Foreign Business Act Stopped

[thaigene2]

Thailand now has a dangerous mix of very slow economic growth/ a dearth of investment and a growing awareness of the masses awakened by Thaksin that they have political power and but are systematically denied opportunities for better jobs, housing, education, healthcare etc. The Chinese business community has benefitted from the nationality laws that prior to 1973 allowed them to become Thai citizens without being born to Thai parents and now tries to batten down the hatches and stop any one else from coming in. They need to understand that what benefits the greater Thai public will also benefit them, rather than instinctively pushing for protectionism to keep wages down and still be able to sell low quality products and services to Thai people without competition.

This is one of the best summations I've seen recently. You really put it in perspective. Funny how this is NEVER in the papers...Maybe because the editors are thai-chin?

[Arkady]

ChiangMaiAmerican

you got me realy intersted in this so i went to llok for information.

I have found the following please correct it where aplicable.

Background

In 1966 Thailand and the US entered into the Treaty of Amity and Economic Relations (the “Treaty of Amity”) to promote friendly relations between them and to encourage mutually beneficial trade and closer economic and cultural ties between their peoples.

Under the Treaty of Amity, American nationals, either natural or juristic persons, can conduct business in Thailand on the same basis as Thai nationals, except for six reserved activities, namely (i) communications; (ii) transportation; (iii) fiduciary functions; (iv) banking involving depository functions; (v) exploitation of land or other natural resources; and (vi) domestic trade in indigenous agricultural products.

The Treaty of Amity states that it will remain in force for 10 years and continue to be in force thereafter until terminated by one year’s written notice. It is reviewed every 10 years.

The existing privileges given to American nationals, under the Treaty of Amity are greater than those extended to other foreign nationals. This is in violation of the rules of the World Trade Organization (“WTO”) and the General Agreement on Trade in Services (“GATS”) which requires member nations to extend most favored nation treatment (“MFN Treatment”) equally to every WTO member. Until now, however, the Treaty of Amity has been valid because in 1995 Thailand requested temporary exemption from MFN Treatment for 10 years. The exemption period will expire on 1 January 2005. By the end of this year, therefore, Thailand must develop WTO compliant strategies, which will also benefit Thailand’s trading relationships.

Present

In compliance with WTO rules, Thailand stated that the Treaty of Amity will not be renewed. However, the existing privileges given to American nationals will instead be included in a new bilateral trade agreement, the Thailand-US Free Trade Agreement (“Thai-US FTA”). Under the Thai-US FTA, it is probable that existing privileges will be extended still further, particularly in the services sector. Under WTO rules, all privileges must now be extended to all WTO members, creating a real dilemma for Thailand. Beyond services, the Thai-US FTA will cover trade, investment and intellectual property protection.

In 2002 Thailand and the US entered into a Trade and Investment Framework Agreement (“TIFA”) in order to facilitate and liberalize trade and investment between them. The TIFA is the fundamental stepping stone to the Thai-US FTA. Nevertheless, negotiations on the Thai-US FTA have not yet been officially finished

It was however, expected that negotiations will be concluded in the middle of 2005.

in December 2005 the Amity was not renewd and the new FTA agreemnet has not yet been signed.

The model for the Thai-US FTA agreement is the US-Singapore Free Trade Agreement, the first free trade agreement between the United States and an Asian nation.

makes an interesting reading

http://en.wikipedia.org/wiki/United_States...Trade_Agreement

so according to this the Amity that is in violation of WTO is no longer valid. hence the thai goverment or the labour department are not violating an amity that does not exist anymore.

true or false??

It is true that, since the expiry of the MFN (most favoured nation provision) in Jan 2005, the Treaty of Amity has been in violation of Thailand's WTO commitments but it is not true that the treaty no longer exists. It can only be terminated if either side gives one year's notice in writing. So far neither side has given notice, so it continues to be in force despite the WTO violation. Other WTO member states are now entitled to take action with the WTO to sue Thailand for compensation for their companies on the basis that they have not been granted equal status with Americans. I believe that they have been hanging fire on this issue waiting to see what happened with the FBA amendments. The FBA amendments would also put Thailand in breach of its WTO commitments, as members are under an obligation to consult other members before enacting legislation that significantly restricts free access to trade in services. The US would probably be willing to join in a case seeking compensation for the amendments even though they have the treaty. Americans still don't have access to financial services or Annex 1 and 2 activities under the treaty and there is a lot of red tape and general Thai government ill will and obstruction towards treaty companies. Thus the Americans would rather work for general liberalization to the benefit of all WTO members rather than cling to the treaty, while the other WTO countries don't see any benefit in giving Thailand an excuse to unilaterally terminate the treaty by challenging it at the WTO.

