Restrictions On Foreigners' Voting Rights Relaxed

[jamie46]

The message is clear.

"Do buisness in Thailand and you will get screwed"

Could not be simpler.

[Dupont]

The message is clear.

"Do buisness in Thailand and you will get screwed"

Could not be simpler.

Think this says it all, clear and simple.

This certainly is the message I get, and many more cautious than me will certainly be getting it.

Last comment to Highdiver, we do not see you as a Nation of peasant rice farmers. We see you as a country of very friendly people on the whole who are kept poor, by a few powerful people. People who really never want the poor of this country to be anything other than that... poor. They also want the poor to remain as un-educated as possible.

When these things are ultimately resolved, it may not be by Thais. Theft is theft. If I buy a stolen car from my lawyer, he gets in the shit and I get my money from his assets or from his companies assets or insurance policies.

Ultimately this could be the state over here as it's clearly been the case down the years that politicians set up this system, owned many of the property and law firms, and profited from selling land. Can't have your cake and eat it! The WTO and international bodies will see to that!

Lot of poorer people realising this nowadays. Access to media, internet and having the odd falang turn up in the village. Once people stop saying "I am poor" and start asking "why am I poor?" then a lot of you "educated" Thais had better start legging it!

Start googling Zimbabwee Highdiver and Thaigoon if you think you can get away with a land grab and still have a viable country!

Edited April 14, 2007 by Dupont

[Arkady]

st people here agree that Thailand should continue protecting what are regarded as strategic sectors in the same way as other countries do. We don't want to own controlling stakes in nuclear power plants or weapons factories, or mobile phone companies, sattelites, TV stations or airlines for that matter. You haven't explained how it will benefit the Thai economy to prohibit foreign investment in the entire service sector as in Annex 3 of the FBA. Annex 3 was originally intended in the original 1972 revolutionary decree to protect service industries (all of them) in which Thais are not yet ready to compete. The 1999 FBA repeated the same wording. After 35 years it seems that the government thinks that Thais are still not able to compete in the service sector. How many more years do they need and what will be the key criteria to indicate that they are ready?

i am sorry you did not understand . the new law does not forbid investmant in the service sector. it describes whar activities are forbiden to forigners to work in. you can be a hotel owner and even a manager but you can not be a bar man. if you wish to make a business in thailand in any one of the services as a forign investor then you just follow the rules: you make an aplication through the BOI to invest according to the criteria and if approved then you get 100% ownership and tax benefits. if you wish to do it as a forigner because you are not approved by the BOI then you must apply for a permit through the ministry and if approved you can do it. if you set up a comapny that is using nominees and overdie the law then you are ileagal.

The idea is to have large investors cxreating many work places for Thais and developing new services that thai can learn and improve from. The intention is very clear.. if you wish to have a buisness in services in thailand that will mostly employ you as the manager and because you aree wealthier then your thai competition you will drive them out of buisness and crate unemplyment then its not contibuting.

your argument even if clearly put still avoids the central issue. if it is forbiden and you do it the you are ileagal.

Also how enthusiastic would you be to invest in a business in which you provide all the expertise, brand name and customer networks, if you were not allowed to have management control of your own business? I noted that a delegation of Thai businessman recently returned from Vietnam ecstatic about the fact that Thai investors could own 100% of their own businesses in the service sector there and urged other Thais to go and look at the opportunities. I doubt that they would invest overseas at all under the conditions of the amended FBA which is effectively a prohibition on foreign investment in services. Think back to Thaksin's farcical attempt to buy Liverpool FC. I don't remember any one in the UK objecting at all to the fact that he was a Thai or even that he was a foreigner. The complaints were mainly that he was unsuitable because he was having impressive quantities of his own people murdered at the time. Otherwise he would have been welcome to buy a non-strategic national asset.

you explained it better then me.how enthusiastic would you be to invest in europe knowing that you are bypassing the laws and that you could end up loosing your buisness..if you wish to invest in a business in any country you must first obide by the laws.

if that country desires the expertise, brand name and customer networks they will award you with a leagal permission and total mangement controll. As for Vietnam a comunist country.. please go the embessy of Vietnam in bangkok and speak to the comercial attache. I am sure you will be surprissed by the true facts of investing in Vietnam. So why are so many people rushing there you may ask??? because there is a huge potential even if ileagalor very high risk and the greedy investors seeking the high reward. thai and forign take the chances.

There is a major differnce in buying a business legitimatly and not. do you think you can a leagal job in america without a green card??

You forgot to answer the question of how many years it will take for Thais be ready to compete in all the service industries which are prohibited to foreigners under the FBA, having already had 35 years to get ready since the military dictatorship introduced the law in 1972. I don't see why Thai businesses should have anything to fear from a small foreign business that just employs its owner as the manager. How could it drive Thai businesses that have many years experience of their own market out of business? Foreigners who try to compete on the basis that they are wealthier will not stay wealthy for very long.

I think you confusing the FBA with the Alien Employment Act of 1979 when you talk about what jobs foreigners can do.

You didn't answer the question as whether you would be willing to invest in a business supplying most of the expertise but you can only have a minority stake and can't have voting control. That would be a legal business under the amendments to the FBA. I didn't ask if you would be willing to invest in an illegal business.

You are extremely naive to dismiss Vietnam as a competitor on the grounds that is a communist country. The world has moved on since the Cold War and the protectionist economic thinking of developing countries in the 60s and 70s that still prevails at the Ministry of Commerce. China, also a communist country, is a global economic powerhouse. Vietnam's economy is now knocking the cover off the ball and investors who persevere there are going to do well. Thailand's democracy and justice system are not exactly much to write home about anyway.

[BAF]

I for one can only hope that the stupidity esculates to such a scale, that reciprocal measures are passed against Thai citizens in Western countries.[/color][/size][/font][/i]

Yesterday Chineses were protesting and waving PRC red flags in Milan's Chinatown (after a riot they started over a parking ticket one of them got 2 days ago). I guess we should have told them "go back home if you don't like it here" instead of holding meetings with local and govt officials, their private and public(!) funded associations etc etc

A BIT OF RECIPROCITY WOULD DO WONDERS TO HEAL A LOT OF THE ISSUES WESTERNERS HAVE ABROAD AND FOREIGNERS HAVE IN THE WEST.

[Arkady]

Hold on, voting rights were never ever mentioned all these years. It's only today that they became a concern, they became illegal. Up until now you could have all Thai partners but still control your company thought voting rights. It wasn't illegal.

It has became clearer now - the definition of a nominee, I agree, but it was legal nevertheless, and now the law is being applied retrocactively. It's a dangerous ground, especially if you start jailing people who had lived here and had legal business for ten years.

You are quite right Plus. Defining companies as foreign based on their voting rights, rather than their share capital, represents a significant change in the law not a clarification as the Ministry of Commerce tries to maintain. It will also be applied retroactively, which is unusual in Thailand.

Thailand will be in breach of its WTO commitments by not consulting its WTO trading partners in advance of a change in the law affecting access to services. I hope WTO members will take tough action to demand compensation for companies affected by the change in the law. The concerted action by ambassadors of Thailand's major trading partners and investors indicates that this is quite possible. Retaliation against Thailand's exports would be fair in view of the action to restrict WTO members' trade in services in Thailand.

Thailand has been in breach of its WTO obligation to treat all WTO members equally since the Most Favored Nation (MFN) accord, whcih temporarily allowed the Treaty of Amity and Economic Relations with the US to continue, expired in January 2006. Thailand is in a dilemma here as it refuses to do the obvious thing and extend the same rights to all WTO members but is terrified of terminating the treaty in case the US applies sanctions. Interestingly the US is staunchly in support of the EU, Japan and Korea in opposing the amendments to the FBA, even though the FBA hardly applies to them due to the treaty. Encouragely, the US seems to want equal treatment for all and would no doubt be in support of sanctions imposed by other WTO members.

It is incomprehensible that the Ministry of Commerce continues to repeat the fiction that Thailand will abide by all its WTO commitments.

[Plus]

I wouldn't go as far threaten Thais with WTO sanctions, I'm simply waiting for clarification from Thai side - are things really as bad as they appear?

How will small owners of numerous bars and restaurants be affected? How will owners of houses and condos bought in companies' names be affected?

So far Thaigoon and Highdiver, as well as their opponents, assume that their interpretations (diametrically opposite) are obvious and unquestionable.

[ChiangMaiAmerican]

Hold on, voting rights were never ever mentioned all these years. It's only today that they became a concern, they became illegal. Up until now you could have all Thai partners but still control your company thought voting rights. It wasn't illegal.

It has became clearer now - the definition of a nominee, I agree, but it was legal nevertheless, and now the law is being applied retrocactively. It's a dangerous ground, especially if you start jailing people who had lived here and had legal business for ten years.

You are quite right Plus. Defining companies as foreign based on their voting rights, rather than their share capital, represents a significant change in the law not a clarification as the Ministry of Commerce tries to maintain. It will also be applied retroactively, which is unusual in Thailand.

Thailand will be in breach of its WTO commitments by not consulting its WTO trading partners in advance of a change in the law affecting access to services. I hope WTO members will take tough action to demand compensation for companies affected by the change in the law. The concerted action by ambassadors of Thailand's major trading partners and investors indicates that this is quite possible. Retaliation against Thailand's exports would be fair in view of the action to restrict WTO members' trade in services in Thailand.

Thailand has been in breach of its WTO obligation to treat all WTO members equally since the Most Favored Nation (MFN) accord, whcih temporarily allowed the Treaty of Amity and Economic Relations with the US to continue, expired in January 2006. Thailand is in a dilemma here as it refuses to do the obvious thing and extend the same rights to all WTO members but is terrified of terminating the treaty in case the US applies sanctions. Interestingly the US is staunchly in support of the EU, Japan and Korea in opposing the amendments to the FBA, even though the FBA hardly applies to them due to the treaty. Encouragely, the US seems to want equal treatment for all and would no doubt be in support of sanctions imposed by other WTO members.

It is incomprehensible that the Ministry of Commerce continues to repeat the fiction that Thailand will abide by all its WTO commitments.

Given the poresent mood in the US Congress toward nationas that abuse trade agreements it is highly likely the US would support sanctions against Thailand if things go that far. The US Embassy is well aware that Thailand fails to fully honor her committments under the Treaty of Amity. For example, in 2004 as I recall the Ministry of Commerce decided that Treaty of Amity businesses must have fully paid up capital before they could employ the American owner. The US protested and the MOL wrote new regulations to exempt those businesses. A short time later the Ministry of Labor changed its regulations to reinstitute the regulation. There are multiple examples of Thailand's failure to honor her committments I cited in earlier posts. The US Congress is under new management. Part of the reason they were elected is because Bush had consistently failed to protect all but a few Americans businesses from trade agreement violations. Bush's recent decision to charge China with WTO violations is in part because he is about to lose his fast track authority and is now faced with a Congress skeptical of his intentions on enforcing trade agreements. I fully anticipate a strong US reaction should the FBA amendments as written become law particularly if Thailand goes after American retirees who on the advice of counsel set up a company in order to buy a retirement home. The crap highdiver writes about foreigners coming to Thailand fully knowing Thai law and conciously deciding to violate the law is just that crap. Foreigners don't have a clue about Thai law. Thats why they hire attorneys to guide them in a manner that is in compliance with the law. Of course the attorneys here are in no danger under the new scheme since the focus is to expropriate assets without compensating the foreign owner. The attorneys who gave the advice are Thai and as previously pointed out often members of well known political families. Nothing whatever will happen to them.

