New Fba In Violation Of Wto?

[Japhrodisiac]

Interesting read...

http://www.nationmultimedia.com/2007/02/10...es_30026486.php

[Nontaburi]

It is no coincidence that many countries are officially making submissions simultaneously. To me it shows other governments are serious about protecting thier citizens business interests in Thailand.

I understand that the addition of voting rights restriction is the violation of existing WTO commitments. However having said that, there is a mechanism process under WTO to "renegotiate" commitments, however there may be some requirement to compensate those affected by new restriction. It does take a while to complete this process.

No country is locked into WTO forever, however I think each must decide if they feel being a WTO member is in line with their future international trade policies/plans. It may also be wise to consider the perception of investors related the openess of their country. Anyway, it's up to Thailand just like any other country. Either they want inward FDI or they don't.

[rogerinthai]

It will be interesting to see what effect this will have. Will it make them come to their senses, or do the opposite - fortify their views of "It's up to us, don't intervene, TiT, don't like it, <deleted> off".

[samran]

Or, they could argue that the intent of the rules were always clear (ie that limited ownership was always the intention), and that the current changes were a way to ensure that the intent of the law wasn't being circumvented in other ways, eg through nominees.

Then, the Thai government, could play a trick so often used by the US, EU, Japan and others, that is to go into arbitration on this, a process that could drag out for years.

It will be interesting to see though what the MOC are really thinking. No doubt, they are simply creating a bargaining chip for themselves so that Thailand has a slightly stronger hand to trade away in upcoming FTA negotiations.

Hey, but I could just be plain wrong, and everyone in Thailand is stupid. 50/50 I reckon.

[Nontaburi]

It's important to separate the issue of nominees from voting rights. "Nominee" shareholding has always been "illegal" under the FBA, just as it is in most other countries. Therefore the argument of "leave them alone" doesn't wash. On the other hand the use of preferential shares under the current FBA and in most other countries is very common and not illegal. Under the proposed amendments what was legal (voting rights), will now become illegal. It's not really relative whether or not the use of voting rights (preferential shares) was or will become a method of circumvention. A significant difference this time is that a companies articles of association should show which shareholder has how many and what type of vote. Who actually owns the shares (nominee or not) is not shown. Thus very difficult for the Commerce Committee to determine a nominee structure. This has been their excuse/argument for allowing nominees throughout the past.

It's also quite certain that there are differing opinions in the Thai Government about the necessity to amend the FBA in this manor. My guess is there are some "power brokers" looking to protect certain interests and perhaps gain some advantages over companies wounded by the FBA amendments. As such it's not likely that the MOC itself (a government ministry) is pushing the FBA changes, but rather certain interested individuals. There could be a more developed mindset that feels the threat of FBA amendments will give a bargaining advantage, but do you think they've thought this far ahead? Maybe after reading your post, they my though. ;-)

Anyway, let's see if there's any wriggling caused by the Embassy submissions.

[Gaudente]

Thailand is the centre of universe. Why should the enlightened Thai government care about this <deleted>....oops I meant WTO thing ?

[terryp]

Thailand is the Hub of the Universe…sorry could not resist

[Nontaburi]

Thailand is the centre of universe. Why should the enlightened Thai government care about this <deleted>....oops I meant WTO thing ?

Interesting and likely the belief (to one extent or another) is true for some. However the problem is just about every legitimate "farang" making a living in Thailand would hate to see this country suffer from the hasty, mono vision perspectives of certain self serving individuals. Call me an idealist but I hope the persistance of those opposed to the FBA amendments pay off in the long run. When Thailand wanted to accede to WTO, at least there was some enlightened Government people that felt WTO membership would benefit Thailand.

Let's hope some of those enlightened souls are still around.

[PeaceBlondie]

I understand that some FTA's, like the North American treaty, create trade dispute courts and a final super-court for making decisions on trade infractions, and the local country has no sovereignty over the matter. Has Thailand entered into free trade agreements that would be litigated totally outside the courts of Thailand, outside the influence of any Thai person? If so, and a trade court ruled against the Thai corporation or person, would they simply refuse to pay? Then what happens?

[samran]

PB,

I believe that the WTO has arbitration processes, and similarly, with FTA's there are agreed dispute mechanisms if it comes to that.

My point only is that many use these mechanisms as a tactic, witness the US's blocking of Canadian hardwood timber imports (or was it softwood) under NAFTA.

They slapped a tariff on Canadian wood, the canadians disputed, the US said, fine, we'll see you in court; many years elapse in the meantime 'W' gets loggers votes and the US industry is effectively protected, and come close to arbitration time (for a case the US was unlikely to win), the US turns around and says...opps, sorry you old Canauks, you were right all along (or was it a face saving 'agreement' where the new Canadian PM 'told' 'W' whats what and sorted it all for the conservatives at home....I forget.).