The WTO's reasoning behind granting the 10 year MFN was obviously that 10 years should be long enough for Thailand to reform its foreign investment laws so that all WTO member countries' rights in Thailand would at least as good the rights the US has under the treaty. so that the treaty would no longer be needed. Unfortunately they didn't count on the stubborn recidivist nature of the Thai vested interests that would rather have a bigger share of a shrinking pie that is only big enough to feed themselves than a slightly smaller share of a growing pie that will be big enough to feed every one. Their good friends in Burma provide their role model.

thank you for the info.

it was my undesrstanding that the Amity needed to be extended every 10 years and that if any party wished to teminate within those 10 years they need to give a 2 year notice.

as the amity was not renewd again after the 10 years expires is it not terminated??

please elaborate if you can.

I am sure it doesn't lapse automatically if neither party gives notice, even though they didn't agree on another 10 year extension. I think there is info on the websites of the US Embassy and the American Chamber of Commerce.

[Arkady]

thank you for the info.

it was my undesrstanding that the Amity needed to be extended every 10 years and that if any party wished to teminate within those 10 years they need to give a 2 year notice.

as the amity was not renewd again after the 10 years expires is it not terminated??

please elaborate if you can.

According to the US Embassy and I have it in writing, the AER had been renewed on a month to month basis after the last one year extension expired awaiting conclusion of the FTA negotiations. Earlier this year the Thai government told the US the treaty would remain in force until further notice, again awaiting conclusion of the now stalled FTA negotiations. The negotiations are expected to resume once an elected government is in place. At present, Treaty business applications are still being process by both governments.

Thaksin was actually trying to get the Cabinet to approve the opening of financial services to every one during the FTA negotiations because that is the main area that the US wants opened up and it is excluded from the treaty. I am not sure if he wanted to open up services to all too but that would have been a logical way to proceed with the FTA. However, he gave up on financial services when he hit opposition even from within his own puppet cabinet and then the FTA fell off the rails anyway, so we will never know. The opposition to financial services liberalisation was totally flaky because financial services were very much liberalised in 1998 in wake of the financial crisis, albeit through temporary waivers, and it doesn't seem to have threatened the large Thai banks at all, since foreigners are only really interested in wholesale financial business here.

The FTA looks tough now that Bush's fast track powers have expired and Congress is controlled by the Democrats who play to the rust belt voters' protectionist concerns. If a Democrat gets into the White House, it would seem even less likely. I think it could take many years to for the Republicans to have the upper hand again to get the FTA back on track and then who knows what the political climate in Thailand will be and if FTAs will still be in fashion or whether there is a swing back to multilaterals again.

Meanwhile, Thailand and the US have to try and drag out the Amity Treaty despite it being illegal under WTO. On the other hand I don't think the Thais, however much they hate it, will dare terminate it unilaterally without a credible excuse because there is a very real danger that the US would retaliate with painful trade sanctions.

[chinthee]

thank you for the info.

it was my undesrstanding that the Amity needed to be extended every 10 years and that if any party wished to teminate within those 10 years they need to give a 2 year notice.

as the amity was not renewd again after the 10 years expires is it not terminated??

please elaborate if you can.

According to the US Embassy and I have it in writing, the AER had been renewed on a month to month basis after the last one year extension expired awaiting conclusion of the FTA negotiations. Earlier this year the Thai government told the US the treaty would remain in force until further notice, again awaiting conclusion of the now stalled FTA negotiations. The negotiations are expected to resume once an elected government is in place. At present, Treaty business applications are still being process by both governments.

Thaksin was actually trying to get the Cabinet to approve the opening of financial services to every one during the FTA negotiations because that is the main area that the US wants opened up and it is excluded from the treaty. I am not sure if he wanted to open up services to all too but that would have been a logical way to proceed with the FTA. However, he gave up on financial services when he hit opposition even from within his own puppet cabinet and then the FTA fell off the rails anyway, so we will never know. The opposition to financial services liberalisation was totally flaky because financial services were very much liberalised in 1998 in wake of the financial crisis, albeit through temporary waivers, and it doesn't seem to have threatened the large Thai banks at all, since foreigners are only really interested in wholesale financial business here.

The FTA looks tough now that Bush's fast track powers have expired and Congress is controlled by the Democrats who play to the rust belt voters' protectionist concerns. If a Democrat gets into the White House, it would seem even less likely. I think it could take many years to for the Republicans to have the upper hand again to get the FTA back on track and then who knows what the political climate in Thailand will be and if FTAs will still be in fashion or whether there is a swing back to multilaterals again.

Meanwhile, Thailand and the US have to try and drag out the Amity Treaty despite it being illegal under WTO. On the other hand I don't think the Thais, however much they hate it, will dare terminate it unilaterally without a credible excuse because there is a very real danger that the US would retaliate with painful trade sanctions.

Good analysis Arkady.

[TAWP]

All I'll add is its a lot easier to be a Thai in Australian than to be an Australian in Thailand.