[ChiangMaiAmerican]

I wouldn't go as far threaten Thais with WTO sanctions, I'm simply waiting for clarification from Thai side - are things really as bad as they appear?

How will small owners of numerous bars and restaurants be affected? How will owners of houses and condos bought in companies' names be affected?

So far Thaigoon and Highdiver, as well as their opponents, assume that their interpretations (diametrically opposite) are obvious and unquestionable.

From the Nation:

Here's the table to summarise the key points of the amended Foreign Business Law. Tell us what you think.

http://nationmultimedia.com/2007/04/12/hea...es_30031689.php

"

Answering a key question from a representative of the JFTCC, Krirk-krai said most foreign investors did understand the government's responsibility and that the government did not wish to create any barriers for them, except trying to move towards transparency and fairness for all involved.

For instance, the government only wants to prevent some foreign investors from circumventing the law by using nominees to invest in restricted businesses.

All businesses are allowed to operate in the Kingdom, except for those who want to have more than 49.99-per-cent equity in businesses listed in Annexes II and III.

http://www.nationmultimedia.com/2007/01/25/national/national_30025042.php

Preventing foreigners from owning a majority of shares businesses in Annex III (basicaly any service business) a focal point of the amendments. No amnesty, greatly increased penalties, only a cosmetic change in list 3, no exemption from penalites for any class of nominee company including home ownership through nominee companies. I believe you have your answer.

Edited April 14, 2007 by ChiangMaiAmerican

[Dakhar]

You know, it is time for bed.

But what I find a little strange here, is this bogus nominee wich hunt. I know of a lot of Thai companies that use the same bogus nominee route, just at the suposed falang "land grab" nominee is set up.

I do not care to give the details, but I would not doubt that a lot of folks have Thai friends/relatives etc, and they know what I am talking about.

So, if Thais are doing this... is this also illegal? If not, then why does the law seem to be focused on falangs....

Oh yea, sorry I am sleepy. I just remembered, TIT.

BTY Highlandeer says those that complain do so because they can not invest in Thailand, and feel 'hurt or offended" etc. Oh please, I lived in the US for most of my life and I never bought up commercial realestate etc. I currently have no desire to at this moment. But I can tell you, if I even had an inkling of a desire to do so, I would not because of Thai rules.

So no, I do not complain because I have been prevented and so now I need to cry.

To be frank, us dumb falangs are offering a recipe for a successful economy. If it were to be implement, you would see less falangs here over time, because their mighty dollars would not be as valuable.

So by virtue of trying to help, falangs are actually kicking themselves out of Thailand.

So don't listen to this hick, I kinda like seing my dollars go far.

[wolfmanjack]

I wouldn't go as far threaten Thais with WTO sanctions, I'm simply waiting for clarification from Thai side - are things really as bad as they appear?

How will small owners of numerous bars and restaurants be affected? How will owners of houses and condos bought in companies' names be affected?

So far Thaigoon and Highdiver, as well as their opponents, assume that their interpretations (diametrically opposite) are obvious and unquestionable.

From the Nation:

Here's the table to summarise the key points of the amended Foreign Business Law. Tell us what you think.

http://nationmultimedia.com/2007/04/12/hea...es_30031689.php

"

Answering a key question from a representative of the JFTCC, Krirk-krai said most foreign investors did understand the government's responsibility and that the government did not wish to create any barriers for them, except trying to move towards transparency and fairness for all involved.

For instance, the government only wants to prevent some foreign investors from circumventing the law by using nominees to invest in restricted businesses.

All businesses are allowed to operate in the Kingdom, except for those who want to have more than 49.99-per-cent equity in businesses listed in Annexes II and III.

http://www.nationmultimedia.com/2007/01/25/national/national_30025042.php

Preventing foreigners from owning a majority of shares businesses in Annex III (basicaly any service business) a focal point of the amendments. No amnesty, greatly increased penalties, only a cosmetic change in list 3, no exemption from penalites for any class of nominee company including home ownership through nominee companies. I believe you have your answer.

Than you for posting this.

Thaigoon. If I am interpreting this correctly the grace period only applies to the voting structure. The nominee portion is punishable retroactively. This is where the "past practices" should be applied by the courts. Has anyone been prosecuted for using the nominee structure or for being a nominee prior to the Temesak investigation ? If so how many and how long ago? The "past practices" has been applied to both criminal (trespassing) and civil cases in the USA. Trespassing is illegal in most if not all countries. There have been cases in the USA where a land owner has allowed public access to their land or across their land. Then after doing so for many years the land owner tried to block access threatening people with being arrested for trespassing. The courts have ruled that the landowner has granted right away in the past therefore loses the right to prosecute for trespassing. The same rule should apply here. The Thai government has not been actively prosecuting people in the past so they should not prosecute anyone for using nominee structures or being a nominee under the old law. Make a new law and give those people a grace period to restructure the same as they are doing with the voting rights issue. If this allows Temesak to to avoid punishment then so be it. As many have pointed out the only reason the gov is not allowing the amnesty is so they can go after Temesak which will never be punished because of their high level connections.

[Arkady]

I wouldn't go as far threaten Thais with WTO sanctions, I'm simply waiting for clarification from Thai side - are things really as bad as they appear?

How will small owners of numerous bars and restaurants be affected? How will owners of houses and condos bought in companies' names be affected?

So far Thaigoon and Highdiver, as well as their opponents, assume that their interpretations (diametrically opposite) are obvious and unquestionable.

From the Nation:

Here's the table to summarise the key points of the amended Foreign Business Law. Tell us what you think.

http://nationmultimedia.com/2007/04/12/hea...es_30031689.php

"

Answering a key question from a representative of the JFTCC, Krirk-krai said most foreign investors did understand the government's responsibility and that the government did not wish to create any barriers for them, except trying to move towards transparency and fairness for all involved.

For instance, the government only wants to prevent some foreign investors from circumventing the law by using nominees to invest in restricted businesses.

All businesses are allowed to operate in the Kingdom, except for those who want to have more than 49.99-per-cent equity in businesses listed in Annexes II and III.

http://www.nationmultimedia.com/2007/01/25/national/national_30025042.php

Preventing foreigners from owning a majority of shares businesses in Annex III (basicaly any service business) a focal point of the amendments. No amnesty, greatly increased penalties, only a cosmetic change in list 3, no exemption from penalites for any class of nominee company including home ownership through nominee companies. I believe you have your answer.

Than you for posting this.

Thaigoon. If I am interpreting this correctly the grace period only applies to the voting structure. The nominee portion is punishable retroactively. This is where the "past practices" should be applied by the courts. Has anyone been prosecuted for using the nominee structure or for being a nominee prior to the Temesak investigation ? If so how many and how long ago? The "past practices" has been applied to both criminal (trespassing) and civil cases in the USA. Trespassing is illegal in most if not all countries. There have been cases in the USA where a land owner has allowed public access to their land or across their land. Then after doing so for many years the land owner tried to block access threatening people with being arrested for trespassing. The courts have ruled that the landowner has granted right away in the past therefore loses the right to prosecute for trespassing. The same rule should apply here. The Thai government has not been actively prosecuting people in the past so they should not prosecute anyone for using nominee structures or being a nominee under the old law. Make a new law and give those people a grace period to restructure the same as they are doing with the voting rights issue. If this allows Temesak to to avoid punishment then so be it. As many have pointed out the only reason the gov is not allowing the amnesty is so they can go after Temesak which will never be punished because of their high level connections.

The grace period applies to voting structures of companies in Annex 1 and 2. Companies in Annex 3 can theoretically continue with majority foreign control as long as they report themselves within one year and apply for a "licence" under conditions that remain unclear - probably a tedious and expensive application process followed by restrictions such as the inability to increase capital, as was the case for foreign companies and branches "grandfathered" under the 1972 Alien Business Law. A case involving nominees and preferential voting rights was investigated in 1991, a distribution arm of Brown Boveri Asea. You can find details by googling in The Nation's archive. It was sent to the Council of State which determined that it was a foreign company based on the voting structure. PM Anand Panyarachun immediately had the Alien Business Law amended to clarify that majority foreign voting rights did not constitute a foreign company. Since then no cases had been pursued until Thaksin's sale of Shin Corp. Nevertheless, the right of way concept is unlikely to be of much use here.

The amnesty for nominees in the first draft of the amendments was a double edged sword. It was intended to encourage nominees to come out and declare themselves and take full ownership the assets they owned as nominees. This would certainly have worked well in cases where lawyers and realtors have acted in tandem to persuade foreigners that it was perfectly legal for them buy land through a company. There are already many cases in resort areas where lawyers have put there friends in as nominees and then sold the property under the noses of their clients. I am not condoning the circumvention of the Land Code here but I would say that in rule of law jurisdictions lawyers are struck off and prosecuted for advising clients to commit illegal acts, as well as sued by their clients for negligence. But then we are talking about a rule of money, force and connections jurisdiction here.

[Old Man River]

My frame of reference when it comes to the impact of these new laws/interpretations is as it relates to the large MNC's, not as it relates to smaller business people owning restaurants, bars, houses etc. That does not mean I don't think people who invest in these categories are any less important to me or any others on TV, but investments by MNC's are the ones that have a large impact on the foreign direct investment (FDI) statistics that carry a lot of weight when viewed by other large global investors, advisors, governments etc.

In my discussions with senior decision makers of MNC's in Thailand (and I have had many such discussions) all, and I mean all, have said that if they are going to invest a material amount in another country, voting control is paramount. They understood that in many countries foreign partners were necessary, and they also understood that different countries had different ways of showing ownerships, but voting control was the one key thing that they would have to have.

Based on the above investment criteria, I believe that in the coming few years these FBA laws will be overturned by elected governments and more investment friendly laws will be adopted. Frankly, I think this is a given.

[Plus]

We've covered MNCs long time ago, I think there were only a few that will be affected as most of them are either under BOI or industry specific laws, like DTAC.

[Arkady]

Thankfully there are many well educated Thais like Ajarn Burin from the SET (see letter below) and the thinkers at the TDRI, including its former director-general, now Finance Minister Chalongphob Sussangkarn, who think of the benefit of Thailand as a whole, rather than just their own narrowly perceived self interest. Eventually they will be allowed to influence policy formulation sometime in the future under an elected government when the current dinosaurs have gone, although it will probably take some time for such reason to prevail and for the damage currently being done to be rectified.