It is a tactic, not a subtle one, but entirely legal.

[Nontaburi]

I suppose Somkid will fix all those problems now! Not.

[topfield]

Or, they could argue that the intent of the rules were always clear (ie that limited ownership was always the intention), and that the current changes were a way to ensure that the intent of the law wasn't being circumvented in other ways, eg through nominees.

Then, the Thai government, could play a trick so often used by the US, EU, Japan and others, that is to go into arbitration on this, a process that could drag out for years.

It will be interesting to see though what the MOC are really thinking. No doubt, they are simply creating a bargaining chip for themselves so that Thailand has a slightly stronger hand to trade away in upcoming FTA negotiations.

Hey, but I could just be plain wrong, and everyone in Thailand is stupid. 50/50 I reckon.

[topfield]

Or, they could argue that the intent of the rules were always clear (ie that limited ownership was always the intention), and that the current changes were a way to ensure that the intent of the law wasn't being circumvented in other ways, eg through nominees.

Then, the Thai government, could play a trick so often used by the US, EU, Japan and others, that is to go into arbitration on this, a process that could drag out for years.

It will be interesting to see though what the MOC are really thinking. No doubt, they are simply creating a bargaining chip for themselves so that Thailand has a slightly stronger hand to trade away in upcoming FTA negotiations.

Hey, but I could just be plain wrong, and everyone in Thailand is stupid. 50/50 I reckon.

No , you are absolutely right Samran ! The rules were clear but the practise made a mockery of the Thai law and had to be changed .

As for the right of foreigners to own land, operate Co's and businesses that is a separate issue which will have to be dealt with at some stage.

[Nontaburi]

No , you are absolutely right Samran ! The rules were clear but the practise made a mockery of the Thai law and had to be changed .

As for the right of foreigners to own land, operate Co's and businesses that is a separate issue which will have to be dealt with at some stage.

I don't want to argue the point, just give a perspective. Please don't get me wrong.

Not sure if you mean that the issue is the law needs to be changed or that they need to find a way to get the land back from foreigners. I agree fully that the law was circumvented in many ways, but we need to look at who gained the benefit from the nominee structure. If we're talking about the land issue alone we must remember that there must always be a seller and a buyer.

Now if you look at how (the process) the FBA was circumvented in the first place, don't forget that the Commerce Committee gave permission to operate business based on the information they received during the application process. The Ministry understood this fact fully back on Aug. 15, 2006 when the DG issued an internal memo instructing officers what kind of documentation must be supplied for any application with a foreign ownership of 40 - 49%. That was their interim way of proving source of funds as an attempt to prove the legitamacy of shareholders. The committee has openly admitted that they didn't have the wherewithal to effectively control the issuance of permission under the FBA.

Finally if we were privy to the REAL motive(s) for amending the FBA, then the Gov't would have REALLY clarified the situation for the foreign diplomatic and private sector.

Anyway, it would be great if Somkid can do a good job of liaise with foreigners to gain their understanding and confidence. Now we just have to figure out the motive for his "assignment". ;-)

Oh one other thing, looking at the comments by Sondhi that he aims to regain ownership of Shin and other national assets, it might shed a little more light on the FBA motivation. Do you think?

[soundman]

I suppose Somkid will fix all those problems now! Not.

The appointment of Somkid is a very interesting political move. He is a guy who can decide on a direction and come up with all sorts of data & reasons why we should all drop everything we are doing & help out doing what he is promoting. He is also very capable of selling his plan to the masses - as the only viable option.

The only problem here - he is being called in to call black, white & totally reverse his view on former policies he was selling, & people are allready believing him. He draws on parallels, providing arguments that a "suffeciency economy" is very silmilar to the blatant "lets get all farmers & minor land owners in our debt" popularist policies of the former government.

It will be interesting reading in the coming weeks as to the outcome & public opinion among thai people.

How this will affect FBA I have no idea. One positive is that the guy is obviously well educated & can see that deniying foreigners company control or even suggesting to "take back" national assets once sold & paid for, (nationalisation without compensation), will lead thailand down the path of countries like Iran. Hopefully he will speak up enough & sell the "powers that be" on a more moderate stance to the FBA.

Wait to see.

Soundman.

[topfield]

No , you are absolutely right Samran ! The rules were clear but the practise made a mockery of the Thai law and had to be changed .

As for the right of foreigners to own land, operate Co's and businesses that is a separate issue which will have to be dealt with at some stage.

I don't want to argue the point, just give a perspective. Please don't get me wrong.