Seriously?

If I was Thai there's absolutely no way I could manage to live in Europe. (Unless I was really very rich, like Thaksin. For UK people, "money number one", I guess.)

Not a very logical argument since most cases we are talking about here is husband or wifes moving to either country. I.e. it's much easier for my wife to get temporarly residental stay, workpermit, permanent resident and citisens ship in my country than it is here. Heck, it's equally fast for her to get a short-time VISA (above 30 days) for when we just go back for visits, for up to 90 days with no border-exists. She can own land, house, open bankaccount without questions (as she did), get free language schooling, adult schooling [if wanted] and more...

I just love the 'you have no right to complain, go back home'-crowd. Is it too much to hope they end up in the same position in the future?

[thaigene2]

One other point here...I don't think this is a "thaksin/TRT" thing or a "military" backed thing. As far as I can tell, in the years I've been here, this is a progressive policy - an actual bureaucratic-led policy to shut the doors on foreigners - from property to business - in order to protect the elites. It would be wrong and overly simplistic to apportion blame to any one party. This seems to be a popular "Thai" initiative that the elites see no way of ever losing (i.e. the masses can be easily swayed that this is good for "Thailand".)

[highdiver]

thank you for the info.

it was my undesrstanding that the Amity needed to be extended every 10 years and that if any party wished to teminate within those 10 years they need to give a 2 year notice.

as the amity was not renewd again after the 10 years expires is it not terminated??

please elaborate if you can.

According to the US Embassy and I have it in writing, the AER had been renewed on a month to month basis after the last one year extension expired awaiting conclusion of the FTA negotiations. Earlier this year the Thai government told the US the treaty would remain in force until further notice, again awaiting conclusion of the now stalled FTA negotiations. The negotiations are expected to resume once an elected government is in place. At present, Treaty business applications are still being process by both governments.

changmai american

i asked the us embessy about the amity and the proble you pointed out about the labour department.

it seems that the US embessy confirms that to have a work permit for a company under the treaty you must still follow the local laws.

this is the answer

Referring to your email message below, I would like to inform you that the Treaty of Amity has been extended until further notice. Then, if you are interested in applying your company under the protection of the Treaty of Amity, please feel free to do so.

For the applying work permit license at the Department of Labor, there are some conditions that the company needs to meet, such as

1. the capital investment fully paid up 2 million baht per a work permit license, or

2. the foreigner receives at least 700,000 baht revenue annually, or

3. the foreigner paid tax 50,000 baht annually, or

4. hiring 4 Thai employees

and more..

If the American company can meet either one of the above conditions, the license will be issued without any problem. However, there will be more details in applying the work permit license, I would suggest you to consult with our legal business services at http://www.buyusa.gov/thailand/en/bsp.html for further information.

Regards,

Kritsananan Setasuvarna (Nan)

Commercial Assistant/System Administrator

U.S. Commercial Service,

American Embassy,

Room 302, GPF Witthayu Tower A,

93/1 Wireless Road,

Bangkok, 10330 Thailand

Tel: 662-205-5282

Fax: 662-255-2915

[ChiangMaiAmerican]

thank you for the info.

it was my undesrstanding that the Amity needed to be extended every 10 years and that if any party wished to teminate within those 10 years they need to give a 2 year notice.

as the amity was not renewd again after the 10 years expires is it not terminated??

please elaborate if you can.

According to the US Embassy and I have it in writing, the AER had been renewed on a month to month basis after the last one year extension expired awaiting conclusion of the FTA negotiations. Earlier this year the Thai government told the US the treaty would remain in force until further notice, again awaiting conclusion of the now stalled FTA negotiations. The negotiations are expected to resume once an elected government is in place. At present, Treaty business applications are still being process by both governments.

changmai american

i asked the us embessy about the amity and the proble you pointed out about the labour department.

it seems that the US embessy confirms that to have a work permit for a company under the treaty you must still follow the local laws.

this is the answer

Referring to your email message below, I would like to inform you that the Treaty of Amity has been extended until further notice. Then, if you are interested in applying your company under the protection of the Treaty of Amity, please feel free to do so.

For the applying work permit license at the Department of Labor, there are some conditions that the company needs to meet, such as

1. the capital investment fully paid up 2 million baht per a work permit license, or

2. the foreigner receives at least 700,000 baht revenue annually, or

3. the foreigner paid tax 50,000 baht annually, or

4. hiring 4 Thai employees

and more..

If the American company can meet either one of the above conditions, the license will be issued without any problem. However, there will be more details in applying the work permit license, I would suggest you to consult with our legal business services at http://www.buyusa.gov/thailand/en/bsp.html for further information.