The Nation, 16th April 2007

Re: "Thailand is a unique case and should continue to be", Letters, April 15. The writer says that we've heard from enough foreigners about why we should liberalise the Foreign Business Act (FBA), and says that all the government is doing is putting an end to widespread evasion of the existing FBA.

I, a Thai, have time and again asked in print, "Why have the FBA at all? Does it benefit Thailand as a whole?" The silence in response to my questions has been deafening. One respondent said that the FBA gave Thais in certain occupations time to become competitive, for example farming (which is on List 1). Fine: so, over the past 20-plus years that we've had the FBA, to what extent have our farmers become competitive in the world arena? If a lot, then surely we can loosen the FBA's conditions. But the answer's more likely to be that very little progress has been made. So, if we have the FBA for another 20-plus years, what assurance do we have that we'll use the time more effectively?

Economy 101 teaches that in a protected industry, those who gain are those engaged in that industry - while those who lose are the consumers (Malaysia and the Proton, for example). But here the average rice farmer hasn't obviously benefited, and 65 million rice-consuming Thais have lost. So, why have the FBA?

In seeking to prove that we don't need foreign funds, the writer poses a question that he should know is absurd: "Is money and consumption the root of all happiness?" Of course they aren't; it depends upon how the funds are used. Egat, PTT, Siam Cement, etc need vast funds if they are to produce what we need for a sustainable economy, even a sufficiency economy fully in line with HM the King's wise philosophy. Chasing foreigners away means that the firms must bid for already-scarce domestic funds, driving up the price.

We should think things through with more rationale and less emotion. For starters, ask the Thailand Development Research Institute, Chulalongkorn University, Thammasat University or the National Institute of Development Administration to study all sides of the question: why have the FBA?

Burin Kantabutra

Bangkok

[Arkady]

We've covered MNCs long time ago, I think there were only a few that will be affected as most of them are either under BOI or industry specific laws, like DTAC.

Not true. MNCs are in many sectors, not only in BOI promotable sectors or industries covered by specific laws. Even in these cases many need to operate auxilliary businesses that are excluded for BOI privileges or specific laws. In any case what will be the position of, say, a telecoms company 49% owned by foreigners who have 60% of the votes after the amendments to the FBA are passed? The Telecommunications Act restricts foreign ownership to 49% but doesn't mention voting rights. So will that be OK?

[Galong]

no i will not, but i will give arrogant forigenrs that think we are a third world country full of natives rice pickers with a sole duty to provide easier lifes for forigners .it abou time that someone reminds all our guests that they are guests and shhould start beahving like ones. and the first thing we expect from guest is for them obide by the law.

Well, this is how you TREAT GUESTS in your country? This door swings both ways you know. Is this how you'd like a HOST to treat you if you were a 'guest' in their country?

Thais can come to my country (US) and get help from my government. Thais can be 100% owners of companies (StarKist Tuna, Bumble Bee Tuna for two examples) in my home country. My government doesn't make it a level playing field, they make it an easy field for Thais to prosper.

There is certainly enough money in Thailand to NOT make it a third world country, but the uneven distribution of this wealth coupled with a total lack of reliable law enforcement and blatant corruption sure do make it look like it's leaning towards the third world status.

You have been colonized from the inside by the Chinese. They are your enemy, not us. They may speak Thai, but they know that they can't compete with an educated Westerner on many counts, so they stir racism to get their way.

I pay a hel_l of a lot of taxes and it really erks me when I can't get a proper tax receipt (when I pay a bill) from a Thai company so I can claim it on my taxes... you know, like the Thai laws say.

[jamie46]

That is true what the last poster said about Thailand being controled from the inside out by the chinese invaders without the Thais even known it.

All the good jobs in Thailand belong to Chinese (prime minister, bankers, laywers, police chiefs etc) and all the bad jobs belong to Thais like security guard, garbage truck collecter, rice farmer, peasant, bus driver, lowest ranking police etc.

It's very sad to see and amazing in a way that Thais hate their brown skin so much thanks to the chinese owned tv stations propaganda and that thais love white chinese skin so much.

Talk about having the wool pulled over their eyes.

Anyway it is very important for the chinese to keep the Thais as uneducated and distracted as possible. Hey blaming foreigners works for the chinese for any problems. In fact blaming anyone but the chinese invaders for the problems here works in the chinese folks favour.

I won't mention any of the real mean selfish behaviour of the chinese here.

This problem with foreign companies is a great buisness opputunity for the chinese to screw the foreigners out of their retirement homes and companies by driving them out and in 10 or 15 years selling back the aqquirements back to foreigners again for incredible profits. Watch back in 10 or 15 years and see.

[Arkady]

most investors are looking to make a high profit.. in many cases in services and manufacturing they do it through lowering labour costs. Western investors used Thailand and malasia as low paid labour hubs and when they got to expensive they shifted to Vietnam and cambodia. Those countries are now better then thialand as they offer cheaper labour.

The only reason the call centers are set up in india are because the labour costs in india are very cheap compared with the west.

So the argument of comparing thailand with those countries is not valid as they too will one day become expensive and then the investors will move to africa.

Well it seems that Western investors are not the only ones that are looking overseas for cheap cooly labour. In fact my Thai landlord has just fired all his Thai workers and moved his entire factory to China. I hope you guys remember to give majority stakes and voting rights to ever so trustworthy local partners when you invest in Africa and all those third world countries. And keep you hands off their land.

April 10, 2007

BOI boosts Thai Overseas Investment

Aims to Strengthen competitiveness of Thai Industries

The Board of Investment approved an overseas investment promotion policy which will encourage overseas investment as a national policy. It aims to strengthen the competitiveness of Thai industries in terms of backward linkage to domestic industries.

Mr. Satit Chanjavanakul, the Secretary of the Board of Investment, said the Board of Investment approved a new promotion policy on Thai overseas investment. The policy aims at strengthening the competitiveness of Thai industries, especially those overseas investments which are able to link backward to strengthen industries at home.

The promotion of Thai investors investing overseas will be beneficial for Thai industries sourcing raw materials in agriculture, mining, fisheries, energy and jewelry. It will also help Thai industries open new markets for automotive parts and components, animal feed and food processing. In addition, investment overseas will be an alternative for Thai investors to find better, lower-cost production bases for textiles, garments and ornamentations. It will also provide an opportunity to seek new production technologies.

The board has also set targeted countries for Thai overseas investment, including CLMV (Cambodia, Laos, Myanmar, and Vietnam), China, India, Indonesia and the Philippines. It will be expanded to include Pakistan, Bangladesh, the Middle East and Africa in the future.

[bkkandrew]

We've covered MNCs long time ago, I think there were only a few that will be affected as most of them are either under BOI or industry specific laws, like DTAC.

Not true. MNCs are in many sectors, not only in BOI promotable sectors or industries covered by specific laws. Even in these cases many need to operate auxilliary businesses that are excluded for BOI privileges or specific laws. In any case what will be the position of, say, a telecoms company 49% owned by foreigners who have 60% of the votes after the amendments to the FBA are passed? The Telecommunications Act restricts foreign ownership to 49% but doesn't mention voting rights. So will that be OK?

Quite so. A friend, who is the MD of a very large MNC in Thailand (US owned) has said that the latest version, if implimented, will result in a pull-out of Thailand.. Apparently this is true of a number of other US-owned MNC's, according to private discussions at the last US Chamber function

[LaoPo]

most investors are looking to make a high profit.. in many cases in services and manufacturing they do it through lowering labour costs. Western investors used Thailand and malasia as low paid labour hubs and when they got to expensive they shifted to Vietnam and cambodia. Those countries are now better then thialand as they offer cheaper labour.

The only reason the call centers are set up in india are because the labour costs in india are very cheap compared with the west.

So the argument of comparing thailand with those countries is not valid as they too will one day become expensive and then the investors will move to africa.

Well it seems that Western investors are not the only ones that are looking overseas for cheap cooly labour. In fact my Thai landlord has just fired all his Thai workers and moved his entire factory to China. I hope you guys remember to give majority stakes and voting rights to ever so trustworthy local partners when you invest in Africa and all those third world countries. And keep you hands off their land.

April 10, 2007

BOI boosts Thai Overseas Investment

Aims to Strengthen competitiveness of Thai Industries

The Board of Investment approved an overseas investment promotion policy which will encourage overseas investment as a national policy. It aims to strengthen the competitiveness of Thai industries in terms of backward linkage to domestic industries.

Mr. Satit Chanjavanakul, the Secretary of the Board of Investment, said the Board of Investment approved a new promotion policy on Thai overseas investment. The policy aims at strengthening the competitiveness of Thai industries, especially those overseas investments which are able to link backward to strengthen industries at home.

The promotion of Thai investors investing overseas will be beneficial for Thai industries sourcing raw materials in agriculture, mining, fisheries, energy and jewelry. It will also help Thai industries open new markets for automotive parts and components, animal feed and food processing. In addition, investment overseas will be an alternative for Thai investors to find better, lower-cost production bases for textiles, garments and ornamentations. It will also provide an opportunity to seek new production technologies.

The board has also set targeted countries for Thai overseas investment, including CLMV (Cambodia, Laos, Myanmar, and Vietnam), China, India, Indonesia and the Philippines. It will be expanded to include Pakistan, Bangladesh, the Middle East and Africa in the future.

2007 is a bit late for the BOI to encourage overseas investment as a NATIONAL POLICY...isn't it ?

These kind of articles make me laugh since such a 'business-idea' is as old as the road to Rome. I'm sure the mentioned overseas countries in the last sentence are desperately waiting for Thai investors.... I hope for Thailand that these countries don't have as strict investment rules for foreigners as Thailand have.

I'd love to see messages now from people who wish to protect the laws of the countries where the Thai are going to invest....

LaoPo

[Thaising]

The reversed gear engaged by Thai’s government had created more problems and enough of panic. As the latest indication shown foreign investment has started to shift to more friendly countries where business environments are much better with lesser imprudent policies. Should the Thai government came out more nonsense proposition, I can only say these Thai governments are giving away the investment cake and indirectly giving neighboring countries a free ride to boost their economic.

[jamie46]

I got offered a job in vietnam yesterday but I'm too old now for starting again.

It is a big deal for the bigger companies to pull out but if the twisted restrictions are screwing them over too much thats the logical choice.

[Dakhar]

I know of companies that distribute products to Thailand.... and they are practically abandoning the Thai market due to poor sales performance, poor growth predictions, unstable economy etc.

So folks, if you thought quality was hard to come by in Thailand, I think it is only going to get worse as the economy struggles. No one is interested in the high costs in overhead to market quality expensive goods that will not sell under these conditions.

Whew... Like I said, us falangs all along this thread are just offering a recipe for economic well being. If Thailand does not want to follow it... oh well, I'll just go swing on a hamock and think of how much money I just earned off of interest.... while I just swing in a hammock and simply breathe.

[peaces]

Swinging in a hammock. Not a care in the world.