Not sure if you mean that the issue is the law needs to be changed or that they need to find a way to get the land back from foreigners. I agree fully that the law was circumvented in many ways, but we need to look at who gained the benefit from the nominee structure. If we're talking about the land issue alone we must remember that there must always be a seller and a buyer.

Now if you look at how (the process) the FBA was circumvented in the first place, don't forget that the Commerce Committee gave permission to operate business based on the information they received during the application process. The Ministry understood this fact fully back on Aug. 15, 2006 when the DG issued an internal memo instructing officers what kind of documentation must be supplied for any application with a foreign ownership of 40 - 49%. That was their interim way of proving source of funds as an attempt to prove the legitamacy of shareholders. The committee has openly admitted that they didn't have the wherewithal to effectively control the issuance of permission under the FBA.

Finally if we were privy to the REAL motive(s) for amending the FBA, then the Gov't would have REALLY clarified the situation for the foreign diplomatic and private sector.

Anyway, it would be great if Somkid can do a good job of liaise with foreigners to gain their understanding and confidence. Now we just have to figure out the motive for his "assignment". ;-)

Oh one other thing, looking at the comments by Sondhi that he aims to regain ownership of Shin and other national assets, it might shed a little more light on the FBA motivation. Do you think?

Just a few points if I may to add some facts to the discussion

1. The UK Finance Act 1943 :

What could the relevance to Thailand be ...over 60 years on ? Well that was the law where the UK recognised there were various classes of shareholdings and that a one percent equity stake with a single vote attached could be more value than a 99 percent equity stake with no vote. The Act was passed in relation to Death Duty evasion but the principle is clear. It was 60 years too late in Thailand.

Secondly the final comment by Nontaburi re taking back Thai assets.

You should be aware that the Thaicom orbital position was allocated to Thailand by international treaty and does and always will belong to the State and NOT to Shin which had no right or power to sell it off.

Secondly all the work and material such as the satellites themselves got tax free exemption as they were recognised by the State as quasi state assets. At the very least all the waived taxes should now be paid to the State in view of the sale.

[Nontaburi]

Just a few points if I may to add some facts to the discussion

1. The UK Finance Act 1943 :

What could the relevance to Thailand be ...over 60 years on ? Well that was the law where the UK recognised there were various classes of shareholdings and that a one percent equity stake with a single vote attached could be more value than a 99 percent equity stake with no vote. The Act was passed in relation to Death Duty evasion but the principle is clear. It was 60 years too late in Thailand.

Secondly the final comment by Nontaburi re taking back Thai assets.

You should be aware that the Thaicom orbital position was allocated to Thailand by international treaty and does and always will belong to the State and NOT to Shin which had no right or power to sell it off.

Secondly all the work and material such as the satellites themselves got tax free exemption as they were recognised by the State as quasi state assets. At the very least all the waived taxes should now be paid to the State in view of the sale.

Sorry, I'm a little too thick and don't really understand your point about the UK Finance Act. I do understand that in many countries, preferential shares, veto power, golden shares, or some other form of voting rights 1 to 1 deviation is quite common. Sure special businesses with specific national interest is usually protected one way or another everywhere in the world and the same should be applicable to Thailand. I suppose that's what Thailand considers all of the sectors in the three FBA lists to be, however the fact remains that most of the businesses described in List 3 are listed under the WTO committments of 2003 which only state 49% horizontal restriction, not voting rights. That was the reason I named the topic title as I did.

About Thai assets, I assume the "deal" was to purchase the concession rights to operate the signall being transponded by the satellite. In some ways it's somewhat irrelevant to this "arguement" who owns the slot. Suppose the Gov't could always consider shutting down those rights. Really I don't know, but do seem to recall that Shin Sat was only part of the deal. Not really my point though as there are many other assets (for example land as I mentioned earlier) not related to Shin that are potentially affected by the FBA amendments. Besides, if you look at the new section 9 of the FBA you'll see that parts of the Shin deal will be exempt anyway just as other some other deals that are being legally contested.

Fact or fiction, there is certainly considerable beleif that one of the motives for amending the FBA was that of some of the old powers (not the Shinawatra powers) feel it is time to take back control/ownership of certain assets, mostly national in nature. I don't think the interim and short term Gov't truly believes it can force restructure all the List 1 and 2 companies formed since NEC 281 of 1972 that may have used nominee and preferential share structures. Me thinks there are a few specific targets. The law is and will likely still be loosely interpreted for business applications depending on who applies and what type of business it is. It's unfortunate that now it will be a little easier to aim when they wish to load the gun at some evil foreign wrong doer.

Even though it may not look like it, I do agree with you. Section 36 of the FBA has always made it illegal to use nominee structures and I agree that the Gov't should go after those law breakers, especially those have harmed the nation via tax evasion or other means. But now, why make everyone rot because of a few of these few bad apples.