Regards,

Kritsananan Setasuvarna (Nan)

Commercial Assistant/System Administrator

U.S. Commercial Service,

American Embassy,

Room 302, GPF Witthayu Tower A,

93/1 Wireless Road,

Bangkok, 10330 Thailand

Tel: 662-205-5282

Fax: 662-255-2915

Just for fun go back and ask specifically if an American has the right to "manage and control his business as well as the right to do all things necessary for that business." Ask if the Ministry of Labor can arbitrarily refuse to issue a work permit after the business has been established. Ask if the Ministry of Labor can refuse to issue a work permit on the grounds the American can hire a Thai to do his job. Some at the Ministry of Labor seem to think so. Ask if the Ministry of Labor can restrict location the American can work and the duties he can perform for his company. Ask if the American can meet outside his business with clients or potential clients. The Ministry of Labor thinks not. Ask your contact what benefits the treaty is to an American if the Thai government can simply pass laws and enact regulations that restrict those benefits to the point they are unenforceable. Then ask the Ministry of Labor the same questions. Ask the Ministry of Labor if the Treaty of Amity applies to them. If they agree it does which is doubtful ask if the MOL has informed their employees about what is required to comply with the treaty. I have it in writing from authority higher than Thai woman you contacted that the Ministry of Labor cannot restrict the American or his appointee as long as he is performing duties for his business nor can they deny the American the right to manage and crontrol his treaty business. Commerce had this problem a few years ago and they wrote regulations to correct the issue.

If the treaty did not provide extraordinary privilege for US citizens as it does for Thais in the US then it would be worthless. The Ministry of Labor is apparently of the opinion it is worthless at least as far as benefits for Americans is concerned. I suspect it would be an entirely different matter if the American government began treating Thais who open businesses in the US under the treaty in the same manner they treat Americans here.

I have found with the Commercial Service that some employees are sharp and some don't have a clue. Several years ago one tried to tell me my business had to conform to the requirements of the FBA. Not that many years ago, before George Bush got his claws into everything, people at the Commercial service from top to bottom were first class. They were concerned about the interests of Americans in Thailand as they shoudl be. A very few are still there and they are Thai citizens. The Americans have been transfered to other posts or have left government service. Once the organization was intent on helping all Americans not just the MNCs and major corporations. After Bush took over things changed. A little more than a year from Americans might see positive change. The old guard republicans already smell disaster for their party and are retiring from politics. The new likely democrat government will take a more proactive role protecting American interests. At that time there should be major changes in the Commercial Service and its attitude toward American small business. Unfortunately that is a long time from now.

Meanwhile, it is painfully obvious to those of us with treaty businesses that Thailand does not intend to honor the spirit if not the letter of the treaty.

Edited August 17, 2007 by ChiangMaiAmerican

[Rooo]

Changes to FBA 'must be' deferred

Pridiyathorn says only an elected parliament should decide such a crucial measurePublished on August 23, 2007

Former deputy premier MR Pridiyathorn Deva-kula yesterday urged the interim government to leave the controversial amendment to the Foreign Business Act on the backburner, saying the elected government expected in a few months should process this crucial piece of legislation.

Another suggestion would be to slash the services protected from foreigners, as listed in Appendix 3, to zero or near zero in order to minimise strains on the country's investment climate, he told a seminar organised by Sasin Graduate School, the Commerce Ministry and Nation Multimedia Group.

On August 8, the National Legislative Assembly voted 76-64 to adopt a new version of the amendment which Pridiyathorn said was "far too strict" towards foreign investment.

The original version drafted by the government, which was rejected by the NLA, was only aimed at ensuring shareholder control of businesses set up here and had nothing to do with management control, he said.

http://www.nationmultimedia.com/2007/08/23...es_30046165.php

[Bruce1]

He's right that slashing the protected list would be a damm good idea, and might assist industries to become internationally competitive, which could create a lot of jobs and raise incomes, which would be a good thing. Question is whether the elites can tolerate competition?

[cclub75]

''Whatever the government does, its next step is going to be crucial and all I can do is to advise them two ways. First is that we hope that the government drags its feet and lets the bill die its own death, and second it is that the government revises 'List 3' down to zero or near zero,'' said M.R. Pridiyathorn Devakula, a former finance minister and central bank governor.

Suddendly, the ex-Czar Pridiyathorn, Finance Minister until march 2007, has become a wise man... His comment about FBA 2 is full of common sense.

The burning question however is : why he didn't stop the Commerce Minister (who launched the amendement process of FBA last october) when he was the Finance Minister, and a powerfull one (the press called him the "Czar") ?

Even in Thailand people do change...

[Bruce1]

Isn't this the same bloke who...

Sorry, lost concentration when a beautiful Thai woman came in and spent 5 mins chatting me up, for no apparent reason, not that I'm complaining, mind you.

... was the minister who tried to reform the foreign business control rules and got stomped on by everybody and slunk off. Suddenly he's had a Road to Damascus conversion and has reemerged as the champion of liberalised rules, which is a good thing I suppose. Boy these Thais are flexible - I can't keep up.