The older i get i think it is easier to just not care about governments clowns and politics. Like the Thais just go numb from all the badness and let it slide on by. It can change for the better on it's own after we're dead and gone and the younger generation can deal with all the crap them stinkey, mean, selfish, self serving, crooked twisted faced, unhappy, starved for cash no matter how much they screw out of the country, poor politians throw up.

All the money they steal and their face and expression show just how incredibley poor they are inside. the poor poor things.

Foreign Companies, the longer they stay the more they'll get duped by the Thais of chinese desent here.

[Arkady]

Just read an interesting research paper from Mckinsey about FDI in emerging markets covering Asia and Latin America. The conclusion was that the biggest mistakes made by governmnents are trying to restrict foreign investment and trying to channel into their preferred sectors through incentives. In fact around 80% of FDI in those economies these days is producing goods and services for domestic sale, not exports as many of the governments would like. Nevertheless, the benefits to the host country of these domestic demand investments are considerable and the cost of keeping them out in terms of protecting inefficient domestic businesses is high. For example improving the retail distribution system as Lotus Tesco has done has reduced the outrageous margins previously earned by inefficient distributors with the result that the standard of living of ordinary people has improved. In Mexico a similar operation actually reduced the country's inflation rate. The study showed that the cost of tax incentives provided to foreign investors is surprisingly high and yet businesses rank tax incentives as their lowest priority in shopping for a location for FDI. If everything else is OK tax incentives might have an impact on the decision but won't outweigh other negative factors and many of the MNCs surveyed said that they would have made the investments even without the tax incentives. Thailand is not alone among emerging markets in trying to protect inefficient incumbents and micromanage investments through its BOI. But it does seem to be particularly backward in its understanding of this topic and, due to recent events Thais have been particularly emotional and irrational in defending protectionism and their expensive policy of trying to direct foreign investment whereever unworldly bureaucrats think it should go.

[highdiver]

Just read an interesting research paper from Mckinsey about FDI in emerging markets covering Asia and Latin America. The conclusion was that the biggest mistakes made by governmnents are trying to restrict foreign investment and trying to channel into their preferred sectors through incentives. In fact around 80% of FDI in those economies these days is producing goods and services for domestic sale, not exports as many of the governments would like. Nevertheless, the benefits to the host country of these domestic demand investments are considerable and the cost of keeping them out in terms of protecting inefficient domestic businesses is high. For example improving the retail distribution system as Lotus Tesco has done has reduced the outrageous margins previously earned by inefficient distributors with the result that the standard of living of ordinary people has improved. In Mexico a similar operation actually reduced the country's inflation rate. The study showed that the cost of tax incentives provided to foreign investors is surprisingly high and yet businesses rank tax incentives as their lowest priority in shopping for a location for FDI. If everything else is OK tax incentives might have an impact on the decision but won't outweigh other negative factors and many of the MNCs surveyed said that they would have made the investments even without the tax incentives. Thailand is not alone among emerging markets in trying to protect inefficient incumbents and micromanage investments through its BOI. But it does seem to be particularly backward in its understanding of this topic and, due to recent events Thais have been particularly emotional and irrational in defending protectionism and their expensive policy of trying to direct foreign investment whereever unworldly bureaucrats think it should go.

I found your article very intresting but would like to offer another view and adress some of the issues that were discussed by you and others.

i will not answer those memebers that call my views"crap" as i belive that if they have no respect for others they dont deserve my respect.

i would like to answer your and others questions and thoughts.

As for the leagal aspects

the status in the eyes of international law as some of the forum members have mentioned the international treaties.

In most of these treaties, the term 'investment' is defined loosely so that it covers as many of the investor's activities and assets as possible. Similarly, host-government actions that interfere with such foreign investment are also legally proscribed to the extent that such actions fall within an increasingly broad definition and interpretation of 'expropriation' or 'takings'.

Traditionally in international law the physical dispossession of the property of the foreign investor by the state constituted expropriation or direct taking. However, 'what constitutes an act of taking of foreign property (investment) in international law. now has come to be befuddled with difficulty as a result of the progressive expansion of the concept of taking. This has been compounded by the formulations in investment treaties, which refer to three types of taking: direct, indirect and anything "tantamount to a taking" or anything "equivalent to a taking".

While direct taking of the property of the foreign investor is clear, the identification of what constitutes indirect taking is not. Nonetheless, support for a robust concept of indirect taking is premised on the argument that the rights and interests of the foreign investor are diminished by state action without necessarily affecting the direct ownership of the foreign investment. Such a broad understanding of indirect taking would potentially cover all government actions including state legislations

As this is after all a debate to view different economical views. We must remeber that at the end of the day it is the right of the Thai govermant to determine its own way and those seeking residency or investment in Thailand should at least understand that they must play by the rules. even if they dont like them. overiding laws and making continuous attempts with the aid of greedy lawyers and locals who aided does not make it leagal or right.

As for capital controls and IMF

East Asian countries have endured the consequences of rapidly liberalizing their financial systems. In recent years, foreign funds and banks have been free to invest or lend to the countries, and just as free to withdraw their funds when the wind changed. In 1996, a total of US$96 billion of private capital entered the region but in the second half of 1997, $102 billion flew out, sparking the financial crisis that has led to recession.

The on-going financial crisis is now focusing attention on the instability and damage caused by global financial liberalization. In recent years, due to deregulation, many countries have lifted most of their previous controls on the inflow and outflow of funds.

Foreign institutions and individuals are allowed to bring in money either as loans to local institutions or as investment in the stock market. Local companies and banks are allowed to lend from abroad. In reverse, it is also much easier to send funds out of the country. Foreigners are allowed to remit money to abroad, and local people can open bank accounts overseas and send their money out of the country.

Until a few years ago, such capital flows had been restricted in most countries. There were laws forbidding or limiting the inflow of foreign money (either as loans or investments) as well as prohibition or restrictions on funds moving out.

At the least, the permission of the Central Bank would have to be obtained, and this would be granted only on certain conditions and up to a certain amount.

The lifting of these restrictions is what economists call "capital account liberalization." This refers to the capital account in the balance of payments, which involves the inflows and outflows of funds into a country that is not accounted for by trade and services (these two are recorded in the "current account").

Most countries used to allow for foreign exchange to be converted to local currency (and vice versa) for purposes of paying for (or receiving revenue from) trade and services, but not for non-trade related autonomous flows of short-term capital.

In such cases, it is said that a country allows for "current account convertibility" but not for "capital account convertibility."

Some countries still have this cautious policy as they fear the potentially destabilizing effect of short-term capital flows. For example, China and India do not have significant capital account convertibility. Because of this, their currencies are not subjected to much speculation and have been relatively sheltered from the East Asian financial crisis.

But under the advice of Western countries and international financial agencies such as the IMF, many developing countries have liberalized their capital account in the past few years.

The theory was that such liberalization would bring in foreign funds that can speed up a country's growth. From a global perspective, there would be also being "a more efficient allocation of financial resources", as funds move across borders to seek the highest returns.

In reality, the move towards financial liberalization has been prompted by the private financial institutions (such as investment and commercial banks, mutual funds, hedge funds).

They have campaigned for the removal of national barriers so that they can shift their huge funds from country to country to obtain the maximum profits from speculating or investing in currencies and shares and to earn higher returns for providing loans.

With the expansion of computer technology, financial markets are increasingly wired globally, and funds can shift with the blink of an eye and the touch of a computer button.

At present, the equivalent of two trillion American dollars (that is, US$2,000 billion) is shifted across borders EVERY DAY. Almost all of this (98 percent) is not related to trade or direct long- term investment, but comprises short-term capital funds.

A large part of it is moved for short periods to take advantage of differences between different countries in interest rates, or changes in currency exchange rates. Even a lot of the funds invested in stock markets are short-term in that the shares are bought and then sold for speculative gains (or to prevent losses).

With deregulation in developing countries and the advance of computer technology, the giant financial institutions of rich countries have moved aggressively into "emerging markets" in recent years, in search of higher capital gains and profits.

Due to the excessive hype about the "East Asian Miracle" (the title of a famous World Bank study), the funds and the banks poured investment capital and loans to the East Asian countries.

But even more rapid than the change in fashion, the feelings of investors about prospects can shift suddenly. The devaluation of the baht in 1997 triggered a massive run of capital out of Asia.

According to data from the Bank of International Settlements, a total of US$184 billion entered Asian developing countries as net private capital flows in 1994-1996. In 1996, US$94 billion came in and even as late as the first half of 1997, US$70 billion poured in.

With the financial crisis starting in June, a total of US$102 billion flew out in the second half of 1997. These figures show how volatile international capital flows can be. And the volatility is of far greater magnitude for developing countries.

This is because the investment funds place only a small fraction of their total resources in emerging markets. But for a developing country that has opened its doors, foreign investment could be a very significant portion of the value of the stock market and foreign loans could be a large part of financial resources in the economy.

Thus what to the international funds is a small shift in the composition of their portfolio is a massive movement of funds for a developing country.

Moreover, a stampede of foreign capital moving out of a country can also generate a loss of confidence by local people who see the prices of their shares and the level of their currency depreciating. This may thus cause more capital flight, this time by local people.

The result can be a devastating collapse of the financial economy (with corporate loan defaults and bankruptcies and a weakening of the banks), translated soon into a deep recession in the real economy of production.

There have been two types of intellectual responses to this scenario, which has been so frighteningly played out in the East Asian crisis.

The first response is that of the Western governments and the IMF (which is after all under their control)and many good foreigners on this forum They argue that there is nothing wrong with capital account liberalization, which should proceed around the world.

Instead, the blame is put on the weak corporate governance and the poor banking practices of developing countries. The solution then is to strengthen the corporate and banking systems and proceed with further liberalization.

The second response is that of increasing numbers of economists. They put the blame on the financial liberalization process itself which has allowed the fund managers to have free rein in the global market, wreaking havoc in country after country as their funds flow in and out, currencies topple and economies are destabilized.

They are putting forward suggestions such as the need to discourage developing countries from liberalizing unless their financial systems are already sophisticated and strong enough, the need to impose a tax on cross-border financial transactions to discourage speculation, and the need for developing countries to impose controls (or at least to have the option to have controls) over capital inflow and outflow.

This policy debate is a crucial one as it may help determine whether developing countries such as thailand make the right or wrong choices that will affect their future economic prospects. I believe Thailand has the right to make its own choices of trying to controll its own future and do so with out the lobbying powers of forign intrests and if forigners dont like it they can go back home.

As for your previous question regarding investment polices for foreigners and the idea of the MIA

MIA, as advocated by Northern countries, is a one- sided framework which would give overpowering rights to foreign companies to enter any country and in almost all sectors, and be granted "national treatment" (or be treated as well as local firms). There would not be obligations on these foreign corporations.

Correspondingly, governments would give up their authority, rights and instruments to regulate the entry and terms of operations of foreign investment. This would give rise to grave dangers, threatening national sovereignty, depriving states of necessary economic and financial policy instruments, and posing dangers to the balance of payments of host countries.

