e. a company of the WTO Member concerned.

MARKETING DIVISION

THE BOARD OF INVESTMENT

MINISTRY OF INDUSTRY

THAILAND

555 Vipavadee Rangsit Road, Jatuchuck 10900 Tel. 0-2537- 8111, 0-2537- 8155 Fax : 0-2537-8177

Pressemitteilung

(Inoffizielle Übersetzung)

Nr. 6/2550 (Or. 3), 16. Januar 2007

Die Förderungsmaßnahmen sind nicht

vom neulich geänderten Alien Business Act betroffen.

Das Thailand Board of Investment (BOI) betont, dass geförderte Projekte nicht von Änderungen im Alien

Business Act betroffen sind.

Satit Chanjavanakul, Generalsekretär des BOI, erklärte, dass die am 09.01.2007 vom Kabinett

verabschiedeten Änderungen im Alien Business Act vom Jahr 1999, die die Anteilsstruktur für

ausländische Unternehmen neu regeln, die Förderungsmaßnahmen des Thailand Board of Investment

nicht beeinträchtigen.

Gemäß des Investment Promotion Act ist es bei förderungswürdigen Projekten ausländischen Investoren

gestattet, einen bis zu 100-prozentigen Mehrheitsanteil zu besitzen. Für Projekte, die bereits gefördert

sind und für zukünftige Projekte, die Investitionsförderung begehren, haben die Änderungen im Alien

Business Act keine Auswirkungen. Ausgenommen sind bisher schon unternehmerische Aktivitäten auf

der Liste 1, bei denen ein thailändischer Anteil von mindestens 51% vorgeschrieben wird, und

unternehmerische Aktivitäten in Bereichen, die gesetzlichem Sonderschutz unterliegen. Zu nennen sind

z.B. Telekommunikation sowie Transport auf Wasser-, Land- und Luftweg.

Das Thailand Board of Investment fördert Aktivitäten in sieben verschiedenen Aktivitätsgruppen, die von

der Produktionsindustrie bis hin zur Dienstleistungsindustrie mehr als 273 Geschäftszweige umfassen.

Die Förderung ist nicht nur thailändischen Investoren vorbehalten, sondern auch für ausländische

Unternehmen offen.

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