[Payboy]

"The government should not act as though you are pro-foreign investment. Otherwise you would see another 1973,"

.... his words 17th Jan 2007 read it all here

[cclub75]

"The government should not act as though you are pro-foreign investment. Otherwise you would see another 1973,"

.... his words 17th Jan 2007 read it all here

Spot on Payboy ! That's hilarious.

Ah... ! delights of the internet... What a powerfull bullshit-debunker-machine. I love it.

So maybe the Czar try to secure a job within the next government, by making wink-wink to the foreign business community.

[Old Man River]

Suddendly, the ex-Czar Pridiyathorn, Finance Minister until march 2007, has become a wise man... His comment about FBA 2 is full of common sense.

The burning question however is : why he didn't stop the Commerce Minister (who launched the amendement process of FBA last october) when he was the Finance Minister, and a powerfull one (the press called him the "Czar") ?

Even in Thailand people do change...

I know this switch sounds funny, but this is the M.R. Pridiyathorn that I've known in the past. This is the man who looked right at Thaksin when he was the strongest and backed him down (over KTB). I can only think that someone persuaded him differently when he was FM, but he has now come back to his senses.

[tim77]

From CNN Sunday (26 Aug 07)

HARARE, Zimbabwe (Reuters) -- Zimbabwe's government introduced a bill Thursday to give Zimbabweans majority ownership of foreign companies, a move critics say will deepen the economic crisis.

Critics of the Zimbabwe government fear a bill against foreign companies will worsen the economic crisis.

If passed it would give the government sweeping powers over how foreign companies, including mines, operate in Zimbabwe.

Critics accuse veteran leader President Robert Mugabe of trying to push through the empowerment bill to extend his patronage and focus attention from Zimbabwe's economic turmoil. Mugabe is seeking another five-year term in presidential elections next year.

Indigenisation and Empowerment Minister Paul Mangwana told parliament the bill would create an environment that would increase the "participation of indigenous people in Zimbabwe".

The draft was passed to a parliamentary legal committee shortly after it was introduced. It is likely to pass because Mugabe's ZANU-PF party dominates parliament, analysts say.

Critics say it is reminiscent of Mugabe's controversial policy of seizing white-owned farms to give to landless blacks, which many say triggered the economic crisis.

Empowerment of Zimbabwean companies could drain what little confidence there is left in the country and step up pressure on Mugabe to show he is in control, analysts say.

"There was no doubt they would push it through before the elections because it's designed to garner votes," said economic commentator Eric Bloch.

"What remains to be seen is how vigorously they are going to implement it, but it's certainly going to discourage investors."

[Rooo]

Americans question new Business Act

Manila - US business interests in Thailand remain concerned about possible tougher provisions in the amended Foreign Business Act, Thai Commerce Minister Krirkkrai Jirapaet said Sunday.

http://www.bangkokpost.com/topstories/tops...s.php?id=121125

[cclub75]

Americans question new Business Act

http://www.bangkokpost.com/topstories/tops...s.php?id=121125

We can notice the amazing duplicity (and lack of political courage) of the Commerce Minister : "The commerce minister said he had explained to US business representatives men that the issue was now beyond his authority, as NLA members wanted to amend the Act. If the businessmen were dissatisfied they could discuss it with NLA members. "

It reminds me... schwarzenegger : "talk to the hand".

[cclub75]

Some new informations about the Foreign Business Act and the amendment voted by the NLA in august.

By the way, the process was not "stopped". But only delayed. Some people inside the gvt still believe -and hope- that the law will be voted before the elections.

An official document explains (published by the Department of Business Developement of the Commerce Ministry PDF file) exactly what the NLA added in august. It's even worse that we've heard before.

"The National Legislative Assembly (NLA), at meeting on 8 August 2007, agreed as follows.

1. Agreed on definition “foreigners” by extending the clauses containing 2 following contents:

1.1 An inclusion of power to name or dismiss the majority of directors and direct the firm’s action as the criteria.

1.2 An inclusion of chain shareholding or multi tier holding company as the criteria."

So actually, they added 2 new criterias to define if a company is "foreign" or not : management control (+ control of the board) and the issue of chain shareholdings...

The 2 other criterias remain the same : % of shares, and % of voting rights.

Edited October 9, 2007 by cclub75

[Rainmaker]

Some new informations about the Foreign Business Act and the amendment voted by the NLA in august.

By the way, the process was not "stopped". But only delayed. Some people inside the gvt still believe -and hope- that the law will be voted before the elections.

An official document explains (published by the Department of Business Developement of the Commerce Ministry PDF file) exactly what the NLA added in august. It's even worse that we've heard before.

"The National Legislative Assembly (NLA), at meeting on 8 August 2007, agreed as follows.