MIA because will abolish the power and legitimate right of states and people to regulate the entry, conditions, behavior and operations of foreign companies and foreigners in their country. This is a prime and fundamental sovereign right which is essential for any country to determine its own economic and social policies.

This is a precious right which is especially vital for developing countries to protect. This is because the domestic sector (comprising local firms, local farms and the public sector) still requires a longer period of capacity building. The ability to regulate foreign companies as part of economic policy is crucial to enable domestic capacity building which would eventually allow local enterprises to compete successfully in the economy. The removal of the right of developing countries to regulate the area of investments would effectively close the possibility of domestic economic capacity building.

For countries in transition, the right and ability to regulate foreign investments is also needed, to enable a relevant mix of policies for the transition to appropriate models of development.

Foreign investment can have a significant role to contribute in the development process, provided that this role in placed in an appropriate policy context. Such as the BOI This requires that governments continue to be given the right to regulate the terms and conditions for the entry and operation of foreign investment in the various sectors.

As for the ideas and views about Thai chineese

So when all goes wrong "blame it on the wealthy chineese" its reminds me of the same debates in other countries like America where the "jews"controll the country. or Russia where only those Moskow people close to the power made money or the UK "Arabs" have bought and controll London, and the bavarians who are controlling germany, and I am sure each one can bring his own addition.

It seems that wherever you go there are allways a group of people who are to blame for "everyones fault" because they are wealthier.

[Arkady]

Just read an interesting research paper from Mckinsey about FDI in emerging markets covering Asia and Latin America. The conclusion was that the biggest mistakes made by governmnents are trying to restrict foreign investment and trying to channel into their preferred sectors through incentives. In fact around 80% of FDI in those economies these days is producing goods and services for domestic sale, not exports as many of the governments would like. Nevertheless, the benefits to the host country of these domestic demand investments are considerable and the cost of keeping them out in terms of protecting inefficient domestic businesses is high. For example improving the retail distribution system as Lotus Tesco has done has reduced the outrageous margins previously earned by inefficient distributors with the result that the standard of living of ordinary people has improved. In Mexico a similar operation actually reduced the country's inflation rate. The study showed that the cost of tax incentives provided to foreign investors is surprisingly high and yet businesses rank tax incentives as their lowest priority in shopping for a location for FDI. If everything else is OK tax incentives might have an impact on the decision but won't outweigh other negative factors and many of the MNCs surveyed said that they would have made the investments even without the tax incentives. Thailand is not alone among emerging markets in trying to protect inefficient incumbents and micromanage investments through its BOI. But it does seem to be particularly backward in its understanding of this topic and, due to recent events Thais have been particularly emotional and irrational in defending protectionism and their expensive policy of trying to direct foreign investment whereever unworldly bureaucrats think it should go.

I found your article very intresting but would like to offer another view and adress some of the issues that were discussed by you and others.

i will not answer those memebers that call my views"crap" as i belive that if they have no respect for others they dont deserve my respect.

i would like to answer your and others questions and thoughts.

As for the leagal aspects

the status in the eyes of international law as some of the forum members have mentioned the international treaties.

In most of these treaties, the term 'investment' is defined loosely so that it covers as many of the investor's activities and assets as possible. Similarly, host-government actions that interfere with such foreign investment are also legally proscribed to the extent that such actions fall within an increasingly broad definition and interpretation of 'expropriation' or 'takings'.

Traditionally in international law the physical dispossession of the property of the foreign investor by the state constituted expropriation or direct taking. However, 'what constitutes an act of taking of foreign property (investment) in international law. now has come to be befuddled with difficulty as a result of the progressive expansion of the concept of taking. This has been compounded by the formulations in investment treaties, which refer to three types of taking: direct, indirect and anything "tantamount to a taking" or anything "equivalent to a taking".

While direct taking of the property of the foreign investor is clear, the identification of what constitutes indirect taking is not. Nonetheless, support for a robust concept of indirect taking is premised on the argument that the rights and interests of the foreign investor are diminished by state action without necessarily affecting the direct ownership of the foreign investment. Such a broad understanding of indirect taking would potentially cover all government actions including state legislations

As this is after all a debate to view different economical views. We must remeber that at the end of the day it is the right of the Thai govermant to determine its own way and those seeking residency or investment in Thailand should at least understand that they must play by the rules. even if they dont like them. overiding laws and making continuous attempts with the aid of greedy lawyers and locals who aided does not make it leagal or right.

As for capital controls and IMF

East Asian countries have endured the consequences of rapidly liberalizing their financial systems. In recent years, foreign funds and banks have been free to invest or lend to the countries, and just as free to withdraw their funds when the wind changed. In 1996, a total of US$96 billion of private capital entered the region but in the second half of 1997, $102 billion flew out, sparking the financial crisis that has led to recession.

The on-going financial crisis is now focusing attention on the instability and damage caused by global financial liberalization. In recent years, due to deregulation, many countries have lifted most of their previous controls on the inflow and outflow of funds.

Foreign institutions and individuals are allowed to bring in money either as loans to local institutions or as investment in the stock market. Local companies and banks are allowed to lend from abroad. In reverse, it is also much easier to send funds out of the country. Foreigners are allowed to remit money to abroad, and local people can open bank accounts overseas and send their money out of the country.

Until a few years ago, such capital flows had been restricted in most countries. There were laws forbidding or limiting the inflow of foreign money (either as loans or investments) as well as prohibition or restrictions on funds moving out.

At the least, the permission of the Central Bank would have to be obtained, and this would be granted only on certain conditions and up to a certain amount.

The lifting of these restrictions is what economists call "capital account liberalization." This refers to the capital account in the balance of payments, which involves the inflows and outflows of funds into a country that is not accounted for by trade and services (these two are recorded in the "current account").

Most countries used to allow for foreign exchange to be converted to local currency (and vice versa) for purposes of paying for (or receiving revenue from) trade and services, but not for non-trade related autonomous flows of short-term capital.

In such cases, it is said that a country allows for "current account convertibility" but not for "capital account convertibility."

Some countries still have this cautious policy as they fear the potentially destabilizing effect of short-term capital flows. For example, China and India do not have significant capital account convertibility. Because of this, their currencies are not subjected to much speculation and have been relatively sheltered from the East Asian financial crisis.

But under the advice of Western countries and international financial agencies such as the IMF, many developing countries have liberalized their capital account in the past few years.

The theory was that such liberalization would bring in foreign funds that can speed up a country's growth. From a global perspective, there would be also being "a more efficient allocation of financial resources", as funds move across borders to seek the highest returns.

In reality, the move towards financial liberalization has been prompted by the private financial institutions (such as investment and commercial banks, mutual funds, hedge funds).

They have campaigned for the removal of national barriers so that they can shift their huge funds from country to country to obtain the maximum profits from speculating or investing in currencies and shares and to earn higher returns for providing loans.

With the expansion of computer technology, financial markets are increasingly wired globally, and funds can shift with the blink of an eye and the touch of a computer button.

At present, the equivalent of two trillion American dollars (that is, US$2,000 billion) is shifted across borders EVERY DAY. Almost all of this (98 percent) is not related to trade or direct long- term investment, but comprises short-term capital funds.

A large part of it is moved for short periods to take advantage of differences between different countries in interest rates, or changes in currency exchange rates. Even a lot of the funds invested in stock markets are short-term in that the shares are bought and then sold for speculative gains (or to prevent losses).

With deregulation in developing countries and the advance of computer technology, the giant financial institutions of rich countries have moved aggressively into "emerging markets" in recent years, in search of higher capital gains and profits.

Due to the excessive hype about the "East Asian Miracle" (the title of a famous World Bank study), the funds and the banks poured investment capital and loans to the East Asian countries.

But even more rapid than the change in fashion, the feelings of investors about prospects can shift suddenly. The devaluation of the baht in 1997 triggered a massive run of capital out of Asia.

According to data from the Bank of International Settlements, a total of US$184 billion entered Asian developing countries as net private capital flows in 1994-1996. In 1996, US$94 billion came in and even as late as the first half of 1997, US$70 billion poured in.

With the financial crisis starting in June, a total of US$102 billion flew out in the second half of 1997. These figures show how volatile international capital flows can be. And the volatility is of far greater magnitude for developing countries.

This is because the investment funds place only a small fraction of their total resources in emerging markets. But for a developing country that has opened its doors, foreign investment could be a very significant portion of the value of the stock market and foreign loans could be a large part of financial resources in the economy.

Thus what to the international funds is a small shift in the composition of their portfolio is a massive movement of funds for a developing country.

Moreover, a stampede of foreign capital moving out of a country can also generate a loss of confidence by local people who see the prices of their shares and the level of their currency depreciating. This may thus cause more capital flight, this time by local people.

The result can be a devastating collapse of the financial economy (with corporate loan defaults and bankruptcies and a weakening of the banks), translated soon into a deep recession in the real economy of production.

There have been two types of intellectual responses to this scenario, which has been so frighteningly played out in the East Asian crisis.

The first response is that of the Western governments and the IMF (which is after all under their control)and many good foreigners on this forum They argue that there is nothing wrong with capital account liberalization, which should proceed around the world.

Instead, the blame is put on the weak corporate governance and the poor banking practices of developing countries. The solution then is to strengthen the corporate and banking systems and proceed with further liberalization.

The second response is that of increasing numbers of economists. They put the blame on the financial liberalization process itself which has allowed the fund managers to have free rein in the global market, wreaking havoc in country after country as their funds flow in and out, currencies topple and economies are destabilized.

They are putting forward suggestions such as the need to discourage developing countries from liberalizing unless their financial systems are already sophisticated and strong enough, the need to impose a tax on cross-border financial transactions to discourage speculation, and the need for developing countries to impose controls (or at least to have the option to have controls) over capital inflow and outflow.

This policy debate is a crucial one as it may help determine whether developing countries such as thailand make the right or wrong choices that will affect their future economic prospects. I believe Thailand has the right to make its own choices of trying to controll its own future and do so with out the lobbying powers of forign intrests and if forigners dont like it they can go back home.

As for your previous question regarding investment polices for foreigners and the idea of the MIA

MIA, as advocated by Northern countries, is a one- sided framework which would give overpowering rights to foreign companies to enter any country and in almost all sectors, and be granted "national treatment" (or be treated as well as local firms). There would not be obligations on these foreign corporations.

Correspondingly, governments would give up their authority, rights and instruments to regulate the entry and terms of operations of foreign investment. This would give rise to grave dangers, threatening national sovereignty, depriving states of necessary economic and financial policy instruments, and posing dangers to the balance of payments of host countries.

MIA because will abolish the power and legitimate right of states and people to regulate the entry, conditions, behavior and operations of foreign companies and foreigners in their country. This is a prime and fundamental sovereign right which is essential for any country to determine its own economic and social policies.

This is a precious right which is especially vital for developing countries to protect. This is because the domestic sector (comprising local firms, local farms and the public sector) still requires a longer period of capacity building. The ability to regulate foreign companies as part of economic policy is crucial to enable domestic capacity building which would eventually allow local enterprises to compete successfully in the economy. The removal of the right of developing countries to regulate the area of investments would effectively close the possibility of domestic economic capacity building.

For countries in transition, the right and ability to regulate foreign investments is also needed, to enable a relevant mix of policies for the transition to appropriate models of development.

Foreign investment can have a significant role to contribute in the development process, provided that this role in placed in an appropriate policy context. Such as the BOI This requires that governments continue to be given the right to regulate the terms and conditions for the entry and operation of foreign investment in the various sectors.

As for the ideas and views about Thai chineese

So when all goes wrong "blame it on the wealthy chineese" its reminds me of the same debates in other countries like America where the "jews"controll the country. or Russia where only those Moskow people close to the power made money or the UK "Arabs" have bought and controll London, and the bavarians who are controlling germany, and I am sure each one can bring his own addition.

It seems that wherever you go there are allways a group of people who are to blame for "everyones fault" because they are wealthier.

Thank you for your thoughtful reply Highdiver. I admit that many foreigners can get as emotional about defending rights to invest as some Thais get in defending the rights to control foreign investment.

Re legal rights, international treaties. I would say that WTO members would have a reasonable case if they wanted to make a case that Thailand was obliged under WTO commitments to consult them first about the FBA amendments, since the voting rights definition can be construed as a very material change in the law. It is hard to argue they are just a clarification since this point was clarified beyond any reasonable doubt in favour of allowing majority voting rights after the Brown Boveri Asea case in the amendments to the Alien Business Law in 1991. The 1999 FBA contains almost exactly the same wording covering this point. It is also beyond dispute that Thailand has been in breach of its WTO obligations regarding the American Treaty of Amity and Economic Relations since January 2006 when the MFN expired. The remedy is to either cancel the treaty unilaterally or extend the same priveliges to all other WTO members. The Thaksin government actually wanted to liberalise access to financial services which are not permitted to Americans by the treaty in order sign an FTA with the US. If this had gone ahead, the treaty situation would logically have been resolved by opening all services to WTO members. Now the FTA and the treaty are in limbo due to events here and in the US. Where your arguments are valid here is in what compensation could be claimed by WTO members on behalf of their companies that are deemed to have been wronged by the amendments to the FBA. I agree that expropriation in this context would be extremely difficult to define.

Re Capital controls and the IMF. We all know that the IMF was flawed in its prescriptions for Asian countries in the 1997-8 crisis because it failed to see that the situation was different from the Latin American economies it bailed out in the 80s and 90s where fiscal profiligacy and inefficient nationalised state industries were largely to blame. But personally I have a view that the Thai crisis was triggered by not enough liberalisation rather than too much. Tarrin as finance minister came up with the strategy of BIBFs as a way to deflect demands from GATS and others to open up access to financial services and at first glance it seemed a good way of funding investment which was on a roll in Thailand in the early 90s. Many Japanese banks in particular wanted licences in Thailand and were told they had to demonstrate their commitment to Thailand through the amount they could lend from their BIBFs. Since their own economy was already in crisis and they needed to develop new markets, they took this extremely seriously and competed with each other to flood Thailand with dollars. Neither the banks nor the borrowers (Thai banks and corporates) saw much risk in borrowing dollars at 6% less than baht loans because it was an article of faith that the exchange rate would always be fixed. History now shows that encouraging unlimited loan inflows combined with a fixed exchange rate was a recipe for disaster. Hedge funds can be blamed for speeding up the process and the Bank of Thailand can be blamed for putting its head in the sand and squandering national resources in defending the baht in the forward market but the basic problem was a structural one. In my opinion it would have been better to issue a new round of foreign banking licences and never to have started BIBF or at least to started to liberalise the exchange rate mechanism as a prerequisite to BIBF. At the time Thai banks argued so vociferously that they were not ready for more competition and the results of issuing even more foreign banking licences (restricted to one branch) would be absolutely dire. Eventually the Bank of Thailand was, of course, forced to allow foreign banks to bail out Thai banks and take over entire national branch networks. The result was not at all dire for Thai banks and, as it turned out, few foreign banks even had an appetite to come into the market and none of them wanted to invest enough capital to be dominant. The ones that did have remained small but have been quite helpful to consumers in pushing new ideas like longer banking hours and branches in department stores.

I do have sympathy for emerging market central bankers in trying to stabilize their currencies, since the wave of votality from capital flows they feel can be more like being in a small boat than a big liner like developed economies. Once you have developed enough to open the capital account it is very hard to go back without causing loss of confidence. The capital controls introduced by the Bank of Thailand have not been very effective, since the problem is structural i.e. Thailand has been exporting too much and capital controls are still in place for outward investment. In other countries they have been introduced the results have been dubious. In Malaysia capital controls were not really necessary to support the currency but were extremely effective in allowing Mahathir to use public funds to bail his cronies, get rid of Anwar and regain his grip on UMNO. In both Chile and Malaysia foreign investment was choked off for several years.

Re MIA. I agree with the broad thrust on liberalisation of investment across borders. However, I agree with you that governments should have a right to regulate to a certain extent. I am fully in support of maintaining foreign ownership restrictions on strategic industries and enforcing prohibitions against the use of nominees in these industries. I do not agree with the US position in their FTA negotiations that financial institutions should be allowed to come to Thailand and set up shop after registering a business. I think that the central bank and other financial regulators should be allowed approve banking licences etc and even restrict the number that are issued. However, I think a blanket restriction on access to the services sector is counter productive and believe that it only serves to protect inefficient incumbents. I agree with McKinsey that the incentive approach to channeling is probably wasteful and I think the whole concept of the BOI is rather old fashioned. It is hard for bureaucrats who have for the main never worked in industry or commerce to keep ahead of the game in knowing exactly what industries to attract. They be many industries they have never thought of that might be extremely beneficial or could be support industries to industries they do want to promote. It seems better for government to stick to deciding which few industries need to be protected for strategic reasons and let investors decide what industries they want to invest in. I can't imagine any one going through the BOI's shopping list to decided on which industry they want to invest in.

I think that with its catch all clause barring foreign companies from all service industries not mentioned elsewhere the FBA was restrictive enough and arguably was starting to make Thaialnd very uncompetitive relative to other countries in the region. Foreign companies adapted by issuing preference shares to give them majority voting rights and this practice was confirmed as lawful after the Brown Boveri case, since it is not practical for them not to have control of their own businesses and often not practical to apply for an alien business permit. The amendments will create an environment that is only realistic for investors who want to take minority positions in existing Thai companies which already have competent management through private equity or the stock market. Realistically no one is going to want to set up a new business in the service sector which is totally dependant on their expertise and contacts without voting control. That is a recipe for disaster. So these businesses will not any more and the FBA will weed out all of them, rather being an effective filter to select those deemed beneficial to the country.

Finally I would say that the Chinese community has developed a lot of Thailand's commercial structure and contributed a lot to the country. In fact Bangkok was largely a Chinese city up until the thirties or so when Thais came to look for labouring jobs. Accounts of visitors in the early part of the last century make it clear that the population was largely Chinese. Even the club servants at the Sports Club were all Chinese with Chinese names until after the second world war. One might argue that the charitable immigrant spirit of the US is missing whereby those descended from previous generations of immigrants who were treated well want to keep immigration laws relatively easy so that new immigrants can enjoy the same opportunities to own businesses and enjoy citizenship as their forefathers did but that is probably an argument for another thread.

[jbowman1993]

Just read an interesting research paper from Mckinsey about FDI in emerging markets covering Asia and Latin America. The conclusion was that the biggest mistakes made by governmnents are trying to restrict foreign investment and trying to channel into their preferred sectors through incentives. In fact around 80% of FDI in those economies these days is producing goods and services for domestic sale, not exports as many of the governments would like. Nevertheless, the benefits to the host country of these domestic demand investments are considerable and the cost of keeping them out in terms of protecting inefficient domestic businesses is high. For example improving the retail distribution system as Lotus Tesco has done has reduced the outrageous margins previously earned by inefficient distributors with the result that the standard of living of ordinary people has improved. In Mexico a similar operation actually reduced the country's inflation rate. The study showed that the cost of tax incentives provided to foreign investors is surprisingly high and yet businesses rank tax incentives as their lowest priority in shopping for a location for FDI. If everything else is OK tax incentives might have an impact on the decision but won't outweigh other negative factors and many of the MNCs surveyed said that they would have made the investments even without the tax incentives. Thailand is not alone among emerging markets in trying to protect inefficient incumbents and micromanage investments through its BOI. But it does seem to be particularly backward in its understanding of this topic and, due to recent events Thais have been particularly emotional and irrational in defending protectionism and their expensive policy of trying to direct foreign investment whereever unworldly bureaucrats think it should go.

I found your article very intresting but would like to offer another view and adress some of the issues that were discussed by you and others.

i will not answer those memebers that call my views"crap" as i belive that if they have no respect for others they dont deserve my respect.

i would like to answer your and others questions and thoughts.

As for the leagal aspects

the status in the eyes of international law as some of the forum members have mentioned the international treaties.

In most of these treaties, the term 'investment' is defined loosely so that it covers as many of the investor's activities and assets as possible. Similarly, host-government actions that interfere with such foreign investment are also legally proscribed to the extent that such actions fall within an increasingly broad definition and interpretation of 'expropriation' or 'takings'.

Traditionally in international law the physical dispossession of the property of the foreign investor by the state constituted expropriation or direct taking. However, 'what constitutes an act of taking of foreign property (investment) in international law. now has come to be befuddled with difficulty as a result of the progressive expansion of the concept of taking. This has been compounded by the formulations in investment treaties, which refer to three types of taking: direct, indirect and anything "tantamount to a taking" or anything "equivalent to a taking".

While direct taking of the property of the foreign investor is clear, the identification of what constitutes indirect taking is not. Nonetheless, support for a robust concept of indirect taking is premised on the argument that the rights and interests of the foreign investor are diminished by state action without necessarily affecting the direct ownership of the foreign investment. Such a broad understanding of indirect taking would potentially cover all government actions including state legislations

As this is after all a debate to view different economical views. We must remeber that at the end of the day it is the right of the Thai govermant to determine its own way and those seeking residency or investment in Thailand should at least understand that they must play by the rules. even if they dont like them. overiding laws and making continuous attempts with the aid of greedy lawyers and locals who aided does not make it leagal or right.

As for capital controls and IMF

East Asian countries have endured the consequences of rapidly liberalizing their financial systems. In recent years, foreign funds and banks have been free to invest or lend to the countries, and just as free to withdraw their funds when the wind changed. In 1996, a total of US$96 billion of private capital entered the region but in the second half of 1997, $102 billion flew out, sparking the financial crisis that has led to recession.

The on-going financial crisis is now focusing attention on the instability and damage caused by global financial liberalization. In recent years, due to deregulation, many countries have lifted most of their previous controls on the inflow and outflow of funds.