1. Agreed on definition "foreigners" by extending the clauses containing 2 following contents:

1.1 An inclusion of power to name or dismiss the majority of directors and direct the firm's action as the criteria.

1.2 An inclusion of chain shareholding or multi tier holding company as the criteria."

So actually, they added 2 new criterias to define if a company is "foreign" or not : management control (+ control of the board) and the issue of chain shareholdings...

The 2 other criterias remain the same : % of shares, and % of voting rights.

So what does this basically mean for people that have property under the company route?

[Naam]

So what does this basically mean for people that have property under the company route?

for them (and that includes me) it means business as usual and life goes on

[MrSquigle]

Its good to be usual again.

[Arkady]

Some new informations about the Foreign Business Act and the amendment voted by the NLA in august.

By the way, the process was not "stopped". But only delayed. Some people inside the gvt still believe -and hope- that the law will be voted before the elections.

An official document explains (published by the Department of Business Developement of the Commerce Ministry PDF file) exactly what the NLA added in august. It's even worse that we've heard before.

"The National Legislative Assembly (NLA), at meeting on 8 August 2007, agreed as follows.

1. Agreed on definition “foreigners” by extending the clauses containing 2 following contents:

1.1 An inclusion of power to name or dismiss the majority of directors and direct the firm’s action as the criteria.

1.2 An inclusion of chain shareholding or multi tier holding company as the criteria."

2.

So actually, they added 2 new criterias to define if a company is "foreign" or not : management control (+ control of the board) and the issue of chain shareholdings...

The 2 other criterias remain the same : % of shares, and % of voting rights.

1. My read of this is that it would cause a melt down in the stock market similar to the capital controls fiasco last December. Clause 1.1 would capture companies that have a lot of shares owned by foreigners through non-voting depository receipts (NVDRs), including Bangkok Bank and KBank. If you exclude the NVDRs, foreigners own a majority of the remaining voting shares and thence the power to name or dismiss the majority of directors etc, even tho they are not interested in using it in those two examples as they are mainly unrelated fund managers. However, there are a lot of listed companies that really are majority controlled by foreigners in this way, e.g. Precious Shipping, Raimon Land, Golden Land. The NLA amendments would catch both types of case.

2. In addition there are a lot companies that have conditions written into their Articles of Association which could be interpreted as tantamount to the power direct the firms actions either since the minority foreign shareholders actively have the power to appoint the CEO etc or because they have the power to veto key actions through minority protection rights. This point would definitely make a number of foreign direct investors consider pulling out of Thailand as their last resort in controlling their investments would be gone.

At any rate this provision might even be unconstitutional, although I haven't read the latest constitution. The problem would be that Thai shareholders would still be permitted to allow these minority protections but foreigners would not. The mere fact of Thai shareholders selling a minority stake to foreigners in a company with such provisions in its articles would instantly make it foreign.

3. The chain shareholding provision is also very troublesome, particularly as it is left extremely vague and thus open to interpretation by overly zealous officials. With group structures they would just have to go after the top company and the rest would fall like a pack of cards.

The NLA clearly didn't think through its amendments which is not a surprise as many of them are not overbright. Krirk-Krai and his flunkies at the Ministry of Commerce are a bit smarter and, even though they probably haven't grasped all the ramifications, I am sure that they figured out my points 2 and 3 and realised the thing would backfire on them very badly and Krirk-Krai would leave behind a very bitter legacy. That is why I believe the Commerce Ministry is going to let the amendments die a death and just say they didn't have enough time to complete the legislation. Although it is quite possible that they are dumber I than I thought and will press on regardless ending in a train wreck scenario.

[cclub75]

A few comments.

Clause 1.1 would capture companies that have a lot of shares owned by foreigners through non-voting depository receipts (NVDRs), including Bangkok Bank and KBank.

It's important to remember that FBA 2 (draft in english here), does include some provisions for this case ("thai" companies that would be defined as "foreign" under the new FBA). My point : they thaught about this issue.

At any rate this provision might even be unconstitutional, although I haven't read the latest constitution. The problem would be that Thai shareholders would still be permitted to allow these minority protections but foreigners would not.

Well... FBA is already unconstitutional. I mean the whole idea behind FBA is discrimination. The core of this law is to define companies as "foreign" or "thai", and then apply special regime and regulations to companies found to be "foreign" !

So I'm not sure that the issue about minority protection, from a legal point of view, could endanger the whole law.

3. The chain shareholding provision is also very troublesome, particularly as it is left extremely vague and thus open to interpretation by overly zealous officials. With group structures they would just have to go after the top company and the rest would fall like a pack of cards.

Yes. Even though we could argue that this provision makes perfectly sense, regarding the whole law.

They want to close all the loopholes that were used under FBA 1 (dual shares structures, and nominees). For that matter, they are coherent with themselves.