Foreign institutions and individuals are allowed to bring in money either as loans to local institutions or as investment in the stock market. Local companies and banks are allowed to lend from abroad. In reverse, it is also much easier to send funds out of the country. Foreigners are allowed to remit money to abroad, and local people can open bank accounts overseas and send their money out of the country.

Until a few years ago, such capital flows had been restricted in most countries. There were laws forbidding or limiting the inflow of foreign money (either as loans or investments) as well as prohibition or restrictions on funds moving out.

At the least, the permission of the Central Bank would have to be obtained, and this would be granted only on certain conditions and up to a certain amount.

The lifting of these restrictions is what economists call "capital account liberalization." This refers to the capital account in the balance of payments, which involves the inflows and outflows of funds into a country that is not accounted for by trade and services (these two are recorded in the "current account").

Most countries used to allow for foreign exchange to be converted to local currency (and vice versa) for purposes of paying for (or receiving revenue from) trade and services, but not for non-trade related autonomous flows of short-term capital.

In such cases, it is said that a country allows for "current account convertibility" but not for "capital account convertibility."

Some countries still have this cautious policy as they fear the potentially destabilizing effect of short-term capital flows. For example, China and India do not have significant capital account convertibility. Because of this, their currencies are not subjected to much speculation and have been relatively sheltered from the East Asian financial crisis.

But under the advice of Western countries and international financial agencies such as the IMF, many developing countries have liberalized their capital account in the past few years.

The theory was that such liberalization would bring in foreign funds that can speed up a country's growth. From a global perspective, there would be also being "a more efficient allocation of financial resources", as funds move across borders to seek the highest returns.

In reality, the move towards financial liberalization has been prompted by the private financial institutions (such as investment and commercial banks, mutual funds, hedge funds).

They have campaigned for the removal of national barriers so that they can shift their huge funds from country to country to obtain the maximum profits from speculating or investing in currencies and shares and to earn higher returns for providing loans.

With the expansion of computer technology, financial markets are increasingly wired globally, and funds can shift with the blink of an eye and the touch of a computer button.

At present, the equivalent of two trillion American dollars (that is, US$2,000 billion) is shifted across borders EVERY DAY. Almost all of this (98 percent) is not related to trade or direct long- term investment, but comprises short-term capital funds.

A large part of it is moved for short periods to take advantage of differences between different countries in interest rates, or changes in currency exchange rates. Even a lot of the funds invested in stock markets are short-term in that the shares are bought and then sold for speculative gains (or to prevent losses).

With deregulation in developing countries and the advance of computer technology, the giant financial institutions of rich countries have moved aggressively into "emerging markets" in recent years, in search of higher capital gains and profits.

Due to the excessive hype about the "East Asian Miracle" (the title of a famous World Bank study), the funds and the banks poured investment capital and loans to the East Asian countries.

But even more rapid than the change in fashion, the feelings of investors about prospects can shift suddenly. The devaluation of the baht in 1997 triggered a massive run of capital out of Asia.

According to data from the Bank of International Settlements, a total of US$184 billion entered Asian developing countries as net private capital flows in 1994-1996. In 1996, US$94 billion came in and even as late as the first half of 1997, US$70 billion poured in.

With the financial crisis starting in June, a total of US$102 billion flew out in the second half of 1997. These figures show how volatile international capital flows can be. And the volatility is of far greater magnitude for developing countries.

This is because the investment funds place only a small fraction of their total resources in emerging markets. But for a developing country that has opened its doors, foreign investment could be a very significant portion of the value of the stock market and foreign loans could be a large part of financial resources in the economy.

Thus what to the international funds is a small shift in the composition of their portfolio is a massive movement of funds for a developing country.

Moreover, a stampede of foreign capital moving out of a country can also generate a loss of confidence by local people who see the prices of their shares and the level of their currency depreciating. This may thus cause more capital flight, this time by local people.

The result can be a devastating collapse of the financial economy (with corporate loan defaults and bankruptcies and a weakening of the banks), translated soon into a deep recession in the real economy of production.

There have been two types of intellectual responses to this scenario, which has been so frighteningly played out in the East Asian crisis.

The first response is that of the Western governments and the IMF (which is after all under their control)and many good foreigners on this forum They argue that there is nothing wrong with capital account liberalization, which should proceed around the world.

Instead, the blame is put on the weak corporate governance and the poor banking practices of developing countries. The solution then is to strengthen the corporate and banking systems and proceed with further liberalization.

The second response is that of increasing numbers of economists. They put the blame on the financial liberalization process itself which has allowed the fund managers to have free rein in the global market, wreaking havoc in country after country as their funds flow in and out, currencies topple and economies are destabilized.

They are putting forward suggestions such as the need to discourage developing countries from liberalizing unless their financial systems are already sophisticated and strong enough, the need to impose a tax on cross-border financial transactions to discourage speculation, and the need for developing countries to impose controls (or at least to have the option to have controls) over capital inflow and outflow.

This policy debate is a crucial one as it may help determine whether developing countries such as thailand make the right or wrong choices that will affect their future economic prospects. I believe Thailand has the right to make its own choices of trying to controll its own future and do so with out the lobbying powers of forign intrests and if forigners dont like it they can go back home.

As for your previous question regarding investment polices for foreigners and the idea of the MIA

MIA, as advocated by Northern countries, is a one- sided framework which would give overpowering rights to foreign companies to enter any country and in almost all sectors, and be granted "national treatment" (or be treated as well as local firms). There would not be obligations on these foreign corporations.

Correspondingly, governments would give up their authority, rights and instruments to regulate the entry and terms of operations of foreign investment. This would give rise to grave dangers, threatening national sovereignty, depriving states of necessary economic and financial policy instruments, and posing dangers to the balance of payments of host countries.

MIA because will abolish the power and legitimate right of states and people to regulate the entry, conditions, behavior and operations of foreign companies and foreigners in their country. This is a prime and fundamental sovereign right which is essential for any country to determine its own economic and social policies.

This is a precious right which is especially vital for developing countries to protect. This is because the domestic sector (comprising local firms, local farms and the public sector) still requires a longer period of capacity building. The ability to regulate foreign companies as part of economic policy is crucial to enable domestic capacity building which would eventually allow local enterprises to compete successfully in the economy. The removal of the right of developing countries to regulate the area of investments would effectively close the possibility of domestic economic capacity building.

For countries in transition, the right and ability to regulate foreign investments is also needed, to enable a relevant mix of policies for the transition to appropriate models of development.

Foreign investment can have a significant role to contribute in the development process, provided that this role in placed in an appropriate policy context. Such as the BOI This requires that governments continue to be given the right to regulate the terms and conditions for the entry and operation of foreign investment in the various sectors.

As for the ideas and views about Thai chineese

So when all goes wrong "blame it on the wealthy chineese" its reminds me of the same debates in other countries like America where the "jews"controll the country. or Russia where only those Moskow people close to the power made money or the UK "Arabs" have bought and controll London, and the bavarians who are controlling germany, and I am sure each one can bring his own addition.

It seems that wherever you go there are allways a group of people who are to blame for "everyones fault" because they are wealthier.

Thank you for your thoughtful reply Highdiver. I admit that many foreigners can get as emotional about defending rights to invest as some Thais get in defending the rights to control foreign investment.

Re legal rights, international treaties. I would say that WTO members would have a reasonable case if they wanted to make a case that Thailand was obliged under WTO commitments to consult them first about the FBA amendments, since the voting rights definition can be construed as a very material change in the law. It is hard to argue they are just a clarification since this point was clarified beyond any reasonable doubt in favour of allowing majority voting rights after the Brown Boveri Asea case in the amendments to the Alien Business Law in 1991. The 1999 FBA contains almost exactly the same wording covering this point. It is also beyond dispute that Thailand has been in breach of its WTO obligations regarding the American Treaty of Amity and Economic Relations since January 2006 when the MFN expired. The remedy is to either cancel the treaty unilaterally or extend the same priveliges to all other WTO members. The Thaksin government actually wanted to liberalise access to financial services which are not permitted to Americans by the treaty in order sign an FTA with the US. If this had gone ahead, the treaty situation would logically have been resolved by opening all services to WTO members. Now the FTA and the treaty are in limbo due to events here and in the US. Where your arguments are valid here is in what compensation could be claimed by WTO members on behalf of their companies that are deemed to have been wronged by the amendments to the FBA. I agree that expropriation in this context would be extremely difficult to define.

Re Capital controls and the IMF. We all know that the IMF was flawed in its prescriptions for Asian countries in the 1997-8 crisis because it failed to see that the situation was different from the Latin American economies it bailed out in the 80s and 90s where fiscal profiligacy and inefficient nationalised state industries were largely to blame. But personally I have a view that the Thai crisis was triggered by not enough liberalisation rather than too much. Tarrin as finance minister came up with the strategy of BIBFs as a way to deflect demands from GATS and others to open up access to financial services and at first glance it seemed a good way of funding investment which was on a roll in Thailand in the early 90s. Many Japanese banks in particular wanted licences in Thailand and were told they had to demonstrate their commitment to Thailand through the amount they could lend from their BIBFs. Since their own economy was already in crisis and they needed to develop new markets, they took this extremely seriously and competed with each other to flood Thailand with dollars. Neither the banks nor the borrowers (Thai banks and corporates) saw much risk in borrowing dollars at 6% less than baht loans because it was an article of faith that the exchange rate would always be fixed. History now shows that encouraging unlimited loan inflows combined with a fixed exchange rate was a recipe for disaster. Hedge funds can be blamed for speeding up the process and the Bank of Thailand can be blamed for putting its head in the sand and squandering national resources in defending the baht in the forward market but the basic problem was a structural one. In my opinion it would have been better to issue a new round of foreign banking licences and never to have started BIBF or at least to started to liberalise the exchange rate mechanism as a prerequisite to BIBF. At the time Thai banks argued so vociferously that they were not ready for more competition and the results of issuing even more foreign banking licences (restricted to one branch) would be absolutely dire. Eventually the Bank of Thailand was, of course, forced to allow foreign banks to bail out Thai banks and take over entire national branch networks. The result was not at all dire for Thai banks and, as it turned out, few foreign banks even had an appetite to come into the market and none of them wanted to invest enough capital to be dominant. The ones that did have remained small but have been quite helpful to consumers in pushing new ideas like longer banking hours and branches in department stores.

I do have sympathy for emerging market central bankers in trying to stabilize their currencies, since the wave of votality from capital flows they feel can be more like being in a small boat than a big liner like developed economies. Once you have developed enough to open the capital account it is very hard to go back without causing loss of confidence. The capital controls introduced by the Bank of Thailand have not been very effective, since the problem is structural i.e. Thailand has been exporting too much and capital controls are still in place for outward investment. In other countries they have been introduced the results have been dubious. In Malaysia capital controls were not really necessary to support the currency but were extremely effective in allowing Mahathir to use public funds to bail his cronies, get rid of Anwar and regain his grip on UMNO. In both Chile and Malaysia foreign investment was choked off for several years.