The NLA clearly didn't think through its amendments which is not a surprise as many of them are not overbright. Krirk-Krai and his flunkies at the Ministry of Commerce are a bit smarter and, even though they probably haven't grasped all the ramifications, I am sure that they figured out my points 2 and 3 and realised the thing would backfire on them very badly and Krirk-Krai would leave behind a very bitter legacy.

Here, I disagree a bit. I am more and more convinced that they know very well what they are doing and the consequences.

I don't believe that FBA 2 + NLA amendment are the fruit of "mistakes" and/or the classic "thai mess"....

On the contrary, it's the rational result of a clear political will : to curb foreign influences on the thai economy.

For that matter, we have to aknowledge that... they did a pretty good work. Until now.

Now, it's clear also that some thai authorities do not share this goal. Therefore, we have -to some extend- a sort of political struggle (last exemple : Democrats party willing to scrap FBA 2 if elected).

Anyway : I won't sleep good... until FBA 2 is officially... burried. Officially, with flowers.

[mellow1]

No matter what they pass today, they can change it all, whenever they want.As you have seen.

[Martin]

IMO, 'cclub75' is probably right, when he says:

"On the contrary, it's the rational result of a clear political will : to curb foreign influences on the thai economy."

The wound of 1997/8 went very deep, and the scar is not yet healed.

It probably never will be, now that the foreign 'developed' economies are seen to be unsustainable, and possibly exhibiting the first tremors of their eventual cracking up.

Every time that I go down to Khon Kaen or to Bangkok, the sight of half-built high-rise-building 'carcases' with tower cranes that haven't moved for ten years, dominating the skyline in some places, jars on me. If they jar on me, they must cause a wince behind the polite smiles of thinking Thai governmental technocrats and bureaucrats, and act as a reminder of the folly of letting foreign money come in in any way at all.

I find that one of the frustrations of living in Thailand is that the thinking of the 'pwers that be' is kept to themselves.

However, there are some indications that real forward thinking does occur in some places (as well as ,woefully, not happening in others).

When I go up to Udon or down to Khon Kaen, I remember how 110 km of that single-carrigeway highway was dualled without a single building having to be demolished. Clearly, many years ago, forethought was applied and the building lines set back far enough to accomodate the future.

In Khon Kaen, I admire the work of whoever was the city planner who earmarked such a huge and convenient tract of land for Khon Kaen University.

And, in the past year, we had the the foreign speculators gearing up to pile into the baht. But, within 24 hours, their plan was nipped in the bud by the 30% withold. That must have been the result of forward planning, the preparation of a contingency plan some time before, and a swift decision that the moment had come to implement it.

As far as the FBA is concerned, I would expect that any official, or committee of officials, given the responsibility of surveying the scene and constructing possible scenarios would recomend that that 'the door be firmly shut' in the face of foreigners desirous of setting up and controlling small or medium-sized businesses.

The probable gains outweigh the potential problems where a few big enterprises like these MNC vehicle-assembly plants are concerned, but that is all.

Thailand is well-placed to cope with (even insulate itself from) the coming world-wide problems of big difficulties in the production of energy of all forms at economic rates, and the Government would be daft to have a proportion of its populace vulnerable to the withdrawal of a lot of shaky foreign-controlled small and medium-sized businesses.

A clear political will to curb foreign influences on the Thai economy is eminently sensible from the Thai perspective.

[younghusband]

IMO, 'cclub75' is probably right, when he says:

"On the contrary, it's the rational result of a clear political will : to curb foreign influences on the thai economy."

The wound of 1997/8 went very deep, and the scar is not yet healed.

It probably never will be, now that the foreign 'developed' economies are seen to be unsustainable, and possibly exhibiting the first tremors of their eventual cracking up.

Every time that I go down to Khon Kaen or to Bangkok, the sight of half-built high-rise-building 'carcases' with tower cranes that haven't moved for ten years, dominating the skyline in some places, jars on me. If they jar on me, they must cause a wince behind the polite smiles of thinking Thai governmental technocrats and bureaucrats, and act as a reminder of the folly of letting foreign money come in in any way at all.

I find that one of the frustrations of living in Thailand is that the thinking of the 'pwers that be' is kept to themselves.

However, there are some indications that real forward thinking does occur in some places (as well as ,woefully, not happening in others).

When I go up to Udon or down to Khon Kaen, I remember how 110 km of that single-carrigeway highway was dualled without a single building having to be demolished. Clearly, many years ago, forethought was applied and the building lines set back far enough to accomodate the future.

In Khon Kaen, I admire the work of whoever was the city planner who earmarked such a huge and convenient tract of land for Khon Kaen University.

And, in the past year, we had the the foreign speculators gearing up to pile into the baht. But, within 24 hours, their plan was nipped in the bud by the 30% withold. That must have been the result of forward planning, the preparation of a contingency plan some time before, and a swift decision that the moment had come to implement it.