Re MIA. I agree with the broad thrust on liberalisation of investment across borders. However, I agree with you that governments should have a right to regulate to a certain extent. I am fully in support of maintaining foreign ownership restrictions on strategic industries and enforcing prohibitions against the use of nominees in these industries. I do not agree with the US position in their FTA negotiations that financial institutions should be allowed to come to Thailand and set up shop after registering a business. I think that the central bank and other financial regulators should be allowed approve banking licences etc and even restrict the number that are issued. However, I think a blanket restriction on access to the services sector is counter productive and believe that it only serves to protect inefficient incumbents. I agree with McKinsey that the incentive approach to channeling is probably wasteful and I think the whole concept of the BOI is rather old fashioned. It is hard for bureaucrats who have for the main never worked in industry or commerce to keep ahead of the game in knowing exactly what industries to attract. They be many industries they have never thought of that might be extremely beneficial or could be support industries to industries they do want to promote. It seems better for government to stick to deciding which few industries need to be protected for strategic reasons and let investors decide what industries they want to invest in. I can't imagine any one going through the BOI's shopping list to decided on which industry they want to invest in.

I think that with its catch all clause barring foreign companies from all service industries not mentioned elsewhere the FBA was restrictive enough and arguably was starting to make Thaialnd very uncompetitive relative to other countries in the region. Foreign companies adapted by issuing preference shares to give them majority voting rights and this practice was confirmed as lawful after the Brown Boveri case, since it is not practical for them not to have control of their own businesses and often not practical to apply for an alien business permit. The amendments will create an environment that is only realistic for investors who want to take minority positions in existing Thai companies which already have competent management through private equity or the stock market. Realistically no one is going to want to set up a new business in the service sector which is totally dependant on their expertise and contacts without voting control. That is a recipe for disaster. So these businesses will not any more and the FBA will weed out all of them, rather being an effective filter to select those deemed beneficial to the country.

Finally I would say that the Chinese community has developed a lot of Thailand's commercial structure and contributed a lot to the country. In fact Bangkok was largely a Chinese city up until the thirties or so when Thais came to look for labouring jobs. Accounts of visitors in the early part of the last century make it clear that the population was largely Chinese. Even the club servants at the Sports Club were all Chinese with Chinese names until after the second world war. One might argue that the charitable immigrant spirit of the US is missing whereby those descended from previous generations of immigrants who were treated well want to keep immigration laws relatively easy so that new immigrants can enjoy the same opportunities to own businesses and enjoy citizenship as their forefathers did but that is probably an argument for another thread.

I started to read this post, then I stopped and realized, that I just don' t care enough about your opinion to subject myself to this much bs.

[highdiver]

Thank you for your thoughtful reply Highdiver. I admit that many foreigners can get as emotional about defending rights to invest as some Thais get in defending the rights to control foreign investment.

Re legal rights, international treaties. I would say that WTO members would have a reasonable case if they wanted to make a case that Thailand was obliged under WTO commitments to consult them first about the FBA amendments, since the voting rights definition can be construed as a very material change in the law. It is hard to argue they are just a clarification since this point was clarified beyond any reasonable doubt in favour of allowing majority voting rights after the Brown Boveri Asea case in the amendments to the Alien Business Law in 1991. The 1999 FBA contains almost exactly the same wording covering this point. It is also beyond dispute that Thailand has been in breach of its WTO obligations regarding the American Treaty of Amity and Economic Relations since January 2006 when the MFN expired. The remedy is to either cancel the treaty unilaterally or extend the same priveliges to all other WTO members. The Thaksin government actually wanted to liberalise access to financial services which are not permitted to Americans by the treaty in order sign an FTA with the US. If this had gone ahead, the treaty situation would logically have been resolved by opening all services to WTO members. Now the FTA and the treaty are in limbo due to events here and in the US. Where your arguments are valid here is in what compensation could be claimed by WTO members on behalf of their companies that are deemed to have been wronged by the amendments to the FBA. I agree that expropriation in this context would be extremely difficult to define.

Re Capital controls and the IMF. We all know that the IMF was flawed in its prescriptions for Asian countries in the 1997-8 crisis because it failed to see that the situation was different from the Latin American economies it bailed out in the 80s and 90s where fiscal profiligacy and inefficient nationalised state industries were largely to blame. But personally I have a view that the Thai crisis was triggered by not enough liberalisation rather than too much. Tarrin as finance minister came up with the strategy of BIBFs as a way to deflect demands from GATS and others to open up access to financial services and at first glance it seemed a good way of funding investment which was on a roll in Thailand in the early 90s. Many Japanese banks in particular wanted licences in Thailand and were told they had to demonstrate their commitment to Thailand through the amount they could lend from their BIBFs. Since their own economy was already in crisis and they needed to develop new markets, they took this extremely seriously and competed with each other to flood Thailand with dollars. Neither the banks nor the borrowers (Thai banks and corporates) saw much risk in borrowing dollars at 6% less than baht loans because it was an article of faith that the exchange rate would always be fixed. History now shows that encouraging unlimited loan inflows combined with a fixed exchange rate was a recipe for disaster. Hedge funds can be blamed for speeding up the process and the Bank of Thailand can be blamed for putting its head in the sand and squandering national resources in defending the baht in the forward market but the basic problem was a structural one. In my opinion it would have been better to issue a new round of foreign banking licences and never to have started BIBF or at least to started to liberalise the exchange rate mechanism as a prerequisite to BIBF. At the time Thai banks argued so vociferously that they were not ready for more competition and the results of issuing even more foreign banking licences (restricted to one branch) would be absolutely dire. Eventually the Bank of Thailand was, of course, forced to allow foreign banks to bail out Thai banks and take over entire national branch networks. The result was not at all dire for Thai banks and, as it turned out, few foreign banks even had an appetite to come into the market and none of them wanted to invest enough capital to be dominant. The ones that did have remained small but have been quite helpful to consumers in pushing new ideas like longer banking hours and branches in department stores.

I do have sympathy for emerging market central bankers in trying to stabilize their currencies, since the wave of votality from capital flows they feel can be more like being in a small boat than a big liner like developed economies. Once you have developed enough to open the capital account it is very hard to go back without causing loss of confidence. The capital controls introduced by the Bank of Thailand have not been very effective, since the problem is structural i.e. Thailand has been exporting too much and capital controls are still in place for outward investment. In other countries they have been introduced the results have been dubious. In Malaysia capital controls were not really necessary to support the currency but were extremely effective in allowing Mahathir to use public funds to bail his cronies, get rid of Anwar and regain his grip on UMNO. In both Chile and Malaysia foreign investment was choked off for several years.

Re MIA. I agree with the broad thrust on liberalisation of investment across borders. However, I agree with you that governments should have a right to regulate to a certain extent. I am fully in support of maintaining foreign ownership restrictions on strategic industries and enforcing prohibitions against the use of nominees in these industries. I do not agree with the US position in their FTA negotiations that financial institutions should be allowed to come to Thailand and set up shop after registering a business. I think that the central bank and other financial regulators should be allowed approve banking licences etc and even restrict the number that are issued. However, I think a blanket restriction on access to the services sector is counter productive and believe that it only serves to protect inefficient incumbents. I agree with McKinsey that the incentive approach to channeling is probably wasteful and I think the whole concept of the BOI is rather old fashioned. It is hard for bureaucrats who have for the main never worked in industry or commerce to keep ahead of the game in knowing exactly what industries to attract. They be many industries they have never thought of that might be extremely beneficial or could be support industries to industries they do want to promote. It seems better for government to stick to deciding which few industries need to be protected for strategic reasons and let investors decide what industries they want to invest in. I can't imagine any one going through the BOI's shopping list to decided on which industry they want to invest in.

I think that with its catch all clause barring foreign companies from all service industries not mentioned elsewhere the FBA was restrictive enough and arguably was starting to make Thaialnd very uncompetitive relative to other countries in the region. Foreign companies adapted by issuing preference shares to give them majority voting rights and this practice was confirmed as lawful after the Brown Boveri case, since it is not practical for them not to have control of their own businesses and often not practical to apply for an alien business permit. The amendments will create an environment that is only realistic for investors who want to take minority positions in existing Thai companies which already have competent management through private equity or the stock market. Realistically no one is going to want to set up a new business in the service sector which is totally dependant on their expertise and contacts without voting control. That is a recipe for disaster. So these businesses will not any more and the FBA will weed out all of them, rather being an effective filter to select those deemed beneficial to the country.

Finally I would say that the Chinese community has developed a lot of Thailand's commercial structure and contributed a lot to the country. In fact Bangkok was largely a Chinese city up until the thirties or so when Thais came to look for labouring jobs. Accounts of visitors in the early part of the last century make it clear that the population was largely Chinese. Even the club servants at the Sports Club were all Chinese with Chinese names until after the second world war. One might argue that the charitable immigrant spirit of the US is missing whereby those descended from previous generations of immigrants who were treated well want to keep immigration laws relatively easy so that new immigrants can enjoy the same opportunities to own businesses and enjoy citizenship as their forefathers did but that is probably an argument for another thread.

Bravo... finally one farrang that can sit down and actually right words of wisdom.

I beg to differ on some of your conclusions but as econmy was never a precise science we can agree that we have different views.

you are right that the Foreign companies adapted by issuing preference shares to give them majority voting rights and this practice was confirmed as lawful after the Brown Boveri case however when this practice has become so common and went out of controll it was used for everything icluding purchasing of land, dealing in realesate, momney laundering, and any type of buisness that was on the Anexes.

in the eyes of the law one has to bring forward the concept and ideas that have been inplaced bt the law makers.

the initial intention was that land can not be owned by forigners, the initial intention was that forigners can not engage in practicesthat are reserved for Thais. when a few forigners overide the law and made adaptations using the prefered shares scheme then the Thais with a "face saving"attitude have overlooked this. As this has been abused in the last 3 years by every forigner wanting to open a bar it has reached a point where the Thai govermant needed to put a halt on this scheme.

In Samui 8 years ago there were only a handfull of companies actually controlled by forigenrs and most of them were real companies that gave work to locals and paid taxes. now in Samui there are thousands of companies mostly set up to own land. that was not the intention of the law makers.

I belive that the Thai govermant needs to evaluate the difference of the True companies wanting to invest in thailand and create a better buisness climate and those just wanting to make a quick rich or by passing the laws.

At the end of the day the Thai people are going to stay here if they are natural Thai or chineese or laos. they wiull continue to live here and need to put only those intrest that serve them.

[Mobi]

I started to read this post, then I stopped and realized, that I just don' t care enough about your opinion to subject myself to this much bs.

BS or not, did you really have to copy page upon page of this stuff all over again?

It's bad enough trying to read it the first time round, without people continually re-posting it because they are either too lazy or too ignorant to use the delete button once in a while to edit out unnecessary verbage.

Or are you testing Thai Visa's storage capacity?