As far as the FBA is concerned, I would expect that any official, or committee of officials, given the responsibility of surveying the scene and constructing possible scenarios would recomend that that 'the door be firmly shut' in the face of foreigners desirous of setting up and controlling small or medium-sized businesses.

The probable gains outweigh the potential problems where a few big enterprises like these MNC vehicle-assembly plants are concerned, but that is all.

Thailand is well-placed to cope with (even insulate itself from) the coming world-wide problems of big difficulties in the production of energy of all forms at economic rates, and the Government would be daft to have a proportion of its populace vulnerable to the withdrawal of a lot of shaky foreign-controlled small and medium-sized businesses.

A clear political will to curb foreign influences on the Thai economy is eminently sensible from the Thai perspective.

You're having a laugh,right? Not even the most nationalistic and inward looking politicians would accept the weird conclusions of the above post.A lot of the background detail is just plain wrong, not least the simple minded reference to foreign speculators and currency speculation.Putting this nonsense to one side,Thailand is committed to full integration in the world economy and though at the margins there are diferences of emphasis,the general approach is accepted by those that matter - not least because it has propelled the country from a poor agricultural sideshow to a relatively prosperous integrated economic player.

[Old Man River]

IMO, 'cclub75' is probably right, when he says:

"On the contrary, it's the rational result of a clear political will : to curb foreign influences on the thai economy."

The wound of 1997/8 went very deep, and the scar is not yet healed.

It probably never will be, now that the foreign 'developed' economies are seen to be unsustainable, and possibly exhibiting the first tremors of their eventual cracking up.

Every time that I go down to Khon Kaen or to Bangkok, the sight of half-built high-rise-building 'carcases' with tower cranes that haven't moved for ten years, dominating the skyline in some places, jars on me. If they jar on me, they must cause a wince behind the polite smiles of thinking Thai governmental technocrats and bureaucrats, and act as a reminder of the folly of letting foreign money come in in any way at all.

I find that one of the frustrations of living in Thailand is that the thinking of the 'pwers that be' is kept to themselves.

However, there are some indications that real forward thinking does occur in some places (as well as ,woefully, not happening in others).

When I go up to Udon or down to Khon Kaen, I remember how 110 km of that single-carrigeway highway was dualled without a single building having to be demolished. Clearly, many years ago, forethought was applied and the building lines set back far enough to accomodate the future.

In Khon Kaen, I admire the work of whoever was the city planner who earmarked such a huge and convenient tract of land for Khon Kaen University.

And, in the past year, we had the the foreign speculators gearing up to pile into the baht. But, within 24 hours, their plan was nipped in the bud by the 30% withold. That must have been the result of forward planning, the preparation of a contingency plan some time before, and a swift decision that the moment had come to implement it.

As far as the FBA is concerned, I would expect that any official, or committee of officials, given the responsibility of surveying the scene and constructing possible scenarios would recomend that that 'the door be firmly shut' in the face of foreigners desirous of setting up and controlling small or medium-sized businesses.

The probable gains outweigh the potential problems where a few big enterprises like these MNC vehicle-assembly plants are concerned, but that is all.

Thailand is well-placed to cope with (even insulate itself from) the coming world-wide problems of big difficulties in the production of energy of all forms at economic rates, and the Government would be daft to have a proportion of its populace vulnerable to the withdrawal of a lot of shaky foreign-controlled small and medium-sized businesses.

A clear political will to curb foreign influences on the Thai economy is eminently sensible from the Thai perspective.

You're having a laugh,right? Not even the most nationalistic and inward looking politicians would accept the weird conclusions of the above post.A lot of the background detail is just plain wrong, not least the simple minded reference to foreign speculators and currency speculation.Putting this nonsense to one side,Thailand is committed to full integration in the world economy and though at the margins there are diferences of emphasis,the general approach is accepted by those that matter - not least because it has propelled the country from a poor agricultural sideshow to a relatively prosperous integrated economic player.

That about sums it all up.

Martin, have a good sleep tonight and then tomorrow read what you wrote. I think it will help.

[cclub75]

Knock... knock...

FBA is coming back ?

Check this article.

The BDD says that they consider "transferring to police the cases of 12 companies over nominees of foreign owners".

And here is the list :

The firms facing complaints of non-compliance with the FBA are Ucom; Bolero-Tak Wu Holdings; Telenor; Hutchison CAT Wireless Multimedia; Asia Aviation, a major shareholder of Thai AirAsia; Thai Sky Airline; CenCar, the operator of Carrefour; Ek-Chai Distribution System, the operator of Tesco-Lotus; Siam City Cement; DHL Logistics (Thailand); Burapa Lumpini Land; and Izumi Zenkosha (Thailand), an event-organiser.

Huge, huh ?

Clearly, we will continue to hear about FBA... for a long time.

Edited January 19, 2008 by cclub75